BURSA ANNOUCEMENTS

Date : 29 June 2011

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS): RELATED PARTY TRANSACTIONS SUNWAY REAL ESTATE INVESTMENT TRUST (“SUNREIT”) - HOTEL MASTER LEASE BETWEEN OSK TRUSTEES BERHAD (AS TRUSTEE FOR SUNWAY REAL ESTATE INVESTMENT TRUST), SUNWAY REIT MANAGEMENT SDN BHD AND SUNWAY PUTRA HOTEL SDN BHD (FORMERLY KNOWN AS WISDOM ACHIEVERS SDN BHD)

SUNWAY REAL ESTATE INVESTMENT TRUST

TypeAnnouncement
SubjectTRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)
RELATED PARTY TRANSACTIONS
DescriptionSUNWAY REAL ESTATE INVESTMENT TRUST (“SUNREIT”)
- HOTEL MASTER LEASE BETWEEN OSK TRUSTEES BERHAD (AS TRUSTEE FOR SUNWAY REAL ESTATE INVESTMENT TRUST), SUNWAY REIT MANAGEMENT SDN BHD AND SUNWAY PUTRA HOTEL SDN BHD (FORMERLY KNOWN AS WISDOM ACHIEVERS SDN BHD)

1. INTRODUCTION

We wish to inform that OSK Trustees Berhad as Trustee for SUNREIT (“the Trustee”) and Sunway REIT Management Sdn Bhd as the Manager for SUNREIT (”the Manager”) has on 29 June 2011, entered into an agreement (“Hotel Master Lease”) with Sunway Putra Hotel Sdn Bhd (formerly known as Wisdom Achievers Sdn Bhd) (“SPHSB”), a wholly-owned subsidiary of Sunway City Berhad (“SunCity”), whereby the Trustee will lease out to SPHSB, a hotel consisting of 458 hotel rooms, 170 serviced apartments and 3 penthouses located at 100 Jalan Putra, Kuala Lumpur (“Hotel”) for a term of 10 years at a total rent in accordance with the formula as stipulated in the Hotel Master Lease.

    The Hotel is part of the property built on that piece of land held under Geran 10012, No Lot 38, Seksyen 51, Mukim Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur (“Land”) which was acquired by the Trustee, on behalf of SUNREIT, at a public auction conducted on 30 March 2011 pursuant to an order of sale obtained by Commerce International Merchant Bankers Berhad. The acquisition was completed upon the registration of the Certificate of Sale (National Land Code Form 16F) with the Kuala Lumpur Land Registry on 19 April 2011.
2. INFORMATION ON SUNCITY, SPHSB, THE MANAGER, THE TRUSTEE AND SUNREIT
    2.1 SunCity

      SunCity is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SunCity are RM3,500,000,000/- and RM470,017,432/- respectively. The principal activities of SunCity are property development and investment, and investment holding.

    2.2 SPHSB

    SPHSB, a wholly-owned subsidiary of SunCity, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SPHSB are RM100,000/- and RM2/- respectively. The principal activity of SPHSB is hotel business. Dewan Bandaraya Kuala Lumpur has issued a licence to SPHSB to operate the Hotel effective from 1 July 2011.


    2.3 The Manager

      The Manager, a wholly-owned subsidiary of SunCity, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 46150 Petaling 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.

    2.4 The Trustee

      The Trustee is a company incorporated in Malaysia and having its registered office at 20th Floor, Plaza OSK, Jalan Ampang, 50450 Kuala Lumpur. It is registered as a trust company under the Trust Companies Act, 1949 and is also registered with the Securities Commission to conduct unit trust business.

      The principal activity of the Trustee is providing private 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 RM6,000,000/- comprising 1,200,000 ordinary shares of RM5.00 each are issued and partially paid-up.
    2.5 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.
    3. SALIENT TERMS OF THE HOTEL MASTER LEASE

    The salient terms of the Hotel Master Lease are as follows:-

    Description of the Hotel:A 5-star 458 hotel rooms, 170 serviced apartments and 3 penthouses located at 100 Jalan Putra, Kuala Lumpur built on the Land and all other facilities on the Premises (as defined in the Hotel Master Lease) as are necessary or desirable for the operation of the Hotel.
    Total rent:Higher of the guaranteed rent or variable rent for that fiscal year.

    "Guaranteed rent" is an annual amount payable by SPHSB in respect of the fiscal year during the lease period of 10 years which will be agreed between the Trustee and SPHSB within 2 months from the commencement date of the lease or such extended period as mutually agreed.

    "Variable rent" is an amount computed based on the following formula:-

    Base rent of 20% of revenue + (70% x gross operating profit of the Hotel - master lease expenses).
    Lease term :10 years commencing from the date of commencement of the lease. The lease will commence at a date to be agreed amongst SPHSB, the Manager and the Trustee which will be a date after vacant possession is delivered by the former owner to the Trustee. The Trustee and the Manager have instituted legal proceedings at the High Court of Malaya in Kuala Lumpur against the previous owner for, inter alia, an order that the former owner deliver up every part of the property which its related companies, its servants or agents and itself are in possession, which order was granted on 28 June 2011.

    At the end of the 10-year term, SPHSB has the option to renew for an additional 10-year term at a rental rate to be renegotiated with the Trustee.
    Payment terms of rental:Monthly payments in arrears on or before the 15th business day of the following month based on the computation shown in the management report to be delivered to the Trustee by SPHSB. After the end of each financial year, the total rent shall be computed based on the audited financial statements, following which an adjustment will be made.
      4. RATIONALE

      This lease arrangement with SPHSB would ensure that SUNREIT benefits from any upside to the hotel business operated by SPHSB through the profit sharing mechanism of the variable rent whilst having protection from downside risk via the guaranteed rent.
        5. EFFECTS OF THE HOTEL MASTER LEASE
          5.1 On Unit Capital and Substantial Unitholders’ Unitholding
            The Hotel Master Lease 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 Hotel Master Lease will have no material impact or changes to the unaudited NAV of SUNREIT at the time of completion.

          5.3 On Earnings

          The Hotel Master Lease is not expected to have any material effect on the earnings of SUNREIT for the financial year ending 30 June 2011.

          6. APPROVALS REQUIRED

            Pursuant to the Securities Commission’s Guidelines on Real Estate Investment Trusts, the Hotel Master Lease 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 Dato’ Ngeow Voon Yean are Directors of SunCity and the Manager. Dato’ Ngeow Voon Yean has direct interest in SunCity and deemed interest in SUNREIT.


            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, Timah Dunia Dredging Sdn Bhd, Active Equity Sdn Bhd and Government of Singapore Investment Corporation Pte Ltd are major shareholders of SunCity and major unitholders of SUNREIT. Sarena Cheah Yean Tih is also a Director of the Manager.

            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 Hotel Master Lease.
            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 Hotel Master Lease.
          8. THE MANAGER’S AUDIT COMMITTEE’S RECOMMENDATION
            The Audit Committee of the Manager, after having considered all aspects of the Hotel Master Lease, is of the opinion that the Hotel Master Lease 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 the Hotel Master Lease 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 Hotel Master Lease is in the best interests of SUNREIT.

          10. DOCUMENT AVAILABLE FOR INSPECTION
            The Hotel Master Lease 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, 46150 Petaling 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 29 June 2011.


          Announcement Info

          Company NameSUNWAY REAL ESTATE INVESTMENT TRUST  
          Stock Name SUNREIT    
          Date Announced29 Jun 2011  
          CategoryGeneral Announcement
          Reference NoSR-110629-587B7

          Back