KUALA LUMPUR (July 15):  Axis Real Estate Investment Trust (REIT) is leasing 2.4975 acres of industrial land at Batu Kawan Industrial Park, Penang from Penang Development Corp (PDC) and developing it into a single-storey warehouse facility with a built-up area of 44,000 sq ft for use by Federal Express Services (M) Sdn Bhd (FedEx).

In a filing with Bursa Malaysia today, Axis REIT said its manager Axis REIT Managers Bhd had today entered into a lease agreement with PDC for the proposed land lease, as well as a build and lease arrangement with FedEx for the proposed development and the proposed 10-year sub-lease.

Under the proposed land lease, PDC will lease the land at RM36 per sq ft or a total of RM3.92 million for a period of 30 years.

Axis REIT, meanwhile, will charge a monthly rental of RM132,000 or RM3 per sq ft for the premises for the first seven years and for years eight to 10, the monthly rental will be RM145,200 or RM3.30 per sq ft.

Axis REIT also said the development cost of the warehouse facility is estimated at RM11.85 million.

Axis REIT said arising from the proposals, the REIT is expected to derive rental income from the proposed sub-lease upon completion of the proposed development.

"The initial net yield for the first seven years of the sub-lease of the premises is estimated to be 9%, with rental step-up in later years.

"As such, the proposals are expected to improve the gross revenue and net property income of Axis-REIT and correspondingly, the income distribution to the unitholders, in addition to enlarging the size of
assets under management of Axis-REIT," it added.

Barring any unforeseen circumstances, the proposed development is expected to be completed by Dec 31.

At 3.27pm, Axis REIT units were up 4 sen or 2.31% at RM1.77 today, with 139,700 shares traded, bringing a market capitalisation of RM2.18 billion.

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