REIT prices edging near pre-Covid levels

REIT prices edging near pre-Covid levels

Returns of Thai REITs remain attractive

Prices of global real estate investment trusts (REITs) edged near pre-pandemic levels following the economic recovery and progress in global vaccine distribution, while Thai REITs remain the laggard despite excellent returns compared to global counterparts and government bonds, says Veena Lertnimitr, executive vice-president of Siam Commercial Bank.

As of May 21, the SETREIT, an index reflecting the overall price performance of Thai REITs, still stood at 29.9% below the pre-pandemic level as they are heavily contributed to by companies in hospitality and retail which have been heavily impacted by the pandemic.

Meanwhile, the SET Index and S&P Global REIT Index have soared to near pre-pandemic levels.

"However, contrary to REITs in the two sectors, other Thai REITs related to manufacturing such as e-commerce, logistics and exports have also edged near their pre-Covid levels thanks to the global economic recovery," she said.

However, contrary to the poor price performance, the returns of Thai REITs now stand at about 3.3% over the 10-year government bond yields and remain attractive.

They are also 1.8% higher than returns from the global REITs, said Tanadech Opasayanont, co-managing director of AIM REIT Management.

"The gap between the prices and returns is unprecedentedly high. The price lag of about 30% is not because of weak fundamentals but lower fund flows," Mr Tanadech said.

AIM Industrial Growth REIT (AIMIRT) will launch a new trust unit to raise capital to acquire three properties comprised of a freehold right to 12 warehouses in two projects, namely TIP and MS Warehouse in Samut Prakan, and a 30-year leasehold right to four warehouses for the company's logistics business, Thai Faffeta, in Rayong.

Total fundraising worth up to 2.28 billion baht will be generated from two sources of financing including issuing a new REIT unit with a value not exceeding 1.98 billion baht, while the remainder will come from debt financing through loans from financial institutions worth about 300-600 million baht.

The offering of the REIT will start on July 5 for preferential public offerings of about 80% of the new trust at a ratio of one existing trust unit to 0.3233 new units. The trust will then be offered to new investors via public offerings.

The company expected returns of 7.5%, assuming the offering price will be at 11.90 baht per unit.

Charasrit A. Voravudhi, managing director of AIM REIT Management, said the new investment will diversify the company's combined portfolio as the logistics business will contribute 18.6% of the total fund's appraisal value, up from 10% at the present and closer to the manufacturers of refined petroleum products whose contribution will drop to 18.9% from 24.7%, and cold storage and logistics providers to 18.4% from 24.1%.

The company aims to raise AIMIRT's total asset value to 20 billion within 2025 from 10 billion baht after the capital fundraising and 7.49 billion baht collected at the end of 2020.

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