Horizon.my

Looking to invest in property which are occupied by quality tenants? Want high yield and something you can get into with little capital?

What’s the catch? Well you don’t get to manage it yourself but will need to rely on professional managers to manage your property portfolio.

Well if you are looking for hassle-free exposure to prime industrial properties in Malaysia, then Atrium Real Estate Investment Trust is a worthwhile consideration.

Atrium REIT is focused on Industrial real estate comprising of Warehouse-Office type properties. It was listed on 2 April 2007 on Bursa Malaysia Main Board and currently owns these properties with the corresponding Net Book Values:

• Atrium Shah Alam 1 (NLA: 311,736 sq ft) – RM57.2 million
• Atrium Shah Alam 2 (NLA: 258,702 sq ff) – RM49.1 million
• Atrium Puchong (NLA: 203,994 sq ft) – RM38.5 million
• Atrium Rawang (NLA: 35,236 sq ft) – RM10.0 million

Photo of Atrium Shah Alam 1 (Source: atriumreit.com.my)

In October 2007, Atrium entered into an agreement to purchase another property Senai Industrial Park Johor (NLA: 125,173 sq ft) for RM12.5 million but announced in June 2008 that it had declined to proceed with the purchase due to certain conditions not met.

Atrium’s policy is to distribute at least 90% of its distributable income. Since listing so far, its distributions have been as follows:

28/8/07 – 2.0 sen
28/11/07 – 2.2 sen
29/2/08 – 2.3 sen
29/8/08 – 2.1 sen

This brings the annual distribution to 8.6 sen implying a gross yield of 12.8% on the current unit price of RM0.67. As at 31-Dec-07, Atirum’s net debt position was RM27 million against total property value of RM155 million meaning that it is reasonably geared.

The key risk with all REITs is that the managers will at some stage get over-enthusiastic with growing fund size (higher management fees for them) and end up over-gearing the fund and buying lower quality properties like what we have witnessed in many of Australia’s property trusts recently. Centro Properties has gone belly up due to aggressive acquisitions and gearing while large trusts such as GPT has seen their unit prices go from around A$5.00 to A$1.00 recently.

With Atrium, additional factors to consider include the relatively low level of tenant diversification which you will otherwise find in larger REITs. Also its small market cap means that many institutions will shy away due to low liquidity and trading volume. Having said this, you should not have to worry so much if you are a small investor – you still get better diversification compared to buying a single house or condo to rent out, and you don’t have to worry about collecting rent

2008 Q3 Results Announcement on 21-Oct-08
Atrium REIT Net Profit came in at RM2.68 million for the quarter, translating into EPS of 2.2 sen. Here are key extracts of its report:

Atrium REIT, after considering the strength of its existing industrial real estate portfolio which is 100% leased to multi-national corporations and its growth strategy to actively pursue quality acquisitions, is confident in achieving the expected performance for financial year ending 31 December 2008 as disclosed in the prospectus dated 28 February 2007.

The Board of Atrium Reit Managers Sdn Bhd has declared an interim income distribution of 2.10 sen of the profit after taxation (realised) for the quarter ended 30 September 2008, to be paid on 28 November 2008 to the unitholders registered in the Record of Depositors on 7 November 2008.

Withholding tax will be deducted for distribution made to the following types of unitholders :

- Resident individual (withholding tax at 15%)
- Non Resident individual (withholding tax at 15%)
- Resident institutional investors (withholding tax at 15%)
- Non-resident institutional investors (withholding tax at 20%)
- Resident companies (No withholding tax. Subject to corporate tax at prevailing rate of 26%)
- Non-resident companies (withholding tax at 26% for Year of Assessment 2008)

Other Items to note
1. Net Debt was relatively unchanged at RM26 million as at 30-Sep-08.
2. A new CEO, Mr Lim Pang Kiam (age 44) was appointed on 2-Sep-08 (work experience in senior management position in several financial Institutions, and previously sat on the Board of Pantai Holdings Bhd and SYF Resources Bhd).

Disclosure: The blog author/owner does not own any securities in ATRIUM Reit at the time of writing.