BURSA ANNOUCEMENTS

Date : 19 May 2014

OTHERS SUNWAY REAL ESTATE INVESTMENT TRUST (“SUNREIT”) - VARIATION TO THE HOTEL MASTER LEASE DATED 29 JUNE 2011, THE FIRST SUPPLEMENTAL AGREEMENT DATED 5 JANUARY 2012 AND THE SECOND SUPPLEMENTAL AGREEMENT DATED 3 JULY 2013 BETWEEN RHB TRUSTEES BERHAD (FORMERLY KNOWN AS OSK TRUSTEES BERHAD) (AS TRUSTEE FOR SUNWAY REAL ESTATE INVESTMENT TRUST), SUNWAY REIT MANAGEMENT SDN BHD AND SUNWAY PUTRA HOTEL SDN BHD

SUNWAY REAL ESTATE INVESTMENT TRUST

TypeAnnouncement
SubjectOTHERS
DescriptionSUNWAY REAL ESTATE INVESTMENT TRUST (“SUNREIT”)
- VARIATION TO THE HOTEL MASTER LEASE DATED 29 JUNE 2011, THE FIRST SUPPLEMENTAL AGREEMENT DATED 5 JANUARY 2012 AND THE SECOND SUPPLEMENTAL AGREEMENT DATED 3 JULY 2013 BETWEEN RHB TRUSTEES BERHAD (FORMERLY KNOWN AS OSK TRUSTEES BERHAD) (AS TRUSTEE FOR SUNWAY REAL ESTATE INVESTMENT TRUST), SUNWAY REIT MANAGEMENT SDN BHD AND SUNWAY PUTRA HOTEL SDN BHD

1.   INTRODUCTION

We refer to our following announcements:-

(a)     Announcement dated 29 June 2011 in relation to the hotel master lease made between RHB Trustees Berhad (formerly known as OSK Trustees Berhad) as Trustee for SUNREIT (“the Trustee”), Sunway REIT Management Sdn Bhd as the Manager for SUNREIT (“the Manager”) and Sunway Putra Hotel Sdn Bhd (“SPHSB”), a wholly-owned subsidiary of Sunway City Sdn Bhd (“SunCity”) which in turn is a wholly-owned subsidiary of Sunway Berhad (“Sunway”) (“Hotel Master Lease”) whereby the Trustee agreed to lease out to SPHSB, the hotel consisting of 618 rooms / serviced apartments (inclusive 3 units of penthouses) located at 100 Jalan Putra, Kuala Lumpur (“Hotel”) for a term of 10 years commencing from 28 September 2011 and will end on 27 September 2021 at a total rent in accordance with the formula as stipulated in the Hotel Master Lease.

(b)     Announcements dated 5 January 2012 and 3 July 2013 in respect of the Trustee, where the Trustee, Manager and SPHSB entered into separate supplemental agreements to the Hotel Master Lease (“First Supplemental Agreement and Second Supplemental Agreement respectively”) to document the agreement reached by the parties on the guaranteed rent payable by SPHSB (“Guaranteed Rent”).

SPHSB expects that its hotel business will continue to experience adverse operating conditions due to the on-going refurbishments at the adjoining Sunway Putra Mall (“SPM”). SPHSB further expects that the adverse conditions will be further exacerbated by the refurbishment works at the adjoining Sunway Putra Tower (“SPT”) commencing from May 2014 to the 1st half calendar year 2015. In view of these circumstances, SPHSB has appealed to the Manager and the Trustee for a variation to the Guaranteed Rent for another year for the period from 1 July 2013 to 30 June 2015. Pursuant to the terms of the Second Supplemental Agreement, SPHSB has requested that the variation to the Hotel Master Lease in relation to the Guaranteed Rent for the period between 1 July 2013 to 30 June 2014 (3rd Fiscal Year) be similarly applied to the Guaranteed Rent for the period from 1 July 2013 to 30 June 2015 (“4th Fiscal Year”).  The Manager and the Trustee have agreed and consented to SPHSB’s request to vary the Guaranteed Rent for the period from 1 July 2014 to 30 June 2015 in the same manner as agreed and stated in the Second Supplemental Agreement (“Letter of Variation”).

2. APPLICABLE SALIENT TERMS OF THE SECOND SUPPLEMENTAL AGREEMENT TO THE LETTER OF VARIATION                                                                                                 

Pursuant to the Letter of Variation and the Second Supplemental Agreement, the parties agree that the Guaranteed Rent for the 4th Fiscal Year shall be as follows:

(a)      The total rent payable by SPHSB to the Trustee shall be the amount calculated in accordance with the variable rent formula under the Hotel Master Lease for the period between 1 July 2014 to 30 June 2015 (“4th Fiscal Year”). As such, the applicable amount of the Guaranteed Rent in the schedule of the First Supplemental Agreement shall not apply to the 4th Fiscal Year.

(b)      If the variable rent calculated is less than the amount of the Guaranteed Rent for the 4th Fiscal Year, the difference between the Guaranteed Rent and the Variable Rent (“differential sum”) shall be adjusted in agreed proportions from 5th Fiscal Year until the 11th Fiscal Year and added to the Guaranteed Rent from the 5th Fiscal Year until the 11th Fiscal Year. The amount of the differential sum added to the Guaranteed Rent each year from 5th Fiscal Year until the 11th Fiscal Year shall be mutually agreed and documented by the parties in writing to supplement the Second Supplemental Agreement and this Letter of Variation.

3.  INFORMATION ON SUNWAY, SUNCITY, SPHSB, THE MANAGER, THE TRUSTEE AND SUNREIT

3.1 Sunway

Sunway is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of Sunway are RM10,000,000,000/- and RM1,723,678,466 respectively. The principal activities of Sunway are investment holding and provision of management services.

3.2 SunCity

SunCity, a wholly-owned subsidiary of Sunway, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SunCity are RM3,500,000,000/- and RM251,354.14 respectively. The principal activity of SunCity is investment holding.

3.3 SPHSB

SPHSB, a wholly-owned subsidiary of SunCity which in turn is a wholly-owned subsidiary of Sunway, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SPHSB are RM100,000/- and RM10,000/- respectively. The principal activity of SPHSB is hotel business. 

3.4 The Manager

The Manager, a subsidiary of Sunway, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of the Manager are RM1,000,000/- respectively. The principal activity of the Manager is managing and administering a real estate investment fund.

3.5 The Trustee 


The Trustee is a company incorporated in Malaysia and having its registered office at
Level 10, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur. It is registered as a trust company under the Trust Companies Act, 1949.


The principal activity of the Trustee is providing professional retail and corporate trustee services.


The present authorised share capital of the Trustee is RM25,000,000 comprising 2,500,000 ordinary shares of RM10.00 each, of which 1,200,000 are currently issued and credited as partially paid-up of RM5.00 each in the Trustee.

3.6 SUNREIT

SUNREIT was established pursuant to a Deed dated 20 May 2010 (as amended by a Supplementary Deed dated 10 June 2010) entered into between the Manager and the Trustee. The principal investment policy of SUNREIT is to invest in commercial, office, industrial and other real estate assets.

4.  RATIONALE

SPHSB expects the performance of the Hotel to be adversely affected by the refurbishments at SPM and SPT whereby

       Construction works on SPT lift lobbies and restrooms will result in noise and vibration, thus affecting the hotel guestrooms as SPT and the hotel are adjoined to one another. This will indirectly cause the hotel rooms to be unsaleable.

       No proper entrance to greet arriving guests to the hotel due to renovation works at adjoining SPM and perimeter. The hotel is expected to regain a proper entrance by December 2014.

       SPHSB foresees that the construction noise, dust and condition of the construction site would discourage guests from patronising the hotel rooms, function rooms and restaurants. Lower room rates will be offered to tour group business segment to compensate for loss of corporate business.

As such SPHSB anticipates that they may not be able to meet the Guaranteed Rent under the Hotel Master Lease during the period of the refurbishments of SPM and SPT.

5.  EFFECTS OF THE LETTER OF VARIATION

5.1 On Unit Capital and Substantial Unitholders’ Unitholding

The Letter of Variation will not have any effect on the total units of SUNREIT in issue and substantial unitholders’ unitholding of SUNREIT as they do not involve any allotment or issuance of new units by SUNREIT.

5.2 On Net Asset Value (“NAV”)

       The Letter of Variation will have no material impact or changes to the unaudited NAV of SUNREIT at the time of completion.

5.3 On Earnings

       SPHSB forecasts that the differential sum for the 4th Fiscal Year is approximately RM2 million and as such is not expected to have any material effect on the earnings of SUNREIT for the financial year ending 30 June 2015.

6.   APPROVALS REQUIRED

Pursuant to the Securities Commission’s Guidelines on Real Estate Investment Trusts, the Letter of Variation does not require approvals from the Securities Commission or the unitholders of SUNREIT. 

7.    DIRECTORS' AND MAJOR UNITHOLDERS' INTERESTS

Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling and Sarena Cheah Yean Tih are Directors of Sunway as well as the Manager. Dato’ Ngeow Voon Yean is Director of the Manager and has deemed interest in SUNREIT. He also has direct and deemed interests in Sunway.

Tan Sri Dato’ Seri Dr Jeffrey Cheah Fook Ling, Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng, Sarena Cheah Yean Tih, Sungei Way Corporation Sdn Bhd, Active Equity Sdn Bhd are major shareholders of Sunway and major unitholders of SUNREIT.

Accordingly, Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling, Dato’ Ngeow Voon Yean and Sarena Cheah Yean Tih have abstained from deliberation and voting in the Board of the Manager in respect of the Letter of Variation.

Save as disclosed above, none of the other directors of the Manager or major unitholders of SUNREIT or persons connected with them has any interest, direct or indirect, in the Letter of Variation.

8.    THE MANAGER’S AUDIT COMMITTEE’S RECOMMENDATION

The Audit Committee of the Manager, after having considered all aspects of the Letter of Variation, is of the opinion that the variation of the Guaranteed Rent for the 4th Fiscal Year is in the best interests of SUNREIT and is not detrimental to the interests of the non-interested unitholders of SUNREIT. The Audit Committee of the Manager is of the view that variation to the Guaranteed Rent for the 4th Fiscal Year is fair, reasonable and on normal commercial terms.

9.    STATEMENT BY THE BOARD OF DIRECTORS

Save and except for Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling, Dato’ Ngeow Voon Yean and Sarena Cheah Yean Tih, the Board of Directors of the Manager is of the opinion that the terms of the Letter of Variation is in the best interests of SUNREIT.

10. DOCUMENT AVAILABLE FOR INSPECTION

The Letter of Variation is available for inspection by unitholders of SUNREIT at the registered office of the Manager at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan during normal business hours (9.00 a.m. to 6.00 p.m.) from Monday to Friday (except public holidays) for a period of 3 months from the date of this announcement.

This announcement is dated 19 May 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Announcement Info

Company NameSUNWAY REAL ESTATE INVESTMENT TRUST  
Stock Name SUNREIT    
Date Announced19 May 2014  
CategoryGeneral Announcement
Reference NoSR-140428-49012

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