KUALA LUMPUR: Australian fund management group AMP Capital Investors Ltd (AMPCI) is exploring real estate investment trust (REIT) partnership opportunities in Malaysia.
At a press briefing held with potential partner Hwang-DBS Investment Management Bhd here yesterday, AMPCI director (Asian investments and head of business development) Simon Vinson said negotiations in Malaysia were ongoing and more would be revealed in the next few weeks.
AMPCI, a subsidiary of AMP Group, Austrialia's biggest life insurer, manages over A$11.2bil in direct property investments and A$6bil in listed property securities as at Dec 31, 2005, including the Global Property Securities Fund – a diversified international property fund for the Singapore market.
“REIT is an exciting sector as we continue to live in a low return world for the medium term of the next five to 10 years. Therefore, our strategy is to go for inefficient assets that can be reworked to give improved yields,” said Vinson.
In the past year, AMPCI's direct property investments gave a return of 9%, while its REIT products returned an average of 12%.
“While REITs are gaining in popularity, there is still continued demand for direct property investment from the company's investors,” Vinson said.
A significant trend that the company observed which had been contributing to the growth of both direct property investment and REITs was an aging population looking for income assets.
There was also a move away from bonds and housing towards non-residential property, such as offices, shopping centres and industrial property over the past year.
For this year, AMPCI sees positive returns from global REITs. It projected yield rates of 6.8% from Australia and 4.5% to 5% from the US this year, while the fairly young Japan REITs market had grown 13% in the 10 months before February.
“Inflation is expected to remain benign, with US interest rates not expected to peak above 5% and no immediate interest rate adjustments are expected from the European Central Bank and Bank of Japan,” said Vinson.
Capital appreciation rates of property in these core-developed markets remained at 2% to 3%, he said, adding that the global REITs market was projected to grow from the current US$7bil to US$1tri by 2010.
