Still in foreign investors' shopping list

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MALAYSIA'S shopping malls continue to be on the radar of foreign investors despite a global economic slowdown.

This is due to the fact that the Malaysian retail industry is mature, coupled with the likelihood of obtaining bargains during a slowdown, property consultants said.

"Retail centres are very good long-term investments. They provide the extra in terms of dynamism, the mall can be repositioned and (space) rejigged," Regroup Associates managing director Allan Soo said.

"Despite the onset of a worldwide recession and the pressure on funding, interest in retail centres is increasing," Soo told Business Times in an interview.
"We (Regroup) continue to get enquiries (to buy). We have at least three foreign funds who are keen on retail centres in Malaysia," he said, adding that funds start from RM100 million up to those with an unlimited budget.

Soo explained that during a recession, there are more sellers and less buyers.

"Therefore yield goes up as price comes down. Instead of the usual five per cent to seven per cent yield that one hopes to get from a purchase, buyers are now hoping for a nine per cent yield," he said.

Yield measures the return for a buyer. In this instance, it is income from the property relative to the value of the asset.

However, as fund raising becomes more difficult during an economic slowdown, some investors hold back their investment as they expect prices to come down further.
"Some funds are reviewing their strategy ... they are looking for the right time to purchase," he said.

He said that in 1998, foreign investors continued to be interested in Malaysia. There were "vulture funds" coming in to buy malls at huge bargains.

Real estate consultant Savills Rahim & Co's managing director Robert Ang feels that while interest in our malls will continue, Malaysia will face competition from other markets, especially those where prices have declined drastically.

"Yes, interest from foreign companies and foreign funds in our malls will continue ... (but) there are many other opportunities elsewhere in other countries too," Ang said.

He pointed out that at this point there are no "juicy malls" in prime locations available.

However, Soo contends that there is a lack of properties for sale in Southeast Asia, which means that Malaysia will remain attractive.

"In this region, there is not that much availability coming up. What is there available in Hong Kong and Singapore?" he asked.

"Compared to India and China, though these markets are growing, they are not as matured. Malaysia has three decades of retail development," Soo said.

But is it good to sell most of our retail centres to foreigners?

According to Soo, it creates value for the asset as it brings in foreign investment.

"These investors cannot take away the asset. They may resell to a Malaysian or to another foreigner, but they can't take the property away," he pointed out.

Ang agreed, saying that there are still developer-managed malls which are poorly run. "When funds come in, they offer a different kind of expertise which keeps the level of management high," he said.

By Business Times (by Vasantha Ganesan)