MARC Ratings has affirmed its ratings of AAA, AA, A and MARC-1 on Trusmadi Capital Sdn Bhd’s Issue 1 of RM235 million Class A, RM40 million Class B, and RM25 million Class C Medium-Term Notes (MTN) as well as RM300 million Commercial Papers (CP). The rated MTN and/or CP issuances are subject to a combined issuance limit of RM300 million. The ratings outlook is stable.
The ratings reflect the loan-to-value (LTV) ratios of the different MTN/CP classes in accordance with MARC Ratings’ benchmarks of the respective rating bands. The LTV ratios of Class A MTN, Class B MTN, Class C MTN and CP are 42.8%, 50.1%, 54.6% and 54.6%, and are derived by valuing the collateral property Menara Shell using an income capitalisation approach. Under this approach, Menara Shell is valued at RM549 million, representing a 16.5% discount from its market value of RM658 million as ascertained by an independent valuer as at December 31, 2021.
The 33-storey Menara Shell, which has a total net lettable area (NLA) of 557,458 sq ft, recorded an increase in average occupancy rate to 99% as at end-June 2022 (end-2021: 93%). Its anchor tenant, Shell People Services Asia Sdn Bhd, accounted for a substantial 54.7% of total NLA. Tenant concentration risk is mitigated by the long-term tenancy agreement with the anchor that provides for rental claims for the remaining unexpired term of the leases in the event of early termination. MARC Ratings also considered the good track record of Trusmadi Capital’s parent Sentral REIT in managing tenancies which has been a key factor supporting Menara Shell’s strong occupancy level.
For 1H2022, Menara Shell recorded an average rental rate of RM8.11 psf (2021: RM8.15 psf). For 2022, net operating income (NOI) is projected to be marginally higher at RM43.0 million due to lower maintenance cost. For 2023, it is projected to increase to RM46.0 million mainly from higher rental income as a major tenant increased its NLA during the year. However, MARC Ratings has maintained the stabilised NOI at RM41.2 million for its valuation of Menara Shell given subdued demand for office space in Kuala Lumpur. As of end-August 2022, the amount outstanding under Issue 1 stood at RM260 million, comprising RM20 million Class A MTN and RM240 million CP.