Sunway REIT’s (SREIT) announced that it is acquiring 163 Retail Park, a freehold prime retail mall centrally located at Mont’ Kiara for RM215m. The acquisition price appears to be fair, given fair value for the asset is about RM225m and was valued as high as RM270.5m last year when it was proposed to be disposed in a related-party transaction to ALX Asset Bhd. Currently, the retail park is 94% occupied with over 100 tenants. The asset is expected to be yield-accretive and is presently estimated to have initial net property income yield of about 6.5% and weighted average lease expiry of about 1.3 years. No change to our earnings estimates pending completion of the deal which is expected by 1H24. Given the limited share price upside, we maintain our Neutral call with TP unchanged at RM1.55.

• Property details. 163 Retail Park is a stratified seven-storey retail mall and is the centrepiece component of a mixed integrated development known as Kiara 163. The asset has a gross floor area of approximately 76,146 sq. m., which comprises a net lettable area (NLA) of approximately 23,740 sq. m. and 1,085 car park bays. Currently, the retail mall is anchored by Jaya Grocer, and supplemented by a diverse range of food and beverages outlets, as well as lifestyle and entertainment offerings which among others include health and beauty services, cinema, ice skating rink. The proposed acquisition will be fully funded by SREIT’s existing debt facilities and is targeted to be completed by the second quarter of 2024. Upon completion of the deal, the Group’s assets under management will increase to RM9.1bn.

Source: PublicInvest Research - 30 Jan 2024