More REITs in the pipeline

Stories by ANGIE NG - STAR Online

MALAYSIA is on its way to host more real estate investment trusts (REITs) within a short span of just over a year since Axis-REIT became the first REIT to be listed on Bursa Malaysia in August last year.

The number of local REITs (M-REITs) is expected to double to 10 with another four to five lined up for listing on the local bourse by the end of this year.

With the growing number of REITs, investors now have the opportunity to participate in a broader asset class as these REITs represent the various sectors of the property market from office buildings to retail, hotels, plantations and industrial/logistics.

The five listed M-REITs so far - Axis-REIT, Starhill REIT, UOA-REIT, Tower REIT and Al-'Aqar KPJ REIT, are a commendable mix of office and industrial property (Axis-REIT) to retail and hotel (Starhill REIT), office buildings (UOA and Tower REITs) and healthcare (Al-'Aqar KPJ REIT).

Besides the array of commercial buildings, other potential REITs assets are infrastructures, resorts, serviced apartments, theme parks, ports, airports, warehouses and utility assets.

An analyst at Hwang-DBS Vickers Research said the country’s REIT industry was still relatively new with plenty of opportunities to be tapped.

“Considering that at least half the number of real estate assets in Australia belong to REITs, our market can still accommodate more REITs going forward.

This will improve the market depth and provide more trading avenues for investors,” he told StarBiz.

The Securities Commission has recently granted approval for Glory Blitz Industries Sdn Bhd to set up Atrium REIT, an industrial asset-focused REIT.

Targeting a listing by December, the company has proposed to inject three warehouses and a specially built office and factory complex worth a total of RM160mil into Atrium REIT.

The properties with net lettable area of some 75,220 sq m are located in Shah Alam, Puchong and Rawang.

In the plantation sector, the Boustead group has proposed to set up an Islamic plantation REIT to be known as Al-Hadharah Boustead REIT.

The plan involves the disposal of nine oil palm estates and two palm oil mills for RM500mil, which will be satisfied by the issuance of 270 million new units by Al-Hadharah and RM230mil in cash.

In the retail front, Hektar-REIT will showcase two retail malls - Subang Parade and Mahkota Parade.

Hektar-REIT, which will be managed by Hektar Asset Management Sdn Bhd, expects to raise RM176mil from the listing exercise.

Meanwhile, the Government has made two REITs proposals - a bumiputra property trust foundation, Yayasan Amanah Hartanah Bumiputera, with an initial capital of RM2bil to purchase commercial properties in major towns and AmanahRaya REIT.

AmanahRaya REIT is expected to kick off with eight properties worth RM337mil.

The asset portfolio includes two office towers at South City Plaza, Wisma UEP, SEGi College, Permanis factory and Wisma Amanah Raya (CIMB Building).

The REIT is expected to issue 184 million units at 94 sen each at an expected annual gross dividend yield of 6.9%.

Standard and Poor’s said the Malaysian REIT market (including AmanahRaya) has a small but growing portfolio, relative to global and Asian peers, such as those in Singapore and Hong Kong.

“However, there is income and cash flow stability from AmanahRaya's long leases and its support from the Malaysian government provide a high degree of certainty on quality growth,” an analyst at S&P said.

Although industry observers and investors would like to see more assertive and proactive actions been undertaken to expand the REITs industry, caution has cropped up as to the need to distinguish the real REITs players from sponsor companies who want to cash out.

“Some of the new and proposed REITs appear to be value-unlocking exercises for their parents.

“We are also uncomfortable with the potential constraints from exposure to a single tenant,” a CIMB analyst said.

There is also a difference between asset acquisition from third parties and from sponsor companies - the former being better regarded as it shows impartiality and better prospects for yield accretion.

“Overall, Malaysia needs to have larger and more aggressively managed REITs to attract investment in the sector.

“While tax breaks are positive for the fledgling industry, the REITs need to undertake more aggressive value enhancing measures to sustain long-term appreciation in value,” the analyst added.