Tradewinds mulls setting up property trust

By New Straits Times

TRADEWINDS Corp Bhd, which recently reorganised its business to focus on its hotel and property businesses, is weighing the option of setting up a real estate investment trust (REIT) possibly on a joint venture basis.

"Doing a REIT is a possibility on our property side," chairman Datuk Seri Megat Najmuddin Megat Khas said.

"We have been approached by a few managers to spin off a REIT and approached by parties to do it on a joint venture basis," Tradewinds Hotels and Resorts Sdn Bhd's chief executive officer Shaharul Farez Hassan said.

Shaharul added that the properties likely to be injected into the REIT vehicle are the non-hotel commercial properties such as the 657,866 sq ft Menara Tun Razak and 60,153 sq m Komplex Antarabangsa which have an estimated value of RM350 million.

The rental for the former is RM3.80 per sq ft and the latter is RM4.60.

In a recent interview with Business Times, Shaharul said that while the company's plan to set up the REIT instrument is still preliminary, it is an option the firm is looking into.

"As a rule of thumb, we want to have a minimum asset value of RM500 million before we do a REIT," he said, adding that at this point it does not have the said portfolio.

"If we do a REIT, we cannot do it by ourselves ... either we build more or we do it on partnership," Shaharul said.

"The ones who have approached us are those who also have about two or three buildings, he said.

"Together there would be two promoters with the required critical mass."

The company owns some 10 hotels including Crowne Plaza Mutiara Kuala Lumpur, Hotel Istana, Hilton Petaling Jaya and Mutiara Johor Baru.

Asked why it does not want to inject one of the hotel components into the REIT to achieve the RM500 million asset target, Shaharul said the group does not see value in pumping in the hotel and then to underwriting the yield return on the property.

Tradewinds recently split its plantation and sugar refining business from the group to focus on its hotel and property businesses.

On the likely date when the REIT will take off, Shaharul said it will depend on timing, including whether the market is willing to pay a premium for it.