New KPJ REIT to get RM250m Islamic funding

AL-'AQAR KPJ REIT will get RM250 million in Islamic financing arranged by AmInvestment Bank Bhd and Kuwait Finance House Malaysia Bhd (KFH) to buy nine properties, mainly hospital buildings, across the country.

The financing will raise its total debt to 45 per cent of shareholders fund, considered high and just below the 50 per cent limit allowed for a REIT under the rules.

However, it has no immediate plan to sell more shares to pare down the gearing, Damansara REIT Managers Sdn Bhd director Datin Paduka Siti Sa'diah Sheikh Bakir said. The company is manager of the REIT.

"This deal shows that the banks are still lending, especially to corporates like KPJ, whose cashflow is steady and strong," KFH managing director Datuk K. Salman Younis said after signing an agreement to seal the deal in Kuala Lumpur yesterday.
The Islamic financing will help pay for six hospital buildings, one nursing college, a hotel and an office tower that cost RM397 million in total. The REIT will pay for the balance by issuing new shares to its parent KPJ Healthcare Bhd.

Both AmInvestment and KFH will fully underwrite the financing, but they hope other banks will also take up some portion. As it is, the deal has received good response from several other Malaysian lenders, AmInvestment's head of debt capital markets Soo Seohan said.

The profit-sharing rate will be decided closer to the draw down date, which is expected to be around April when the buildings are ready to be sold into the REIT.

KPJ REIT will probably pay around 5 to 5.5 per cent, slightly higher than what it used to pay previously, but still lower than what others pay for financing in the market, senior vice-presi-dent of Johor Corp Kamaruzzaman Abu Kassim said. Johor Corp is the parent of KPJ Healthcare. Kamaruzzaman said the REIT can get better rates from lenders due to the certainty of its cash flow.

By Business Times (by Chong Pooi Koon)