KUALA LUMPUR — Amanah Raya Bhd plans to double its AmanahRaya real estate investment trust (REIT) fund size to RM2 billion and to acquire better assets for the REIT’s improvement purposes in three to five year’s time.
Group managing director Adenan Md Yusof said the group aims to grow the REIT’s fund size to RM2 billion from the current RM1 billion.
AmanahRaya REIT’s portfolio includes 14 properties as at Sept 30, 2016, with a dividend yield of 6-7%.
“In the future, we hope to give better returns in terms of dividend yield and capital appreciation,” he said after a signing a strategic collaboration with Japan’s largest independent real estate management company Kenedix Inc, here yesterday.
Kenedix, via its wholly-owned subsidiary KDA Capital Malaysia Sdn Bhd, is acquiring 85.98 million units of AmanahRaya REIT representing 15% of total units in circulation for an aggregate consideration of RM85.98 million.
It is also acquiring 735,000 ordinary shares of AmanahRaya REIT Managers Sdn Bhd (ARRM) representing a 49% stake for RM5.14 million at a consideration of RM7 per share.
Post acquisition, Amanah Raya will maintain its controlling stake of 51% in ARRM.
The parties also signed a shareholders’ agreement and a memorandum of understanding on a bridge fund for the purpose of acquiring and nurturing assets before injection into the REIT.
Adenan said the bridge fund will be used to identify, acquire and nurture assets to be injected into the REIT when the assets achieve returns of 6-7%.
These assets include an office building and an industrial building in Malaysia.
“We are looking at a few and we are in negotiations. It will be quite substantial,” he added.
Kenedix specialises in managing real estate funds, private pension funds and is the sponsor company for six public-listed REITs and one private REIT in Japan.
Kenedix’s portfolio comprises conventional asset classes such as office buildings, logistic facilities, residential properties and retail outlets as well as new asset segments such as senior healthcare facilities and data centres.
Also present was Finance Minister II Datuk Johari Abdul Ghani, who said the government and Securities Commission will be introducing a comprehensive guideline to facilitate the growth of REITs in the market and to promote stronger governance to instil greater market confidence.
“The review exercise is also premised on the understanding of the evolving needs of investors and REITs, as well as taking into account developments and regulatory requirements in the regional markets,” said Johari.
He said a key characteristic of the enhancements is to allow REITs to invest in a wider range of real estate asset classes.
“It is proposed that REITs be allowed to undertake property development subject to a cap of 15% of their total asset value.
“Under the current framework, although REITs are currently permitted to acquire properties under construction valued at up to 10% of their total asset value, they are not permitted to undertake property development activities or acquire vacant land,” he said.
Commenting on the US Federal Reserve’s decision to increase its interest rates by 25 basis points (bps), he said, ringgit has been affected long time ago and fallen to its lowest since the 1998 Asian Financial Crisis.
“How much more it (the US dollar) is going to increase, I think it depends on the President-elect Donald Trump’s policies going forward,” he said.
Johari added it is a matter of time before the ringgit stabilise and move back to what it used to be.
The Malaysian REITs market is relatively small when compared to more matured markets like Japan (US$110 billion or RM491.7 billion), Australia (US$105 billion), Singapore (US$53 billion) and Hong Kong (US$27 billion) but it has shown steady growth over the past 10 years.
As at November 2016, the total market capitalisation of Malaysian REITs amounted to RM41 billion or approximately US$ 10 billion.
This is represented by 17 REITs, including four Islamic REITs of which one is part of a stapled structure.
Malaysia REITs own a wide range of real estate, including office buildings, retail malls, hotels, healthcare establishments and industrial properties. (US$1 = RM4.47)