KIP REIT buying Ipoh mall

RM208mil purchase to help property trust diversify geographically

PETALING JAYA: KIP Real Estate Investment Trust (REIT) is buying Aeon Mall Kinta City shopping centre in Ipoh for a cash consideration of RM208mil.

KIP REIT said the four-storey shopping centre has a monthly rental income of RM1.36mil, or RM16.31mil per annum.

The total lettable space of Aeon Mall Kinta City is 530,181 sq ft and as at Dec 31, 2017, the 21-year-old building has a net book value of RM253mil, it said in a filing with Bursa Malaysia.

“The vendor of the property, Kinta City Sdn Bhd, has accepted the offer letter from KIP REIT’s trustee, Pacific Trustees Bhd, for the proposed acquisition.

“The purchase consideration was arrived at on a willing buyer-willing seller basis, after taking into consideration the property’s market value of RM220mil, as appraised by CH Williams Talhar & Wong Sdn Bhd on Aug 17, 2018, using the income approach (investment method) and comparison approach,” it said.

The purchase consideration of the mall and any expenses related to the proposed acquisition are expected to be funded via bank bor- rowings and/or internally generated funds.

KIP REIT said the addition of a mall in Ipoh to its current portfolio of properties in Johor, Melaka, Negri Sembilan and Selangor allowed it to diversify geographically.

The property trust said such diversification mitigated any overall risk of its presence in any particular state.

“The property has low leasing risk as it was leased out for 10 years from 2015 to 2025, with an option to renew the lease for an additional five years.

“Given the long-term lease secured, the property is expected to have a stable income in the long run,” said KIP REIT, adding that the lease has a rent escalation mechanism.

The property has a strategic location and is surrounded by mixed commercial and residential development.

As the vendor has recently enhanced the property, incurring expenditure of over RM32mil in the past two years, KIP REIT expects the cost to maintain or enhance the property will be relatively low.