The construction and engineering company, plans to list its industrial property assets under AME Real Estate Investment Trust (AME REIT) to expand into the central and northern regions of Peninsular Malaysia as well.
In line with that objective, I-REIT Managers Sdn Bhd, the management company of AME REIT, has identified Selangor in the central region and Penang in the north as key economic zones, as Johor is for the south.
These three areas are the most attractive for local and foreign direct investments, I-REIT Managers chairman and executive director Simon Lee said at the trust’s prospectus launch today.
To start off, AME REIT already has 34 industrial and industrial-related properties in Iskandar Malaysia, Johor in its RM557 million portfolio. These fully-tenanted assets will provide visible and stable cash flow, the company said.
It will also leverage on its sponsor, AME Elite, for future property development projects, ready source of industrial properties, workers’ dormitories and warehouses for acquisition.
Under the arrangement, the trust has the first right of refusal for any property the industrial developer wants to sell on the open market.
For the initial public issuance, it will not raise any proceeds as the move does not involve the issuance of new units. Instead the trust will offer 254.8 million units at a retail price of RM1.15 per unit, which translates into 49% of the total 520 million units in AME REIT.
Of the offered units, 156.6 million will be for AME Elite shareholders on the basis of one unit for every five shares held in the counter, 10.4 million units will be made available to the Malaysian public and 7.8 million units to eligible directors and employees of the group and its subsidiaries.
In addition, approximately 80 million units will be made available to Malaysian institutional investors and selected investors, including bumiputera investors, approved by the international trade and industry ministry.
The trust will leverage on its ample debt headroom of up to RM240.8 million to pursue potential acquisitions based on the prescribed limit of 50% of total asset value.
Based on a pro forma statement, its current total debt is approximately RM46.5 million, which translates to 8.1% of its estimated total asset value of RM574.5 million.
Lee said the mandate to acquire third-party properties beyond Johor provides AME REIT the flexibility and opportunity to expand the reach of its property trust to generate stable cash flows and potential long-term income and capital growth.
He pointed out that AME REIT will also be able to leverage on its sponsors’ branding and reputation by replicating their managed industrial parks concept in the central and northern regions.
“The prospects for industrial and industrial-related properties remain positive, with resilient demand supported by growth in the electrical and electronics as well as logistics and e-commerce sectors. Hence, we are optimistic of AME REIT’s future outlook,” he said.
I-REIT Manager CEO Chan Wai Leo said that while Malaysia may be facing economic challenges, industrial properties are more resilient compared with residential and commercial units.
He said this is evident from the fact that while the overall property market fell some 15% over the pandemic period, industrial property transactions reported a 5% growth in the same period.
On acquisition plans, Chan said location would be one of the considerations but it would also assess the tenants of those properties.
“When we acquire (a property), we will also do due diligence on tenants to make sure they can pay the rent. These are the main criteria that we have to look at when it comes to acquiring the assets,” he added.