Axis REIT sues ex-tenant to recover RM105 mil in unexpired future rental payments

KUALA LUMPUR (Sept 5): Axis Real Estate Investment Trust (Axis REIT) has filed a lawsuit against a previous occupant of Axis Steel Centre @ SiLC in Nusajaya, Johor. The objective is to retrieve outstanding rental payments that are yet to be fulfilled, totaling RM105.4 million.

The real estate investment trust (REIT) announced that its trustee, RHB Trustees Bhd, filed a lawsuit against Yongnam Engineering Sdn Bhd (YESB) at the High Court in Johor Bahru on Tuesday.

Axis REIT has recently announced that it has ended its lease agreement with YESB, as they failed to fulfill their rental payment obligations. This decision was documented in a submission made to Bursa Malaysia. The lease agreement between Axis REIT and YESB was first established in November 2014.

Last year in December, RHB Trustees initiated a legal proceeding against YESB and its corporate guarantor, Yongnam Holdings Ltd, for an outstanding amount of RM8.46 million in rental fees and additional expenses owed by YESB until Dec 21, 2022.

In January and February 2023, YESB faced legal action due to their failure to pay rent. This resulted in the court carrying out a distress action on July 24, whereby the items seized from the property were sold for RM1.2 million.

This sum of RM1.2 million will be used to cover a portion of the overall unpaid amounts owed by the defendants to the trustee according to the lease agreement. It pertains specifically to the rental that remains outstanding for the months of January and February 2023.

Axis REIT stated that in addition to the notice of termination and the distress action being carried out, they plan to recoup the remaining rental payments from YESB. This includes the rental fees for the remaining period of the lease agreement, which amount to RM105.4 million.

The blog post mentioned that the management company, Axis REIT Managers Bhd, is currently incapable of predicting or evaluating the financial and operational consequences of the legal case on the REIT. This uncertainty is due to the fact that it all depends on the final result of the lawsuit.

Axis REIT's shares closed at RM1.82 on Tuesday, recording a decrease of one sen or 0.55%. This has resulted in the overall market value of the REIT being valued at RM3.17 billion.