1. INTRODUCTION
On 12 August 2016, RHB Trustees Berhad as trustee for SUNREIT (“the Trustee”) had approved the capital expenditure for the refurbishment and upgrading of Sunway Pyramid Convention Centre ("Project") and has duly authorised Sunway REIT Management Sdn Bhd, the Manager for SUNREIT (”the Manager”) to appoint the relevant contractors and consultants for the said Project. On 18 August 2016, the Manager has, pursuant to the authority given by the Trustee, awarded Deco Style Sdn Bhd (“Deco Style”), a wholly-owned subsidiary of Sunway City Sdn Bhd (“SunCity”) which in turn is a wholly-owned subsidiary of Sunway Berhad (“Sunway”) as the project delivery partner (PDP) for the refurbishment and upgrading the multi-function hall, meeting rooms and back of house area of Sunway Pyramid Convention Centre (“Works/Award”).
2. INFORMATION ON SUNWAY, SUNCITY, DECO STYLE, THE MANAGER, THE TRUSTEE AND SUNREIT
2.1 Sunway
Sunway is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of Sunway are RM10,000,000,000.00 and RM2,045,702,632.00 respectively. The principal activities of Sunway are investment holding and provision of management services.
2.2 SunCity
SunCity, a wholly-owned subsidiary of Sunway, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of SunCity are RM3,500,000,000.00 and RM251,447.14 respectively. The principal activity of SunCity is investment holding.
2.3 Deco Style
Deco Style, a wholly-owned subsidiary of SunCity, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of Deco Style are RM5,000,000.00 and RM2,000,000.00 respectively. The principal activity of Deco Style is specialising in renovation of commercial and residential projects.
2.4 The Manager
The Manager (also referred to as “the Employer” under the Award), a joint-venture company of Sunway, is a company incorporated in Malaysia and having its registered office at Level 16, Menara Sunway, Jalan Lagoon Timur, Bandar Sunway, 47500 Subang Jaya, Selangor Darul Ehsan. The authorised and paid-up share capital of the Manager are RM1,000,000.00 respectively. The principal activity of the Manager is managing and administering a real estate investment fund.
2.5 The Trustee
The Trustee is a company incorporated in Malaysia under the Act and having its registered office at Level 9, Tower One, RHB Centre, Jalan Tun Razak, 50400 Kuala Lumpur, Wilayah Persekutuan. It is registered as a trust company under the Trust Companies Act, 1949. The principal activity of the Trustee is to provide professional retail trustee services (will writing, estate planning and private trust) and corporate trustee services (collective investment schemes).
The present authorised share capital of the Trustee is RM25,000,000.00 comprising 2,500,000 ordinary shares of RM10.00 each, of which 1,200,000 ordinary shares are currently issued and credited as partially paid-up to RM5.00 each in the Trustee.
2.6 SUNREIT
SUNREIT was established pursuant to a Deed dated 20 May 2010 (as amended by a Supplementary Deed dated 10 June 2010) entered into between the Manager and the Trustee. The principal investment policy of SUNREIT is to invest in commercial, office, industrial and other real estate assets.
3. SALIENT TERMS OF THE AWARD
The salient terms of the Award are as follows:-
3.1 The provisional contract sum shall be RM15,194,100.00 (Ringgit Malaysia Fifteen Million One Hundred Ninety Four Thousand and One Hundred) only (“Provisional Contract Sum”) which comprises amongst others, various work contract packages to be competitively tendered. The Provisional Contract Sum is deemed to include the cost of all works necessary for the timely and satisfactory completion of the Works in its entirety.
3.2 The completion date of the Works shall be within eight (8) weeks from the Date of Commencement (“Completion Date”). The Date of Commencement shall be the (i) date of the permit to carry out any of the Works, or (ii) the date of the permit to carry out building works issued by the Building Authority or (iii) a date to be mutually confirmed in writing by the Manager and Deco Style.
3.3 Deco Style shall be responsible for delivering to the Manager the fully renovated Sunway Pyramid Convention Centre in a completed and fully functional and operational state on or before the Completion Date. Deco Style is fully responsible and liable for the due performance by all the Work Contractors who are awarded the works packages comprised in the Works.
3.4 It is acknowledged that time is the essence under this contract. In the event of any delay to the completion of the Works beyond the Completion Date as specified, the Manager shall be entitled to deduct or to recover an amount of Ringgit Malaysia Forty Thousand (RM40,000.00) per calendar day from Deco Style as liquidated damages. The payment or deduction of such liquidated damages shall not relieve Deco Style from its obligation to complete the Works or from any other obligations and liabilities under the contract.
3.5 The Defect Liability Period shall be twenty four (24) months from the date of practical completion stated in the Certificate of Practical Completion of the Works.
4. RATIONALE
The refurbishment of Sunway Pyramid Convention Centre is to be undertaken via a PDP arrangement. A PDP is based on a cost-plus arrangement whereby a PDP is appointed at a pre-refurbishment stage to leverage on the PDP’s capability, experience and resources from an early stage to potentially achieve lower cost and shorter completion period.
Deco Style is appointed as the PDP based on the following justifications:-
- It is a reputable company with good track record;
- It has the necessary expertise and resources to undertake the project; and
- All sub-contractors’ packages forming the total construction cost will be competitively tendered and the margin for such PDP arrangement is within market range.
5. EFFECTS OF THE AWARD
5.1 On Unit Capital and Substantial Unitholders’ Unitholding
The Award will not have any effect on the total units of SUNREIT in issue and substantial unitholders’ unitholding of SUNREIT as they do not involve any allotment or issuance of new units by SUNREIT.
5.2 On Net Asset Value (“NAV”) and gearing
The Award is not expected to have material effect on the NAV and gearing of SUNREIT based on the audited financial statements of SUNREIT as at 30 June 2016.
5.3 On Earnings
The Award is not expected to have any material effect on the earnings of SUNREIT for the financial year ending 30 June 2017.
6. APPROVALS REQUIRED
Pursuant to the Securities Commission’s Guidelines on Real Estate Investment Trusts, the Award does not require approvals from the Securities Commission or the unitholders of SUNREIT.
7. DIRECTORS' AND MAJOR UNITHOLDERS' INTERESTS
Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling, AO and Sarena Cheah Yean Tih, both are directors of Sunway and the Manager.
Tan Sri Dato’ Seri Dr Jeffrey Cheah Fook Ling, Puan Sri Datin Seri (Dr) Susan Cheah Seok Cheng, Sarena Cheah Yean Tih, Evan Cheah Yean Shin, Sungei Way Corporation Sdn Bhd and Active Equity Sdn Bhd are major shareholders of Sunway and major unitholders of SUNREIT.
Accordingly, Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling and Sarena Cheah Yean Tih have abstained from deliberation and voting in the Board of the Manager in respect of matters pertaining to the Award.
Save as disclosed above, none of the other directors of the Manager or major unitholders of SUNREIT or persons connected with them has any interest, direct or indirect, in the Award.
8. THE MANAGER’S AUDIT COMMITTEE’S RECOMMENDATION
The Audit Committee of the Manager after having considered all aspects of the Award, is of the opinion that:-
a) the refurbishment and upgrading of Sunway Pyramid Convention Centre is in the best interests of SUNREIT and is not detrimental to the interests of the non-interested unitholders; and
b) it is fair, reasonable and undertaken on normal commercial terms.
9. STATEMENT BY THE BOARD OF DIRECTORS
Save and except for Tan Sri Dato' Seri Dr Jeffrey Cheah Fook Ling and Sarena Cheah Yean Tih (who have abstained from deliberation and voting in the Board of the Manager in respect of the Award), the Board of Directors of the Manager is of the opinion that the refurbishment and upgrading of Sunway Pyramid Convention Centre is in the best interests of SUNREIT and is not detrimental to the interests of the non-interested unitholders. The Board of Directors of the Manager is also of the view that the Award is fair, reasonable and made on normal commercial terms.
This announcement is dated 18 August 2016.
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