Other pertinent information on the Property are as follows:

Transcription

1 PAVILION REAL ESTATE INVESTMENT TRUST ( PAVILION REIT ) PROPOSED ACQUISITION BY AMTRUSTEE BERHAD ON BEHALF OF PAVILION REIT (THE TRUSTEE OR THE PURCHASER ), OF THE INTERMARK MALL (AS DEFINED HEREIN) FOR A TOTAL CASH CONSIDERATION OF RINGGIT MALAYSIA ONE HUNDRED AND SIXTY MILLION (RM160,000,000) ONLY (THE PROPOSED ACQUISITION ) 1. INTRODUCTION Pavilion REIT Management Sdn Bhd, the management company of Pavilion REIT (the Manager ) wishes to announce that the Trustee, on behalf of Pavilion REIT, had on 29 December 2015 entered into a sale and purchase agreement (the SPA ) with The Intermark Sdn. Bhd. (the Vendor ) for the acquisition of a six (6)-storey retail building having a main parcel of strata floor area of 31,348 square metres (approximately 337,427 square feet) together with fixtures, fittings, assets or items of equipment which are currently affixed, installed, attached and/or appurtenant to the retail building save and except for those fixtures, fittings, assets or items of equipment belonging to the tenants, together with 367 designated car park bays located on basement level 2, basement level 3, level 1, level 2 and level 3 ( Car Park Bays ) (the six (6)- storey retail building and the Car Park Bays are collectively referred to as the Intermark Mall or the Property ) for a total cash consideration of Ringgit Malaysia One Hundred and Sixty Million (RM160,000,000) only. 2. DETAILS OF THE PROPOSED ACQUISITION 2.1 Description of the Property The Property consists of the Intermark Mall, all of which are erected on part of a piece of freehold land held under Geran 75638, Lot No , Section 43, Town and District of Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur (the Master Land ). Strata title to the Property has been issued. Other pertinent information on the Property are as follows: Postal address : Intermark Mall, The Intermark No. 348, Jalan Tun Razak Kuala Lumpur Wilayah Persekutuan Kuala Lumpur Title details : Geran 75638, Lot No , Section 43, Town and District of Kuala Lumpur, State of Wilayah Persekutuan Kuala Lumpur Tenure of the Master Land : Freehold (interest in perpetuity) Registered proprietor of the Master Land Land area of the Master Land : The Intermark Sdn. Bhd. : 21,270 square metres (approximately 5.26 acres) Strata title details : Strata Geran 75638/M1/B3/2, Lot Seksyen 43, Bandar Kuala Lumpur, Negeri Wilayah Persekutuan Kuala Lumpur 1

2 Strata floor area : 39,603 square metres (approximately 426,283 square feet), consisting 31,348 square metres (approximately 337,427 square feet) of main parcel area and 8,255 square metres (approximately 88,856 square feet) of accessory parcel area Net lettable area : 20,904 square metres (approximately 225,014 square feet) Category of land use : Bangunan (Building) Property use : Retail Age of building : Approximately 3 years. The Intermark Mall had undergone major refurbishment and repositioning in year Encumbrances : Nil Restrictions-in-interest : Nil Express condition : Tanah ini hendaklah digunakan untuk bangunan perdagangan bagi tujuan kompleks perdagangan sahaja. (This land shall be used as commercial building for the purpose of commercial complex only.) Endorsements : Part of the land are leased to Tenaga Nasional Berhad for a period of 30 years each vide Presentation Nos /2012, 26832/2012, 26833/2012 and 26834/2012, all registered on 29 June Occupancy rate : 74% based on committed and/or commenced tenancies as at the valuation date of 30 September 2015 Tenancy description : As at July 2015, the Intermark Mall houses tenants from five major trade mix as follows: Trade Percentage % Supermarket 19 Food and beverage 36 Beauty/wellness 16 Specialty 26 Services 3 Total 100 The total monthly rental for the Intermark Mall is approximately RM1.2 million. As at July 2015, the Car Park Bays are managed and operated by Secure Parking Corporation Sdn Bhd. The total monthly rental for the Car Park Bays is 2

3 approximately RM70,000. Estimated net yield with : 6.1% per annum Rental Guarantee (as defined in Section 2.3 below) (1) Estimated net yield without Rental Guarantee (1) : 3.0% per annum Net book value : RM227,000,000 based on the audited financial statements of the Vendor as at 31 December 2014 Note: (1) The estimated net yield is computed by dividing the estimated net property income with the Purchase Consideration (as defined in Section 2.2 of this announcement). The estimated net property income was derived by extracting the portion of the annualised net property income which was contributed by the Property from the Vendor s unaudited management accounts for the nine-month financial period ended 30 September Purchase Consideration The Proposed Acquisition involves the acquisition by the Purchaser of the Property from the Vendor for a cash consideration of Ringgit Malaysia One Hundred and Sixty Million (RM160,000,000) only (the Purchase Consideration ). The Purchase Consideration was arrived at on a willing-buyer willing-seller basis based on the market value of the Property as appraised by Knight Frank Malaysia Sdn Bhd ( Knight Frank ), being the independent registered valuer appointed by the Manager, on behalf of Pavilion REIT, in respect of the Property. Knight Frank has assessed the market value of the Property using the income approach by investment method and the comparison approach as at the valuation date of 30 September For the avoidance of doubt, Knight Frank has not taken the Rental Guarantee (as defined in Section 2.3 below) into consideration when arriving at the market value of the Property. The Purchaser will satisfy the Purchase Consideration in cash, which will be paid in the following manner: (i) (ii) a sum of Ringgit Malaysia Sixteen Million (RM16,000,000) only, being the deposit equivalent to 10% of the Purchase Consideration (the Deposit ), together with an amount equivalent to six percent (6%) of the Deposit as goods and services tax (the GST ), had been paid to the Vendor upon the execution of the SPA; the balance of the Purchase Consideration amounting to Ringgit Malaysia One Hundred and Forty Four Million (RM144,000,000) only (the Balance Purchase Consideration ), together with GST, shall be paid by the Purchaser within three (3) months from the date of the SPA (the Completion Period ) or the Extended Completion Period (as defined below), as the case may be, in the following manner: (a) (b) an amount payable to the Vendor s financier for the purpose of redeeming the Property from the Vendor s financier (the Redemption Sum ); and the Balance Purchase Consideration (together with GST on the full Balance Purchase Consideration) less the Redemption Sum (if any) shall be paid to the Vendor. 3

4 In the event the Purchaser is unable to pay the Balance Purchase Consideration (together with GST) to the Vendor on or before the expiry of the Completion Period, the Vendor shall grant to the Purchaser an automatic extension period of one (1) month from the expiry of the Completion Period (the Extended Completion Period ) to pay the Balance Purchase Consideration (together with GST) to the Vendor provided that the Purchaser shall pay to the Vendor interest on the Balance Purchase Consideration at the rate of eight per centum (8%) per annum calculated on a daily basis from the day immediately after the expiry of the Completion Period until the date of full payment thereof, including any GST related to such additional amount. The date on which payment of the Balance Purchase Consideration (together with any GST and interest) is paid in full within the Completion Period or the Extended Completion Period, as the case may be, shall be deemed as the Completion Date. 2.3 Other salient terms and conditions of the SPA The other salient terms and conditions of the SPA are as follows: The Vendor shall provide the Purchaser, a rental guarantee of the sum of Ringgit Malaysia Fifteen Million (RM15,000,000) only, being the aggregate of Ringgit Malaysia Five Million (RM5,000,000) only per 12-month period in the form of cash (the Rental Guarantee ) to be held by a trustee to be jointly appointed by the Vendor and the Purchaser as the stakeholder for the Rental Guarantee (the Guarantee Stakeholder ), which covers the period of 36 months from the Completion Date (the Guaranteed Period ). The Guarantee Stakeholder shall pay to the Purchaser the Rental Guarantee by 25 instalments in the following manner: (a) for the first 24 months following the Completion Date, 24 equal monthly payments of Ringgit Malaysia Four Hundred and Sixteen Thousand Six Hundred and Sixty-Six and sen Sixty Seven (RM416,666.67) only; and (b) on the 25 th month following the Completion Date, one payment of Ringgit Malaysia Five Million (RM5,000,000) only. 2.4 Liabilities to be assumed by Pavilion REIT Pavilion REIT will not be assuming any liability (including contingent liabilities and guarantees) under the Proposed Acquisition. There is no requirement for any additional financial commitment from Pavilion REIT, except for capital expenditure to be incurred in the course of its normal operations since the Property is already established and fully operational. 3. INFORMATION ON THE VENDOR The Intermark Sdn. Bhd. was incorporated in Malaysia under the Companies Act, 1965 ( Act ) on 7 July 2006 as a private limited company under the name of Affluent Impact Sdn. Bhd. Subsequently, on 1 September 2006, the company name was changed to MGP I (Mal) Sdn. Bhd., and on 25 November 2008, The Intermark Sdn. Bhd. assumed its present name. As at 5 October 2015, the authorised share capital of the Vendor is RM10,400,000 comprising 10,000,000 ordinary shares of RM1.00 each ( Shares ) and 40,000,000 preference shares of RM0.01 each ( Preference Shares ), of which RM900,000 comprising 500,000 Shares and 40,000,000 Preference Shares have been issued and credited as fully paid-up. 4

5 The principal activities of the Vendor are the holding of investment properties and leasing of investment properties under operating leases. The Directors of the Vendor are Richard Hugh Andrew, Paridah Binti Mohamad, Patrick Liau Kong Voon and Bernardine Louise Maria Vos, as well as Joanne Fitzgerald as the alternate director to Bernardine Louise Maria Vos. The sole shareholder of the Vendor is MAL II (BVI) Ltd holding 500,000 Shares and 40,000,000 Preference Shares. 4. RATIONALE FOR THE PROPOSED ACQUISITION The Manager aims to provide the unitholders of Pavilion REIT ( Unitholders ) with regular and stable distributions as well as to achieve long term growth in the net asset value ( NAV ) per unit in Pavilion REIT ( Unit ) through, among others, selectively acquiring properties that meet the Manager s investment criteria. The Proposed Acquisition is consistent with the investment objective and strategy of Pavilion REIT and it is expected to be accretive to Pavilion REIT s distributable income as the Property is located along Jalan Tun Razak on the fringe of the Golden Triangle of Kuala Lumpur, the city s main commercial precinct. The area that the Property is located at consists of prime office buildings, prime retail centres and prestigious internationalclass hotels with the Kuala Lumpur City Centre development within its vicinity. The Property is easily accessible from various parts of the city via various major highways interconnecting the enclave. Upon completion, the Proposed Acquisition will enlarge Pavilion REIT s portfolio of investment properties from RM4.6 billion as at 30 September 2015 to RM4.8 billion. 5. PROSPECTS The Property forms part of an integrated mixed-use development known as The Intermark, which also comprises two corporate office towers and a hotel. It is strategically located at the crossroads of Jalan Ampang and Jalan Tun Razak, the gateway of Kuala Lumpur s Golden Triangle. It is easily accessible from various parts of the Klang Valley via Jalan Tun Razak, the Ampang - Kuala Lumpur Elevated Highway (AKLEH), the Kuala Lumpur Middle Ring Road II (MRR2), the Stormwater Management and Road Tunnel (SMART), the Federal Highway, the New Klang Valley Expressway (NKVE), the Duta - Ulu Klang Expressway (DUKE) and the New Pantai Expressway (NPE). The locality is also well-served by public transportation such as buses, taxis and the light rail transit (LRT) system. The Intermark Mall caters to the daily needs and convenience of corporate tenants and hotel guests within the integrated mixed-use development as well as those working and/or staying in the immediate locality. The Manager believes that with good and improving occupancy levels of its two corporate office towers and hotel, there will be opportunities for the Intermark Mall to improve its occupancy levels by offering a wider trade mix to cater to the needs of its corporate tenants, hotel guests and nearby residents. In view of the above, the Manager is of the opinion that the net yield of the Property will be sustained after the Guaranteed Period. (Source: Valuation report dated 28 December 2015 prepared by Knight Frank in respect of the Property) 5

6 6. RISK FACTORS The Proposed Acquisition may be subjected to certain risk factors. These include, but are not limited to, the following: (i) (ii) non-completion risk of the Proposed Acquisition; the gross rental income and the value of the Property may be affected by a number of factors including but not limited to: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) vacancies following expiry or termination of tenancy agreements and/or licence agreements that lead to a decrease in the occupancy rates and rental income; the ability to collect rental from tenants on a timely basis; tenants seeking protection under the bankruptcy laws could result in delays of rental payments or inability to pay rental at all or termination of tenancy agreements and/or licence agreements prior to expiry; tenant that breaches the terms and conditions of the tenancy agreements and/or licence agreements that result in termination of tenancy agreements and/or licence agreements or non-payment of rental; increased competition from other retail properties for tenants; competition between retailers of similar nature of business which may affect the financial position of the tenants and may consequently result in early termination of tenancy agreements and/or licence agreements or non-payment of rental; the rental rates and the terms of the renewed tenancy agreements and/or licence agreements being less favourable than the current tenancy agreements and/or licence agreements; adverse changes in local market, national or economic conditions; due diligence on the Property may not detect all material defects, noncompliance with law and regulations and other flaws; changes in statutory laws, regulations or government policies, which may affect the value of the Property; (iii) (iv) (v) (vi) the net yield of the Property may subsequently decline after the Guaranteed Period; compulsory acquisition of the Property and/or any part of the Master Land by the Malaysian Government; the sale price for the Property in the future may be less than the current valuation or the Purchase Consideration paid by the Purchaser; and losses or liabilities from latent building or equipment defects may adversely affect earnings and cash flow. 6

7 7. EFFECTS OF THE PROPOSED ACQUISITION 7.1 Unitholders Capital and Substantial Unitholders Unitholdings 7.2 NAV The Proposed Acquisition will not have any effect on the total units of Pavilion REIT in issue and substantial unitholders unitholdings, as the Purchase Consideration will be satisfied entirely in cash. The Proposed Acquisition will have no impact to the NAV of Pavilion REIT at the time of completion. 7.3 Earnings Upon completion, the Proposed Acquisition is expected to contribute positively to the earnings of Pavilion REIT. 7.4 Gearing In view that the Manager intends to fully fund the Proposed Acquisition through debt, the Proposed Acquisition is expected to increase the gearing of Pavilion REIT from 16% as at 30 September 2015 to 19%, which is below the gearing limit of 50% as prescribed under Clause 8.37 of the Guidelines on Real Estate Investment Trusts issued by the Securities Commission Malaysia. 8. APPROVALS REQUIRED Pursuant to the REIT Guidelines, the Proposed Acquisition does not require approval of Securities Commission Malaysia nor the prior approval of the Unitholders. 9. INTERESTS OF THE DIRECTORS AND/OR MAJOR SHAREHOLDERS OF THE MANAGER, MAJOR UNITHOLDERS AND/OR PERSONS CONNECTED TO THEM None of the Directors and/or major shareholders of the Manager and/or major Unitholders and/or persons connected to them have any interest, direct or indirect, in the Proposed Acquisition. 10. DIRECTORS STATEMENT The Board of Directors of the Manager, having considered all aspects of the Proposed Acquisition and after careful deliberation, is of the opinion that the Proposed Acquisition is in the best interest of Pavilion REIT. 11. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed Acquisition is expected to be completed by the first quarter of

8 12. DOCUMENTS AVAILABLE FOR INSPECTION The following documents are available for inspection at the registered office of the Manager at 6-2 Level 6 East Wing, Menara ING, No. 84 Jalan Raja Chulan, Kuala Lumpur during normal business hours from Mondays to Fridays (except for public holidays) for a period of three months from the date of this announcement: (i) (ii) the SPA; and the valuation report dated 28 December 2015 prepared by Knight Frank in respect of the Property. This announcement is dated 29 December