Tuesday, December 19, 2006

REIT Me My Rights

gsg said...
i do believe that with the malaysian govt at this right juncture doing the right things to lure/improve foreign interest in malaysia, will eventually do the necessarily to make malaysia competitive in terms of REITs.....so yes, it will be something to watch for,.....the smart companies are waiting for the right time to REIT their assetsany suggestions on which in KLSE will benefit?

I do agree that REITs will be a big theme in 2007 for Malaysia. Malaysia only have less than RM4bn in REITs while Singapore has a stupendous RM52bn. The issue is Malaysian commercial properties are not all-REITable immediately, maybe just 5% of the total passes the basic criteria required. However, more savvy player will be able to reinvent, refurbish existing commercial properties to a REITable state. We can also expect players to come in and buy up existing big commercial properties and do it up to a REITable state, or like CapitaLand - buy some, build the rest. The key players:

a) Singapore's CapitaLand Group, which is already managing 14 REITs in Singapore and 4 outside of Singapore. The company has already announced a US$250m or RM890m Malaysia Commercial Development Fund, in a jv with Maybank. This will be the seed capital which should see a gross development valued at US$1bn. This will result in a sustainable completion plan of properties for an eventual REIT. The project will complement the existing REITable properties CapitaLand has in mind. Initially the fund will buy about RM200m of existing properties for immediate injection.

b) Resorts/Genting/Landmarks - There should be a bigger REIT here after the failed SungeiWang REIT.

c) Some of the real estate fund managers will try to tap into the REITs market by placing out shares or doing an IPO.

d) Other big groups a bit stretched for cash will be the first to enter the fray, such as Lion Group and Sunway. Others who do not need it so much will come much later.

e) A number of big government fund management units could very well develop Islamic REITs as a by product. With a number of big sized Middle Eastern banks in Malaysia, we can look forward to a useful listed exchange for these product if we play our cards right.

In actual fact, any of the top 20 companies in market capitalisation will have sufficient properties to consider selling/merging the properties into a REITable state. Look for independent managers such as Macquarie to piece together a few different owners' properties to a REITable state.

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