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Malaysia's first education REIT taking shape


The sale-lease marks the start of the first education REIT in the country. Paramount said the disposal was in line with plans to pursue an asset light strategy.

The sale-lease marks the start of the first education REIT in the country. Paramount said the disposal was in line with plans to pursue an asset light strategy.

PETALING JAYA: Paramount Corp Bhd is proposing to dispose of the company’s private and international schools, Sekolah Sri KDU and Sri KDU International School, to unlisted Alpha Real Investment Trust (REIT) for RM165mil.

Paramount said in a stock exchange filing that the company had entered into a master agreement and triple net lease with Alpha REIT to dispose of the properties in Pekan Baru, Sungai Buloh in Selangor.

The sale-lease marks the start of the first education REIT in the country. Paramount said the disposal was in line with plans to pursue an asset light strategy.

“Monetising the group’s real estate assets through this sale-leaseback transaction enables it to unlock capital resources from being tied up in long-term assets, providing growth capital and allowing the group to focus on its core activities to ultimately better reward shareholders.”

Paramount said the proposed lease also safeguards the schools’ operations, allowing it to continue at the existing premises without any disruption.

It added that the lease would lock in rental rates over a long-term period of ten years, with options to extend the term of the lease for 20 more years and eliminating the risk of volatility in rental rates.

The properties, which had an original cost of investment of RM102.54mil, have a net book value of RM87.03mil based on subsidiary Sri KDU Sdn Bhd’s audited financial statements for the financial year ended Dec 31, 2016.

The 4.83 ha comprises three-storey and four-storey primary school buildings, a three-storey secondary school building and six-storey international school building with a carpark and sports complex.

Paramount said the land has a 99-year lease tenure up to Jan 25, 2104, adding that the bulk of the proceeds would be utilised to cut back on leverage.

Upon completion of the agreement, Paramount said net assets would stand at RM1mil, compared with RM934,636 as at Dec 31, 2016.

In a separate statement, Alpha REIT chairman Datuk Stewart LaBrooy said a second acquisition of an international school at RM140mil would be executed within a month, adding that the REIT’s initial portfolio would be RM305mil.

In the same statement, Alpha REIT chief executive officer Jeyabalan Parasingam said the REIT aimed to grow its assets to a size of RM2bil to RM3bil within three years as it prepares to list.

“This strategy will provide the market with a proven robust platform and track record before listing,” he said.

Paramount , Alpha , leaseback

   

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