REIT ASIAPAC
F E AT U R E
M-REITS YIELD
strategy is to focus on
retail malls with “unique
competitive profiles.” Half
of its portfolio is positioned
as the “only mall in town,”
the other half are “leading
malls” in their respective
markets,” says the company,
whose cornerstone investor
is Frasers Centrepoint Trust,
part of the Fraser & Neave
Group, headquartered in
Dato’ Hisham bin Othman,
Singapore. The company’s
Executive Director and Chief
mantra for success is to
Executive Officer of Hektar REIT
ensure that its properties
have the “right location, the right size and the right tenant mix.”
The company’s 2 million square feet of retail space, spread across
six malls, has an overall occupancy rate of above 90% and serves
a 3 million shopper catchment.
Aeon Mall Kinta City, Ipoh
daily necessities that cater to the mass market. “This allows our
property income to be resilient against adverse changes in the
economic climate. In addition, we have secured most leases that
are expiring in FY2019 with positive rental reversions,” says KIP
REIT. Rental reversions allow the adjustments of rentals to the
prevailing market rate on expiry of the lease term.
Separately, its acquisition of Aeon Mall Kinta City in Ipoh
in Northwestern Malaysia will help boost its assets under
management to RM834.9 million. The RM208 million acquisition
will be completed in the third quarter of this year. “The 100%
master lease agreement with AEON Co until 2025 translates to
an estimated gross yield of 7.8%. There is room for upside in
yields given that options to renew the lease come with a rent
escalation mechanism,” says the company.
ACQUISITIONS
KIP REIT, also in the retail sector, aims to enlarge its asset size
to RM2 billion (US$483 million) in the next three years through
organic growth and acquisitions. “In 2019, we will continue to
focus on improving occupancy, asset enhancement and acquisition
of valuable assets,” says KIP REIT’s Chief Executive Officer, Chan
Heng Wah. A defensive quality about the REIT is that its malls’
tenancy mix is focused mainly on retailers that specialise in
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
MGS (%)
Yield Spread (%)
Source: Bloomberg, Malaysian REIT Managers Association (as of 31 December 2018)
“The REIT is also looking into other segments of the
industry to capture assets with growth potential
and proven yield performance.”
Al-Salām REIT, a diversified Islamic REIT, is also on a lookout to
acquire properties from its parent Johor Corp. as well as from
third parties. The company has been on an acquisition spree in
AIRPORT REIT WILL
PROVIDE BOOST
M-REITS PREMIUM/DISCOUNT TO NET ASSET VALUE % (NAV) 2018
recent years. In 2016 it acquired 22 Kentucky Fried Chicken and Pizza Hut
outlets across Malaysia for RM 115 million from QSR Brands (M) Holdings
Bhd. This was followed by the acquisition of Mydin Mall Gong Badak in Kuala
Terengganu for RM155 million in cash. The REIT says its Komtar mall in the
city centre of Johor Bahru, the capital of southern state Johor, will continue
to be a main yield driver going into 2019. It is also expecting its Mydin Mall
Gong Badak acquisition to contribute to its growth trajectory.
Meanwhile, the company’s sister Al-Aqar Healthcare REIT (Al-Aqar) has
continued to attract investor interest due to Malaysia’s growing affluence
and increasing demand for quality healthcare. “The REIT is on track to deliver
attractive returns going into the new year,” says Wan Azman, Chief Executive
Officer for Damansara REIT Managers Sdn. Bhd., the Manager of Al-Aqar.
Source: Bloomberg, Malaysian REIT Managers Association (as of 31 December 2018)
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Over the longer term, a key initiative announced
by the government in its 2019 budget to set up
the world’s first Airport REIT will bring about
transformative changes. The REIT aims to raise
RM4 billion by selling a 30% stake in the REIT to
private investment institutions. Investors of the
Airport REIT will receive returns derived from user
fee payments paid by Malaysia Airports Holdings
Berhad —the operator of 39 commercial airports in
Malaysia—to the government.
The establishment of the REIT is expected to boost
the combined property value of M-REITs by 35%
to above RM70 billion, based on initial estimates,
according to MRMA. “The proposed Airport REIT
will not only help to rationalise the country’s debt
burden but stimulate growth through the revival
of tourism and investment into Malaysia,” says
the association. The government has said that it is
considering similar funding structures for hospitals
and railway projects.