This article first appeared in City & Country, The Edge Malaysia Weekly on June 26, 2023 - July 2, 2023

Valerie Ong Pui Shan has a hectic schedule. The newly minted CEO of KIP Real Estate Investment Trust (KIP REIT) greets us at Menara KIP in Jalan Ipoh, Kuala Lumpur, having held back-to-back meetings.

Ong has hit the ground running since being appointed to the role in April, which is not a surprise given her experience. She joined KIP Group in 2012 and was appointed CEO in 2017.

During her time in KIP Group, Ong had stints in various divisions, ranging from construction to leasing.

“I was part of the construction team, where we construct residential and commercial properties, and shopping malls. After building the mall, we then hand it over to the leasing division, which will run it and operate it until we achieve the targeted yield. Then, we will offer to sell it to KIP REIT,” she explains.

Ong was appointed as a non-independent non-executive director of KIP REIT in 2018 and was redesignated as executive director in August 2022.

“I have a very strong interest in learning about our properties and the [business] operations. And it has played a large part in the preparation for my current position,” says Ong, who no longer holds a position in KIP Group.

KIP REIT’s goal is to achieve RM1.5 billion in portfolio value, and Ong will continue to aim for that.

Currently, it has assets under management amounting to RM937 million ­(unaudited), comprising seven community-centric neighbourhood malls across Peninsular Malaysia and three industrial assets in Pulau Indah, Klang that was acquired in December last year.

The malls are KIPMall Tampoi, KIPMall Masai, KIPMall Kota Tinggi, KIPMall Bangi, KIPMall Melaka, KIPMall Senawang and AEON Mall Kinta City (in which it has a master lease).

The industrial assets in Pulau Indah have a total land size of 61,164 sq ft and a lettable area of 350,558 sq ft. They have a 15-year lease with a rental yield of 6.5% and a rental escalation of 13% per term. There will be four terms and one term is three years.

Ong is confident of achieving RM1 billion in portfolio value by the first half of 2024 and RM1.5 billion by 2026. 

“It is not impossible for us to reach RM1.5 billion as we have been aggressively looking for retail and industrial assets to boost our portfolio,” she says, adding that the REIT already has new assets in the pipeline to be revealed in due course.

In fact, KIP REIT announced on June 16 that it had signed a conditional sale and purchase agreement with Cahaya Serijaya Sdn Bhd to acquire KIPMall Kota Warisan in Sepang, Selangor, for RM80 million. The acquisition is expected to be completed in first quarter of next year. 

These prospective acquisitions will be in line with KIP REIT’s investment criteria of accretive yield, long-term sustainable business and good financial standpoint.

Ong is wasting no time in setting her priorities for the company.

“I have four things on my list [and] this is not going to be a long or short-term plan, but a continuous effort throughout my tenure here.”

Those four priorities are acquiring value-accretive assets, actively reviewing tenant mix, embarking on asset enhancement initiatives (AEI) and sustainability integration.

The team will proactively look for potential value-accretive assets that meet the benchmark of KIP REIT’s investment policy to grow its existing asset portfolio.

The REIT’s acquisition of the three industrial assets last December marked its foray into the segment. Ong explains that the decision to acquire the new asset class was made prior to the pandemic and was accelerated by the stellar demand for industrial properties at the peak of the pandemic.

“Since the pandemic, we have seen that the industrial segment [has been] performing well. Therefore, we deliberated with the board to see whether we could [add] this asset class into our REIT.

“It is very important for us to ­diversify [into industrial] because the demand and growth in industrial property [has] remained strong, backed by strong rental yield, especially if you look at logistics and warehousing demand.

“In fact, logistics companies are aggressively expanding in this space, and we are not seeing a slowdown in this industry. This gives us an indication of the sustainability of this business especially when it comes to e-commerce,” Ong explains.

When asked whether it would look at other kinds of retail assets, she emphasises that community-centric neighbourhood malls will still be its core focus and strength. She adds that the acquisition of the industrial assets benefited KIP REIT’s business model overall.

“The 15-year lease is very secure, which will benefit the REIT as a whole,” Ong says, explaining that the shorter leasing options on the retail side do not provide the same long-term stability as the industrial assets.

“Having said that, our core business is still in retail. So, we will still focus mainly on improving our existing assets as well as acquiring retail assets when they become available.

“This strategy has continued to pay off, as we continue to see record growth.”

KIP REIT recorded a gross revenue of RM21.8 million in the third quarter of FY2023, an increase of 15.9% as compared to RM18.8 mil in 3Q2022, and a net profit of RM10.5 million, an increase of 15.4% year on year, underpinned by lease income from the three newly acquired industrial properties and higher occupancy rates at its retail segment.

“There is still a lot of potential to grow in this space. In terms of region, there is still a lot of opportunity to acquire or to build community-centric neighbourhood malls.”

Another area that is of utmost importance is to constantly review tenant mix, to meet the demands of its shoppers.

Towards this end, Ong holds monthly meetings with the complex managers to exchange knowledge on the latest trends.

“As our malls are spread across different regions, it is important for me and the team to share our knowledge [on the latest trends] because our [malls] are geographically localised. We need to make certain adjustments to ensure we fit the demand of the surrounding neighbourhood.

“Every month, I will have a transparent and open discussion with my complex managers and leasing team to see how we can best fit the people of the area. We will start bringing in a lot of the bigger and more trendy brands like Gigi Coffee and Mitsui, so that we have at least a very good tenant mix,” she adds.

Ong also notes that footfall at its malls have remained consistent as they mainly provide daily essentials.

This year, popular brands such as Gigi Coffee, Secret Recipe, Sushi Go and Jalan-Jalan Japan have begun operating at KIPMall Bangi to serve the local community. With the new additions, a substantial increase in footfall has been observed.

Next, Ong plans to start asset enhancement initiatives (AEI) and upgrade the facilities at the malls to enhance the shopping experience for shoppers and for tenants’ benefit as well.

For FY2024, funds have been allocated for AEI exercises at KIPMall Tampoi, KIPMall Kota Tinggi, KIPMall Masai, KIPMall Melaka and KIPMall Senawang.

The AEI exercise for KIPMall Bangi will be completed by the end of this year. A total of RM21 million has been allocated for upgrading the mall’s facilities, a major retrofitting and improvement of floor layout by reconstructing new spaces.

“If you were to visit [KIPMall Bangi], ­[you would see that] it has changed quite a lot. We have upgraded the facilities like washrooms and the surau [which is the biggest in Bangi] as well as the mechanical and electrical items such as air-conditioning, lifts and escalators.

“I think we should concentrate on the facilities first. These are the little intricate things that are important for the shoppers. You don’t realise it, but when it is hot, dirty and the facilities are not functioning, you get agitated,” Ong explains.

Another area of importance is sustainability.

“One thing that I am personally interested in is to integrate sustainability efforts into our day-to-day operations and to enhance our ESG (environmental, social and governance) framework,” she states.

Ong highlights that KIP REIT installed solar panels at its malls, except for AEON Mall Kinta City, before the pandemic. The installation started in 2015 and was completed in 2019.

The use of the solar panels helped cushion the REIT’s utility costs during the pandemic.

“After the installation, we have been able to save an approximate blended average of 36.6% [in electricity consumption] across all malls,” Ong says.

She has taken on the additional role of chairperson of the company’s newly formed sustainability committee. Among its plans is to hire a sustainability consultant.

“We will be appointing a sustainability consultant to do a gap analysis and see what are the areas we can improve on. We are really looking forward to [collaborating] with the third-party consultant to draw up the sustainability framework for us to see how to close the gap.

“We should [be able to see] in the next couple of quarters how we can implement some of the things that are not already done,” says Ong.

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