AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") PROPOSED ACQUISITION BY Axis-REIT OF TWO (2) PROPERTIES KNOWN AS LOT 13A (HELD UNDER TITLE PN 4614 LOT NO. 20 SECTION 32 TOWN OF PETALING JAYA, DISTRICT OF PETALING, STATE OF SELANGOR) AND LOT 13B (HELD UNDER TITLE PN 4615 LOT 358 TOWN OF PETALING JAYA, DISTRICT OF PETALING, STATE OF SELANGOR) ("LOT 13A & LOT 13B") FROM CYCLE & CARRIAGE BINTANG BERHAD FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 32.50 MILLION ("PROPOSED ACQUISITIONS") & LEASE BACK TO CYCLE & CARRIAGE BINTANG BERHAD of LOT 13A & LOT 13B ("PROPOSED ACQUISITION & LEASE BACK")
| AXIS REAL ESTATE INVESTMENT TRUST |
|
Type | Announcement |
| Subject | AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") PROPOSED ACQUISITION BY Axis-REIT OF TWO (2) PROPERTIES KNOWN AS LOT 13A (HELD UNDER TITLE PN 4614 LOT NO. 20 SECTION 32 TOWN OF PETALING JAYA, DISTRICT OF PETALING, STATE OF SELANGOR) AND LOT 13B (HELD UNDER TITLE PN 4615 LOT 358 TOWN OF PETALING JAYA, DISTRICT OF PETALING, STATE OF SELANGOR) ("LOT 13A & LOT 13B") FROM CYCLE & CARRIAGE BINTANG BERHAD FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 32.50 MILLION ("PROPOSED ACQUISITIONS") & LEASE BACK TO CYCLE & CARRIAGE BINTANG BERHAD of LOT 13A & LOT 13B ("PROPOSED ACQUISITION & LEASE BACK") |
Contents :
1. INTRODUCTION
- The Board of Directors (“Board”) of Axis REIT Managers Berhad (“ARMB”), the management company of Axis-REIT, wishes to announce that OSK Trustees Berhad (“OSK”), the trustee of Axis-REIT, has entered into the following agreement in relation to the Proposed Acquisition & Lease Back on behalf of Axis-REIT:
1.1 Proposed Acquisition & Lease Back of Lot 13A & Lot 13B
- Axis-REIT proposes to acquire the entire interest in Lot 13A & Lot 13B for a total lump sum cash consideration of RM 32.5 Million from Cycle & Carriage Bintang Berhad (Co. No. 7378-D) (“Cycle & Carriage”) and to enter into lease back agreement with Cycle & Carriage.
Lot 13A & Lot 13B is to be acquired free from encumbrances but subject to the terms and conditions stipulated in the sale and purchase Agreement for acquisition (“Lot 13A & Lot 13B SPA”) entered into between OSK and Cycle & Carriage on 25 May 2006.
Pursuant to the Deed dated 15 June 2005 constituting Axis-REIT, entered into between OSK and ARMB (“Axis Deed”), OSK, as the trustee of Axis-REIT, has approved the Proposed Acquisitions, vide their letter dated 24 May 2006.
1.2 Information on Lot 13A & Lot 13B
Lot 13A & Lot 13B are two contiguous plots of industrial land. Together, they form a near rectangular shape. Individually, Lot 13A resembles an ‘L’ shape whilst Lot 13B is regular in shape.
Lot 13A enjoys a road frontage onto Jalan 225, Section 51A, Petaling Jaya whereas Lot 13B is a second layer lot and has no road frontages.
- LOT 13A
- Lot 13A is an Industrial Lot and constructed upon it is a 4 storey showroom cum office space with a basement level.
- Lot 13A is currently occupied by Cycle & Carriage as their showroom cum office.
Further details of Lot 13A are set out in the table below.
| Property particulars | : | Lot 13A, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor Darul Ehsan. |
| Land area | : | 108,900 sq. ft. |
| Gross floor area | : | approximately 94,771 sq.ft. |
| Net lettable area | : | approximately 65,856 sq.ft.. |
| Tenure | : | Industrial leasehold for a period of 99 years, expiring on 23, January 2067. |
| Occupancy as at 25 May 2006 | : | 100.00% |
| Encumbrance | : | NIL |
LOT 13B
- Lot 13B is an Industrial Lot and constructed upon it a 2 ½ storey car service centre, a guard house and a refuse chamber/store building.
- Lot 13B
Further details of Lot 13B are set out in the table below.
| Property particulars | : | Lot 13B, Jalan 225, Section 51A, 46100 Petaling Jaya, Selangor Darul Ehsan. |
| Land area | : | 105,841 sq. ft. |
| Gross floor area | : | approximately 121,210 sq.ft. (excluding guard house and refuse chamber |
| Net lettable area | : | approximately 107,151 sq.ft. (excluding guard
house and refuse chamber |
| Tenure | : | Industrial leasehold for a period of 99 years,
expiring on 8, June 2071. |
| Occupancy as at 25 May 2006 | : | 100.00% |
| Encumbrance | : | NIL |
2. DETAILS OF THE PROPOSED ACQUISITIONS OF LOT 13A & LOT 13B
- 2.1 Salient terms and conditions of the Proposed Acquisitions of Lot 13A & Lot 13B
- (a) A total sum of RM 650,000.00 being Refundable Earnest Deposit and towards a 10% Deposit (“Deposit’) payment of the Lot 13A & Lot 13B Purchase Price (“Lot 13A & Lot 13B Deposit”) has been paid by OSK to Cycle & Carriage prior to the execution of the SPA.
(b) The balance Deposit of RM 2,600,000 shall be paid by OSK to Cycle & Carriage upon execution of the Lot 13A & 13B SPA
(c) Pursuant to the Lot 13A & Lot 13B SPA, the balance of the purchase consideration amounting to RM 29,250,000 shall be paid by OSK to Cycle & Carriage’s Solicitors as stakeholders on or before 30 June 2006 (“the Completion Date”) with a further extension of 1 month subject to interest at a rate of 8% per annum calculated on a daily basis.
2.2 Memorandum of Lease (“Lease")
- Simultaneously with the execution of the Lot 13A and lot 13B SPA, Cycle & Carriage will execute a memorandum of lease together with the lease annexure, on agreed terms, (collectively the “Lease”) and deposit the same with OSK solicitors, with instructions to effect the same on the Completion Date (as therein defined). The principal terms of the Lease are as follows :-
(a) Initial Lease term shall be six (6) years (“Initial Lease Term”). The agreed annual rental for the first three (3) years of the Initial Lease Term shall be fixed at RM2,600,000.00 per year (“First Term”) and for the remaining three (3) years of the Initial Lease Term (“Second Term”), the annual rental shall be revised to be the lower of the Fair Market value rent or 110% of the agreed First Term rental, as the case may be, subject to the same not being lesser than the prevailing agreed rent for the First Term.
- The purchase consideration for Lot 13A & Lot 13B was arrived at based on a willing-buyer willing-seller basis after taking into account the total combined market value of Lot 13A & Lot 13B of RM36.0 million as appraised by Colliers, Jordan Lee & Jaafar Sdn Bhd, an independent firm of registered valuers in its valuation report dated 8 May 2006. The valuation was arrived at using a combination of comparison and investment methods of valuation.
Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of Lot 13A & Lot 13B.
- The Proposed Acquisition of Lot 13A & Lot 13B will be funded by existing bank borrowings.
3. INFORMATION ON THE VENDOR
3.1 Cycle & Carriage
Cycle & Carriage is a public company, listed on Bursa Malaysia, incorporated in Malaysia under the Companies Act, 1965. Cycle & Carriage is principally involved in the distribution and retailing of motor vehicles, distribution and sales of spare parts and servicing of vehicles.
As at 31 December 2005, the authorised share capital of Cycle & Carriage is RM200.0 Million comprising 200 Million ordinary shares of RM1.00 each, of which RM100.745 Million comprising 100.745 Million ordinary shares of RM1.00 each have been issued and fully paid-up.
Further information on Cycle & Carriage is available on Bursa Malaysia Securities
Berhad’s website at: www.bursamalaysia.com
ARMB, the management company of Axis-REIT, aims to provide Unitholders with stable distribution and to achieve growth in net asset value per unit of the Fund through, inter-alia, selectively acquiring properties that meet the Manager’s investment criteria. The purchase consideration for the Proposed Acquisitions is at a discount compared to the appraised value of the property. The Proposed Acquisitions will be accretive to Axis-REIT’s distributable income. The Proposed Acquisitions will at the same time diversify and enlarge Axis-REIT’s portfolio of property and is expected to benefit the Fund in the long term from economies of scale.
- 5.1 Unit Capital and Substantial Unitholders’ Unitholding
- The Proposed Acquisition will not have any effect on the total units in issue and substantial unitholders’ unitholding of Axis-REIT as the purchase consideration will be paid entirely in cash.
5.2 Net Asset Value ("NAV")
- The Directors of ARMB expect the Proposed Acquisition to contribute positively to the earnings of the Fund for the financial year ending 31 December 2006.
5.4 Gearing
- ARMB intends to utilise debt facility of approximately RM32.5 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 21.23 % of total assets, which is below the gearing limit of 35% prescribed by the Guidelines on Real Estate Investment Trusts issued by the Securities Commission.
6. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITIONS
- Pursuant to the guidelines on Real Estate Investment Trust issued by the Securities Commission dated 3 January 2005, the valuations set out in the proposed acquisition of Lot 13A & Lot 13B is not subject to approval by the Securities Commission.
7. RELATED PARTIES DEALINGS WITH CYCLE & CARRIAGE
- ARMB wish to disclose that the proposed acquisitions of Lot 13A & Lot 13B from Cycle & Carriage constituted two (2) out of six properties offered for sale by Cycle & Carriage. The remaining four (4) (“Other Properties”) being offered for sale by Cycle & Carriage are:-
2. Lot 11, Jalan 219, Section 51A, Petaling Jaya
3. Lot 11, Jalan 225, Section 51A, Petaling Jaya
4. Lot 13, Jalan 225, Section 51A, Petaling Jaya
However ARMB has reviewed the Other Properties and have concluded that they require a substantial investment outlay to be redeveloped over an extended period of time, and only one out of the four has a short 3 year tenancy with Cycle & Carriage. Cycle & Carriage is selling the Other Properties on an “as is where is” basis without any accompanying certificate of fitness for occupation. The same are not in full compliance with the requirements of Section 10.03 of the Securities Commission Real Estate Investment Guidelines issued on 3 January 2005, and in the interest of Axis-REIT’s Unitholders, ARMB cannot recommend that the Other Properties be acquired by Axis-REIT. The Other Properties are now in the process of being acquired by the following company and/or its subsidiaries :-
Property Name of Purchaser Acquisition Price
Lot 9, Jalan 219 Autofield Sdn Bhd (726817-X) (“Autofield) RM 9.6 million
Lot 11, Jalan 225 Continential Oasis Sdn Bhd (724771-P) RM 11.1 million
(“Continental”)
Lot 13, Jalan 225 Dazzling Township Sdn Bhd (722277-H) RM 14.7 million
(“Dazzling”)
- ARMB wishes to disclose that the directors and some of the shareholders of Autofield, Bizlot, Continental and Dazzling are connected to substantial unitholders of Axis-REIT and are directors of ARMB, the management company of Axis-REIT.
ARMB wishes to disclose that the following directors of ARMB have the following direct and indirect interest in Autofield, Bizlot, Continental and Dazzling :-
Dato Abas Carl Gunnar bin Abdullah 17.5%
Alex Lee Lao 17.5%
Tew Peng Hwee 17.5%
Lim Kian Thiam 17.5%
Dato’ Mohamed Salleh Bajuri 4.9%
8. DIRECTORS STATEMENT
9. RISK FACTORS
- Lot 13A & 13B may be subject to certain risks inherent in the property market industry. These include but not limited to the following:-
(b) Compulsory acquisition by the Government;
(c) Non-Renewal of tenancy for a further period after 6 years due to change in circumstances of the Tenant;
(d) adverse changes in national or economic conditions;
(e) adverse local market conditions;
(f) the financial conditions of tenants, buyers and sellers of properties;
(g) changes in environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;
(h) changes in 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 market;
(i) competition among property owners for tenants;
(j) illiquidity of real estate investments; and
(k) acts of God, uninsurable losses and other factors.
10. ESTIMATED TIMEFRAME FOR COMPLETION
11. DOCUMENTS FOR INSPECTION
- The following documents are available for inspection at the registered office of ARMB at Suite 11.1A, Level 11, Menara Weld, 76 Jalan Raja Chulan, 50200 Kuala Lumpur during normal office hours from Monday to Friday (except on public holidays) for a period of three (3) months from the date of this announcement :-
- (ii) Valuation report on Lot 13A & Lot 13B prepared by Colliers, Jordan Lee & Jaafar Sdn Bhd dated 8 May 2006.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 25 May 2006 |
| Category | General Announcement |
| Reference No | CC-060525-64904 |
