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A Foolish Tour Of AIMS AMP Capital Industrial REIT And 15 Interesting Observations

My colleagues and I at The Motley Fool Singapore were invited by the manager of AIMS AMP Capital Industrial REIT (SGX: O5RU) for a tour of some of their properties over the weekend.

It was a hot and sunny Saturday day when we meet with Joanne Loh, Assistant Fund Manager of AIMS AMP Capital Industrial REIT’s manager. As a brief introduction, AIMS AMP Capital Industrial REIT has a focus on industrial real estate and currently has 25 properties in Singapore and one in Australia.

Joanne brought my colleagues and I to visit four of the REIT’s properties. They are: 20 Gul Way (the REIT’s largest property in its portfolio), 8 & 10 Pandan Crescent (the fourth largest), 1A International Business Park (sixth largest), and 30 & 32 Tuas Road which is currently undergoing development.

The tour opened my eyes to many interesting facts about AIMS AMP Capital Industrial REIT which I think can help investors understand the REIT better.

With that, here are 15 observations I had made during the visit:

  1. 8 & 10 Pandan Crescent is a Cargo Lift Warehouse property. It is a relatively big property for the REIT with a gross floor area (GFA) of 81,000 square metres and a net lettable area (NLA) of 66,000 sqm. The property has 80 loading/unloading bays and 38 dock levellers. This makes it very convenient for tenants, in my view, as their trucks can stop at a bay which has a cargo lift that opens directly into their warehouse.
  2. The warehouse space and the office spaces at 8 & 10 Pandan Crescent are also connected, making it seemingly easy for the property’s tenants to move between the two areas. There is also segregation for tenants (the REIT usually provides bare units to tenants, who then fit out themselves) as cargo comes in from the back of the property while staff can use passenger lifts at the front to access the office areas.
  3. Next moving onto 20 Gul Way, this property was redeveloped in four phases (Phase 1, Phase 2, Phase 2E, and Phase 3) over three-and-a-half years. It was initially a manufacturing facility with a plot ratio of 0.46 and GFA of 378,000 square feet; now, it’s a ramp up warehouse facility with an increased plot ratio of 2.0 and GFA of 1.66 million square feet.
  4. 20 Gul Way’s plot ratio increase had to be approved by the Urban Redevelopment Authority (URA).
  5. The redevelopment costs for 20 Gul Way came in at S$150.1 million for Phase 1 and 2, and S$73 million for the latter two phases. Following the first two phases of redevelopment, the property’s value increased from S$41.8 million to S$214 million. This resulted in the REIT enjoying a profit of S$25.8 million which is a 13.4% profit margin. Phases 2E and 3 allowed the REIT to enjoy a further S$16.4 million profit and profit margin of 22.4%. As at 30 September 2015, 20 Gul Way was valued at S$303.4 million.
  6. Because the property was developed in 4 phases, it allowed some rental income to come in the same time while some development was still taking place.
  7. Prior to the development of 20 Gul Way, AIMS AMP Capital Industrial REIT’s manager had signed a master lease with Singapore-listed logistics services provider CWT Ltd (SGX: C14), thus ensuring the property can be fully leased after completion. In my opinion, the REIT’s manager had helped to alleviate leasing risk by structuring the deal in this manner.
  8. Moving onto 1A International Business Park, it is one of the two business parks that AIMS AMP Capital Industrial REIT has in its portfolio. The other one is located in Australia.
  9. 1A International Business Park is on a master lease which is expiring only in 2019. One of the advantages of this property, in my view, is its proximity to the industrial areas in Tuas, Singapore.
  10. 1A International Business Park is useful for tenants who lease operational spaces in Tuas. Many of the tenants lease space at the property as it helps them to portray a better corporate image.
  11. Coming to 30 & 32 Tuas Road, it was only a brief visit (my colleagues and I only saw some columns in the site of the on-going development).
  12. This property is being redeveloped from a cargo lift warehouse into a ramp up warehouse. After completion, the GFA will double from 159,717 square feet to 287,866 square feet. The plot ratio will also increase as well from 1.15 currently to 2.07.
  13. AIMS AMP Capital Industrial REIT’s manager also managed to secure a tenant (that would be CWT) on a staggered master lease for 30 & 32 Tuas Road. The master leases range from 2 years and 8 months to 4 years and 2 months. These will come into effect once the property is completed. As I mentioned earlier, the appearance of master leases before the completion of a property can help the REIT mitigate some leasing risk.
  14. The REIT’s manager mentioned to us that they are on the lookout for potential acquisitions, which is one of their stated strategies.
  15. But, it appears that they are not in a rush as the latest acquisition that AIMS AMP Capital Industrial REIT had made was in February 2011 (a purchase of 29 Woodlands Industrial Park E1; it is a high-tech space and is currently the fifth largest property in the REIT’s portfolio). I think that can be a sign of the REIT manager’s prudence in making yield-accretive acquisitions.

With that, I end my recount of the very interesting tour that my colleagues and I had of AIMS AMP Capital Industrial REIT. As I mentioned earlier, I had learnt many interesting things about the REIT and hope the above can aid investors in their decisions.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay does not own shares in any companies mentioned.