Axis REIT to ride out slowdown

AXIS Real Estate Investment Trust (Axis REIT) (5106) expects to continue paying out attractive dividends to its unitholders despite the slowing global economy and the recent dismal performance of the local stock market.

Axis REIT, which now has a portfolio of 19 properties, does not see a cause for concern as only 20 per cent of its tenancy agreements are up for renewal next year.

Chief executive officer Stewart LaBrooy in fact feels that when businesses feel the pinch of the slowing economy, they tend to cut costs by relocating their offices from Grade A buildings into those offering more attractive rates.

"Based on the previous recession, when things get bad, companies trim their budgets and move to industrial parks .... (and) these are the types of properties that Axis REIT owns," he said.
"Our rentals have always been below the market price. We are so, (because we are) not located in town centres and want to be competitive. Our strategy is to keep the tenants for the long term," LaBrooy said, adding that buildings owned by Axis REIT are categorised as Grade A minus.

"In the location we are based at, we offer better yield even with our lower rents," he told Business Times in an interview recently.

Axis REIT, according to him, has managed to generate a gross yield of 11.6 per cent and has always distributed 99.9 per cent of its net income.

On whether Axis REIT will continue to acquire properties in the current economic scenario, Labrooy said: "We will still grow (our assets) despite the market.

"One should not buy when the market is greedy, but when the market runs scared," he said. In fact, he said, in the current market, there is more properties for sale than previously.

"There are many building owners who want to sell and lease back as they want to monetise their assets for working capital," he said.

"We will take the opportunity when we see it," he said.

Axis REIT will continue to look for commercial properties like offices, warehouses and industrial buildings in the Klang Valley and Johor to expand its asset base.

Currently, Axis REIT has completed the purchase of four and is completing a fifth property that will bring the value of its portfolio to an estimated RM696 million by December 31 2008.

Meanwhile, Axis REIT, which recently applied to be registered as a syariah-compliant counter, may look at debt financing though the issuance of sukuk paper as part of its future strategy.

"We are not looking at it ... maybe at the end of 2009 or in 2010," he said.

By Business Times (by Vasantha Ganesan)