Written by Sheikh Al-Zaquan & Haziq Hamid
Wednesday, 13 July 2011 12:13
KUALA LUMPUR: Investors of real estate investment trusts (REITs) may see better returns this year in terms of dividends.
Last year, most local REITs saw lower or flattish dividend payouts, which had resulted in the decline in yields. This was despite capital gains registered from property revaluations reflected in the share prices and positive movements in the REITs’ net asset values.
In a media briefing yesterday on Asia Pacific REITs, AmInvestment Bank Group director of retail funds, Ng Chze How, said REIT players are expected to cope with investors’ higher expectation on dividends amid soaring property prices by increasing rental rates. He expects yields from REITs to recover to 7% to 8% this year.
Despite REITs’ generally lower yields in 2010, Ng emphasised that REITs still performed better next to the region’s equity indices. Based on AmInvestment’s portfolio of 32 Asia-based REITs, the sector registered an annual dividend yield of 6.3% as at their prices on May 4. In comparison, market indices in Malaysia, Singapore and Indonesia registered yields of 3.5%, 3.2% and 2.3%, respectively.
“Not withstanding the global crisis, prices of Asia-Pacific REITs have also picked up and appreciated by 46% and this is clearly a better performance compared to global REITs’ 14.4%,” said Ng.
He added that the Asian real estate sector has more room to grow, as it has yet to reach its peak achieved before the global financial crisis in 2007.
“From our perspective, it is very timely to invest in REITs as we are only in the third year and an early stage of business recovery,” said Ng.
REITs are also expected to benefit from rise in rental and occupancy rates as demand for commercial and retail properties takes on an uptrend. “With growing population and economic activity, the average occupancy rate for office and retail space in the Asia-Pacific region has reached 90%,” said Ng, citing that an additional boost may come from the increased interests from foreign investors.
“We continue to see an influx of foreign money flowing into the local property market,” he added.
Axis REIT CEO Stewart LaBrooy maintains that REITs will continue to pay consistent dividends even during the economic downturn. “If the market improves, so do the dividend payouts,” he said.
This article appeared in The Edge Financial Daily, July 13, 2011.
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