AXIS Reit ... Oct 2008

AXIS REIT Managers Bhd has lined up more than RM300mil worth of assets to be injected into Axis real estate investment trust (REIT) over the next two years.

The group will be acquiring assets from developers or third parties, as well as tapping into its eight private equity assets. The properties from its private equity fund comprise office, warehouse, industrial or showroom type properties. The first of the asset has been injected into Axis REIT recently at a cost of RM32mil, which was a discount of some 12.5% from the market value.

They have committed to a portfolio of 21 properties of which 18 assets worth RM670mil have been concluded. They have pre-qualified three assets in Johor and the Klang Valley worth a total RM150mil and expect these acquisitions to be completed by year end (2008).

Axis’ target to increase its asset base to RM1bil would be achievable next year (2009).

Besides resorting to bank borrowings, the group would also undertake equity raising exercises to raise capital to fund the acquisitions. The private placement of 50 million new units at RM1.80 each in January 2007 has raised RM88mil. This has given the company the flexibility to pursue more aggressive yield accretive acquisitions without raising its gearing. Axis REIT has been approved to issue another 51.18 million units valued at around RM82mil, which is equivalent to 20% of the approved fund size of 255.9 million units.

REITs in the country are allowed to gear up to 50% of their asset value but Axis REIT is sticking to its target of maintaining a gearing ratio of between 35% and 40%. Its current gearing ratio is about 39%.

The line up of strategic office cum industrial buildings would give a boost to Axis REIT’s income yielding potential.