Kuala Lumpur, 5 December 2024 – Pavilion Real Estate Investment Trust (Pavilion REIT) has unveiled its latest move to solidify its position as a leading real estate investment trust in Malaysia. In a landmark deal worth RM480 million, Pavilion REIT has announced the acquisition of two iconic hospitality properties, Banyan Tree Kuala Lumpur (BTKL) and Pavilion Hotel Kuala Lumpur (PHKL). Both properties are situated in Bukit Bintang, the vibrant heart of Kuala Lumpur’s Golden Triangle.
Details of the Acquisition
MTrustee Berhad, representing Pavilion REIT, signed conditional agreements with Lumayan Indah Sdn Bhd and Harmoni Perkasa Sdn Bhd for BTKL and PHKL, respectively. The acquisition values BTKL at RM140 million and PHKL at RM340 million.
A Vision for Growth
Pavilion REIT’s Chief Executive Officer, Dato’ Philip Ho, shared the strategic intent behind this acquisition, stating, “The acquisitions align with Pavilion REIT’s strategy which contributes positively to the overall portfolio and future growth, while also generating stable and sustainable income for unitholders.”
He added, “Acquiring these iconic hospitality assets reinforces our commitment to delivering premium offerings while capitalising on synergistic opportunities with Pavilion Kuala Lumpur Mall.”
Funding and Financial Structure
To finance the acquisitions, Pavilion REIT has proposed raising between RM264 million and RM552 million via private placement of new units. Alternatively, up to RM246.5 million worth of units may be issued to partially settle the purchase consideration. This funding strategy ensures minimal impact on its existing cash flow while unlocking new revenue streams.
Enhancing Portfolio Diversification
These acquisitions signify Pavilion REIT’s strategic pivot towards diversification. By incorporating hospitality assets into its portfolio, Pavilion REIT aims to reduce its dependency on Pavilion Kuala Lumpur Mall, whose contribution to the total asset value will decline from 61.4% to 58.0%.
Synergies with Pavilion Kuala Lumpur Mall
BTKL and PHKL’s seamless integration with Pavilion Kuala Lumpur Mall is a key highlight. This connectivity allows for shared marketing strategies and operational efficiencies, enhancing both properties’ value proposition.
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Operational Excellence
Managed by Banyan Tree Hotels & Resorts Pte Ltd, BTKL and PHKL are recognized for their exceptional occupancy rates, averaging 83.0% and 82.2% respectively. BTKL boasts 55 luxurious suites and the renowned Banyan Tree Spa, while PHKL offers 325 rooms with world-class event and dining facilities.
A Yield-Accretive Investment
The hotels will be leased back to the current operator under a 10-year agreement with renewal options for up to 20 years. The deal guarantees a fixed annual rental income of RM33.5 million, offering an approximate gross yield of 7.0% annually.
Boosting Malaysia’s Hospitality Sector
This acquisition aligns with the resurgence of Malaysia’s tourism industry. International tourist arrivals are projected to surge to 27.3 million in 2024, up from 20.1 million in 2023.
Dato’ Philip Ho remarked, “The area’s proximity to world-class attractions, premier retail, and excellent connectivity ensures the hotels and Pavilion Kuala Lumpur Mall are well-positioned to benefit from Malaysia’s ongoing promotion of the tourism sector.”
Subject to approvals from unitholders and Bursa Malaysia Securities Berhad, this acquisition will further strengthen Pavilion REIT’s dominance in Malaysia’s REIT landscape. Upon completion, these hotels will constitute 5.5% of Pavilion REIT’s enlarged portfolio, which is appraised at RM8.4 billion.
About Pavilion REIT
Established in 2011, Pavilion REIT is Malaysia’s largest retail-focused real estate investment trust. With a robust portfolio that includes Pavilion Kuala Lumpur Mall, Pavilion REIT is committed to delivering value through strategic acquisitions and operational excellence.
