Revisiting REITs as an Investment

Transcription

HEKTAR REIT
REVISITING REITS AS AN INVESTMENT
A REGIONAL REVIEW + CASE STUDY
INTERNATIONAL FINANCIAL PLANNING ADVISORS
CONFERENCE 2008
HEKTAR ASSET MANAGEMENT SDN BHD
FEBRUARY 2008
KUALA LUMPUR
PRIVATE & CONFIDENTIAL
Disclaimers
The material that follows is a presentation of general background information about the Hektar Group’s
activities current as at the date of this Presentation.
The information contained herein is given in summary form solely to provide an understanding of the business
of the Hektar Group and does not purport to be complete. You should conduct your own investigation and
analysis of the Hektar Group and other data contained in this Presentation. It is not intended to be relied upon
as advice for investment or invitation to invest in the Hektar Group or an evaluation of the Hektar Group. No
representation, warranty, express or implied, is made and no reliance should be placed on the accuracy,
fairness or completeness of the information contained herein. This presentation may contain forward-looking
statements that involves risks and uncertainties. Actual future results may vary materially from those
expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. You
are cautioned not to place undue reliance on these forward-looking statements, which are based on the
Manager’s current view of future events.
Whilst we have used our best endeavour and exercised reasonable diligence in collating information from
public domain, we have not independently verified the accuracy of such information.
Hektar Group or any of its directors, officers and employees shall not accept any responsibility for any errors
or omission in this Presentation and shall not be liable for any loss or other consequence of any reliance upon
the whole or any part of the contents of this Presentation thereon.
2
REVISITING REITs
•
•
•
•
•
Definition
Reviewing REIT Markets
REIT Fundamentals
The Malaysian Experience
CASE STUDY
3
Definition
The Property Cycle
•Vacancies flatten
•Rates, Values flatten
•Banks Lend
•Developers Build
•Excess Supply hits the market
•Declining Vacancies
•Rates, Values Rise
•Banks Lend
•Developers Build
Post-Boom
Contraction
Boom
Recovery
•Vacancies increase
•Rates, Values decline
•Banks stop lending
•No construction
•Properties can trade
below replacement cost
•Vacancies stabilise
•Rates, Values stabilise
•Banks inactive
•Developers inactive
Is there a financial entity which can capture
opportunities throughout the property cycle?
4
Definition
What is a REIT?
Pronounced ‘reet’ and short for Real Estate Investment Trust
A REIT typically invests in income-producing real estate assets
REITs are run by professional management teams and governed by a
trust structure
REITs earn their revenue from the rental income generated from their
properties and from capital improvements on their properties
REIT units are sold on public stock exchanges, providing investors an
opportunity to own a piece of an investment-grade property portfolio and
earn stable, high-yield dividend income
5
Definition
REITs focus on properties as an asset class:

Industrial – warehouses, light manufacturing / assembly
Office – urban or suburban office buildings
Retail – shopping centres, retail formats
Residential – apartment / condominium complexes
Lodging – hotels, resorts, service residences
Healthcare – hospitals, medical centres
Diversified – mix of 2 or more sectors
Others – self-storage, timber, plantation, vineyards, prisons, etc
6
REVISITING REITs
•
•
•
•
•
Definition
REIT Fundamentals
CASE STUDY
7
REIT Markets
Snapshot of REIT Markets
Selected Countries
Country
First
Listing
No. of REITs / LPTs &
Estimated Total Market Cap (2007/8)
“Turning Point”
Event
U.S.A.
1960
134 REITs, US$311 billion (~ RM1,029 billion)
Tax Reform Act (1986)
Take off from 1993
Australia
1971
67 LPTs, A$124 billion (~RM360 billion)
Recession (Late 1980s)
Take-off from 1992
Singapore
2002
20 S-REITs, S$24 billion (RM55 billion)
Financial Crisis (1997)
New Legislation (1999)
Malaysia
1989
13 REITs, RM5.2 billion
SC Guidelines (2004/5),
MOF (2004/5)
Source: Malaysia / Singapore from Bloomberg (Jan-2008); Australia from ASX, Dec-2007. US Figures for Dec-07, inclusive of non-equity REITs (NAREIT).
8
REITs – The U.S. Context
Brief History of U.S. REITs
1960s
First REIT formed in 1960. Tax-neutral but ‘passive’ trust structure.
10 REITs in the 1960’s – Average yield 6.1%, FFO (cash flow) growth 5.8%.
1970s
1968-70: Construction loan mortgage REIT boom.
1970’s Oil shocks, high inflation era
1973-4 Stock market crash – REITs collapse. Investors shun REITs.
1980s
1981: ERA launches rival LP structure. Property buying and development boom.
1986: Tax Reform Act. Allows REITs to ‘actively’ manage properties.
1987: Stock market crash, S&L collapse, real estate collapse.
1990s
Early 90’s: real estate recession. Low valuations.
1991-3: RTC. Excellent buying opportunity for REITs.
1993-4: REIT IPO Boom. Birth of the modern REIT.
2000s
2001: RMA: new legislation providing more opportunities for REITs
2003: NAREIT Index annual return 38.5%
2006: NAREIT Index annual return 34.4%
2007: NAREIT Index annual return -17.8%
Acronyms: FFO: Funds From Operations; ERA: Economic Recovery Act; LP: Limited Partnerships; S&L: Savings & Loans;
RTC: Resolution Trust Corporation.
9
The U.S. REIT Sector has grown significantly
U.S. Equity REITs Market Capitalisation (1971-2007):
Surpasses
US$400 billion (2006)
400
>US$100 billion
(1997)
350
300
>US$4 billion
(1987)
US$
(billion) 2 5 0
Declines
17.8%
(2007)
IPO Boom
>US$500 million
(1977)
200
US$242 million
(1974)
150
100
50
0
1971
1985`
1993
1999
2007
Source: Equity REITs Market Cap, NAREIT
10
U.S. - The First REIT Market
First REIT in 1960
Total Equity REITs: 134, Equity Market Cap: US$311 billion (~RM1 trillion)
Largest Sector: Retail
FTSE NAREIT Equity
REIT Index Sectors
Industrial / Office
Retail
Residential
Diversified
Lodging / Resorts
Health Care
Mortgage
Self Storage
Specialty / Misc
Hybrid
No. of
REITs
26
26
15
8
10
11
25
4
6
3
Dividend
Yield
4.7%
4.8%
5.3%
4.9%
6.5%
5.4%
10.5%
3.8%
3.9%
12.2%
Market
Capitalisation
(US$ bn)
$72.7
$80.4
$39.1
$18.3
$19.3
$26.0
$18.4
$14.8
$17.7
$4.2
Lodging, Healthcare,
Others
25%
Industrial /
Office
23.5%
Mortgage
4.9%
Retail
26.7%
Diversified
6.4%
Residential
13.5%
Sector Share by Market
Capitalisation
Source: NAREIT, December 2007. Abbreviated figures may produce rounding errors.
11
REITs Regarded as a Separate Asset Class
U.S. Portfolio Performance Comparison (1972-2005):
Stocks & Bonds
With 10% REITs
With 20% REITs
REITs
10%
T-Bills
10%
T-Bills
10%
Stocks
45%
Stocks
50%
REITs
20%
Stocks
40%
T-Bills
10%
Bonds
40%
Bonds
35%
Return 10.7%
Risk 11.0%
Sharpe Ratio 0.42
Source: Ibbotson Associates
Return 11.0%
Risk 10.7%
Sharpe Ratio 0.46
Bonds
30%
Return 11.4%
Risk 10.6%
Sharpe Ratio 0.50
12
REITs – Singapore
Chronology of Singapore REITs (S-REITs)
1999
1999: REIT guidelines published
2002
CapitaMall Trust (CMT) launched
Ascendas REIT (A-REIT) launched
2003
CapitaMall raises S$128M to acquire IMM Building
Fortune REIT launched - first Asian cross-border REIT
2004
Singapore budget announces tax exemption for individual REIT unitholders
A-REIT raises S$700M in 3 equity offerings for acquisitions
CapitaCommercial Trust (CCT) launched
CapitaMall raises S$476M to acquire Plaza Singapura
Suntec REIT launched
2005
A-REIT raises S$205M for acquisitions
Singapore budget announces non-resident REIT unitholders withholding tax 10%
2006-7
CapitaRetail China Trust – China-focused retail REIT listed
First REIT – Indonesia-focused retail REIT listed
Ascendas India Trust – India-focused industrial REIT listed
Saizen REIT – Japan-focused residential REIT
13 new REITs listed during period
13
REITs – Singapore
Retail – Dominant in Singapore REITs
First REIT listed in 2002
Total: 20 S-REITs, Market Cap: S$24 billion (~RM$55 billion)
Top REITs – CapitaMall Trust (listed 2002)
Equity
REITs
Sectors
Retail
Industrial
Diversified
Office
Hospitality
Health Care
Residential
Total
No. of
REITs
5
5
3
2
2
2
1
20
Equity Market
Capitalisation
S$8.1 billion
S$5.5 billion
S$3.8 billion
S$3.3 billion
S$2.5 billion
S$0.8 billion
S$0.4 billion
S$24.4 billion
% Tot. Market
Capitalisation
33%
22%
16%
13%
10%
3%
2%
Industrial
22%
Diversified
16%
Retail
33%
Office
13%
Residential
Hospitality
2% Health Care 10%
3%
Capitalisation
Source: Bloomberg, January 2008
14
-20%
Capital Gain Since IPO
Lippo-Mapletree
Indonesia Retail
Macarthurcook
Industrial REIT
Parkway Life
Allco REIT
Saizen
Cambridge
Industrial Trust
Ascendas India
First REIT
Ascott Residence
Trust
Macquarie MEAG
Prime REIT
Fortune REIT
Frasers Centrepoint
Trust
K-REIT
Mapletree Logistics
Trust
Suntec REIT
CapitaRetail China
Trust
CapitaCommercial
Trust
Ascendas REIT
CDL Hospitality
Trusts
CapitaMall Trust
REITs – Singapore
Performance of S-REITs
220%
180%
140%
100%
REITs Listed between
2006 - 2007
60%
20%
15
Reviewing REITs
•
•
•
•
•
Definition
REIT Fundamentals
CASE STUDY
16
Definition
Differences Between REITs and Listed Companies
TRUSTEE
TRUSTEE
Listed
Listed
Property
Property
Company
Company
Real Estate
Assets
Public / Capital Markets
REIT
REIT
MANAGEMENT
MANAGEMENT
COMPANY
COMPANY
Real Estate
Assets
SERVICE
SERVICE
COMPANY
COMPANY
Property
Management
REIT ORGANISATION
17
Definition
Differences Between REITs and Listed Companies
Features
Listed Property Company
REIT
Investment Policy
Management can engage in a variety
of activities
Focused on income-generating assets
Income Profile
Combination of sales, development
profits, rental income
Rental income
Cash Flow
Varies according to activity
Negative during development
Positive (via rental income)
Capital Structure
Typically high gearing ratio due to
development activities
Maximum gearing of 50% of total
assets
Dividend Policy
At management discretion
Typically a high payout policy
90% payout = no corp tax
Risk Profile
Can be significant depending on
activity, gearing, cash flow, etc
Limited due to focus, trust structure
REITs can carry the recurring income feature of bonds, while still
retaining the potential for capital appreciation of equity
18
Definition
REITs as an Investment Case
Opportunity - provides investors with vehicle to invest in commercial
grade property
Professional - Managed by professional teams with property
experience
Governance - REIT structure encourages good corporate governance
Tax Transparency - no corporate tax if dividend payout =/> 90%
Liquidity - provides liquidity to an illiquid asset class
Income – good dividend yield from rental income
Capital Growth – prospect of increasing unit price due to capital
appreciation of REIT’s property
Asset Class Diversification - benefits due to low correlation with other
asset classes
19
Reviewing REITs
•
•
•
•
•
Definition
REIT Fundamentals
Malaysia’s Experience
CASE STUDY
20
REITs – Malaysia’s Experience
Malaysian REITs Milestones
First Generation
Reform
Next Generation
Issues &
Challenges
*Source: Bloomberg, January 2008
• Property Trust Guidelines
• 1988 – 1990: 4 Property Trusts Launched
• 2002 – 2005: Revised Legislation
• Guidelines Revision 2002, 2005
• Tax Incentives 2004 – 2005
• 2005 – 2007: 11 New REITs Listed
• REIT Market Cap ~ RM5 billion (US$1.5 billion)
• Withholding Tax Regime (15% / 20% / 27%)
• Investor Expectations
21
2007
2006
2005
Malaysian REITs Listed 2005-2007
REIT
Sector
Equity Market Value
Sponsor / Manager
Axis REIT
Office & Industrial
RM374 million
Affiliates to Axis
Starhill REIT
Retail & Hospitality
RM1.08 billion
YTL
UOA REIT
Office
RM327 million
UOA Holdings
Tower REIT
Office
RM370 million
GuocoLand / Hong Leong
Al-’Aqar KPJ REIT
Hospitals
RM329 million
KPJ Healthcare
Hektar REIT
Retail
RM460 million
Hektar Group
AmFirst REIT
Office
RM381 million
AmInvestment Group
Quill Capita Trust
Office & Industrial
RM515 million
Quill Group & CapitaLand
Al-Hadharah Boustead REIT
Plantation
RM675 million
Boustead Holdings
Amanah Raya REIT
Diversified
RM405 million
Amanah Raya
Atrium REIT
Industrial / Logistics
RM117 million
Affiliates to Atrium
Total
RM 5.0 billion
Source: IPO Prospectuses, Bursa Malaysia, Bloomberg (Jan 2008)
22
Malaysia REIT Sector Composition
Legislation: LPTs since 1988/9, REITs since 2005
11 REITs listed since 2005. Total: 13, Market Cap: US$1.5 billion
Major Sector: Office & Industrial
Equity
REITs
Sectors
Office & Industrial
Diversified
Plantation
Retail
Health Care
Total
No. of
REITs
5
5
1
1
1
13
Equity Market % Tot. Market
Capitalisation Capitalisation
RM1.7 billion
33%
RM2.0 billion
39%
RM0.7 billion
13%
RM0.5 billion
9%
RM0.3 billion
6%
RM5.2 billion
Office &
Industrial
33%
Diversified
39%
Healthcare
6%
Retail
9%
Plantation
13%
Capitalisation
LPT = Limited Property Trust
23
M-REITs Performance (2007)
120
Change in Unit Price
100
80
60
40
20
HEKT MK Equity
ARET MK Equity
STRH MK Equity
AQAR MK Equity
ATRM MK Equity
TRET MK Equity
BIRT MK Equity
AXRB MK Equity
UOAR MK Equity
19-Dec
5-Dec
21-Nov
7-Nov
24-Oct
10-Oct
26-Sep
12-Sep
29-Aug
15-Aug
1-Aug
18-Jul
4-Jul
20-Jun
6-Jun
23-May
9-May
25-Apr
11-Apr
28-Mar
14-Mar
28-Feb
14-Feb
31-Jan
-20
17-Jan
0
3-Jan
Change in Unit Price (%)
140
AARET MK Equity
QUIL MK Equity
24
-10%
-20%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
Capital Gain Since IPO
AmFirst REIT
Starhill REIT
Atrium REIT
Al-'Aqar KPJ REIT
Amanah Raya
REIT
UOA REIT
Tower REIT
Hektar REIT
Al-Hadharah
Boustead REIT
Axis REIT
Quill Capita Trust
-10%
-20%
AmFirst REIT
Atrium REIT
Starhill REIT
Al-'Aqar KPJ REIT
Amanah Raya REIT
UOA REIT
Tower REIT
Axis REIT
Hektar REIT
Al-Hadharah
Boustead REIT
Quill Capita Trust
Performance of M-REITs
70%
Annualised Gain Since IPO
25
Challenges & Opportunities
Strategy & Execution
• Market Focus
• Competitive Business Model
• Sustaining Growth
Investors Expectations
• Dividend Income v Capital Appreciation
• Positioning
Taxation – Withholding Tax (WHT)
• Residents / Individuals – WHT 15% vs 0% in Singapore
• Foreign Institutional Investors – WHT 20% vs 10% in Singapore
External Factors
• Capital Market Factors
• Property Cycle
26
Analysing a REIT
27
Analysing a REIT – A Framework
Case Study: Hektar REIT
• Organisation & Portfolio
• Market Focus
• Business Model
• Value Creation
• Portfolio Performance
• Financial Performance
28
Organisation
About the Hektar Group
Founded in 2002
Vision of developing world-class retail centres in Malaysia based on
international best practices
Hektar
Hektar
Premier
Premier
Hektar
Hektar
Black
Black
Hektar
Hektar
Klasik
Klasik
HEKTAR
HEKTAR
ASSET
ASSET MANAGEMENT
MANAGEMENT
HEKTAR
HEKTAR REIT
REIT
Subang
Parade
Expansion
Redevelopment
In Planning
Nusajaya
Greenfield Development
In Planning
Current Portfolio
Valuation RM559 million
29
Organisation
Hektar REIT’s Organisation
Unitholders
Investment in REIT
Hektar Asset
Management
(Manager)
Management
fees
Trustee’s fee
(Property
Management
Company)
AmTrustee
Hektar
HektarREIT
REIT
Acts on behalf of
Unitholders
Management
services
Ownership of assets
Izrin & Tan
Dividends and other distributions
Property
management fees
Property
management
services
(Trustee)
Rental income
Real Estate Assets
IPO Completed:
4 December 2006
30
Portfolio
Hektar Group’s Portfolio
Peninsular Malaysia
Hektar REIT
Total Gross Built Area
2.3 million sq ft
Total Net Lettable Area
946,865 sq ft
Occupancy
96.9%
(as of 31 Dec 2007)
Subang Jaya,
SELANGOR
Melaka,
MELAKA
31
Portfolio
Portfolio Statistics
Subang Parade
Mahkota Parade
1.9 acre land parcel
currently vacant
Land
Description
Gross Built-Up Area
Net Lettable Area
Primary Trade Area
Visitor Traffic
Positioning Strategy
Occupancy
3 acre land parcel currently used
as car park
~10 acres [Freehold]
~10 acres [Leasehold until 2101]
3 Floors Retail + Basement
3 Floors Retail + Basement
1.2 million sq ft
1.1 million sq ft
473,108 sq ft [Efficiency: 39%]
471,792 sq ft [Efficiency: 43%]
705,000 within 15 minutes drive*
287,273 within 15 minutes drive*
150,816 per week (2007)
169,559 per week (2007)
Neighbourhood / Community-Focused
Regional Mall – Melaka State
99.9% (as of 31 Dec 2007)
93.9% (as of 31 Dec 2007)
Key Tenants
* Source: MIRP (2006)
32
• Market Focus
• Business Model
• Value Creation
33
Market Focus
Retail Management is a Growth Business
Malaysia’s shopping centre NLA sq ft per capita lags behind other
developed countries
Shopping Centre NLA sq ft per Capita, Country Comparison
21.5
US (2004)
7.5
Australia (2004)
Singapore (2004)
3.2
Malaysia (2005)
3.0
Kuala Lumpur (2005)
-
12.6
5.0
10.0
15.0
20.0
25.0
Source: JPPH, UrbisJHD, MIRP, 2006.
KL has ¼ of Malaysia’s shopping centre NLA
34
Market Focus
Huge Retail Opportunity Throughout Malaysia
34 cities with populations > 100,000
Consolidation play: redevelopment of existing centres
1.6
Greenfield development
0.8
6.2
Kedah
Shopping Centre NLA, State Comparison
Untapped
Retail
Potential
S ta te
K u a la L u m p u r
P u la u P in a n g
S e la n g o r
W .P . L a b u a n
Johor
M e la k a
N . S e m b ila n
P e r lis
P e ra k
Kedah
Pahang
S a ra w a k
K e la n ta n
Sabah
T e re n g g a n u
T o ta l
P o p u la t io n
1 .6 m n
1 .6 m n
4 .9 m n
0 .1 m n
3 .2 m n
0 .7 m n
1 .0 m n
0 .2 m n
2 .3 m n
1 .9 m n
1 .5 m n
2 .3 m n
1 .5 m n
3 .1 m n
1 .0 m n
2 6 .8 m n
N L A s q ft p e r
C a p it a
1 2 .6
6 .2
3 .7
3 .1
3 .0
2 .8
2 .8
2 .4
1 .9
1 .6
1 .3
1 .1
1 .0
0 .8
0 .3
2 .9 6
1.9
1.1
1.0
12.6
Sarawak
Kelantan
0.3
Penang
Perak
Terengganu
3.7
1.3
7.5
Pahang
KL
Selangor
3.0
2.8
Melaka, N.S.
Australia
Average
Key
Sabah
3.0
Johor
Malaysia
Average
Cities with > 100,000 population
NLA sq ft per Capita population
Source: JPPH 2006. Figures for 2005
35
• Market Focus
• Business Model
• Value Creation
36
Hektar’s Business Model
Competitive Advantage of Business Model
Derived from international best practices
Standard Business Model
Focus
Tenancy Model
Performance
Monitoring
Overall
Approach
Result
Archaic Tenant-Mix Approach
Adversarial (Risk of Rent Saturation)
Hektar’s Business Model Toolkit
Consumer Research Focus
(demographic & market analysis)
Model Alignment with Tenants
(Step-Up & Turnover Rent)
Single-Dimensional
•Occupancy Rate
•Rental Rates
Multi-faceted Approach
•Comprehensive Budget & Monthly Report
•Occupancy Rate
•Rental Rates / Increases
•Pedestrian Traffic Analysis
•Turnover Sales Analysis
•Lease Expiry Profile
No measurement of tenant success
or shopper satisfaction
Data-Driven approach to
track tenant performance & monitor
shopper satisfaction in “real-time”
Mall rental premium not maintained
Owner cuts OPEX, CAPEX
Mall under-serving market
Ability to devise value creation initiatives
to maintain mall competitiveness
37
Hektar’s Business Model - Tools
Consumer Research Focus
•To define the Trade Areas (Primary & Secondary)
Objectives •To understand the target market demographics
•Consumer Exit Surveys
Comprehensive •Household Interviews
Surveys •Focus groups
& Research •Competition Review & SWOT Analysis
•Economic / Retail Trends & Data
Subang Parade (2003/4)
•Exit Surveys: > 1,000 respondents
Typical Survey •Household Interviews: 421
•Focus Groups: Women shoppers
Research provides a deep understanding of the market
for strategic planning & positioning of mall
38
Consumer Research Focus - Results
Subang Parade Trade Area zones / travel time / income
Bandar Utama
Petaling Jaya
Bukit Jelutong
Shah Alam
Klang
Subang
Jaya
USJ
Puchong Jaya
Subang Parade Trade Catchment Analysis (2003)
39
Detailed market research provides competitive advantage
Subang Parade Demographic Analysis (2003)
Source: MIRP, 2003, 2005
40
Detailed market research provides competitive advantage
Subang Parade Demographic Analysis (2003)
i
Source: MIRP, 2003, 2005
41
Business Model – The Enhanced Tenancy Model
Scenario: Tenant leases 1,000 sq ft at RM10/11/12 psf (base rent) or 10%
Sales (turnover rent), whichever is higher
• Step-Up Rate: Year 1: RM10psf, Year 2: RM11psf, Year 3: RM12psf
• Turnover Rent Provision: Variable, e.g. 10% of Annual Sales
1st Year
2nd Year
3rd Year
Step-Up Rent (RM psf)
10.00
11.00
12.00
Monthly Base Rent (RM)
10,000
11,000
12,000
Annual Base Rent (RM)
120,000
132,000
144,000
Break-even Point (Base Rent=% Sales)
RM1.2 m
RM1.32 m
RM1.44 m
Tenant’s Reported Annual Turnover
RM1.2 m
RM1.4 m
RM1.6 m
Example:
Hektar Collects
10% Annual Sales
Turnover Rent (Difference between Base Rent & % Turnover)
RM120,000
RM 0.00
RM140,000 RM160,000
RM 8,000
RM 16,000
System motivates management to promote tenant sales
42
Business Model – Targeted Marketing
22 schools participated
A contest :
Shoppers nominate
School through receipts
RM1 = 1 point
Top 10 Schools Win
RM60,000 prizes
Sponsors of contest
Benefits: Win-Win-Win
•Increase in tenant sales
•Benefits to the community
•Reaches out to shoppers (families)
43
Performance Measurement – Traffic KPI

Implemented Footfall system
UK technology installed in > 500 shopping centres worldwide
Strategically-located custom cameras at doors
Image-based recognition system processes video at 25 frames per
second tracks incoming and outgoing traffic
System provides real-time monitoring and analysis of traffic
44
• Market Focus
• Business Model
• Value Creation
45
Hektar’s Business Model – Value Creation
Value Creation Initiatives Matrix
Upside
Potential
Tenant Re-Mixing
Asset Enhancement
• Refreshing the Tenant Mix
• Improving Centre Positioning
• Driven by Market /
Demographic Research
• Increasing NLA by
capital Improvements
• Reconfiguring Low-Yielding
Lots into Higher-Yield Lots
Tenant Relocation
Refurbishment
• Improving Retailer Zoning
• Improving Traffic Circulation
• Enhancing Customer Amenities
• Refreshing Centre Appeal
Risk
Value Creation Initiatives optimise asset value
46
Hektar’s Business Model – Tenant Relocation
Part 2 – Relocate Anchor
Actions
• Closed Food Court
• Relocated Toys R Us to
old Food Court (from LG to
1F)
• Relocated HSL to old Toys
R Us lot
• New tenant in old HSL lot:
Voir
• Vacated Subang
Furnishing lot
• New tenant: Celebrity
Fitness
• Old Food Court running at
a significant deficit
• Toys R Us relocation
improved traffic and rental
prospects on 1F
• Relocation to improve
traffic circulation between
anchors (Parkson and
HSL)
• HSL built their largest
concept store at the time
• Affected NLA: 32,281 sq ft
• Celebrity Fitness to add to
lifestyle appeal of target
market demographic
Results
Part 1 – Relocate Anchor
Rationale
Subang Parade Anchor Tenant Relocation
Part 3 – Replace Anchor
Increase in Net Rental Income, Respective Lots: 38.8%
47
Hektar’s Business Model – Asset Enhancement
Asset Enhancement – Subang Parade Digital One
Previously, partially-vacant lots and storage space
Opportunity to create new NLA and ‘IT’ retail zone to complement HSL
Creation of 21,361 sq ft NLA
Subang Parade Basement Plan
Capital Expenditures
First Year Return on Investment
RM3.9 million
9.2%*
* Not based on Turnover Rent, based on actual occupancy as at December 31, 2006
48
Hektar’s Business Model – Asset Enhancement
Asset Enhancement – Mahkota Parade Ex-G79
Previously, large low-yielding 28,460 sq ft space
Opportunity to create zone with higher-yielding lots
Re-Configuration
of 28,460 sq ft NLA
Mahkota Parade Ground Floor
Capital Expenditures
First Year Return on Investment
RM2.9 million
16.5%*
* Not based on Turnover Rent, based on actual occupancy as at March 31, 2007
49
Hektar’s Business Model - Refurbishment
Subang Parade Refurbishment

Improving consumer amenities in response to feedback
New amenities – Mother’s Room, Surau
Car Park Refurbishment – Flooring, Lighting
Centre Flooring, Railings, Ceiling
50
Before
After
51
Before
After
Before
After
52
Before
After
53
Guest Services
Mother’s Room
Lounges
First Floor
54
Hektar’s Value Creation Summary
Hektar Has Produced Strong Results in its Portfolio
Year Acquired
Tenant Re Mixing
Tenant
Relocation
Since August 2003
•New Tenants: Celebrity Fitness,
Eden, Orlando, Blook, Voir
•Rezoning: Health Services,
Electronics
Since April 2004
•New Tenants: SenQ, Kenny Rogers
Roasters, Coffee Bean, Starbucks
•Toys ‘R’ Us, HSL Electrical &
Electronics
•Seleria Food Court / SenQ / Thai
Kuang
Asset Enhancement
•Digital One
•Lot G79
Asset Enhancement
Refurbishment
•Restrooms
•Internal Full Refurbishment
•Car Park Refurbishment
•Mother’s Room
•Surau
•Restrooms
•Mother’s Room
•Surau
RM223 million
RM147 million
RM67 million (30% increase)
RM86 million (58.5% increase)
Acquisition Cost
Increase in Valuation
Value Creation
Collective Asset Value Appreciation: 41% (2006)
55
Hektar’s Portfolio – Subang Parade Today
Car Park
Lift Lobby
Restrooms
56
Hektar’s Portfolio – Mahkota Parade Today
Food Court on Opening
Restrooms
57
• Market Focus
• Business Model
• Value Creation
58
Hektar’s Portfolio - Traffic
Steady Visitor Traffic in Hektar’s Portfolio
Overall visitor traffic up 14.5% in 2007
Tracked by Footfall, camera-based system installed in each centre
Subang Parade’s traffic up 32.6% in 2007 after 2006 refurbishment
Subang Parade
% Change in Traffic
No. of Visits
(2005)
5,689,196
-
No. of Visits
(2006)
5,916,354
4.0%
No. of Visits
(2007)
7,842,409
32.6%
Mahkota Parade
% Change in Traffic
8,012,968
-
8,636,714
7.8%
8,817,065
2.1%
Total
% Change in Traffic
13,702,164
-
14,553,068
6.2%
16,659,474
14.5%
Property
59
Hektar’s Portfolio - Occupancy
Portfolio occupancy holding well in 2007
Property
Subang Parade
Mahkota Parade
Total / Overall
100%
As of 31
December
2003
97.7%
As of 31
December
2004
93.4%
86.8%
91.3%
97.7%
98.3%
97.7%
As of 31
As of 30
December September
2005
2006
98.3%
98.5%
96.9%
94.9%
97.6%
96.7%
98.5%
As of 31
December
2007
99.9%
93.9%
96.9%
99.9%
93.4%
95%
96.9%
94.9%
90%
93.9%
Subang Parade
Mahkota Parade
86.8%
85%
80%
75%
70%
2003
2004
2005
2006
(September
30)
2007
60
Hektar’s Portfolio – Tenant Mix
Tenant Mix Remains well-diversified
Combined Portfolio as of 31 December 2007
By Rental Income*
1.7%
8.4%
3.4%
By NLA
1.9%
6.9%
30.3%
1.9% 0.9%
16.8%
11.1%
7.6%
4.8%
16.8%
11.8%
10.6%
22.0%
13.0%
30.3%
Fashion & Footwear
Food & Beverage / Food Court
Department Store / Supermarket
Gifts / Books / Toys / Specialty
Education / Services
Leisure & Entertainment, Sport & Fitness
Electronics & IT
Homewares & Furnishing
Others
* Based on monthly rental income for December 2007.
61
Hektar’s Portfolio – Rental Reversions
Overall Full Year 2007 – Strong Rental Reversions
But reversions flat in central Melaka in 4Q07 (Mahkota Parade)
4Q07: 26 new tenancies / renewals @ 9% average rental increase
FY07: 84 new tenancies / renewals @ 20% average rental increase
Fourth Quarter
(3 months)
(Ending 31 Dec)
Subang Parade
Mahkota Parade
Portfolio Total / Average
No. of New
Tenancies /
Renewals
16
10
26
Full Year 2007
(13 months)
(Ending 31 Dec)
Subang Parade
Mahkota Parade*
Portfolio Total / Average
No. of New
Tenancies /
Renewals
43
41
84
NLA
(sq ft)
34,891
12,721
47,612
NLA
(sq ft)
137,177
54,760
191,937
% of
Total NLA
7%
3%
5%
%
Increase / (Decrease) Over
Previous Rent Rates
15%
-1%
9%
% of
Total NLA
29%
12%
20%
%
Increase / (Decrease) Over
Previous Rent Rates
16%
26%
20%
Figures as of 31 December 2007. Outstanding tenancies are currently in negotiation.
* Mahkota Parade figures include rental increases from a one-time asset enhancement exercise. See 1Q07 results for more details.
62
Hektar’s Portfolio – Tenancy Expiry Profile
Portfolio Tenancy Expiry Profile 2008 – 2011
Combined Portfolio (as of 31 December 2007)
P o rtfo lio
F or Year E nding
31 D ecem ber
F Y 2008**
F Y 2009
F Y 2010
F Y 2011
60%
N o. of
T enancies
E xpiring
75
59
69
11
N LA of tenancies
expiring
(sq ft)
524,105
104,444
178,456
41,818
N LA of tenancies
expiring as % of
total N LA
56%
11%
19%
4%
% of T otal
M onthly R ental
Incom e*
42%
19%
27%
4%
56%
50%
42%
40%
30%
** After Parkson’s
renewal options exercised
29% 30%
By NLA
27%
19%
20%
By Monthly Rental Income
19%
11%
10%
4%
4%
0%
FY 2008**
FY 2009
FY 2010
FY 2011
* Based on monthly rental income for December 2007.
**Major Anchor Tenant Parkson has tenancy renewal options for up to 9 years, commencing in 2008.
63
• Market Focus
• Business Model
• Value Creation
64
Income Statement Summary – FY2007
FY2007 DPU Exceeds Forecast by 11.2%
For Period 1 December 2006 (IPO) – 31 December 2007 (13 months)
YTD Actual
(RM '000)
YTD Budget
(RM '000)
Variance
(%)
78,331
(29,052)
49,279
74,580
(28,738)
45,842
+ 5.0%
- 1.1%
+ 7.5%
Interest & Other Income
Total Income
123
49,402
374
46,216
- 67.0%
+ 6.9%
Trust Fees & Expenses
Interest Expense
Net Income Before Tax - Realised
(4,395)
(8,325)
36,682
(3,745)
(11,661)
30,811
- 17.4%
+ 28.6%
+ 19.1%
Fair Value Gain on Investment Properties
43,842
Net Income Before Tax
80,524
FY 2007
Gross Revenue
Direct Cost & Property Expenses
Net Property Income (NPI)
Net Income per Unit (sen)
25.16
Net Income per Unit - Realised (sen)
11.46
9.63
19.1%
Full Year 2007 Dividend Distribution* (sen)
Quarterly Distributions (Q1+Q2+Q3) (sen)
Final (Fourth Quarter) Distribution (sen)
10.71
7.20
3.51
9.63
11.2%
65
Dividend Distribution
FY 2007 Dividends Exceeds Forecast by 11.2%
Actual DPU of 10.7 sen (13 Months), Annualised DPU of 9.9 sen*
FY2007
Net Income - Realised
Actual
Budget
Variance Change (%)
RM ('000)
36,682
30,811
5,872
+ 19.1%
Net Income Per Unit - Realised
sen
11.46
9.63
1.83
+ 19.1%
Dividend Per Unit (DPU)
sen
10.71
9.63
1.08
+ 11.2%
Three (3) Quarterly Distributions
sen
7.20
7.20
Final Distribution
sen
3.51
2.40
Annualised DPU
sen
9.89
8.89
Composition:
1.00
+ 11.2%
DPU Yields
Based on :
Unit Price of RM1.40 on 31 Jan 08
IPO Retail Price of RM1.05 on 4 Dec 06
IPO Institutional Price of RM1.11 on 4 Dec 06
FY2007 (13-m)
7.7%
10.2%
9.6%
Annualised
7.1%
9.4%
8.9%
*As per initial offering prospectus dated November 2006, Hektar REIT will pay out a forecast of 9.6 sen for the FY2007 representing the 13-month
period ending 31 December 2007 or 90% of its actual net income, whichever is higher. The final DPU for FY2007 is 10.71 sen representing a 93%
payout of the actual net income of 11.46 sen.
66
Hektar REIT Unit Price Performance
FY2007: 4 December 2006 – 31 December 2007
Capital Appreciation
Dividend Yield
Total Return since IPO
+ 43.8%
+ 10.2%*
+ 54%*
70
31 Dec 07
RM1.51
% Change in Unit Price / Index
60
50
4 Dec 06 – 31 Dec 07
40
Hektar REIT + 43.8%
KLCI Index + 33.8%
30
IPO Price
RM1.05
20
10
0
Hektar REIT
29-Dec
14-Dec
29-Nov
14-Nov
30-Oct
15-Oct
30-Sep
15-Sep
31-Aug
16-Aug
1-Aug
17-Jul
2-Jul
17-Jun
2-Jun
18-May
3-May
18-Apr
3-Apr
19-Mar
4-Mar
17-Feb
2-Feb
18-Jan
19-Dec
4-Dec
-20
3-Jan
-10
KLCI Index
Source: Bloomberg (2008). KLCI = Kuala Lumpur Composite Index.
* Based on FY2007 DPU of 10.71 sen and IPO Retail Price of RM1.05. IPO Institutional Investors Total Return: 45%
67
Comparative Yields - Malaysia
Hektar REIT Yield Spread (DY2007)
Yield
Yield (%)
(%
Traded at a 344 bps spread over MGS 10-year as at 31 January 2008
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
7.10
344
bps spread
5.15
Hektar
REIT
3.66
3.48
10-year
MGS
5-year
MGS
4.09
3.67
KLCI
12-month
Dividend Deposits
(FY2007)
EPF
Dividend
(2006)
Source: The Star, Bloomberg, Estimates. Hektar REIT yield based on closing price 31 January 2008 of RM1.40 and annualised DPU for
FY2007.
68
• Market Focus
• Business Model
• Value Creation
….Further Remarks
69
The Business Model
REIT Growth Strategies
Portfolio Management Strategies (Internal Growth)
•
•
•
•
Leasing & Tenant Management Strategy
Asset Enhancement
Facilities Management
Marketing & Branding
Investment Strategies (External Growth)
• Property Acquisitions & Disposals
• JV / cooperation with developers & capital partners
Capital Management Strategies
• Sponsor / Cornerstone Investor Strength
• Overall Capital Management
• Funding Strategy
70
Closing Remarks
REITs combine the attributes of real estate and equity investing
REITs have established themselves as a distinct asset class in
developed markets and an addition to any diversified portfolio
Malaysia’s REIT sector continues to evolve
Analysing a REIT requires a study of its:

Market Focus – Prospects of its respective sector?
Business Model – Competitive Advantage?
Track Record of Management – Established Record?
Growth Strategies – Feasible?
71
Thank You
CREATING THE PLACES PEOPLE LOVE TO SHOP
Hektar Asset Management Sdn Bhd
Block A-2-4, Plaza Damas
60 Jalan Sri Hartamas 1
Sri Hartamas
50480 Kuala Lumpur
MALAYSIA
℡ +6 03 6201 1011
+6 03 6201 0012
www.hektargroup.com
72

Revisiting REITs as an Investment

Transcription

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