Analysts, players say M’sian REITs provide good returns and are still growing

PETALING JAYA: Malaysian real estate investment trusts (M-REITs)
have performed well this year, according to sector leaders and property
analysts.
Axis REIT Managers Bhd chief executive officer and executive director Stewart Labrooy said according to Bloomberg
data, over the past 12 months, M-REITs had provided strong returns with
examples including 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 believes that the prevailing view is that M-REITs are doing just fine.

[You must be registered and logged in to see this image.] Labrooy: ‘This speaks well of the management of these REITs.’ “M-REITs trade at a lower average yield than Singapore, thus underlying their resilience,” said Labrooy.
It should be noted that a recent Bloomberg report had said Singapore-listed REITs were the best performing in the world this year.
It
had reported that according to its compiled data, Singapore's US$38bil
(RM118bil) REIT market had returned an average of 37% this year, which
was twice the gains in the United States, the UK and Japan.
On the local bourse, there are 15 M-REITs with a combined market capitalisation of above RM19bil, according to Bloomberg data.
However,
with the listing of IGB REIT which is slated for Sept 21, M-REITs will
have a combined market capitalisation of more than RM23bil.
Meanwhile,
a UOA REIT spokesperson said real estate values in Malaysia needed to
fundamentally appreciate and catch up before M-REITs were able to match
the size of Singapore REITs.
“For example, office space in
Singapore can be valued at S$2,000 (RM5,000) per sq ft whilst in
Malaysia, it is only RM1,000 per sq ft. Naturally, a M-REIT with
similar asset size is about 25% the size of a Singapore REIT,” he said.
Labrooy
also pointed out that a study by the Asia Pacific Real Estate
Association showed M-REITs, despite criticism of their low liquidity,
had significantly outperformed the wider REIT market in Asia Pacific
and was one of the markets that were not badly impacted by 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 M-REITs had done well as they “did not follow the pack.”
Meanwhile, Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng also said M-REITs had performed commendably since the start of the year.
Ng
pointed out that year-to-date (till end-August 2012), the average
capital appreciation for M-REITs was 12.8% versus 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.
Ng also reckoned that investors preferred larger
REITs for better liquidity, as the top three M-REITs were trading at
distribution yields of below 5.5%.
Ng said to further grow
M-REITs, the sector needed more of quality REITs with a portfolio of
iconic landmark assets, reputable sponsors as well as experienced and
skilled managers.
“Interestingly, Malaysia is unique where
plantation and Islamic REITs are only found here thus far. Promoters
should work in this area and continue to introduce a diverse base of
M-REITs including introduction of REITs with overseas assets to offer
variety to investors.”
A property analyst contacted by StarBiz
said there was still room to grow for M-REITs, in terms of valuation.
“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.”
The
analyst said depending on external factors like the anticipated third
quantitative easing and developments in the eurozone crisis, there
could be more flights to safety. “So with so much uncertainty,
investors would prefer defensive investments like REITs,” he said.