KUALA LUMPUR (July 26): Axis Real Estate Investment Trust’s (Axis REIT) net property income (NPI) fell 7.58% to RM58.43 million in the second quarter ended June 30, 2023, from RM63.23 million a year earlier, due to lower property income, higher expenses and lower gains on financial liabilities.

Revenue for the quarter fell 5.6% to RM68.45 million from RM72.52 million previously, according to the commercial property REIT's filing with Bursa Malaysia.

The REIT said the realised net income from its operations was RM33.74 million after deducting total expenditure of RM34.71 million, of which RM10.28 million was attributable to property expenses and RM24.43 million to non-property expenses.

Axis REIT declared a second interim income distribution of 2.05 sen per unit, which will be paid on Aug 30.

“The second quarter was undoubtedly a challenging period for us as we addressed issues related to the shortfall in contribution from Axis Steel Centre @ SiLC," said Axis REIT Managers Bhd chief executive officer Leong Kit May.

"Some challenges are undeniably beyond our control but on our part, as we move forward, we will continue with our proactive leasing strategy and our strategy of pursuing high-quality accretive properties with strong recurring rental income to optimise our earnings," she said in a statement.

"We are also pleased to reveal that of the 1.57 million sq ft of space expiring in 2023, 78% has been renewed from 64% as at March 2023. That is an additional 220,000 sq ft of space renewed,” she added.

For the six months ended June 30, 2023, Axis REIT recorded a total revenue of RM138.63 million, compared with RM139.21 million in the previous corresponding period.

During the period, a total of RM129.13 million was incurred for major capital expenditure for enhancement of properties of Axis REIT and expenses for its ongoing proposed developments.

Axis REIT Managers is optimistic that in view of the satisfactory performance of Axis REIT’s existing property portfolio and its growth strategy to actively pursue quality investments, it will be able to maintain its current performance for the financial year ending Dec 31.

Meanwhile, Axis REIT said the development of BRDC 2 has obtained the Certificate of Practical Completion on June 26 and expects to obtain the Certificate of Compliance and Completion (CCC) in August.

"With the CCC in hand, Axis REIT will be able to hand over BRDC 2 to the e-commerce operator, SPX Xpress (Malaysia) Sdn Bhd (formerly known as Shopee Express Malaysia Sdn). The property has been fully tenanted by the latter for a period of 15 years," it said.

The development of BRDC 2 involves the construction of a single storey warehouse and ancillary buildings, enhancement of an existing 3-storey office block with a total gross built-up area of approximately 620,096 sq ft, located on a 20-acre freehold land in Bukit Raja, Klang.

"Coupled with the new tenancy at Shah Alam DC 3 by early August 2023, the positive effect from this on-time completion of BRDC 2 will snowball to improve the portfolio occupancy rate by three percentage points to 92%. The higher occupancy rate will contribute positively to Axis REIT’s income in the coming quarters," said the trust.

Axis REIT units closed one sen or 0.54% lower at RM1.83, valuing the REIT at RM3.19 billion.