“Prime office assets in Australia currently yield approximately 6% to 8% annually,” Teow said.

KUALA LUMPUR: EWI Capital Bhd (formerly Eco World International Bhd) has announced a major strategic pivot toward investment holding, committing A$100mil (RM274.77mil) as the anchor investor in the TrustCapital Australian Office Fund No 3.

The investment, made through its wholly-owned subsidiary EWI Investment Holdings Ltd, marks a decisive step for the group to generate nearer-term, recurring income and strengthen its financial resilience. The fund, managed by Singapore-based TrustCapital Advisors Investment Management Pte Ltd (TCA), is established to acquire prime commercial office assets across major Australian capital cities.

The TrustCapital Fund No 3 aims for a total equity raise of up to A$500mil. Its mandate is to invest in prime office assets located in Sydney, Melbourne, Canberra, Brisbane and Perth.

EWI Capital is targeting an Internal Rate of Return (IRR) of approximately 10% per annum over the Fund’s planned 8-year tenure. The decision to partner with TCA is based on the manager’s strong performance track record; TCA’s earlier vehicles (AOF 1 & 2) achieved IRRs ranging from 11% to 24% upon divestment in 2017.

Rationale: Stable yields and market upside

Management views the Australian office sector as presenting a compelling investment prospect, supported by strong fundamentals and improving market conditions.

EWI Capital president and chief executive officer Datuk Teow Leong Seng explained the timing of the pivot. “Prime office assets in Australia currently yield approximately 6% to 8% annually,” he said. “With the use of gearing, we are confident of achieving overall returns in excess of our base target IRR of 10%.”

Teow highlighted several key factors driving the group’s optimism:

• Tapering supply: Elevated construction costs are limiting the supply of new office buildings, leading to an optimistic medium-term outlook for office demand recovery.
• Interest rate impact: Easing inflationary pressures have led the Reserve Bank of Australia to cut its cash rate. Dato’ Teow believes potential for further rate cuts exists, which could provide significant additional upside through capital appreciation.
• Accelerated income recognition: From an accounting standpoint, the investment holding strategy will accelerate income recognition, as rental revenues can be recognised immediately upon asset acquisition, strengthening the Group’s financial performance.

To align with its new strategic direction, EWI Capital is undertaking an internal restructuring. This includes renaming its subsidiary, EWI Marketing Sdn Bhd, to EWI Management Sdn Bhd (EWIM) to underscore the new focus on identifying, acquiring, managing and optimising its investment assets.

Crucially, the group is also in the process of assessing its existing property portfolio, including the need for impairments, to immediately realise the value of undeveloped land sites.

“Our ultimate objective from this whole exercise is to raise cash, clean up our balance sheet, and establish a clear pathway for EWI Capital to return to profitability as soon as possible,” Teow remarked. He confirmed that capital unlocked from divesting certain undeveloped projects will be reinvested to take advantage of the current window of attractive, risk-adjusted returns in the Australian office sector.

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