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Wednesday, August 6, 2008

Axis REIT in talks to buy RM566m properties

AXIS Real Estate Investment Trust (Axis REIT) is in talks to buy properties worth RM566 million as it seeks to boost the size of its portfolio.

Out of that amount, it hopes to complete deals worth RM180 million by the middle of next year. By that time, its total property portfolio would rise to some RM844 million.

The trust currently has 20 buildings worth RM663.89 million.

"The current slowdown gives us an opportunity to add assets at attractive prices," its chief executive officer Stewart LaBrooy told a press conference yesterday.

RECLASSIFIED: La Brooy (left) and Lim talk about purchase plans

It will partly fund the purchases with money raised from the proposed sale of 120 million new units, which at current prices could raise some RM193.2 million.

Part of the unit sales will also be used to settle its debt.

"Our gearing is about 31 per cent now. We have two deals which are yet to be completed that will increase gearing to 35 per cent, and could complete the acquisition of two other buildings that will further increase our gearing to 41 per cent," Axis REIT Managers Bhd chief financial officer Lim Yoon Peng said.

However, a softer market may make it difficult to raise funds. That is why Axis REIT decided to reclassify itself as a syariah-compliant REIT, from conventional.

The reclassification will enable it to widen its investor base to include locally-based syariah funds as well as develop investor interest from foreign syariah funds.

It could also attract investments from pilgrim fund Lembaga Tabung Haji and the Armed Forces Fund.

This would make it the first office industrial REIT in the world to comply with syariah principles, LaBrooy said.

It has appointed Abdul Raman Saad & Associates to conduct due diligence and help it comply with the necessary rules. It hopes to be syariah-compliant by the year-end.

In the first half ended June 30 2008, Axis REIT's property income rose 37.6 per cent to RM30.1 million (from 17 properties) compared with RM21.87 million (from nine properties) in the previous corresponding period.

Income after tax was RM18.62 million, up 47.3 per cent from RM12.64 million.

LaBrooy also said that he hopes the government will announce the removal of the withholding tax for individuals investing in REITs in the coming budget.

Malaysia imposes a 15 per cent withholding tax and 26 per cent tax on foreign investors and 20 per cent on institutional investors. In Singapore, there is no withholding tax on individuals and only 10 per cent tax on other investors.

By New Straits Times (by Vasantha Ganesan)

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