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| Exciting Days Ahead For REITs |
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| THE real estate investment trust (REIT) market will see more exciting developments going forward as new players join the fray. |
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| The country’s maiden REIT, Axis-REIT, was listed in August 2005, and there are now nine REITs listed on Bursa Malaysia with a combined asset portfolio worth some RM4.7bil and market capitalisation of more than RM3bil. |
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| The spread of the asset portfolios has also widened – from office and industrial property (Axis-REIT) to retail and hotel (Starhill REIT), office buildings (UOA, Tower, Quill Capita, AmFirst REITs), hospital (Al’-Aqar KPJ REIT), retail (Hektar REIT) and plantation (Al-Hadharah Boustead REIT). |
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| This year, at least two new REITs – Atrium REIT and AmanahRaya REIT – will add more depth to Malaysia’s REIT (M-REIT) market. |
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| Atrium REIT will have three warehouses and a specially built office and factory complex worth a total of RM160mil. |
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| AmanahRaya REIT is expected to kick off with eight properties worth RM337mil. |
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| The asset portfolio includes two office towers at South City Plaza, Wisma UEP, SEGi College, Permanis’ factory and Wisma Amanah Raya (CIMB Building). |
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| The market is also abuzz with talk of some government-linked companies with good portfolios of real estate assets getting into the act. |
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| The landscape for REITs looks brighter this year, and investors should be upbeat of the potential for higher returns and capital gain. |
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| M-REIT’s dividend yields compare favourably against the Employees Provident Fund’s dividend yield of 5.15%, 10-year government bonds (3.76%), as well as the Kuala Lumpur Composite Index’s equity dividend yield of 3.4%. |
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| After deducting the 15% withholding tax for individuals, M-REITs yield 6.66%, and this compares well against the one-year fixed deposit rate of 3.7%. |
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| Valuations should improve with expectations of fiscal stimulus driving up rental yields and property prices. |
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| The outlook for REITs looks good from the interest rate perspective, aided by the fact that both the global and domestic interest rates have peaked somewhat and may be on a downtrend soon. |
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| The rollout of Ninth Malaysia Plan (9MP) projects and rising capital value and rental rates of commercial properties also augur well for the market going forward. |
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| The entry of new foreign investors in the local property scene looking to increase their exposure in Malaysian properties, especially investment-grade commercial real estate, is another plus factor for the M-REIT market. |
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| They may either invest in the REIT market or through direct acquisition of good grade commercial properties. |
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| Most of the foreign funds see good upside potential for Malaysian properties, which are presently undervalued compared with that in the neighbouring countries. |
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| Kuala Lumpur’s property prices and rentals are currently one of the lowest compared with other capital cities in South-East Asia, including new markets like Ho Chi Minh City. |
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| Strong demand for Grade A office space and the tight supply of prime office space in Kuala Lumpur due to a freeze on new office development (introduced since 1999) is good news for the office sector. |
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| The total supply of office space in Kuala Lumpur and Selangor stood at 7.76 million sq m in 492 buildings, accounting for 53.7% of national supply. |
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| The occupancy rate of most of the purpose-built office space in Kuala Lumpur is close to 90%. |
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| With more multinational companies looking towards Malaysia, mainly Kuala Lumpur and Petaling Jaya, to set up their regional headquarters, the commercial property sector has reason to celebrate. |
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