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Saturday, March 8, 2008

Local REITs gain global attention

Cross-border REIT partnerships will benefit all

BARELY three years after Malaysia's first real estate investment trust (REIT) was on the stock exchange, the industry crossed a new milestone with Wednesday's signing of a partnership agreement between Hektar Klasik Sdn Bhd and Singapore-based Frasers Centrepoint Asset Management (M) Pty Ltd (FCAM).

Today, not only have local REITs grown in market capitalisation to over RM1bil, investors can look forward to enjoying the benefits of this first cross-border REIT partnership. This surely augurs well for the industry as a whole and for the REITs in terms of global recognition by institutional investors.

Commenting on the cross-border REIT partnership, Hektar Asset Management Sdn Bhd chief executive officer Datuk Jaafar Abdul Hamid said the joint venture would benefit both parties.

“It would help harness the combined strengths of the sponsors: FCAM's strategic reach and financial resources within South-East Asia and Hektar group's experience and expertise in Malaysia.

“We have extensive understanding of the Malaysian market and we are gaining momentum in growing the REIT's asset size, especially with our recent retail acquisition in Johor,” he said.

The joint venture agreement is part of the sale and purchase agreement entered into between Hektar Klasik and Fraser Centrepoint Ltd (FCL) on May 16, 2007 for FCL's acquisition of a a 40% stake in Hektar Asset Management Sdn Bhd, the managers of Hektar REIT.

FCL fully owns FCAM and also has a stake in Frasers Centrepoint Trust (FCT), which purchased a 27% stake in Hektar REIT for RM104.5mil in June 2007. FCL is a unit of Fraser & Neave Ltd.

A foreign REIT analyst said the partnership would bring about tremendous synergy and was a win-win situation for both Hektar REIT and FCT.

“It shows commitment by FCAM to grow FCT via a stake in Hektar REIT and also benefits the latter through the combined expertise of the REIT managers from both trusts,” he said.

The Securities Commission had earlier approved the appointment of two directors from FCAM and a third independent director to the board of Hektar Asset Management.

Asked if there could be more cross-border REIT partnerships in time, the analyst said it would be difficult to predict but certainly other REIT managers would be looking at ways to increase their trust asset size, exposure to foreign investors and market capitalisation via various means including cross-border REIT partnerships and mergers and acquisitions.

He said REIT managers could also work with property developers and third parties with good prime assets in strategic locations to inject matured properties into the trusts.

“Every trust is trying to grow by attracting more investors and the competition for funds is getting tougher,” he said.

By The Star (by Danny Yap)

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