By THE STAR
COO says lower rates for some floors to fill up office building
PETALING JAYA: Lembaga Tabung Haji (LTH) decided to let out its Grade A office building at below market price as the pligrim fund would rather see it occupied than being empty.
Towards this end, (LTH) chief operating officer Datuk Adi Azuan Abdul Ghani (pic) said dropping rentals for Grade A office space was part and parcel of a free market.
“It’s akin to a sale,” Adi quipped.
“For us it is simple… we rather have someone there as opposed to leaving the building vacant,” he said on the strategy, adding that the offer was for a limited time period and confined to only five floors.
“The RM5 psf package for Menara TH Platinum is for a limited period from May to the end of the year. And it is only for five floors at the lower levels,” he told StarBiz recently.
Adi was commenting on the brouhaha in the property circle when the pilgrim fund began marketing its office space in Menara TH Platinum at Platinum Park, Kuala Lumpur, at RM5 per sq ft (psf) a few months ago. This rate is below prevailing rates for Grade A office space in the city centre, where rentals average between RM7.50 psf and RM8 psf. The move raised the issue as to whether the office oversupply situation in the city was worse than thought.
The pilgrim fund is the owner of the Grade A 38-storey office tower near the Petronas Twin Towers in Kuala Lumpur.
According to Adi, the rate stays until the renewal of the next tenancy agreement.
“We’ve had a lot of site visits. We have secured one tenant who will take up one whole floor and there is high potential of securing three to four more tenants soon.” After the end of the promotion period, rentals, he said, would go back to normal market rates. As to the yields at RM5 psf, Adi declined to disclose, but said it was above the cost of funds.
“I do not see the office supply situation as a glut, maybe others do. The package is a way to make sure that the buildings we’ve bought for investment purposes are occupied and meet the minimum returns.” He revealed that five floors on the upper level had been rented out at RM7.50 psf to a local company.
Adi confirmed that the office tower, which was bought for about RM450mil, has been empty for over a year.
The office space was initially targeted for oil and gas personnel but the oil price decline had left many offices in the vicinity empty. LTH has 7.8 million-8 million sq ft of lettable properties locally. About 7% was vacant, mostly at Menara TH, said Adi.
“The 93% that’s occupied is giving us the returns that meets what management has set,
“At a time when stock markets are volatile, property is being counted on for recurring income.”
Property investments make up 20% of asset allocation from a fund size of RM62bil.
Domestically, it invests in commercial buildings and development projects.
Currently, the pilgrim fund through its property arm, TH Properties, is constructing a 333-room five-star hotel in the vicinity of KLIA. It is slated to open next year.
The RM439mil development is on 17ha and will have a convention centre that can seat 1,500 people. It will also be the pilgrim fund’s new haj complex.
The pilgrim fund is also mulling over a real estate investment trust (REIT).
“We may do a REIT, but it will depend on how the market is. It’s 50:50 whether the idea will take off.”
Besides Menara TH Platinum, the fund’s other local property holdings are the Tabung Haji headquarters in Jalan Tun Razak, TH Selborn in Kuala Lumpur, Menara TH Glomac in Petaling Jaya, Block D of Plaza Sentral and Bangsar South Tower 2A, It also owns several hotels in the country and assets overseas in Saudi Arabia, UK and Australia.
– Malaysia Property News