Khazanah explains sale of assets in Singapore

(Reuters pic)

PETALING JAYA: Khazanah Nasional has defended its decision to sell assets it owned in Singapore through its subsidiary, M+S Pte Ltd.

Khazanah managing director Shahril Ridza Ridzuan told FMT the capital costs incurred by Duo Galleria and Duo Towers were higher than the returns from rental even if all of the units in them were rented out.

“It makes more sense to sell and reinvest the proceeds for higher returns,” he said. “Our threshold of return is high. So it’s better to sell to another investor that is expecting lower returns.”

It was recently reported that M+S sold off its entire stake in Ophir-Rochor Commercial Pte Ltd, which owns Duo Galleria and Duo Towers, for RM4.7 billion.

M+S, of which Khazanah owns 60%, continues to own the five-star Andaz Singapore, a hotel which occupies 15 floors of Duo Tower and Marina One.

Shahril said Khazanah would still hold on to Marina One.

Selling off Duo Tower, he added, would remove risks from Khazanah’s office portfolio and allow it to reinvest and diversify its holdings.

Former prime minister Najib Razak has criticised the sale, saying it would be better for Khazanah to hold on to the properties and collect rent. He noted that nearly 100% of them were rented out.

Barjoyai Bardai, an economist attached to Universiti Tun Abdul Razak, told FMT he believed the timing of the sale was bad because the properties could fetch higher prices a few years from now.

“But, of course, the sale is justified if the proceeds are reinvested into other holdings that can give better returns,” he added.

He said it was unlikely that Khazanah would get a chance to own such strategic assets in Singapore again without paying premium prices.

“I don’t think Singapore would be open to allowing us to own such prime land again.”

The land for the Duo properties was gained from a land swap.

Yeah Kim Leng of Sunway University’s Business School said Khazanah’s decision should be seen as a move to reallocate portfolios and the sale should be judged according to whether it met the fund’s objectives and performance targets.