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Tuesday, August 5, 2008

More REITs can give trading a leg up

CAPITALAND Ltd’s plans to list a RM2bil pure-play retail real estate investment trust (REIT) on Bursa Malaysia later this year will add more depth to and attract greater trading interest in the local market, say industry observers.

Interest in REITs and equities has taken a beating as a result of rising inflationary pressures and uncertainties in the global and regional economies.

An analyst with a foreign brokerage said although there was still much liquidity in the local market, investors were keeping to the sidelines due to the poor market sentiment and lack of fresh leads.

“Local REITs generally lack liquidity as they are perceived to be too small in their issue and capital base, and REITs with larger asset size like CapitaLand’s will be able to attract greater trading interest,” she said.

Axis REIT Bhd executive director Stewart Labrooy said the market could do with more REITs to inject greater trading dimension and yield potential for investors.

There were currently 11 REITs listed on Bursa Malaysia, he said, adding that the participation of more players would contribute towards rebuilding Kuala Lumpur’s skyline and enhance professionalism among industry players.

“There is still much untapped potential in the local market and the onus is on industry players to harness their accretive yields potential by building their assets base through both organic and acquisition growth,” he told StarBiz.

CapitaLand’s announcement that it was on track to list its REIT in Malaysia by year-end will see the country’s first foreign-sponsored REIT on Bursa Malaysia.

“The market certainly needs more diversified types of REITs and, given its reputation in turning around slow-performing malls into profitable entities, CapitaLand’s debut will inject more exciting changes to the local retail market,” he added.

The Singapore-based developer is one of the largest retail real estate owners and managers in the region with more than 115 malls in Singapore, China, India, Malaysia and Japan.

CapitaLand has been eyeing a presence in Malaysia’s retail market for a while now and started building its asset portfolio last year.

The company had last August paid RM770mil to buy Gurney Plaza in Penang and RM435mil for the Mines Shopping Fair in Seri Kembangan, Selangor. Its latest acquisition was a 61.9% stake in Sungei Wang Plaza for RM595mil in June.

Enhancement works are ongoing to spruce up the facilities and add new space to the shopping malls.

CapitaLand has four listed trusts – CapitaMall Trust, CapitaCommercial Trust, CapitaRetail China Trust and Ascott Residences Trust – on the Singapore Exchange.

By The Star (by Angie Ng)

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