AMFIRST REAL ESTATE INVESTMENT TRUST (“AmFIRST REIT” OR THE “FUND”)
PROPOSED ACQUISITION BY AmFIRST REIT OF ALL THAT PREMISES KNOWN AS UNIT NO. S2.140B, 2ND FLOOR THE SUMMIT SUBANG USJ, PERSIARAN KEWAJIPAN USJ 1, UEP SUBANG JAYA, SELANGOR MEASURING APPROXIMATELY 37,372 SQUARE FEET AND HELD UNDER STRATA TITLE GERAN 43528/M1/3/459 LOT 14 IN PEKAN SUBANG JAYA, DISTRICT OF PETALING AND STATE OF SELANGOR DARUL EHSAN (THE “PROPERTY”) FROM SYF TRADING SDN BHD (COMPANY NO. 94099-A) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 6,800,000 (“PROPOSED ACQUISITION OF PROPERTY”)
AMFIRST REAL ESTATE INVESTMENT TRUST
Type
Announcement
Subject
AMFIRST REAL ESTATE INVESTMENT TRUST (“AmFIRST REIT” OR THE “FUND”)
PROPOSED ACQUISITION BY AmFIRST REIT OF ALL THAT PREMISES KNOWN AS UNIT NO. S2.140B, 2ND FLOOR THE SUMMIT SUBANG USJ, PERSIARAN KEWAJIPAN USJ 1, UEP SUBANG JAYA, SELANGOR MEASURING APPROXIMATELY 37,372 SQUARE FEET AND HELD UNDER STRATA TITLE GERAN 43528/M1/3/459 LOT 14 IN PEKAN SUBANG JAYA, DISTRICT OF PETALING AND STATE OF SELANGOR DARUL EHSAN (THE “PROPERTY”) FROM SYF TRADING SDN BHD (COMPANY NO. 94099-A) FOR A TOTAL LUMP SUM CASH CONSIDERATION OF RM 6,800,000 (“PROPOSED ACQUISITION OF PROPERTY”)
Contents
1. INTRODUCTION
The Board of Directors (“Board”) of Am ARA REIT Managers Sdn Bhd (“the Manager”), the management company of AmFIRST REIT, wishes to announce that, Mayban Trustees Berhad (“MTB”) being the trustees for AmFIRST REIT, has, based on the recommendations of the Manager, entered into a Sale and Purchase Agreement (“SPA”) in respect of the Proposed Acquisition of Property on behalf of AmFIRST REIT.
Proposed Acquisition of Property
AmFIRST REIT proposes to acquire the Property free from encumbrances and subject to the Existing Tenancies (as hereinafter defined) from SYF Trading Sdn Bhd (Company No.: 94099-A) (“the Vendor” or “SYF”) for a total purchase consideration of RM 6,800,000.00 (“the Purchase Price”) in cash subject to the terms and conditions contained in the SPA. The proposed acquisition was made based on and in consideration of, amongst others:-
(a) the warranty, representation and assurance given by SYF that the monthly rental income (“Guaranteed Minimum Gross Income”) to be derived from the Property and to be actually received by MTB during and for a period of one (1) year (“Guarantee Period”) from the date MTB completes the Proposed Acquisition of the Property (“Completion Date”) shall be Ringgit Malaysia Sixty Eight Thousand Nine Hundred and Twenty Nine and Sen Seventy Three (RM68,929.73) only per month (“Guaranteed Monthly Gross Income”) aggregating to a sum of Ringgit Malaysia Eight Hundred and Twenty Seven Thousand One Hundred and Fifty Six and Sen Eighty (RM827,156.80) only for the Guarantee Period;
(b) the execution of the relevant sets of Deed of Assignment between the Vendor and MTB (“Deed of Assignment”) whereby the Vendor assigns absolutely unto the Purchaser all the Vendor’s rights, remedies, benefits and whatsoever advantage under the existing tenancies (“Existing Tenancies”) between the Vendor and the following existing tenants (“Existing Tenants”):-
(1) Handi-Arts Sdn Bhd (“HASB”) with whom the Vendor has entered into a fixed period of two (2) years tenancy that expires on 31 May 2011 over a net lettable area of 19,510 sq.ft at a monthly rental of RM 1.20 per sq.ft; and
(2) A.Y.A Network Berhad (“AYA”) with whom the Vendor has entered into a periodic tenancy over a net lettable area of 17,862 sq. ft. at a monthly fixed rental of RM 10,000.00.
(c) the right of MTB to retain from the Purchase Price a sum of RM827,156.80 to set off against either:
(1) any monthly shortfall arising from the difference between the Guaranteed Monthly Gross Income and the rental actually received by the MTB from Existing Tenants for each and every month during the Guarantee Period; or
(2) failure or nonpayment of rent by any of the Existing Tenants; or
(3) the Property or any part of it being or becoming vacant and unoccupied due to or arising from a termination of any of the Existing Tenancies on or before the expiry of the Guaranteed Period.
Information on the Property
The Property is a retail lot located on the 2nd Floor of The Summit Retail Podium, which is within an integrated commercial complex known as The Summit Subang USJ located along Persiaran Kewajipan, USJ 1, 47600 UEP Subang Jaya, Selangor Darul Ehsan.
The Summit Subang USJ complex is situated about 35 kilometres south west of Kuala Lumpur city centre and is accessible either via Jalan Syed Putra and thence continues onto the Federal Highway or onto the New Pantai Expressway (NPE) which eventually intersect with Persiaran Kewajipan. Alternatively it is also accessible from the Lebuhraya Shah Alam via the Kewajipan Interchange.
The Strata Title to the Property has been issued by the relevant authority and is currently registered in the name of Meda Development Sdn Bhd (Company No. 276563-A) (“the Developer”). Under the SPA, the Vendor will at its own costs and expense obtain from the Developer the consent to directly transfer the Strata Title to MTB and cause the Developer to execute a valid and registrable Memorandum of Transfer in favour of MTB (“MOT”) as outlined in the terms and conditions of the SPA.
As at the date hereof, the Vendor has assigned all its rights benefits and interest to the Property to Alliance Bank Malaysia Bhd (Company No. 88103-W) of 29th Floor, Menara Multi Purpose, Capital Square, 8, Jalan Munshi Abdullah, 50100 Kuala Lumpur (“Alliance Bank”) as security for loans obtained from Alliance Bank by Tomisho Sdn Bhd (Company No. 144265-W), a company related to the Vendor.
2. DETAILS OF THE PROPOSED ACQUISITION OF PROPERTY
Acquisition
The Property is to be acquired free from encumbrances but subject to the terms and conditions stipulated in the SPA. Simultaneously with execution of the SPA, the Vendor will cause:
(a) HASB to execute in escrow the one (1) set of Deed of Assignment that will be effective on Completion Date; and
(b) HASB and AYA to each issue in escrow a written acknowledgement of SYF’s assignment of all rights, benefits and interest under the Existing Tenancies to MTB with effect from the Completion Date.
Salient terms and conditions of the SPA
(i) Payment Terms
The Purchase Price shall be paid in the following manner:-
(a) an initial sum of RM68,000.00 equivalent to 1% of the Purchase Price being refundable earnest deposit and part payment towards the Purchase Price (“Earnest Deposit”) was paid by MTB to MTB’s solicitors as stakeholders on the Vendor’s acceptance of the offer made by the Manager prior to the execution of the SPA;
(b) a further sum of RM612,000.00 equivalent to 9% of the Purchase Price being refundable deposit and part payment towards the Purchase Price was paid by MTB to MTB’s solicitors as stakeholders upon execution of the SPA;
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM6,120,000.00 shall be paid within ninety (90) days from the unconditional date of the SPA by MTB to MTB’s solicitors named in the SPA, to be held as stakeholders, who will be authorized to deal with the balance of the Purchase Price by, amongst others, redeeming all rights, benefits and interest to the Property from Alliance Bank; and
(d) MTB is entitled to a further extension of 30 days to pay the balance of the Purchase Price but this extension of time is subject to interest at a rate of 8% per annum calculated on a daily basis (the “Extended Completion Period”).
(ii) Conditions Precedent
Completion of the SPA is conditional upon the occurrence of the following events within 60 days from the date of the SPA subject to an extension of a further 30 days:
(a) SYF executing in escrow and depositing with MTB’s solicitors as stakeholders the Deed of Assignment;
(b) SYF procuring and securing, at its own costs and expenses, a written consent from the Developer to directly transfer the Strata Title from the Developer to MTB (hereinafter called the “Direct Transfer”) and the Developer’s execution of the MOT and thereafter delivery thereof together with original of the Strata Title to MTB’s solicitors as stakeholders;
(c) SYF’s due observance and performance to the satisfaction of the Developer all conditions imposed by the Developer in consenting to the Direct Transfer and in executing and releasing the MOT, the original Strata Title and all other documents to MTB’s solicitors, conditions of which may include without limitation to its and Joint Management Body of The Summit Subang USJ’s (“JMB”) receipt of full settlement of all the Developer’s administration fee payable, full settlement of current and arrears of service charges due and owing to the JMB, contribution towards sinking fund and insurance premium contributions and all outgoings, including without limitation, sewerage charges (if any) payable in respect of the Property;
(d) the JMB’s written confirmation on, amongst others, the time of receipt of settlement of arrears of service charges;
(e) SYF’s procurement from HASB & AYA, a written acknowledgement of their notice of the assignment of the Existing Tenancies by SYF to MTB with effect from the Completion Date;
(f) SYF’s issuance of the relevant notices of assignment and thereafter delivery thereof to MTB’s solicitors as stakeholders, who are authorised to serve the notices of assignment to the Existing Tenants on Completion Date; and
(g) MTB’s satisfaction of the results of the due diligence review carried out on the Property and SYF.
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 RM6,800,000.00 as appraised by Rahim & Co, an independent firm of registered valuers, in its valuation report dated 19th April 2010. The valuation is derived using a combination of comparison method/cost approach and investment methods of valuation.
Liabilities to be assumed by AmFIRST REIT
The Trustee will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
Source of funding
The Proposed Acquisition of the Property will be funded by internal funds.
3. INFORMATION ON THE VENDOR
SYF Trading Sdn Bhd (Company No. 94099-A)
SYF is a private limited company incorporated in Malaysia under the Companies Act, 1965 on 9 December 1982. SYF principally carries out the business of trading furniture and related products. SYF is a wholly owned subsidiary of SYF Venture Sdn Bhd (Company No 670406-M) which is in turn a wholly owned subsidiary of SYF Resources Berhad (364372-H). As at the date hereof, SYF has an authorized capital is RM 10,000,000 divided into 10,000,000 ordinary shares of RM1.00 each of which all 10,000,000 shares have been issued and credited as fully paid up. SYF’s registered office is located at Level 18, The Gardens North Tower, Mid Valley, Lingkaran Syed Putra, 59200 Kuala Lumpur.
4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTY
AmFIRST REIT has on 31 March 2008 announced the completion of the acquisition of “The Summit Subang USJ” which consists of a mixed development compromising of Office Lots, Retail Lots, Hotel and Car Park bays. This Proposed Acquisition of Property will enlarge the overall ownership of the Retail Lots at The Summit Subang USJ and enable AmFIRST REIT to have a strategic control and effective leasing of all the retail spaces. The Proposed Acquisition of Property is consistent with the investment objective and strategy of AmFIRST REIT and it will be accretive to AmFIRST REIT’s distributable income.
5. EFFECTS OF THE PROPOSED ACQUISITION OF PROPERTY
Unit Capital and Substantial Unitholders’ Unitholding
The Proposed Acquisition of Property will not have any effect on the total units in issue and substantial unitholders’ unitholding of AmFIRST REIT as the purchase consideration will be paid entirely in cash.
NAV
The Proposed Acquisition of Property will have no impact or changes to the unaudited NAV of AmFIRST REIT at the time of completion.
Earnings
The Directors of the Manager expect the Proposed Acquisition of Property to contribute positively to the earnings of the Fund for the financial year ending 31 March 2011.
Gearing
The Manager intends to utilize it’s internally funds, therefore there is no change in the gearing ratio of 39.55% of the audited total assets as at 31 March 2010, which is below the gearing limit of 50% prescribed by the REIT Guidelines.
6. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITION OF THE PROPERTY
Pursuant to the REIT Guidelines, the valuation set out in the Proposed Acquisition of Property is not subject to approval by the Securities Commission nor the prior approval of the unitholders of AmFIRST REIT.
7. INTEREST OF DIRECTORS AND SUBSTANTIAL UNITHOLDERS OF AMFIRST REIT
None of the Directors of the Manager and substantial unitholders of AmFIRST REIT or persons connected to them, has interest, direct or indirect, in the Proposed Acquisition of Property.
8. 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-fulfillment of the conditions precedent stipulated in the SPA;
(b) Non registration of the transfer of the Title to the Property;
(c) Non-renewal of tenancy after expiry due to change in circumstances of the Tenant;
(d) The financial conditions of the Tenants, the Guarantor and the Vendor; and
(e) Acts of God, uninsurable losses and other factors.
9. ESTIMATED TIMEFRAME FOR COMPLETION
The Proposed Acquisition of Property is expected to be completed within a period of five months from the SPA date.
10. STATEMENT BY THE MANAGER
The Board, having considered the rationale of the Proposed Acquisition of Property, is of the opinion that the Proposed Acquisition of Property is in the best interest of the Fund.
11. DOCUMENTS FOR INSPECTION
The following documents are available for inspection at the registered office of the Manager at Level 22, Bangunan AmBank Group, No. 55 Jalan Raja Chulan, 50250 Kuala Lumpur or the place of business of MTB at 34th Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 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 ;
(ii) Valuation report on the Property prepared by Rahim & Co dated 19th April 2010; and
(iii) Letter of Consent dated 2 February 2010 from the MTB addressed to the Manager for the above Proposed Acquisition of Property.
