EPF to buy more commercial properties

By sharen@nstp.com.my

MALAYSIA’S biggest pension fund, the Employees Provident Fund (EPF), wants to buy more commercial properties to help improve returns and boost its property portfolio.

Its property investment ballooned to RM1.65 billion at the end of June 2006 but represents only 0.6 per cent of the fund’s total size of RM272.24 billion in the period.

The fund can spend up to RM14 billion, or some 5 per cent, of its assets to invest in properties. However, it may also raise funds by listing a property trust to help part-fund more property acquisitions.

“EPF is also looking at buying more commercial buildings in the country to ride on the tenant rental.

This is the direction that it wants to move into, and it therefore requires additional funds for this purpose.

“It has not evaluated its potential fund size but the initial round will be in excess of RM2 billion to last between two to three years. It may double from there,” said the source.

Another source said EPF plans to launch a RM2 billion real estate investment trust (REIT) within two to three years.

It is believed that the plan will include a mixed REIT, and EPF would most likely include a string of properties like The Mall shopping complex and the adjoining office towers known as Putra Place at Jalan Putra in Kuala Lumpur, which it had acquired for over RM400 million.

It could also include the Giant supermarket and hypermarket chain and Wisma KFC at Jalan Sultan Ismail.

The REIT could post distribution yields that range between 7.15 per cent and 7.35 per cent.

“When such a REIT is formed, it could attract a lot of foreign interest due to the type of properties owned by EPF, and because of its prudent management,” said a source.

As of 2004, the EPF owned 45 properties nationwide.

Apart from its own office buildings in various states, EPF also owns the Sogo shopping centre at Jalan Tuanku Abdul Rahman, Bangunan Kassim & Chan in Kuala Lumpur, as well as shophouses, apartments, bungalows and land nationwide.