Axis Real Estate Investment Trust (Axis-REIT) has completed the acquisition of a leasehold property within the Bukit Raja industrial zone in Klang, Selangor for RM37 million.
The property comprises 5.6-acre land with two blocks of detached factory and a double-storey office building. It was acquired from Lion Steelworks Sdn Bhd, a unit of Lion Corp Bhd.
The net lettable area is 149,605 sq ft. There is a 99-year lease on the property, expiring on 22 October 2088.
In a filing with Bursa Malaysia, Axis REIT Managers Bhd (ARMB), the Manager of Axis-REIT said the acquisition of the property had been completed on Tuesday in accordance with the terms and conditions of the Sale and Purchase Agreement dated 24 December 2019.
The acquisition is in line with the fund's investment objectives and to achieve growth in the net asset value (NAV) per unit of Axis-REIT, by acquiring high quality, earnings accretive properties with strong recurring rental income.
ARMB said last December that the property will be accretive to Axis-REIT’s distributable income and further strengthens it's portfolio of industrial properties.
It is expected to contribute positively to the earnings of the fund for the financial year ending 31 December 2020.
The occupancy rate of the property, which has an approximate age of 33 years is 100 per cent as at 24 December 2019.
Lion Steelworks is using the site to manufacture and distribute office equipment, security equipment and steel related products.
Now that the acquisition is completed, Lion Steelworks will lease the property and it shall pay advance rental to Axis-REIT for the first 24 months of the initial term, amounting to RM5.4 million. This is around RM225,000 monthly rental to Axis REIT.
The tenancy is for a fixed period of two years and five months from the tenancy agreement’s commencement date, with an option to renew for another two terms of one year each.
As of June 2019, the property’s net book value stood at RM2.6 million.
ARMB on acquisition trail this year
Axis REIT is Malaysia’s first real estate investment trust.
It was listed on Bursa Securities on August 3,2005 and has a diverse portfolio of 48 properties located in the Klang Valley, Johor, Penang, Pahang, Negri Sembilan and Kedah.
ARMB chief executive officer Leong Kit May said at a media briefing in January that the board is actively scouting around for properties.
She said ARMB aims to acquire RM140 million worth of properties to be added into the portfolio.
This includes Grade A logistics facilities and manufacturing facilities with long leases from tenants; retail warehousing for last-mile distribution; as well as office, business parks and industrial assets with potential for future enhancements.
ARMB had been focusing on getting industrial-type assets in the manufacturing and warehousing sector.
Leong said the company is bullish on industrial properties like warehousing, and foresee higher demand following the growth of e-commerce.
E-commerce growth means there will be higher requirement for warehousing and logistics space, she said.
"The logistics market is doing well. Port Klang reported a 10.7 per cent increase in activities in their twenty-foot equivalent units (TEUs) that they handled to about 12.3 million TEUs. We will also be looking at well-located retail warehousing and locations ideal for last-mile distributions,” he said.
Last month, ARMB acquired a property in the industrial area of Nilai, Negri Sembilan from K-Plastics Industries Sdn Bhd for RM50 million in cash.
The leasehold land with a gross floor area of 246,500 sq ft houses a single-storey factory with a double-storey office annexed. K-Plastics is using it to manufacture plastics and packaging products.
Analysts are saying the purchase of the Nilai property is an "attractive investment".
The tenancy has been fixed for a period of 10 years from the commencement date of the lease agreement with an option to renew for another five years.
The rental income for the property is RM277,096 per month f
rom the first year to the third year. From the fourth year onward until the sixth year, the rental will be adjusted to RM304,805.60 a month. It will be RM335,286.16 per month from the seventh year to the ninth year.
In the tenth year of the lease term, the rental will be RM368,814.77 per month.
As of December 2019, the property’s net book value stood at RM33.7 million.