PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A PARCEL OF INDUSTRIAL LAND PRESENTLY BUILT UPON WITH A 2-STOREY OFFICE BUILDING, AN ANNEXED SINGLE STOREY WAREHOUSE AND OTHER SUPPORTING STRUCTURES KNOWN AS ‘NESTLE WAREHOUSE’ (THE "PROPERTY") FROM INNONATURE (M) SDN BHD (CO. NO. 232877-W) FOR A TOTAL LUMP SUM CONSIDERATION OF RM7,200,000 ("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 PARCEL OF INDUSTRIAL LAND PRESENTLY BUILT UPON WITH A 2-STOREY OFFICE BUILDING, AN ANNEXED SINGLE STOREY WAREHOUSE AND OTHER SUPPORTING STRUCTURES KNOWN AS ‘NESTLE WAREHOUSE’ (THE "PROPERTY") FROM INNONATURE (M) SDN BHD (CO. NO. 232877-W) FOR A TOTAL LUMP SUM CONSIDERATION OF RM7,200,000 ("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 IMSB on 26 July 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 trustee for Axis-REIT, has approved the Proposed Acquisition of the Property, vide their letter dated 18 July 2007.
The Property is located within the Subang Hi-Tech Industrial Park which lies in the Municipality of Subang Jaya approximately 20 kilometres south-east of the City Centre of Kuala Lumpur. It has a primary frontage onto the eastern side of Jalan Delima 1/1 which is the main access road serving the Subang Hi-Tech Industrial Park.
The site of the Property comprises a rectangular shaped parcel of industrial land with a title land area of 9,100 square metres (97,952 square feet). The Nestle Warehouse comprises a 2-storey office building, an annexed single storey warehouse with a 2-storey office section sheltered under its main roof and other supporting structures.
The Property is currently tenanted to and occupied by Nestle Products Sdn Bhd (Co. No. 45229-H) (“Tenant”). Simultaneously with the execution of the SPA, the Vendor will cause the Tenant to execute a lease agreement with OSK, as trustee for Axis-REIT (hereinafter called the “Lease Agreement”) in escrow and the Lease Agreement will be deemed to have commenced on the completion date, as defined in the SPA.
Further details are set out below:
| Property Address | : | Lot.14, Jalan Delima 1/1, Subang Hi-Tech Industrial Park Batu Tiga, 40000 Shah Alam Selangor Darul Ehsan |
| Title Details | : | GRN 86529/Lot 38554 Pekan Country Height Mukim of Damansara District of Petaling Selangor Darul Ehsan |
| Tenure | : | Freehold |
| Total Land Area | : | 9,100 sq. m. (97,952 square feet) |
| Gross Floor Area | : | Office Building - 8,500 sq.ft Warehouse - 8,360 sq.ft Office section within Warehouse- 11,180 sq.ft |
| Lettable Floor Area | : | Office Section - 19,288 sq.ft Warehouse Section - 8,266 sq.ft |
| Age of Building | : | 12 years (approximately) |
| Occupancy as at 26 July 2007 | : | 100.00% |
2.1 Purchase price
The total lump sum cash consideration for the Property of RM 7,200,000 (“Purchase Price”) is payable in the following manner:-
(b) Upon execution of the SPA, RM 576,000 being the equivalent to 8% of the Purchase Price (“Balance Deposit”) has been paid by OSK to IMSB; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM6,480,000 shall be paid by OSK to IMSB’s appointed stakeholders, as stakeholders within thirty (30) days from the delivery of the original issue document of title, duplicate charge, discharge documents and other transfer documents to OSK’s solicitors (“the Completion Period”) with a right to an extension of one (1) month subject to interest payable to the Vendor at a rate of 8% per annum calculated on a daily basis (“the Extended Completion Date”).
- Upon the execution of the SPA, the 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 within such time deemed expedient, submit the Memorandum of Transfer for assessment of stamp duty and hold the same as stakeholders to deal with the Memorandum of Transfer on the terms and conditions as set out therein.
2.2 Basis of the Purchase Price for the Property
- The Purchase Price for the Property is derived on a willing-buyer willing-seller basis after taking into account the total market value of the Property of RM 7,500,000 as appraised by REGROUP Associates, an independent firm of registered valuers in its valuation report dated 29 May 2007. The valuation is derived using a combination of investment and comparison methods of valuation.
- Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
3. INFORMATION ON THE VENDOR
 | No. of Ordinary Shares of RM1.00 each |
| Sullivan Joseph O’Carroll (Trustee for Nestle @ Malaysia Expatriate Provident Fund) | 2,500,000 |
| Sullivan Joseph O’Carroll (Trustee for Nestle @ Malaysia Group Retirement Scheme) | 7,000,000 |
- NPSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 whose activities are in the manufacturing, marketing, distribution and the sale, both locally and for export internationally well-known food products. NPSB is a wholly owned subsidiary of Nestle (Malaysia) Berhad (Co. No. 110925-W).
- (i) The lease term shall be a fixed term of six (6) years from the commencement date (“Lease Term”). The agreed rental for the first period of three (3) years from the Commencement Date (“Initial Period”) is the sum of Ringgit Fifty One Thousand Two Hundred and Fifty (RM 51,250) only per month, calculated based on lettable floor area of RM 2.10 per sq.ft for the Office and RM 1.30 per sq.ft for the Warehouse space.
(ii) For the three year (3) year period from the expiry of the Initial Period, the agreed rental will be Ringgit Malaysia Fifty Seven Thousand Three Hundred and Twelve (RM 57,312) only per month, calculated based on lettable floor area of RM 2.35 per sq.ft for the Office and RM 1.45 per sq.ft for the Warehouse space.
(iii) NPSB may renew the tenancy for two (2) terms of three (3) years each ( collectively the “Renewed Periods” and respectively the “First Renewed Period” and “Second Renewed Period” ) after the expiry of the Lease Term . The monthly rental for the Renewed Periods will be negotiated between OSK and NPSB based on the prevailing market rate and to be mutually agreed between the parties at least one (1) month prior to the expiry of the Lease Term or the First Renewed Period, as the case maybe.
ARMB’s, 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.
6.1 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 of the Property 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.
6.4 Gearing
ARMB intends to utilize debt facility of approximately RM7,200,000 from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 22.74% 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.
- 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.
8. 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.
9. DIRECTORS’ STATEMENT
10. 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 registration of the transfer of the Property;
(b) Compulsory acquisition by the Government;
(c) Non-renewal of tenancy after expiry
(d) Adverse changes in national or economic conditions;
(e) Adverse local market conditions;
(f) Changes in environmental laws and regulations, zoning laws and other governmental
rules and fiscal policies;
(g) 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;
(h) Competition among property owners for tenants;
(i) Illiquidity of real estate investments; and
(j) Acts of God, uninsurable losses and other factors.
11. ESTIMATED TIMEFRAME FOR COMPLETION
- The Proposed Acquisition of the Property is expected to be completed by the end of August or latest by the end of September 2007.
12. 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:-
· The SPA on the Proposed Acquisition of the Property; and
· Valuation report on the Property prepared by REGROUP Associates dated 29 May 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-070726-EF63A |
