Axis REIT to revamp ‘icon’ after losing Nestle as tenant

PETALING JAYA: Axis Real Estate Investment Trust (REIT) will soon lose Nestle (M) Bhd as an anchor tenant in one of its properties but it is in discussions with prospective tenants.

Before it leases out the office space, Axis REIT will renovate the property, long known as Nestle House, in Petaling Jaya to draw new tenants.

Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said the group would embark on a major refurbishment called “The remaking of an Icon”.

“We will be spending RM7mil to renovate and reposition the building as a 21st century icon. Renovations are targeted to be co-meted by January next year. We expect the building to be ready by 2010,” he told StarBiz.

He said changes to the exterior, interior and mechanical and electrical systems were planned.

To a question, LaBrooy said: “Nestle says that the building is too small to cater for its future needs.”

Nestle is said to be moving out from its headquarters, Nestle House, in October to Surian Tower in Mutiara Damansara.

LaBrooy said Axis REIT purchased Nestle House for its iconic status and location and was one of its best buys for the trust.

“It has one of the best locations in Petaling Jaya and our acquisition price of RM375 per sq ft was a bargain by all counts,” he said, adding that to date, the building had generated a lot of interest in the market.

“We are actively speaking to many potential tenants. The impact to the trust will be a building with better returns in the long term once the makeover is completed,” LaBrooy said.

While he remained unperturbed by Nestle’s moving, he did not disclose if the move would affect the trust.

“Our strength lies in our diverse portfolio of 19 properties as it spreads risk over a much larger base,” he said.

LaBrooy said the company was always looking for high-yielding acquisitions that would benefit the trust. “We have a substantial pipeline of properties in place,” he added.

Axis REIT’s occupancy as at March 31, rose to 95.4%, up from 95.2% as of Dec 31, 2008, with a few vacancies in its office properties.

LaBrooy said the company had positive rent reversions in the first quarter of this year. He said the rates were extremely competitive vis-a-vis the current markets and well below the rates charged in KL.

“As a result, we are getting enquiries from companies wanting to move out of KL to Petaling Jaya to reduce costs or avoid traffic woes,” he added.

For the first quarter ended March 31, Axis REIT posted a net profit of RM10.4mil, up 15.4% from RM9mil in the previous corresponding period. Revenue for the period rose to RM17.3mil from RM14.5mil a year ago.

It reported earnings per share of 4.07 sen versus 3.76 sen a year ago.

By The Star (by Leong Hung Yee)