Axis Real Estate Investment Trust · MYX:AXREIT
Axis Real Estate Investment Trust — Asia Traders & Investors Convention (ATIC) Kuala Lumpur 2010
57 slides from Axis Real Estate Investment Trust's conference presentation, 2010
Slide 1: REITs: An Alternative Investment Tool for your Wealth Creation
REITs An Alternative Investment Tool for your Wealth Creation by Stewart LaBrooy CEO Axis REIT Managers Bhd ATIC Kuala Lumpur 2010
Slide 2: Introduction
Introduction The biggest asset class that the average Malaysian invests in is his life time is: Property 2
Slide 3: Why Property?
Introduction Why Property? Hedge against inflation Measure of wealth Inheritance for children 3
Slide 4: What Property do we buy?
Introduction What Property do we buy? Houses Shop lots Office suites Condos 4
Slide 5: What Problems do we commonly face buying property for investment?
Introduction What Problems do we commonly face buying property for investment? Quick disposal Exposure to interest rates Taxation on income Finding tenants 5
Slide 6: You can invest in REITs
Introduction Until 2005 people who wanted to invest in property directly had only these choices But all that has changed -Today There is a different form of investing directly in property You can invest in REITs 6
Slide 7: What is a REIT?
What is a REIT? “A real estate investment trust is a listed vehicle that invests in a portfolio of income-generating properties. Rents collected from tenants, less expenses are distributed on a regular basis to provide stable yields to Unitholders” This distributed income to Unitholders is subject t
Slide 8: What is a REIT?
What is a REIT? Units in a REIT represents equity ownership Indirect access of large, stable estate portfolios in a tax efficient manner Investors are only taxed once Governed by a Trust Deed, the stock exchange and the securities commission regulations which define the operating procedures ensu
Slide 9: Why Listed REITs
Why Listed REITs Liquid proxy to physical assets Priced daily in the market Liquid pool of stocks / easy disposal Linked to interest rate cycle Hedge against inflation Low entry / minimum purchase 100 units only Excludes Property Business risk 9
Slide 10: REITs vs. Real Estate
REITs vs. Real Estate REITs Real Estate Capital Growth Yes Yes Regular Dividends Yes Not certain Liquidity Yes No Tax Efficiency Yes No Professional Management Yes No Part ownership of Large assets Yes No Correlation with other investments Yes No 10
Slide 11: REITs vs Property Companies
REITs vs Property Companies Earnings Profile A REIT is driven by recurring rental income A property company seeks a combination of property sales, development profits, rental income and property investments Capital Structure and Cash Flow A REIT has low and defined level of retained earnings, lo
Slide 12: REITs vs Property Companies
REITs vs Property Companies Dividend Distribution Policy A REIT will distribute 90-100% of its retained earnings before tax. A property stock has no certainty of a dividend payout. Risk Profile A REIT is a low risk, passive investment vehicle with a high certainty of cash flow from rentals deriv
Slide 13: REITs vs Property Companies
REITs vs Property Companies Corporate Governance REITs are governed by multiple layers of stakeholders - unitholders, manager, trustees, regulating authorities ensuring that interest of minority unitholders are protected. A property stock is often dominated by a controlling shareholder which raise
Slide 14: REITs vs Unit Trusts
REITs vs Unit Trusts A REIT unitholder has a direct investment in the underlying assets of a REIT. A Unit Trust unitholder has an indirect investment in the investments held by the Unit Trust. 14
Slide 15: REITs vs Unit Trusts
REITs vs Unit Trusts Type of Fund REIT Unit Trust Can Fund size be increased? Yes Yes/No Dealings/Trading Bursa Malaysia Fund Manager Pricing Growth & earnings NAV Income Distribution Quarterly/ Semi Varies annually Distribution Cash Units Payout Policy > 90% Subject to performance 15
Slide 16: Typical REIT Structure
Typical REIT Structure Cornerstone Vendors Investors investors Maximum 75% Institutional funds Unit Minimum 25% and 1,000 holders Unit holders Retail Distributions Investment in REIT Units Acts on behalf of Unit holders Management Services REIT Management REIT Trustees Company Management Fees Truste
Slide 17: Typical Islamic REIT Structure
Typical Islamic REIT Structure Cornerstone Vendors Investors investors Maximum 75% Institutional funds Unit Minimum 25% Shariah and 1,000 holders Unit holders Retail Advisor Distributions Investment in REIT Units Acts on behalf of Unit holders Management Services REIT Management REIT Trustees Compan
Slide 18: What are Islamic REITs?
WHAT ARE ISLAMIC REITS ? 18
Slide 19: Islamic REITs – a Quick Introduction
Islamic REITs – an Quick Introduction Guidelines for Islamic Real Estate Investment Trusts were issued on 21 November 2005 Key Elements • The total rental from non-permissible activities should not exceed the 20% benchmark as determined by the SAC for the criteria on rental from non-permissible acti
Slide 20: Islamic REITs – Guidelines
Islamic REITs – Guidelines Rental Activities that are Classified as Non-permissible • Financial services based on riba (interest); • Gambling/gaming • Manufacture or sale of non-halal products or related products; • Conventional insurance; • Entertainment activities that are non-permissible accordin
Slide 21: Why REITs are an important Part of an Investment Portfolio - The Benefits
Why REITs are an important Part of an Investment Portfolio - The Benefits 21
Slide 22: Why REITs?
Why REITs ? REITs have a long history of impressive long term returns. REITs have a low correlation to stocks and Bonds They help reduce a portfolio’s risk profile Data has shown that a portfolio that has a minority allocation to REITs have out performed those with only Bonds and equities.* •Sou
Slide 23: Why REITs? REITs have a low Beta
Why REITs ? REITs have a low Beta- doesn’t follow the equity index 120 110 100 90 80 Apr-09 Mar-09 Jan-09 Feb-09 KLCI Index M-REITs Baseline Source: Bloomberg / ASEAM
Slide 24: You can own properties around the world!
Why REITs ? You can own properties around the world! With a bigger global market we can see investors placing their funds in countries where they may never have a chance to invest in property – London , New York, Tokyo, Hong Kong & Singapore all have REIT stock to choose from. More important they ca
Slide 25: REIT vs. Fixed Deposit
REIT vs. Fixed Deposit RM 1,000,000 in Fixed Deposit will yield RM 25,000 a year With inflation running at 3.5% your RM 1,000,000 will be worth RM 965,000 Your annual net loss = (RM 10,000)
Slide 26: REIT vs. Fixed Deposit
REIT vs. Fixed Deposit RM 1,000,000 in a REIT stock will yield RM 80,000 a year (RM 72,000 after tax) And with inflation running at 3.5% your portfolio could be worth RM 1,035,000 upon revaluation Your total gain = RM 72,000 + 35,000 = RM107,000 Advantages: 1. You can sell down stock when you want –
Slide 27: REITs – Global Context
REITs – Global Context 27
Slide 28: REITs Worldwide
REITs Worldwide Cofinimmo 28
Slide 29: REITs Worldwide - Chronology
REITs Worldwide - Chronology Date as of 30 Apr 2008 Source: APREA Research 29
Slide 30: REITs Worldwide – Market Capitalization
REITs Worldwide – Market Capitalization 489 Trusts worth USD 710 Billion (Dec 2007) North America 52.1% Europe 20.8% US 48.5% Belgium 0.9% Canada 3.6% Bulgaria 0.1% Greece 0.1% Asia 11.1% Netherlands 1.7% HK 1.1% Turkey 0.3% Japan 6.6% France 9% Malaysia 0.2% UK 8.7% S’pore 2.5% Taiwan 0.2% Australa
Slide 31: An Overview of Asian REITs
An Overview of Asian REITs 31
Slide 32: The Current Market Capitalization of Asian REITs
The Current Market Capitalization of Asian REITs The Asian REIT market has grown from USD2bil in 2001 to USD 67 billion in 2010. Number of REITs have grown from 2 to 117 in less than 6 years. 32 32
Slide 33: Asian REITs are diversified
Asian REIT’s are diversified 2% 8% 26% Healthcare 20% Hotel Residential Office 10% Industrial Retail 35%
Slide 34: Asian REIT Market
Asian REIT Market Asian markets without REIT regulations • China – Unit trust structure currently prevents REITs – APREA assisting on proposed REIT law • India – Draft REIT law for public comment Dec 2007, APREA assisting • Philippines – REIT legislation effective by January 2010 • Indonesia – Draft
Slide 35: M REITs Scorecard
M REITs Scorecard 35
Slide 36: Capital Gain Since IPO
70% 60% 57% 50% 40% 31% 30% 19% 20% 10% 13% 10% 7% 6% 1% 0% -10% -5% -9% -13% -20% Source The Edge Daily Jan 2010 36 Capital Gain Since IPO
Slide 37: Discount to Net Asset Value
15% 11% 10% 5% 0% -5% -1% -10% -9% -9% -12% -13% -15% -20% -18% -20% -19% -25% -30% -31% -30% -35% Source The Edge Daily Jan 2010 37 Discount to Net Asset Value
Slide 38: Distribution Yields of M REITs at Current prices
10.00% 8.87% 8.96% 8.85% 8.85% 9.00% 8.58% 8.42% 7.90% 8.06% 7.87% 8.00% 7.68% 7.15% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Source The Edge Daily Jan 2010 Distribution Yields of M 38 REITs at Current prices
Slide 39: Tracking REIT Stocks
39 Tracking REIT Stocks BURSA MALAYSIA DANY SUMnaARY
Slide 40: Tracking REIT Stocks
Tracking REIT Stocks Source Star March 2, 2010 40
Slide 41: How have we fared since October 2009
How have we fared since October 2009 41
Slide 42: REITs – The Risk Factors
REITs – The Risk Factors 42
Slide 43: REITs – Risk Factors
REITs – Risk Factors Refinancing Risks The ability for REITs to refinance their existing banking facilities are critical to their survival Downside Dividend Yields Global recession putting strain across all businesses. As a result, dividend yields will come under tremendous pressure with neg
Slide 44: REITs – Risk Factors
REITs – Risk Factors Valuations Pressure Property valuations will also come under stress should negative rent reversion persist. As valuations fall, REITs gearing level will increase and possibly breaching debt covenants. May require balance sheet recapitalisation. Dilutive capital raising
Slide 45: REITs – Risk Factors
REITs – Risk Factors Economic, Political and regulatory risks The performance of the real estate industry is closely linked to the economic environment. Any adverse developments in the political and economic environment and uncertainties in Malaysia can materially and adversely affect the property
Slide 46: REITs – Risk Factors
REITs – Risk Factors Risk associated with borrowings Significant fluctuations in interest rates may have an adverse impact on the financial performance of REITs and may lower income distribution to unit holders. There is an inverse correlation between the interest rates and the distributable incom
Slide 47: REITs – Risk Factors
REITs – Risk Factors Risk related to investments in real estate The yields of the real estate may be adversely affected by a number of factors, including but not limited to: Vacancies following expiry or termination of leases that reduces the REIT’s income; The Manager’s ability to provide ade
Slide 48: REITs – Risk Factors
REITs – Risk Factors Risk related to investments in real estate Lower rent when leases are renewed; Poor cost control resulting in higher operating and other expenses without a corresponding increase in revenue; Unexpected expenses incurred due to changes in statutory laws, regulations or go
Slide 49: What to look for - the Investors Perspective
REITs What to look for - the Investors Perspective 49
Slide 50: The Investors Perspective: Learn about REITs
REITs – The Investors Perspective Learn about REITs -Investor Education is necessary to gain confidence and support Often neglected aspect of launching a new asset class is investor education. Misunderstanding of a new asset class can lead to a mismatch of expectations and subsequent disenchantm
Slide 51: The Investors Perspective: Look for Transparency
REITs – The Investors Perspective Look for Transparency Transparent earnings and simplified operating models are now preferred Complex financial engineering/cross border structuring by REITs are now being closely examined 51
Slide 52: The Investors Perspective: Capital Management
REITs – The Investors Perspective Capital Management is increasingly important Investors should insist on prudent capital management The manager should focus on reducing existing gearing levels and extend debt maturity profile Focus on refinancing debts and capping interest spreads Look into th
Slide 53: The Investors Perspective: The Management Team
REITs – The Investors Perspective The Management Team is paramount for success Investors should put a greater scrutiny on the REIT Manager Look for focused management teams with a proven track record Look for good governance and transparency by the manager 53
Slide 54: The Investors Perspective: Capital Raising
REITs – The Investors Perspective Capital Raising Investors should avoid REITs that exercise dilutive capital raisings 54
Slide 55: The Investors Perspective: Have a Sector Focus
REITs – The Investors Perspective Have a Sector Focus Focus not only on acquisition growth but have an increasing focus on existing portfolios by: Timely enhancements to preserve valuations Emphasis on asset and leasing management to deliver rental growth and mitigate negative rent reversions I
Slide 56: The Investors Perspective: Look out for an Industry Consolidation
REITs – The Investors Perspective Look out for an Industry Consolidation Small REITs with higher cost of capital, no sponsorship and visible pipeline of acquisitions will be vulnerable to takeover REITS will lower cost of capital and strong sponsorship will continue to outperform and will be pre
Slide 57: Thank You
Thank You Avgls