Axis REIT inks deal with MAHB
Agreement involves land lease and construction of plant-cum-office building
PETALING JAYA: Axis Real Estate Investment Trust (REIT), via its trustee RHB Trustees Bhd, has inked a sub-lease agreement with Malaysia Airports Holdings Bhd (MAHB) for the proposed land lease and construction of a manufacturing plant-cum-office building at the Sultan Abdul Aziz Shah Airport in Subang, Selangor.
Axis REIT is expected to derive rental income from the proposed development upon commencement of the sub-lease.
According to Axis REIT’s filings with the stock exchange, Upeca Aerotech Sdn Bhd, a unit of Upeca Technologies Sdn Bhd (owned by Senior Plc, listed on the London Stock Exchange) had accepted Axis REIT’s offer letter dated Sept 5, 2017 to, among others, build the said facility-cum-office building with a gross built-up area of about
178,978.6 sq ft.
Upeca will also lease the facility from the trustee upon the completion of the proposed development.
Under the proposed land lease agreement, the 7.02-acre project land, which is vacant and located within the proposed Malaysia International Aerospace Centre Technology Park at the airport, will be leased out to Upeca at an intial sub-lease period of 30 years, with an automatic renewal and/or extension for a further 19 years up to Dec 30, 2066.
The lease consideration has been set at RM65 per sq ft for the entire lease tenure, amounting to about RM19.88mil.
Axis REIT said the project land was not held under an individual title but formed part of the Master Land, which is owned by the Federal Lands Commissioner (FLC).
The FLC is a corporate body established under the Federal Lands Commissioner Act 1957.
By way of a lease agreement dated Oct 25, 2007 between FLC and MAHB, FLC had leased the entire master land to MAHB for 60 years beginning Jan 1, 2007.
On the proposed development of the facility, the initial rental period has been fixed at 20 years, at a monthly rental of RM465,344.36.
This is calculated on a rate of RM2.60 per sq ft (excluding the goods and services tax) multiplied by the gross built-up area provided that construction cost and any other incidental costs will not cross RM46.80mil.
“For every RM300,000 increase in the total project cost exceeding RM46.80mil, all rental rates set out in the Upeca sub-lease deal will increase by RM0.01 per sq ft.
“This offers an estimated initial 7% yield per annum,” Axis REIT noted.
The development cost is estimated at RM53.29mil (excluding the project land) and RM74.16mil (including project land).
Once both parties have agreed on specification details, Axis REIT hopes to ink an agreement to build and lease by Nov 10, 2017.
It will make an announcement once this is formalised to the stock exchange.
Axis REIT’s gearing ratio is expected to rise to 36.87% from 34.78% as at Dec 31, 2016.
This is based on the estimated RM53.29mil total development cost.
“The gearing ratio of 36.87% after the proposed development is below the 50% threshold as permitted under the guidelines on REITs issued by the Securities Commisson.
“Axis REIT may implement a placement exercise to repay its bank financing to reduce its gearing ratio as part of prudent capital management,” Axis REIT said.