PROPOSED ACQUISITION BY AXIS REAL ESTATE INVESTMENT TRUST ("Axis-REIT" OR THE "FUND") OF A PARCEL OF INDUSTRIAL LAND PRESENTLY BUILT UPON WITH A SINGLE STOREY FACTORY AND TWO (2) STOREY OFFICE (THE "PROPERTY") FROM A.M.E CONSTRUCTION SDN BHD (CO. NO. 278191-X) FOR A TOTAL LUMP SUM CONSIDERATION OF RM 12,300,000 ("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 INDUSTRIAL LAND PRESENTLY BUILT UPON WITH A SINGLE STOREY FACTORY AND TWO (2) STOREY OFFICE (THE "PROPERTY") FROM A.M.E CONSTRUCTION SDN BHD (CO. NO. 278191-X) FOR A TOTAL LUMP SUM CONSIDERATION OF RM 12,300,000 ("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:
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 AMECSB on 26 July 2007 (“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 trustee for Axis-REIT, has approved the Proposed Acquisition of the Property, vide their letter dated 19th July 2007.
1.2 Information on the Property
The subject Property is located in the Senai IV Industrial Area which is approximately 30 kilometres due north-east of Johor Bahru City. It is accessible from Senai town via the Sultan Ismail International Airport road, followed by Persiaran Cyber, and then finally onto Jalan Cyber 14.
The subject site is almost rectangular in shape with a land area of 3.434 acres. It has a frontage of about 87.006 metres along Jalan Cyber 14.
The Property is currently leased to FCI Connectors Malaysia Sdn Bhd (Co. No. 412599-W) (“FCICMSB”) (“Lessee”), a company incorporated in Malaysia under the Companies Act, 1965 whose principal activities are in the manufacture of Audio, Hard Disks connectors and other connectors and connector based components.
By a Lease Agreement dated 26th February 2007 and supplemental letters dated 28th February 2007 and 22nd March 2007 (hereinafter called the ‘Lease Agreement’) made between the Vendor and FCICMSB, the Vendor agreed to grant and FCICMSB agreed to accept a lease for the said Property for a term of five (5) years commencing from 31st July 2007 or such earlier date that the certificate of fitness for occupation (“CFO”) for the buildings is issued, at a monthly rental of RM 109,295.20 only (excluding the amortization costs for the Air Conditioning and Smoke Ventilation Systems, which are installed at the request of the Lessee), with an option for renewal for a further period of two (2) years from the expiry of the lease term provided that three (3) months notice be given by FCICMSB. The CFO for the building was issued on 9th July 2007.
Further details are set out below:
| Property Address | : | PLO 205, Jalan Cyber 14, Senai IV Industrial Area 81400 Senai Johor Darul Takzim |
| Title Details | : | HS (D) 444242 for PTD 87606 Mukim of Senai-Kulai District of Johor Bahru Negeri Johor |
| Tenure | : | Leasehold for 60 years expiring on 10 June 2067 |
| Registered Owner | : | A.M.E. Construction Sdn Bhd |
| Category Of Land Use | : | Industry |
| Total Land Area | : | 13,898.798 sq.m. (3.434 acres) |
| Gross Floor Area | : | Factory - 8,376.22 sq.m Office Building - 2,144.14 sq.m Annexed two (2) storey Building - 1,105.19 sq.m |
2.1 Purchase price
The total lump sum cash consideration for the Property of RM 12,300,000 (“Purchase Price”) is payable in the following manner:-
(b) Upon execution of the SPA, RM 1,107,000 being the equivalent to 9% of the Purchase Price (“Balance Deposit’) shall be paid by OSK to OSK’s appointed solicitors as stakeholders; and
- OSK’s appointed solicitors shall be authorized to released the Earnest Deposit and Balance Deposit together with all interest earned thereon to the Vendor upon the unconditional date of the SPA.
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 appointed solicitors as stakeholders, who shall submit the Memorandum of Transfer for assessment of stamp duty 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”)
The sale and purchase of the Property shall be conditional upon the following being fulfilled within six (6) months from the date of the SPA or such other period that may be extended by OSK, as the case may be (“Conditional Period(s)):-
- (a) consent from the relevant authority for the sale and transfer of the Property in favour of OSK (hereinafter called the “Authority’s Consent”);
(b) the Building (the specifications of which are more particularly described in the SPA) being practically completed and constructed in accordance with the approved plans;
(c) the CFO for the Building being obtained from the relevant municipal authority or such other relevant authority having jurisdiction over the same, as the case may be;
(d) the Vendor give OSK a full set of the as built plans for the Building and shall submit and procure the approval of the relevant municipal authority of the extension of the floor areas of the Building;
(e) the Commencement Date, as stipulated in the Lease Agreement being confirmed by the Vendor and the Lessee and vacant possession of the said Property being accepted by the Lessee, on or before 31st July 2007;
(f) the Vendor, OSK and the Lessee shall have duly executed the novation agreement, as per the format annexed in the SPA, subject always to further changes, if any, that may be mutually agreed by all parties (hereinafter called the “Novation Agreement”), novating and assigning all rights, benefits, interests, titles and obligations under the Lease Agreement to OSK, to be delivered and held by the Vendor’s Solicitors as stakeholders in accordance with the provisions therein;
(g) the written confirmation from the Vendor, as at the date the last of all the above conditions precedent having been fulfilled, that it has not received any notification from the Lessee for the early termination of the Lease Agreement and the Vendor is not aware nor has any reason to believe that the Lessee shall terminate the Lease Agreement immediately thereafter.
- hereinafter be collectively called the “Conditions Precedent”.
- 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 13,900,000 as appraised by M/s C H Williams Talhar & Wong , an independent firm of registered valuers in its valuation report dated 19th July 2007. The valuation is derived using a combination of investment and cost methods of valuation.
- Axis-REIT will not assume any liabilities pursuant to the Proposed Acquisition of the Property.
3. INFORMATION ON THE VENDOR
AMECSB is a private limited company incorporated in Malaysia under the Companies Act, 1965 whose principal activities are in fabrication works and building contractors. Its authorized share capital is RM 5,000,000 divided into 5,000,000 Ordinary Shares of RM 1.00 each and the issued share capital is RM 4,000,000 divided into 4,000,000 Ordinary Shares of RM 1.00 each. The shareholdings in AMECSB are as follows:-
 | No. of Ordinary Shares of RM1.00 each |
| Amsun Industries Sdn Bhd | 3,600,000 |
| Lee Sai Boon | 400,000 |
4. RATIONALE FOR THE PROPOSED ACQUISITION OF THE PROPERTY
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 M/s C H Williams Talhar & Wong. 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.
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.
The Proposed Acquisition of the Property will have no impact or changes to the unaudited NAV of Axis-REIT at the time of completion.
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 effected prior thereof.
5.4 Gearing
ARMB intends to utilize debt facility of approximately RM 12,300,000 from Axis-REIT’s existing credit lines. The proposed debt financing will increase Axis-REIT’s gearing ratio to 23.7% 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.
6. 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.
7. 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.
8. DIRECTORS’ STATEMENT
9. 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 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) Changes in environmental laws and regulations, zoning laws and other governmental
rules and fiscal policies;
(h) Changes in relative popularity of property types and locations leading to an oversupply of space or a reduction in tenant(s) demand for a particular type of property in a given market;
(i) Competition among property owners for tenants;
(j) Illiquidity of real estate investments; and
(k) Acts of God, uninsurable losses and other factors.
10. ESTIMATED TIMEFRAME FOR COMPLETION
- The Proposed Acquisition of the Property is expected to be completed by the end of October 2007 or latest by the end of February 2008.
11. 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:-
(a) The SPA on the Proposed Acquisition of the Property; and
(b) Valuation report on the Property prepared by M/s C H Williams Talhar & Wong dated
19th 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-EF63B |
