REITs set to ride on recovering economy

PROPERTY is a relatively stable sector for investment, and with the better economic outlook, real estate investment trust (REIT) players are already looking to cash in on the improved sentiment.


Abas A. Jalil ... ‘The old perception that the REIT market is not active is no longer there.’

AmanahRaya-REIT Managers Sdn Bhd chief operating officer Abas A. Jalil claims that many investors are already starting to look at the REIT market positively.

“Previously, people perceived that Malaysian REITS had slow growth in returns,” he tells StarBizWeek.

“However, with the announcement of Sunway City Bhd (SunCity) and Qatar-based REITs, you will see more activities in the local (REIT) scene, which will in turn become the engine for the overall property growth in Malaysia.”

According to Maybank Investment Bank’s recent research note, the asset size of Malaysian REIT market could double to RM18bil by year-end due to three impending listings – the SunCity REIT (with an asset size of RM4bil), CapitaRetail Malaysia Trust (up to RM3bil) and Malaysia’s first cross-border REIT, the Qatar REIT (RM1bil).

Abas believes that the local REITs will spark more interest among investors and the sector will become more vibrant.

“The old perception that the REIT market is not active is no longer there. Investors’ understanding of this segment has also changed,” he says.

“Now they (investors) are seeing REITs as an alternative form of liquid investment that provide a very stable yield as well as a potential upside in terms of pricing.”

AmanahRaya-REIT is the manager for AmanahRaya Real Estate Investment Trust (ARREIT), which is targeting to grow its total assets to RM1.5bil in the next two years, from RM748mil currently, by injecting new properties into its portfolio and improving the value of its existing assets.

Abas, who is confident of achieving this target, says ARREIT has a good mix of tenants with good occupancy rates. It will acquire Selayang Mall in Selayang, Selangor, and Dana 13 in Ara Damansara, which are expected to boost its total asset value to RM1bil.

“ARREIT was listed in February 2007 with an asset size of RM345mil. In three years, we have reached RM1bil. I think this is a good achievement,” he adds.

He says ARREIT also became the first local to be rated by Standard & Poor’s in early 2010, earning a rating of BB+.


Stewart LaBrooy ... ‘Axis REIT Managers is on track to improve on last year’s performance.’

Axis REIT Managers Bhd chief executive officer Stewart LaBrooy says the local REIT market has often been criticised by foreign funds as lacking depth and liquidity, adding however that the new listings will make it more attractive.

Axis REIT announced early this year it was targeting to grow its total assets to at least RM1bil from RM907.7mil as at end 2009. LaBrooy says the target is achievable.

“We have also announced our first acquisition for 2010 – a RM30mil logistics warehouse at the Port of Tanjong Pelapas in Johor. This brings our total assets under management to RM957.78mil and we should be on track to cross the RM1bil target before year-end,” he says in an e-mailed response.

Axis REIT Managers is the promoter of Axis REIT. Its strategy currently is to acquire office and industrial assets that are syariah-compliant, focusing on properties in the Klang Valley, Johor and Penang, says LaBrooy.

“We have just disclosed our first-quarter dividend of 3.7 sen, which is much higher that our peers in the Malaysian market. We are on track to improve on last year’s performance as our recently refurbished Quattro West and Shah Alam SADC 1 welcome new tenants,” he says.


Kumar Tharmalingam says REITs are defensive stocks with longterm capital appreciation.

Hall & Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam believes that the REIT market is looking buoyant and recommends it to anyone looking for stable returns.

“The REITs purchase quality assets and the investments are mostly in commercial buildings. These buildings are mostly in the city centre and the tenancy rate is always good,” he adds.

He says REITs are defensive stocks with long-term capital appreciation, adding that he is optimistic about the Qatar-based REIT.

“I think the prospects are good. The country has good oil reserves and is not affected by the world economy. The only problem is that the property is overseas and the investor needs to travel to Qatar to see them.”

By The Star (by Eugene Mahalingam)