Airport REIT.

Well, I definitely did not see it coming.

In the presentation of Budget 2019 by Finance Minister Lim Guan Eng today, he announced the establishment Airport REIT (Real Estate Investment Trust). If you have been following No Money Lah’s REIT investment articles, you must at least be a little intrigued by this so-called Airport REIT.

Without further ado, let’s dive straight into it!

(1) Background & Aim

Airport REIT is established as a plan under the 3rd strategy of Budget 2019: To Increase the Government’s Revenue.

As announced by the Finance Minister, the establishment of the Airport REIT is to collect at least RM4 billion from the sales of 30% equity of the REIT to qualified financial institutions and investors (fingers crossed that retail investors are included).

Aside from that, the management of Airport REIT would also be able to liquidate its units of shares to fund airport expansion and improvement initiatives, especially airports with overcapacity issues.

Interesting fact: The Airport REIT is, in fact, the first airport-focused REIT in the world! (fact-checked and according to the Budget announcement. Do correct me if I am wrong!)

(2) Revenue Generation

How will Airport REIT generate its income?

According to the announcement, the REIT’s revenue will come mainly from the users/consumer fees collected by Malaysia Airport Holdings Bhd (MAHB).

The details and structure of the fees are not disclosed, though.

(3) Execution Plan

In terms of the final execution, Airport REIT will be established officially after the details regarding the fees-revenue structure and assets under management are determined and finalized.

(4) Impact

The establishment of Airport REIT is hoped to achieve 2 main purposes:

  • To reduce the government’s burden in financing airports’ expansion projects
  • To ensure the role of MAHB as a light asset operator remain intact without the need for huge debt-piling and capital investments.

(5) Further Suggestions

Aside from the 4 main points shared above, the Finance Minister has also suggested for hospitals and rail projects to mirror Airport REIT’s investment and funding structure.

No Money Lah’s verdict:

Personally, I would wait for more details to be announced and I look forward to see the assets that will be included under Airport REIT’s portfolio.

So, what do you think about the introduction of Airport REIT in the market? Would you invest in it if the REIT is open to retail investors like ourselves?

Share with me your thoughts under the comment section below, and I cannot wait to hear from you!

Cheers,

Yi Xuan