PETALING JAYA: WCT Holdings Bhd plans to launch a real estate investment trust (REIT) next year to unlock the value of its assets and pare down debts.
It will firm up plans by year-end and if it does go ahead with the fund-raising event, the initial public offering (IPO) is likely to be towards the end of next year.
The company will have four malls by then with a total net lettable area (NLA) of 3.3 million sq ft. The plan is to list a REIT that comprises purely its malls in the initial stages because the hotel business is still in its infancy.
“We may consider injecting our hotel business when it is mature,” WCT managing director Peter Taing Kim Hwa told StarBiz.
The plan is to REIT its PJ Paradigm and Bukit Tinggi AEON malls, with a combined NLA of 1.68 million sq ft, next year and inject Gateway@klia2 and JB Paradigm, with a combined NLA of 1.61 million sq ft, two to three years later.
PJ Paradigm Mall and the Bukit Tinggi Aeon Mall are more mature, with an estimated total asset value of RM1.2bil.
If WCT’s plans were to take off, it would join the likes of CapitaMalls Malaysia Trust, IGB, Pavilion and Hektar REIT, which are all focused only on malls.
Taing said the eventual plan was to have a total of five million sq ft of NLA in its REIT.
The JB Paradigm Mall, among the largest in Johor, will have an NLA of 1.25 million sq ft. It will be operational by September 2016. Located on 13 acres fronting the Skudai Highway, the project will comprise residential towers, offices and a hotel with a development cost of RM1bil.
“The gross development value of the project is targeted at around RM1.5bil, spanning over three years,” Taing said, adding that the company will have a signing ceremony of its anchor tenants on Aug 13.
WCT has recently renewed its tenancy agreements for its PJ Paradigm Mall, which is 93% occupied.
It will also be launching a hotel – to be managed by Hong Kong’s New World Millennium – at PJ Paradigm Mall.
On its plan to go the REIT way, Taing said the idea is “to get ready a platform” to list its new malls as and when they are ready and consistent with their long-term plan of establishing a recurring income, while maintaining a reasonable gearing at group level.
“From the listing of the REIT, we will be able to reduce our gearing,” he said.
As at March 31, WCT had a net gearing of 0.7 times. The firm’s total borrowings was at RM2.4bil, while cash and cash equivalents stood at RM762.7mil.
Said Taing: “Our plan is to swap all our current investment in the malls with new shares in WCT REIT, which is consistent with our long-term plan to grow our property investment business and unlock value.”
He said the company hoped to retain about 40% in the REIT, as it would allow WCT to remain as the controlling shareholder and property manager of these assets.
On the potential rise in interest rates (in the US), which may be a dampener for valuations of REITs, Taing said interest rates were a macro-economic factor.
He said interest rates may affect REITs in the short term, but WCT’s objective is to establish a long-term recurring income from the property investment business.
“We reckon that the other industrial players are strong and we will face stiff competition from the day we enter the mall business. But we believe we have the capability and resources to compete and achieve our long-term plan on property investment. To date, our mall business is stable and generates commendable returns to the group and we will stay focused on achieving our goals,” he said.
On the yet-to-be-received claims awarded by a Dubai tribunal over a long-standing contract dispute with Meydan Group LLC, Taing said WCT would use part of the RM1.2bil award for debt repayment, but declined to reveal the breakdown.
Meydan Group in Dubai had abruptly cancelled a construction contract during the 2008 global financial crisis.