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Malaysia REITs Happenings (May 2021)

Too busy to run through the announcements made by Malaysia REITs? In this segment of Malaysia REITs Happenings, we will be summing up some of the key happenings in Malaysia REITs in May 2021.

Read More: Malaysia REITs Happenings (April 2021

The month of May has been fairly quiet with announcements mainly on quarterly results and income distribution. Nevertheless, here are some which are useful to investors.

1) Circular to unitholder of Al-Aqar REIT on the proposed lease renewal

Following our previous Malaysia REITs Happenings April 2020 edition, Al-Aqar REIT has further issued a circular to unitholders on the proposed renewal on 6 leases due to expire.

The 6 properties are KPJ Ampang Puteri Specialist Hospital, KPJ Damansara Specialist Hospital, KPJ Ipoh Specialist Hospital, KPJ Johor Specialist Hospital, KPJ Puteri Specialist Hospital, and KPJ Selangor Specialist Hospital.

Refer to the terms of the renewal below.

Rental TermRent Formula
1st Year5.75% per annum X the reasonable and fair market value of the Properties.
2nd and 3rd Year2% incremental increase x the rent for the preceding year.
1st year of every succeeding
rental term (Years 4, 7, 10
and 13)
(10-years Malaysian Government Securities + 200 basis points) x Open Market Value of the Properties, at the point of review subject to:
(a) a minimum rent of 5.75% per annum x prevailing Open Market Value of the Properties or the rent payable for the 1st year of the first rental term of the Properties, whichever is higher; and
(b) any adjustment to the rent shall not be more than 2.0% incremental increase over the rent for the preceding year which shall be in RM.
2nd & 3rd year of every
succeeding rental term
(Years 5, 6, 8, 9, 11, 12, 14,
15)
2% incremental increase over the rent for the preceding year which shall be in RM.

The EGM for the approval of the proposed renewal will be held on 10 June 2021. Upon the approval of the lease renewal, this would be a plus to Al-Aqar REIT which would strengthen their overall WALE.

2) Proposed Mandate Expansion of CMMT

The second key announcement relates to Capitaland Malaysia Mall Trust of which an expansion in mandate was proposed.

So what is this new change and how does it affect CMMT as a whole?

Quoting CMMT existing strategy page:

The principal investment objective of CMMT is to invest, on a long-term basis, in a portfolio of income-producing real estate primarily used for retail purposes.

The existing mandate limits CMMT investment to just retail properties which in our opinion have not been performing well historically. The uncertainty of COVID-19 is adding to the problem. CMMT proposed mandate expansion allow them to invest beyond the retail sector. This will give them a larger pool of investment opportunities such as commercial, office and industrial assets.

In our opinion, this mandate expansion is a plus given the retail sector sentiment in Malaysia. Furthermore, this would provide them with an avenue to further grow and diversify their revenue.

Summary

We hope this segment of Malaysia REITs Happenings adds value to your REITs investment journey. Do let us know if we miss out on any key Malaysia REITs Happenings in May 2021.

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