PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A PARCEL OF COMMERCIAL LAND PRESENTLY BUILT UPON WITH A 6-STOREY OFFICE BUILDING COMPLETE WITH A BASEMENT CAR PARK ACCOMMODATING A TOTAL OF 113 CAR PARKS KNOWN AS ‘NESTLE HOUSE’ (THE "PROPERTY") FROM INNONATURE (M) SDN BHD (CO. NO. 232877-W) FOR A TOTAL LUMP SUM CONSIDERATION OF RM39,800,000 ("PROPOSED ACQUISITION OF THE PROPERTY")
| AXIS REAL ESTATE INVESTMENT TRUST |
|
Type | Announcement |
| Subject | PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A PARCEL OF COMMERCIAL LAND PRESENTLY BUILT UPON WITH A 6-STOREY OFFICE BUILDING COMPLETE WITH A BASEMENT CAR PARK ACCOMMODATING A TOTAL OF 113 CAR PARKS KNOWN AS ‘NESTLE HOUSE’ (THE "PROPERTY") FROM INNONATURE (M) SDN BHD (CO. NO. 232877-W) FOR A TOTAL LUMP SUM CONSIDERATION OF RM39,800,000 ("PROPOSED ACQUISITION OF THE PROPERTY") |
Contents :
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 of the Property on behalf of Axis-REIT:
1.1 Proposed Acquisition of the Property
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 IMSB on 26 July 2007 (“SPA”).
1.2 Information on the Property
The Property is located within the central commercial area commonly known as the PJ New Town Centre in Section 52 of the City of Petaling Jaya and prominently faces the Federal Highway at a radical distance of 8 kilometres south-west of the City Centre of Kuala Lumpur.
Each floor layout of the building is divided into two interconnected left and right wings with the service core placed at its centre and originally designed with the flexibility for ease of occupation by a single tenant or multiple tenants.
The Property is currently tenanted to and occupied by Nestle Products Sdn Bhd (Co. No. 45229-H) (“Tenant”). Simultaneously with the execution of the SPA, the Vendor will cause the Tenant to execute a tenancy agreement with OSK, as trustee for Axis-REIT (hereinafter called the “Tenancy Agreement”) in escrow and the Tenancy Agreement will be deemed to have commenced on the completion date, as defined in the SPA.
Further details are set out below:
| Property Address | : | No. 4, Lorong Persiaran Barat 46200 Petaling Jaya Selangor Darul Ehsan |
| Title Details | : | HSD 59450 for PT 4 Seksyen 26 in the Town of Petaling Jaya, District of Petaling, State of Selangor |
| Tenure | : | Leasehold – 99 years expiring on 10 October 2072 |
| Total Land area | : | 42,841 square feet |
| Lettable Floor Area | : | 106,130 square feet |
| Age of Building | : | 25 years (approximately) |
 | | |
| Occupancy as at 26 July 2007 | : | 100.00% |
2. DETAILS OF THE PROPOSED ACQUISITION OF THE PROPERTY
2.1 Purchase price
The total lump sum cash consideration for the Property of RM 39,800,000 (“Purchase Price”) is payable in the following manner:-
(b) Upon execution of the SPA, RM 3,184,000 being the equivalent to 8% of the Purchase Price has been paid by OSK to the Vendor’s appointed stakeholders, as stakeholders; and
(c) Pursuant to the SPA, the balance of the Purchase Price amounting to RM 35,820,000 shall be paid by OSK to the Vendor’s appointed stakeholder as stakeholders within thirty (30) days from the unconditional date of the SPA (“the Completion Period”) with a right to an extension of one (1) month days subject to interest payable to the Vendor at a rate of 8% per annum calculated on a daily basis (“the Extended Completion Date”).
Upon the execution of the SPA, the Vendor shall execute a valid Memorandum of Transfer and stamping proforma for the purpose of effecting the transfer of the Property in favour of OSK free from all encumbrances and deposit the same with OSK’s solicitors as stakeholders, who shall within such time deemed expedient, submit the Memorandum of Transfer for assessment of stamp duty and hold the same as stakeholders to deal with the Memorandum of Transfer on the terms and conditions as set out therein.
- The sale of the Property shall be conditional upon the following being obtained or fulfilled within six (6) months from the date of the SPA or such other extended period that may be mutually agreed upon between OSK and the Vendor in writing:-
(b) The relevant land office rectifying the title to the Property so that the Registered TNB Lease reflects the area involved in the TNB Lease is 592 sq.ft.
(c) The letter of consent of Tenaga Nasional Berhad addressed to the relevant land office consenting to the registration of the Memorandum of Transfer in favour of OSK, if applicable.
- The Purchase Price for the Property is derived on a willing-buyer willing-seller basis after taking into account the total market value of the Property of RM41,000,000 as appraised by REGROUP Associates, an independent firm of registered valuers in its valuation report dated 28 May 2007. The valuation is derived using a combination of investment and comparison methods of valuation.
- Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
3. INFORMATION ON THE VENDOR
3.1 Innonature (M) Sdn Bhd (“IMSB”)
| No. of Ordinary Shares of RM1.00 each |
| Sullivan Joseph O’Carroll (Trustee for Nestle @ Malaysia Expatriate Provident Fund) | 2,500,000 |
| Sullivan Joseph O’Carroll (Trustee for Nestle @ Malaysia Group Retirement Scheme) | 7,000,000 |
4. INFORMATION ON THE TENANT
- NPSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 whose activities are in the manufacturing, marketing, distribution and the sale, both locally and for export internationally well-known food products. NPSB is a wholly owned subsidiary of Nestle (Malaysia) Berhad (Co.No. 110925-W).
- The salient terms and conditions of the Tenancy Agreement between OSK and NPSB which will commence simultaneously on the completion date, as defined in the SPA, are as follows:-
- (i) A fixed period of two (2) years (“Initial Term”) at a monthly rental of RM318,000 which is approximately RM3.00 per sq. ft. based on the gross built up area of 106,000 square feet; and
(ii) NPSB may renew the tenancy for two (2) terms of three (3) years each (collectively the “Renewed Periods” and respectively the “First Renewed Period” and “Second Renewed Period” ) after the expiry of the Initial Term, with the following options:-
- (a) in the event the Tenant shall before the expiry of one (1) year from the commencement of the Initial Term provide an irrevocable written confirmation to renew the tenancy for the whole six (6) years of the Renewed Periods, then Axis-REIT will be obligated to expend up to RM5,600,000.00 in capital expenditure for the enhancement of the Property, which enhancement works are to be completed prior to the expiry of the Initial Term and the monthly rental payable by the Tenant shall be revised to RM371,000.00 per month (at RM3.50 per sq. ft.) for the First Renewed Period and RM424,000.00 per month (at RM4.00 per sq. ft.) for the Second Renewed Period;
(b) unless the tenancy is renewed under option (a) above, the Tenant may renew the tenancy for the First Renewed Period, with a further option to renew for the Second Renewed Period, by giving at least 180 days’ notice prior to the expiry of the Initial Term or the First Renewed Period, as the case may be, and the monthly rental payable for the First Renewed Period or the Second Renewed Period, as the case may be, shall be negotiated based on prevailing market rate and to be mutually agreed between OSK and NPSB at least three (3) months prior to the expiry of the Initial Period or the First Renewed Period, as the case may be.
ARMB’s, the management company of Axis-REIT, objective is to continuously pursue an acquisition strategy that meet the Manager’s investment criteria with a view to provide Unitholders with stable, long-term and sustainable distribution of income and achieve growth in net asset value (“NAV”) per unit of the Fund. The Purchase Price for the Property is fully supported by the independent valuation conducted by REGROUP Associates. 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 with recurring rental income and potential for revenue and capital growth.
6.1 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.
The Proposed Acquisition of the Property will have no impact or changes to the unaudited NAV of Axis-REIT at the time of completion.
6.3 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 2007 if completion may be affected prior thereof.
ARMB intends to utilize debt facility of approximately RM39,800,000 from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 28.32% of the 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.
7. 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.
8. RELATED PARTY DEALINGS IN RESPECT OF PROPOSED ACQUISITION OF THE
- PROPERTY
None of the Directors and/or the sole shareholder of ARMB and substantial unitholders of Axis-REIT as well as persons connected to them have any interest, direct and/or indirect, in the Proposed Acquisition of the Property.
9. DIRECTORS’ STATEMENT
10. 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 Property;
(c) Compulsory acquisition by the Government;
(d) Non-renewal of tenancy;
(e) Adverse changes in national or economic conditions;
(f) Adverse local market conditions;
(g) Changes in environmental laws and regulations, zoning laws and other governmental
- rules and fiscal policies;
(i) Competition among property owners for tenants;
(j) Illiquidity of real estate investments; and
(k) Acts of God, uninsurable losses and other factors.
11. ESTIMATED TIMEFRAME FOR COMPLETION
- The Proposed Acquisition of the Property is expected to be completed by the end of October 2007or latest by the end of February 2008.
12. 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:-
· The SPA on the Proposed Acquisition of the Property; and
· Valuation report on the Property prepared by REGROUP Associates dated 28 May 2007.
This announcement is dated 26 July 2007.
Announcement Info
| Company Name | AXIS REAL ESTATE INVESTMENT TRUST |
| Stock Name | AXREIT |
| Date Announced | 26 Jul 2007 |
| Category | General Announcement |
| Reference No | CC-070726-F3E5B |
