AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" or "the Fund") - PROPOSED ACQUISITION OF A FREEHOLD INDUSTRIAL FACTORY ON PART OF LOT NO. 211 MUKIM OF SENAI-KULAI, JOHOR BAHRU FROM WELL-BUILT HOLDINGS SDN BHD FOR RM14.0 MILLION
| AXIS REAL ESTATE INVESTMENT TRUST |
| Type | Announcement |
| Subject | AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" or "the Fund") - PROPOSED ACQUISITION OF A FREEHOLD INDUSTRIAL FACTORY ON PART OF LOT NO. 211 MUKIM OF SENAI-KULAI, JOHOR BAHRU FROM WELL-BUILT HOLDINGS SDN BHD FOR RM14.0 MILLION |
| Contents | PROPOSED ACQUISITION BY Axis-REIT OF A FREEHOLD INDUSTRIAL FACTORY WITH ANCILLARY BUILDINGS WITH AN APPROXIMATE BUILT-UP AREA OF 11,657.10 SQ. METRES ERECTED ON PART OF LOT NO. 211 MUKIM OF SENAI-KULAI, DISTRICT OF JOHOR BAHRU MEASURING APPROXIMATELY 5.335 ACRES (2.159 HECTARES), HELD UNDER MASTER TITLE GM 1171 FOR LOT 211, IN TEMPAT SEELONG, MUKIM SENAI-KULAI DAERAH KULAI STATE OF JOHOR (THE “PROPERTY”) FROM WELL-BUILT HOLDINGS SDN BHD (NO. 366020-V) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 14.0 MILLION (“PROPOSED ACQUISITION OF THE PROPERTY”) |
1. INTRODUCTION
2. DETAILS OF THE PROPOSED ACQUISITION OF THE PROPERTY
2.2 Conditions Precedent and Novation Agreement (“Novation’)
3. INFORMATION ON THE VENDOR
4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTY
7. RISK FACTORS
8. ESTIMATED TIMEFRAME FOR COMPLETION
9. DOCUMENTS FOR INSPECTION
- 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 14.0 Million from Well-Built Holdings Sdn Bhd (“WBHSB”).
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 WBHSB on 1 April 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 30 October 2007.
1.2 Information on the Property
The subject Property is situated about 5 kilometres to the north of Senai town and about 26 kilometres to the north-west of Johor Bahru City Centre which lie within the Iskandar Development Region.
- The subject Property is currently tenanted to and occupied by Celestica (AMS) Sdn. Bhd (formerly known as MSL Technology Services (Malaysia) Sdn Bhd (Co. No. 332253-K) (“CASB” or “Tenant”)) pursuant to a tenancy agreement dated 10 November 2006 and a supplemental letter of agreement dated 10 May 2007 (the “Tenancy Agreement”), for a three (3) years tenancy commencing on 15 March 2007 and expiring 14 March 2010 at the monthly rental of RM112,928.40.
There is an option to further renew the tenancy for a further 2 terms of three years each at the expiry of the tenancy on 14 March 2010.
- CASB is a company whose principal activity is the manufacture of electronics products and inkjet cartridges.
Further details are set out below:
| Property’s address | : | Lot No. 211, Jalan Seelong 81400 Senai Johor |
| Tenure | : | Freehold |
| Total Land area | : | 5.335 acres approximately |
| Built-Up area | : | 125,476 sq. ft. approximately |
| Approximate age of building | : | 1 year |
 | | |
| Occupancy as at 1 April 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
(a) A total sum of RM 280,000.00 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 WBHSB’s solicitors as stakeholders prior to the execution of the SPA;
(b) A total sum of RM 1,120,000.00 being the equivalent to 8% of the Purchase Price (“Balance Deposit”) shall be paid by OSK to WBHSB’s solicitors as stakeholders within five (5) working days upon the issuance of the subdivided title to the Property (“Issuance Date”); and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 12,600,000.00 shall be paid by OSK to WBHSB’s solicitor 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, whichever date is later provided that the valuation date shall not be later than four (4) months from the 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”).
(ii) Within one (1) month from the execution of the SPA, WBHSB 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’)
- WBHSB shall within a period of three (3) months from the date the SPA with a further extension of another three (3) months (“ Conditional Period”) procure the fulfilment and compliance of the following conditions precedent:-
- (a) the approval of the Subdivision Application (as defined in the SPA) and the issuance of separate issue documents of title for the Property;
(b) 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 Tenancy Agreement from WBHSB to OSK; and
- (c) written confirmation from the Vendor, as at the date the above conditions precedent having been fulfilled, that it has not received any notification from the Tenant for the early termination of the Existing Tenancy,
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 15.0 million as appraised by Param & Associates, an independent firm of registered valuers in its valuation report dated 10 December 2007. The valuation is derived using a combination of comparison, cost 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 Well-Built Holdings Sdn Bhd (“WBHSB”)
WBHSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 7 November 1995. WBHSB is principally a property 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 RM500,00.00 only. The registered office of WBHSB is at Suite 12.15, 12th floor, Menara TJB, 9 Jalan Syed Mohd. Mufti, 80000 Johor Bahru, Johor .
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 2008.
5.4 Gearing
- ARMB intends to utilise debt facility of approximately RM14.0 million from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 37.6% of audited total assets as at 31 December 2007, 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;
(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
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 10 December 2007.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 1 Apr 2008 |
| Category | General Announcement |
| Reference No | CCS-080401-192EF |
