Syarikat Takaful Malaysia Bhd, a provider of general and family takaful, is on the threshold of investing in properties in the UK due to its better structured property leases and higher returns compared to similar investments locally.
The company is now a step closer towards setting up a wholly-owned subsidiary in Labuan International Offshore Financial Centre that will act as a special-purpose vehicle (SPV) to handle its overseas property investment.
The company, a subsidiary of BIMB Holdings Bhd, is expected to get its board’s approval by month-end before seeking Bank Negara Malaysia’s nod for the SPV structure.
Once all the necessary approvals are obtained, the company would then begin to identify buildings to purchase in its maiden foray into overseas property investments, where initially it would focus on the UK property market.
Takaful Malaysia has allocated RM200 million for the UK venture.
This is two-thirds of the amount the company is allowed to invest abroad, which is 5% of its total assets.
Its total assets as at end-2011 stood at RM6.1 billion, according to its 2011 annual report.
When asked on its decision to explore investing in the UK, Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil (picture) said one pull factor there was the better nature of its tenure.
“In the UK, tenure for a lease is more than 10 years, compared to about three years in Malaysia. It can even go up to 25 years.
“The good thing is that there is no early exit. Their leases are more secured compared to ours. Once commited, you must pay for 10 years. If you (tenant) want to move out, you have to find a new tenant. The only risk is if the tenant goes bankrupt,” he told The Malaysian Reserve.
Mohamed Hassan said the internal rate of return (IRR) of investment in the UK is 150 basis points higher (1.5%) than Malaysia. For a local brand new building, it can have an internal IRR of 4%. In the UK, a similar building can command an internal IRR as high as 6%.
Takaful Malaysia will be looking for properties located about 20-30 minutes from London.
Some of the areas that it will explore are Maidenhead, Harlow and Bracknell.
“We are not keen on buying properties in other countries as the sustainability and capital gains may not be as attractive as what the UK has to offer.”
Takaful Malaysia posted a net profit of RM22.58 million, or 13.9 sen per share, for the second-quarter (2Q) ended July 30, 2012, up 36.8% from the same period a year ago.
It also saw higher sales from family takaful and higher investment income.