Acquisition Of A Shopping Complex And Hotel Tower Together With A Basement Car Park From Wetex Realty Sdn Bhd And Lease Back Of Hotel Tower
Published : 18 Feb 2008
Announced : 18 Feb 2008
i. Sale and Purchase Agreement dated 18 February 2008 between Wetex as Vendor and AmTrustee as Purchaser ("SPA") for the acquisition of the Property; and
ii. Lease Agreement dated 18 February 2008 between AmTrustee as Lessor and Wetex as Lessee ("Lease Agreement") for the lease of the Hotel.
Hektar REIT is acquiring the Property for a total lump sum cash consideration of RM117,500,000 from Wetex and is entering into a lease back arrangement with Wetex in respect of the Hotel.
The Property is being acquired free from encumbrances but subject to the terms and conditions stipulated in the aforementioned SPA.
1.2 Information on the Property
The Property is situated in the Town of Bandar Maharani, District of Muar, State of Johore. Further details are as set out below Table 1.
- Upon the execution of the SPA, the Purchaser shall pay to the Vendor's Solicitors as stakeholders the sum of Ringgit Malaysia Nine Million and Four Hundred Thousand (RM9,400,000) ("Balance Deposit"). The Earnest Deposit and Balance Deposit shall hereinafter be collectively referred to as the "Deposit".
iii. Balance Purchase Price
iv. Assignment of Tenancies
- On the Completion Date, the Vendor shall assign unto the Purchaser its benefits, rights, interests, obligations and liabilities under the relevant agreement for the Tenancy by a Deed of Assignment. The Vendor shall deliver the signed but unstamped Deed of Assignment to the Purchaser within three (3) Business Days from the Completion Date and the Purchaser shall bear all stamp duties in respect of the Deed of Assignment.
v. Transfer of Title
- The Purchaser's Solicitors are hereby authorised to submit the Transfer to the Collector of Stamp Duty for adjudication (if applicable) as to the stamp duty chargeable thereon after the Unconditional Date (as defined hereinbelow).
- The Purchaser's Solicitors are authorised to present the Transfer for registration at the relevant Land Office or Registry after full payment of the Purchase Price or upon receipt of the Transfer Documents (as defined in the SPA).
i. Conditional Agreement
- The Purchaser shall, within fourteen (14) Business Days from the date of the SPA and subject to the Vendor providing all necessary information to the Purchaser within seven (7) Business Days from the date of the SPA, submit its application for the State Authority Approval.
- The SPA shall become unconditional on the date when the Condition Precedent is satisfied ("Unconditional Date"). The Vendor's Solicitors shall release the Deposit together with the accrued interest to the Vendor on the Unconditional Date.
iii. Lease and Lease Agreement
- Upon Completion (as defined in the SPA), the Purchaser's Solicitors shall and are authorised to effect registration of the Lease simultaneously with the registration of the Transfer.
i. Lease and Renewal
- The Lessor grants the Lease, and the Lessee accepts the Lease of the Hotel (as defined in the Lease Agreement) under the provisions of the National Land Code, 1965 upon and subject to the terms and conditions contained in the Lease Agreement.
- The ten (10) year lease term ("Term") shall commence on the date of completion of the SPA ("Lease Commencement Date") with an option for the renewal of the Lease for a further term of ten (10) years from the date falling on the tenth (10th) anniversary of the Lease Commencement Date ("the Renewed Term").
AmTrustee had also approved the Acquisition subject to relevant approvals obtained from relevant authorities.
2.4 Liabilities to be assumed by Hektar REIT
Hektar REIT will not assume any liabilities pursuant to the Acquisition.
Wetex is a company incorporated in Malaysia under the Companies Act, 1965 on 14 September 1981. Wetex is principally involved in property investment and operating shopping complexes and hotels. As at to date, its authorised capital is RM25,000,000 comprising 25,000,000 ordinary shares of RM1.00 each and its issued and paid-up share capital is RM16,000,000. The registered office of Wetex is at No. 67, 2nd Floor, Room B, Jalan Ali, 84000 Muar, Johor Darul Takzim.
4. RATIONALE FOR THE ACQUISITION OF PROPERTY AND LEASE BACK OF HOTEL
The Manager aims to provide the unitholders of Hektar REIT with stable distribution and to enhance the value of Hektar REIT's property portfolio over time through, inter-alia, selectively acquiring properties that meet the Manager's investment criteria. The Acquisition's rationale is as follows :-
- Yield-accretive to Hektar REIT, providing for an expected increase in income for the financial year ending 31 December 2008;
- Stabilised asset with potential for growth in the interim;
- Improved income/asset diversification for Hektar REIT with new exposure to the Johor market; and
- The lease back of Hotel is on a long-term 10-year basis and will account for only 2.7% of revenue for the financial year ending 31 December 2008.
In light of the above, Hektar REIT will maintain its primary focus on retail properties.
5. EFFECTS OF THE ACQUISITION OF PROPERTY AND LEASE BACK OF HOTEL
The Acquisition will not have any effect on the total units in issue and substantial unitholders' unitholding of Hektar REIT as the purchase consideration will be paid entirely in cash.
5.2 Net Asset Value ("NAV")
Hektar AM intends to utilise RM117,500,000 from Hektar REIT's bank borrowings. The proposed debt financing will increase Hektar REIT's gearing ratio from 31.3% to 41.8% of unaudited total assets as at 31 December 2007, which is still below the gearing limit of 50% as prescribed by the Securities Commission's ("SC") Guidelines on Real Estate Investment Trusts ("REIT Guidelines").
Pursuant to the REIT Guidelines, the valuation set out in the acquisition of the Property is not subject to approval by the SC.
7. RISK FACTORS
The Property may be subject to certain risks inherent in the property market industry. These risks include but are not limited to the following :-
- Non-fulfillment of the condition precedent in the SPA;
- Non registration of the transfer of the Property;
- Compulsory acquisition (as affected by any notice of acquisition or intended acquisition under the Land Acquisition Act, 1960 or other legislation of Malaysia);
- Non-renewal of tenancy after expiry due to change in circumstances of the Tenant;
- Adverse changes in national economic conditions;
- Adverse local market conditions;
- Changes in environmental laws and regulations, zoning laws and other governmental rules and fiscal policies;
- Changes in relative popularity of certain property types and locations leading to an oversupply/undersupply of space or an increase/reduction in tenant demand for a particular type of property in a given market; and
- Acts of God, uninsurable losses and other factors.
The Acquisition is expected to be completed within three (3) months from the date of the Condition Precedent being satisfied i.e. by May 2008.
10. DOCUMENTS FOR INSPECTION
The SPA and Lease Agreement are available for inspection for a period of three (3) months from the date of this announcement, at the office of Hektar AM at Block A-2-4, Plaza Damas, No. 60, Jalan Sri Hartamas 1, Sri Hartamas, 50480 Kuala Lumpur or the principal place of business of AmTrustee at 17thFloor, Bangunan AmBank Group, 55, Jalan Raja Chulan, 50200 Kuala Lumpur.
|Property's address||:||69 Jalan Ali, Off Jalan Sulaiman, 84000 Muar, Johor Darul Takzim|
|Title nos.||:||(i) H.S. (D) 19633, No. Lot PTB 10586; and
(ii) GRN 84560 (formerly known as Certificate of Title
2955), Lot No. 3675
|Total land area||:||(i) 0.4908 hectares (equivalent to 1.2128 acres); and
(ii) 641.1728 square metres
|Gross built-up area (Mall)||:||290,200 square feet|
|Net lettable Area (Mall)||:||178,742 square feet|
|Occupancy in 2007 (Mall)||:||94.6%|
|Hotel component||:||156 rooms|
|Car parks||:||190 bays|
|Approximate age of building||:||11 years|
* Valuation dated 14 August 2007 by Henry Butcher Malaysia Sdn Bhd ("Henry Butcher")
|The Mall (inclusive of the basement car park)||
|Total Purchase Price of the Property||