REIT: Mid Valley Megamall, Gardens Mall

The real estate investment trust (REIT) offering by IGB Corp Berhad could fetch valuations of between RM4.3 billion and RM4.6 billion for the two prime retail malls currently held under IGB’s subsidiary KrisAssets Holdings Bhd.

Sources said the deal is structured on a capitalisation rate of 5.3%
Mid Valley Megamall has a net lettable area (NLA) of over 1.7 million sq ft spread across five levels of retail space. Apart from that, it also houses a 48,300 sq ft exhibition space.

The large retail mall has over 430 tenants, anchored by its major tenants Carrefour hypermarket, Golden Screen Cinemas, Jaya Jusco and Metrojaya.

Mid Valley recorded over 35 million visitors in 2010 and had an occupancy rate of 99.86%.

The Garden Mall, is a five-storey shopping complex with an NLA of about 800,000 sq ft.

Most of its 200 tenants are upper-mid to upper-range retail boutiques, and food and beverage outlets while its anchor tenants are GSC Signature cinema, Cold Storage supermarket, Robinsons and Isetan department stores.

Following a recent revaluation (end of December 2011) of the two retail malls, The Gardens Mall and Mid Valley Megamall now have a combined revised market value of about RM3.29 billion.

Separately, the revised market value for Mid Valley Megemall is RM2.36 billion while The Gardens Mall’s revised market value was RM930 million
Based on earlier calculation by The Edge Financial Daily, Pavilion KL is valued at RM2,390 psf based on the REIT’s purchase consideration of RM3.19billion and the NLA of 1.335 million sq ft.

However, Pavilion KL mall’s appraised value is even higher at RM3.415 billion or RM2,558 psf.

A simple calculation of KrisAssets’ malls shows that the RM2.36 billion revised market value for both malls translates into roughly RM944 psf, which is grossly undervalued compared with Pavilion REIT.

Neverthelss, analysts concur that if the REIT exercise prices the two malls at up to RM4.6 billion, the valuation would be around RM1,840 psf – still lower than Pavilion REIT’s pricing.

Analysts concur that the potential REIT exercise, if it materialises, would provide a big boost to KrisAssets, which is 75.66% owned by IGB.

“KrisAssets’ current market capitalisation of RM3.11 billion means there is a potential upside of at least RM1.2 billion assuming the retail REIT is packaged at RM4.3 billion.

Abstracted from The Edge Daily 20 March 2012