The REIT Manager’s principal objectives are to deliver regular and stable distributions to Unitholders, as well as to achieve long-term growth in DPU and NAV per unit, while maintaining a sustainable capital structure.
Active asset management
To understand and meet the needs of the retail tenants, the REIT Manager has hired Property Managers, FPT Group ex-owners of the properties), to manage its asset because of their relationship and knowledge of the retail tenants as well as their working teams which can serve tenants in time and efficiently. From their long experience as leaders in the business of building factories and warehouses for lease, both companies have a large client base of both Thai and international clients.
Frasers Property (Thailand) group manages assets professionally and has experience in managing rental rates as well as ensuring a constant renewal rate of rental agreements, in addition to improving operational efficiency and costs. Also, REIT manager engages in Asset Enhancement Initiative such as Installation solar panels on the rooftop of property.
Asset enhancement initiative
The REIT Manager seeks to do an Asset Enhancement Initiative (“AEI”) to improve quality of properties under trust and to meet the needs of tenants. AEI includes expansion of leasable area, installing and/or building improvement. AEI shall provide opportunity to REIT to increase occupancy rate and/or WALE which should improve revenue for the trust and create memorable and enriching experiences for tenants.
In fiscal year 2019, FTREIT invested in expanding the leasable area of one factory located at Amata City Rayong, Rayong province by 1,700 sq.m. (net leasable area after expansion is 15,950 sq.m.) The tenant has agreed to a long-term lease extension of the area for 7 years.
The REIT Manger will continue to source and pursue strategic asset acquisitions for the trust. Backed by strong and established sponsor, Frasers Property (Thailand) group, FTREIT is able to leverage on the Sponsor’s strong network and pipeline of quality assets. The Sponsor provides Right of First Refusal (“ROFR”) to FTREIT and must propose selling properties to the trust before proposing them to any third party. ROFR is the key to sustainable growth for FTREIT.
FTREIT employs the strategy of investing in high quality industrial and logistics property in prime locations and strategic areas owned by other parties. FTREIT does not invest only in domestic factories and warehouses; FTREIT also invests in overseas industrial and logistics properties which can generate high returns for FTREIT. The REIT Manager considers the suitability and qualifications of the targeted properties based on following key factors:
- Quality of the assets i.e. location, landscape, building conditions, engineering systems, utilities; and overall environment; must comply with the regulations and be of acceptable risk
- Returns from investment
- Qualifications of tenants and rental & service payment ability
- Occupancy rate
In addition, based on Notification No.49/2012 announced by The Office of Securities and Exchange Commission, Thailand and trust deed, a Trust can develop Greenfield projects at a value not exceeding 10% of total asset value. The opportunity to develop a Greenfield project allows FTREIT to develop property in the future.
In the first-half of 2020, FTREIT has invested in high-quality valued at Baht 2,050 million from Sahathai Property & Development Company Limited. The assets listed in this investment comprise of 11 warehouses on the total net leasable area of over 80,000 sq.m. on a 125-rai of land.
Capital & risk management
The REIT manager seeks to optimize the capital structure and cost of capital structure. The REIT manager considers the market interest rate in each situation and forecasts the interest rate to help make the decision to proceed with the type of loan which reflects the lowest cost of debt to FTREIT in order to maximize benefit for the unitholders. The REIT manager sets the policy on lending loan/debentures or any type of loan at an appropriate level, to maintain refinancing risk and comply with SEC regulations which set leverage level not over 35% (for no investment grade) and 60% (for investment grade).
Moreover, the Credit Rating of FTREIT is not below investment grade. The current rating of FTREIT is A (tha) which is rated by TRIS Rating Company Limited and this is the highest rating for industrial and logistics REITs in Thailand.