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Friday, January 18, 2008

A shot in the arm for REITs

Suncity set to propel properties under trusts into international arena

MALAYSIAN real estate investment trusts (REITs) will be getting a shot in the arm in terms of international attention when Sunway City Bhd (SunCity) injects its stable of properties worth a whopping RM3bil to RM4bil into a REIT before year-end.

This may also set a precedent in the valuation and pricing of local REITS making their listing debut on Bursa Malaysia, which could mean that their market capitalisation could start from several billion ringgit instead of around RM1bil currently.

The largest Malaysian REIT in asset size so far is Starhill REIT, whose market capitalisation broke the RM1bil mark at the time of listing in December 2005.

However, SunCity’s REIT, which is yet to be named, is highly likely to surpass Starhill REIT in asset size – if the REIT were to be listed on Bursa Malaysia.

An analyst with a local research house said if this happened, SunCity’s REIT would set a new record that would surely raise the profile of local properties (under trusts) in the eyes of investors, especially foreign institutional investors.

“Starhill REIT set a significant milestone for the local REITs industry by hitting RM1bil, but SunCity’s REIT would propel properties under trusts into the international arena and show foreign investors that Malaysian properties are ready for the big boys’ league,” he said.

SunCity property investment managing director Ngeow Voon Yean said while the group favoured Bursa Malaysia for the listing of its REIT, the company had sought the advice of its investment bankers on whether it was better to list the REIT on the Singapore stock exchange.

“We have not decided where to list the REIT. It will depend on the advice of our investment bankers,” he told StarBiz yesterday.

SunCity told Bursa yesterday it would appoint investment bankers to assist in the listing of its REIT.

Ngeow said SunCity would have between 30% and 40% equity in the REIT post-listing and management control.

“We want to make it clear to everyone that we are not just disposing of our properties. We have a long-term interest in the REIT and will appoint a REIT manager to manage and enhance the properties under the REIT,” he said.

Ngeow said the REIT would be an integrated trust with a variety of properties for various businesses.

“We will have properties ranging from retailing to education and even tourism,” he added.

He said the REIT would grow through property acquisitions channelled from a pipeline of properties under SunCity and third party transactions.

Ngeow said the trust would not discount the possibility of acquiring properties from neighbouring countries.

It would be fair to conclude that the Malaysian REITs industry has grown substantially in a relatively short time.

The first Malaysian REIT, Axis REIT, was listed on Aug 3, 2005 with four properties worth a total of RM296mil.

Today, Malaysian properties under trusts are worth billions of ringgit, irrespective of where they are listed.

A case in point is Starhill REIT. And the impending listing of SunCity’s REIT clearly shows how fast Malaysia’s REITs have progressed within a span of 2½ years.

By The Star -News Analysis (by Danny Yap)

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