Axis REIT seeks to boost coffers

AXIS Real Estate Investment Trust (Axis REIT) will raise more money from shareholders to boost its property portfolio value by two thirds to some RM1 billion by the end of 2008.

The property trust will place out more new Axis REIT units which will essentially lower its gearing, a measure of its borrowings against its total assets.

Hence, Malaysia's first listed REIT will have more room to secure loans for future real estate acquisitions.

"It is not a question of (portfolio) size, it is a question of quality," Axis REIT Managers Bhd executive director Stewart LaBrooy told Business Times in Petaling Jaya recently.

LaBrooy did not specify the number of properties Axis REIT plans to buy or their respective locations.

Although an overseas foray by Axis REIT is also on the cards, it is most likely to involve acquisition of securities in foreign property trusts.

Direct physical property buys abroad are, however, less favoured due to more legal complexities. "There is still a lot more to do in Malaysia," LaBrooy said, without indicating when its initial venture abroad will take place.

Axis REIT's gearing, derived from dividing its borrowings by its total assets, indicates to what extent the property trust relies on loans to grow its business.

Since its listing on Bursa Malaysia's main board in August 2005, Axis REIT has bought 16 local commercial and industrial assets worth an estimated RM600 million to date, said LaBrooy.

It initially had, upon listing, five entities collectively valued at about RM300 million. These include the Menara Axis, and Crystal Plaza, both located beside the Asia Jaya LRT station in Petaling Jaya.

New additions this year include the Giant Hypermarket in Sungai Petani, Kedah, and BMW Asia Technology Centre at Port of Tanjung Pelepas, Johor.

Axis REIT chief financial officer Lim Yoon Peng had said in July that due to its latest property purchases, its gearing was expected to almost double to 42.4 per cent.

The figure was, however, anticipated to drop to 23 per cent due to a planned private placement of 50 million new Axis REIT units, its first new security issue since its flotation.

Malaysia's Securities Commission has capped local REIT's gearing at 50 per cent. This means that property trusts could only borrow up to half of their total assets.

The 50 million new units could potentially raise some RM87 million, assuming they were priced at RM1.74 each, according Axis REIT's filings to the bourse.

Axis REIT will seek unitholders' consent for the exercise on December 7. Proceeds from the sale will be used to reduce debt, and fund future real estate acquisitions.

"Axis REIT is the most aggressive acquirer of assets among Malaysian REITs," research firm BNP Paribas said in a note.

Axis REIT's income before tax in the nine months to September 2007 rose 78 per cent to RM50 million, partly due to an upward revision in the fair value of its properties. Revenue surged 12 per cent to RM33.8 million.

Its securities, which were untraded yesterday, traded at RM1.89 last Friday, a one sen or 0.5 per cent drop from the previous day's closing.

By The EDGE MALAYSIA (By Chong Jin Hun)