KUALA LUMPUR: AmInvest’s diversification into non-conventional real estate investment trusts (REITs), with assets such as childcare centres, energy, healthcare, large scale logistics and data centres, has paid off with these investments showing good growth.
The fund has high holdings of these non-conventional REITs in countries like Japan, Australia and Singapore.
Currently, no such REIT has been made available to local investors.
“We are more interested in asset classes like data centres, which is a sector that we think would see greater demand going forward with the intensification of Internet use.
“We also focus on service-related REITs which previously were not considered investable asset classes, but are becoming more institutionalised today, therefore being more investable and liquid,” said AmInvest equities fund manager Selina Yong.
In Australia, investors seek alternative asset classes outside traditional segments such as office, retail, and industrial-based REITs. Examples of these alternative asset classes include childcare centre REITs, premium offices in Sydney and Melbourne, as well as retail properties with non-discretionary tenants.
As for Japan, sustained decline in vacancy rates have supported rental rate growth for office REITs while inbound tourist arrivals continue to support demand for accomodation, boosting hospitality REITs.
In Singapore, the oversupply in segments such as hotels and offices, combined with a sluggish economy, will be a drag on most segments.
The asset management househas an “underweight” view on Malaysian REITs, as the property sector in Malaysia remains soft and occupancy rates continue to be low.
AmInvest’s has a 10% porfolio exposure to Malaysian REITs with high occupancy rates.
The fund remains wary of the oversupply situation in Malaysia’s property market, but will hold on to its positions because the yield spreads continue to be comfortable.
AmInvest equities chief investment officer Andrew Wong does not expect Malaysia’s interest rates to rise in the near term.
In order to be protected from interest rate volatility, REITs have substantially hedged their interest rates.
Yong explained that the fixed debt ratio rate for REITs in Singapore was in the range of 70% to 90%, while Australia and Japan was about 50% to 60%, due to decreasing interest rates.
This is to protect the REITs from short term volatility and interest rates, where there will not be any impacts to the bottomline and distribution.
Meanwhile, Yong said opportunities for Malaysian REITs lie in the Securities Commission relaxing regulations for REITs.
“This is so that they can have up to 15% of net asset value in development properties which then gives them the opportunity to grow. Right now, many REITs are constrained in terms of organic growth, whether it is finding the right property or owners of quality assets do not to let go those assets.
“The development pipeline will allow them to grow organically and benefit from the uplift in yields,” said Yong.
Apart from that, AmInvest targets to increase REIT assets under management (AUM) to RM500mil for the financial year ending March 31, 2017.
AmInvest’s REIT AUM have a value of RM267mil, as of September 6.
To date, AmInvest’s has a total AUM size of RM38.3bil, while AUM annualised growth from December 2010 until July 2016 is 8%.
The income distribution payout of REITs for 2016 was 3.31 sen per unit.