Contents :

1. INTRODUCTION

On behalf of the Board of Directors ("Board") of Am ARA REIT Managers Sdn Bhd ("Am ARA" or "Manager"), the manager of AmFIRST REIT, AmInvestment Bank Berhad (formerly known as AmMerchant Bank Berhad)(a member of AmInvestment Bank Group) wishes to announce that the Trustee and Meda had on even date entered into a conditional sale and purchase agreement ("SPA") for the acquisition of the Property for a cash purchase consideration of RM260,000,000 ("Purchase Consideration").

The Property is located within “The Summit Subang USJ” which is constructed on a piece of freehold land under title known as Geran 43528, Lot No. 14 (formerly known as H.S.(D) 121185, P.T. No. 8) in Pekan Subang Jaya, District of Petaling, State of Selangor (“Land”) and comprises, inter-alia,:-

(a) a 15-storey office tower with a total of 13 levels of office lots known as Menara Summit (“Office Tower”);

(b) a 17-storey 332-room 4 star rated hotel tower known as The Summit Hotel (“Hotel”);

(c) a 6-storey retail podium with a total of 546 retail lots (“Retail Podium”); and

(d) 2,125 car parking bays located within 3 basement levels and open area within the perimeter of the property (“Car Park”)

(the Office Tower, Hotel, Retail Podium and Car Park are collectively known as “Buildings”).

2.1 Salient terms and conditions of the SPA

The Trustee shall purchase from the Vendor the Property, free from all encumbrances on the completion date of the SPA, on an as-is where-is basis and on a “lock stock and barrel” basis, at the Purchase Consideration subject to the terms and conditions set out in the SPA.

The purchase of the Property is subject to, amongst others, the tenancies of the unsold individual lots in the Retail Podium and Office Tower but with vacant possession of all parts of the Buildings which are not tenanted and not sold, and excludes the Land, the Sold Lots and the Common Property (as defined in the Strata Titles Act 1985).

The SPA is also subject to the fulfillment of, inter-alia, the following conditions precedent on or before the cut-off date (being a date falling 8 months from the date of the SPA) or such extended date as agreed by the parties to the SPA:-

(a) the Trustee obtaining all such approvals or waivers (where required or as may be advisable) of the Securities Commission (“SC”) or such other regulatory bodies or authorities relating to the purchase of the Property, including but not limited to, the valuation of the Property (excluding, inter-alia, the Sold Lots) at not less than the Purchase Consideration;

(b) the Trustee having conducted and completed a legal, financial, building structure and property due diligence on the Property and is satisfied with the results thereof;

(c) the Trustee shall have received a valuation report from an independent valuer appointed by the Trustee confirming that the market value of the Property (excluding, inter-alia, the Sold Lots) is not less than RM260,000,000;

(d) the Vendor shall have, at its own costs and expense, submitted its application and done all acts for the subdivision of the Buildings and the issuance of strata titles to the Buildings (“Vendor’s Strata Title Application”);

(e) within ninety (90) days from the date of the SPA or such extended date as may be granted by the Trustee, the Vendor shall have removed all caveats (save for the Trustee’s caveat) registered or presented for registration on the Land;

(f) the Vendor shall have executed an irrevocable and unconditional power of attorney in favour of the Trustee wherein the Vendor shall appoint the Purchaser as its attorney to, inter-alia, deal with any professionals and advisors (“Professional Persons”) appointed by the Vendor in relation to the Vendor’s Strata Title Application and execute all documents and agreements to ensure the completion of the Vendor’s Strata Title Application;

(g) the Vendor shall have received the Professional Persons’ acknowledgement and consent to the terms and conditions set out in the letters of authorisation and instruction, wherein the Vendor irrevocably and unconditionally authorises and instructs the Professional Persons to, after the completion date of the SPA and when requested by the Trustee, furnish to the Trustee copies of all plans, drawings, applications and any other documents prepared by the Professional Persons in relation to the Vendor’s Strata Title Application;

(h) the Vendor shall have executed a first legal charge in favour of the Trustee over all monies in the account to be opened for the purposes of receiving all monies received or derived from the business or operations of the letting out of the Hotel by the Trustee to the Vendor;

(i) the Vendor shall have furnished to the Trustee all documentary evidence from the appropriate authorities:-

(i) confirming their receipt of the Vendor’s Strata Title Application; and

(ii) confirming their receipt of all the fines and penalties (if any) imposed on the Vendor in relation to the Vendor’s Strata Title Application;

(j) the Vendor shall have

(i) formed the Joint Management Body (“JMB”) in accordance with the Building and Common Property (Maintenance and Management) Act 2007 (“Building and Common Property Act”);

(ii) forwarded to the JMB all receipts, books, records and banking account records relating to the Building Maintenance Account and the Building Maintenance Fund (as described in the Building and Common Property Act) and the latest audited accounts and the latest management accounts relating to the Building Maintenance Account and the Building Maintenance Fund;

(iii) complied, to the satisfaction of the JMB, with all the Vendor’s duties stated under the Building and Common Property Act; and

(iv) submitted to the JMB the Vendor’s layout plans for the issuance of the strata titles to the Buildings and share value allocated to each of the individual lots in the Retail Podium and Office Tower;

(k) in the event that any disclosure letter has been received by the Trustee from the Vendor disclosing the Vendor’s breaches of warranties in the SPA, the Trustee being satisfied with the contents therein;

(l) the Vendor obtaining the approval of the SC for the disposal of the Property;

(m) compliance with and satisfaction of such other conditions precedent as may be stipulated or imposed by the SC or any other persons in connection with the sale and purchase of the Property;

(n) within ninety (90) days from the date of the SPA or such extended date as may be granted by the Trustee, the Vendor shall have either obtained its shareholders’ approval for the sale of the Property or furnished to the Trustee a letter from a licensed banker of the Vendor advising that such approval is not required; and

(o) where the Trustee is obtaining financing for the purchase of the Property, such loan facility is to be made available for drawdown during the completion date of the SPA, provided that the Trustee shall furnish documentary evidence of an in-principle loan approval for the purchase of the Property within ninety (90) days from the date of the SPA or such extended date as may be granted by the Vendor.

The Purchase Consideration shall be settled as follows:-

(a) earnest deposit of RM2,600,000 (being 1% of the Purchase Consideration) has been paid prior to the execution of the SPA;

(b) initial balance deposit of RM10,400,000 (being 4% of the Purchase Consideration) shall be paid within 5 business days from the receipt by the Trustee of the SPA duly executed by the Vendor;

(c) final balance deposit of RM13,000,000 (being 5% of the Purchase Consideration) shall be paid within 5 business days upon the removal of all existing caveats on the Land by the Vendor; and

(d) completion balance of RM234,000,000 (subject to certain adjustments including redemption sum payable, tenancy deposits, retention amounts, outgoings reimbursable by the Vendor/Trustee and any late payment interest payable by the Trustee) to be paid on completion of the SPA.

Pursuant to the terms of the SPA, a tenancy agreement shall be executed between Meda (as “Tenant”) and the Trustee (as “Landlord”) for the Tenant to take the tenancy of the Hotel for a period of three (3) years upon the expiry of which the Landlord has put options to extend the initial term up to a further period of seven (7) years.

The Vendor has given their warranties in respect of the following:-

(a) the minimum net income of the Retail Podium, Office Tower and Car Park for a period of four (4) consecutive years immediately following the completion date of the SPA shall amount to a total of RM71,000,000.

The net income is defined in the SPA as the amount of the promotional fees, rentals and car park charges actually received from the Retail Podium, Office Tower and Car Park after deducting any amount paid for quit rents, rates, assessments, services charges (which are payable by the Trustee and not payable by the tenants of the unsold lots under their respective tenancy agreements) and insurance payable with respect to the unsold lots in the Retail Podium, Office Tower and Car Park; and

(b) the minimum rentals which the Trustee shall be able to receive from the Trustee’s letting out of the Hotel for a period of five (5) consecutive years immediately following the completion date of the SPA shall amount to a total of RM37,500,000.

In this respect, the Trustee had on even date entered into a Guarantee cum Indemnity Agreement (“Guarantee Agreement”) with Meda Inc. (“Guarantor”) wherein the Guarantor has agreed to guarantee the receipt of the aforesaid amounts by the Trustee. In addition, for the purpose of, amongst others, meeting any shortfall between the actual net income and rental received by the Trustee and the aforesaid guaranteed minimum net income and rental, the Purchaser shall be entitled to retain, from the balance Purchase Consideration, the amount of RM13,000,000, in escrow accounts.

2.2 Information on the Property

The Property is part of “The Summit Subang USJ” which is located within one of the commercial hubs of UEP Subang Jaya (“USJ”), approximately 35km south-west of Kuala Lumpur city centre, and near the inter-section of Lebuh Raya Shah Alam and Pesiaran Kewajipan. USJ is one of the major townships in the Klang Valley and located adjacent to its older and smaller twin township of Subang Jaya.

"The Summit Subang USJ" consists of 15-storey office tower with a total of 13 levels of office lots; a 332-room 4 star rated hotel; a 6-storey shopping podium with a total of 546 retail lots; and 2,125 basement and surface car parking bays. The total surveyed area of the Office Tower, Hotel and Retail Podium is 1,301,393 square feet (“sq ft”), of which 968,138 sq ft are currently owned by the Vendor.

A brief description of the Property is set out in Table 1.

2.3 Basis of arriving at the purchase consideration
The purchase consideration for the Proposed Acquisition of RM260,000,000 was arrived at on a willing-buyer willing-seller basis based on the market value of the Property (excluding the Sold Lots) of RM265,000,000 as valued by Rahim & Co Chartered Surveyors Sdn Bhd, an independent firm of registered valuers, in its valuation certificate dated 17 July 2007 (“Valuation Certificate”). The material date of valuation is 13 June 2007.
2.4 Source of funding

The Proposed Acquisition will be funded by bank borrowing and/or equity.

2.5 Information on the Vendor

Meda was incorporated in Malaysia under the Companies Act, 1965 (“Act”) on 20 September 1993 as a private limited company, under the name Simephoenix Development Sdn Bhd. On 21 April 1994, it changed its name to Meda Development Sdn Bhd. Meda is engaged in property development, property investment, and the operations of a hotel and car park.
As at 31 December 2006, the authorised share capital of Meda is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each, of which 16,375,000 shares have been issued and fully paid-up.

Meda is a wholly-owned subsidiary of Meda Inc., a company listed on the Main Board of the Bursa Securities Malaysia Berhad (“Bursa Securities”).

2.6 Liabilities to be assumed

Save for the liabilities incurred by the Vendor in the ordinary course of business in relation to the Property, there are no liabilities to be assumed by AmFIRST REIT arising from the Proposed Acquisition.

2.7 Original date and cost of investment

The development of the Retail Podium, Office Tower and Hotel were completed in December 1997, May 1999 and July 2000 respectively. The total cost of the Property (excluding, inter-alia, the Sold Lots) is approximately RM264.7 million.

Am ARA, the manager of AmFIRST REIT, is actively seeking to acquire yield accretive assets or good quality properties with strong recurring rental income and potential for revenue and capital growth. The Proposed Acquisition is expected to provide unitholders with higher and stable distribution with the potential to achieve a long-term growth in net asset value of AmFIRST REIT.

The addition of the Property to AmFIRST REIT’s portfolio will diversify its sources of income as well as its tenant base. Am ARA intends to capitalise on its partner’s expertise and proven track records in successfully managing commercial properties (including retail malls) in Hong Kong and Singapore to bring the performance of the Property to an even higher level. Its partner, the ARA Group from Singapore (a member of Hong Kong-listed Cheung Kong Group) is currently managing three other public-listed REITs in Hong Kong and Singapore, with total assets under management of about US$4.2 billion.

As the Proposed Acquisition does not involve any issuance of new units, it will not have any effect on the unit capital and net asset value of AmFIRST REIT, and substantial unitholders’ unitholdings in AmFIRST REIT.

4.1 Gearing

The proforma effects of the Proposed Acquisition on the gearing of AmFIRST REIT are set out in Table 2.

4.2 Earnings

The Proposed Acquisition will not have any material effect on the earnings of AmFIRST REIT for financial year ending 31 March 2008 as the Proposed Acquisition is expected to be completed in the first quarter of 2008. The Proposed Acquisition is expected to contribute positively to the future earnings of the AmFIRST REIT after taking into consideration the income from the Property.

4.3 Distributions

As the Proposed Acquisition is expected to be completed in the first quarter of 2008, the Proposed Acquisition is not expected to have any material impact on AmFIRST REIT’s distribution policy for the financial year ending 31 March 2008.

The activity in the non-residential sub-sector trended higher during 2006 in line with robust business activity. Growth was backed by strong demand for both commercial and office space as reflected by the high occupancy rates and higher rentals during 2006. In particular, incoming supply of shopping complexes during 2006 recorded a significant increase due to 10 large malls being constructed in the Klang Valley. These shopping complexes are expected to add 4 million square feet to the existing stock of 36 million square feet in 2007. Retailers have expanded their business activity in the key catchment areas while new malls have different concepts tailored towards the targeted consumer segments. (Source: Bank Negara Report 2006)

To promote tourism, the Visit Malaysia Year 2007 with the theme “Celebrating 50 Years of Nationhood” was held. To remain competitive, government will continue to upgrade tourist facilities and develop new tourism products. To facilitate the arrival of foreign tourists, multiple entry visas (MEVs) will be given to all visitors from India, China and West Asia for a period of one year. In addition, visa on arrival will be granted to selected foreign tourists for a stay of one month effective from 1 September 2006. Besides, the Malaysian International Halal Showcase (MIHAS) and the World Halal Forum 2006, which received encouraging response, will be held annually. All these efforts are expected to see increased numbers of tourist arrivals. Leisure property specifically the hotels sub-sector is expected to benefit from this and enjoy higher occupancy rates. (Source: Property Market Report 2006 by Valuation and Property Services Department, Ministry of Finance, Malaysia)

The Proposed Acquisition is expected to contribute positively to AmFIRST REIT in view of the potential to enhance the performance of the Property through organic growth in rental and occupancy rates of the unsold units of the Office Tower and Retail Podium, as well as the room rates and occupancy rate for the Hotel.

The Proposed Acquisition is subject to certain risks inherent in the property industry, which may not be exhaustive, as follows:
(a) adverse changes in national or economic conditions or property market conditions;

(b) the financial conditions of tenants;

(c) changes in environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;

(d) changes in the relative popularity of property types and locations leading to an oversupply of space or a reduction in tenant demand for a particular type of property in a given location;

(e) competition among property owners for tenants; and

(f) the future sale price of the Property (excluding, inter-alia, the Sold Lots) may be lower than the current valuation or the purchase price paid by AmFIRST REIT.

The Proposed Acquisition is subject to the approvals being obtained from the following:-

(a) the SC for:

(i) The valuation of the Property (excluding, inter-alia, the Sold Lots); and

(ii) The waiver from compliance with Clause 10.03(4) of the SC’s Guidelines on Real Estate Investment Trusts (“REIT Guidelines”) as detailed in Section 11 below;

(b) the Trustee for the Proposed Acquisition;

(c) the SC and shareholders of the Vendor for the proposed disposal of the Property to the Trustee; and

(d) any other relevant authorities or persons.

The Proposed Acquisition is also subject to the conditions precedent of the SPA as set out in Section 2.1 above.

AmInvestment Bank, a wholly-owned subsidiary of AmInvestment Group Berhad and a company related to Am ARA, has granted financing facilities to the Vendor.

Save as disclosed above, Am ARA is not aware of any Directors or major shareholders of Am ARA or major unitholders of AmFIRST REIT and persons connected to them having any interest, direct or indirect, in the Proposed Acquisition.

The Board of Am ARA, having considered all aspects of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of AmFIRST REIT and its unitholders.

AmInvestment Bank has been appointed as the Adviser for the Proposed Acquisition.

The Proposed Acquisition is expected to be completed in the first quarter of 2008.

Pursuant to the new Building and Common Property Act (which applies to properties capable of being subdivided in respect of vacant possession has been handed over by the developer to the purchasers but which strata titles have yet to be issued) which came into operation on 12 April 2007, a JMB consisting of the developer and purchasers must be formed within 12 months from the commencement of the said Act. The JMB shall elect a Joint Management Committee (“JMC”) to perform its duties.

Following the abovementioned Act, in the interim period until the issuance of the strata titles to the Property, the decision with regards to the maintenance and management of the Property will be jointly decided by the Trustee (who may be nominated into the JMB and JMC upon the completion of the SPA) together with other members of the JMB and JMC. As such, AmFIRST REIT may be deemed as not having full control over the unsold units of the Property during the said interim period.

In this respect, the Proposed Acquisition will not be in compliance with Clause 10.03(4) of the REIT Guidelines which requires a REIT to be able to exercise all rights and interests over the real estate proposed to be acquired without any hindrance whatsoever. Am ARA intends to seek a waiver from the SC from compliance with the said provision.

Save for the above, to the best knowledge of the Board of Am ARA, the Proposed Acquisition does not depart from the REIT Guidelines.

Applications to the SC and any other relevant authorities for the Proposed Acquisition are expected to be made within 3 months from the date of this announcement.

The SPA, the Guarantee Agreement and the Valuation Certificate are available for inspection at the registered office of Am ARA at Level 16, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50450 Kuala Lumpur during normal office hours from Monday to Friday (except public holidays) for a period of three (3) months from the date of this announcement.

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