Malaysia's Axis to list world's largest sharia REIT

KUALA LUMPUR, March 11 (Reuters) – Malaysia’s Axis REIT Management Sdn Bhd is set to list the world’s largest sharia real estate investment trust valued at over 3 billion ringgit ($988 million) to meet demand for new Islamic finance products, three sources with direct knowledge of the deal said on Friday.

Axis REIT Management, which also manages Axis REIT , is conducting preliminary book-building for the Axis Global Industrial REIT, said the sources who asked not to be identified as they are not authorised to speak to the media.

The REIT, which is expected to be listed in the second quarter of this year, would manage 33 properties located in three Asian countries including Australia and Hong Kong.

“Axis Global’s mandate is to invest in high-quality industrial and business parks outside Malaysia,” one source told Reuters.

“The size of the IPO will be larger than the listing of Capitamalls Malaysia Trust, which raised 852 million ringgit.”

Axis REIT’s chief executive officer Stewart LaBrooy declined to comment when contacted by Reuters.

The upcoming REIT’s investment mandate would be similar to Axis REIT’s existing mandate, which is to invest in logistics-related properties such as warehouses and showrooms.

The investment banking arm of CIMB Group is the principal adviser for the initial public offering and Standard Chartered is also involved, one of the sources said.

The source said some of the REIT’s properties were bought and leased-back to Australia’s Goodman Group , which is looking to buy the ING Industrial Fund .

The Goodman Group will remain property managers of those assets, he added.

REITs are a relatively new asset class in emerging Asia, although they are well-established in mature markets such as Singapore and Australia. Singapore REITs were badly hit by the 2008 financial crisis, but the market has since recovered.

REITs have regained some popularity in Malaysia, which saw a number of large-cap listings last year including Sunway REIT and the Capitamalls Malaysia Trust , which raised $459 million and $281 million respectively.

A property analyst who tracks Axis said the REIT would likely carry between 30-36 percent of debt, which implied a net asset value close to two billion ringgit.

“Axis generally places out more units when it hits the 35 percent gearing mark, that is, as a function of total assets,” she said.

A handful of Islamic REITs have been launched recently, including Emirates Tarian’s Sabana REIT in Singapore and Dubai Islamic Bank’s Emirates REIT, as investors demanding sharia-compliant assets seek to broaden their portfolio beyond traditional offerings such as sukuk.

“It’s no surprise that Axis wants to do something bigger along those lines because it’s been a great success for them and they’re one of the most successful REITs to have come through,” said Abdul Jalil Rasheed, head of equities at Aberdeen Asset Management’s Malaysian unit.

“There’s a lot of demand and people are probably all too familiar with the normal Islamic finance products and are waiting for something new to come.”

Axis REIT listed in 2005 at 1.25 ringgit per unit. It closed unchanged on Friday at 2.35 ringgit per unit, and was down 0.8 percent since the start of the year compared to the benchmark KLCI’s 1.4 percent drop.

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