Regulator approval for the listing is valid until next year
CAPITALAND'S long-delayed plan to list its Malaysian malls locally is unlikely to materialise now that it has decided to spin off its pan-Asian retail portfolio and list it separately on the Singapore bourse.
The Singapore developer's intent puts paid to any public share sale of a Malaysian real estate investment trust (Reit) consisting of its local retail assets, property players said yesterday.
'What's the point? Putting the malls into a super-regional portfolio makes more sense because it's bigger and hotter,' said a senior executive with an international consultancy. 'And if that's the case, why do a Malaysian Reit which would only be small and attract little public subscription?'
CapitaLand, which obtained two extensions to proceed with listing plans in Malaysia, did not respond to telephone or email enquiries yesterday on how its proposed spin-off of CapitaMalls Asia (CMA) - the vehicle under which the retail portfolio will be parked - will affect or alter its plans for a Malaysian-listed retail Reit.
Malaysia's regulator confirmed its approval for the listing is valid until next year. But property consultants believe CapitaLand has already 'suspended' its local plans, given it did not pursue the listing even when the stock market improved this year.
South-east Asia's largest developer had intended to inject an initial three shopping malls - Penang's Gurney Plaza and Kuala Lumpur's Sungei Wang Plaza and The Mines Shopping Fair - worth an estimated RM2 billion (S$820 million) into a retail Reit.
The public share sale was approved by Malaysia's Securities Commission in 2008 but the company - like most with approval - did not proceed with an initial public offering after global markets plunged when the sub-prime financial crisis hit.
The three retail malls will now to be included in CMA's massive S$20.3 billion portfolio of 86 malls spanning the region. Of the 59 completed malls, 32 are in China, 16 in Singapore, seven in Japan and one in India. Also in various stages of development are a further 27 properties in Singapore, China and India.
Because Malaysian Reits are small and illiquid, they lack excitement or attraction for investors, especially institutions. And Malaysia's 'laggard market' tag compounds the problem, as institutional investors prefer higher beta markets.
Although average yields are attractive at 7 to 8 per cent, retail investors are put off by flat - or declining - share prices and shy away. 'The level of Reit literacy is very low and most retail investors are not motivated to understand the structure better. They don't understand that Reits are basically a defensive play,' said a property consultant who is frustrated at the lack of progress in the sector.
Often caught in a chicken-and-egg situation, controlling shareholders find it difficult to enhance their assets because raising funds is challenging.
'When they want to issue new units or do a placement, investors demand a big discount because the Reit is illiquid. But as most Reits only trade at about 1x book versus 1.8 for foreign ones, it's difficult to give them a discount,' said a property analyst.
In comparison, in Singapore's active real estate market, assets are constantly revamped or revalued and Reits find many opportunities to enhance their distribution per unit.
In 2007, CapitaLand listed a commercial Reit in Malaysia in joint venture with local specialist office contractor Quill Group. The Quill Capita Trust has since expanded its commercial properties to 10 valued at RM818 million. Its market capitalisation is about RM380 million.
Source: Business Times, 8 Oct 2009
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