This article first appeared in The Edge Financial Daily on January 22, 2020 - January 28, 2020

KUALA LUMPUR: Axis Real Estate Investment Trust (Axis REIT) has identified RM140 million worth of new assets to buy this year, continuing its acquisition spree that lifted its assets under management to RM3.09 billion last year. The focus, it said, remains on properties sought by the manufacturing and logistics sectors.

At a press briefing yesterday, Axis REIT head of investments Tan Kee Hong said the logistics market is doing well.

“Port Klang reported a 10.7% increase in activities in their twenty-foot equivalent units (TEUs) that they handled to about 12.3 million TEUs [from January to November 2019].

“We will also be looking at well-located retail warehousing and locations ideal for last-mile distributions,” he said.

The investment trust had announced buying eight properties at over RM325 million in 2019.

From Axis REIT’s net lettable area of 9.5 million sq ft at end-2019, 44% comprised warehouse logistics properties, followed by manufacturing facilities (31%), office or industrial properties (16%), office (5%) and hypermarkets (4%).

Around 1.68 million sq ft is up for lease renewal this year. The management is “very confident” about securing a high renewal rate as seen in 2019 — when 96% of 2.2 million sq ft for renewal was taken up.

Amid an 8% vacancy in its assets under management, Axis REIT posted a 7.9% yield on assets across its portfolio in 2019.

Axis REIT chief executive officer Leong Kit May said the firm recognised a positive 2% increase in average rental rates across its portfolio in 2019.

“It is also a factor of market conditions. I think to sustain a positive 2% rental rate reversion is very much achievable for 2020,” she said.

For the fourth quarter ended Dec 31, 2019 (4QFY19), Axis REIT’s net property income (NPI) fell to RM48.19 million — from RM55.11 million for 4QFY18, when it incurred a lease incentive adjustment of RM6.4 million due to accounting standards to be amortised over some time.

There was a fair value gain of its investment properties of RM101.55 million for 4QFY19, more than double FY18’s RM42.56 million.

Most of the fair value gain came from two properties that it developed — RM15 million from Axis Aerotech Centre in Subang, and an additional RM13 million from the Axis Mega Distribution Centre in Banting, both in Selangor, on top of a previous RM15 million gain.

On its built-to-suit warehouse in Bayan Lepas, Penang for FedEx, Axis REIT expects to receive the certificate of completion and compliance by February, with rental income to kick in from March 1.

For FY19, Axis REIT’s NPI rose 4.78% to RM184.22 million, from RM175.81 million for FY18.

Its distribution per unit (DPU) totalled 9.26 sen in FY19, versus 8.74 sen in FY18. The 4QFY19 DPU was lower on-year at 2.2 sen from 2.45 sen, due to a dilution from a recent unit placement helping it raised RM330 million to pare its debts.

The resulting lower gearing ratio of 29% allows the REIT to conclude the proposed acquisitions in 2019 that will again increase the ratio to 35% — that is, before including changes that will come from proposed acquisitions for this year.

Axis REIT units closed two sen or 1.13% higher at RM1.79 yesterday, with a market capitalisation of RM2.57 billion.