Maleisie

After a record number of deals valued at RM5 billion involving shopping complexes in 2011, this retail asset will continue to
be on the radar of funds and real estate investment trusts (REITs) in 2012.

Allan Soo, managing director of CB Richard Ellis Malaysia, said that since there are not many quality malls to go around, buyers will look at alternative methods of growing their asset portfolio.

"Funds or companies may develop a shopping complex on their own or enter into a joint venture. They could also buy assets that are close to completion," Soo told Business Times.

If in 2011 we witnessed virtually all major mall deals taking place in Peninsular Malaysia, Soo expects 2012 to see deals also being done for mall assets in Sabah and Sarawak.

And if a mall is available for purchase, Soo said: "It continues to be a seller's market this year."

Meanwhile, vice president of Royal Institution of Surveyors Malaysia (Property Management, Estate Agency and Valuation Division) Adzman Shah Mohd Ariffin agrees that 2012 is
a seller's market.

High prices are also a result of higher land value and costlier construction costs, he added. "Prices are already higher naturally due to higher land values and cost of construction.
Given lower passing rental levels, especially for malls opened in the past two to three years, the yields are likely to be low.

"Even the recent deals in Klang Valley showed yields of about 5.5 per cent to 6.5 per cent only, which is already much lower than most investors' target of 7 per cent," Adzman said.

However, he said that malls are dynamic and capable of generating better income if operated well with strong corporate governance and good retail mix. This makes it a good resilient investment in weathering global economic uncertainties.

According to Adzman, it could cost more to build a mall from scratch. As such, it would make better sense to purchase existing malls which are in good condition, location, population
catchment and potential for enhancement and repositioning.

"Purchasers must look beyond the yield at the time of purchase and be prepared to work on the assets for capital appreciation and bettering the income stream in the long term," he said.

Adzman, meanwhile, reckons that purchasers will be from private funds to focus on assets to "warehouse" rather than REITs, which would look for yield-accretive assets.

"Warehouse" is when an asset is held for a period of time in order to nurture it until it produces a better income stream.

After about a dozen deals in 2011, could there be another record set this year?

It is expected to be vibrant but not a repeat of 2011, but deals this year may very well thump last year's in terms of value.

Already, there have been indication that KrisAssets Holdings Bhd, which owns the Mid Valley Mega Mall and The Gardens, will spin off the asset into a REIT. These assets alone are valued at RM3 billion.

We have also yet to hear the outcome of the Bandar Raya Development Bhd (BRDB)'s plan to call for a tender for the sale of the Bangsar Shopping Centre and CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor. These three malls may be valued at another RM800 million.