Sunway REIT portfolio swells

By Sharen Kaur 

sharen@nstp.com.my

Published in NST on dECEMBER 27, 2012

Sunway REIT, Malaysia's largest real estate investment trust, is upbeat its total assets under management will exceed RM7 billion in three to five years.

This will be driven by the RM3 billion pipeline assets it has and third-party acquisitions, Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng told Business Times.

For third-party acquisitions, the focus is on retail or mixed-use assets with strong growth prospects, in large and high growth cities here, Ng said.

Listed on Bursa Malaysia's Main Market in 2010, Sunway REIT is the largest REIT, in terms of asset size.

Its total assets under management will reach RM4.95 billion after the acquisition of Sunway Medical Center (SMC) by end of this month.

Sunway REIT, also one of the largest retail-focused REITs in Malaysia, has obtained the approval from unitholders to buy SMC for RM310 million.

With the acquisition, Sunway REIT's portfolio will expand to 12 properties.

"By acquiring SMC, Sunway REIT is adding yet another quality asset into its portfolio. More importantly, SMC is a leading private healthcare centre that is located within the Sunway Resort City township, alongside with four other Sunway REIT assets.

"It is the synergistic fit into the township assets that is more crucial to us instead of a standalone property.

"We will only consider other asset classes provided that they are located in townships, master-planned and developed by our sponsor (Sunway Bhd)," Ng said.

The inclusion of SMC will diversify the income stream of Sunway REIT.

Sunway REIT has entered into a master-lease arrangement with the hospital operator for an initial term of 10 years with the option to renew it for another 10 years.

The deal is based on a pre-agreed initial rental of RM19 million for the first year and annual incremental rental of 3.5 per cent for the remaining nine years of the initial term.

Ng said under the master-lease structure, Sunway REIT enjoys certainty in income stream with a guaranteed incremental rental reversion.

Going forward, Ng said Sunway REIT's strategy is to remain focused on retail with at least 60 per cent of its assets in the retail segment, measured by either asset size, revenue or net property income.

Sunway REIT remains bullish on the retail sector on the back of strong consumerism, young population and growing affluence of the nation, in line with government's aspiration to achieve a high income nation by 2020.

"We are also optimistic of prospects of the hospitality sector, where the tourism business will benefit from the government's ongoing promotional activities to boost tourist arrivals ahead of Visit Malaysia Year 2014," Ng said.