IOI Properties Proposes REIT Listing to Unlock RM4.62 Billion in Cash Proceeds
PUTRAJAYA: IOI Properties Group Berhad (IOIPG) has announced plans to list a real estate investment trust (REIT) in Malaysia, a move expected to unlock RM4.62 billion in cash proceeds and strengthen its balance sheet.
On April 10, the group outlined a proposal to inject assets worth RM7.58 billion into the new vehicle, to be known as IOIPG REIT.
Diversified Asset Portfolio
The REIT will comprise a mix of retail, hospitality, and office assets, including flagship properties such as IOI City Mall, Putrajaya Marriott Hotel, Le Méridien Putrajaya, Moxy Putrajaya, W Kuala Lumpur, Courtyard by Marriott Penang, IOI City Towers, and the Puchong Financial Corporate Centre Towers.
The transaction will be funded through the issuance of 5.5 billion new units at an indicative price of RM0.90 per unit, alongside RM2.65 billion in cash consideration. Based on this pricing, the REIT is expected to debut with an estimated market capitalisation of approximately RM4.95 billion.
Offering Structure and Timeline
Under the proposed structure, IOIPG plans to place out up to 2.2 billion units, or roughly 40% of the REIT. This includes 684 million units for retail investors and 1.52 billion units for institutional investors.
The listing is targeted for completion by the fourth quarter of 2026. Post-listing, the REIT’s gearing is projected to stand at around 35%, with part of the acquisition funded through medium-term notes.
Capital Recycling to Reduce Debt
Analysts at CGS International view the proposal positively, noting it marks a key milestone in IOIPG’s capital recycling strategy.
Of the RM4.62 billion in expected proceeds, approximately 66% will be used for debt repayment, while the remaining 34% is allocated for working capital and capital expenditure.
The move is expected to improve IOIPG’s net gearing ratio to 0.76 times, down from 0.9 times currently, while generating annual interest savings of approximately RM77 million. In addition, the asset injection is anticipated to unlock fair value gains of around RM576 million.
Retention Stake and Yield Expectations
IOIPG is expected to retain a 60% stake in the REIT post-listing. However, CGS noted that a lower retained stake could have accelerated deleveraging by generating higher upfront cash proceeds.
The REIT is also expected to offer a dividend yield of at least 6% per annum to attract investor interest, particularly in a more competitive yield environment.
Outlook Remains Positive
CGS maintained its “Add” call on IOIPG with a target price of RM4.08, citing improving recurring income and a stronger balance sheet following the REIT monetisation.
Potential catalysts include further clarity on the REIT listing and stronger-than-expected property sales, while risks include weaker valuations and policy changes affecting the property markets in Malaysia and Singapore.
Overall, the proposed REIT listing is seen as a significant step in unlocking asset value and enhancing IOIPG’s financial flexibility.