CapitaMalls Malaysia REIT Management (CMRM), a private company controlled by Singapore's CapitaMalls Asia (CMA), yesterday detailed its RM848 million (S$365.5 million) initial public offering (IPO) of the country's largest 'pure-play' shopping mall real estate investment trust (Reit).

Under the offer, CapitaMalls Malaysia Trust (CMMT) will issue 1.35 billion units, out of which 786.5 million units will be offered to institutional investors in Malaysia and abroad and to Malaysian retail investors.

The Reit's sponsor, CMA, will retain a 33-41 per cent interest in CMMT after the listing on Bursa Malaysia, which is scheduled for July 16.

The units are tentatively priced at RM1.08 each although the final price could change as it will be determined only after a book-building exercise undertaken by the listing's joint global coordinators, CIMB and JPMorgan.

Even so, CMMT's prospectus expects the trust to be the largest Reit on the Kuala Lumpur stock exchange with a market capitalisation of RM1.46 billion on an asset base of RM2.13 billion. It will also be the most liquid with a free float of up to 67 per cent.

Meanwhile, the Employees Provident Fund, Malaysia's largest private pension plan, and Great Eastern Life Assurance have agreed to sign on as so-called 'cornerstone' investors, taking up an aggregate interest of 11.4 percent.

Both have agreed to pay RM1.10 a unit or the institutional price, whichever is lower.

CMMT's listing in Malaysia underscores its Singapore owner's confidence in the future potential of the Malaysian real estate market.

It also demonstrates a confidence that it can grow by acquisition in the country's shopping mall sector which has a fragmented ownership structure: Most Malaysian shopping malls are one-owner controlled.

The listing also coincides with a region-wide resurgence of interest in Reits generally.

The renewed enthusiasm among foreign portfolio fund managers for the asset class could herald serious institutional interest in CMMT.

The Reit's promoters are also confident of CMMT's growth prospects because it can leverage on CMA's strengths.

The Singapore-based firm has a tenant network across 87 retail properties in 48 cities in five countries

Even so, CMMT's yields do not seem overly generous. At RM1.08 a share, prospective investors can expect a yield of 6.9 per cent, compared to the 8-9 per cent average for Malaysia Reits.

'You have to take price appreciation into account as well,' Lim Beng Chee, CMA's chief executive, told reporters at a media briefing in Kuala Lumpur yesterday.

'If you had invested in CapitaMall Trust when we first listed in Singapore in 2002, you would have received returns of close to 10 per cent a year because of unit price appreciation,' he said.

CMRM moved to Malaysia only in 2007 but now owns three prime malls in Kuala Lumpur, Selangor and Penang, which are on average 97 percent occupied. The three malls are: Sungei Wang Plaza, the Mines and Gurney Plaza.

According to the prospectus, CMMT is expected to record distributable income of RM64.7 million for the eight-month period to end-December 2010. For the whole of 2011, this figure is expected to rise to RM101.3.

Source : The Business Times © Singapore Press Holdings Ltd. Reprinted with permission.