More ‘offbeat’ assets for REIT

  • Sales of Malaysian products normal in China despite boycott call – Bernama
    Sales of Malaysian products normal in China despite boycott call – Bernama

    The sales of Malaysian products in China, particularly food and beverage (F&B) products, remain normal despite calls by Chinese netizens to boycott them following the disappearance of Malaysia Airlines (MAS) flight MH370. A Malaysian importer of various products here, Loh Wee Keng, said the sales of F&B products were normal, especially in... …

  • Detainee’s ‘sudden death’ in jail due to viral infection, say police – Bernama

    A man who was remanded by the police last week on a drug-related offence was found dead at the Jinjang police station lock-up in Kuala Lumpur early today. The police found A. Mogan, 48, on the floor of the cell and foaming at the mouth at 12.45am. Sentul police chief ACP Zakaria Pagan said after finding Mogan unconscious, the police called... …

  • Sea Dragon and other probes that can go deeper may take over if mini-sub fails, says CNN
    Sea Dragon and other probes that can go deeper may take over if mini-sub fails, says CNN

    The search for Malaysia Airlines flight MH370 is nearing the end of its 40th day without any significant development and CNN aviation consultant Mary Schiavo said underwater probes which can go deeper may be deployed if current efforts using a high-tech mini-submarine fails. The mini-submarine or autonomous underwater vehicle (AUV), known as... …

  • Police cadet delivers baby in toilet while under training
    Police cadet delivers baby in toilet while under training

    A police trainee who was undergoing training at the police training centre (PULAPOL) delivered a baby girl in a toilet at a hospital yesterday, three months after she was tested negative for pregnancy. A source said the trainee, delivered her baby in a toilet of the Kuala Lumpur Hospital at 11am. Both mother and child are in good health. It... …

  • Mahathir wants Causeway replaced with ‘Friendship Bridge’ to Singapore – Bernama
    Mahathir wants Causeway replaced with ‘Friendship Bridge’ to Singapore – Bernama

    Former Prime Minister Tun Dr Mahathir Mohamad (pic) today suggested the removal of the Johor Causeway in order to build the Friendship Bridge proposed by the government.    He said the Johor Causeway causes various problems, mainly involving environmental issues and traffic congestion, in Johor Baru.   "If it is a bridge, then what need is... …

  • MACC reaches out to Chinese community – Bernama
    MACC reaches out to Chinese community – Bernama

    The Malaysian Anti-Corruption Commission (MACC) has invited more Chinese non-governmental organisations (NGOs) to participate in the "Amalan Kredibiliti, Masyarakat Berintegriti" (Credible Practices, Community Integrity) Programme at the Malaysian Institute of Integrity in Kuala Lumpur on April 26. MACC Community Education Division director... …

KUALA LUMPUR: Malaysia has yet to fully expand the full potential of the real estate investment trust (REIT) structure. Assets of local REITs presently consist mostly of commercial buildings but the Securities Commission Malaysia (SC) guidelines allow a greater flexibility for the inclusion of various other types of real estate, according to financial executives.

Going by trends abroad, shopping malls, offices, warehouses, hotels and hospitals are the standard REIT options. In recent developments globally, more offbeat assets like billboards, casinos,

telecom towers, restaurant chains, cinemas or even prisons are making their way into a REIT, industry experts said.

US media group CBS Corp, for instance, recently announced plans to spin off its outdoor advertising business or billboards into a REIT. Executives of New York-listed Penn National Gaming Inc are reported as saying more gaming companies would follow their lead in spinning off casinos into a REIT or even sell their casino premises to a REIT to free up cash.

REITs are property trust funds that invest primarily in rent or income generating real estate. The main benefit for local listed REITs is they pay zero corporate tax by distributing to unit holders at least 90% of profits annually.

According to the SC’s guidelines for the issuance of REITs, the “real estate” for a REIT listing is defined as “land and all things that are a natural part of the land as well as things attached to the land both below and above the ground”. That would apply to telecom towers.

Axiata Group Bhd president and group CEO Datuk Seri Jamaludin Ibrahim told The Edge in an interview recently the group would consider listing its telecom tower assets under a REIT or business trust, should it decide to monetise these assets.

“When you know the ground rules inside out, the possibilities are limited only by one’s imagination. Certainly, the authorities would need to be supportive to allow developments [in the REIT sector],” said an investment banker, adding that “anything with a rental lease structure” has the potential to be a REIT.

The banker, who does deals locally, expects asset owners with large capital needs or debt to be more receptive to investment bankers for REIT. In fact, he feels that the government has not fully tapped into REIT to monetise its assets to pare down the national debt and cut the budget deficit.

With the promise of generous and reliable dividends, REITs have been sought after by investors seeking stability amid economic uncertainties, especially in the current low interest rate environment.

While the local REITs did well with several gigantic listings over the past year, such as Pavilion REIT, IGB REIT and the upcoming KLCC stapled REIT, the composition of their assets is mostly commercial buildings.

So far, the country has only one offbeat REIT, the Al-Hadharah Boustead REIT, listed in 2007. It is a syariah-compliant trust that relies on oil palm estates and palm oil mills as its primary income generating asset.

According to Al-Hadharah Boustead’s listing prospectus, the plantation assets are leased back to the vendors [Boustead Plantations Bhd and Boustead Properties Bhd] for a cumulative period of between three and 30 years. Together with the fixed rental, the REIT also gets a share of additional profits, should crude palm oil prices go above the pre-agreed threshold in the tenancy agreement.

But unfortunately, other local plantations firms have not followed Al-Hadharah Boustead’s lead in floating their oil palm estates despite the tax benefits accorded under a REIT.

“I believe companies that go for REITs are looking more at monetising the assets [up front] while still having control [over the asset] plus income from it, rather than going for the tax benefits per se,” said Linda Koh, an analyst at Asia Analytica Sdn Bhd.

Bankers said as investors become more familiar with the benefits and risks, more asset owners might be open to explore REITs as well as business trusts, loosely described as a hybrid between a regular company and a REIT.

Unlike REITs, business trusts have to pay corporate tax even if they pay high dividends but are allowed to have higher levels of debt and assets under construction.

Investment bankers see owners of telecoms towers as well as highway and power concessions as potential pioneers of business trusts in Malaysia, given their steady cash flow and high capital needs.

Analysts like Koh think more companies may follow KLCC Property Holdings Bhd’s lead in exploring the “stapled-REIT” structure, should it make sense for their strategy.

“But it remains to be seen just how well investors welcome a stapled structure [a REIT within a regular company] relative to a straight [regular] REIT that has a more predictable income stream, and thus lower risk profile,” Koh said.


This article first appeared in The Edge Financial Daily, on February 4, 2013.

If investment bankers get their way, chances are that more companies would consider monetising their assets if this makes more sense than owning 100% of them, market watchers said. CBS stocks, for instance, jumped following news of the planned billboard spin-off.


This article first appeared in The Edge Financial Daily, on February 4, 2013.

Follow @YahooMalaysia on LINE for daily news updates.

Comments on Yahoo pages are subject to our link to Comments Guidelines. You are responsible for any content that you post. Yahoo is not responsible or liable in any way for comments posted by its users. Yahoo does not in any way endorse or support comments made by its users.

  • ‘Huge’ Hindu, Buddhist statues against Islam, ex-judge says The Malay Mail Online
    ‘Huge’ Hindu, Buddhist statues against Islam, ex-judge says

    KUALA LUMPUR, April 16 — The “huge” statues at a Hindu temple in Batu Caves and Buddhist temple in Penang are an affront to Islam as the religion forbids idolatry, a retired Court of Appeals judge... …

  • Wreck hunter confident MH370 crash site found, says Aussie paper The Malaysian Insider
    Wreck hunter confident MH370 crash site found, says Aussie paper

    A wreck hunter is confident that the search teams had pinpointed the crash site of Malaysia Airlines flight MH370 and believes that the black boxes will be located soon, the Sydney Morning Herald (SMH) reports. David Mearns, director of Blue Water Recoveries told the ABC's 7.30 programme yesterday, he was confident that, because of their... …

  • ‘All the best’, Selangor MB tells Bible society at exit The Malay Mail Online
    ‘All the best’, Selangor MB tells Bible society at exit

    SHAH ALAM, April 15 — Selangor Mentri Besar Tan Sri Khalid Ibrahim said today he wished the Bible Society of Malaysia (BSM) well on its decision to move its headquarters out to Kuala Lumpur to... …