ACQUISITION OF RETAIL PROPERTY IN CHENGDU

Profit Guarantee (under the Revised Agreement)

Under the Revised Agreement, the Vendor and the Obligor guarantee for a period of two years, that MMP REIT will receive annually, net distributable profits of at least RMB26.4 million (equivalent to S$5.28 million) from China. This guarantee is to be ?secured? by the sum of RMB20 million (equivalent to S$4 million), which will be deducted from the consideration and held in escrow.

Profit Guarantee (under the Business Cooperation Agreement)

Pursuant to the BCA, Rendong Company guarantees, for a period of four years, that the PRC WFOE will achieve annual net profits after tax of at least RMB26.4 million (equivalent to S$5.28 million). MMP REIT may (through the PRC WFOE) make good on any shortfall by deducting the equivalent amounts from the repayments due to the Rendong Company under the debt of RMB40 million (equivalent to S$8 million) assumed by MMP REIT.

VALUATIONS OF THE PROPERTY

The open market value of the Property was independently assessed by Savills (HK), as described in its report dated 20 April 2007, which was prepared in accordance with the instructions of the Trustee. The valuation was prepared using the direct capitalisation approach, discounted cash flow analysis and direct market comparison methods. This valuation was updated as at 31 July 2007 and the Property re-valued at RMB350 million (equivalent to S$70 million).

Yield accretion

The Acquisition will be yield accretive to MMP REIT?s distribution per unit (?DPU?). The pro forma financial effect of the Acquisition on DPU for the financial year ended 31 December 2006 would be an additional 0.194 Singapore cents per unit, representing an initial yield accretion of 3.4%, improving the DPU currently enjoyed by Unitholders.

Entry into the China market

The Acquisition will provide MMP REIT with a strategic foothold in China while underscoring the key tenets of MMP REIT?s investment strategy. As MMP REIT will enjoy first right of refusal to the Obligor?s pipeline of opportunities in Chengdu and the rest of China, this Acquisition also serves as a springboard for MMP REIT to further expand its reach into the most vibrant and fastest-growing retail markets in China.

Income and geographical diversification

The Acquisition is expected to improve the income diversification of MMP REIT and is in line with MMP REIT?s regional growth strategy. MMP REIT?s portfolio of properties (which already includes properties in Singapore and Japan) will be further diversified and its asset base accordingly enlarged (upon completion) by 3.9%.

Stable property income

The Property is 100% occupied and has been operated as a department store under the extremely successful ?Renhe Spring? brand name for the past three years. Income received from the concessionaires and international retailers secure the cashflows of the Property and the MMP REIT portfolio as a whole. The income stream from the Property to MMP REIT is guaranteed by the Obligor and Rendong Company for at least the next four years.

METHOD OF FUNDING AND FINANCIAL EFFECTS OF THE ACQUISITION

The Manager will fund the Acquisition wholly with debt. Upon completion of the Acquisition, the aggregate leverage of MMP REIT is expected to be approximately 31.8% of the deposited property of MMP REIT and well within the aggregate leverage limit stipulated by the Property Funds Guidelines. The pro forma financial effects of the Acquisition are described purely for illustrative purposes and are not indicative of the actual financial effects of the Acquisition on the net tangible assets (?NTA?) and the earnings per unit (?EPU?) of MMP REIT, nor are they indicative of the financial performance of MMP REIT for the financial year ended 31 December 2006. The pro forma financial effects on EPU have been prepared based on the assumption that the Acquisitions have been included in MMP REIT?s portfolio since 1 January 2006, whereas the pro forma financial effects on NTA have been prepared based on the assumption that the Acquisition has been included in MMP REIT?s portfolio since 31 December 2006. Based on the aforesaid assumptions, the Acquisition will not have a material impact on the NTA per unit and the EPU of MMP REIT for the financial year ended 31 December 2006.

 

MMP REIT TO INCREASE ITS 50% STAKE IN PRIME CHENGDU RETAIL PROPERTY TO 100%

MMP REIT TO INCREASE ITS 50% STAKE IN PRIME CHENGDU RETAIL PROPERTY TO 100%

Last Done Price: S$1.23 Fair Value S$1.32

However, this also means that market could be surprised on the upside with either more acquisitions or possibly some M&A activity.

Macquarie Bank Ltd increased its interest in MACQUARIE MEAG PRIME REIT from 24.51% to 25.00%.