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Saturday January 24, 2009

Axis REIT considers Islamic financing

AXIS Real Estate Investment Trust (REIT) is looking at various options to raise capital, including Islamic financing, to buy more properties.

Axis REIT Managers Bhd chief executive officer and executive director Stewart LaBrooy says it was timely that Axis REIT became syariah-compliant last December as it can now tap into Islamic funding.

“Being syariah-compliant means we can sell to both Islamic and conventional funds. There are a lot of mutual funds that have Islamic funds and require Islamic yield-based products,” he said at a briefing on Axis REIT’s fourth-quarter performance yesterday.

While there is much interest in the stock, share placement at the current price level is unattractive to the company.

“There’s a bit of appetite for our shares but we’re unwilling to give it at the current price. That’s why some funds are buying in the open market,” LaBrooy says, adding that the gearing level at 32% can be reduced via new equities.

He says the cost of financing has declined, especially after Bank Negara’s recent 75-basis points cut in overnight policy rate.

While acquisition plans are on hold until further capital can be raised, Axis REIT is still proceeding with refurbishment activities at three of its properties – Menara Axis, Nestle House and Crystal Plaza – which will cost a total of RM8mil.

LaBrooy says refurbishments and upgrading of its commercial properties will attract tenants and potential clients, hence sustaining valuations.

“We can take the opportunity to add value to our properties during the downturn because we can get the best prices,” he says. Axis REIT currently owns 19 properties.

This year, despite the challenging economic conditions, it intends to maintain the level of its distribution per unit (DPU).

Axis REIT is distributing 7.87 sen per unit for the second-half year ended Dec 31, and coupled with the 7.4 sen paid in the first six months ended June 30, brings the total DPU for FY08 to 15.27 sen, or 12% higher than the previous year’s 13.63 sen.

“If this year we can maintain where we are, it’ll be a good performance for us,” LaBrooy says.

On Thursday, it told Bursa Malaysia that realised income before taxation in the fourth quarter rose almost 33% to RM10.5mil compared with RM7.9mil in the previous corresponding period.

The figure was 6% higher versus third quarter’s RM9.9mil. For the full year, realised income before taxation increased by 39% to RM39mil from RM28mil in 2007.

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