Hive of activity around KLCC Park
KUCHING: Analysts are optimistic Petronas’ wholly-owned subsidiary, KLCC (Holding) Sdn Bhd, which is currently developing three major mixed-use commercial projects around KLCC Park, partnering with several foreign and domestic companies.
These projects are slated for completion between 2020 to 2022.
While the developments are already underway, the details on some projects are still scarce. KLCC has the first right of refusal for any properties developed by KLCC Holding.
Assuch,AffinHwangInvestment Bank Bhd (AffinHwang Capital) said some of these developments could be injected into KLCC in the next three to five years.
“Our back- of- the- envelope calculation suggests that these developments may have a combined gross development value (GDV) of over RM10 billion,” it said in a note yesterday.
“Separately, Four Seasons Hotel Kuala Lumpur, currently Malaysia’s second tallest skyscraper after the Petronas Twin Towers has opened its atrium mall in May 2018.
“The RM3 billion, 65- storey building is located right next to the Petronas Twin Towers, complementary to Suria KLCC Mall but competing with Mandarin Hotel KL for hotel guests.”
National Property Information Centre’s ( NAPIC) data shows that the average retail mall’s occupancy rate stood at 78 per cent as at end-December 2017.
Meanwhile, there are an estimated 17 new retail malls under various stages of construction, potentially adding 5.96 million square feet of space over the next three years.
“While the majority of these incoming supplies are mass market retail malls that pose little direct competition to Suria KLCC, the increase in overall supply will nevertheless affect retailers’ sentiment and limit Suria KLCC’s long-term rental growth rate,” it added.
Looking at office properties, a steady increase in Klang Valley’s office supply since 2010 has outpaced the demand growth, leading to subpar occupancy rates and a weak rental market.
Moving ahead, AffinHwang Capital saw that the large incoming supply of new offices may worsen the medium-term market conditions.
“Owners of new offices may offer attractive move-in incentives to attract tenants while the old offices may find it difficult to retain their tenants.
“KLCC’s triple net lease arrangements and long tenancy periods should help the group to weather these headwinds.
“It’s early days, but the new projects are good injection candidates. The combined GDV for the three ongoing development projects by KLCCH around KLCC Park may exceed RM10 billionn, we estimate. KLCC has the first right of refusal for any projects developed by KLCC Holdings.
“These three projects are, in our view, likely candidates for assets injections, given their close proximity to KLCC’s assets, common shareholder (KLCCH) and similar integrated development concepts.”
To note, KLCC has a total asset value of RM17.8 billionn and gross borrowings of RM2.2 billionn as at end-December 2017.
“Assuming KLCC is to cap its gross gearing ratio at 0.5 times total assets, we believe the group has capacity to undertake RM6.6 billionn of additional borrowings for future acquisitions.”