KIP REIT plans to offer investors higher yield

Lim: ‘Our premises are predominantly occupied by vendors and traders who provide basic necessity items.’

KUALA LUMPUR: Prospective investors of KIP Real Estate Investment Trust (KIP REIT) can expect a distribution yield of 6.54% in 2017, which is above the average market yield of 5.8%.

KIP REIT Management Sdn Bhd CEO Lim Han Gie told StarBiz that KIP REIT, which is en route to listing on the Main Market of Bursa Malaysia on Feb 6, 2017, plans to offer a slightly higher yield of 6.59% in 2018.

“This is possible because of KIP REIT’s resilient business model,” said Lim, as he added the investment trust projects to raise at least RM234mil via its initial public offering (IPO).

The investment trust which focuses on hybrid community-centric retail centres, will possibly be the first REIT to be listed this year with its IPO underwritten by CIMB Investment Bank Bhd.

The bulk of the IPO proceeds would be used purchase property assets consisting of five KiP Marts located in Tampoi, Kota Tinggi, Masai, Senawang and Malacca, and a neighbourhood retail centre known as KiP Mall in Bangi.

Lim said that the assets which were owned by KIP Group, would put the investment trust on a sustainable, long-term positive growth trajectory post-acquisition.

For the four-month period ended Oct 31, 2016, KiP Marts had commendable occupany rates of above 90%, except for KiP Marts in Malacca and Senawang which were 65.8% and 72.6% occupied respectively.

In the same period, KiP Mall in Bangi registered an occupancy rate of 90.3%.

“We plan to distribute 100% of KIP REIT’s 2017-2018 distributable income to our investors, which is according to the REIT guidelines of a rate of 90% and above,” said Lim, who added that the gearing ratio is low at 15%.

Upon listing, KIP REIT’s debt to asset will be 14.8%, which is lower than that of the average Malaysian REITs, of 32% as at Sept 30, 2016.

Despite talks of a sluggish property market outlook going forward, Lim was bullish on KIP REIT’s performance.

“Our premises are predominantly occupied by vendors and traders who provide basic necessity items such as food and other household items.

“So, we only foresee minimal impact, if any, on our operations and the occupancy rate of our premises,” Lim said.

Asked if the KiP Mart brand would see expansion beyond Malaysia, Lim replied that KIP REIT would be focusing on the country’s operations.

“In the next five years we are looking at expanding into other states that do not currently have our presence,” Lim said.

KIP REIT is expected to post revenue of RM44mil for the eight-month financial period ending June 30, 2017. As for FY18, the total revenue is forecast to hit RM68mil.

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The investment trust has also forecast a distributable income of RM22mil for FY17 and a 50%-higher distributable income for FY18, at RM33mil.