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Wednesday, December 3, 2008

Axis REIT plans expansion

PETALING JAYA: Axis REIT (real estate investment trust) is eyeing more office and industrial properties in the Klang Valley and Johor next year to expand its existing portfolio of 19 properties.

Malaysia’s first listed REIT expects rental rates to hold steady in 2009 due to tight supply, although it also sees a slower growth rate, says Axis REIT Managers Bhd chief executive officer and executive director Stewart LaBrooy.

Stewart LaBrooy

It was a matter of assessing the right time and opportunities before Axis REIT embarked on its expansion plans, he said, without disclosing the number of properties and their locations.

“Axis REIT has grown from five to 19 properties in the portfolio in three short years,” he told StarBiz in an e-mail interview. “We took the decision early on to grow our fund through acquisitions funded by debt and equity.”

According to LaBrooy, Axis REIT has always held the view that cross-border investments carry much higher risks for a property trust, thus it does not plan to acquire overseas properties for now.

On the outlook for rentals, LaBrooy said Malaysia was fortunately not part of a property bubble that had become evident in Singapore, Vietnam and Dubai, and that the domestic market would be stable.

“We foresee the rentals for industrial and office properties in Malaysia holding steady for 2009 due to the tight supply currently,” he said, adding that much of the industrial and office properties coming onstream in 2009 had been pre-leased.

“For industrial properties, we have seen rental growth of 10% upon renewals in 2007 and 2008, whereas in the office sector, rentals have grown by 15% to 20% over the past 12 months,” he said.

Currently, Axis REIT’s monthly rentals range from RM1 per sq ft for industrial space to RM4 per sq ft for top-end commercial space.

However, Axis REIT expects a slower rental growth rate in 2009 due to the current downbeat economic climate.

Nevertheless, LaBrooy expects Malaysian REITs (M-REITs) to offer investors the opportunity to earn 11% to 13% returns.

“Investors who are taking the opportunity now will be buying prime assets at a discount where the real market prices haven’t moved,” he added.

Labrooy acknowledged that M-REITs had taken a beating, in tandem with the selldown in global markets, including Malaysia’s.

“Despite this, M-REITs are still posting positive earnings growth and with their conservative leverage and attractive returns, they still have a compelling investment story,” he said.

Axis REIT posted its best results since its listing in the third quarter, reporting an earnings per unit of 3.85 sen, compared with 3.75 sen in the preceding quarter.

For the nine-month period, it made 11.36 sen per unit, the highest in the industry.

By The Star (by Rachael Kam)

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