KUALA LUMPUR (April 15): AmFIRST Real Estate Investment Trust (AmFIRST REIT) said the acquisition of Mydin Hypermall in Bukit Mertajam, Penang is expected to help lift the distribution per unit (DPU) by 0.34 sen per unit per year.

Am ARA REIT Managers Sdn Bhd chief executive officer Wong Khim Chon said this is based on lease terms which include an initial net property income yield of 6.5% for the first five years.

The REIT is acquiring the Mydin Hypermall from Mydin Mohamed Holdings Bhd for RM250 million cash. The Edge Financial Daily had on Tuesday (April 14) reported that the store is at the tail end of construction and is expected to commence operations in the third quarter of this year.

Wong said following the acquisition, which is expected to be completed in July this year, the trust will look to pare down its gearing, as it is close to hitting its limit of 50% of assets. AmFIRST REIT (fundamental: 0.6; valuation: 2.7) will fund the acquisition through bank borrowings.

Wong said the gearing level of the REIT will rise to 42.8%, from 32.65% as at March 31, 2014.

"There will not be enough headroom for further expansion," he told reporters, after the signing ceremony of the proposed acquisition today.

He said the REIT can choose to increase its units via a private placement or rights issue to pare down its borrowings.

"But we have yet to firm up what we are going to do," he added.

Upon completion, the hypermall will be leased to Mydin Mohamed for 30 years, with the rent to be reviewed every five years.

AmFIRST REIT shares closed unchanged at 94 sen, bringing a market capitalisation of RM645.22 million.

(Notes: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)