Important Dates and Times for Unitholders
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CIRCULAR DATED 24 AUGUST 2009 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. Singapore Exchange Securities Trading Limited (the “SGX-ST”) takes no responsibility for the accuracy of any statements or opinions made, or reports contained, in this Circular. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Approval in-principle has been obtained from the SGX-ST for the listing and quotation of the new units in Fortune Real Estate Investment Trust (the “Rights Units”) to be issued for the purpose of the Rights Issue (as defi ned herein). The SGX-ST’s in-principle approval is not an indication of the merits of Fortune REIT, the Rights Issue and the Rights Units. If you have sold or transferred all your units in Fortune Real Estate Investment Trust (“Units”), you should immediately forward this Circular, together with the Notice of Extraordinary General Meeting and the accompanying Proxy Form, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. This Circular is not for distribution, directly or indirectly, in or into the United States and does not constitute an offer of securities into the United States. The “nil-paid” rights entitlements and the Rights Units have not been and will not be registered under the U.S. Securities Act of 1933 (as amended) (“Securities Act”) or under the securities laws of any state or other jurisdiction of the United States. The “nil-paid” rights entitlements and the Rights Units may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offer of securities in the United States. FORTUNE REAL ESTATE INVESTMENT TRUST (Constituted in the Republic of Singapore pursuant to a trust deed dated 4 July 2003 (as amended)) MANAGED BY Circular to Unitholders in relation to: Important Dates and Times for Unitholders CIRCULAR DATED 24 AUGUST 2009 CIRCULAR DATED (1) THE PROPOSED ACQUISITIONS OF METRO TOWN, Last date and time for : 9 September 2009 at 2.30 p.m. lodgement of Proxy Form CARIBBEAN BAZAAR AND HAMPTON LOFT; Date and time of Extraordinary : 11 September 2009 at 2.30 p.m. (2) THE PROPOSED WHITEWASH RESOLUTION; AND General Meeting Place of Extraordinary : Capricorn Room, Level 1 (3) THE PROPOSED TRUST DEED AMENDMENT TO General Meeting Marina Mandarin Hotel FACILITATE EQUITY FUND RAISINGS. 6 Raffl es Boulevard, Marina Square Singapore 039594 Joint Financial Advisers and Joint Lead Managers and Underwriters Independent Financial Adviser to the Independent Directors of ARA Asset Management (Singapore) Limited KPMG Corporate Finance Pte. Ltd. Please see the Glossary for defi nitions of defi ned terms. OVERVIEW OF FORTUNE REIT Fortune REIT is the fi rst real estate investment trust holding assets in Hong Kong. It is sponsored by Cheung Kong (Holdings) Limited and was listed on the Main Board of the SGX on 12 Aug 2003. Fortune REIT holds a portfolio of eleven retail malls and properties spread across Kowloon and the New Territories worth HK$8.9 billion as at 30 June 2009. THE TARGET PROPERTIES METRO TOWN Gross Rentable Area 180,822 sq ft Car Park Lots 74 Valuation HK$1,481.0 million (Knight Frank) (as at 30 June 2009) HK$1,480.0 million (Savills) Purchase Consideration HK$1,452.0 million Occupancy 93.1% (as at 30 June 2009) Net Property Yield for 4.8% FY 2008 Metro Town at 8 King Ling Road, Tseung Kwan O, Hong Kong, is located on top of the Mass Transit Railway Tiu Keng Leng Station. It comprises the commercial development on the ground level, level one, level two, level three and level fi ve, and the covered footbridge as well as the whole commercial car park (with 74 commercial carparking spaces) on level two of the residential development called “Metro Town”. CARIBBEAN BAZAAR Gross Rentable Area 63,018 sq ft Car Park Lots 117 Valuation HK$431.0 million (Knight Frank) (as at 30 June 2009) HK$430.0 million (Savills) Purchase Consideration HK$428.0 million Occupancy 97.5% (as at 30 June 2009) Net Property Yield for 5.7% FY 2008 Caribbean Bazaar at 1 Kin Tung Road, Tung Chung, Hong Kong comprises the commercial development, kindergarten, wet market and 117 commercial carparking spaces in Phase VI car park of the residential development called “Caribbean Coast”. HAMPTON LOFT Gross Rentable Area 74,734 sq ft Car Park Lots 35 Valuation HK$161.0 million (Knight Frank) (as at 30 June 2009) HK$160.0 million (Savills) Purchase Consideration HK$159.0 million Occupancy 100% (as at 30 June 2009) Net Property Yield for 5.7% FY 2008 Hampton Loft at 11 Hoi Fan Road, Kowloon, Hong Kong comprises the commercial units on level fi ve and level six and 35 commercial carparking spaces on level one of the residential development called “Hampton Place”. OVERVIEW OF THE TRANSACTIONS A THE PROPOSED RIGHTS ISSUE Offer Structure Fully underwritten and renounceable Rights Issue Rights Ratio 1–for–1 HK$2.29 representing a discount of: t UP$MPTJOH1SJDF Rights Issue Price t UP5&31 t UPQSPGPSNB/"7QFS6OJU 1SP'PSNB%16:JFMEPO5&31 7.2% 1SP'PSNB%16:JFMEPO3JHIUT*TTVF 10.0% Price t UPQBSUmOBODFUIF"DRVJTJUJPOT 6TFPG/FU1SPDFFET t GPSXPSLJOHDBQJUBM EFCUSFMBUFEDPTUTBOEHFOFSBMDPSQPSBUFQVSQPTFT t GPSBTTFUFOIBODFNFOUJOJUJBUJWFT Distributions Entitled to any distributions which may accrue from 1 July 2009 t 5IF.BOBHFSIBTTVDDFTTGVMMZTFDVSFEBMPOHUFSNTPMVUJPOGPS'PSUVOF3&*5TGVOEJOHSFRVJSFNFOUT o ),NJMMJPO"DRVJTJUJPO'BDJMJUZNBUVSJOHJOUPmOBODFUIF"DRVJTJUJPOT o ), NJMMJPO3FmOBODJOH'BDJMJUZUPSFmOBODFUIF&YJTUJOH5FSN'BDJMJUZBOEUIF"DRVJTJUJPO'BDJMJUZ – HK$270.0 million New Revolving Facility for corporate funding purposes B THE PROPOSED ACQUISITIONS 'PSUVOF3&*5QSPQPTFTUPBDRVJSFUISFFQSPQFSUJFTXIJDIBSFMPDBUFEJO)POH,POH CFJOH.FUSP5PXO $BSJCCFBO#B[BBSBOE Hampton Loft. The Properties are strategically located throughout Hong Kong and represent an attractive growth opportunity for Fortune REIT. STRATEGICALLY LOCATED WITH HIGH OCCUPANCIES E E New Territories E E E E E E Kowloon E LEGEND E 1 Metro Town 3 1 E 2 Caribbean Bazaar 2 3 Hampton Loft Lantau E Existing Properties Island Hong Kong • The Properties are located in high population growth areas at regional transportation hubs • The Properties are expected to benefi t from growing demand due to their strategic locations • Enhanced geographical diversifi cation • The Properties’ weighted average occupancy of 95.6% is above the Hong Kong retail occupancy average of 91.3% in 2008. THE BENEFITS OF AN ENLARGED PORTFOLIO 1 ENLARGED EXPOSURE TO HONG KONG SUBURBAN RETAIL REAL ESTATE1 Suburban Shopping Centre Ownership Shopping Centres by fl oor area Urban Shopping Centre Ownership 5.0% 4.0% 12.0% 25.0% 40.0% SUBURBAN URBAN 60.0% 70.0% 84.0% Developers REITs Others t 7BMVBCMFPQQPSUVOJUZUPPXOBTJ[BCMFQPSUGPMJPPGTVCVSCBOSFUBJMTQBDFJO)POH,POH t 4IPQQJOHDFOUSFTJOHPPEMPDBUJPOTBSFUJHIUMZIFMECZEFWFMPQFSTBOEPOMZoPGMBSHFTIPQQJOHDFOUSFT PXOFECZ institutions other than developers and REITs) are potentially available for sale t 0OMZTIPQQJOHDFOUSFTPGPWFS TRGUXFSFUSBOTBDUFECFUXFFOBOE 2 ENHANCED PORTFOLIO DIVERSIFICATION AND INCREASED ECONOMIES OF SCALE t 3FEVDFEEFQFOEFODFPOBOZTJOHMFQSPQFSUZ Largest Single Property Contribution to Net Property Income2 t -FTTEFQFOEFODZPOBOZNJDSPQSPQFSUZNBSLFU t 5IF"DRVJTJUJPOTBSFFYQFDUFEUPDSFBUFGVSUIFS 50%50% 38.5%38.5% economies of scale 31.7%31.7% 4QSFBEmYFEPQFSBUJOHDPTUT 225%5% .PSFCBSHBJOJOHQPXFSXJUITVQQMJFSTBOE service providers 0% BeforeBefore AcquisitionsAcquisitions AfterAfter AcquisitionsAcquisitions 3 INCREASED LIQUIDITY AND ENHANCED CAPITAL STRUCTURE t 1PUFOUJBMGPSJODSFBTFEMJRVJEJUZHJWFOBO Gearing increase in units in the free fl oat from UP Current Post-Transactions3 t %FCUQSPBDUJWFMZSFmOBODFEVOUJMBUB margin of 2.0% over HIBOR 50% Refi nancing only due in 2013 t $POTFSWBUJWFHFBSJOHPGPODPNQMFUJPOPG 25.7% 24.9% UIF"DRVJTJUJPOTBOEUIF3JHIUT*TTVF 25% t 6QPOSFmOBODJOHPGUIF&YJTUJOH5FSN'BDJMJUZ BOEUIF"DRVJTJUJPO'BDJMJUZ UIF1SPQFSUJFTXJMM be unencumbered 0% 2010 2013 1 1MFBTFSFGFSUPUIF3FUBJM.BSLFU0WFSWJFXBOE$BUDINFOU"SFB"OBMZTJTVOEFS"QQFOEJY% 2 Pro forma for the period from 1 January 2008 to 31 December 2008 3 0ODPNQMFUJPOPGUIF"DRVJTJUJPOTBOEUIF3JHIUT*TTVF TABLE OF CONTENTS Page CORPORATE INFORMATION ............................................... ii SUMMARY ............................................................. 1 INDICATIVE TIMETABLE .................................................. 6 LETTER TO UNITHOLDERS 1. Summary of Approvals Required . ....................................... 7 2. The Acquisitions and the Rationale for the Acquisitions......................... 7 3. Details of the Acquisitions . ............................................ 12 4. Details of the Rights Issue . ......................................... 37 5. The Proposed Whitewash Resolution . .................................... 47 6. The Proposed Trust Deed Amendment to Facilitate Equity Fund Raisings . .......... 52 7. Recommendations . ............................................... 53 8. Extraordinary General Meeting. ..................................... 53 9. Abstentions from Voting ................................................ 54 10. Action to be Taken by Unitholders . .................................. 54 11. Directors’ Responsibility Statement. ..................................... 54 12. Joint Lead Managers and Underwriters’