Health check on REITs (M'sia)

Top 3 REITs in Malaysia are mainly from retail segments, they are respectively IGB REIT, Sunway REIT and Pav REIT.


4 indicators to show the strength of a REIT:-
1. Rental income per square feet.
2. Occupancy rate
3. Income distribution
4. Net Property Income Margin

Extra 6 filters to pick a great REIT:- (inspired by Starman)

1. DPU growth

2. Quality of real estate

3. Genuine valuation of the NAV (not makeup by valuator)

4. Diversification of estate holding (prevent concentration risk)

5. Makeup in the balance sheet (a) major shareholder guarantee, (b) major shareholder not taking dividend for first few years and hence DY was artificially drove up upon listing, (c) interest rate swap, hence the interest rate is lower at first, then higher at the end of tenure

6. Capability for asset enhancement (most important!)


IGB REIT
Highlights: Mid Valley Megamall, The Garden Mall
Location: Klang Valley
Key segments: Retailer
Rental per sqft: rm15
Occupancy rate: 100% for 3 years
Income distribution: 78% retailer, 9% parking, 13% ads
Net Property Income Margin: 77%

Sunway REIT
Highlights: Sunway Pymarid Mall, Sunway Medical Centre, Sunway Hotel
Location: Penang, Perak, KL
Key segments: Retailer, Hotel, Hospital, Office
Rental per sqft: rm11
Occupancy rate: 95% retail, 70% others
Income distribution: 75% retailer, 13% hotel, 7% office, 4% hospital
Net Property Income Margin: 71%

Pavilion REIT
Highlights: Pavilion Shopping Mall, Intermark Mall, Da Men Mall, Pavilion Tower
Location: Klang Valley
Key segments: Retailer, Office
Rental per sqft: rm20
Occupancy rate: 98%
Income distribution: Retailer
Net Property Income Margin: 66%