QUILL Capita Trust has bought a Tesco building in Jelutong, Penang, from property developer IJM Properties Sdn Bhd for RM132 million, bringing its total asset size to RM796 million.

Chief executive officer of the trust's manager Chan Say Yeong said the purchase is expected to provide an initial net property yield of 6.3 per cent when the deal is completed by the fourth quarter of this year.

Speaking in Kuala Lumpur yesterday, he said the purchase will be funded mostly with debts and a small portion of internal funds. A bridging loan has been secured, he said, but the bank loan will be refinanced later with bonds to lock in fixed rate and long-term funding.

Quill Capita is already ahead of its own target of a RM750 million fund size by year-end, Chan said, and whether another purchase will come this year may depend on the performance of the stock market. A stronger market will allow the fund to place out new units to raise money for future buys.

Chan said both of the trust's sponsors, the Quill Group and CapitaLand, have strong asset line-ups for the fund, with values ranging from RM100 million to RM400 million each.

"But before buying any big chunky assets, we will first need to raise the equity ratio so as not to breach the gearing limit. The market is weak now," Chan explained.

The trust's gearing is set to rise to about 38 per cent after the Tesco Penang deal, from 25 per cent at present. Gearing of a property trust is capped at 50 per cent under Securities Commission's rules.

It is Quill Capita's aim to keep its gearing level at around 35 to 40 per cent over the long term so that it can react faster when the right acquisitions come by, Chan said.

IJM Corp Bhd chief executive officer Datuk Krishnan Tan Boon Seng said after the Menara CIMB and the Tesco building, the firm may sell some of its purposed-built commercial assets. A few prospective sales may come from Penang, Kuala Lumpur and Petaling Jaya, he said.

As an infrastructure and property developer, the group has no plans to hold investment properties.

"We don't want to be there collecting rents. We want to move on and build," he said. The property trust market has provided it a ready exit for properties that it has nurtured, he said.

The sale of Tesco Penang will let IJM raise money to focus on other bigger project such as the 61-hectare waterfront city development opposite the Tesco Penang called The Light.

Built on a freehold land with a net lettable area of 275,020 sq ft and 1,050 car park bays, the Tesco building is located in the district of Jelutong which is undergoing significant urban redevelopment.