PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("AXIS-REIT") OF A SINGLE STOREY FACTORY/ WAREHOUSE WITH A DOUBLE STOREY OFFICE ANNEXE AND OTHER ANCILLARY BUILDINGS ERECTED ON FOUR CONTIGUOUS PARCELS OF LAND HELD UNDER TITLE NOS. H.S.(D) 80008 (P.T. NO. 14321), H.S.(D) 80009 (P.T. NO. 14322), H.S.(D) 80010 (P.T. NO. 14323) AND H.S. (D) 80011 (P.T. NO. 14324), ALL WITHIN THE MUKIM OF DAMANSARA, DISTRICT OF PETALING, STATE OF SELANGOR) (collectively the "Properties") FROM SKB SHUTTERS MANUFACTURING SDN BHD (CO.NO. 31982-W) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 18.50 MILLION ("Proposed Acquisition of the Properties")
| AXIS REAL ESTATE INVESTMENT TRUST |
|
Type | Announcement |
| Subject | PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("AXIS-REIT") OF A SINGLE STOREY FACTORY/ WAREHOUSE WITH A DOUBLE STOREY OFFICE ANNEXE AND OTHER ANCILLARY BUILDINGS ERECTED ON FOUR CONTIGUOUS PARCELS OF LAND HELD UNDER TITLE NOS. H.S.(D) 80008 (P.T. NO. 14321), H.S.(D) 80009 (P.T. NO. 14322), H.S.(D) 80010 (P.T. NO. 14323) AND H.S. (D) 80011 (P.T. NO. 14324), ALL WITHIN THE MUKIM OF DAMANSARA, DISTRICT OF PETALING, STATE OF SELANGOR) (collectively the "Properties") FROM SKB SHUTTERS MANUFACTURING SDN BHD (CO.NO. 31982-W) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 18.50 MILLION ("Proposed Acquisition of the Properties") |
Contents :
1. INTRODUCTION
- The Board of Directors (“Board”) of Axis REIT Managers Berhad (“ARMB” or “the Manager”), the management company of Axis-REIT, wishes to announce that OSK Trustees Berhad (“OSK”), the trustee for Axis-REIT, has entered into the following agreement in relation to the Proposed Acquisition of the Properties on behalf of Axis-REIT:
1.1 Proposed Acquisition of the Properties
Axis-REIT proposes to acquire the Properties for a total lump sum cash consideration of RM 18.5 Million from SKB Shutters Manufacturing Sdn Bhd (“SKBSMSB”).
The Properties are to be acquired free from encumbrances but subject to the terms and conditions stipulated in the sale and purchase agreement for such acquisition entered into between OSK and SKBSMSB on 20 April 2007 (“SPA”).
Pursuant to the Deed dated 15 June 2005 and the Supplemental Deed dated 8 December 2006 constituting Axis-REIT, entered into between OSK and ARMB (“Axis Deed”), OSK, as the trustee for Axis-REIT, has approved the Proposed Acquisition of the Properties, vide their letter dated 17 April 2007.
1.2 Information on the Properties
The Properties constituted four contiguous plots of industrial land that form a rectangular shaped flat land measuring approximately 16,243 square metres (4.01 acres). Erected thereon is a single storey factory/ warehouse with a double storey office annexe and other ancillary buildings.
The Properties are located along Jalan SU 6A within Taman Perindustrian Subang (Lion Industrial Park) Section 22, Shah Alam and enjoy a road frontage since they are sited at the intersection of Jalan SU 5.
- The subject property is currently tenanted to and occupied by Setia Corporation Sdn Bhd (“SCSB”) (the “Existing Tenancy”) whose principal activities are that of providing transportation, forwarding and warehousing services, pursuant to a tenancy agreement dated 28th August 2006 (“the Tenancy Agreement”).
Further details are set out below.
| Properties’ particulars | : | Lot Nos. 2-22, 2-24, 2-26 & 2-28, Jalan SU 6A, Taman Perindustrian Subang (Lion Industrial Park) Section 22, 40300 Shah Alam, Selangor Darul Ehsan. |
| Tenure | : | Freehold |
| Total Land area Single-Storey Factory/ Warehouse | : | 174,838.18 sq. ft. |
| Gross floor area | : | approximately 100,985 sq.ft. |
| Approximate age of building | : | 14 years |
 | | |
| Occupancy as at 20 April 2007 | : | 100.00% |
| | |
| Gross floor area | : | approximately 9,606 sq.ft. |
| Approximate age of building | : | 14 years |
| | |
| Occupancy as at 20 April 2007 | : | 100.00% |
| | |
- 2.1 Salient terms and conditions of the Proposed Acquisition of the Properties
- (a) A total sum of RM 370,000.00 being the equivalent of 2% of the Purchase Price being refundable earnest deposit and towards part payment of the Purchase Price (“Earnest Deposit’) was paid by OSK to SKBSMSB prior to the execution of the SPA;
(b) Upon execution of the SPA, RM 1,480,000 being the equivalent to 8% of the Purchase Price shall be paid by OSK to SKBSMSB; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 16,650,000 shall be paid by OSK to SKBSMSB’s Solicitors as stakeholders within thirty (30) days from the unconditional date of the SPA (“the Completion Period ”) with a further extension of 30 days subject to interest at a rate of 8% per annum calculated on a daily basis (the “Extended Completion Period”).
2.2 Conditions Precedent and Novation Agreement (“Novation’)
- SKBSMSB shall within the conditional period provided in the SPA, execute the Novation between SKBSMSB, OSK and SCSB and deposit the same with SKBSMSB’s solicitors as stakeholders and to be released to OSK on the Completion Date (as defined in the SPA). The conditions precedent and the principal terms of the Novation, include the following:-
(a) That SKBSMSB shall be deemed to have assigned absolutely to OSK all rentals due and payable under the existing tenancy together with their full and entire rights, benefits, title and interests under the Tenancy Agreement. The Tenancy Agreement will expire on 31st August 2008 and the current monthly rental of the Properties is RM 126,500 per month. There is provision for an option on the part of SCSB to further renew for another two (2) years at a rental to be mutually agreed based on prevailing market rate at the time of such renewal.
(b) That SCSB shall undertake that it will not exercise its right of early termination for the period of the Existing Tenancy up to its expiry on 31st August 2008.
The Purchase Price for the Properties is derived on a willing-buyer willing-seller basis after taking into account the total combined market value of the Properties of RM18.5 million as appraised by Colliers, Jordan Lee & Jaafar Sdn Bhd, an independent firm of registered valuers in its valuation report dated 19 March 2007. The valuation is derived using a combination of comparison and investment methods of valuation.
Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Properties.
- The Proposed Acquisition of the Properties will be funded by existing bank borrowings of Axis-REIT.
3. INFORMATION ON THE VENDOR
3.1 SKB Shutters Manufacturing Sdn Bhd (“SKBSMSB”)
SKBSMSB is a private limited company incorporated in Malaysia under the Companies Act, 1965. SKBSMSB is a wholly owned subsidiary of SKB Shutters Corporation Berhad (Company No: 430362-U) which is a public company, listed on Bursa Malaysia Securities Berhad, incorporated in Malaysia under the Companies Act, 1965. SKBSMSB is principally involved in the manufacturing and distribution of roller shutters, racking systems and related steel products.
4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTIES
ARMB, the management company of Axis-REIT, aims to provide Unitholders with stable distribution and to achieve growth in net asset value (“NAV”) per unit of the Fund through, inter-alia, selectively acquiring properties that meet the Manager’s investment criteria. The Purchase Price for the Properties is fully supported by the independent valuation conducted on the same by Colliers, Jordan Lee & Jaafar Sdn Bhd. The Proposed Acquisition of the Properties will be accretive to Axis-REIT’s distributable income. The Proposed Acquisition of the Properties will at the same time diversify and enlarge Axis-REIT’s portfolio of properties 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 of the Properties 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 NAV
- The Directors of ARMB expect the Proposed Acquisition of the Properties to contribute positively to the earnings of the Fund for the financial year ending 31 December 2007.
5.4 Gearing
- ARMB intends to utilise debt facility of approximately RM18.5 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 24.77 % of audited total assets as at 31st December 2006, which is below the gearing limit of 50% prescribed by the Guidelines on Real Estate Investment Trusts issued by the Securities Commission.
- Pursuant to the Guidelines on Real Estate Investment Trusts issued by the Securities Commission dated 3 January 2005, the valuation set out in the proposed acquisition of the Properties is not subject to approval by the Securities Commission.
7. RELATED PARTY DEALINGS IN RESPECT OF PROPOSED ACQUISITION OF THE PROPERTIES
None of the Directors and/or the sole shareholder of ARMB and substantial unitholders of Axis-REIT as well as persons connected to them have any interest, direct and/or indirect, in the Proposed Acquisition of the Properties save and except for Mr. Tew Peng Hwee @ Teoh Peng Hwee, a Director of ARMB who is the principal owner of Hectares & Stratas, a real estate agency, whom will receive a commission from SKBSMSB in respect to the Proposed Acquisition of the Properties. Mr Tew Peng Hwee @ Teoh Peng Hwee has abstained and will continue to abstain from Board deliberation in respect of the Proposed Acquisition of the Properties.
8. DIRECTORS’ STATEMENT
9. RISK FACTORS
- The Properties may be subject to certain risks inherent in the property market industry. These include but not limited to the following:-
(a) Non-fulfilment of the conditions precedent stipulated in the SPA;
(b) Non registration of the transfer of the subject properties;
(c) Compulsory acquisition by the Government;
(d) Non-renewal of tenancy after expiry due to change in circumstances of the Tenant;
(e) Adverse changes in national or economic conditions;
(f) Adverse local market conditions;
(g) The financial conditions of tenants, buyers and sellers of properties;
(h) Changes in environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;
(i) 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;
(j) Competition among property owners for tenants;
(k) Illiquidity of real estate investments; and
(l) 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 or the place of business of OSK at 6th Floor, Plaza OSK, Jalan Ampang, 50450 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 :-
(i) The SPA on the Proposed Acquisition of the Properties ; and
(ii) Valuation report on the Properties prepared by Colliers, Jordan Lee & Jaafar Sdn Bhd dated 19 March 2007.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 20 Apr 2007 |
| Category | General Announcement |
| Reference No | CC-070420-51D5C |
