Guidance in the News

21 October 2013 Plenty of upside in warehouse REITs

Kuala Lumpur, 21 Oct 2013, The Edge Financial Daily | There is plenty of upside had in Asian real estate investment trusts (REIT’s) that focus on logistics warehouses with industrial activities expected to pick up by the first half of next year, according to Guidance Investments Sdn Bhd.

“With the Eurozone out of recession, China stabilising and the US coming back, we see these as factors that contribute to our confidence that the Asian economy will recover. We see a stronger Malaysian economy driven by its domestic demand,” Steve Pyne, Guidance Investments’ Asian real estate managing director, told The Edge Financial Daily.

He said the trend now is that investments are pouring into better-made and more modern warehouses instead of conventional industrial warehouses.

“The old warehouses are poorly designed and lacking in quality. Modern warehouses are better designed with better flooring and higher ceilings for more storage,” Pyne said.
Guidance Investment is planning to launch its Southeast Asia Real Estate Partners fund, a syariah-compliant fund that invests in income producing logistics, industrial and warehouse retail properties in Malaysia, Singapore, Indonesia and Thailand.

Pyne foresees the industrial sector outperforming other sectors in the coming years as domestic demand will be stronger, which will drive the demand for logistics and industrial warehouses.

He said given the prospects, the number of REITs investing in warehouse is only expected to grow.

Currently, AXIS REIT is the only real estate investment trust listed on Bursa Malaysia that invests solely in warehousing. RHB forecasts it will generate an average yield of 5.4% this year.

There are other REITs that invest in warehouses, although not exclusively. This includes Amanah Raya REIT, which recently has to deal with troubled tenant, Silver Bird Group Bhd.

Investments are pouring into more modern warehouses instead of conventional industrial warehouses.

REITs in general are losing their lustre as a safe haven investment as investors switch to government debt paper. This comes as the yield of government debt rises with the outflow of funds following the US Federal Reserve’s impending move to reduce its programme of asset purchases, known as quantitative easing,, that has been in place since 2009.

Guidance Investments, which opened its KL branch in May this year is part of Guidance Financial Group, an international investment firm specialising in syariah-compliant investment management and advisory services.

CEO Dr Hasnita Hashim said that the finance group, which also includes its investments, has transacted over US$5 billion in real estate investments over 10 years.

“We expect to bring in US$200 million (RM632 million) worth of investment next year and we estimate investments will double in 2015,” she said.

Hasnita noted that investment inflow has increased, as the investment group likes the government’s transparency, legal system and the availability of liquidity.

Asked about the outlook for Malaysia’s property sector, Pyne noted that of the four countries where it has presence, Malaysia comes in second after Singapore. Malaysia has a mature property market with good real estate investments from international investors, he said, adding that although Singapore is the most advanced in terms of infrastructure, the Malaysian market has the most stability.

“The Malaysian economy is doing relatively well and so is the property market. So I do not expect any property bubble to pop,” Pyne said. Malaysia’s official GDP growth forecast for 2013 is between 4.5% and 5%.


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