As an insider for the healthcare market, I think that alaqar is very stable. All their location is in strategic area and they can safely dispose of it to other healthcare provider if they choose to

Sorry guys,

Wanna ask is buying REIT same as shares? Would like to buy Sunway Reit..

Simple answer is yes.

But don't expect reit performance is same with ordinary shares.

Al'Aqar properties have only one tenant i.e. KPJ run hospital. There are no other tenant. So Al'aqar is a proxy to KPJ's performance. As long KPJ do well, Al'aqar should do well. And looks like KPJ is doing well for the moment.

With a 7.xx% dividend p.a., it is not too bad. It is like you are buying a proxy to KPJ counter.

Xuzen

xuzen,

KPJ may be doing well, but the rental income is tied to the value of the property. So if the value doesn't appreciate as much, I don't see any reason KPJ would want to increase the rental for the property.

My 2 cents.

Just to add, Dynaquest's SPG gives Al'Aqar only a 3.5/10 rating i.e. a below average rating. There must be a reason why they rate it below average, but I do not know why.

So as usual... "caveat emptor".

Xuzen

My guess (I could be wrong), is that,

1. All building/properties are customised which originated from KPJ.

2. KPJ is the sole tenant of those properties while KPJ is also the major stake shareholder as well as party that inject/dispose the properties to the reit.

So all are close tied to KPJ.
While customised building will have more difficulty to rent out, if one day, the sole tenant doesn't want to rent anymore.

Regarding issue 1, Old and new hospital can always be converted to office block with some effort. If you see at the new tawakal hospital, It have a build it 4 storey car lot with capacity for 200 cars +/-

The chance of KPJ not wanting to rent the building is very slim, Most of the building is in strategic area with tawakal right next to GH, KPJ Ipoh right in the downtown. Everyday people do get ill and as long they prefer private health care than KPJ will survive. Anecdotal evidence suggest more and more foreign patient are flocking in to KPJ Hospital for treatment ie Indonesian

Xuzen,

I have given the reason why it is rated low.

idunnolol,

When a building needs conversion, it takes a lot of effort on the purchaser's part. It would be more cost effective to build a new building from scratch. Who would want to buy a hospital building just to convert it into a usable building, when all other buildings are available widely? We are not in Singapore.

As cherroy mentioned earlier, the earning potential of KPJ does NOT affect the earning of Alaqar or the property's value. Property is valued based on demand. If there is no demand, the price would be stagnant.

There are some merits in reusing old building. If you notice now, A lot of "Medical Centre " and small hospital are actually based in shoplots. Case in point would be the old tawakal building as well as alpha medical centre

idunnolol,

That is reusing the old shoplots, but in this case, it is the other way around. You should take note that the structure for specialised hospital is different from that of a normal property. If I were going to buy a hospital to be converted into an office building, I really don't know what would I use the mortuary for.

I forgot there is one case where the previous sentosa medical center was reused as tune hotel
Actually,i think hospital would make great conversion to a hotel like tune. Most of the rooms are a bit soundproofed with rooms on both side of the hallway, Anyway i am going offtopic here but there are some "unspecified" use for mortuary

A hospital converted into a hotel is a good script for a horror movie.
I for one wouldn't stay in a hotel if it's previously used to be a hospital. Imagine how many people died in the same building before. How many people willing, or dare to stay in this hotel?

I understand you pov, just a reit holder, we want the portfolio properties

1. independant with the major stake holder aka no/less RPT issue, and little conflict of interest. In this issue, there is conflict of interest as increase rental rate would hurt KPJ earning or increase its cost. The issue is same with Stareit (at least about half only as compared to 100%), Amfirst as well.
That's why Axreit is always preferred by investors or strong point of Axreit.

2. Reit is not properties development company. As reit holders, we merely want its as passive income, aka own the properties and constant collect rental only. This is a fixed income instrument. We don't want to see our reit venture in properties development, change/redevelop the properties. We just want the properties is maintain in good shape which has a lot of demand in rental market, as well as could be potential improved in valuation.

3. Whether those properties is originated from shoplots or build from scatch is the not main issue here. We as reit holder, pay the valuation based on value and yield potential.
Even those are from old shoplot conversion, but when injected into reit time, it is based on market valuation of those properties, it doesn't come cheap, it is based on fair actual valuatoin when the properties being injected time. You paid the land valuation + building together. If the building is customised and has little demand on it, the value part is land only, building valuation paid won't be recovered.

4. Just like Jordy said, there is no competition in lease demand for those properties due to customised and nature of it (whole building or 10 shoplot together one). Unlike office space, when the properties fully occupied, and still there is demand for it, then rental rate stand a chance of increasing.

As a conclusion, we want reit as indepedant as possible, not rely on everyone, major stake holders, to generate income, which is based on its own competitiveness in the market and suriving on its own. It is same with ordinary share or listed company.
This is important because if a company is surviving on its own based on its competitiveness, then there is more security of its long term future.

Don't get me wrong, I no doubt Al'qar provide quite decent yield as well and security in term of rental/lease (as it is very unlikely KPJ won't rent those properties), just something we can highlight about the issue, and why people give lower rating.

Thanks for taking your time for making it clear cherroy

idunnolol,

Well, finally cherroy hit you Whatever I want you to realise has been said by cherroy. As REIT holders, we must look long term and look for the catalyst for rental yield improvement. When we deal in properties, we need to think in terms of demand, and not potential. They are different.

I'm still researching which reits is the best to invest in?
any advices????thanks~

Trying 1st IPO this year. SUNWAY REIT. Closing today at 5.00pm.

Me too.

Something for all to digest.



AmFIRST To Build Up Assets



AmFIRST Real Estate Investment Trust (AmFIRST REIT), Malaysia’s second biggest property trust by assets, is out to increase its asset size of more than RM1b and expects a deal to be done in the current financial year. Its performance will also be driven by the expansion of major tenant AmBank Group and progressive upgrading of existing buildings to attract new tenants. Am ARA REIT’s Manager said in an interview with Business Times that for every asset they acquire, they will look at its returns or yield and potential capital appreciation. He also added that they are actively looking at property acquisitions in Malaysia via its private real estate funds, which in turn will serve as a pipeline of properties to boost AmFIRST REIT’s investment portfolio.



Cheers to all.