PETALING JAYA: With the pandemic still raging, the newly-minted chairman of the Malaysian Real Estate Investment Trust (M-REIT) Managers Association (MRMA) Datuk Hisham Othman (pictured) is already hitting the ground running, having taken over the position from immediate past chairman Datuk Jeffrey Ng on June 17.
The chairman, who is also the CEO of Hektar Asset Management Sdn Bhd, says the M-REIT industry hasn’t been spared from the pandemic. The REIT managers, especially retail REIT, are struggling in retaining tenants while ensuring they have sufficient cash flow to weather the storm.
In dealing with the suppressed rental yield growth, Hisham and the new board members’ current task is to assist M-REIT managers in navigating through the Covid-19 pandemic and being prepared for the recovery.
Since Aug 2005, M-REITs have come a long way from less than RM500 million in market capitalisation to some RM40 billion in 2020, backed by more than RM50 billion assets under management (from iconic landmarks to retail malls, hotels, offices and industrial properties).
Currently, the 17 listed M-REITs own and manage 10% of retail mall space and 5% of office space in Malaysia, contributing substantially to the national economy and real estate landscape, with room for further growth in the years to come.
“We aim to navigate to the best of our abilities to ensure the survival of the M-REITs,” Hisham told EdgeProp Malaysia in a virtual interview amidst his busy schedule yesterday.
However, he noted that MRMA couldn’t do this alone as it requires the help from the government and regulatory bodies, such as the Securities Commission (SC) and Ministry of Finance (MoF), to survive the current woes.
Vaccination is the key
The most urgent first step, said Hisham, is to get those who work in the retail industry categorised as frontliners and let them get their vaccinations first to reduce the risk of infection.
“Retail represents a significant portion of the service economy from shops to shopping malls. They should be given priority in vaccination… There were some efforts by the government to expedite this and we welcome the idea,” said Hisham.
Earlier in May, the Domestic Trade and Consumer Affairs Ministry said that it was working with the Covid-19 Immunisation Task Force (CITF) to roll out the Economic Frontliners Vaccination Programme for the retail sector this month (June). It is expected to involve some 500,000 workers in the sector.
Next, Hisham pointed out that several measures can be taken to help ease the cash flow of REITs. For instance, he said, the 10% electricity bill discount could be extended till the year end – beyond September as laid out by the PEMERKASA+ fiscal aid announced by Prime Minister Tan Sri Muhyiddin Yassin last month.
“Electricity bills account for an average of 17% of the total expenses incurred by M-REITs. Shopping malls, for instance, could not fully switch off their power supplies. Some air-conditioning and lights have remained operational for essential shops throughout the lockdowns,” noted Hisham.
The same could be said of the wage subsidy programme. “It could be extended till the end of the year as well,” suggested Hisham.
Rebates for assessment rates and quit rents
Meanwhile, the government could provide rebates for assessment rates and quit rent charges for year 2020/21. “It is only fair that way. Unlike normal times, some properties are not earning much income and yet they are still taxed. These taxes account for about 10% of the total expenses for an M-REIT,” said Hisham.
Additionally, a kind of rental support scheme could be introduced for qualifying tenants of commercial properties. “When shops cannot open, surely there will be difficulty in paying rents. Perhaps, a similar scheme as the one introduced by the Singaporean government could be implemented here,” noted Hisham.
Announced on May 28, the Singapore Ministry of Finance will provide rental relief for small and medium enterprises (SMEs), and eligible non-profit organisations with an annual revenue not exceeding S$100 million (about RM300 million), who are tenant-occupiers of qualifying commercial properties. For privately-owned commercial properties, there will be a half-month cash payout while government-owned ones will receive a one-month rental waiver.
As for regulatory matters, Hisham suggested that the grace period for income distribution to REIT’s unit holders to be extended beyond the two months from its ending financial year (to qualify for tax exemption) as required by law. “It will be helpful for this to be extended to aid the cash flow of M-REITs,” added Hisham.
The worst is not over yet
It is not over, not until the lifting of the Movement Control Order, said Hisham.
“At the moment, we are still somewhat stuck. Hence, it is imperative that there are exit plans, especially from the government for the retail sector. At this juncture, the answer points to vaccinations. Speeding up inoculations is the ultimate answer.
“Even before we achieve a large number of vaccinations, the MRMA hopes that the retail and perhaps the hotel sectors could be reopened first before the country emerges from the lockdown,” said Hisham.
He added that the MRMA meanwhile, will continue to raise awareness on REITs as a potential investment asset. “We want REITs to be more competitive in the local bourse, with more listings, and for the man in the street to be more familiar with them,” stressed Hisham, noting that they will continue to engage directly with the public, investment banks and the regulatory bodies to do so.
“Lastly, I would like to thank the immediate past chairman Datuk Jeffrey and Datuk George Stewart LaBrooy for their efforts over the years. We hope to continue to guide REITs through the pandemic with the support of many parties, from the media as well as the government so we can emerge with as little damage as possible [from this pandemic]. At this point of time, that is going to be a real challenge. With everyone’s support, I aim to do a better job [as chairman],” concluded Hisham.
MRMA is one of the supporting parties for Edgeprop Malaysia’s Best Managed & Sustainable Property Awards, which is dedicated to the benchmarking of Malaysia’s Gold Standard of Property Management Practices and Sustainability.
The Awards, which is presented by EdgeProp Malaysia, is also endorsed by the Ministry of Housing and Local Government.
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