Malaysia’s Employees Provident Fund (EPF) may discontinue its plans to purchase Quill City Mall in the Kuala Lumpur City Centre (KLCC) for RM1.2 billion.
According to media reports, EPF and the seller, Quill Group, are currently mulling their next move, which may include the termination of the deal, as preconditions of the sale and purchase agreement were not met.
Originally, the fund announced in mid-2013 that it plans to acquire the 1.35 million sq ft mall as long as the seller fulfils a number of conditions. These include completing the shopping centre in three years, achieving an occupancy level of at least 70 percent, and its minimum commercial yield should be sustainable over the long term.
In December 2014, Quill City Mall’s occupancy hit 74 percent before it further increased to 80 percent as of December 2016. While the EPF didn’t specify which condition was not achieved, it is uncertain if the long term tenancies in the mall could continue to generate high yields.
Quill City Mall forms part of the 7.1-acre Vision City integrated project that was originally started by RHB Daewoo Sdn Bhd. It was later abandoned, but was revived by Quill Group’s unit Quill Vision City Sdn Bhd after it spent RM430 million to purchase it.
Meanwhile, the issues plaguing the country’s retail property were highlighted after news broke out that the EPF may axe its plans to purchase the mall, with experts saying they were not surprised by the story, amidst an oversupply of retail space.
“Sales performance and occupancy rates of malls even located right in the heart of the city have not been up to expectations,” said a market watcher, adding that the sector’s outlook remains weak over the near term, given the cautious sentiment and large pipeline.
Another expert said the problem is more acute in Quill City Mall compared to other shopping centres due its proximity to larger and more established malls, like the nearby Pavilion and Suria KLCC, which continue to attract crowds. Sunway Putra Mall is also close by.
“There is also Sungei Wang Plaza and Bukit Bintang, which are just over 2km away from Quill City Mall and have been established for years. Today, there is an abundance of retail space within a close proximity and people are spoilt for choice.”
In fact, CBRE and WTW forecast that competition in the retail property market will become more intense after nearly 4.5 million sq ft of retail space were completed in end-2016.
“The uncertainties in both the global and local economic outlook might cut consumer spending, which may later affect shopper traffic and retail sales, particularly for those retail malls located in less strategic locations.”
“However, well-located malls concentrated within Kuala Lumpur, especially the KLCC and Bukit Bintang areas, remain appealing to some international retailers,” they added.
Image sourced from gowhere
Diane Foo Eu Lynn, Senior Content Specialist at PropertyGuru, edited this story. To contact her about this or other stories email diane@propertyguru.com.my
