Business Times Malaysia, May 21 2005
SINGAPORE, Fri: YTL Corp, Malaysia’s biggest builder, plans to raise more than RM500 million from the sale of Malaysia’s largest real estate investment trust (REIT), betting rising demand for real estate will boost rental yields.
YTL has submitted its plan for regulatory approval and the sale may take place by the first half of the year, managing director Tan Sri Francis Yeoh, 50, said in an interview.
“The properties, which will include JW Marriott Hotel, and Starhill and Lot 10 shopping centres in Kuala Lumpur, will be valued at RM1.2 billion,” Yeoh said.
Retail rents in Malaysia may rise as the US$118 billion (US$1 = RM3.80) economy expands and the nation woos more tourists.
Malaysia’s retail rents are lower than Hong Kong’s, Shanghai’s and neighbouring Singapore’s, which has five property trusts whose shares have risen as much as 32 per cent this year.
“The potential is there for property yields to rise in Malaysia,” said Winson Fong, who manages US$2.3 billion as chief investment officer at SG Asset Management Pte, Societe Generale SA’s asset-management unit here.
“There is demand for REIT in Malaysia as people want some stable income on top of price appreciation nowadays.”
“The trust will yield about 6 per cent,” Yeoh said.
Singapore’s real estate trusts are offering yields of 4 to 5.2 per cent, according to data compiled by Bloomberg.
CapitaMall Trust, Singapore’s largest with a market capitalisation of US$1.7 billion, has more than doubled since it started trading in 2002.
“The upside of REIT is tremendous,” Yeoh said. “Today, the rents are very cheap, the hotels are very cheap and we’re giving you a good yield already.”
Average rents at Suria KLCC, Kuala Lumpur’s most expensive shopping centre located at the Petronas Twin Towers, rose 35 per cent to the equivalent of US$3.03 a sq ft a month last year from 2001, according to property company Regroup Associates Sdn Bhd in Kuala Lumpur.
That’s lower than Hong Kong, where the cheapest rent at four of the city’s prime shopping districts was US$32.10 in the fourth quarter of 2004, according to Los Angeles-based CB Richard Ellis, the world’s largest commercial real-estate firm.
In Singapore, rental at the Orchard Road shopping belt ranges from US$15.20 to US$36.60.
Rentals for Malaysia’s top shopping centres may rise another 15 to 30 per cent in the next three to five years, said Allan Soo, Regroup’s managing director. — Bloomberg