This article first appeared in The Edge Malaysia Weekly on June 17, 2024 - June 23, 2024

HEKTAR Real Estate Investment Trust (Hektar REIT) (KL:HEKTAR), which has several retail malls in its portfolio, could see the emergence of a new substantial unitholder.

According to sources, Hektar Black Sdn Bhd’s stake in Hektar REIT has seen interest from several suitors for a while now. The company, which is believed to be the private vehicle of Tan Sri Halim Saad, held a 17.5% stake in the REIT as at June 13. Earlier this year, it had 21.33%.

The largest unitholder of Hektar REIT is businessman Datuk Eddie Ong Choo Meng, with direct and indirect equity interest of 8.465% and 19.997% respectively.

“After a lull, interest in Hektar Black’s stake in Hektar REIT re-emerged after the deal between Markmore Energy (Labuan) Ltd and Nasdaq-listed Liberty Resources Acquisition Corp lapsed,” says one of the sources familiar with the company.

Markmore Energy is an oil and gas unit of Halim’s that was to be injected into Liberty Resources, a special-purpose acquisition company.

On May 14, a filing with the US Securities and Exchange Commission (SEC) showed that Markmore Energy and Liberty Resources had entered into a mutual termination agreement citing challenging global economic conditions. The agreement is with regard to an announcement in 2022 that would have seen Liberty Resources acquire Halim’s Kazakhstan-based oil and gas production concession holder Caspi Oil Gas LLP. The transaction would have effectively led to the listing of Caspi Oil Gas, which is held by Markmore Energy.

Caspi Oil Gas owns the concession for the Rakushechnoye oilfield in West Kazakhstan. The transaction would have provided the company with net proceeds of at least US$55 million (RM234 million), according to Liberty Resources’ disclosure to the SEC in 2022.

As part of the deal, Liberty Resources was to pay Export-Import Bank of Malaysia and Markmore Energy US$50 million each. Malaysia-based Liberty Resources entered into a business combination with Caspi Oil Gas in December 2022 at a proforma enterprise value of US$427.7 million.

Liberty Resources is led by CEO Datuk Maznah Abdul Jalil, a seasoned investment banker with more than 30 years of experience. She is best known for her role in helping build DRB-Hicom into an automotive powerhouse in the 1990s.

When asked what Markmore Energy’s next step would be following the termination of the deal with Liberty Resources, Halim says he is “planning” the next move.

Hektar REIT may not be one of the better known REITs in the market, but there have been a slew of developments over the past year. The latest development was the sudden resignation of its CEO Johari Shukri Jamil last week, effective immediately. According to a statement, Johari, 52, was stepping down to pursue new opportunities after holding the CEO post for two years.

In September last year, Hektar REIT announced that it was buying Kolej Yayasan Saad (KYS) in Ayer Keroh, Melaka, for RM150 million. KYS is a private residential school founded by Halim. This was the REIT’s first non-retail acquisition.

“Our last asset acquisition was Segamat Central in 2017. Besides education, we also intend to diversify into industrial assets. In the next five years, the target is to have at least 20% of the portfolio consist of non-retail assets,” Johari said at the time.

While Halim is the founder of KYS, he is not a shareholder, according to the filing. The transaction was deemed a related party transaction as Halim’s daughter, Nor Sabrina Halim, sits on the board of Hektar Black, which is a major unitholder of Hektar REIT. 

It is worth noting that Hektar Black, the initial sponsor of Hektar REIT, was founded by the late Datuk Jaafar Abdul Hamid, who was formerly managing director of United Engineers Malaysia Bhd.

In February, Hektar REIT issued five-year medium-term notes (MTN) worth RM215 million that were triple A-rated by RAM Ratings. This is its maiden bond issuance under a 10-year MTN programme of up to RM500 million. The first tranche of RM215 million was guaranteed by Credit Guarantee and Investment Facility, a trust fund of the Asian Development Bank.

Hektar REIT said the proceeds would be used to refinance its existing borrowings as well as fund its capital expenditure and asset enhancement initiatives at Subang Parade, one of the first few shopping centres in Selangor when it opened in 1988.

Apart from Subang Parade, Hektar REIT has five other shopping malls in its portfolio, which are well-diversified geographically across Peninsular Malaysia. They are Mahkota Parade in Melaka; Wetex Parade and Classic Hotel in Muar, Johor; Segamat Central in Segamat, Johor; Central Square in Sungai Petani, Kedah; and Kulim Central in Kedah.

Subang Parade and Mahkota Parade currently make up the bulk of Hektar REIT’s total portfolio value and rental revenue. In total, the REIT owns two million sq ft of retail space with assets valued at RM1.4 billion as at March 31.

In the first quarter of FY2024, Hektar REIT’s net property income fell 5.5% or RM830,000 to RM14.38 million from RM15.21 million a year earlier due to higher utility costs. In FY2023, its net property income stood at RM60.05 million, up from RM58.69 million previously.

In late 2023, Hektar REIT saw the emergence of Ong as a major shareholder after he acquired the 24.75% stake from Singapore-based Frasers Centrepoint Trust.

Hektar REIT’s unit price closed at 61 sen last Friday, giving the REIT a market capitalisation of RM427.79 million. This valued Halim’s stake in the REIT at RM74.86 million and Ong’s at RM105.99 million.

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