Axis REIT to strengthen its balance sheet

PETALING JAYA: Axis REIT Managers Bhd (ARMB), the manager of Malaysia’s first listed real estate investment trust Axis Real Estate Investment Trust (Axis REIT), plans to strengthen its balance sheet by buying more assets and refurbishing its existing ones.

According to chief executive officer Datuk Stewart LaBrooy, the company was in a consolidation mode last year when it took the assets off the market, and started to refurbish them.

“People will not pay a premium for an old building, so we take the buildings off the market, completely strip them down, build them up from scratch again and put them back on the market.

“So effectively it’s a lot cheaper to refurbish an old building than to buy a new one today because the costs are much lower and the returns are much higher,” he told reporters after the company’s annual general meeting (AGM) yesterday.

He cited the refurbishment of Axis Business Campus in Petaling Jaya as an example, adding that he is optimistic it will rake in double-digit returns.

At the AGM, unitholders approved a placement exercise involving an issue of 86.04 million units, representing 18.65% of the existing fund size of 461.24 million units. This is expected to raise approximately RM275 million.

The unitholders also passed a resolution to increase the fund size to a maximum of 547.28 million units from its current size of 461.24 million units. The net asset value per unit will increase from RM2.23 to RM2.38 after the new units are allotted and issued.

This is in line with ARMB’s capital management and growth strategy of reducing gearing once it exceeds 35% of the total assets of the fund, and will provide Axis REIT with sufficient headroom to make future cash acquisitions. Axis REIT’s current gearing stands at 33%.

It was previously reported that Axis REIT will spend around RM380 million in 2014 to acquire several new assets. LaBrooy said the company is currently in the process of negotiating several terms with vendors.


This article first appeared in The Edge Financial Daily, on Aprill 30, 2014.