Axis Real Estate Investment Trust’s (“Axis-REIT”) trustee, RHB Trustees Berhad, for and on behalf of Axis-REIT, has entered into a sale and purchase agreement, with K-Plastics Industries Sdn Bhd (“K-Plastics”) in relation to the proposed acquisition of a property for a total cash consideration of RM50 million.
The said property, with a lettable area of 246,500 sq. ft., comprises of a single storey factory/warehouse with a double storey office annexed, a single storey refuse collection centre, a guard house and a power substation. These structures sit on a leasehold industrial land, measuring 8.75 acres. The property is strategically located within Kawasan Perindustrian Nilai II, approximately 5.5 kilometres from Bandar Baru Nilai. The warehouse and office are currently being used by K-Plastics for the manufacturing and sale of plastics and packaging products.
Axis-REIT will lease the property back to K-Plastics upon the completion of the acquisition, for a fixed period of 10 years with an option to renew for another 5 years. The rental for the first three years of the lease term will be RM277,096 per month. The monthly rental will increase to RM304,805.60 for the 4th to 6th year and RM335,286.16 for the 7th to 9th year of the lease term. The 10th year rental is set at RM368,814.77 per month.
The appraised value of the property is RM51 million, as evaluated by PPC International Sdn Bhd. The proposed acquisition will be funded by bank financing, which will increase Axis-REIT’s gearing ratio to 38.4% of its audited total assets as at 31 December 2018. The acquisition is expected to contribute to Axis-REIT’s current financial year’s earnings as the acquisition exercise is anticipated to be completed by end 2019.
K-Plastics is part of the Dynapack Asia Group, South East Asia’s largest rigid plastics and packaging producer serving blue-chip multinationals across the region in the oil & gas, F&B, automotive, pharmaceutical, household and personal care industries.
Axis REIT Managers Berhad Chief Executive Officer/Executive Director Leong Kit May says, “The proposed acquisition is in line with Axis-REIT’s growth strategy and plans to not only provide stable income distribution to our unitholders, but also to achieve growth in Axis-REIT’s net asset value (NAV) per unit. I am confident this new acquisition fits in soundly alongside the rest of our properties in our portfolio. The acquisition is expected to not only help lay an even stronger foundation for Axis-REIT, but also benefit us in the long-term as a result of economies of scale.”