Sunway REIT acquires industrial property in Selangor,Malaysia
Sunway REIT Management Sdn. Bhd. has entered into a conditional sale and purchase agreement (“SPA”) with Champion Edge Sdn. Bhd. to acquire an industrial property at Section 23, Shah Alam, Selangor for a total purchase consideration of RM91.5 million.
The Property is strategically located in the prime industrial hub of Shah Alam, Selangor and is predominantly occupied by established multinationals, logistics and manufacturing companies.
The Property is easily accessible to the Kuala Lumpur city centre through major roads and expressways such as Federal Highway, ELITE Highway and Shah Alam Expressway (“KESAS”) as well as close proximity to Kuala Lumpur International Airport and Port Klang, the largest sea gateway in the country.
The lease of the Property is structured on a triple-net-lease basis (where all costs and outgoings in relation to the Property are borne by the Lessee) through a novation of an existing lease agreement. The lease has a remaining duration of approximately eighteen (18) years which shall expire on 31 December 2034 (“Initial Term”). The initial term will automatically be extended for one further term of five (5) years (“Renewal Term”) on the same terms and conditions.
The Lessee has the option to notify the Lessor in writing, not less than 18 months prior to the end of the Initial Term if they do not wish to renew the lease. The renewal term may also be extended to more than five (5) years to a tenure of not exceeding fifteen (15) years. Based on the initial year’s annual rental of RM5.6 million, this translates into an initial acquisition yield (based on net property income) of 6.12%. Thereafter, the net property yield is expected to increase to 6.73% upon the next rent review in 2019.
Dato’ Jeffrey Ng, CEO of Sunway REIT Management Sdn. Bhd., said, “We are pleased to announce that Sunway REIT is making its maiden foray into the industrial property sub-sector. Under the prevailing challenging operating environment, investment in this property offers stable income stream regardless of economic and market condition. The proposed acquisition is backed by a long lease and tenanted by a reputable tenant, hence, able to offer Sunway REIT a resilient rental income stream and contribute positively to its earnings and distributable income.”
He added, “Sunway REIT’s asset will increase to 15 upon the completion of the proposed acquisition and reinforces its position as the second largest REIT in Malaysia with a property value of RM6.52 billion. We are on track to meet our target of RM7 billion by FY2017.”