AXIS REIT ... Aug09

Axis REIT, ich is back on the acquisition trail, is mulling another round or two of unit placements in 2010 to lure investors that may include Middle Eastern funds.

The unit-placement exercise was consistent with the REIT’s efforts to reduce gearing and fund the acquisition of properties. It would be one (placement) this year (2009), followed by one or two next year, but it depends on the market condition.

The REIT had placed out new units in January 2008 and had proposed another placement last October (2008) but that did not materialise due to the global financial crisis.

Most recently, it proposed to undertake the placement of up to 51.18 million new units in the second half of 2009 and local syariah-compliant funds were expected to participate in this round of placement. It will ask for shareholders’ approval this month (Aug 2009) for this placement.

Axis REIT, which was reclassified as an Islamic REIT late last year (2008), could get investors from the Middle East next year despite the exit of some US-based funds from the REIT amid the global financial crisis. These (Middle Eastern) funds want to take significant positions.

Currently, Axis REIT’s foreign holdings stand at 10.7%, far from the 70% threshold allowed by the country’s REIT regulations.

The placement of up to 51.18 million new units is estimated to raise RM79 million based on an indicative price of RM1.55 per unit. Axis REIT closed at RM1.71 last Friday. Its net asset value (NAV) stood at RM1.76 per unit. The REIT distributed eight sen per unit for the first half of its financial year ending Dec 31, 2009.

The property trust’s debt-to-assets ratio is already close to the 50% limit under current regulations, therefore, it may try to sell the maximum number of new units to investors to reduce gearing.

As at June 30, Axis REIT had 19 properties under its stable with assets under management worth about RM728 million and a fund size of 255.9 million units of RM1 each. It recently announced plans to purchase Axis Steel Centre in North Port, Klang for RM65 million and is already in talks for another four buildings worth RM220 million.

The REIT would focus on acquiring local assets for now as they presented the best value in the region. He noted that its most recent acquisition had a net yield of 9.7%.

Related:-
AXIS REIT ... July 09
AXIS Reit ... Oct 2008