For consistency, the abbreviations used throughout this announcement shall have the same meaning as defined in the announcement dated 30 November 2007 unless stated otherwise.

1.            INTRODUCTION

We refer to the announcement dated 30 November 2007 made by AmInvestment Bank Berhad on behalf of the Board of Directors ("Board") of Am ARA REIT Managers Sdn Bhd ("Manager"), the manager of AmFIRST REIT, in relation to the acquisition of The Summit Subang USJ. Pursuant to the Sale and Purchase Agreement ("SPA"), Bounty Dynamics Sdn Bhd (formerly known as Meda Development Sdn Bhd) ["BDSB"], in its capacity as vendor of the Retail Lots, Office Lots, Hotel and Car Park in The Summit Subang USJ, gave to the Trustee warranties on the minimum net income receivable by the Trustee from the Retail Lots, Office Lots, Hotel and Car Park (“Warranties”). Pursuant to the Warranties, the Trustee of the one part and Meda Inc. Berhad ("Meda Inc"), being the holding company of BDSB, of the other part, had on 30 November 2007 entered into two (2) separate Guarantee and Indemnity Agreements (“Guarantee Agreements”) where a guarantee on the Warranties (“Guarantee”) was given by Meda Inc.

After having carefully considered various factors in managing The Summit Subang USJ and after taking into account the challenges in enforcing the Warranties following the implementation of the repositioning and rebranding of The Summit Subang USJ, the Trustee, on behalf of the REIT, has, acting in the best interest of the REIT, discharged BDSB from its Warranties and further discharged Meda Inc from the Guarantee (collectively, the “Discharge”). The Discharge will be effective on 21 March 2011 (“Effective Date”). Notwithstanding the Discharge, the Trustee is expected to receive full payments for outstanding sums due and owing by BDSB under the SPA.

2.            RATIONALE

The Manager has embarked on and implemented in various stages a refurbishment program on The Summit Subang USJ in order to reposition and realign the direction and branding of The Summit Subang USJ. This will allow the retail mall to improve tenant mix and be rebranded with a new image. The right mix of tenancy is vital to attract appropriate category of tenants and hence, enable the Manager to put forward strong bargaining power in future negotiation of rental rates for new tenants or renewal. The repositioning and realignment exercise is also expected to bring/enjoy long term enhancement of rental returns of The Summit Subang USJ.

The repositioning and rebranding of The Summit Subang USJ necessitates selection of tenant profiles by the Manager which may affect the rental income from the retail portion of The Summit Subang USJ. In implementing the repositioning of The Summit Subang USJ, it is necessary to, amongst others:

(i)         re-locate certain tenants around The Summit Subang USJ; and

(ii)        create new tenancies in favour of new tenants over strategic lots which were vacated by and as a result of the relocation of these tenants.

By reason of the foregoing, the rates of rent payable by these existing and new tenants will vary and revised, where applicable. This will have an impact on the Warranties and Guarantee by BDSB and Meda Inc at the time the SPA was made. Whilst the Warranties given in the SPA were applicable at the time of acquisition, their purpose and intent were somehow negated or became increasingly difficult to monitor and enforce since the relocation and rebranding of The Summit Subang USJ was implemented. 

The repositioning is also timely considering that the REIT has surrendered 159 accessory parcels in the form of car park bays due to the compulsory acquisition by the Selangor State Government for extension of Light Rapid Transit project as announced on 18 January 2010, 19 March 2010 and 4 May 2010. The Selangor State Government has awarded RM3,204,596 as compensation to the REIT for the abovementioned car park bays.

3.             SALIENT TERMS OF THE DISCHARGE OF WARRANTIES 

Under the Discharge:

(i)            BDSB will be discharged from the Warranties given under the SPA on the Effective Date, save and except for any antecedent breaches that occurred prior to and on the Effective Date; and

(ii)           Meda Inc. will be discharged from the Guarantee contained in the Guarantee Agreements on the Effective Date, save and except for any guarantee enforceable by the Trustee prior to and on the Effective Date.

It is suffice to emphasize and stress that the guarantee by Meda Inc over the rental actually received by the Trustee for the tenancy over the Hotel remains intact by virtue of the new Guarantee and Indemnity Agreement made by Meda Inc and the Trustee on 28 September 2010.

4.             EFFECTS OF THE DISCHARGE

The Discharge does not have any material effects on the unitholders’ capital, substantial unitholders’ unitholding, gearing and net asset value of the REIT. 

The Discharge will have an impact on the earnings of the REIT. However, for financial year ending 31 March 2011 this will be mitigated by an amount of RM5.67 million received as compensation awarded by the authorities following the compulsory acquisition of the common area fronting The Summit Subang USJ. For financial year ending 31 March 2012 and subsequent years, we expect additional revenue arising from new tenancies as well as positive rental reversion due to the repositioning and rebranding strategies implemented, which will invariably cushion any financial impact arising from the Discharge.

5.             APPROVAL REQUIRED 

The Discharge is not subject to the approval of the unitholders of AmFIRST REIT or any other authorities.

6.                   INTERESTS OF THE DIRECTORS AND MAJOR SHAREHOLDERS OF THE MANAGER, AND MAJOR UNITHOLDERS

7.            DIRECTORS’ STATEMENT

The Board, having considered all aspects of the Discharge and after careful deliberation, is of the opinion that the above-mentioned are in the best interest of the REIT.

This announcement is dated 21 March 2011.