I am trying to make some sense of the events of the past 12 months (or has it been over 14 months now) especially when it relates to the Malaysian Real Estate Investment Trust (REIT) (MREITs) sector. Most MREITs are heavily invested in the following asset classes – Malls, Offices and Hotels, with some having a blend of all three.
Unfortunately, the succession of the Movement Control Orders (MCOs) since our first lockdown kickstarted on March 18, 2020, has taken its toll on the performance for the four quarters that followed since.
The series of lockdowns have kept customers away from patronising their portfolios, as was the case of the Mall REITs whose customers were prevented from visiting their favourite weekend destinations while tenants demanded more rebates on rents.
Coupled with the “Work From Home” (WFH) directive, this has brought into question the relevance and need for office space expansion especially coming from the many tenants who were not able to use their offices during the lockdowns now requesting for rent relief or rent reductions.
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This has put the income of Office REITs under pressure. Hotel REITs also saw occupancy fall to unprecedented levels as fear gripped the nation with revenue being impacted negatively.
MCO 3.0 [and this may not be the last] will no doubt inflict another round of pain on the MREIT sector. As fear and uncertainty grip the markets again, REITs are being ordered to close their properties, often with little notice and with confusing and contradictory SOPs. There is no real solution to the current dilemma apart from executing a massive roll out of the vaccination and testing programme throughout the country and in the shortest possible time frame.
The tragedy is that we had a year to plan for a vaccination programme, secure supplies of vaccines and build the facilities to administer the vaccines. But sadly, the execution has left much to be desired.
However, we can redeem ourselves if a rapid roll out is given top priority over everything else. I am glad to observe that after a huge outcry from the public there now seems to be a concerted effort by the Government to ramp up the programme by opening more mega facilities and getting the MySejahtera app to work more efficiently. It doesn’t seem that the pandemic problem is confined to Malaysia alone though, but is an administrative and political problem that has affected most ASEAN countries.
Many ASEAN countries lag far behind Malaysia in rolling out their respective immunisation programmes, having been complacent with low case numbers for many months. Getting a herd immunity first will help Malaysia open up faster and be entitled to a lion’s share of the recovery that will follow.
A quick recovery is crucial to the MREITs performance in the coming months. MREITs comprise some of Malaysia’s most prized assets, and they will bounce back with a vengeance once we bring the pandemic to its knees.
Although MREITs unit prices have taken a dip, they still represent a great buying opportunity moving forward. After all, they represent the best managed asset portfolios in the country.
