29 May 2019 19:27:00
Notification of the resolution of the Investment Committee on the lease agreement of Patong Heritage Hotel Project of MFC Patong Heritage Property Fund (M-PAT)
Reference is made to that MFC Asset Management Company Limited ("the Management Company"), on behalf of the management company of MFC Patong Heritage Property Fund ("the Fund") has disclosed the notification of Record Date for determining the right of unitholders for attending the Extraordinary General Meeting No.1/2019 (Revised no.2) and the Management Company are waiting for lease proposal as detail in reference. Currently, the Fund receives lease proposal from Patong Heritage Co.,Ltd. ("Patong Heritage") as the lessee of Patong Heritage Hotel ("the Property") and also be reaffirmed from other prospect lessee to lease the property. Therefore, the Investment Committee considered and recognized the necessary to enter lease agreement in order to protect benefit of unitholders. In this respect, the Investment Committee held the meeting on 29 May 2019 to consider and approve the lease agreement and other relevant matters in relation to Agenda 3 of the Extraordinary General Meeting No.1/2019 hold on July 4, 2019 as follows: 1. Resolved to propose to the unitholders meeting to consider and approve the new lease proposal for Patong Heritage Hotel Project Background Reference to Lease Agreement for Patong Heritage Hotel Project which is made between MFC Asset Management Plc. on behalf of MFC Patong Heritage Property Fund and Patong Heritage Co.,Ltd dated June 11, 2014 ("the Lease Agreement") will end on June 10,2019. As stipulated in the Lease Agreement, Patong Heritage has given commitment to renew the agreement for every period of 3 years with required mutually agreed on a new rental rate for renewal of the lease agreement. Implementation In this regard, the Fund has proposed new rate for the renewal of the Lease Agreement to Patong Heritage. Patong Heritge has acknowledged the intention of the Fund but didn't accept the new rate. Later on, Patong Heritage has proposed back its new rental rate and other conditions to the Fund but until now, Patong Heritage and the Fund still cannot mutually agree on the new rental rate. For the consideration of the other possible alternatives, the Fund has taken the process of seeking a new lease. Therefore the Fund appointed property agent to find new lease and analyze other possible alternatives for the best benefit of the unitholders. Until now, there is a few potential new lessees propose term and conditions of new lease agreement to the Fund. Proposal of Lease of Patong Heritage Hotel Project from new lessee With regard of the Lease proposal together with terms and conditions based on which a new lease agreement will be prepared, there are 4 proposals submitted to Management Company. Opinion Taking the advantage and disadvantages for selecting new proposal to lease Patong Heritage Hotel Project. It has opined that it is suitable to propose Proposal C to the unitholder's meeting to lease Patong Heritage Hotel Project because in doing so the risk from fluctuated of actual performance will be mitigated as well as the risks arising from any renewal of the agreement will be eliminated. Additionally, Proposal C offers a better security in terms of lessee's credibility considering that the proposer is an entity listed on the stock exchange of Thailand. Although the mentioned proposal is subjected to due diligence which could lead to amendment of conditions within the proposal. The fund shall with the unitholder's best interest in mind negotiate for the best terms and conditions of all the available proposal. The implementation and execution of required processes in order to come to an agreement with the new lessee such as due diligence and negotiation may be take longer than 3 months following the current's lease agreement expiration date. The fund finds that it is appropriate to propose a short term of 3 months lease extension with the current lessee under the variable rent scheme of 70% to the fund and 30% to the lessee deriving from the Hotel's operating profit Meanwhile, during the period for the unitholders' meeting to be held, if there are other prospect lease proposal submitted to the Fund, the Fund will disclose necessary information in the invitation letters submitted to unitholders which is not less than 14 days in advance prior to the date of Extraordinary General Meeting. Potential effects on unitholders from the approval of the lease proposal From the above lease proposals, the Fund's rental revenue will decrease when comparing to the existing lease agreement which will effect on net asset value of the fund and the return to the unitholders. Matters to approve Resolve to propose to the unitholders meeting to consider and approve to accept the new lease proposal for Patong Heritage Hotel Project and authorized the Fund to conduct the following: 1. To negotiate, prepare, and execute a lease agreement and/or other agreement and/or any related document and to do any other necessary acts as related the aforementioned actions in accordance to Unitholder's approval. 2. In the event of amendment of terms and conditions from conducting due diligence process, the fund will proceed ahead with the key terms and conditions of the lease agreement shall not be inferior to the terms approved by the Unitholders. 3. In the event of amendment of terms and conditions from conducting due diligence process shall deemed inferior comparing to the terms and conditions approved by the unitholders, the fund is authorized to obtain the best possible terms and conditions for the fund. 4. In the case which the fund takes longer than 3 months in order to obtain and execute a new lease agreement, the fund shall propose for additional 3 months extension of the lease agreement with the current lessee whereby the variable rent shall be 70% to the fund and 30% to the lessee of the hotel's operating profit. This agenda shall be approved by the unitholder's meeting with the Votes of more than half of the total number of units of the unitholders attending the meeting and having the right to vote. 2. Resolved to propose to the unitholders meeting to consider and approve the Management Company to explore potential alternatives to manage the property for the best benefit to unitholders Background Lease Agreement for Patong Heritage Hotel Project is made between MFC Asset Management Plc.('the Management Company") on behalf of MFC Patong Heritage Property Fund ("the Fund") and Patong Heritage Co.,Ltd ("Patong Heritage") dated June 11,2014 ("the Lease Agreement") will end on June 10, 2019 In consideration of other possible alternatives, the Fund has taken the process of seeking a new lease. The Fund has appointed property agent to find new lessee and to seek other possible alternatives to manage the property for the best benefit of unitholders. Implementation IC Meeting No. 24/2018 approved to appoint Jones Lang Lasalle ("JLL") as exclusive property and marketing advisor to provide advice and assistance in connection with any transactions of the property with significant service as a) Prepare market material to provide prospective purchaser and prospective lessees b) Market the property and provide a list of prospective purchaser /investor and prospective lessees prospect c) Advise a strategy for negotiating with prospective purchasers and prospective lessee etc. There are a few prospective lessees submitted indicative proposals to the Fund for consideration In addition to JLL's mandate on assisting in negotiation with multiple of prospects potentially as the new lessee of the fund, JLL shall also advise in parallel on exploring other alternatives perhaps sales of asset or any other option that may prove to be more beneficial the unitholders whereby such proposal shall be again proposed to the unit holders for further approval. Opinion For the best benefit of unitholders, the Fund should explore more potential alternatives for the property Matters to approve Resolve to propose to the unitholders meeting to consider and approve the Fund to explore any potential alternatives to manage the property for the best benefit to unitholders. This agenda shall be approved by the unitholder's meeting with the Votes of more than half of the total number of units of the unitholders attending the meeting and having the right to vote. Please be informed accordingly Yours Faithfully, (Ms. Natree Panassthrkorn) Executive Vice President ______________________________________________________________________ This announcement was prepared and disseminated by listed company or issuer through the electronic system which is provided for the purpose of dissemination of the information and related documents of listed company or issuer to the Stock Exchange of Thailand only. 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