Institutional buyers to drive office property market

By THE STAR

PETALING JAYA: The office property market will continue to hold out well with strong interest from local and foreign institutional buyers, industry players said.

Knight Frank Ooi & Zaharin Sdn Bhd managing director Eric Ooi said in the past year, the capital values of Grade A office space had appreciated by between 20% and 30% to RM1,000-RM1,300 per sq ft. Rentals grew by 20% to 30% as well to RM7.50-RM8 per sq ft.

Meanwhile, super prime office space in the Petronas Twin Towers commands rentals of between RM10 and RM12 per sq ft.

According to Ooi, institutional buyers continue to see good upside potential in capital values and rentals of quality office buildings in Kuala Lumpur and this bodes well for the market going forward.

An analyst with a local brokerage said a lot of foreign and local institutional funds wanted to hedge against inflation and were on the lookout for strategic acquisition of prime office buildings with high yield potential.

“Property investment, especially in commercial properties, is still considered the better option for high yield potential compared with investment in the lacklustre equity market,” he said.

Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said with the recent budget incentive for real estate investment trust (REIT) in the form of lower withholding tax for local and foreign investors, REIT managers would be looking at more ingenious ways to enhance their asset values by making more yield accretive purchases.

The tax rate on REIT dividend received by foreign institutional investors will be slashed to 10% from 20% while for individual investors (both foreign and local), the withholding tax will be reduced to 10% from 15%.

LaBrooy said the office market, which had made substantial gains in capital values and rentals in the past 12 months, continued to offer good upside potential.

“There is no overbuilt situation for Grade A office space in the city centre and the number of transactions at new record prices underscores the positive market sentiment,” he added.

In its latest Real Estate Highlights, Knight Frank Research said the first half of this year saw several transactions on “forward purchase” basis that recorded capital values surpassing RM1,000 per sq ft.

Kuwait Finance House (KFH) entered into an agreement with YNH Property Bhd for the purchase of half of Menara YNH along Jalan Sultan Ismail for RM920mil or about RM1,230 per sq ft.

KFH was also involved in another forward purchase agreement to buy Glomac Tower for RM576.85mil, or RM1,120 per sq ft.

The latest office building in the city to be transacted is Menara Citibank in Jalan Ampang, Kuala Lumpur. The buyer, IOI Corp Bhd, is said to have proposed a price of RM573mil or RM970 per sq ft for the building.

Another building that is believed to be up for sale is Menara Standard Chartered on Jalan Sultan Ismail, which has a price tag of close to RM300mil. The front-runner to bid for the building, which is owned by Government of Singapore Investment Corp Real Estate, is said to be ING Real Estate.

Tax breaks to buy first home By THE STAR

This is the first of a three-part question-and-answer series provided by PricewaterhouseCoopers for The Star readers on various aspects of Budget 2009.

Q: My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.

A: If you are buying a low-cost house, you will get full stamp duty exemption on all documents, including loan agreements. However, if you are buying a medium-cost house of up to RM250,000, you will get a 50% stamp duty exemption on the loan agreement, in addition to the 50% stamp duty exemption on the sale and purchase agreement currently available. However, you need to be a Malaysian citizen to be eligible for the exemption and it is limited to the purchase of one residential property only. Please note that the stamp duty exemption is effective for sale and purchase agreements executed from Aug 30, 2008, to Dec 31, 2010.

As you do not have a fixed income, you may benefit from the Housing Credit Guarantee Scheme, which is a fund set up to assist those without fixed income to obtain housing loans from any financial institutions to purchase low- and medium-cost houses.

Q: I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?

A: Your rental income would be subject to tax in Malaysia as it is a Malaysian sourced income. Prior to 2009, your rental income will be taxed at a non-resident rate of 28%. However, under the proposed legislation, your non-resident tax rate will be reduced to 27% in year of assessment 2009.

by The Star

CapitaLand divests stake in KL tower

Source : Business Times - 30 Aug 2008

CAPITALAND is divesting its 30 per cent stake in a company that owns Menara Citibank, a 50-storey office tower in Kuala Lumpur’s Jalan Ampang, for RM176 million (S$75.5 million). Upon completing the divestment, the Singapore-based property giant will recognise a gain of about S$22.1 million.

The company being divested is Inverfin Sdn Bhd, whose principal asset is Menara Citibank. CapitaLand and the other Inverfin shareholders - Citibank (50 per cent) and Lion Group (20 per cent) - are selling their respective shareholdings in Inverfin to IOI Corporation Bhd.

The total consideration for the divestment is RM586.7 million and based on the net asset value of Inverfin which values the property at about RM733.6 million, this works out to about RM1,000 per square foot of net lettable area for the freehold property.

CB Richard Ellis Singapore and RE Group Associates Sdn Bhd acted for Inverfin’s shareholders.

CapitaLand Commercial Ltd CEO Wen Khai Meng said the group will recycle or redeploy proceeds from the divestment to tap on new opportunities in the growing Malaysian market.

The Malaysian real estate market continues to enjoy good growth underpinned by the country’s healthy economic performance, CapitaLand said in a statement yesterday.

Riding on this positive backdrop, CapitaLand has continued to expand its investments in Malaysia through Quill Capita Trust (QCT), which owns nine properties in Cyberjaya and Klang Valley. In addition, CapitaLand manages the US$30 million Mezzo Capital Fund, which has invested in five residential projects in Kuala Lumpur, and the US$270 million Malaysia Commercial Development Fund (MCDF).

MCDF holds stakes in two sites in Kuala Lumpur Sentral to build offices and serviced apartments with retail amenities, and has other projects located in quality residential and commercial precincts including Mont’ Kiara and the Kuala Lumpur City Centre area.

The group is planning to list a Malaysian mall real estate investment trust (Reit) this year, barring unfavourable market conditions. The new Reit will initially comprise three shopping malls worth RM2 billion - Penang’s Gurney Plaza, and Mines Shopping Fair and Sungei Wang Plaza in Klang Valley.

Project exists but is not official yet

IPOH: A proposed RM180 million housing project in Seri Iskandar, at the centre of a graft probe, exists -- contrary to the claim by the menteri besar that it does not.

Sources told the New Straits Times that one of the exco members detained by the Anti-Corruption Agency for alleged graft had even showed a third party the land earmarked for the mammoth project recently.

It is understood that the idea to develop a large parcel of land in the Perak Tengah district for housing cropped up during an informal meeting at the Perak Tengah district office and was immediately acted upon by one the suspects.

"The third party was even taken to the proposed site before he agreed to submit a proposal to develop the land.

"It is still in the early planning stages. This is why searches by the state government on the project did not come up with anything," a source said.
Menteri Besar Datuk Seri Mohammad Nizar Jamaluddin said on Wednesday the project did not exist, shortly after the ACA announced the arrest of six people in its probe into allegations that they had received RM120,000 to expedite the approval process.

Perak Tengah district officer Hasim Hasan said even if a survey on the said land had been carried out, it was strictly between the parties concerned.

It is understood that the ACA will call Hasim later today to record his statement to facilitate investigations.

REIT managers seek withholding tax waiver

MANAGERS of real estate investment trusts (REITs) in Malaysia are hoping that a removal of withholding tax for investors will be included in next year's federal budget. The move is crucial to spur growth in the industry and to keep Malaysian property trusts competitive, they said.

"We would like to see a waiver or substantial reduction in withholding tax. Currently the withholding tax is notably higher compared to markets such as Singapore, Thailand and Hong Kong," Quill Capita Management Sdn Bhd chief executive officer Chan Say Yeong said. The company is the manager of Quill Capita Trust.

Lowering withholding tax would directly make Malaysia property trusts more regionally competitive, improve foreign direct investment into the country and increase the after-tax yield, he said.

"Such a move will attract foreign pension funds that are looking for long-term investments with higher yield as well as individual investors seeking higher return than bank deposits," Chan told Business Times via e-mail.

He added that the resulting better yield and foreign investor interest from the waiver will further generate confidence in developing Malaysian REITs.

His view was echoed by Stewart LaBrooy, the chief executive officer of Axis REIT Managers Bhd, who told reporters of a similar wish during a company briefing this month.

Malaysia imposes a 15 per cent withholding tax and 26 per cent tax on foreign investors and 20 per cent on institutional investors. In Singapore, there is no withholding tax on individuals and only 10 per cent tax on other investors, LaBrooy said.

Despite their defensive nature, as property trusts generally pay higher dividends, their share performance were not spared by the current weak market. So far, there has not been a single REIT being listed this year, after a few years of solid growth.

"The slowdown in the global economy and the tightening in liquidity due to US subprime issue have impacted the growth of the equity market in general, not just limited to REITs," Chan said.

Still, he said, Malaysian REITs have a lot of untapped potential as properties in the country are still generally undervalued and the economy is poised for sustainable long-term growth.

"The waiver in withholding tax that we are hoping for will create positive response in the market, helping to attract foreign inves-tors and individual investors."

Malaysia remains a new and fledgling market when it comes to the REIT industry, Chan said. Hence, investor awareness and education need to be continued and strengthened to boost industry prospects, he said.