By THE STAR
ASIA NEWS NETWORK
Property consultants were not surprised by a report that the EPF was finalising its termination agreement that would entail an investment of 1.2 billion ringgit into the 1.35 million-sq-ft mall due to the sluggish retail property market currently.
“Sales performance and occupancy rates of malls even located right in the heart of the city have not been up to expectations,” said an industry observer, adding that the retail property segment is expected to remain challenging over the near term due to the cautious sentiment and incoming retail space.
Another industry observer said Quill City Mall faced a bigger challenge compared to other retail malls because there were more established and bigger malls nearby.
“Malls such as Pavilion and KLCC, which still continue to pull in the crowds, are less than 2km away. Sunway Putra Mall is also less than 2 kilometres away.
“There is also Sungei Wang Plaza and Bukit Bintang, which are just over 2 km 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.”
According to a report, the EPF had scrapped its plans to purchase the Quill City Mall from the Quill Group of Companies as preconditions under the agreement were not met.
The deal was announced in mid-2013 whereby the EPF would invest 1.2 billion ringgit into the mall provided the owners, which is Quill Group of Companies, met several conditions.
Among the preconditions was that construction of the mall would need to be completed within three years and have a minimum 70 per cent occupancy rate at an agreed sustainable minimum commercial yield over the long term. According to reports, the mall had an occupancy level of around 74 per cent in December 2014, reaching 80 per cent at the end of last year.
However it is uncertain if there were long term tenancy with rates that could sustain high yields.
When the proposal was first announced in mid-2013, many viewed it as something that was not viable for the EPF because of the upcoming retail malls in that area.
But the EPF countered that the deal was subject to many conditions and was investment-driven. It would not have to make any payment until all the conditions were satisfied and the asset had achieved a pre-agreed yield.
Quill City Mall is part of the 7.1-acre Vision City integrated development originally undertaken by RHB Daewoo Sdn Bhd. In 2007, Quill Group, via Quill Vision City Sdn Bhd, acquired the abandoned project for 430 million ringgit with a view of reviving it.
According to CBREWTW’s 2017 Property Market report, increasing competition in the retail market will continue with the addition of the completed and incoming supply of close to 4.5 million sq ft of retail space by the end of 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.”
Overall, CBREWTW said rental rates continue to remain flattish with investment prospects remaining firm, driven by the depreciated currency which will favour foreign investment activities in Malaysia.