#Update* Axis REIT to add RM450m worth of properties

KUALA LUMPUR: Axis Real Estate Investment Trust (Axis REIT) has an acquisition pipeline of close to RM450 million worth of properties in 2012 and 2013.

This will allow the REIT to expand its total asset base of RM1.43 billion as at June 30. Stewart LaBrooy, CEO of Axis REIT Managers Bhd, the manager of Axis REIT, said the acquisition pipeline for 2012 and 2013 comprises nine logistics, industrial and commercial properties in Penang, Selangor, Negri Sembilan and Johor.

“Johor’s industrial properties offer good prospects. Our acquisitions usually have a gestation period of two years,” LaBrooy told reporters yesterday. Of the nine properties, he said Axis REIT has signed sale and purchase agreements for four, with a combined value of RM219.5 million.

The remaining five potential deals, with a collective worth of RM227.78 million, are still being negotiated, he said, adding that the five comprise three properties in Johor and two in Selangor.

LaBrooy: Johor's industrial properties offer good prospects.

LaBrooy said the properties in Johor include two within the Port of Tanjung Pelepas. In Selangor, the REIT intends to buy a technology centre in Petaling Jaya and a warehouse in Shah Alam.

LaBrooy said Axis REIT, which already owns 29 properties across Malaysia, plans to raise RM250 million to RM270 million from its proposed placement of up to 90.76 million new units.

This translates into a unit price of between RM2.75 and RM2.94. The exercise is Axis REIT’s fifth unit placement since its listing in 2005 when the property trust had six properties worth RM300 million.

Proceeds from the placement will be used to reduce the company’s debt and acquire new properties. The placement proceeds are expected to reduce Axis REIT’s gearing level to about 24%, he said.

The company’s gearing stood at 32% as at June 30 this year, derived from dividing the firm’s total assets of RM1.43 billion by its borrowings of RM461.47 million, its latest balance sheet as at June 30 shows. Axis REIT is also raising funds via a RM300 million Islamic bond or sukuk scheme.

The company has issued RM110 million worth of 10-year medium term notes (MTN). LaBrooy said the proceeds will be mainly used to refinance the property trust’s existing debt obligations. He said the sukuk will offer flexibility to Axis REIT based on its financing needs.

This essentially means the property trust will be able issue short-term commercial paper to finance its immediate capital requirements or longer term MTNs to finance new acquisitions.

“It provides us with the ability to lock in a fixed interest rate on longer-tenure debt beyond five years. We plan to restructure our debt with the sukuk,” LaBrooy said.

According to Axis REIT’s filings with Bursa Malaysia, the Islamic bond programme raises the property trust’s exposure to long-term financing to 60%.

Axis REIT units rose six sen or 2% to close at RM2.90 yesterday for a market capitalisation of RM1.32 billion. The stock has gained 11% this year, outperforming the FBM KLCI’s 7% advance. Axis REIT’s latest reported net assets per unit stood at RM2.11.

This article appeared in The Edge Financial Daily on July 25, 2012.