Airport REIT finalisation underway

The move to transfer the airport assets into a REIT will allow the govt to monetise its ownership of airports


THE proposed Airport Real Estate Investment Trust (REIT) is expected to be finalised once the government has inked the operating agreement (OA) with operators of airports nationwide.

The idea of a special REIT for airports was announced during the 2019 budget presentation last year. The Airport REIT is expected to generate more than RM700 million annually.

The move to transfer the airport assets into a REIT will allow the government to monetise its ownership of airports, the first for the country. However, any decision will depend on the negotiations with the airports’ operators.

“The Airport REIT is tied to the new Regulatory Asset Base (RAB) framework and the final consultation outcome was just published last month for the public to see,” said political secretary to the Minister of Finance Tony Pua (picture).

He was asked during the RAM-SIDC Bond Conference “Fresh Perspectives: Engineering the Future of the Malaysian Bond and Sukuk Market” in Kuala Lumpur yesterday.

The Ministry of Finance (MoF) hopes to raise RM4 billion by selling a 30% stake in the REIT to private investors. The proceeds from the sale of the stake will be used to finance the airports’ capital expenditure (capex).

Maybank Investment Bank Bhd in its research report previously highlighted concern over the structure of the Airport REIT as most airports are in constant need of maintenance capex.

“Most airports will reach their design capacity over a 10-year cycle and require major capacity expansion.

“Malaysia’s REIT structure only allows a 15% provision for expansion, and this might not be sufficient for airports,” the research house said.

Meanwhile, Securities Commission Malaysia chairman Datuk Syed Zaid Albar believes there is a place for bonds and sukuk instruments to be part of a well diversified retail investment portfolio.

He said since the inception of direct access to the fixed income instruments in 2012, retail investment had remained low as issuers continued to prefer issuing their papers in the wholesale market and in larger denominations.

“In this regard, we believe investment in technology could help provide a potential solution,” he said.

RAM Holdings Bhd chairman Tan Sri Amirsham Abdul Aziz said the Malaysian bond and sukuk market continues to demonstrate its importance as a key pillar in the capital market, financing the real economy and the infrastructure needs of the country.

The Malaysian Reserve previously reported issuance of local corporate bond surged by RM23.4 billion to RM78.4 billion, but the large issuance of unrated sukuk linked to Urusharta Jamaah Sdn Bhd was valued at RM27.6 billion.

Urusharta Jamaah is a special-purpose vehicle company setupbyMoFtobuyand manage Lembaga Tabung Haji’s underperforming assets.

According to Malaysian Rating Corp Bhd, the largest corporate bond issuers in June were CIMB Group Holdings Bhd (RM2 billion), followed by Hong Leong Financial Group Bhd (RM1.1 billion) and Hong Leong Bank Bhd (RM1 billion).