KUALA LUMPUR (Nov 5): Shares in real estate investment trusts (REITs) dropped in the morning trading session on Bursa Malaysia today, following emerging risk of tenants dropping out for retail mall owners.

At the time of writing, the REIT Index had fallen 0.09 point or 0.01% to 785.72.

At 10.20am, Tower REIT and KIP REIT were among the top decliners. Shares in Tower REIT had fallen two sen or 3.42% to 56.5 sen, bringing its market capitalisation to RM158.48 million, while KIP REIT was down half a sen or 0.62% to 80 sen, with a market value of RM404.24 million.

Elsewhere, IGB REIT dipped 0.61% or one sen to RM1.62.

CGS-CIMB Research analyst Sharizan Rosely said tenants dropping out are likely to be an emerging risk for retail mall owners, according to the research house's note on Tuesday.

He said anecdotal events in October pointed to the potential shutdown of certain departmental stores negatively affected by falling footfall and tenant sales.

“Our preliminary assessment/checks on retail malls since the reinstatement of the CMCO (conditional movement control order) found that footfall and tenants sales could decline by 20%-30% in 4Q20 (the fourth quarter of 2020), and concerns about potential dropping out of tenants could grow if the deterioration in tenant sales is prolonged,” he said.

CGS-CIMB retained its "neutral" call for REITs with longer lead times for replacement tenants and a new emerging risk for selected malls.

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