Axis-REIT to expand portfolio to RM2b in 2H14

LaBrooy said the company does not expect the acquisitions to affect its earnings this year because when it sold Axis Plaza, it was  careful how it maintained distribution to its shareholders.

KUALA LUMPUR: Axis Real Estate Investment Trust Managers Bhd (Axis-REIT) plans to buy five assets in the second half of this year (2H14), which would bump up its assets under management (AUM) to RM2.02 billion, up 27.36% from the RM1.59 billion it recorded in 1H14.

With the acquisitions, its total assets would jump from 30 to 35 by year-end.

After announcing on Monday that it plans to buy three assets in Shah Alam, Selangor, for RM280.5 million, the REIT now plans to acquire two more industrial facilities, one each in Johor and Prai (Penang) at RM153.5 million and RM38 million respectively.

Axis-REIT had entered into two letters of offer for the purchase of these two assets and is currently doing due diligence on the properties, its chief executive officer Datuk Stewart LaBrooy told reporters yesterday after a briefing on the trust’s second-quarter results.

If all five acquisitions go through, the price tag of the total assets acquired by Axis-REIT in 2014 will hit RM472 million.

“We are going to buy on leverage first and retire our debts with placement,” LaBrooy said, adding that the company is expected to raise approximately RM280 million in the placement exercise, which will involve 83.6 million units.

He said the placement should be in early October, in conjunction with the expected completion of the new acquisitions.

By then, the REIT should have a 34% gearing post-placement, compared with 31.7% as at June 30.

LaBrooy said it did not expect the acquisitions to affect its earnings this year because, “when we sold Axis Plaza, we were very careful on how we were going to maintain our distribution to our shareholders”.

On March 25, Axis-REIT completed the disposal of Axis Plaza to Collective Developers Sdn Bhd for RM34 million, which resulted in a total realised gain on disposal of RM11 million.

“We expect a soft second and third quarter as we try to re-gear the portfolio. We currently have 8% of our portfolio vacant at the moment,” he said, adding that the vacancy would garner an income of RM20 million when fully leased, translating to a distribution per unit (DPU) of 4.6 sen.

“Once we have leased them out, we can expect a strong upside, maybe for the first half of next year,” he said, adding that the REIT is also eyeing to acquire assets in Johor, particularly in Senai, as there are brownfields (land previously used for industrial or commercial purposes) there that are ripe for redevelopment.

On another note, LaBrooy said Axis-REIT has registered with the Royal Malaysian Customs and is ready to be fully goods and services tax (GST)-compliant.

“We are still discussing with the Customs to clear up certain grey areas. This will be taken care of in the next nine months.”

Meanwhile, acting chief operating officer Leong Kit May said the implementation of the GST would have minimal impact on the industry in terms of new acquisitions as the new system would allow it to claim back tax paid within 14 days after payment is made.

“The REIT has been paying service tax on some consultancies and management fees that the trust incurred. Once the GST is in place, whatever 6% tax that we have paid can be claimed back as input tax [and this will go] back to the system,” she said.

The REIT has previously announced a RM21.89 million net profit for its second quarter ended June 30, down 10.22% from RM24.38 million a year ago. Revenue for the quarter was flat at RM35.09 million, compared with RM35.48 million in 2013.

It has also announced a second interim income distribution of 5.3 sen per unit for the second quarter of 2014, to be paid on Sept 5.

This article first appeared in The Edge Financial Daily, on August 6, 2014.