I consider this a positive news for the Real Estate Investment Trusts (REITs) and also for the real estate industry. Okay, perhaps more for the Klang Valley property market since most REITs are focused here. Reported in many media, the Securities Commission Malaysia’s (SC) has proposed to allow (REITs) to acquire vacant land and undertake property development. This is at proposal stage since July 14 and it’s at the public feedback stage currently. Comments are due by 13 Sept 2016. SC wants to further liberalise and grow the maturing REIT market.
The proposal is to allow REITs to acquire vacant land and undertake property development up to a 15% cap based on total asset value. In other words, still within manageable risks from these new developments. The development, once completed would have to be retained by the REIT for a minimum of 2 years. The proposal include also enhancements to the level of disclosure and reporting to unit holders. For those thinking of REITs currently, the second enhancement is good news for you. As for the permission to acquire land and build,well it depends.
As per reported, REITs with strong sponsors and experience will benefit more than smaller REITs or those without experience. The reason is simple, for smaller REITs, a cap of 15 percent would severely limit what they could do. Too huge, they could not do it and too small would not be worth the hassle. As per reported, according to an analyst who was not named, he said that while this proposal may provide greater risks to REITs but it would also bring with it greater returns. (I agree with him). He shared further that industrial REITs can easily buy land and build a warehouse but for retail REITs, it is harder for them to build malls from scratch. Perhaps extending existing malls may be more feasible.
As at today, I hold zero units of REITs. However, I still think REITs are good, especially for those who firmly believe in real estate but is worried to enter alone. Occasionally, I will share REIT news. Recent one: Dividend yield for REIT? Sunway REIT’s at 5.5 percent Here is also another good resource for everyone to see at a glance on the results and type of assets for all REITs in Malaysia. Click: http://mreit.reitdata.com Their August data as per image. In fact, it’s easy to note that some of the REITs, based on their current share price meant that the dividend yield is indeed very healthy for a ‘pretty safe’ kind of real estate investment. Please, read further on what are the assets owned by these REITs before deciding whether to buy. Looking at just numbers may not be enough. Cheers.
written on 16 Aug 2016
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