IOIPG group chief financial officer Leow Weng Seong says the group acknowledges the concerns, but emphasises that the asset is a “high-quality, income-generating office property” capable of delivering stable recurring income.
“Over the medium term, the group is targeting to bring gearing down to a more comfortable level of below one time within five years, subject to market conditions and the execution of these deleveraging initiatives,” he says in an email reply to The Edge Malaysia.
Currently, IOIPG’s net gearing of 0.9 times is the highest among large-cap property developers on Bursa Malaysia, significantly higher than diversified Sunway, which has a net gearing of 0.5 times.
“With improvements to the asset and anticipated rental increases following review cycles, the acquired asset is expected to become self-sufficient in supporting its own operations and financing costs over time,” he adds.
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To recap, IOIPG announced in a filing early last week that it had entered into an agreement to acquire 100% of Asia Square Tower 2, located in the Marina Bay CBD, from CapitaLand Integrated Commercial Trust. The proposed acquisition involves a 46-storey Grade A office tower with ancillary retail space, boasting a net lettable area of 773,460 sq ft.
The acquisition follows a put-and-call option agreement signed with CapitaLand Integrated Commercial Trust for the office tower.
Leow explains that the use of a put-and-call option agreement allows IOIPG to proceed with the acquisition in a careful and structured manner, as the transaction will only proceed after approval of the Additional Conveyance Duty tax waiver from the Inland Revenue Authority of Singapore, thereby avoiding any potential tax exposure to the group.
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“Under this structure, once the put-and-call option is exercised, both the seller and the purchaser are deemed to have entered into the sale and purchase agreement (SPA). Accordingly, the effective date of the SPA will be the date on which the option is exercised,” he says.
Notably, the property developer and investment group has been on an acquisition spree in recent years, resulting in rising debt levels.
In particular, it made headlines for acquiring Tropicana Corp’s assets, including the five-star W Kuala Lumpur Hotel at the end of 2023 for RM270 million, followed by Courtyard by Marriott Penang for RM165 million. IOIPG also acquired Tropicana Gardens Mall for RM680 million in July 2024 and rebranded it as IOI Mall Damansara.
Then, in June 2025, it acquired the remaining 50.1% stake in the South Beach mixed-use development in Singapore for $834.2 million, gaining full ownership of the asset.
Leow says the group has a clear plan to progressively reduce its gearing through a combination of capital recycling initiatives, including monetisation via the Malaysia REIT, and proceeds from ongoing land sales and property development activities, all of which will contribute to debt reduction.
“We will also evaluate opportunities to monetise parts of our Singapore investment property portfolio at the appropriate time, taking into account the prevailing market conditions and potential valuation uplifts arising from operational and leasing performance improvements,” he adds.
In an April 15 report, Hong Leong Investment Bank Research (HLIB Research) comments that IOIPG is “incubating” a significantly larger portfolio of prime Singapore assets, with a combined value that is three times that of its Malaysia REIT portfolio.
“Once the Malaysia REIT is listed, we expect market attention to shift towards the monetisation of its Singapore portfolio, which could serve as the next major re-rating catalyst,” it says.
HLIB Research outlined three potential ways IOIPG could monetise its Singapore portfolio: a Singapore REIT listing by 2029; listing South Beach first and later injecting IOI Central Boulevard Towers into it; or establishing a private commercial real estate fund.
The local research firm remains positive on the group’s latest acquisition, stating in its April 21 report that IOIPG’s Singapore assets under management is expected to increase to around $10 billion — four times the size of its upcoming Malaysia REIT portfolio.
“The acquisition should allow IOIPG to gain market dominance and control over marquee assets in the Marina Bay precinct. All eyes will now be on how the group monetises this portfolio of assets, which would serve as the stock’s next major re-rating catalysts,” it says.
HLIB Research has a “buy” call on IOIPG, with a target price of RM5.20. Over the past year, IOIPG’s share price has more than doubled, closing at RM3.87 ($1.25) last Thursday, valuing the group at RM21.31 billion — making it the country’s largest property company by market capitalisation.
Meanwhile, CGS International Securities is “neutral” on the Asia Square Tower 2 acquisition, as it believes the incremental recurring income from the prime office asset may be offset by concerns over a more leveraged balance sheet.
It estimates that the asset could contribute an additional RM65 million to recurring net profit in the financial year ending June 30, 2027.
CGS International also notes that it had previously expected IOIPG’s net gearing to improve from 0.9 times as at end-December 2025 to 0.75 times after the Malaysia REIT listing, adding that deleveraging may be slower than anticipated.
The research house maintains an “add” call on the stock, with a target price of RM4.08.
This story first appeared in the April 27 issue of The Edge Malaysia
