PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A FREEHOLD INTEREST IN A PARCEL OF COMMERCIAL LAND, HELD UNDER HS (M) 21211 PT92180 LOCALITY OF KAMPONG PADANG, BANDAR SUNGAI PETANI, DAERAH KUALA MUDA, NEGERI KEDAH DARUL AMAN, PRESENTLY BUILT UPON WITH A GENERAL-PURPOSE SINGLE STOREY WAREHOUSE AND OTHER SUPPORTING STRUCTURES PRESENTLY USED FOR THE OPERATIONS OF GIANT HYPERMARKET, FROM RAYA PEGUN SDN BHD (CO. NO. 705774-W) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 38,000,000 ("PROPOSED ACQUISITION OF THE PROPERTY")
| AXIS REAL ESTATE INVESTMENT TRUST |
|
Type | Announcement |
| Subject | PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A FREEHOLD INTEREST IN A PARCEL OF COMMERCIAL LAND, HELD UNDER HS (M) 21211 PT92180 LOCALITY OF KAMPONG PADANG, BANDAR SUNGAI PETANI, DAERAH KUALA MUDA, NEGERI KEDAH DARUL AMAN, PRESENTLY BUILT UPON WITH A GENERAL-PURPOSE SINGLE STOREY WAREHOUSE AND OTHER SUPPORTING STRUCTURES PRESENTLY USED FOR THE OPERATIONS OF GIANT HYPERMARKET, FROM RAYA PEGUN SDN BHD (CO. NO. 705774-W) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 38,000,000 ("PROPOSED ACQUISITION OF THE PROPERTY") |
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 Property on behalf of Axis-REIT:
The Property is 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 RPSB on 26 July 2007 (“SPA”). Pursuant to the said SPA, RPBS undertook to novate their rights to the Lease Agreement dated 9 August 2006 (“Lease Agreement”) and the Agreement to Build and Let dated 9 August 2006 (“Agreement to Build and Let”) entered into between RPSB and GCH Retail (Malaysia) Sdn Bhd (“GCHR”).
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 trustee for Axis-REIT, has approved the Proposed Acquisition of the Property, vide their letter dated 23 July 2007.
1.2 Information on the Property
The Property site comprises a rectangular shaped parcel of commercial land having a provisional title land area of about 34,027 square metres (366,264 square feet). Erected upon it is a single storey warehouse, a pump house and two (2) guard houses. The buildings were constructed in accordance with the Building Layout Plans approved by the Majlis Perbandaran Sungai Petani and issued with a Temporary Certificate of Fitness for Occupation on 19 March 2007 for a period of six (6) months expiring on 18 September 2007.
The Property has wide frontages onto three main roads i.e. Jalan Batu Lintang, Jalan Bakar Arang and Jalan Lencongan Barat.
The subject Property is currently tenanted to and occupied by GCH Retail (Malaysia) Sdn Bhd (“GCHR”) (“Tenant”) (the “Existing Tenancy”) whose principal activities are the operation of hypermarket under the name ‘Giant’, pursuant to the Lease Agreement.
GCHR has agreed to lease the Property for a fixed period of nine (9) years (hereinafter defined as the "Guaranteed Period") at a monthly rental of RM241,500 per month based on RM1.75p.s.f. for the first three years on the net lettable area of 138,000 sq. ft. (subject to final survey) with rental step-up every subsequent three (3) years at the rate of RM1.93p.s.f. for the 2nd three (3) years and RM2.12p.s.f. for the 3rd three (3) years. GCHR may renew the tenancy for two (2) terms of three (3) years (collectively the "Renewed Sub Terms" and respectively the "Second Sub Term" and "Third Sub Term") after the expiry of the Guaranteed Period at the rate of RM2.33p.s.f. the Second Sub term and RM2.56p.s.f. for the Third Sub Term.
Further details are set out below:
| Property Address | : | Giant Hypermarket (Sungai Petani), Jalan Lencongan Barat, 08000 Sungei Petani, Kedah Darul Aman |
| Tenure | : | Freehold |
| Total Land Area | : | 34,027 square metres. |
Single Storey Warehouse
| - Main building - Mall Area/ utility/ office - Office section/ store etc - Verandah and loading Pump House Guard House (2 nos) | : | 120,260 square feet 49, 160 square feet 19,050 square feet 10,360 square feet 560 square feet 86 square feet |
| Total Gross Floor Area | : | 199,476 square feet |
| Age Of Building | : | 5 months (approximately) |
| Occupancy as at 26 July 2007 | : | 100% |
2.1 Purchase price
The total lump sum cash consideration for the Property of RM 38,000,000 (“Purchase Price”) is payable in the following manner:-
(b) Upon execution of the SPA, RM 3,040,000 (hereinafter called the “Balance Deposit”) being the equivalent to 8% of the Purchase Price shall be paid by OSK to Vendor; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 34,200,000 (hereinafter called the “Balance Purchase Price”) less the Redemption Sum (as defined in the SPA), owing by Vendor to OCBC Bank (Malaysia) Berhad shall be paid by OSK to Vendor’s Solicitors as stakeholders within the Completion Period being three (3) months from the unconditional date of the SPA (“the Completion Period”) with a further extension of thirty (30) days subject to interest at a rate of 8% per annum calculated on a daily basis (“the Extended Completion Date”).
- Upon the execution of the SPA, Vendor shall execute a valid Memorandum of Transfer and stamping proforma for the purpose of effecting the transfer of the Property in favour of OSK free from all encumbrances and deposit the same with OSK’s solicitors as stakeholders, who shall submit the Memorandum of Transfer for assessment of stamp duty and hold the same as stakeholders and deal with the Memorandum of Transfer on the terms and conditions as set out therein.
The sale and purchase of the said Property shall be conditional upon the following being obtained or fulfilled within three (3) months from the date of the SPA or such other extended period that may be mutually agreed between the parties in writing (hereinafter called the “Conditional Period”):-
(a) the due execution in escrow of the Novation Agreement by the Tenant, consenting to the novation and/or assignment of all rights, benefits and interest of the Lease Agreement and the Agreement to Build and Let from the Vendor to OSK;
(b) the approval of the shareholders, of the Vendor (if applicable); and
(c) written confirmation from the Vendor, as at the date the last of all the above conditions precedent having been fulfilled, that it has not received any notification from the Tenant for the early termination of the Lease Agreement.
2.3 Salient Terms of the Novation Agreement (“Novation”)
The Vendor as beneficial owner of all rights, titles, interests and benefits under and in respect of the Lease Agreement AGREES TO NOVATE, TRANSFER AND ASSIGN absolutely to OSK all the Vendor’s rights, title and interest under the Lease Agreement and the Agreement to Build and Let and the full rights, interest and benefits granted thereby together with the transfer of all liabilities and obligations and all stipulations therein contained and all remedies for enforcing the same free from encumbrances to HOLD the same unto OSK absolutely and as if OSK was the person named in place of the Vendor under the Lease Agreement and the Agreement to Build and Let, which novation, transfer and assignment herein shall take effect on the Completion Date of the SPA and conditional upon the completion of the SPA.
- The Purchase Price for the Property is derived on a willing-buyer willing-seller basis after taking into account the total combined market value of the Property of RM 38,000,000 as appraised by REGROUP Associates, an independent firm of registered valuers in its valuation report dated 6 June 2007. The valuation is derived using a combination of investment and cost methods of valuation.
- Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
3. INFORMATION ON THE VENDOR
Raya Pegun Sdn Bhd (Co. No. 705774-W), a private limited company incorporated under the laws of Malaysia with its registered office at Level 15-2 Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur whose principal activities includes selling and dealing with land. Its authorized share capital is RM100,000 divided into 100,000 Ordinary Shares of RM 1.00 each and the issued share capital is RM100,000 divided into 100,000 Ordinary Shares of RM 1.00 each. The shareholdings in RPSB are as follows:-
 | No. of Ordinary Shares of RM1.00 each |
| Diversified Rewards Sdn Bhd | 100,000 |
ARMB, the management company of Axis-REIT, objective is to continuously pursue an acquisition strategy that meet the Manager’s investment criteria with a view to provide Unitholders with stable, long-term and sustainable distribution of income and achieve growth in net asset value (“NAV”) per unit of the Fund. The Purchase Price for the Property is fully supported by the independent valuation conducted by REGROUP Associates. The Proposed Acquisition of the Property 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 with recurring rental income and potential for revenue and capital growth.
5.1 Unit Capital and Substantial Unitholders’ Unitholding
The Proposed Acquisition of the Property 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.
The Proposed Acquisition will have no impact or changes to the unaudited NAV of Axis-REIT at the time of completion.
The Directors of ARMB expect the Proposed Acquisition of the Property to contribute positively to the earnings of the Fund for the financial year ending 31 December 2007.
ARMB intends to utilize debt facility of approximately RM 38,000,000 from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 28.03% of the 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.
6. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITION OF THE PROPERTY
- 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 Property is not subject to approval by the Securities Commission.
7. RELATED PARTY DEALINGS IN RESPECT OF PROPOSED ACQUISITION OF THE
PROPERTY
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 Property.
8. DIRECTORS’ STATEMENT
9. RISK FACTORS
The Property may be subject to certain risks inherent in the property market industry. These include but not limited to the following:-
- (a) Non-fulfillment of the conditions precedent stipulated in the SPA;
(b) Non registration of the transfer of the subject property;
(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) 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(s) 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
- The Proposed Acquisition of the Property is expected to be completed by the end of October 2007.
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:-
(a) The SPA on the Proposed Acquisition of the Property; and
(b) Valuation report on the Property prepared by REGROUP Associates dated
6 June 2007.
This announcement is dated 26 July 2007.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 26 Jul 2007 |
| Category | General Announcement |
| Reference No | CC-070725-73AEB |
