Commercial & Industrial Property News Update

Malaysia - M-REITs "Performing Well And Still Growing"

September 14, 2012

Analysts and market players said that Malaysian real estate investment trusts (M-REITs) have performed well this year.

Sector leaders and property analysts have come out in support of M-REITs, saying that the sector has performed well this year.

Stewart Labrooy, ceo and executive director of Axis REIT Managers Bhd pointed to several strong performers in the M-REIT market. Citing Bloomberg data, he said that many M-REITs have provided significant returns over the past 12 months.

Examples include: Al-Hadharah Boustead REIT (46.72%); Al-Aqar Healthcare REIT (44.38%); Pavilion REIT (52.23% since listing in December 2011); CapitaMalls Malaysia Trust (39.2%); Sunway REIT (34.63%); Axis REIT (28.95%); Starhill REIT (27.57%) and Tower REIT (26.25%).

"This is an impressive performance by any means, and speaks well of the management of these REITs," said Labrooy, who is also the chairman of the Malaysian REIT Managers Association.

Labrooy said the prevailing view is that M-REITs are doing just fine. "M-REITs trade at a lower average yield than Singapore, thus underlying their resilience," he said.

In a recent report, Bloomberg named Singapore REITs as the best performers this year, saying that its USD 38 billion (RM 118 billion) market returned an average of 37% in 2012, twice the gains in US, UK and Japan.

At present, there are a total of 15 M-REITs listed on the market, with a combined capitalisation of more than RM 19 billion, according to Bloomberg data. The upcoming listing of IGB REIT will boost the total capitalisation to more than RM 23 billion.

Noting a study by the Asia Pacific Real Estate Association, Labrooy said that despite criticisms of their low liquidity, M-REITs outperformed the wider REIT market in Asia Pacific and was one of the segments that managed to avoid significant negative consequences stemming from the global financial crisis.

"The results speak for themselves. The regional REITs (with the exception of Hong Kong which recorded a 11.2% gain) have not recovered from their losses, and are still in negative territory if we take a 2007-to-2012 investment view. M-REITs have stormed ahead, and showed strong returns with Axis REIT showing a whopping 270% gain from the lows in 2007," he said.

Labrooy is joined in his positive sentiments by Sunway REIT Management Sdn Bhd ceo Datuk Jeffery Ng, who praised the performance of M-REITs since the start of the year.

Ng said that the average capital appreciation for M-REITs was 12.8% year-to-date, compared to FBM KLCI's return of 7.5%.

"The average distribution yield as at end-August 2012 is 6.4%. The top three M-REITs in terms of market capitalisation, registered an average capital appreciation of 18.5% for the same period, outperforming the M-REITs average capital appreciation of 7.5%," he said.

Lastly, a property analyst believes that M-REITs still have much room for growth.

"Look at the yield compression. Pavilion REIT was listed at around 6.4% gross yield in December last year. It looks like IGB REIT will be listing at about 5.2% gross yield. Now, there is potential for a KLCC Property REIT exercise next year to have a 4.5% gross yield," he said.

Tags: Commercial real estate, Income properties, Business space

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