Letter to Unitholders from the Chairman & CEO


2023 has been a year of strategic optimisation for Axis-REIT.

During the year, we directed our focus on enhancing the performance of our portfolio and operations, and completed our fourth development project and a major Asset Enhancement Initiative (AEI). We are pleased to report that despite economic and operating headwinds encountered in the first half of the year, we were able to close the year on stronger operating metrics, and report a steady financial performance for the full year. The Fund’s 8.65 sen DPU declared for the financial year ended 31 December 2023 translates to a commendable yield of 4.8% based on the Fund’s closing Unit price of RM1.79 at the close of the year.

Dato’ Carl Gunnar Myhre @ Dato’ Abas Carl Gunnar Bin Abdullah
Executive Chairman

Leong Kit May
Chief Executive Officer/Executive Director

Dear Unitholders,

We are pleased to present Axis-REIT’s Integrated Annual Report for the financial year ended 31 December 2023.

2023 presented a challenging economic backdrop for businesses globally. The prolonged interest rate upcycle, persistently high levels of inflation, and weak external sector weighed down on the momentum of 2022’s post-pandemic recovery. Fortunately, Malaysia’s resilient domestic demand saw sustained private and public consumption as well as investments, that offset weak external demand. The country also saw continued inflows of domestic and foreign direct investments (FDI) into the manufacturing sector during 2023, which supported continued demand for industrial real estate assets.

Against this backdrop, Axis-REIT’s strategic focus in 2023 turned towards optimising our operations and portfolio, and integrating sustainability considerations to further strengthen the Fund’s resilience and readiness to address the challenges of climate change and enhanced sustainability disclosures.

Growing Today, Shaping Tomorrow

Amid rising concerns of climate change risk, we strive to ensure that the initiatives we invest in today will shape the development of resilient and sustainable operations in the medium to long-term. We continued to advance Axis-REIT’s sustainability agenda in 2023, making a commitment to reduce our GHG emissions (Scope 1 and Scope 2 combined) to as close to zero (carbon neutrality) or to achieve net zero by 2050 or earlier.

Towards this end, we will enhance our sustainability initiatives, building on our existing efforts that already pinpoint clear and quantifiable sustainability targets across our 6 strategic pillars. These existing targets include obtaining 1 additional green building certification a year, as well as achieving explicit energy, water, GHG emissions and waste reduction targets.

We are pleased to report that in 2023, we met our energy reduction targets and secured final GreenRE Silver certification for Axis Facility 2 @ Bukit Raja, as well as provisional GreenRE Silver and GreenRE Gold certifications for Axis Mega Distribution Centre (Phase 1) and Axis Mega Distribution Centre (Phase 2) respectively. We also successfully met the SPT of our sustainability-linked financing facility and enjoyed financing cost savings from a reduction in the profit rate in accordance with the SPT terms during the financial year under review.

Cumulatively, these efforts and achievements underscore our commitment towards creating sustainable, long-term value for our Unitholders. These initiatives were also instrumental in maintaining Axis-REIT’s inclusion as a constituent of the FTSE4Good Bursa Malaysia Index and the FTSE4Good Bursa Malaysia Shariah Index, which in turn, reaffirms our strong ESG practices and lifts the Fund’s visibility within the investment community.

Portfolio Highlights

In 2023, we directed our focus on optimising our existing portfolio. Specifically, we focused our efforts to ensure the timely completion of our fourth development project, Bukit Raja Distribution Centre 2, as well as our major AEI involving Axis Facility 2 @ Bukit Raja. We are pleased to report that Bukit Raja Distribution Centre 2 was completed and handed over to SPX Xpress (Malaysia) Sdn Bhd (formerly known as Shopee Express Malaysia Sdn Bhd) (Shopee) on 1 August 2023, a month ahead of schedule, while the AEI of Axis Facility 2 @ Bukit Raja was also completed and tenanted as scheduled. The completion of both projects added to our space under management during the year, while our portfolio count remained stable at 62 properties.

Looking ahead, we have substantially completed the construction of Axis Mega Distribution Centre (Phase 2), with full completion of the development slated for 1Q 2024. This logistics warehouse will be our fifth development project, and will feature a builtup area of approximately 509,035 sq. ft. that can be sub-divided to 8 modules for maximum flexibility, to cater to tenants’ requirements. Axis Mega Distribution Centre (Phase 2), along with the acquisitions of Axis Hypermarket @ Temerloh and a manufacturing facility in Sendayan, Negeri Sembilan which were ongoing as at 31 December 2023, will add to Axis-REIT’s portfolio count and space under management during 2024.

Operational Highlights

While demand dynamics for industrial properties remained positive, the Fund did experience fluctuations in portfolio occupancy rates at the start of 2023, due to tenant turnover and the termination of a long-term lease agreement. Despite such headwinds, we are pleased to report that we were able to address the situation quickly, and close the year with stronger operating metrics.

The Real Estate Team successfully secured renewals for 1.53 million sq. ft. or 97% of space by net lettable area (NLA) that had come up for renewal in 2023. Together with new tenancies for a further 1.91 million sq. ft. of space that commenced during the year, the Fund achieved a portfolio occupancy rate of 97% as at 31 December 2023, up 2 percentage points from the preceding year. This was further enhanced by a positive rental reversion of 5.8% across the portfolio for the year.

Key Highlights

Achieved 97% tenant retention rate and 5.8% positive rental reversion

Raised portfolio occupancy rate to 97% as at 31 December 2023, up 2 percentage points from the preceding year.

Entered into sale and purchase agreements (SPA) for the acquisitions of Axis Hypermarket @ Temerloh as well as a manufacturing facility in Sendayan, Negeri Sembilan. The acquisition of Axis Hypermarket @ Temerloh was concluded on 16 January 2024, while the acquisition of the manufacturing facility in Sendayan is slated for completion in the first half of 2024.

Completed the development and handover of our fourth development project, Bukit Raja Distribution Centre 2, on 1 August 2023.

Completed the major AEI of Axis Facility 2 @ Bukit Raja

Obtained final GreenRE Silver certification for Axis Facility 2 @ Bukit Raja, provisional GreenRE Silver certification for Axis Mega Distribution Centre (Phase 1) and provisional GreenRE Gold certification for Axis Mega Distribution Centre (Phase 2).

Successfully completed an IDRP exercise in conjunction with the Fund’s third interim income distribution for FYE2023, achieving a 67% take up rate and retaining RM10.7 million in capital that was deployed to AEIs of the Fund’s portfolio

Declared a distribution per Unit (DPU) of 8.65 sen for FYE2023, which translated to a distribution yield of 4.8% based on the Fund’s year-end Unit closing price.

Our commitment to deliver exceptional business space solutions and services, along with the strength of the Axis-REIT brand and portfolio of properties, continues to attract and retain an impressive tenant listing that comprises multinational companies (MNCs), government-linked companies (GLCs) and large listed companies.

We will continue to proactively engage our tenants and real estate agents to drive awareness and interest in our portfolio, and maintain high levels of tenant satisfaction to support tenant retention and occupancy rates. Such engagements will also provide insights into the needs and expectations of our tenants, guiding our efforts to efficiently enhance the property portfolio with impactful features such as resource-efficient fittings and fixtures and enabling renewable energy options, to further improve tenant satisfaction.

Financial Highlights

Notwithstanding challenges in the economic, investing and operating environment, AxisREIT reported stable financial results for 2023. Revenue rose marginally, by 1.4% to RM288.4 million for the year, on incremental rental income from new leases, full year rental income contributions from acquisitions completed in 2022, and positive rental reversions achieved during the year. These were partly offset by tenant turnover and the termination of the long-term lease at Axis Steel Centre @ SiLC in the first half of the year. At the bottom line, net property income was stable, at RM245.4 million in 2023 (2022: RM245.3 million). The Fund announced a total distribution of 8.65 sen per Unit for the financial year 2023, which translated to a distribution yield of 4.8% based on the Fund’s closing Unit price of RM1.79 as at 29 December 2023.

During the year, we continued to prioritise sustainability-linked financing, taking on a further RM320.0 million in sustainabilitylinked term financing facilities. These facilities brought our total sustainabilitylinked financing facilities to RM490.0 million, representing almost one third of our total financing facilities, providing further incentives for the Fund to meet its sustainability commitments and targets.

As at 31 December 2023, Axis-REIT’s financing ratio declined slightly, to 34.4%, from 36.3% a year earlier, following the private placement of 100 million new Units and the IDRP undertaken in 2023. The private placement and IDRP had collectively raised net proceeds of RM183.7 million, which were used to repay the Fund’s existing shortterm financing as well as to fund AEIs. The relatively low financing ratio gives the Fund sufficient headroom for further acquisitive and development opportunities, with the ability to take on a further RM706.5 million in financing facilities before breaching the 50% financing ratio limit set by the SC.

Risk Management

With heightened concerns over the impact of climate change, we have increasingly focused our attention on climate-related risks in our portfolio and operations. These risks are incorporated in our comprehensive Risk Management Framework, which addresses both financial and non-financial risks and opportunities

In preparation to align our reporting disclosures with TCFD Recommendations, we undertook a TCFD gap analysis in 2023 to enhance our understanding of the Fund’s readiness to adopt TCFD-aligned reporting. This TCFD gap analysis also serves as a roadmap for the Fund on the next steps required to align our disclosures in the short, medium and long-term towards meeting Bursa Securities’ directive of TCFD-aligned reporting by 2027.

Among the next steps identified in the TCFD gap analysis are for the Fund to undertake a climate scenario analysis to ascertain climaterelated risks impacting the Fund’s portfolio, and to identify physical and transition risks that could impact its operations. We will also look into expanding our Scope 3 reporting to accelerate our progress towards our sustainability targets.

Concurrently, we have also remained vigilant in managing cybersecurity risks. We engaged our outsourced IT service provider to enhance the implementation of our cybersecurity defences, ensuring that our IT infrastructure is up-to-date and fit-for-purpose. During the year, we explored the implementation of an IT disaster recovery plan, and completed an internal audit on our IT processes to identify areas for improvement. We also conducted cybersecurity awareness and training programmes for our people, and reviewed our Personal Data Protection Policy and Privacy Notice.

2024 Outlook and Strategy

We are cautiously optimistic in our outlook for 2024, as Malaysia’s economic resilience and catalytic initiatives will support investment activity. We expect sustained demand for well-located, Grade A industrial properties driven by continued investments in the logistics and manufacturing sectors, as well as rapidly emerging segments such as data centre properties.

Our Real Estate and Property Management Teams will continue to proactively engage our tenants and real estate agents to build stronger relationships and gain better insights to understand our tenants’ and the market’s expectations, strategies and challenges, which will, in turn, allow us to tailor our business space solutions to better serve tenants’ needs.

Against this backdrop, we will continue to build a pipeline of acquisitive and development opportunities that will drive the Fund towards its targeted Assets Under Management (AUM) of RM5 billion by the end of 2024. We will continue to position our industrial portfolio to benefit from long-term opportunities at prime industrial locations that hold significant value enhancement potential through future rejuvenation programmes. Concurrently, we will also continue to maintain our office properties, which offer quality business space solutions in thriving commercial centres in the Outer Kuala Lumpur area.

Acknowledgements & Appreciation

We wish to express our deepest appreciation to our former Independent Non-Executive Chairman, YAM Tunku Dato’ Seri Shahabuddin Bin Tunku Besar Burhanuddin, our former Senior Independent Non-Executive Director, En. Mohd Sharif Bin Hj Yusof, and our former Independent NonExecutive Director, Datuk Seri Fateh Iskandar Bin Tan Sri Dato’ Mohamed Mansor, who stepped down from their respective roles during the year, in compliance with the SC’s cap on independent directors’ tenures at 12 years. Their years of dedicated counsel, service and leadership have been instrumental in shaping the strategies and growth of the Fund, and we wish them our very best in their next endeavours. We also extend our gratitude to our sitting Board members for all their continued contributions in sharing invaluable insights and expertise in taking the Fund forward.

As always, we are also grateful to our industry associations and media partners in acknowledging our efforts and achievements through the conferment of the following awards in 2023

Awards & Recognition

THE EDGE BILLION RINGGIT CLUB 2023

  • Highest Growth in Profit after Tax over Three Years (REIT Category)

ALPHA SOUTHEAST ASIA BORROWER ISSUER AWARDS 2023

  • Best REIT Deal of the Year in Asia

KSI MALAYSIAN PROPERTY ICON LEADERSHIP AWARD 2023

  • Leong Kit May

THE ASSET ESG CORPORATE AWARDS 2023

  • Gold Award

SIN CHEW BUSINESS EXCELLENCE AWARDS 2023

  • Top 10 (Profit After Tax) Property Excellence Award

NACRA EXCELLENCE AWARDS 2023

  • Silver Award (Less than RM10 billion in market capitalisation)

BEST OF THE BREEDS REITS AWARDS 2023

  • Best Industrial REIT (Malaysia) - Platinum

  • Best CEO (Asia Pacific) - Platinum (Less than USD1 billion in market capitalisation)

  • Best CFO (Asia Pacific) - Platinum (Less than USD1 billion in market capitalisation)

  • Best Islamic REIT (Malaysia) - Platinum

In closing, we express our heartfelt appreciation to our various stakeholders – from our colleagues, to the Fund’s Unitholders, tenants, contractors, suppliers, real estate agents, surrounding communities and business partners – for their continued trust in the Fund. It is with this continued support that we are able to pursue and realise Axis-REIT’s vision and mission.


Dato’ Carl Gunnar Myhre @ Dato’ Abas Carl Gunnar Bin Abdullah
Executive Chairman

Leong Kit May
Chief Executive Officer/Executive Director