SINGAPORE-LISTED healthcare firm International Healthway Corp (IHC) is finalising negotiations with Asian Retail Mall Fund II (ARMF II) to acquire Island Plaza, which was once an iconic shopping mall on Penang island, according to sources.
It is learnt that the neighbourhood mall is fetching an estimated price of RM115 million.
IHC (fundamental: 0.8; valuation: 0.0) is said to be keen on buying Island Plaza mainly because the group wants to spread its wings in Malaysia. Indeed, it is in the process of setting up its business in Kuala Lumpur.
IHC is expected to convert the mall into a wellness centre catering for women and children.
When contacted, IHC confirmed that it is working to expand into Penang through a mall acquisition, but it decline to reveal the vendor or the mall.
“We are in negotiations with a vendor to acquire a retail mall on Penang island. Due to reasons of confidentiality, we cannot formally mention the name of the mall and the terms of the acquisition. We have not closed the deal yet, and there is still a small chance that it may not go through,” IHC vice-president for medical real estate (SEA) Liew Ed Mun tells The Edge in an email.
“We are always exploring opportunities in Malaysia and the region, and that includes Penang. When there is a suitable opportunity, we will certainly look at it. Our plans in Penang are still being finalised at this juncture.
“We will reposition the mall with a women and children-centric theme for all the medical and retail components.”
He adds that it will be similar to its Kuala Lumpur city centre project.
IHC’s core businesses are providing healthcare services and investing, managing and developing healthcare assets, including medical real estate, healthcare-related assets and integrated mixed-use developments.
Should the deal go through, IHC is expected to invest more than RM150 million on the asset (including the purchase price and costs of refurbishment and medical equipment). It is understood that IHC’s plan is to have a mix of medical suites, medical-related and general retail components.
In Kuala Lumpur, IHC is building a 33-storey mixed-used development in Jalan Kia Peng, which will feature specialist medical suites, retail space and serviced residences. It was reported that the project, with a gross floor area of 47,162 sq m, will be completed in 2017.
The group has appointed Marriott International Ltd as the manager for its executive apartments. It bought the parcel of land located in the vicinity of Petronas Twin Towers in 2011 for RM81.36 million.
Meanwhile, sources say the ARMF II has been looking for a buyer for Island Plaza, located in Jalan Tanjung Tokong, in the past two years. ARMF is a Pan-Asian real estate fund managed by Pramerica Real Estate Investors Ltd, the real estate investment management and advisory business of Prudential Financial Inc of the US.
In August 2007, the fund bought the retail portion and unsold offices in Island Plaza for RM120 million from Belleview Group. Reports said ARMF had pumped in RM40 million to refurbish the mall back then. The building also includes an eight-storey block, called One One Eight@Island Plaza, which comprises small offices/home offices.
The acquisition of Island Plaza was part of Pramerica’s programme to invest RM1.1 billion in four shopping centres. The other three were greenfield projects — SStwo Mall in Petaling Jaya, Selangor, Ampang Mall and 1st Avenue in George Town, Penang.
A combination of factors is said to have contributed to Island Plaza losing its appeal among retailers and shoppers. Among them is that it is a strata property, hence there are difficulties in managing tenancy portfolio. Furthermore, shoppers are drawn to new and larger malls nearby, such as Gurney Plaza Extension and Straits Quay.
Repositioning Island Plaza is possibly a move in the right direction and may turn around its fortunes. After all, Penang is well known for its medical tourism.
In 2013, some 770,000 foreign patients contributed US$200 million (RM716 million) in revenue to the country. Traditionally, Penang accounts for over half the country’s medical tourism earnings.
Pramerica’s funds have been trying to divest their assets. SStwo Mall is expected to undergo a makeover after failed attempts to dispose of it. It is understood that it is likely to be partially demolished and its retail space reduced. It will also see the addition of serviced apartments.
Another Pramerica-linked mall that was put up for sale was Seremban Prima, previously known as Seremban Parade. In 2011, TMW Asia Property Fund 1, a German-based property fund also managed by Pramerica, tried to sell three malls — Klang Parade, Ipoh Parade and Seremban Parade — to ARA Asia Dragon Fund (an affiliate of Hong Kong billionaire Li Ka-shing’s Cheung Kong Group). However, the deal to dispose of Seremban Parade fell through.
TMW acquired the three malls from the Lion Group for an estimated RM340 million in 2005.
Then, Pramerica partnered Allstones Group Asia Sdn Bhd to undertake an asset enhancement exercise to reposition Seremban Parade. Some RM70 million (including the retail tenants’ portion) was invested and the exercise was completed in the third quarter of 2013. It was renamed Seremban Prima.
In 2006, Pramerica bought Kinta City Shopping Centre and last September, it acquired KL Festival City from Parkson Holdings for RM349 million.
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This article first appeared in The Edge Malaysia Weekly, on January 19 - 25 , 2015.
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