1. Effectiveness of Amanah Raya Berhad as a Property Manager

Management Strategies and Frameworks

Evaluate the management performance of AmanahRaya-Kenedix REIT Manager Sdn. Bhd. (AKRM) as REIT Manager; Trustee: Pacific Trustees Berhad; ARB as parent/public trustee background. AKRM employs a proactive asset management approach, focusing on close tenant relationships and rigorous property upkeep. The REIT Manager emphasizes preventive maintenance and AEIs (Asset Enhancement Initiatives) to sustain property competitiveness.

ARB schedules regular upgrades (e.g. modernizing escalators and replacing aging water pipes in its properties) to improve building conditions and value. A structured governance framework underpins these strategies – ARB adheres to Malaysia's REIT guidelines and corporate governance code, and internal risk management processes are in place via the Group's Risk Management Department.

Tenant Satisfaction and Feedback Mechanisms

ARB's property management places strong emphasis on tenant satisfaction, though its approach is more relational than survey-based. The company maintains regular tenant engagement meetings to discuss key concerns such as maintenance quality, property improvements, safety, and utilities management.

ARB has demonstrated tenant-centric policies, evidenced during the COVID-19 pandemic when rental rebates totaling RM5.59 million were given to struggling tenants. This short-term revenue sacrifice helped maintain tenant relationships and occupancy, indicating ARB's priority on tenant retention and satisfaction.

Operational Efficiency Metrics

ARB monitors and strives to improve several operational efficiency metrics across its property portfolio. Cost efficiency is a key focus: the Manager closely tracks property operating expenses (maintenance, utilities, etc.) on a per-property and per-square-foot basis to identify savings opportunities.

The Management Expense Ratio (MER) is used as an efficiency benchmark, standing at 1.17% for ARREIT in 2020. This MER (which includes the Manager's and Trustee's fees as a percentage of NAV) is comparable to industry norms, indicating that ARB's management overhead is in line with peers.

2. Monetization of Unclaimed Assets Under Management (AUM)

Overview of Unclaimed AUM at ARB

Amanah Raya Berhad, as Malaysia's public trust corporation, often becomes the custodian of unclaimed assets, particularly from deceased estates with no immediately located heirs. As of early 2025, an estimated RM500 million in cash is held by ARB as pending inheritance funds awaiting rightful claimants.

Potential Monetization Strategies

Despite the fiduciary nature of unclaimed AUM, there are several strategies ARB could employ to derive value from these assets while safeguarding beneficiaries' rights. One key strategy is prudent investment of unclaimed cash funds.

Instead of leaving cash idle, ARB pools unclaimed monies into its Common Fund and invests in low-risk instruments (such as government bonds or fixed deposits). Indeed, ARB already practices this – assets held in its Common Fund are invested to earn returns, and competitive dividends are paid out to the beneficiaries' accounts.

3. ARREIT Performance vs. Market Benchmarks

Relevant Benchmarks for Comparison

To evaluate AmanahRaya Real Estate Investment Trust (ARREIT)'s performance, it should be compared against both industry-specific and broad market benchmarks. A primary benchmark is the FTSE Bursa Malaysia REIT Index, which tracks the performance of listed REITs in Malaysia.

Key Performance Indicators and Data

Return on Investment (Total Return): ARREIT's total return to unitholders includes unit price appreciation (or depreciation) plus distributions. Over the past year, ARREIT delivered roughly a 13.7% total shareholder return, which is on par with the Malaysian REIT industry's ~14.3% return and notably better than the broader market's negative return of –6.7% in the same period.

Occupancy Rates: AmanahRaya Real Estate Investment Trust (ARREIT)'s portfolio occupancy as of latest data is improving but still has gaps. ARREIT holds 12 properties (as of 31 Mar 2025). At the end of 2020, ARREIT reported an average occupancy of ~82% across its properties. By 2024, with leasing efforts, occupancy has risen in key assets, with Vista Tower occupancy (dated): 2020 ≈ 63% → trough ≈ 35.5% (3Q2023) → 58% (late-2024).

Distribution Yield: ARREIT has historically offered a relatively high distribution yield to investors. In the pre-pandemic period, ARREIT's annual DPU was around 6.1 to 6.2 sen, which at the time equated to yields of ~7–8%.

1. Performance Analysis (Last 5 Years)

Over the past five years, ARREIT's performance has been under pressure, with total shareholder returns turning negative. ARREIT's DPU plummeted from 6.200 sen in 2019 to just 1.198 sen in 2023, a drop of over 80%. This reflects the significant challenges faced during the COVID-19 pandemic and subsequent portfolio transitions.

Key Events Impact

Several key events impacted ARREIT's performance trajectory. The COVID-19 crisis (2020–2021) led to tenant non-renewals and lower occupancy, especially in office assets. ARREIT's flagship Vista Tower in KL saw occupancy plunge as tenants adopted hybrid work models.

Portfolio occupancy dropped from 86% (FY2019) to ~74% by mid-2023 due to pandemic-related exits at Vista Tower, Dana 13, and a vacant Toshiba Shah Alam building. Consequently, net property income (NPI) eroded – FY2023 NPI fell 17.3% YoY to RM46.5 million.

Strategic Overhaul

In response, ARREIT undertook a strategic overhaul in 2022–2024. Under new management (with a new Managing Director appointed Dec 2022), the REIT began repositioning its portfolio and cost structure. Non-core, low-yield assets were divested – notably the Holiday Villa Langkawi disposal: RM145m; gain RM45m; completed Jan 2024.^[1]

2. Comparative Analysis vs. Peer REITs and Market

Valuation Discount

ARREIT's units are deeply undervalued by asset metrics. It trades at only about 0.3× Price-to-Book (P/B) (i.e. market price ~30% of its net asset value). This is less than half the ~0.7× P/B average for comparable Malaysian REITs, and far below the ~0.9× P/B for the broader property sector.

Dividend Yield and Income

Historically, ARREIT offered attractive yields in line with peers, but recent cuts have made its current yield modest. At the current price (~RM0.38), ARREIT's trailing 12-month dividend yield is ~3.9%. This is on the lower end among REITs – top-tier Malaysian REITs often yield ~5% and smaller retail/industrial REITs often 6–8%.

Financial Health & Gearing

ARREIT's balance sheet health is comparable to peers, though its gearing is on the higher side. As of mid-2024, ARREIT's debt stood at RM558.1 million, which is roughly 43% of total assets (~RM1.3 billion). This gearing level is within regulatory limits but slightly high relative to some peers.

3. Analyst Insights and Sentiment Trends

Consensus Rating

The average analyst rating on ARREIT is currently "Hold", with no Buy ratings and a minority of Sell ratings. Specifically, out of 6 analysts covering the stock, 3 rate it Hold, 2 Sell, and 1 Strong Sell, and 0 have a Buy recommendation.

Target Prices

There is considerable divergence in valuation opinions. The analysts' average 12-month price target for ARREIT is effectively around the current trading range. However, one optimistic outlook comes from an RHB Research trading idea which assigned a fair value of RM0.51 per unit – about +28% above the then-price of RM0.40.

4. Valuation Assessment: Intrinsic Value vs Market Price

Net Asset Value (NAV) Discount

ARREIT trades at approximately 0.29–0.30× Price-to-NAV. In absolute terms, as of 1Q 2025 its NAV per unit is about RM1.27, while the stock trades around RM0.37–0.40, meaning the market price is a 70% discount to the trust's book value.

Earnings and Cash Flow Valuation

In terms of earnings power, ARREIT's trailing price-to-earnings (P/E) ratio is extremely high ~37×–67×. This is far above the REIT sector average P/E of ~14–15× and indicates that ARREIT's recent net profits were very low.

Executive Summary

The tokenization of ARREIT represents a transformative opportunity to enhance liquidity, accessibility, and operational efficiency while positioning the trust at the forefront of digital innovation in real estate investment. This strategic assessment outlines a comprehensive roadmap for implementing blockchain-based tokenization that preserves ARREIT's regulatory compliance while unlocking new value creation opportunities.

Tokenization offers ARREIT the potential to fractional ownership, reduce transaction costs, enable 24/7 trading, and attract a broader investor base including retail and international participants. The implementation requires careful consideration of regulatory frameworks, technology infrastructure, and market readiness.

Tokenization Framework and Structure

Token Architecture: Implementation of security tokens representing fractional ownership in ARREIT units, maintaining compliance with securities regulations while enabling enhanced liquidity and accessibility.

Smart Contract Integration: Automated distribution payments, voting rights management, and compliance monitoring through smart contracts, reducing administrative costs and improving operational efficiency.

Fractional Ownership: Enabling smaller investment amounts through token fractionalization, expanding the potential investor base and improving market accessibility.

Governance Framework: Digital voting mechanisms and stakeholder engagement tools that maintain regulatory compliance while enhancing unitholder participation.

Identity and Compliance: Integration of digital identity verification and KYC/AML processes to ensure regulatory compliance while streamlining investor onboarding.

Technology Infrastructure Requirements

Blockchain Platform Selection: Evaluation of enterprise-grade blockchain platforms that offer scalability, security, and regulatory compliance capabilities suitable for institutional real estate tokenization.

Security Protocols: Implementation of multi-signature wallets, cold storage solutions, and cybersecurity frameworks to protect investor assets and maintain institutional-grade security standards.

Integration Architecture: Seamless integration with existing ARREIT management systems, accounting platforms, and regulatory reporting tools to minimize operational disruption.

Trading Infrastructure: Development or partnership with regulated digital asset exchanges that support security token trading while maintaining compliance with Malaysian securities regulations.

Custody Solutions: Implementation of institutional-grade digital asset custody services that meet regulatory requirements and investor security expectations.

Regulatory Compliance and Legal Framework

Securities Commission Malaysia (SC) Compliance: Ensuring full compliance with Malaysian securities regulations, including registration requirements and ongoing reporting obligations for tokenized securities.

Cross-Border Considerations: Addressing international regulatory requirements for global investor participation while maintaining primary compliance with Malaysian regulations.

Anti-Money Laundering (AML): Implementation of robust AML and counter-terrorism financing procedures within the tokenized platform to meet regulatory standards.

Data Protection: Compliance with Malaysian Personal Data Protection Act and international data privacy regulations for investor information handling.

Tax Implications: Assessment of tax treatment for tokenized REIT units and development of clear guidance for investors regarding tax obligations.

Market Opportunity and Value Proposition

Enhanced Liquidity: 24/7 trading capabilities and reduced settlement times increase market liquidity and price discovery efficiency.

Global Accessibility: Expanded access to international investors seeking exposure to Malaysian real estate through digital asset platforms.

Operational Efficiency: Automated processes for distributions, reporting, and compliance reduce operational costs and improve accuracy.

Innovation Leadership: Positioning ARREIT as a pioneer in real estate tokenization within the Malaysian market, attracting innovation-focused investors.

Cost Reduction: Lower transaction costs, reduced intermediary fees, and streamlined processes benefit both ARREIT and its investors.

Risk Assessment and Mitigation

Technology Risks: Smart contract vulnerabilities, blockchain security issues, and technical failures could impact operations and investor confidence.

Regulatory Risks: Evolving regulations around digital assets and tokenized securities may require ongoing compliance adjustments.

Market Adoption: Limited investor familiarity with tokenized assets may initially constrain market participation and liquidity.

Operational Risks: Integration challenges with existing systems and potential disruption during implementation phases.

Mitigation Strategies: Phased implementation approach, comprehensive testing protocols, regulatory engagement, investor education programs, and robust cybersecurity measures.

Implementation Roadmap

Phase 1 - Foundation (Months 1-6):

• Regulatory consultation and approval processes
• Technology platform selection and partnership establishment
• Legal framework development and documentation
• Initial system design and architecture planning

Phase 2 - Development (Months 7-12):

• Smart contract development and security auditing
• Platform integration and testing
• Compliance system implementation
• Investor education and market preparation

Phase 3 - Pilot Launch (Months 13-18):

• Limited pilot program with select investors
• System optimization and performance monitoring
• Regulatory compliance validation
• Market feedback integration

Phase 4 - Full Deployment (Months 19-24):

• Complete tokenization of ARREIT units
• Full market launch and trading commencement
• Ongoing optimization and feature enhancement
• International market expansion planning

Success Metrics and KPIs

Liquidity Metrics: Trading volume, bid-ask spreads, and time to settlement compared to traditional REIT trading.

Adoption Metrics: Number of tokenized unitholders, transaction frequency, and investor demographics.

Operational Metrics: Cost savings from automation, reduction in administrative overhead, and system uptime performance.

Compliance Metrics: Regulatory adherence rates, successful audit outcomes, and incident-free operations.

Financial Metrics: Impact on ARREIT's unit price, trading premium/discount, and total return performance.

Strategic Recommendation

The tokenization of ARREIT represents a strategic opportunity to enhance competitiveness, improve operational efficiency, and unlock new sources of value creation. The recommended approach emphasizes gradual implementation with strong regulatory compliance and risk management frameworks.

Success factors include thorough regulatory engagement, robust technology implementation, comprehensive investor education, and continuous monitoring of market developments. The initiative positions ARREIT for long-term growth while maintaining its reputation for institutional excellence and investor protection.

Implementation should proceed with careful consideration of market readiness, regulatory environment, and stakeholder acceptance, ensuring that tokenization enhances rather than disrupts ARREIT's core value proposition as a stable, income-generating real estate investment vehicle.

1. Holiday Villa disposal announcement