Quick updates on REIT sector in Malaysia. Basically what the Malaysian REIT Managers Association lead by Dato Stewart Labrooy is submitting proposal to the Securities Commission to allow REITs to take on construction risk. What it means is that instead of buying or injecting properties from related or third parties, if the proposal goes through, REIT can take on property development activities limited by 10 percent of a REIT total asset value. The rationale of this is to yield higher return to shareholders, making REIT more of an attractive investment at a slightly higher risk, if you ask me. From REIT manager standpoint, they cannot just be static and deliver the same investment returns moving forward – that will make REIT lose its appeal. Also, this is driven by the fact that yield accretive acquisitions is becoming more difficult today, so such move will be an out of the box approach for M-REIT. For S-REITs, his rule has been in place – so the intention is to put M-REIT in line with S-REIT. To further lower the risk factor, the acquisitions will be focused on pre-committed projects with Grade A tenants. Say, if Tesco wants a REIT to build a new facility and pre-sign a 15 year lease, it makes sense for the REIT to undertake the project, and then retain the developer’s profit as gain for its shareholders.
The second thing is an interview with Warren Buffett – which I stumbled upon in Youtube. Skip to 7.10 for this. The best part of it when he said – “Don’t listen to me when you want to make money in the stockmarket“. See it to believe it – I am not kidding.