PETALING JAYA: IOI Properties Group Bhd
(IOIProp) will likely pursue a real estate investment trust (REIT) listing in the second half of 2026 (2H26), covering assets such as IOI City Mall Phases 1 and 2, offices, and hotels in Malaysia, with an estimated valuation of between RM7bil and RM8bil, says UOB Kay Hian (UOBKH) Research.
The research house said following the recent full acquisition of South Beach Development, management is also targeting a potential Singapore REIT listing in 2027, with combined assets from IOI Central Boulevard (IOICB) and South Beach Development and expected valuation at RM23bil to RM26bil.
“Assuming IOIProp retains a 50% stake in both REITs, it could reap total proceeds of RM15bil to RM17bil to pare down debt and gearing to around 0.3 times, per our estimates.
“As of end March 2025, IOIProp’s total borrowings stood at RM19.4bil, excluding the RM3.6bil (S$1.09bil) from the South Beach Development. Upon balance sheet consolidation, net gearing is expected to rise to 0.93 times, from 0.75 times as of end-March 2025,” UOBKH Research said in a report last week.
Earlier this month, IOIProp gained full control of Singapore’s South Beach project by acquiring the remaining 50.1% stake from Singapore-based City Developments Ltd.
UOBKH Research said while the acquisition of South Beach Development may have been priced at a slight premium, full ownership should provide IOIProp with greater flexibility to enhance yields over time.
The research house added that though South Beach Tower’s actual occupancy is 80% due to the departure of an anchor tenant, its committed occupancy remained high at 92.4% as of end-March 25.
“Currently, the 34-storey Grade A tower offers 509,000 sq ft of office space, and has anchor tenants such as Baker McKenzie Wong & Leow and Legos.
“Average monthly rental is currently around S$11 per sq ft (psf), higher than the average Central Business District Grade A office rents of S$9.80psf, according to Savills Research,” UOBKH Research said.
According to the research firm, the hotel component, JW Marriott (634 rooms), is running at close to breakeven (but cash flow positive) with an occupancy rate of 76% and average daily rate of S$460, largely due to reliance on corporate rates and a lack of major events.
“Nevertheless, we expect the hotel segment to gradually improve on the back of higher inbound tourists and less emphasis on corporate clients,” UOBKH Research said.
The research house said overall, South Beach Development recorded a profit after tax of RM63mil and net property income (NPI) of RM331mil in the financial year 2024 (FY24).
“Based on South Beach’s total asset valuation of RM5.5bil (as implied by the 50.1% stake acquisition), this translates to a net yield of 1.2% and NPI yield of 6%. The wide gap between net yield and NPI yield is largely attributable to the high depreciation and amortisation charges, as well as interest expenses,” UOBKH Research said.
That said, with the stake acquisition targeted for completion in September 2025, management aims to raise average room rate to S$600 by targeting more retail or rack-rate bookings, which could lift net yield to at least 3% by the fourth quarter of financial year 2026 (4Q26) (that is 2Q27).
Meanwhile, UOBKH Research said IOICB is expected to move into the black in the coming few months. IOICB currently has a committed occupancy rate of more than 85% (versus 80% as of end-March, 2025), with actual occupancy surpassing 70%.
