KUALA LUMPUR: MRCB-Quill Real Estate Investment Trust (MQReit) is acquiring Menara Shell in Kuala Lumpur from its major unitholder Malaysian Resources Corp Bhd (MRCB) for RM640mil in cash, to be funded through private placements to MRCB and MRCB’s substantial shateholder, the Employees Provident Fund (EPF).
In a filing with Bursa Malaysia, the commercial property REIT said Maybank Trustees Bhd, acting as trustee for and on its behalf, signed a conditional agreement with MRCB’s unit 348 Sentral Sdn Bhd to buy the 33-storey office tower together with a five-storey podium and a four-storey basement car park at Jalan Tun Sambathan.
Menara Shell, with a net lettable area of 557,053 squ ft, is a two-year-old building with a 99.9% occupancy rate and gross rental income of RM46.36mil for the financial year ended Dec 31, 2015.
To raise the estimated RM656mil funding required (the additional RM16mil is for various expenses), MQReit proposes to place units to MRCB, which owns 31.18% equity interest in MQReit, and to the EPF. a substantial shareholder of MRCB with a 37.4% stake.
MRCB has given an undertaking to subscribe for between RM110mil and RM152mil of placement units while the pension fund has expressed interest to subscribe to up to 7% of MQReit’s enlarged units in circulation as well as to submit its bid in the bookbuilding exercise for the proposed placement, If the EPF does not participate in the placement, the units allocated to it will be placed out to others by way of bookbuilding.
MQReit said its board also seeks the authority to allot and issue up to 31.95 million new units to pay as management fee to MRCB Quill Management Sdn Bhd.
The REIT’s management board also proposes to increase the approved fund size of MQReit from 700 million units currently to up to a maximum of 1.1 billion units.
MQReit said the basis to determine the actual placement size would be decided based on the optimal debt to equity ratio so that the proposals were expected to be neutral/accretive in respect of distribution per unit (DPU) and DPU yield.
The chief executive officer of MRCB Quill Management will determine the actual placement size and issue price based on the authority given by MRCB Quill Management’s non-interested directors.
The placement units will be placed out at no more than 10% discount to the five-day volume weighted average market price (VWAMP) of the Units immediately prior to the price-fixing date. MQReit units closed unchanged at RM1.16 on Thursday.
The placement exercise requires the approvals of MQReit unitholders and the Securities Commission (SC) for a waiver from the SC’s REIT guidelines. It departs from the guidelines in several ways: the number of placement units to be issued exceeds 20% of MQReit’s approved fund size; placement to a single placee (MRCB) exceeds 10% of the approved fund size; MRCB is an interested person of the management company; and EPF is connected to MRCB, an interested person.
MQReit said the proposed acquisition of Menara Shell would strengthen MQReit’s position as a sizeable, geographically well-diversified office REIT in the Klang Valley.
MQReit’s asset size will increase from RM1.63bil to RM2.27bil, raising its position from 8th to 7th out of 16 players in the Malaysian REIT industry. “The increase in total asset size will enable the REIT to enjoy greater operating efficiency arising from economies of scale and enhance its competitive position,” it said.
In a filing with Bursa Malaysia, the commercial property REIT said Maybank Trustees Bhd, acting as trustee for and on its behalf, signed a conditional agreement with MRCB’s unit 348 Sentral Sdn Bhd to buy the 33-storey office tower together with a five-storey podium and a four-storey basement car park at Jalan Tun Sambathan.
Menara Shell, with a net lettable area of 557,053 squ ft, is a two-year-old building with a 99.9% occupancy rate and gross rental income of RM46.36mil for the financial year ended Dec 31, 2015.
To raise the estimated RM656mil funding required (the additional RM16mil is for various expenses), MQReit proposes to place units to MRCB, which owns 31.18% equity interest in MQReit, and to the EPF. a substantial shareholder of MRCB with a 37.4% stake.
MRCB has given an undertaking to subscribe for between RM110mil and RM152mil of placement units while the pension fund has expressed interest to subscribe to up to 7% of MQReit’s enlarged units in circulation as well as to submit its bid in the bookbuilding exercise for the proposed placement, If the EPF does not participate in the placement, the units allocated to it will be placed out to others by way of bookbuilding.
MQReit said its board also seeks the authority to allot and issue up to 31.95 million new units to pay as management fee to MRCB Quill Management Sdn Bhd.
The REIT’s management board also proposes to increase the approved fund size of MQReit from 700 million units currently to up to a maximum of 1.1 billion units.
MQReit said the basis to determine the actual placement size would be decided based on the optimal debt to equity ratio so that the proposals were expected to be neutral/accretive in respect of distribution per unit (DPU) and DPU yield.
The chief executive officer of MRCB Quill Management will determine the actual placement size and issue price based on the authority given by MRCB Quill Management’s non-interested directors.
The placement units will be placed out at no more than 10% discount to the five-day volume weighted average market price (VWAMP) of the Units immediately prior to the price-fixing date. MQReit units closed unchanged at RM1.16 on Thursday.
The placement exercise requires the approvals of MQReit unitholders and the Securities Commission (SC) for a waiver from the SC’s REIT guidelines. It departs from the guidelines in several ways: the number of placement units to be issued exceeds 20% of MQReit’s approved fund size; placement to a single placee (MRCB) exceeds 10% of the approved fund size; MRCB is an interested person of the management company; and EPF is connected to MRCB, an interested person.
MQReit said the proposed acquisition of Menara Shell would strengthen MQReit’s position as a sizeable, geographically well-diversified office REIT in the Klang Valley.
MQReit’s asset size will increase from RM1.63bil to RM2.27bil, raising its position from 8th to 7th out of 16 players in the Malaysian REIT industry. “The increase in total asset size will enable the REIT to enjoy greater operating efficiency arising from economies of scale and enhance its competitive position,” it said.
MRCB, meanwhile, said the proposed disposal would result in a net gain of about RM139mil for it and a reduction of its net gearing to 1 times.
The heads of agreement for the sale of Menara Shell to MQReit was signed on Dec 3 last year. At the time, the purchase consideration was to be satisfied via a combination of cash and issuance of new MQReit units.
The cut-off date for the execution of the sale and purchase agreement was extended several times since.
MRCB shares closed 1 sen lower at RM1.06 on Thursday, with 344,400 shares traded.
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