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Investment Prospects of REITs

Bursa Malaysia saw its first real-estate investment trust (REIT) in 2004, while the first REIT was listed on the Singapore Exchange (SGX) in July 2002. Today, SGX has 44 REITs with a total market capitalisation of S$115 bil (RM356 bil) as at Dec 31, 2021, while Bursa has 18 on its main market with a total market capitalisation of RM39.34 bil in the same corresponding period.

Malaysian REITs pale in comparison to Singapore REITs but the Malaysian REIT Managers Association is planning to work with the regulators to scale up with best practices.

This includes liberalisation of the withholding tax of Malaysian Reits Income Distribution to all unitholders, tax

transparency for joint ventures and appeal to classify REITs under the definition of a property based business, among others.

REITs may not be the darling asset class for investors of Bursa but it is the only asset class that is required to pay out a dividend to investors for it to remain a REIT.

"When REITs are selling low, it is time to accumulate more REITs," said AREA Management "Sdn Bhd executive chairman Datuk Stewart LaBrooy, touted as the REIT pioneer in the country.

Naturally, LaBrooy's own investment portfolio consists mainly of REITs.

"There are limited selection asset classes amongst Malaysian REITs but that doesn't stop investors from venturing offshore for opportunities. Some of the higher performing niche REITs globally are those in the space of Data Centre, Retirement Homes, Prison, Mortgage and Exchange Traded Fund Reits.

"Singapore has the largest REIT market in Asia (ex-Japan) and is increasingly becoming a global REIT hub. It is an important component of the Singapore's stock market and comprise around 13

per cent of the SGX market capitalisation.

The recipe contributing to Singapore REITs success included factors such as liquidity, consistency, transparency and currency stability.

"Properties offer the best hedge against inflation. Industrial REITs, in particular, have proven that in times of stress, it has come out tops," he added.

He further said that a REIT investor in Malaysia can be liken to having fractional ownership of iconic landmarks like the Petronas Twin Towers or the Pavilion shopping centre, Mid Valley Mega

mall or Sunway Pyramid.

While some have taken a hit due to the pandemic, their revenue streams are set to recover and the flow of stellar dividends will resume again.

LaBrooy, 71, comes from a family of doctors. His mother was a royal physician in the 1950s while his sister is a specialist doctor currently residing in London. His late father owned and ran a

printing business.

At age 16, LaBrooy secured a scholarship under the American Field Service (AFS) programme to study in the United States. In the beginning, his mother was appalled at the thought of letting her only son go overseas on his own.

However, LaBrooy was adamant to embark on this adventure, and eventually he got his way.

"I was fearless at that age and happily hopped onto the plane in 1967 which took me to Manila, then to Hawaii and finally to Kansas City, Missouri, where I stayed for a year. The US was very defining for me. After the foreign exchange programme ended, I came back to resume my Form

Six," he said.

He holds a Bachelor of Engineering (Hons) degree and a Post Graduate Diploma in Business Studies from the University of Sheffield and is a member of the Institute of Engineers, Malaysia.

He became Executive Chairman of AREA Management after his retirement as Chief Executive Officer and Executive Director of Axis REIT Managers Bhd (ARMB) in 2015. Axis, which was the first REIT listed on Bursa, was founded in 1996 by LaBrooy.

It became an important component of the capital markets, and the first Shariah-compliant industrial REIT in the world, winning several awards including the Asia Pacific Real Estate Association (APREA) Best Practices Award in 2010, 2011 and 2013.

Since its inception, AREA was established as a boutique advisory firm providing advice on investing in industrial properties in Malaysia, UK, Australia and Germany.

On another matter, LaBrooy's pet project Compass at Kota Seri Langat, an integrated logistics and industrial park with a gross development value of RM1.23 bil, is gearing up for its inaugural sales launch this month.

A joint venture between AREA, PNB and KWest, the project attracted enquiries from property hunters who were looking for green buildings.

"The big boys want green buildings now, and they won't invest in buildings that are not green anymore. Buyers are pivoting to green parks because of the financing facilities.

Compass is a green industrial park that is aiming for GreenRE certification and will have five per cent of its total area set aside for landscaping and green spaces.

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