Stewart Labrooy
KUCHING: Malaysia will be the fourth most liquid real estate investment trusts (REITs) market in Asia after Japan, Singapore and Hong Kong with market capitalisation reaching a new height of RM24 billion if IGB REIT makes its way to the Main Board.
At a market capitalisation of RM4.6 billion, IGB REIT will be the largest REIT in market capitalisation on Bursa Malaysia, but both Sunway and Pavillion REITs are not far behind at RM4 billion each, source concured.
The market is even more abuzz with talks of Kuala Lumpur Convetion Centre (KLCC) listing its assets which would create an even larger vehicle of RM6 billion.
“I believe M-REITs have found a sweet spot with the investors going forward. What we see here is an unprecedented listing of the ‘Crown Jewels’ of properties – Pavillion, Sunway Pyramid, Mega Mall and perhaps the KLCC as well,” Malaysian REITs Managers Association chairman Stewart LaBrooy told The Borneo Post in an interview.
He said many owners of yielding property assets were now seriously considering securitising their assets through REITs as the continuously volatile equity markets had driven investor to seek yield and stability in REIT stocks creating rich valuations for their assets.
All REITs need a growth strategy, but the availability of assets locally “are a problem especially for Retail REITs as there is limited stock of high-end shopping malls which take many years to stabilise and show strong returns,” he added.
This might drive REITs managers to look at offshore assets to inject into their REIT vehicles to get the growth and increasing shareholder return, he pointed out.
In terms of foreign property acquisitions for the trust, REITs players would focus on the countries with strong rule of law, property ownership and a transparent taxation system.
Apart from that, currency exchange rates also played an important role in acquiring foreign properties – if it depreciates to the ringgit then there would be write downs in property values (in ringgit terms) and reduced return to the unitholders, Labrooy said.
Top picks included Singapore, Hong Kong, Japan, Australia and the UK. “Buying in the Euro currently can be considered risky given the eurozone problems at the moment,” he said.
LaBrooy expressed his ‘wishlist’ for the upcoming Budget 2013, which would be zero taxes for individual shareholders on their dividends, allowing EPF withdrawals to be invested in REITs as well as Mutual Funds and similar inventives for the Islamic REIT Managers as the current Islamic Fund managers were enjoying.
“Finding assets to buy in such a low interest rate regime is the hardest task for any REIT today. Asset prices are at an all-time high and yields are very low thus REITs find it difficult to acquire as it would dilute shareholder returns.
“The REIT managers in Malaysia have displayed a strong sense of commitment to their shareholders in providing growing dividends and increasing values to their shareholders. Such tarnsparent behaviour will set a good example to other REIT markets,” he concluded.