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Messrs Amorn (right) and Charasrit are continuously exploring new opportunities.
Ticon Freehold and Leasehold Real Estate Investment Trust (TREIT) listed on the Stock Exchange of Thailand in January 2015. Managing director Amorn Chulaluksananukul and Charasrit A Voravudhi, general manager and head of business development, discuss the fund's strategy and outlook.
What assets are currently in TREIT?
Our investment portfolio comprises 98 units of premium warehouses and factories with total rental area of 369,705 square metres on 503 rai of land. These include 71 warehouses covering 293,805 sq m (79%), and 27 factories covering 75,900 sq m (21%). Freehold investments account for 56% and leasehold investments 44% of the portfolio. The properties are in strategic locations at 16 leading industrial estates, industrial and logistics parks in Thailand. The fund's total asset value is 7.7 billion baht.
How will you continue to develop TREIT?
We are continuously exploring new opportunities to expand through a combination of assets purchased from Ticon Industrial Connection Plc and from other companies. What is important is that we have to ensure that the revenue structure of the prospective assets is similar to that of our existing assets which generate recurring and stable income streams. We need to understand clearly how the assets operate as well as identify key success factors of the business and cover locations that are strategically attractive to the existing and potential customer base.
We have a positive outlook for the industry, supported by the introduction of the Asean Economic Community. Thailand continues to be a key destination for international investors who aim to use the country as a distribution hub and manufacturing base, given the competitiveness of the manufacturing industry and ideal location at the centre of Asean.
As the REIT manager, we also have to ensure that TREIT is optimally managed in terms of both revenue and expenses. We need to utilise the appropriate financial instruments to enhance returns to our investors.
What differentiates TREIT from others in the market?
Our strength lies on great quality of assets in 16 locations across Thailand. These strategic locations offer great growth potential and logistical advantages in the form of access to main roads that connect to various regions, allowing convenience and speed in transport.
Our strong customer base also plays a big part in our success. The majority of our customers are leading local and multinational companies with growth potential and strong financial stability. The combination of strengths allows us to ensure stable revenue streams from our assets and to maintain our distribution policy of at least 90% of adjusted net profit.
TREIT is also the first and so far only REIT in Thailand to have a credit rating, having been assigned a national long-term rating of A-(tha) with a stable
outlook by Fitch Ratings. The rating reflects the strength of TREIT and will enable us to secure financing through the bond market at a lower interest cost relative to bank loans and to enhance returns to unit holders.
How do you view the REIT market developing in Thailand?
The REIT market is still relatively new in Thailand. The opportunities to invest in real estate are mostly in commercial rather than retail properties; each represents a different level of risk-andreturn dynamic. Although commercial properties are somewhat affected by economic conditions, the impact is considered minimal as we still see signs of ongoing demand from customers who are shifting strategically from owning fixed assets with high investment cost to renting properties for their business operations.
The REIT market in Thailand is expected to develop progressively over time because it is an important financial tool for companies to fund business expansion.
We expect to see more liquidity and demand in the market eventually. On average, the yield on REITs is generally higher than on government bonds; however, REITs are still relatively less attractive to investors because of lower liquidity. We do hope that with government support the REIT industry in general could grow more quickly. This could include support for the conversion of existing property funds to REITs, tax privileges, shortening the IPO process and educating the market more about REIT investment.What are the biggest risks facing TREIT?The performance of our tenants typically relies on economic conditions locally and globally. We try to mitigate this by ensuring long-term tenants with manageable pricing. Interest-rate risk is another factor and we have options available such as bond issuance to ensure that our average interest cost remains low and stable.
Where do you see TREIT five years from now?
Our target since we formed TREIT has been to achieve an asset size of 25 billion baht. And we continue to aim for this target by expanding the asset base in Thailand and internationally when the regulations permit us to do so. We will also continue to focus on providing an attractive yield for both institutional and retail investors.
The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle. For more information, e-mail pon@rossvancompernolle.com or supat@shareinvestor.com. Website: www.ShareInvestorThailand.com
