Pavilion REIT: Acquisition of Pavillion Bukit Jalil

Pavilion REIT: Acquisition of Pavillion Bukit Jalil

What is a REIT?

You can read more about it here in an earlier article too. REIT Advantages Real Estate Investment Trust (REIT) is another way for invetors to start investing into the real estate world without the need to have big capital. Just buy these like we buy a stock from the share market. Enjoy the dividends which is still considered attractive when compared to fixed deposit rates. Just need to be aware of the latest returns before you buy yeah. It could have changed because the REIT price may have increased etc. Plus, REIT allows us to buy into real estate assets which would have been impossible for us to buy by ourselves. For example, a stake in Pavillion Bukit Jalil? Below is the media realese from Pavillion REIT.

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PAVILION REIT TO STRENGTHEN ASSET LINE-UP WITH RM2.20 BILLION

ACQUISITION OF PAVILION BUKIT JALIL

Kuala Lumpur– MTrustee Berhad, the trustee of Pavilion REIT has entered into a conditional sale and purchase agreement to acquire Pavilion Bukit Jalil (“PBJ Mall”) from Regal Path Sdn Bhd for RM2.20 billion. Pavilion REIT Management Sdn Bhd (“the Manager”) also proposes to undertake a private placement exercise to raise up to RM1.27 billion, with the issue price to be determined later through a book-building exercise.

Subject to condition precedents being complied with, the proposed acquisition is expected to be completed in the second quarter of 2023 whereas the proposed placements are expected to be implemented in tranches.
This will enlarge Pavilion REIT’s assets to six, from the current line-up that comprises Pavilion Kuala Lumpur Mall, Pavilion Tower, Intermark Mall, DA MEN Mall and Elite Pavilion Mall.

The Manager said the acquisition of PBJ Mall is expected to contribute positively to Pavilion REIT’s future growth, adding an additional 27% to Pavilion REIT’s enlarged total assets under management. This proposed acquisition is timely following the resumption of economic activities and expectation of better employment opportunities post COVID-19 pandemic.

Such positive spillover can be seen in Pavilion REIT’s nine-months profit after tax for 2022 of RM181.4 million (+153% YoY) and distribution per unit (DPU) to 30 September 2022 of 6.16sen, attributed by higher revenue rent, income from advertising and marketing events as well as lower property operating expenses.

With a net lettable area of 1.8 million square feet, PBJ Mall has rejuvenated Bukit Jalil into a vibrant destination for business, shopping, dining, leisure and entertainment on a 28-acre freehold plot. The mall houses five levels of retail space, two levels of basement parking with 4,800 car park bays and a Piazza (centralized green area) – with all these integrated seamlessly as part of the 50-acre Bukit Jalil City integrated lifestyle development comprising 3 storey shop
offices and residences (The Park and The Park 2).

Completed a year ago, the last six months saw PBJ Mall recording an average of 1.2 million monthly footfall with an occupancy rate of 78.2%. “The retail industry is expected to stay relatively resilient for the time being, even with the
environment indicating risks of higher inflation. With retail sales growth expected to normalise, Pavilion REIT remains committed to bringing long-term growth and value for our stakeholders”, said Dato’ Philip Ho, the Chief Executive Officer of the Manager.

Tourist arrivals are also expected to fully return to pre-pandemic levels by 2024 as more countries relax their respective COVID-19 prevention measures, including Malaysia. Observers are also optimistic that China will eventually loosen travel restrictions on its citizens in the near future.

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What are some REIT Advantages?

Here are the 5 advantages of REITs?

#1 – Super affordable to start. A RM500,000 property means we need a minimum of RM50,000 just for down-payment. Well, with a REIT, we do not need 10% down-payment to buy. We can have RM500, RM5,000 or even RM50,000 and we can still choose to start with buying the REIT stock we love. There are many choices, so just choose the one we like the most by knowing which property they manage. In fact, we could just choose to buy as much as we could afford too.

#2 – Liquidity. Unlike buying a property which will take months or at least weeks if we could afford to buy via cash, when it comes to REITs, we can buy today, sell today. We can also buy today, sell 3 months later. The timing is really up to us. Here, we have liquidity when we need them. Suddenly we found something we must buy? Just sell the REIT and get the money to invest / buy in days. This is unlike buying a property which will take many months to complete the buy and another few months to sell.

#3 – Steady dividends. When we rent out our property today, we may not even have positive rental yields. Let’s not even talk about steady dividends. Well, when it comes to REITs, they usually declare as much dividend payout as they could unless they need the money for further acquisitions. So, every year, the investment will give returns. Steady dividends would be something expected too unless some unforeseen circumstances happen to that property which was being managed.

#4 – You ‘OWN’ a commercial property you love to visit. Every time we visit a mall we love, don’t we wish that we are the owner of the mall? Well, with a REIT we would. We can choose to buy that particular REIT and now we can proudly say that we are the “owner” (partial owner is still owner okay…) of a famous and popular mall. So moving forward, we can say I am visiting my mall and contributing to its success too. Haha. Anyway, many property “experts” also tell everyone they own 50 properties etc… Some times, these ownership is just a 1% stake. So, if they could claim, you can claim to own the mall too. 

#5 – Professional management. It’s not possible to be able to manage all our property investments easily unless we are professionals with years of experience. This is why sometimes it’s best to leave all these management to the professionals. Well, when I referred to some of these REIT mangement teams, I do think the professionals who are managing these REITs are experienced people. Usually with years and years of real estate industry experience too. So, their decision will be better than ours too.

Happy deciding.

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