BURSA ANNOUNCEMENTS

 

Date : 31 January 2008

PROPOSED ACQUISITION OF A LEASEHOLD INDUSTRIAL PROPERTY FROM ORIENTAL PULSE SDN BHD FOR RM12.50 MILLION

AXIS REAL ESTATE INVESTMENT TRUST

TypeAnnouncement
SubjectPROPOSED ACQUISITION OF A LEASEHOLD INDUSTRIAL PROPERTY FROM ORIENTAL PULSE SDN BHD FOR RM12.50 MILLION
ContentsProposed Acquisition By Axis Real Estate Investment Trust (“Axis-REIT” or the “Fund”) of a leasehold industrial property comprising a single storey detached factory, with ancillary buildings with an approximate built-up area of 12,145.24 sq. metres erected on land held under H.S.(D) 437877 for PTD 190745 in the Mukim of Plentong, Daerah of Johor Bahru, State of Johor measuring approximately 20,240.226 sq. metres (the “Property”) which 60 years’ leasehold tenure will be expiring on 23 January 2067 from Oriental Pulse Sdn Bhd (No. 627687-X) for a total lump sum cash consideration of RM 12.5 Million (“Proposed Acquisition of the Property”)
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 12.5 Million from Oriental Pulse Sdn Bhd (“OPSB”).

          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 OPSB on 31 January 2008 (“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 8 January 2008.
      1.2 Information on the Property

      The subject Property is situated within the Pasir Gudang Industrial Area developed by the Johor State Economic Development Corporation and lies about 35 kilometres to the north-east of the Johor Bahru city centre.
          The subject Property is currently tenanted to and occupied by Delfi Cocoa (Malaysia) Sdn Bhd (Co. No. 524708-X) (“DCMSB” or “Tenant”) pursuant to a Tenancy Agreement dated 23rd February 2006 and Extension Tenancy Letter dated 12th December 2006 (the “Existing Tenancy”), in which the tenancy was renewed for a further three (3) years commencing 1 January 2007 and expiring 31st December 2009 at the monthly rental of RM108,864.00.

          DCMSB is a company whose principal activity is the manufacture and trading in industrial cocoa ingredients.

          Further details are set out below:
Property’s address:PLO 563 Jalan Keluli 8,
Pasir Gudang Industrial Estate
81700 Pasir Gudang
Johor
Tenure:Leasehold interest for 60 years expiring on 23 January 2067, leaving an unexpired term of about 59 years
Total Land area:20,240.226 square metres approximately
Built-Up area:12,145.24 square metres approximately
Approximate age of building :2 years
Occupancy as at 31 January 2008 :100.00%
    2. DETAILS OF THE PROPOSED ACQUISITION OF THE PROPERTY
        2.1 Salient terms and conditions of the Proposed Acquisition of the Property
              (i) The total lump sum cash consideration for the Property of RM 12.5 million (“Purchase Price”) is payable in the following manner:-
                  (a) A total sum of RM 250,000.00 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 OPSB’s appointed solicitors (“Vendor’s Solicitors”) as stakeholders prior to the execution of the SPA;

                  (b) Upon execution of the SPA, RM 1,000,000.00 being the equivalent to 8% of the Purchase Price shall be paid by OSK to the Vendor’s Solicitors as stakeholders; and

                  (c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 11,250,000.00 shall be paid by OSK to the Vendor’s Solicitors to be held as stakeholders, within thirty (30) days from the unconditional date of the SPA or the valuation date of the Memorandum of Transfer by the Johor land office, whichever date is later (“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”).
      (ii) Upon the execution of the SPA, OPSB shall submit the Memorandum of Transfer to the relevant stamp office for the endorsement of stamp duty exemption on the Memorandum of Transfer pursuant to Stamp Duty (exemption)(No.4) order 2004 and thereafter to submit the Memorandum of Transfer or copies thereof to the relevant land office in Johor for valuation of the said Property to ascertain the registration fees payable to the relevant land office in Johor to enable the presentation of the Memorandum of Transfer and hold the same as stakeholders to deal with a Memorandum of Transfer on the terms and conditions as set out therein.

      2.2 Conditions Precedent and Novation Agreement (“Novation")
              OPSB shall within a period of six (6) months from the date the SPA (“Conditional Period”) procure the fulfilment and compliance of the following conditions precedent:-

              (a) the due execution in escrow of the Novation Agreement between OPSB, OSK and DCMSB and deposit the same with the Vendor’s Solicitors as stakeholders pending completion;

              (b) the consent to transfer being obtained from the relevant state authority for the transfer of the Property to OSK; and

              (c) written confirmation from OPSB that it has not received any notification from DCMSB for the early termination of the Existing Tenancy.

          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 market value of the Property of RM 13.5 million as appraised by Regroup Associates (J) Sdn Bhd, an independent firm of registered valuers in its valuation report dated 7 November 2007. The valuation is derived using a combination of cost and investment methods of valuation.
      2.4 Liabilities to be assumed by Axis-REIT

          Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
        2.5 Source of funding
                The Proposed Acquisition of the Property will be funded by existing bank borrowings of Axis-REIT.

        3. INFORMATION ON THE VENDOR

            3.1 Oriental Pulse Sdn Bhd (“OPSB”)

                OPSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 10 September 2003. OPSB is principally an investment holding company. As at to-date, its authorized capital is RM 500,000.00 divided into 500,000 ordinary shares of RM 1.00 each and its issued and paid-up capital is RM 200,100 only. The registered office of OPSB is at Bilik 1A, Tingkat 15, Komtar, 80000 Johor Bahru.

        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 Regroup Associates (J) Sdn Bhd. 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. EFFECTS OF THE PROPOSED ACQUISITION OF THE PROPERTY
              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 Proposed Acquisition of the Property will have no impact or changes to the unaudited NAV of Axis-REIT at the time of completion.
                5.3 Earnings
                    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 2008.

                5.4 Gearing
                    ARMB intends to utilise debt facility of approximately RM12.50 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 23.71% 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.
            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. 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;
            (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.

            8. ESTIMATED TIMEFRAME FOR COMPLETION
                  The Proposed Acquisition of the Property is expected to be completed latest by the end of August 2008. However the same may be completed earlier in the event the conditions precedent are fulfilled or complied earlier than the expiry of the Conditional Period.

              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 Regroup Associates (J) Sdn Bhd dated 7 November 2007.
              This announcement is dated 31 January 2008.

              Announcement Info

              Company NameAXIS REAL ESTATE INVESTMENT TRUST  
              Stock Name AXREIT    
              Date Announced31 Jan 2008  
              CategoryGeneral Announcement
              Reference NoCCS-080131-6967E

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