ENTRY INTO HEADS OF AGREEMENT FOR ACQUISITION OF STARHILL GALLERY AND LOT 10

Transcription

1 SGX-ST Announcement ENTRY INTO HEADS OF AGREEMENT FOR ACQUISITION OF STARHILL GALLERY AND LOT INTRODUCTION YTL Pacific Star REIT Management Limited, as manager of Starhill Global Real Estate Investment Trust ( Starhill Global REIT, and as manager of Starhill Global REIT, the Manager ), is pleased to announce that HSBC Institutional Trust Services (Singapore) Limited, as trustee of Starhill Global REIT (the Trustee ), has today entered into a heads of agreement (the Heads of Agreement ) with Mayban Trustees Berhad, as trustee of Starhill Real Estate Investment Trust ( Starhill REIT or the Vendor ). Starhill REIT is listed on Bursa Malaysia Securities Berhad ( Bursa Malaysia ). The Heads of Agreement concerns the proposed acquisition by Starhill Global REIT through an asset-backed securitisation structure ( ABS Structure ) from the Vendor of the following two properties which are located in Kuala Lumpur, Malaysia: (i) (ii) the freehold interest in a shopping centre known as Starhill Gallery which comprises part of a seven level building with five basements and a 12 level annex building with three basements, located at 181 Jalan Bukit Bintang, Kuala Lumpur and erected on part of the freehold land held under Geran No , Lot No. 1267, Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan, together with the assets appurtenant thereto ( Starhill Gallery ); and a leasehold interest expiring 29 July 2076 in 137 strata parcels with two accessory parcels which consist of retail, office storage and other spaces, within a shopping complex known as Lot 10 Shopping Centre which consists of an eight storey building with a basement and a lower ground floor, together with a seven-storey annex building with a lower ground floor and located at 50 Jalan Sultan Ismail, Kuala Lumpur and held under leasehold master title Pajakan Negeri No Lot No. 1247, Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan together with the assets appurtenant thereto ( Lot 10 Property ), (collectively, the Properties, and the proposed acquisition of the Properties, the Acquisitions ). The Heads of Agreement sets out the agreement in principle that has been reached by the Vendor and the Trustee in relation to the sale and purchase of the Properties as an interim record and expression of intent, pending the execution of comprehensively legally binding agreements (the Definitive Agreements ). Under the Heads of Agreement, each of the Vendor and the Trustee agrees that it shall negotiate in good faith and use its best efforts to prepare, finalise and execute the Definitive Agreements based on the terms set out in the Heads of Agreement and the parties agree that they will negotiate exclusively with each other in relation to the sale and purchase of the Properties during the period commencing from the 1

2 date of the Heads of Agreement and expiring 90 days thereafter (subject to any extension which may be mutually agreed). 2. RATIONALE FOR THE ACQUISITION OF THE PROPERTIES 2.1 Competitive Strengths of the Properties Strategic Location The Acquisitions are in line with the Manager s growth strategy to pursue acquisition opportunities that will enhance Starhill Global REIT s asset base and maintain an attractive cash flow and yield profile. The Properties are landmark prime properties in Kuala Lumpur and are strategically located in the Jalan Bukit Bintang area, which forms part of the city s Golden Triangle, one of the main tourist hubs and a popular shopping and entertainment district in Kuala Lumpur. High occupancy rates and quality tenant base The Properties enjoy high occupancy levels, reflecting the demand for high quality space at prominent locations in the Kuala Lumpur City Centre. Both Starhill Gallery and the Lot 10 Property enjoy high occupancy rates, with an average occupancy rate of 96.4% and 86.4% respectively for the 12-months ended 30 June The Properties have a strong tenant base with excellent brand recognition. Tenants range from high profile, international brands to prominent local retailers. Notable tenants in Starhill Gallery include Louis Vuitton, Audemar Piguet, Bottega Venetta, Boucheron, Chopard, and Van Cleef & Arpels. Tenants in the Lot 10 Property were recently repositioned to appeal to young urbanites with Debenhams being expected to open its flagship store. Other tenants include The Actors Studio, Timberland and the Apple store. 2.2 Stable Cashflow with Organic Growth The Properties would be rented to Katagreen Development Sdn Bhd (the Master Tenant ), an indirect wholly-owned subsidiary of YTL Corporation Berhad ( YTL ), under a master tenancy agreement (the Master Tenancy Agreement ) for a fixed tenancy term of years. This would provide for stability in the rental income from the Properties for the next six to nine years. The step up feature incorporated every three years would also provide growth in Starhill Global REIT s cash flow. (See paragraph 3.5 below for more details) The Acquisitions are expected to be accretive to unitholders of Starhill Global REIT ( Unitholders ). 2.3 Unique opportunity with inherent synergistic benefits The Manager is of the view that this is a rare opportunity to acquire prime retail properties in a prime location in Kuala Lumpur. In addition, there are inherent synergistic benefits that can be derived by Starhill Global REIT in terms of retail management and tenant mix, given the similarity in the positioning and branding of the Properties with Starhill Global REIT s existing Singapore properties. 2

3 2.4 Diversification of existing portfolio The Acquisitions are in line with Starhill Global REIT s geographical diversification strategy and will reduce the concentration risk in its current portfolio of assets. The Acquisitions will diversify the existing portfolio by reducing the geographical dependency on Singapore from 86.1% to 70.8% in terms of asset value, as at 15 June USE OF ASSET-BACKED SECURITISATION STRUCTURE TO ACQUIRE THE PROPERTIES 3.1 Subscription of 100.0% of Junior Medium Term Notes and Non-Redeemable Preference Shares by Starhill Global REIT The Manager is proposing to acquire the Properties through the ABS Structure, via the following steps: (a) (b) SG REIT (M) Pte. Ltd., a wholly-owned subsidiary of Starhill Global REIT incorporated in Singapore ( SGRMPL ), will subscribe for 100.0% of the Malaysia Ringgit ( RM ) denominated junior medium term notes (the Junior MTNs ) and 100.0% of the nonredeemable preference shares ( NRPS ) to be issued by a bankruptcy-remote special purpose vehicle incorporated in Malaysia (the ABS SPV ); and the subscription of the Junior MTNs will be financed via cash and/or issuance of convertible preference units ( CPUs ). (See paragraph 4 below for further details) The ABS Structure (which is subject to the approval from the relevant regulatory authorities) is intended to, among other things, enable Starhill Global REIT to acquire the interest in the Properties in a tax-efficient manner. 3.2 Purchase Consideration Under the Heads of Agreement, it is proposed that the ABS SPV will acquire Starhill Gallery at a purchase consideration of RM629.0 million (S$258.5 million 1 ) and the Lot 10 Property at a purchase consideration of RM401.0 million (S$164.8 million 1 ). The purchase consideration for the Properties has been arrived at on a willing buyer and willing seller basis, taking into account, among other things, their valuations (see paragraph 3.4 below) as well as the potential cashflow which they can generate. 3.3 Conditions Precedent The Acquisitions by the ABS SPV from the Vendor under the Heads of Agreement are subject to the satisfaction of certain condition precedents, including obtaining: (a) (b) (c) the approval of unitholders of Starhill Global REIT and the Vendor authorising the sale and purchase of the Properties as contemplated under the Heads of Agreement; the consent of the trustee of Starhill REIT; the approval of the Securities Commission of Malaysia; 1 Based on an exchange rate of RM1.00 = S$

4 (d) (e) the approval of Bank Negara Malaysia; and all other necessary relevant approvals, waivers and/or consents from any other relevant authority and/or persons in Singapore and Malaysia. 3.4 Valuation The Properties have been appraised by two independent valuers, Knight Frank (Ooi & Zaharin Sdn Bhd), which has been appointed by the Trustee, and Rahim & Co. Chartered Surveyors Sdn Bhd, which has been appointed by the Manager (collectively, the Independent Valuers ), and their aggregate valuation of the Properties as at 28 October 2009 and 20 October 2009 is RM1,000.0 million (S$411.0 million 1 ) and RM1,030.0 million (S$423.3 million 1 ) respectively. The Independent Valuers have each estimated the open market value of the Properties by using the income capitalisation method and/or the direct comparison method. 3.5 Master Tenancy Arrangement The Properties would be rented to the Master Tenant, an indirect wholly-owned subsidiary of YTL, for a fixed tenancy term of years, at the annual rental of RM72.1 million (S$29.6 million 1 ) for the first three-year term, RM77.3 million (S$31.7 million 1 ) for the second three-year term and RM82.4 million (S$33.9 million 1 ) for the third three-year term. The payment obligations of the Master Tenant under the Master Tenancy Agreement would be guaranteed by YTL. The tenancy would be automatically renewed for the second three-year term and both the ABS SPV and the Master Tenant would have a put and call option respectively to extend the tenancy for a third three-year term upon the expiry of the second term. 3.6 Debt Financing Subject to the assessment of the rating agency (RAM Rating Services Berhad) and approval by the relevant Malaysian regulatory authorities, it is intended that the ABS SPV will issue RM denominated 5-year senior medium-term notes ( Senior MTNs ) and 5-year Junior MTNs pursuant to a 65-year MTN Programme of up to RM1.25 billion (S$513.8 million 1 ). The issue sizes of the Senior MTNs and Junior MTNs will be determined upon finalisation of the assessment by the rating agency. It is intended that the Senior MTNs which are entitled to a fixed coupon be issued by the ABS SPV to institutional and/or sophisticated investors, secured against, among other things, the interest of the ABS SPV in the Properties. The Senior MTNs will be refinanced at the end of each maturity and will pay fixed coupon at a rate to be determined after assessing market conditions and interest from investors. The Junior MTNs will be refinanced at the end of each maturity and will pay variable coupon at a rate to be determined at each coupon payment date. 3.7 Economic in the Properties The Junior MTNs and NRPS are intended to provide Starhill Global REIT (through its 100.0% ownership of SGRMPL) with the same economic interest as if it had acquired the Properties directly, by enabling Starhill Global REIT (through the ABS SPV) to obtain 100.0% ownership of the surplus income generated by the Properties after netting off payments to the Senior MTN holders and various fees and expenses. The Junior MTNs will be subordinated to the Senior MTNs in terms of security and repayment. The Trustee or its nominee would be given a call option to buy the Properties at an amount 4

5 which is not lower than the unpaid and accrued coupon payments and outstanding nominal value of the Senior MTNs and all outstanding fees and expenses. Such call option could be exercised upon the maturity of the Senior MTNs or the occurrence of certain trigger events or a declaration of an event of default under the terms of the Junior MTNs or Senior MTNs. In addition, the transaction documents constituting the MTNs would provide that the approval of SGRMPL as the holder of the Junior MTNs would be required in relation to certain key operational issues. 4. ISSUE OF CONVERTIBLE PREFERENCE UNITS It is intended that the subscription of the Junior MTNs and NRPS by Starhill Global REIT will be financed by the payment of cash and/or issuance of CPUs by Starhill Global REIT, and that the CPUs be instruments which are classified as equity instruments of Starhill Global REIT. The Manager is currently considering the actual proportion of the cash to be paid and the number of CPUs to be issued by Starhill Global REIT, as well as the terms of the CPUs to be issued. 5. ADDITIONAL INFORMATION ON STARHILL GALLERY 5.1 Description 5.2 Title Starhill Gallery has a net lettable area of approximately 297,354 sq ft and is located at 181 Jalan Bukit Bintang, Kuala Lumpur. Starhill Gallery is part of an integrated development which includes a hotel known as JW Marriott Hotel Kuala Lumpur ( JW Marriott Hotel ). The entire integrated development is currently owned by the Vendor under a single freehold land title held under Geran No , Lot No. 1267, Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan (the Master Land Title ) and JW Marriott Hotel will be retained by the Vendor after the divestment of Starhill Gallery to the ABS SPV. The Master Land Title will not be transferred to the ABS SPV upon the completion of the acquisition of Starhill Gallery by the ABS SPV since the Vendor still retains ownership of JW Marriott Hotel. The Vendor will instead apply to the Malaysian Land Office for the single Master Land Title to be sub-divided into individual strata titles in relation to JW Marriott Hotel and Starhill Gallery respectively so that the Vendor can transfer separate and discrete strata title(s) in respect of Starhill Gallery (the Starhill Gallery Strata Title ) to the ABS SPV. The Vendor has agreed that pending the delivery of the Starhill Gallery Strata Title to the ABS SPV, the Vendor would give the ABS SPV a lease of Starhill Gallery (which is registrable at the Malaysian Land Office) for a period of 30 years, which is renewable for successive periods of 30 years on a perpetual basis. No further consideration is payable by the ABS SPV to the Vendor upon each such extension. 5

6 6. ADDITIONAL INFORMATION ON THE LOT 10 PROPERTY 6.1 Description 6.2 Title The Lot 10 Property has a net lettable area of approximately 256,811 sq ft and is located at 50 Jalan Sultan Ismail, Kuala Lumpur held under leasehold master title Pajakan Negeri No Lot No. 1247, Seksyen 67, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Wilayah Persekutuan. The beneficial ownership in the strata titles for the Lot 10 Property will vest in the ABS SPV upon the completion of the acquisition of the Lot 10 Property, while the legal title will be transferred at the time of registration of the instrument of transfer, which is expected to take place after the completion of the acquisition of the Lot 10 Property. 7. PRO FORMA FINANCIAL EFFECTS Certain pro forma financial effects of the subscription of the Junior MTNs and NRPS, the Master Tenancy Agreement and the issue of the CPUs (collectively, the Transactions ) will be announced once the Definitive Agreements have been entered into and the detailed terms of the Transactions are available. 8. DISCLOSURE UNDER THE LISTING MANUAL AND THE PROPERTY FUNDS GUIDELINES 8.1 ed Person Transaction and ed Party Transaction YTL is both the sponsor of Starhill REIT and Starhill Global REIT. As at 16 November 2009 (the Latest Practicable Date ), YTL directly and/or through its subsidiaries, has an interest of (i) 28.93% in Starhill Global REIT, (ii) 65.23% in Starhill REIT and (iii) 50.0% of the Manager, and is therefore regarded as a controlling unitholder/shareholder 2 of Starhill Global REIT, Starhill REIT as well as the Manager, under both the listing manual of Singapore Exchange Securities Trading Limited (the Listing Manual ) and the Property Funds Guidelines in Appendix 2 to the Code on Collective Investment Schemes issued by the Monetary Authority of Singapore (the Property Funds Guidelines ). Therefore, the Acquisitions and the Master Tenancy Agreement will constitute ed Person Transactions under Chapter 9 of the Listing Manual. The Acquisitions also constitute an ed Party Transaction under the Property Funds Guidelines. Accordingly, approval of Unitholders will be sought for the Acquisitions and the Master Tenancy Agreement. 2 A controlling unitholder or controlling shareholder refers to a person with an interest in one or more units/shares constituting not less than 15.0% of all outstanding units/shares in issue. 6

7 8.2 Relative figures computed on the bases set out in Rule 1006 The relative figures computed on the following bases set out in Rule 1006 of the Listing Manual are as follows: (i) (ii) the net profits attributable to the assets acquired, compared with Starhill Global REIT s net profits; and the aggregate value of the consideration given, compared with Starhill Global REIT s market capitalisation. Comparison of: The Properties (1) Starhill Global REIT Relative Figure Net Property Starhill Gallery S$17.6 million (3) Income (2) Lot 10 Property S$11.2 million (3) Total Net Property Income S$28.8 million (3) S$95.9 million (4) 18.4% 11.7% 30.1% Purchase Consideration against Starhill Global REIT s market capitalisation Starhill Gallery S$258.5 million Lot 10 Property S$164.8 million Total Purchase Consideration of approximately S$423.3 million (5) Starhill Global REIT s market capitalisation: S$1,111.1 million (6)(7) 23.3% 14.8% 38.1% Notes: (1) Based on an exchange rate of RM1.00 = S$ (2) In the case of a real estate investment trust, the net property income is a close proxy to the net profits attributable to its assets. (3) Based on the terms of the Master Tenancy Agreement, less allocated estimated property expenses. (4) For the financial year ended 31 December 2008 ( FY2008 ). (5) Does not include transaction costs. (6) Based on the closing price of S$0.575 per Unit on the SGX-ST on 16 November (7) Based on the number of Units in issue as at 16 November As the relative figures in relation to the Acquisitions for the basis of comparison above exceeds 20.0%, the Acquisitions therefore constitute a major transaction for Starhill Global REIT under Rule 1014 of the Listing Manual and Unitholders approval is required. 9. AUDIT COMMITTEE STATEMENT The Audit Committee will be obtaining an opinion from an independent financial advisor before coming to its view on the Acquisitions by Starhill Global REIT through the ABS Structure. 10. OTHER INFORMATION 10.1 Other ed Person Transactions Prior to the Latest Practicable Date, Starhill Global REIT had entered into several interested person transactions with associates of YTL ( Existing ed Person Transactions ) during the course of the current financial year and the details are set out below. These Existing 7

8 ed Person Transactions relate to leases signed by the various interested persons as tenants of the existing properties of Starhill Global REIT. ed Person Nature of Transaction Area (s.f.) Start Date Value of Transaction (S$ million) Percentage of NAV (1) (2) 1. Lease of three years for Lakefront Pte Ltd #13-01 Wisma Atria 3, Jan % 2. YTL Singapore Pte Ltd (3) Lease of three years for #14-01 to 06 Wisma Atria 7, Apr % Total % Notes: (1) Based on the audited consolidated financial statements for FY2008. (2) Lakefront Pte Ltd is a subsidiary of YTL Singapore Pte Ltd, which is a subsidiary of YTL. (3) YTL Singapore Pte Ltd is a subsidiary of YTL s of Directors and Substantial Unitholders The details of the unitholdings of the Directors of the Manager are as follows: Unitholder Tan Sri Dato (Dr) Francis Yeoh Sock Ping... Direct Deemed % (1) Total % (1) Dato Yeoh Seok Kian Mr Franklin Heng Ang Tee (2) ,000, ,000, Dr Hong Hai , , Mr Michael Hwang (3) , , Mr Keith Tay Ah Kee , , Notes: (1) The percentage interest is based on total issued Units of 1,932,418,044 as at the Latest Practicable Date. (2) Deemed interest held through nominee, Hong Leong Finance Nominees Limited. (3) Deemed interest held through nominee, UBS AG. Tan Sri Dato (Dr) Francis Yeoh Sock Ping and Dato Yeoh Seok Kian are directors of YTL, the manager of Starhill REIT and the Manager. Save as disclosed above and based on information available to the Manager, none of the Directors has an interest, direct or indirect, in the Acquisitions and the Master Tenancy Agreement. 8

9 The details of the unitholdings of the Substantial Unitholders who are interested in the subscription of the Junior MTNs and NRPS and the Master Tenancy Agreement are as follows: Unitholder Starhill Global REIT Investments Limited (2)... Direct Deemed % (1) Total % (1) - 539,840, ,840, YTL Cayman Limited (3) ,006, ,006, YTL (4) ,006, ,006, Yeoh Tiong Lay & Sons Holdings Sdn Bhd (4)... Tan Sri Dato Seri (Dr) Yeoh Tiong Lay (4) ,006, ,006, ,006, ,006, Notes: (1) The percentage interest is based on total issued Units of 1,932,418,044 as at the Latest Practicable Date. (2) Deemed interest held through nominee, HSBC (Singapore) Nominees Pte Ltd. (3) Deemed interest by virtue of 18,000,000 Units held through nominee, HSBC (Singapore) Nominees Pte Ltd, 539,840,000 held by Starhill Global REIT Investments Limited ( SGRIL ) and 50.0% of the 2,332,851 Units held by the Manager. (4) Deemed interest by virtue of 539,840,000 Units held by SGRIL, 18,000,000 Units held by YTL Cayman Limited ( YTL Cayman ) and 50.0% of the 2,332,851 Units held by the Manager As at the Latest Practicable Date, YTL, through its wholly-owned subsidiaries being YTL Cayman and SGRIL, and through its 50.0% interest in the holding company of the Manager, YTL Pacific REIT Management Holdings Pte Ltd, holds an aggregate indirect interest of 28.93% in Starhill Global REIT (with YTL Cayman having a direct interest of 18,000,000 Units, SGRIL having a direct interest in 539,840,000 Units and YTL s 50.0% interest in the Manager s direct interest in 2,332,851 Units) and is deemed to be a controlling unitholder of Starhill Global REIT. YTL is also a controlling unitholder of Starhill REIT. Whilst Starhill Global REIT has other Substantial Unitholders (details of which have been announced on the SGXNET), based on information available to the Manager, none of these Substantial Unitholders has an interest, direct or indirect, in the Acquisitions and the Master Tenancy Agreement, and therefore their details have not been disclosed as such details are not relevant Director s Service Contracts No person is proposed to be appointed as a director of the Manager in connection with the Acquisitions or any other transaction contemplated in relation to the Acquisitions. 11. DOCUMENTS FOR INSPECTION Copies of the Heads of Agreement and valuation certificates are available for inspection during normal business hours at the registered office of the Manager at 391B Orchard Road, #21-08 Ngee Ann City Tower B, Singapore from the date of this announcement up to and including the date falling three months after the date of this announcement 3. 3 Prior appointment with the Manager would be appreciated. 9

10 The trust deed constituting Starhill Global REIT dated 8 August 2005 (as amended) will also be available for inspection at the registered office of the Manager for so long as Starhill Global REIT continues to be in existence. 12. FURTHER DETAILS Further details, including the convening of an extraordinary general meeting to seek the necessary approvals from Unitholders, will be announced when the Definitive Agreements have been executed. By Order of the Board YTL Pacific Star REIT Management Limited (Company registration no C) (as manager of Starhill Global Real Estate Investment Trust) Patricia Ong Joint Company Secretary Singapore 18 November

11 About Starhill Global REIT Starhill Global REIT is a Singapore-based real estate investment trust investing primarily in real estate used for retail and office purposes, both in Singapore and overseas. Listed on the Mainboard of the Singapore Exchange Securities Trading Limited ( SGX-ST ) since 20 September 2005, Starhill Global REIT owns two landmark properties on Orchard Road, Singapore s premier shopping and tourist precinct. Its initial portfolio included a 74.23% strata title interest in Wisma Atria and a 27.23% strata title interest in Ngee Ann City. In 2007, Starhill Global REIT enlarged its asset base and geographical footprint with the acquisition of seven properties in the prime areas of Roppongi, Shibuya-ku, Minato-ku and Meguro-ku in Tokyo, Japan and a premier retail property in Chengdu, China. Starhill Global REIT s portfolio now comprises 10 properties in the three countries, valued at about S$2.0 billion. Starhill Global REIT remains focused on sourcing property assets in Asia, while driving organic growth from its existing portfolio, through proactive leasing efforts and creative asset enhancements. Starhill Global REIT is managed by an external manager, YTL Pacific Star REIT Management Limited. The Manager is a wholly owned subsidiary of YTL Pacific Star REIT Management Holdings Pte Ltd, a 50:50 joint venture between Starhill Global REIT Management Limited (an indirect wholly owned subsidiary of YTL Corporation Berhad) and Pacific Star REIT Management Holdings Limited. Visit Starhill Global REIT s website at < for more details. Important Notice The value of Starhill Global REIT units ( Units ) and the income derived from them may fall or rise. The Units are not obligations of, deposits in, or guaranteed by, the Manager or any of its affiliates. An investment in Units is subject to investment risks, including the possible loss of the principal amount invested. Investors have no right to request the Manager to redeem their Units while the Units are listed. It is intended that unitholders of Starhill Global REIT may only deal in their Units through trading on the SGX-ST. Listing of the Units on the SGX-ST does not guarantee a liquid market for the Units. This document is for information only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Units. The past performance of Starhill Global REIT is not necessarily indicative of the future performance of Starhill Global REIT. This document may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from similar developments, shifts in expected levels of property rental income, changes in operating expenses (including employee wages, benefits and training costs), property expenses and governmental and public policy changes. Investors are cautioned not to place undue reliance on these forward-looking statements, which are based on the Manager s view of future events. 11