PROPOSED ACQUISITION & LEASE BACK OF A LEASEHOLD INDUSTRIAL PROPERTY FROM NIRO CERAMIC (M) SDN BHD FOR RM14.50 MILLION
| AXIS REAL ESTATE INVESTMENT TRUST |
| Type | Announcement |
| Subject | PROPOSED ACQUISITION & LEASE BACK OF A LEASEHOLD INDUSTRIAL PROPERTY FROM NIRO CERAMIC (M) SDN BHD FOR RM14.50 MILLION |
| Contents | Proposed Acquisition by Axis Real Estate Investment Trust (“Axis-REIT” or the “Fund”) of a leasehold industrial property comprising a single storey warehouse building with a 3-storey office together with guard house and ancillary buildings with a gross built-up area of approximately 171,000 sq.feet held under Title No. H.S.(D) 330804 PTD 163163 in the Mukim of Plentong District of Johor Bahru, State of Johor measuring approximately 2.4305 hectares (the “Property”) which 60 years’ leasehold tenure will be expiring on 29 March 2051, from Niro Ceramic (M) Sdn Bhd (No. 169869-M) for a total lump sum cash consideration of RM 14.5 Million (“Proposed Acquisition of the Property”) & lease back to Niro Ceramic (M) Sdn Bhd (“Proposed Acquisition & Lease Back 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 and Lease Back of the property on behalf of Axis-REIT:
2.1 Salient terms and conditions of the Proposed Acquisition & Lease Back of the Property
(i) The total lump sum cash consideration for the Property of RM 14.5 million (“Purchase Price”) is payable in the following manner:-
(a) A total sum of RM 290,000.00 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 OSK’s solicitors prior to the execution of the SPA to be released to NCMSB simultaneously with the execution of the SPA;
(b) Upon execution of the SPA, RM 1,160,000.00 being the equivalent to 8% of the Purchase Price shall be paid by OSK to NCMSB; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 13,050,000.00 shall be paid by OSK to the NCMSB’s appointed solicitors (“Vendor’s Solicitors”) to be held as stakeholders, on or before the expiry of three months from the date of the SPA (hereinafter called 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 Lease Agreement (“Lease")
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 14.5 million as appraised by Regroup Associates (J) Sdn Bhd, an independent firm of registered valuers in its valuation report dated 19 December 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 Niro Ceramic (M) Sdn Bhd (“NCMSB”)
NCMSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 11 April 1988. NCMSB is principally involved in the manufacturing and trading of ceramic tiles. As at to-date, its authorized capital is RM 50,000,000 divided into 50,000,000 ordinary shares of RM 1.00 each and its issued and paid-up capital is RM 36,146,175 only. The registered office of NCMSB is at Level 14, Uptown 1, No. 1, Jalan SS21/58, Damansara Uptown, Petaling Jaya, Selangor Darul Ehsan.
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 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 RM 14.50 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 24.1% 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 by the end of April 2008.
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 19 December 2007.
This announcement is dated 31 January 2008.
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 and Lease Back of the property on behalf of Axis-REIT:
1.1 Proposed Acquisition & Lease Back of the Property
Axis-REIT proposes to acquire the Property for a total lump sum cash consideration of RM 14.5 Million from Niro Ceramic (M) Sdn Bhd (“NCMSB”) and to enter into a lease back arrangement with NCMSB.
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 NCMSB 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.
Further details are set out below:
| Property’s address | : | PLO 419-421, Jalan Emas 2 Pasir Gudang Industrial Estate 81700 Pasir Gudang Johor Darul Takzim |
| Tenure | : | Leasehold interest for 60 years expiring on 29 March 2051, leaving an unexpired term of about 43 years |
| Total Land area | : | 2.4305 hectares approximately |
| Total Built-Up area | : | 171,000 square feet approximately |
| Approximate age of building | : | 5 years |
| Occupancy as at 31 January 2008 | : | 100.00% |
2.1 Salient terms and conditions of the Proposed Acquisition & Lease Back of the Property
(i) The total lump sum cash consideration for the Property of RM 14.5 million (“Purchase Price”) is payable in the following manner:-
(a) A total sum of RM 290,000.00 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 OSK’s solicitors prior to the execution of the SPA to be released to NCMSB simultaneously with the execution of the SPA;
(b) Upon execution of the SPA, RM 1,160,000.00 being the equivalent to 8% of the Purchase Price shall be paid by OSK to NCMSB; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 13,050,000.00 shall be paid by OSK to the NCMSB’s appointed solicitors (“Vendor’s Solicitors”) to be held as stakeholders, on or before the expiry of three months from the date of the SPA (hereinafter called 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 Lease Agreement (“Lease")
- Simultaneously with the execution of the SPA, NCMSB will execute a Lease Agreement (upon the format agreed under the terms of the SPA) and deposit the same with the Vendor’s Solicitors with instructions to date and effect the same on Completion Date (as defined in the SPA). The principal terms of the Lease are as follows:-
- (a) A fixed term of six (6) years from the Completion Date (“Lease Term"). The agreed monthly rental for the first period of three (3) years of the Lease Term from the Completion Date (“Initial Period”) shall be RM 130,000.00 per month and for the three (3) years from the expiry of the Initial Period up to the expiry of the Lease Term shall be RM 139,750 per month.
- (b) Renewal option at the end of the Lease Term shall be a further six (6) years (“Renewed Lease Term”) and the monthly rental to be renegotiated and mutually agreed upon by the parties, based on the then prevailing market rental in the vicinity but in any event shall not exceed twelve per centum (12%) of the current rental rate, at least one (1) month prior to the expiry of the Lease Term subject to such rental being reviewed by OSK at the end of the first three (3) years of the Renewed Lease Term based on the same formula.
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 14.5 million as appraised by Regroup Associates (J) Sdn Bhd, an independent firm of registered valuers in its valuation report dated 19 December 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 Niro Ceramic (M) Sdn Bhd (“NCMSB”)
NCMSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 11 April 1988. NCMSB is principally involved in the manufacturing and trading of ceramic tiles. As at to-date, its authorized capital is RM 50,000,000 divided into 50,000,000 ordinary shares of RM 1.00 each and its issued and paid-up capital is RM 36,146,175 only. The registered office of NCMSB is at Level 14, Uptown 1, No. 1, Jalan SS21/58, Damansara Uptown, Petaling Jaya, Selangor Darul Ehsan.
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 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 RM 14.50 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 24.1% 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 by the end of April 2008.
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 19 December 2007.
This announcement is dated 31 January 2008.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 31 Jan 2008 |
| Category | General Announcement |
| Reference No | CCS-080131-69676 |
