PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A FIVE STOREY OFFICE CUM FLATTED FACTORY, WITH MEZZANINE FLOOR AND A TWO (2) LEVEL BASEMENT CAR PARK WITH AN APPROXIMATE LETTABLE AREA OF 104,903 SQ.FT ERECTED ON LAND UNDER A 99 YEARS LEASEHOLD TITLE NO. PN 29932 FOR LOT 84 SEKSYEN 13 (FORMERLY H.S.(D) 97253, P.T. 3), BANDAR PETALING JAYA, DAERAH PETALING, NEGERI SELANGOR MEASURING APPROXIMATELY 49,675 SQ. FT. (THE "PROPERTY") EXPIRING ON 21 OCTOBER 2068, FROM WAH SEONG INDUSTRIAL HOLDINGS SDN BHD (NO. 213453-T) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 37.0 MILLION ("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 FIVE STOREY OFFICE CUM FLATTED FACTORY, WITH MEZZANINE FLOOR AND A TWO (2) LEVEL BASEMENT CAR PARK WITH AN APPROXIMATE LETTABLE AREA OF 104,903 SQ.FT ERECTED ON LAND UNDER A 99 YEARS LEASEHOLD TITLE NO. PN 29932 FOR LOT 84 SEKSYEN 13 (FORMERLY H.S.(D) 97253, P.T. 3), BANDAR PETALING JAYA, DAERAH PETALING, NEGERI SELANGOR MEASURING APPROXIMATELY 49,675 SQ. FT. (THE "PROPERTY") EXPIRING ON 21 OCTOBER 2068, FROM WAH SEONG INDUSTRIAL HOLDINGS SDN BHD (NO. 213453-T) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 37.0 MILLION ("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:
1.1 Proposed Acquisition of the Property
Axis-REIT proposes to acquire the Property for a total lump sum cash consideration of RM 37.0 Million from Wah Seong Industrial Holdings Sdn Bhd (“WSIHSB”).
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 WSIHSB on 12 October 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 Property, vide their letter dated 10 October 2007.
1.2 Information on the Property
The subject Property is situated within the industrial neighbourhood of Section 13, Petaling Jaya. The locality is predominantly spread with flatted industrial developments interspersed with several commercial and institutional concerns. Commercial developments in the vicinity include the newly completed Jaya 33, Menara Bakti, Jaya Supermarket and 32 Square.
- The subject Property is currently tenanted to and occupied by Kompakar CRC Sdn Bhd (“KCRCSB” or “Tenant”) formerly known as Computer Recovery Centre Sdn Bhd (Company No: 187200-W) (the “Existing Tenancy”) pursuant to an Agreement to Lease dated 28th November 1996 and a registered lease in respect of the whole of the Property for nine (9) years, from 23rd November 1998 to 22nd November 2007 pursuant to the Memorandum of Lease and the Annexure dated the 22nd March 1999 (collectively the “Registered CRC Lease”).
A new Tenancy Agreement dated the 7th March 2007 (the “Tenancy Agreement”) for a new term of three (3) years commencing 23rd November 2007 (the “Tenancy Term”) has been duly executed by KCRCSB at a monthly rental of RM 267,502.65 based on RM 2.55 per square feet per month. There is provision for an option on the part of KCRCSB to further renew for another three (3) years (the “Option Period”) at a rental of RM 2.90 per square feet per month. KCRCSB must give notice of intention to renew or not to renew the Tenancy Term for the Option Period, at least 24 months prior to the expiry of the Tenancy Term, failing which KCRCSB shall be deemed to have exercised its option to renew the tenancy for the Option Period and the new tenancy rate shall be automatically applicable for the Option Period.
KCRCSB is a specialist in Managed Services and Business Continuity Solutions since 1989 offering a variety of services spanning across the Information Availability Continuum.
Further details are set out below:
| Property’s address | : | No. 12, Jalan Bersatu 13/4, Section 13, 46200 Petaling Jaya, Selangor Darul Ehsan |
| Tenure | : | Leasehold interest for 99 years expiring on 21 October 2068, leaving an unexpired term of about 61 years |
| Total Land area | : | 4,615 square metres (49,675 square feet) |
| Gross floor area Lettable Area | : : | 14,737.67 square metres (158,635 square feet) approximately 9,745.81 square metres (104,903 square feet) approximately |
| Approximate age of building | : | 9 years |
| Occupancy as at 12 October 2007 | : | 100.00% |
2. DETAILS OF THE PROPOSED ACQUISITION OF THE PROPERTY
- 2.1 Salient terms and conditions of the Proposed Acquisition of the Property
- (a) A total sum of RM 740,000.00 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 WSIHSB prior to the execution of the SPA;
(b) Upon execution of the SPA, RM 2,960,000.00 being the equivalent to 8% of the Purchase Price shall be paid by OSK to WSIHSB; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 33,300,000.00 shall be paid by OSK to the Vendor’s Stakeholders named in the SPA, to be held 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")
- WSIHSB shall within the conditional period provided in the SPA, cause all parties to execute the Novation between WSIHSB, OSK and KCRCSB in escrow and deposit the same with OSK’s solicitors as stakeholders and to be released to OSK on the Completion Date (as defined in the SPA).
The other conditions precedent of the SPA and the principal terms of the Novation, include the following:-
(a) That WSIHSB shall assign 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 on the Completion Date (as defined in the SPA);
(b) The approval of the shareholders the WSIHSB and/or its holding company (if applicable);
(c) That WSIHSB shall obtain in writing the letter of consent from Tenaga Nasional Berhad and KCRCSB addressed to the respective land office consenting to the registration of the Memorandum of Transfer in favour of OSK;
(d) Written confirmation from WSIHSB that it has not received any notification from KCRCSB for the early termination of its existing tenancy; and
(e) The repairs and rectification works more particularly stipulated in Schedule 4 of the SPA (the “said Repairs”) being effected and completed by WSIHSB to the reasonable satisfaction of OSK, provided the cost of such repairs shall not exceed RM 125,000 only.
2.3 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 combined market value of the Property of RM 38.0 million as appraised by Param & Associates, an independent firm of registered valuers in its valuation report dated 17 September 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 Property.
- The Proposed Acquisition of the Property will be funded by existing bank borrowings of Axis-REIT.
3. INFORMATION ON THE VENDOR
3.1 Wah Seong Industrial Holdings Sdn Bhd (“WSIHSB”)
WSIHSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 7 March 1991. WSIHSB is a wholly owned subsidiary of Wah Seong Corporation Berhad (Company No: 495846-A) which is a public company incorporated in Malaysia under the Companies Act, 1965 and listed on Bursa Malaysia Securities Berhad. WSIHSB is principally an investment and property holding company and is also involved in the provision of management services. As at to-date, its authorized capital is RM 100,000,000 divided into 100,000,000 ordinary shares of RM 1.00 each and its issued and paid-up capital is RM 54,150,000 only. The registered office of WSIHSB is at Suite 2-1, 2nd Floor, Menara Penang Garden, 42A, Jalan Sultan Ahmad Shah, 10050 Pulau Pinang.
4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTY
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 Property is fully supported by the independent valuation conducted on the same by Param & Associates. The Proposed Acquisition of the Property will be accretive to Axis-REIT’s distributable income. 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 from economies of scale.
- 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.
5.2 NAV
- 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, if completion may be effected prior thereof.
5.4 Gearing
- ARMB intends to utilise debt facility of approximately RM 37.0 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 27.87 % 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 Property is not subject to approval by the Securities Commission.
7. 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-fulfilment 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) 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;
(j) Competition among property owners for tenants;
(k) Illiquidity of real estate investments; and
(l) Acts of God, uninsurable losses and other factors.
8. ESTIMATED TIMEFRAME FOR COMPLETION
9. 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 Property; and
(ii) Valuation report on the Property prepared by Param & Associates dated 17 September
- 2007.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 12 Oct 2007 |
| Category | General Announcement |
| Reference No | CC-071012-0D8C7 |
