by SHAZNI ONG/ pic by MUHD AMIN NAHARUL
THE Malaysian REIT Managers Association’s (MRMA) call for further relief measures during the current challenging economic climate reflects the impact of business closures on Malaysian real estate investment trusts (M-REITs), said analysts.
Independent financial consultant and investment analyst Leong Hoe Kit said REITs are just as affected as other industries by the Covid-19 pandemic, especially the extended Movement Control Order (MCO).
“While the focus is on helping retailers and asking for a helping hand from landlords with some concession on rental payments, we must not forget that the landlords themselves, namely the REITS, are also affected.
“However, the REITs should be extra careful in requesting for the authorities to allow them to distribute income through the issuance of units in full as this could be viewed negatively by investors as the attractiveness of a REIT to investors is its cash dividends, not capital gains,” he told The Malaysian Reserve (TMR).
Meanwhile, MIDF Amanah Investment Bank Bhd analyst Jessica Low Jze Tieng said the move is “understandable” given the various challenges faced by the REITs.
“REITs in various industries, especially retail REITs have been hit by the partial closure of malls and rental support for tenants,” she told TMR.
On the other hand, RHB Investment Bank Bhd analyst Loong Kok Wen highlighted that Singapore has already announced measures to help Singaporean REITs.
These include allowing tenants, excluding residential, to have the option of differing rental for six months and compensating landlords by differing the payment of the dividends.
“In Malaysia, we have yet to see anything like this and at the same time, the tenants are asking the landlords to have some rebates in their rentals,” Loong told TMR.
MRMA recently released a statement seeking more relief measures from the government and relevant authorities, to mitigate the adverse impact caused by Covid-19, the MCO and the gestation period before operations resume.
It said M-REITs are burdened by the ongoing operational expenditure, capital and financial commitments amid closure of business premises.
“At the same time, landlords have been inundated by requests from tenants and business partners for assistance. To date, M-REITs have offered the necessary assistance to tenants and business partners, albeit at varying degrees at the prerogative of the individual REIT.
“While the government’s economic stimulus package has endeavoured to alleviate the burden of businesses and rakyat, the implication of Covid-19 and its aftermath are expected to linger and strain businesses,” MRMA said.
Among the measures proposed are for the electricity tariff discount to be increased from 15% to 25% for hotels, retail malls, convention and exhibition centres, and commercial and industrial properties for six months up to end of September.
MRMA also proposed a full waiver of the imbalance cost pass-through charges for six months, a waiver of any penalty due to non-compliance with the minimum electricity usage for the same duration, and a 100% waiver of the assessment tax and quit rent chargeable for one year. It further appealed for the exemption in withholding tax to all resident individual unitholders, who are currently taxed at 10%.
For financial relief, the association suggested a reduction in the interest and financing rate to 3% for at least six months, an automatic six-month moratorium on financing facilities repayment or payment, and a double deduction of borrowing costs for six months from April 1.