The trust, part-owned by Australian institutional real estate fund manager AMP Capital Investors (AMPGCH.UL), also aims to grow its portfolio by about $200 million, its chief executive officer Nicholas McGrath told Reuters in an interview.
“We have an increasing bias towards business parks and high-tech space,” said McGrath, a trained lawyer who moved to Singapore six years ago.
“We think rentals are likely to grow faster than in industries where margins may be under pressure and therefore the ability to afford higher rentals is under pressure”.
In the last 15 months, AA Reit bought about $300 million worth of assets and sold its sole Japanese property for 1.49 billion yen in order to focus its business on Singapore.
Currently, it has 26 properties in the city-state worth about $832.9 million and hopes to see business park assets account about 20-30% of its portfolio in about 3 years, McGrath said. They make up about 18% of its portfolio now.
The trust hopes to acquire more industrial properties that cater to higher-end manufacturing or high-technology businesses, as Singapore seeks to move away from low cost manufacturing activities.
“Singapore’s government policy as a whole is to move up the value chain...It is not the low cost manufacturer of products that it once was. Our strategy is very much aligned with where the market is moving,” said McGrath.
He added that he expects demand for business parks to increase faster than that for manufacturing facilities, which currently account for about 22% of AA Reit’s total portfolio.
Although AA Reit is one of the smallest amongst its peers with a market capitalisation of US$358 million ($452 million), it had a high distribution yield of 9.5%. This compares with an average of about 7% for Singapore-listed real estate investment trusts.
AA Reit is also looking at redeveloping and enhancing several of its warehouses, logistic and manufacturing facilities as they currently have underutilized plot ratios.
This would help the reit to boost its gross floor area and rental income, McGrath said.
AA Reit is also exploring acquiring properties in China or Australia, where its sponsors AMP Capital and AIMS Financial Group already have a presence.
“Over the next several years, call it a 5-year plan, we can be a reit that is well-diversified, not only across different asset classes within the general moniker of industrial, but also well diversified geographically,” McGrath said.
However, the trust has no immediate plans to buy assets in overseas markets due to the relatively high interest rates and low yields in Chinese and Australian markets, McGrath said.
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