KUALA LUMPUR (Jan 23): KIP Real Estate Investment Trust (KL:KIPREIT) unitholders have approved the acquisition of four industrial properties associated to its largest shareholder Datuk Eddie Ong Choo Meng, for a total purchase price of RM98.3 million.
At the company’s extraordinary general meeting (EGM) on Thursday, the four acquisition resolutions were passed with shareholders and proxies attending the meeting holding 99%, voting in favour of the related party transaction (RPT).
Commenting after the EGM, KIP REIT chief executive officer Valerie Ong Pui Shan shared that all four industrial properties have met the minimum hurdle rate of 6.5%, with rental yields ranging from 6.6% to 7.6%. Additionally, these properties come with a rental reversion of 11%-12% upon renewal at the end of their three-year terms.
Valerie explained the income-accretive acquisition move, stating, “Generally, a property yielding around 7% to 7.5% is considered very high-yielding”.
“Regardless of who the owners are, we will have to go through a stringent process to be deliberated by the investment steering committee, based on investment parameters. In this case, the properties have met the hurdle rate,” she added.
The acquisitions include a factory in Cheras Jaya for RM22.6 million, a warehouse in Pasir Gudang, Johor, for RM23.3 million, leasehold land with an industrial building in the Port Klang Free Zone, Pulau Indah for RM23.7 million, and a processing plant in Bintulu, Sarawak for RM28.7 million.
All four properties come with an initial three-year lease term, with the option to renew for an additional nine to 12 years, broken down into three-year terms. There is a 11%-12% reversion clause at the end of each term.
The acquisition will be fully funded by bank borrowings, and this will increase KIP REIT’s gearing ratio to 45.23%, from 41.58% on Dec 20.
In the first year, the four properties are projected to generate a total rental income of RM7.15 million. However, after deducting the cost of financing and fees, the pro forma total comprehensive income of the REIT is expected to increase by RM1.34 million, or 2.8%, to RM48.65 million from RM47.31 million.
Upon completion, KIP REIT’s portfolio will expand to 17 properties, including the seven KIPMalls, AEON Mall Kinta City in Ipoh, D’Pulze Shopping Centre in Cyberjaya, and three existing industrial properties in Pulau Indah.
Its total asset value is expected to increase to 7.1% to RM1.49 billion, from RM1.39 billion as of December 2024.
Agrochemical businessman Eddie is currently the largest unitholder of KIP REIT, owing the 11.38% stake held via his vehicle Hextar Rubber Sdn Bhd.
Meanwhile, Valerie’s father Datuk Ong Kook Liong, who is also the REIT’s managing director, owns 9.42%. The Employees Provident Fund (EPF), which emerged as a substantial unitholder on Dec 4, holds a 6.07% stake.
At Thursday’s midday break, shares in KIP REIT closed unchanged at 88, giving the trust a market value of RM702.79 million.