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Axis REIT looking to acquire RM140m worth of new assets this year

KUALA LUMPUR (Jan 21): Axis Real Estate Investment Trust (Axis REIT) has identified RM140 million worth of new assets to buy this year, continuing its acquisition spree that lifted its asset under management to over RM3 billion in 2019.

The focus remains on properties sought by the manufacturing and logistics sector, the management guided during its press briefing today, noting the persistent demand for such properties presently.

Its head of investments Tan Kee Hong said that at present, the logistics market was doing well.

"I think Port Klang has reported an increase of 10.7% in activities in terms of their twenty-foot equivalent units (TEUs) that they handled to about 12.3 million TEUs [in January-November 2019].

"And we will be looking at well-located retail warehousing and locations that are ideal for last-mile distributions," he said.

In 2019, Axis REIT announced acquisitions of eight properties valued at over RM300 million — including a property in Bukit Raja, Klang, worth RM37 million that it announced on Dec 24, 2019.

Based on its net lettable area, around 44% of the group's assets comprise warehouse logistics properties, followed by manufacturing facilities (31%), office/industrial properties (16%), office (5%) and hypermarkets (4%).

With 1.68 million sq ft or 17.7% of Axis REIT's space under management up for lease renewal this year, the management is "very confident" of getting high renewal rate as seen in 2019 — where 96% out of 2.2 million sq ft up for renewal was taken up.

Amid the 8% vacancy in its assets under management, Axis REIT managed to post a 7.9% yield on assets across its portfolio in 2019.

Axis REIT chief executive officer Leong Kit May said the firm recognised a positive 2% increase in average rental rates across the portfolio in 2019.

"It is also a factor of market conditions. I think to sustain a positive 2% rental rate reversion is very much achievable for 2020," she said.

Axis REIT posted a strong fourth quarter ended Dec 31, 2019 (4QFY19), where net property and investment income rose to RM148.68 million from RM87.85 million in the year-ago corresponding period, largely thanks to fair value gain of its investment properties of RM101.55 million. This compares with RM42.56 million in the whole of 2018.

The bulk of the fair value gains came from two properties that it developed — RM15 million from Axis Aerotech Centre in Subang, and an additional RM13 million from the Axis Mega Distribution Centre in Banting Klang on top of the RM15 million gain recorded previously.

On its built-to-suit warehouse in Bayan Lepas, Penang, for client FedEx, Axis REIT expects the certificate of completion and compliance to be received by February, with rental income to kick in from March 1.

For the full-FY19, Axis REIT net property and investment income rose 27.62%year-on-year to RM283.93 million from RM222.47 million. Trust income rose 5.89% to RM216.41 million, from RM204.36 million.

Distribution per unit (DPU) totalled 9.26 sen in FY19, versus 8.74 sen in FY18. The DPU in the 4QFY19 was lower on-year at 2.2 sen from 2.45 sen, due to dilution from the recent unit placement that helped it raise RM330 million to pare down debt.

The resulting lower gearing ratio of 29% allows the REIT to conclude the proposed acquisitions in 2019 that will again increase the ratio to 35% — that is, before including the changes that will come from proposed acquisitions for this year.

On another development, Axis REIT has submitted a letter of offer for its maiden property in 144,000 sq ft in Kota Kinabalu Industrial Park in Sabah for RM60 million.

At noon market break, Axis REIT units were up 2 sen or 1.13% at RM1.79, giving it a market capitalisation of RM2.57 billion.

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