NOTHING SUSPICIOUS AT ALL: EPF defends RM1.2bil mall purchase

The Employees Provident Fund has reacted to reports over its decision to purchase a retail mall in Kuala Lumpur, saying it was not venturing into an alien sector as claimed by some but was open to exploring good investment opportunities in real estate.

"The EPF is always committed to adopt a prudent and low risk investment policy backed by thorough research in accordance with investment best practices to ensure that members’ savings are protected," EPF's public relations general manager Nik Affendi Jaafar said in his statement to Harakahdaily.

Affendi clarified that the pensions fund's purchase of Quill City Mall on Jalan Sultan Ismail was not the first such investment as it already invested or owned other retail stores including the Sogo department store and Giant hypermarkets.

He further said that the latest retail investment was as a co-owner of Paradigm Mall in Petaling Jaya, adding that EPF has good exposure in real estate investment trusts and developers.

'Value yet to be determined'

Yesterday, PAS research head Dr Dzulkefly Ahmad, in response to news that EPF was buying the mall for RM1.2 billion, questioned the decision saying it had not been EPF's forte to venture into the private properties market.

"There is also a danger of overcrowding and reducing liquidity in the local market if EPF continues to invest in the local properties especially by competing and borrowing local loans," Dzulkefly told Harakahdaily.

But EPF said the final value would be determined only after the mall commenced operations, saying the reported sum of RM1.2 billion was "the maximum payable but will only be paid if all the performance targets are met within the agreed timeframe."

"The EPF assumes no liability for the debts of the development, including the RM700 million papers issued recently," it added.

The mall will be located in what used to be Vision City, widely seen as a 'white elephant' in the capital, which is now being redeveloped as Quill City.

Affendi further said that EPF was only buying the Quill Mall and not the other projects which will form part of Quill City.

"The EPF investment in the Quill Mall is still conditional upon physical completion of the mall according to the specifications agreed within three years. In addition to the completion of the mall, a minimum of 70 per cent occupancy at an agreed sustainable minimum commercial yield over the long-term must be met.

"We would like to emphasize at this juncture, no payment has been made to the development until all the conditions that agreed are fulfilled and the asset achieves the agreed yield," he added.

London properties

On Dzulkefly's criticism of EPF's 2011 acquisition of three London properties through a £300 million loan, Affendi said the fundraising was not directly undertaken by EPF but by its "special purpose vehicle" that houses its properties in the UK.

"The facility is a refinancing of our first three UK property purchases that we had previously acquired via 100% cash. The main objective of the facility is to provide natural hedging on our GBP exposure while being an essential part of our overall tax and yield planning," he explained.

Affendi assured that the EPF, while continuing to diversify its investments, would invest in real estate-related projects "as long as the investment is consistent with our investment objectives of achieving a positive income stream in a long run".

- Harakahdaily