Pavilion REIT to acquire Elite Pavilion for RM580mil

Pavilion Elite between KL Pavilion KL and the Regent Hotel became operational in November 2016. AZMAN GHANI / The Star

KUALA LUMPUR: Pavilion Real Estate Investment Trust (Pavilion REIT) plans to acquire the new retail landmark in Bukit Bintang, Elite Pavilion Mall, along with related assets and rights, for RM580mil cash.

The REIT’s manager Pavilion REIT Management Sdn Bhd on Thursday also proposed to undertake a private placement exercise comprising 7.2% of its units in circulation in order to partially fund the purchase and its estimated expenses of RM16.5mil. 

In a filing with Bursa Malaysia, CIMB Investment Bank and Maybank Investment Bank (the joint principal advisers for the proposals) said the proposed placement would raise an estimated RM370.6mil (based on an illustrative issue price of RM1.70 per unit) while the rest of the payment would come from borrowings.

Mtrustee Bhd, on behalf of the retail-focused REIT, signed a conditional agreement to buy Elite Pavilion from owner Urusharta Cemerlang (KL) Sdn Bhd (UCKL) on Thursday.

UCKL is ultimately owned by Pavilion REIT Management chairman and executive director Tan Sri Lim Siew Choon (51%) and Qatar Holdings LLC (49%).

Mtrustee also inked two agreements with Urusharta Cemerlang Sdn Bhd  (UCSB). a company 51% owned by Lim and his wife Puan Sri Tan Kewi Yong (who is also an executive director at Pavilion REIT) and 49% by Qatar Holdings.

One was a vesting  agreement to give Mtrustee all rights and ownership of, among others, the pedestrian link bridges on Levels 4 to 7 with seating and/or retail areas located on Levels 4 to 10 that link Elite Pavilion Mall with Pavilion KL Mall (extension-connections).

The other was a conditional agreement for Pavilion REIT to sell an area comprising, among others, 10 car park bays within the Pavilion KL Mall to UCSB for RM880,000 cash.

Elite Pavilion Mall, which opened its doors only nine months ago, has 10 floors with a net lettable area of 229,609 sq ft. It was 91.6% occupied as of  last month. 

Under the Elite Pavilion sale and purchase agreement, Pavilion REIT will also have the benefits and rights to the extension-connections and the subway linkage (an underground pedestrian tunnel that links Elite Pavilion Mall with Fahrenheit 88 shopping mall).

The  extension-connections have an occupancy rate of about 73.26% while the retail areas in the subway linkage are fully occupied.

According to the Bursa announcement, the proposals are expected to be completed in the fourth quarter of this year.

For the financial year ended Dec 31, 2016, Pavilion Kuala Lumpur Mall contributed 86.8% (RM399.0mil) to Pavilion REIT’s gross revenue of RM459.7mil. The REIT’s total income was RM312.14mil.

In a separate filing with Bursa Malaysia, Pavilion REIT Management reported an unaudited net profit of RM54.4mil for the second quarter ended June 30, an 8.7% drop from a year earlier, on 1.9% higher revenue of RM120.26mil.

Total net property income fell 5.8% to RM76.72mil due to a RM7mil higher property operating expenses, mainly due to higher maintenance cost incurred at Pavilion Kuala Lumpur, improvement of light fittings at Intermark Mall, tenancy costs incurred for landlord provisions at Damen Mall and higher provision for doubtful debts.

It said distributable income for the quarter under review was RM58.6mil or 1.94 sen per unit, it said.

The counter closed unchanged on Thursday at RM1.75 per unit.


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