Wednesday 06 Dec 2023
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KUALA LUMPUR (Sept 20): AME Real Estate Investment Trust (REIT), which debuted on Bursa Malaysia on Tuesday (Sept 20), has identified three more industrial properties for potential acquisition over the next 12 months from its sponsor AME Elite Consortium Bhd.

These properties have a total gross floor area of 256,828 sq ft and are located in AME Elite’s industrial parks, said Simon Lee, chairman and executive director of I REIT Managers Sdn Bhd, the management company of AME REIT.

“[The acquisition] is still being negotiated. Because it is a related-party transaction, there are also procedures that [we] need to go through; these assets are also subject to independent valuation. It (the acquisition) also needs to [be] cleared [by] the independent board of AME Elite and AME REIT, as both are listed entities. It is still early days right now,” he told reporters after the listing ceremony.

The acquisition, if it materialises, would increase AME REIT’s portfolio of assets to 37 investment properties, from 34 currently.

Lee said AME REIT is capable of acquiring up to RM480 million worth of assets based on its gearing of 8% currently.

(From left) AME Elite Consortium Bhd group chief financial officer Gregory Lui, I REIT Managers Sdn Bhd alternate director Kang Ah Chee and director Lim Yook Kim, Hong Leong Investment Bank Bhd group managing director/chief executive officer Lee Jim Leng, I REIT Managers chairman/executive director Simon Lee Sai Boon and CEO/ED Chan Wai Leo, AME Elite group MD and I REIT Managers ED Kelvin Lee Chai, with I REIT Managers non-EDs Datin Cheryl Kaur Pola, Yau Yin Wee and Wee Beng Chuan. (Photo by Shahrin Yahya/The Edge)

“SC (Securities Commission Malaysia) guidelines actually allow us to gear up to 50%, so we have debt headroom of about RM240 million. Maximum we could buy about RM480 million worth of assets before we need to come back to the market to do [another fund] raising.

“Assuming we do touch the 50% gearing, we would have almost RM1 billion in total assets under management, and then we may do another capital raising,” he said.

Apart from AME Elite, Lee said the industrial-focused REIT is also assessing acquisition from third parties.

“We are impartial, we don’t say that we have to buy from our sponsor. Of course, we are a sponsor-led REIT, hence there will be a pipeline coming from the sponsor. Nevertheless, the manager has also been mandated to buy third-party assets. Right now, we are evaluating a few proposals, both from the sponsor side and third parties,” he said.

Outlook for industrial real estate

The prospects of industrial real estate appear bright for Lee as well, especially with upcoming demand arising from the pipeline of foreign direct investment (FDI) into the country’s three industrial areas, namely Penang, Klang Valley and Johor.

“If you look at what is happening in Penang, you will see a lot of tech facilities coming onboard. In the Klang Valley side, a lot of warehouses are being built. Down south in Johor where we are, a lot of E&E (electronic and electrical) companies together with big pharmaceutical companies are setting up their facilities there. All in all, the industrial market is still quite robust and active in that sense,” he said.

Even with a rising interest rate environment, Lee said there are still opportunities for AME REIT to reap, especially for under-rented properties and in the case of sales-and-leaseback.

“Although we may buy it at very tight spread because of rising interest rates, we could look at assets that have enhancement opportunities, or we find assets where the lease structure is under-rented, so if we can change the tenant mix, put in a little bit of capex (capital expenditure) and fix the yield, that is something worthwhile to look at,” he said.

Lee said higher interest rates would also affect property investors’ cash flow, which may give rise to more acquisition opportunities.

“That is where the potential opportunity for REITs to look at more sales and leaseback acquisition [is], because it helps a lot of asset owners to free up more cash flow, and then focus on their businesses, not getting their working capital tied up in real estates.

“We take note of the rising interest rate, [but] it doesn’t make acquisition impossible; it just makes [acquisition] a little harder. As manager, we need to find assets that we can buy and sweat it a little bit more,” he added.

AME REIT rose four sen or 3.5% to RM1.17 per unit at market break, valuing it at RM608.4 million.

Edited BySurin Murugiah
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