SALE & LEASEBACK BLOCK B4, LEISURE COMMERCE SQUARE 9 JALAN PJS 8/9,46150 PETALING JAYA, SELANGOR

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1 1 SALE & LEASEBACK BLOCK B4, LEISURE COMMERCE SQUARE 9 JALAN PJS 8/9,46150 PETALING JAYA, SELANGOR

2 2 The State of Selangor continues to be the largest contributor to the national economy and contributed more than 20% of the nations GDP Haryanto Lim Mob

3 3 TABLE OF CONTENTS 01 EXECUTIVE SUMMARY 4 02 PROPERTY PROFILE 7 - Building Specifications - Title Particulars 03 PRIME LOCATION 10 - Map of Leisure Commerce Square - KTM Commuter Route Map 04 SCHEDULE OF FLOOR AREA 12 - Stacking plan - Floor Plans 05 OPPORTUNITY 17 - Malaysia booming economy - Foreign Direct Investment (FDI) - Adding Value - Advertising Opportunity 06 FINANCIAL ANALYSIS 18 - Cash flow assumptions 07 SALES PROCESS APPENDIX 20 - Appendix 1 Selangor Market - Appendix 2 Sales Comparables

4 4 01 EXECUTIVE SUMMARY The State of Selangor continues to be the largest contributor to the national economy and contributed more than 20% of the nations GDP. According to the National Property Information Centre provisional statistics for Q1 2014, there was just over 33 mil sq ft of office space within Selangor with an occupancy rate of 75.4%. Despite this low occupancy rate, the Selangor office market is very popular with large back office occupiers and also occupiers that prefer to own their real estate. Sale and leaseback opportunities such as this are more prevalent in Selangor with cap rates of between 7-8%. THE PROPERTY Leisure Commerce Square was designed by renowned Malaysian Architect Dr Kenneth Yeang of the firm TR Hamzah & Yeang and completed in The development as a whole sits on 25,671 sqm (6.34 acres) of leasehold land expiring 2091 (77 years unexpired). The gross built up area of the entire development measures approx. 1,352,144 sq ft (1,055,846 sq ft net). Block B4 ( The Property ) is the largest component standing 25 storey tall alongside the Federal Highway. THE TENANT AmGeneral Insurance Berhad comprises the combined business of the two former entities AmG Insurance Berhad and Kurnia Insurans (Malaysia) Berhad. It was established following completion of the acquisition of Kurnia Insurans (Malaysia) Berhad by AmG Insurance Berhad in March AmGeneral Insurance Berhad is 51% owned by AMMB Holdings Berhad (upgraded to AA status in 2013) and 49% by Insurance Australia Group. 4

5 5 KEY INVESTMENT HIGHLIGHTS Situated in the heart of the Klang Valley in Bandar Sunway Link bridge to commuter train station Setia Jaya (6 stops to Klang / 7 stops to KL Sentral) Ample car parking to be sold with the building Owner occupied for the past 15 years and regularly maintained Leaseback from AA rated tenant Ideal for owner occupation in the future or for refurbishment/repositioning Value add opportunities include naming / signage / green building rating / MSC Status (subject to approvals / consents) Subdivision into strata units for sale 5

6 6 02 PROPERTY PROFILE BUILDING SPECIFICATIONS No of Storeys 25 Strata Title Measurement 26,303 sqm / 283,122 sq ft Typical Floor Size Year of Completion ,614 sq ft Architect Dr Kenneth Yeang (TR Hamzah & Yeang) Developer Car Park Bays 472 Car Park Ratio Leisure Commerce Square Sdn Bhd (part of MBf Group of Companies) 1 bay for every 469 sq ft occupied 6

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8 8 MASTER TITLE PARTICULARS Master Title No PN Lot No 54 Town District Land Area Tenure Category Of Land Use Registered Owner Syarat syarat Nyata (Express Conditions) Sekatan sekatan Kepentingan (Restrictions In Interest) Rekod Urusan (Endorsements) Registered Number 82218/2003 Registered Number / 2003 Registered Number / 2003 Encumbrances Bandar Sunway Petaling 25,671 sqm / 6.34 acres Leasehold until 17 July 2091 (77 years unexpired as at July 2014) Bangunan (Building) LCS Management Corporation Commercial Building Land is not to be transfered, pledged or charged without the approval of the state government / / hectares has been leased to Tenaga Nasional Berhad for 30 years from 28 January January 2033 (30 years) None 8

9 9 STRATA TITLE PARTICULARS State District Town Selangor Petaling Bandar Sunway Strata Certified Plan PA(B) to PA(B) Strata Register 4145 Total Shares For Whole Building 606,699 Total Shares For Block B4 133,332 % Voting Rights Approx 22% Registered Owner Registered Management Corporation Kurnia Insurans (Malaysia) Berhad LCS Management Corporation Strata Title Issued 1 September 2009 Number Of Accessory Parcels 45 9

10 10 03 PRIME LOCATION SETIA JAYA TRAIN STATION (7 STOPS TO KL SENTRAL) LEISURE COMMERCE SQUARE B4 FEDERAL HIGHWAY 10

11 RAJAH LALUAN KTM KOMUTER Ktm Komuter Route Map 11 TANJUNG MALIM KA15 KUALA KUBA BHARU KA14 RASA KA13 BATANG KALI KA12 SERENDAH RAWANG KUANG SUNGAI BULOH KEPONG SENTRAL KEPONG KA11 KA10 KA09 KA08 KA07 KA06 KC05 KC04 KC03 KC02 KC01 BATU CAVES TAMAN WAHYU KAMPUNG BATU BATU KENTONMEN SENTUL SEGAMBUT KA05 KA04 KA03 KA02 KA01 PUTRA BANK NEGARA KUALA LUMPAR KL SENTRAL ANGKASAPURI KA02 KB01 MIDVALLEY PANTAI DALAM KD03 KB02 SEPUTEH PETALING KD04 KB03 SALAK SELATAN JALAN TEMPLER KD05 KB04 BANDAR TASIK SELATAN KG DATO HARUN KD06 KB05 SERDANG SERI SETIA KD07 KB06 KAJANG SETIA JAYA KD08 KB07 UKM SUBANG AYA KD09 KB08 BANGI BATU TIGA KD10 KB09 BATANG BENAR SHAH ALAM KD11 KB10 NILAI PERTUKARAN KE KLIA INTERCHANGE TO KLIA PADANG JAWA KD12 KB11 LABU BUKIT BADAK KD13 KB12 TIROI KLANG LD14 KB13 SEREMBAN TELUK PULAI KD15 KB14 SENAWANG TELUK GADONG KD16 KB15 SUNGAI GADUT KG RAJA UDA KD17 JALAN KASTAM KD18 PELABUHAN KLANG KD19 TUNJUK LEGEND LALUAN SUNGAI GADUT - RAWANG - TANJUNG MALIM SUNGAI GADUT - RAWANG - TANJUNG MALIM ROUTE LALUAN BATU CAVES - PELABUHAN KLANG BATU CAVES - PELABUHAN KLANG ROUTE STESEN STATION STESEN PERTUKARAN INTERCHANGE STATION Setia Jaya train station is an important station on the route between the port of Klang and Kuala Lumpur as it sits at almost the middle point between the two. In 2010, CSR Zhuzhou, China s leading rolling stock manufacturer won the order to supply new trains to the Malaysia KTM at a cost of nearly RM 2 bil. The vehicles, with a top speed of approx 140 km per hour, were all in service in 2012 and were part of the governments initiative to reduce traffic congestion. Features include dynamic route maps inside the carriages and overall design by German company Tricon Design. 11

12 12 04 SCHEDULE OF FLOOR AREA STACKING PLAN TINGKAT M 2 SQ FT PA(B) JUMLAH M 2 JUMLAH SQ FT PETAK AKSESORI PA(B) UNIT SYER , A39 - A , L O W Z O N E 3 1,096 11, ,058 11, ,058 11, ,058 11, ,058 11, ,058 11, ,058 11, A 49 - A A A A ,058 11, ,079 11, ,079 11, ,079 11, , ,122 A A A 142 & A ,332 out of 606, ,079 11, H I G H Z O N E 15 1,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, ,079 11, A A A A A A A A

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14 14 FLOOR PLANS HIGH ZONE GROUND FLOOR 14

15 15 LOW ZONE 15

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17 17 05 OPPORTUNITY MALAYSIA S BOOMING ECONOMY Malaysia s economy strengthened with robust growth recorded for Q of 6.2% (average of 4.7% in 2013). The strong performance in services and manufacturing coupled with a bullish momentum in construction remains the key economic driver. The state of Selangor, Malaysia s most developed state, is also one of the richest in the country with a highly competent workforce. The state is also home to the largest port in the country (Port Klang) and houses some of the nation s largest industrial operations. Tourism activities are important catalysts for the economy s growth, especially as both the Kuala Lumpur International Airport (KLIA) and Subang Airport are located within the state. Consequently, the state is the biggest contributor to national GDP, having accounted for 22% of total GDP in 2009 and 23.5% of total GDP FOREIGN DIRECT INVESTMENT Malaysia attracted RM38.77 bil of foreign direct investments (FDI) in 2013, which was the highest ever according by the Ministry of International Trade and Industry. Mining and manufacturing still make up the majority of FDI but the service sector, including banking and insurance, recorded an impressive 28.8% of 2013 FDI. VALUE ADD OPPORTUNITY POST LEASEBACK Refurbished GF lobby, common areas and lift cars will be sufficient to reposition the property Possibility to utilise unique leasing incentives such easy in / easy out short term contracts and capture any upswings in market rent Subdivide Block B4 into strata floors or office suites for sale ADVERTISING OPPORTUNITY The property is a landmark in the Klang Valley and the position at the intersection of the Federal Highway and Lebuhraya Damansara Puchong (LDP) is a valuable advertising opportunity. Federal Highway, or Lebuhraya Persekutuan in Malay connects the Federal Territory of Kuala Lumpur and the port town of Klang in the State Of Selangor. It is the busiest highway in Klang Valley during rush hour from/to Kuala Lumpur. The history of the highway started after the separation of Singapore from Malaysia in 1965, when the Malaysian government decided to make Port Swettenham (now Port Klang) as Malaysia s new national port as a replacement for Singapore. As a result, the government planned to build a highway connecting Port Klang to Kuala Lumpur by upgrading the former Kuala Lumpur-Klang Highway to a full motorway and making the Federal Highway Malaysia s first expressway. 17

18 18 06 FINANCIAL ANALYSIS CASH FLOW ASSUMPTIONS LEASEBACK PERIOD 12 MONTHS GENERAL ASSUMPTIONS HOLDING PERIOD Holding Period Capital Value Growth 5 years 6% per annum Loan To Value Ratio 70% Interest Rate 5% RENT / OTHER INCOME ASSUMPTIONS Occupancy From Acquisition Date 100% of NLA Rent Reversion From January 2016 Vacancy 25% of NLA For 3 months every year EXPENSE ASSUMPTIONS Operating expense Assessment Charge Menara Kurnia Quit Rent Menara Kurnia Approx RM 1.00 per sq ft per month, increase of 5% per year RM 302, per year as indicated by the vendor RM 17, per year as indicated by the vendor 18

19 19 07 SALES PROCESS EXPRESSIONS OF INTEREST PROCESS & TIMETABLE This sales offering presents an exceptional opportunity for investors to acquire a high yielding asset with future upside potential. Henry Butcher Real Estate are seeking non-binding Expressions of Interest (EOI) to acquire 100% of the Property directly through an asset sale closing Friday 5 September 2014 at 2pm (Malaysia time). Please ensure your EOI clearly states (at a minimum): Pricing Conditions, if any Funding requirements Process and timing of Due Diligence All enquiries about the Property must be directed Henry Butcher Real Estate. All inspections of the Property must be arranged via prior appointment with Henry Butcher Real Estate. DUE DILIGENCE INFORMATION To assist in the assessment of this offering, due diligence information is available via a physical data room located at Level 25 of the Property. Access will be granted upon request and after signing a CA. Changes to the process The Vendor reserves the right not to accept any offer and, without limitation, nor is the Vendor obliged to accept the offer with the highest consideration. The Vendor may, in its absolute discretion, suspend or vary the sale process, negotiate with any party who submits an EOI or with any other person, enter into a binding contract with any party at any time and/or, at any time prior to exchange of binding contracts, may withdraw the Property from sale. No person is entitled to any redress against the Vendor if the Vendor exercises such discretion. The Vendor is not responsible for any costs or expenses incurred by any party in preparing and lodging an EOI or in taking part in the above process, whether or not the party is successful or whether or not the Vendor terminates, varies or suspends that process or takes any action available to the Vendor. No offer will be deemed or regarded to be accepted, unless and until, a binding contract for sale is entered into by the Vendor with the relevant party. 19

20 20 08 APPENDIX APPENDIX 1 - SELANGOR MARKET CONTINUED INVESTMENT IN LOCAL DEVELOPMENTS WILL FURTHER ENHANCE THE AREA The dominant developer in the area is Sunway, which counts Government Investment Corporation Singapore (GIC) as a substantial shareholder. Bandar Sunway has attracted many foreign investors including CI Korea, Daol Trust & Fund Co, Mitsui Fudosan. Since June 2012, Sunway has been working closely with Prasarana to construct the elevated Bus Rapid Transit (BRT) - Sunway Line, with the aim of addressing the traffic congestion problem of Bandar Sunway and Subang areas. The BRT-Sunway line, which covers 6km via 7 stations, will connect Bandar Sunway and Subang commuters with the Kelana Jaya LRT Extension Line at USJ6 and with Setia Jaya station near the Federal highway. Other developments nearby include M Greens by Tropicana Corporation and Icon City by Mah Sing. Property development in Selangor State and in particular the district of Petaling Jaya is experiencing a new level of confidence. Other developments nearby include M Greens by Tropicana Corporation and Icon City by Mah Sing. Icon City PJ is a mixed commercial development that sits on a 8.21ha site at the intersection of the Federal Highway and LDP. It has been reported that the entire project has a gross development value of RM3.2bil and prices peaked in 2012 at over RM 1,000 psf for a fitted residential unit. In 2013 residential prices were achieving approx RM 800 psf for unfitted units. Also transacted at developer s price is one of the development s 745sq ft SOVO (small office, versatile office) units for RM804,000 or RM1,080 per sq ft. 20

21 21 APPENDIX 2 - SALE COMPARABLES 159 JALAN TEMPLER, 46050, PETALING JAYA, SELANGOR, MALAYSIA Property description Comments Sale History Physical Areas Analysis 159 Jalan Templer is a 12.5 storey office building with approx. 93,381 sq ft NLA / 215,365 sq ft GFA including car parks. The land measures approx. 56,888 sq ft and is leasehold for 99 years expiring 28 May 2068 (54 years unexpired). The property is approx. 10 years old and owner occupied by the vendor Green Packet Berhad. A valuation report dated 20 May 2013 concluded a value of RM 46,000,000 and the rationale for disposal was to use the proceeds for working capital and repay debt. The sale and purchase agreement contained a condition that the vendor and purchaser shall enter into a tenancy agreement. The proposed terms at the time of exchange of contracts were for a period of 15 years using a series of 3 year tenancy agreements. The commencement date of the tenancy was stated as the same date as completion of the sale and at an annual rent of RM 4,116,000 and a net initial yield of 8.4%. The proposed tenancy also included an annual increase in rent by 3% for 8 years. 5 May 2008 : Original cost of acquisition RM 39,000,000* 31 May 2013 : Exchange of contracts for RM 49,000, November 2013 : Contract became unconditional 28 January 2014 : Completion and tenancy commencement : *RM 48,300,000 including renovation cost Land Area : 56,888 sq ft NLA : 93,381 sq ft GFA including car parks : 215,365 sq ft Sale Price : RM 49,000,000 Sale Price (on land area) : RM 861 per sq ft Sale Price (on NLA) : RM 524 per sq ft Leaseback : Up to 15 years Annual Rent (Year One) : RM 4,116,000 Initial Gross Yield : 8.4% Vendor : Green Packet Berhad Purchaser : SYM World Realty 21

22 22 Haryanto Lim Mob HENRY BUTCHER REAL ESTATE SDN BHD ( w) We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions, assumptions or estimates for examples only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the Property and transaction.