Public Release LBS BINA GROUP BERHAD (518482-H) DEVELOPMENT RIGHTS AGREEMENT BETWEEN MENTERI BESAR SELANGOR (PEMERBADANAN), WORLDWIDE PROPERTY MANAGEMENT SDN. BHD. AND KEMUDI EHSAN SDN BHD, A SUBSIDIARY OF LBS BINA HOLDINGS SDN BHD, WHICH IS IN TURN A SUBSIDIARY OF LBS BINA GROUP BERHAD Contents: 1. Introduction The Board of LBS Bina Group Berhad ( LBGB or Company ) wishes to inform that its subsidiary, Kemudi Ehsan Sdn. Bhd. ( KESB ) together with Worldwide Property Management Sdn Bhd ( WPM ) had on 10 September 2016 entered into a Development Rights Agreement ( DRA ) with Menteri Besar Selangor (Pemerbadanan) ( MBI ) to accept the development rights for the development on 10 parcels of leasehold lands all situated in Mukim Ijok, District of Kuala Selangor, in the State of Selangor ( Development Land ) subject to and upon the terms and condition of the DRA. (KESB and WPM shall be collectively referred to as the Developer ) (KESB, WPM and MBI shall be collectively referred to as the Parties ) 2. Background Information on KESB KESB was incorporated in Malaysia on 23 March 2015 as a private limited company and is having its authorized share capital of RM1,000,000.00 divided into 1,000,000 ordinary shares of RM1.00 each of which 500,000 ordinary shares have been issued and fully paid-up. KESB has not commenced business since its incorporation. The intended business activity of KESB is property development. 3. Background Information on MBI MBI was established under the Enactment of Selangor (Enactment No. 3, 1994) and having its business address at Tingkat 14, Bangunan Sultan Salahuddin Abdul Aziz Shah, 40503 Shah Alam, Selangor Darul Ehsan. MBI is the proprietor of the Development Land. 4. Background Information on WPM WPM was incorporated in Malaysia on 17 February 1997 as a private limited company under the name of Sasaran Kiara Sdn Bhd. It assumed its current name on 18 August 1998. WPM is having its authorized share capital of RM100,000.00 divided into 100,000 ordinary shares of RM1.00 each of which 2 ordinary shares have been issued and fully paid-up. WPM is a wholly-owned subsidiary of Worldwide Holdings Berhad ( WHB ) which in turn is a whollyowned subsidiary of Perbadanan Kemajuan Negeri Selangor. WHB s main business is property development. 5. Information on Consortium Agreement KESB had on 4 August 2016 signed a conditional Consortium Agreement ( CA ) with its consortium partner WHB with the purpose of setting out all obligation, cost and liabilities arising from or in connection with the Development Land for:- Page 1 of 7
a) the provision of Common Infrastructure; b) the settlement of MBSB s Loan; and c) the rehabilitation of the Abandoned Project which will be based on the following cost sharing percentage ratio: Item Developer Percentage % (i) KESB 53.33 (ii) WHB 46.67 ( Consortium Partner s Portions ) A Supplemental CA ( SCA ) was signed on 7 September 2016 to reflect WPM as a party to the Consortium and therefore WHB s rights and obligations under the CA shall be assigned to WPM. 6. Information of the Development Land The Development Land is under the jurisdiction of Majlis Daerah Kuala Selangor (MDKS). The location map of the Development Land is set out as below:- Source: MBI The Development Land is located in the up-and-coming North West of Klang Valley, approximately 45 kilometres from Kuala Lumpur city centre, 40 kilometres from Petaling Jaya city centre and 18 kilometres from Sungai Buloh town centre. It is well connected to established suburban centres such as Kota Damansara, Shah Alam and Sungai Buloh via major roads - Jalan Batu Arang, Persiaran Mokhtar Dahari, Jalan Meru Tambahan and Jalan Kuala Selangor as well as existing highways including the LATAR Expressway, North-South Expressway and Guthrie Expressway. The accessibility to the Lands is expected to be enhanced with new proposed expressways including the DASH Highway and West Coast Expressway. Page 2 of 7
Part of the Development Land is in the Alam Perdana township and other major townships and developments within the vicinity of the Development Land are Puncak Alam Township, Eco Grandeur, Bandar Sri Coalfield, Hill Park Shah Alam, Bandar Saujana Utama and Shah Alam 2 Township, as well as a tertiary education institution, namely University Teknologi Mara. Other developments such as KWASA Land, Denai Alam, Sunway Kayangan, Cahaya SPK and Elmina are located within a 10 kilometres radius from the Lands. The Development Land comprises 10 parcels of land identified as follows and all are with 99 years leasehold expiring on 15 February 2111: KESB s portion of land: Identify Title & Lot No. Developer in Provisional charge area (acres) Parcel 2 PN 92984 (Lot 4289) KESB 187.82 Parcel 3 PN 92987 (Lot 4292) KESB 46.21 Parcel 4 PN 92988 (Lot 4293) KESB 83.35 Parcel 5 PN 92989 (Lot 4294) KESB 57.58 Parcel 6 PN 92990 (Lot 4295) KESB 94.89 Total: 469.85 WPM s portion of land: Identify Title & Lot No. Developer in Provisional charge area (acres) Parcel 1 PN 92983 (Lot 4288) WPM 212.31 Parcel 7 HSD 279611 (PT28595) WPM 147.84 Parcel 8 HSD 278983 (PT27896) WPM 5.9 Parcel 9 HSD 279609 (PT28593) WPM 19.45 Parcel 10 HSD 279610 (PT28594) WPM 53.66 Total: 439.16 Land Land The Development Land currently is a vacant land overgrown with shrubs and bushes. There is a main road Jalan Batu Arang passes through the Development Land. The category of land use condition for the Development Land is Bangunan and part of the Development Land are charged to Malaysia Building Society Berhad ( MBSB ) as security for the loan granted by MBSB to PNSB Development Berhad ( PNSB ) (hereinafter referred to as MBSB Loan ). The Development Land would be developed into a mixed development township comprising majority landed residential units to be priced at affordable range. Rumah SelangorKu would also be included in the development plan. This township would be equipped with various amenities such as surau, community hall, school, payground and park to enhance the living standard of the residents. Based on the preliminary plan, the estimated gross development value (excluding Rumah SelangorKu units) ( Non-RSK GDV ) to be generated from the Development Land is approximately RM3.43 billion ( Projected GDV ) which is based on the following proportion to be developed over a period of 12 years development period:- (i) (ii) The projected Non-RSK GDV for KESB s 5 parcels of land is RM1.83 billion only; and The projected Non-RSK GDV for WPM s 5 parcels of land is RM1.60 billion only. KESB is currently in the initial stage of development planning and as such, is unable to ascertain the expected cost required to develop the Development Land. Nevertheless, the Management planned to finance the relevant development cost through the combination of internally generated fund and/or bank borrowings. Page 3 of 7
7. Salient Terms of the DRA i) MBI shall make available to the Developer the Development Land for development and the Developer shall be fully responsible for all cost and expenses on undertaking completing the Development Work on the Development Land subject to the terms and conditions as per the DRA. ii) The DRA is conditional upon the Parties fulfilling the followings:- (A) MBI s Conditions Precedent ( MBI s CP ) MBI shall, within twelve (12) months from the date of the DRA or any other extended date as may be mutually agreed in writing by the Parties ( Cut-Off Period ) fulfill the following conditions precedent:- (a) to fully and final settlement and disposal of any pending legal dispute involving the Development Land so that it is free from any restrictions and/or restraints in dealing; (b) to remove any form of statutory caveats endorsed on the issue document of title of the Development Land; and (c) the removal of the Prohibitory Order on Lot 4288 (Parcel 1) endorsed on the issue document of title of Parcel 1. (B) The Parties Condition Precedent ( Parties CP ) The Parties shall, within the Cut-Off Period mutually ascertain whether there is any claim or demand made by the previous contractor(s), consultant(s) or supplier(s) to PNSB or MBI with regards to any amount that is owing by PNSB or MBI to such previous contractor(s), consultant(s) or supplier(s) in respect of any works and/or services rendered in respect of the Abandoned Project (hereinafter referred to as Ascertained Claim ). Such Ascertained Claim shall be dealt with and settled by the Developer in accordance with the Consortium Partner s Portions. (the MBI s CP and Parties CP shall be collectively referred to as the Conditions Precedent ) iii) Fulfillment of Conditions Precedent The completion of the Agreement shall cease to be conditional on the date of fulfillment of the Conditions Precedent. iv) Non-fulfillment of Conditions Precedent In the event the Conditions Precedent cannot be fulfilled by the expiry of the Cut-Off Period, the Parties agree that the DRA shall be deemed to have been terminated and is deemed null and void and the respective Parties obligation shall ceased accordingly and MBI shall within fourteen (14) days upon request in writing from the Developer, refund all monies paid by the Developer to MBI, failing which a compensation based on the rate of Seven per centum (7%) per annum calculated on a daily basis shall be imposed. v) Development Rights Value The payment of Development Rights Value for KESB s portion shall be RM293.3 million and shall be settled in the following manner:- Page 4 of 7
Milestone Amount (RM) Upon execution of the DRA. 5,333,000.00 Repayment to MBSB of the Principal Amount of MBSB Loan. Within six (6) months upon fullfilment of all the Conditions Precedent. Via progressive payment within the Development Period starting from 5 th year to 12 th year. 87,114,188.96 47,997,000.00 152,870,811.04 Total Guarantee Development Rights Value: 293,315,000.00 In the event upon expiry of the Development Period, the actual Non-RSK GDV of the Development Land exceeds the Projected GDV, the Developer shall irrevocably make additional payment of five percent (5%) of the differential sum between the actual Non- RSK GDV and the Projected GDV to MBI accordingly for their respective relevant portion. 8. Liabilities to be assumed Other than the Development Rights Value as mentioned above, the Developer shall jointly responsible for: (a) the construction and completion of 203 units of abandoned terrace house within the Development Land; (b) completion of the Common Infrastructure on the Development Land; and (c) settlement of MBSB Loan (which the Principal Amount forms part of the Development Rights Value as mentioned above) and cost and interest that may be incurred. in the manner and as set out in the CA. 9. Basis on arriving at the Development Rights Value The KESB s portion of Development Rights Value of RM293,315,000 was arrived at on a willing-buyer willing-seller basis through an open/a competitive tender process taking into accounts of the following:- (a) the development potential and prospects of the Development Land in view of its strategic location in the growth area in north west of Klang Valley where connectivity to other suburban centers such as Shah Alam, Sungai Buloh, Kota Damansara, Rawang as well as Kuala Lumpur city center are made easy via LATAR expressway, Guthrie Expressway and North-South Highway; (b) the Group s strategy to further strengthen its foothold in Klang Valley as well as the potential cost savings from synergistic benefits that may arise such as sales and marketing and site operations; and (c) the KESB s portion of Development Rights Value is within the range of acceptable land cost given the potential GDV to be generated based on the Group s internal assessment of the Development Land. Page 5 of 7
10. Rationale of the DRA The DRA fits into the Group s property development strategy to enlarge its land bank particularly in the Klang Valley for its future development project and expected to generate future revenue stream and contribute positively to the Group s profitability. The success of LBS township development in the Klang Valley with products priced at affordable range was attested by the record sales achieved in the past 2 years. About 85% of the total sales of RM1.029 billion in 2015 was contributed from affordable products in Klang Valley, mainly form BSP 21 in Bandar Saujana Putra and SkyVilla in D Island Residence. Up to middle of September this year, about 88% of the sales are derived from the similar products in Klang Valley. The strong take-up rate in the recent launch of landed residential properties in Desiran Bayu further demonstrated the resilient demand in this type of properties despite the prevailing soft market sentiment. Desiran Bayu, a landed residential project located next to D Island Residence in Puchong has received overwhelming results where all the 330 units under Phase 1 to 3 were sold upon launch in August this year. As mentioned in Item 6 above, the Development Land would be developed into properties that are similar to our Desiran Bayu project with majority are landed residential units targeted to first time home buyers and those upgraders to landed property. 11. Financial Effects (a) (b) Issued and Paid-up Capital and Substantial Shareholders Shareholdings The signing of DRA will not have any effect on the issued and paid-up share capital of the Company as well as its substantial shareholders and their shareholdings. Net Assets ( NA ), Gearing and Earnings The signing of DRA is not expected to have any material impact on the NA, Gearing and Earnings of the Group for the financial year ending 31 December 2016. 12. Risk Factors 12.1 Non-Completion of the DRA There is no assurance that all the terms and conditions can be fulfilled by either parties to the DRA within the time frame set out in the DRA or will not be exposed to risks such as inability by either party to the DRA to fulfill the terms and conditions of the DRA and/or obtain the relevant approvals from the relevant authorities. However, the Company will take all reasonable steps that are within its control to ensure that the Conditions Precedents are fulfilled by the stipulated date and in accordance with the provisions of the DRA. In the event of the Conditions Precedent stated in the DRA, which include, amongst others, the approvals from authorities are not fulfilled within the stipulated time, the DRA may be terminated and all payment to MBI will be refunded. 12.2 Business, Political, Economic and Regulatory Risk The Board is not aware of any material risk factors arising from the project on the Development Land other than the risks and uncertainties that are generally associated with the property development and construction industries, such as changes in political, economic and regulatory conditions, shortage of labour and building materials, increase in labour and material costs, changes in credit and interest rate conditions, inflation and natural disaster that may affect the financial and operational conditions and the profitability of LBGB subsequently. Page 6 of 7
Although LBGB seeks to limit these risks by taking more stringent internal controls over the business operations of the Group, no assurance can be given that any changes in these factors will not have any adverse impact on the business, prospects and/or future financial performance of the Group. 12.3 Competition Risk The Group s competitiveness is dependent on the ability of its management to price its products competitively, to provide quality and timely delivery of developments and to manage the sales of its properties. Nevertheless, the Group will continue to undertake measures to remain competitive in the property development industry by providing quality products and competitive pricing and ensuring the timely completion and delivery of properties sold. However, there can be no assurance that the Group s efforts will be sufficient to mitigate the competition risks from other companies operating in the property development sector. 13. Directors and Substantial Shareholders Interest None of the Directors, substantial shareholders of LBGB and or persons connected with them has any interest, direct or indirect, in the DRA and CA. 14. Approval Required and Percentage Ratio Applicable The DRA is not subject to the approval of LBGB s shareholders. The highest percentage ratio pursuant to Paragraph 10.02(g) of the Main Market Listing Requirements ( LR ) of Bursa Malaysia Securities Berhad ( Bursa Securities ) for this Agreement is 16.4%. This announcement is made pursuant to Paragraph 10.06 of the LR of Bursa Securities. 15. Statement by Directors After having considered all aspects of the DRA and CA, the Board of Directors of LBGB is of the opinion that the DRA is fair, reasonable and in the best interest of LBGB Group. 16. Documents Available for Inspection Copy of the DRA, CA and SCA are available for inspection at the Registered Office of LBGB at Plaza Seri Setia, Level 1-4, No. 1, Jalan SS9/2, 47300 Petaling Jaya, Selangor during normal office hour from Monday to Friday (except for public holidays) for a period of three (3) months from the date of this announcement. This announcement is dated 10 September 2016. Page 7 of 7