MRMA upbeat on Airport REIT

> Government should sell more than 30% stake, says REIT managers group

PETALING JAYA: The Malaysian REIT Managers Association (MRMA) believes that with the right pricing and valuation, an almost RM20 billion airport real estate investment trust (Airport REIT) of high quality government-backed assets will garner strong interest from both institutional and retail investors.

It estimates that just under RM20 billion worth of assets are likely to be injected into the Airport REIT, after imputing a certain leverage level to the government’s hope to raise RM4 billion from disposal of a 30% stake in the Airport REIT.

MRMA said the plan is a strategic way to unlock the country’s aviation infrastructure value, creating a sustainable structure to fund the airports’ future capital expenditure and expansion as well as igniting capital market interest. “This may position the REIT as one of the largest REITs in Malaysia (M-REITs) and simultaneously boost M-REITs combined property value by 35% to above RM70 billion.”

In addition, MRMA suggests that the government consider increasing the freefloat of the Airport REIT to more than the proposed 30% stake in order to increase liquidity and tradeability of the REIT.

“With sizeable free-float, the IPO will attract greater interest of international funds,” MRMA chairman Datuk Jeffrey Ng said.

Commenting on factors needed to make the REIT a success, MRMA said the REIT should balance growth potential with protection from any downside risks.

“In view that the distributable income from the Airport REIT is based on user fees collected from the established airport management concession holder, Malaysia Airports Holdings Bhd (MAHB), the lease structure of the REIT should have a minimal guaranteed income to protect the downside risk while unitholders may also enjoy the upside growth of the user fees derived from aeronautical revenue and non-aeronautical (which include duty-free retail, food and beverages offerings, car park management and advertising) revenue,” it said.

MRMA said the interest and tripartite minimum guarantee income between the government, the proposed Airport REIT and MAHB will be considered thoroughly, by balancing the yield accretiveness of the REIT and income sustainability of MAHB.

MRMA opined that the proposed Airport REIT forms part of the larger agenda of not only to rationalise the country’s debt burden, but also to stimulate growth through revival of tourism and investment into Malaysia.

Over the long term, MRMA is optimistic that the proposed REIT would perform well given that passenger traffic at the 39 airports in the countries MAHB operates in have been recording healthy growth.

MRMA said it is heartened by the statement from the government that other sub-sectors such as hospital and rail infrastructure may be considered for similar funding and investment structures.