Al Hadharah Boustead REIT to become first Malaysian REIT to be privatized - IFN

Al Hadharah Boustead REIT to become first Malaysian REIT to be privatized

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MALAYSIA: The Al Hadharah Boustead REIT, the first plantation-based Islamic real estate investment trust in Malaysia, could be subject to privatization following an announcement on the Kuala Lumpur Stock Exchange (Bursa Malaysia) on the 12th July calling for the suspension of trading on Al Hadharah Boustead REIT’s and Boustead Holding’s securities. Affin Investment Bank is said to be involved in the privatization of the Islamic REIT by Boustead Holdings, its parent company. However, when contacted by Islamic Finance news, representatives at the investment bank could not provide comments on the deal. The Al Hadharah Boustead REIT was first listed on Bursa Malaysia in February 2007, making it the second Islamic REIT to be listed in Malaysia, and the first to invest in plantation estates and mills. At present, the Islamic REIT manages 12 oil palm estates and three palm oil mills encompassing 19,945 hectares in total, and is majority owned by Boustead Holdings with 53.6% of the I-REIT’s shares, followed by Lembaga Tabung Angkatan Tentera; a savings scheme for Malaysia’s armed forces, with 12.7%. Speaking to Islamic Finance news, a market analyst at a Malaysia-based investment bank said that the most likely rationale for the privatization of the Islamic REIT is its illiquid position and lackluster interest from equity investors mainly due to the fact that it is pegged to plantation assets — a less than popular choice among other REIT managers on both the conventional and Islamic side. “From my understanding, the Al Hadharah Boustead REIT has not seen much improvement in yield since its listing. Plantation yields are generally not as attractive as other REITs such as commercial and industrial buildings, because there is generally more of a growth story there in terms of acquisitions and expansion. They also generate income during financial downturns and recessions,” she said. The source also added that plantation yields are viewed to be relatively stagnant as they are not tagged to movement in commodity prices. However, according to the Al Hadharah Boustead REIT website, the terms for rental, which is reviewed every three years include historical, prevailing and expected crude palm oil prices, cost of production, extraction rates and yield per hectare. Islamic REITs in Malaysia are subject to the regulatory requirements of the Securities Commission of Malaysia’s Islamic Real Estate Investment Trust guidelines which were issued in November 2005. According to a research report by Affin Investment Bank dated the 1st July, Boustead currently has a total planted area of 68,375 hectares in Peninsular Malaysia and 41,924 hectares in the East Malaysian states of Sabah and Sarawak. The planted areas include estates bought back from Golden Crop Returns and19,945 hectares held under a lease arrangement with Al Hadharah Boustead REIT. “Unless pricing is attractive, Boustead has no plans to acquire new plantation land bank,” the report suggested.