Theme park land under 60-year lease from PBA

The 44 acres of land for the Escape Theme Park near the Teluk Bahang Dam is being leased from the Penang Water Authority (PBAPP) for RM39m in total rentals.

The RM39m in total rentals works out to just RM20 per square foot for the 60-year lease.

The annual rental payment for the first five years for the 44 acres is RM200000. That works out to a monthly rental of just RM379 per acre. Huh? RM379 per acre?? After the first five years, the rental increases by 20 per cent every five years.

Is the PBA so desperate for money that it is willing to lease 44 acres of ecologically sensitive land for RM200000 a year? Is this deal really in the best interest of the PBA, and ultimately the residents of Penang? There must be a good reason why these 44 acres come under the PBA in the first place.

Was the entire PBA board of directors in agreement over the deal? Penangites have the right to know.

As the site is ecologically sensitive, it is vital for an independent detailed environmental impact assessment and an independent traffic impact assessment to be carried out. It is amazing the authorities should think that a 44-acre site near the Teluk Bahang Dam, forest reserve and national park does not require an EIA.

Meanwhile the Consumers Association of Penang and Friends of the Earth, Malaysia have come out with a statement urging the state government to scrap the project.

The following is a response by PBA to a Bursa Malaysia query, followed by an amended announcement by PBA to the Bursa on its lease agreement with Sim Leisure Consultants.

General Announcement
Reference No CS-101102-2090D

Company Name
: PBA HOLDINGS BHD
Stock Name
: PBA
Date Announced
: 02/11/2010

Type
:
Reply to query
Reply to Bursa Malaysia’s Query Letter – Reference ID
:
YL-101101-42477
Subject
:

LEASE AGREEMENT BETWEEN A WHOLLY-OWNED SUBSIDIARY OF PBA HOLDINGS BHD AND SIM LEISURE CONSULTANTS SDN BHD (“LESSEE”) (“AGREEMENT”)

Contents
:

Reference is made to the letter from Bursa Malaysia Securities Berhad (“Bursa Securities”) dated 1 November 2010 in relation to the Company’s announcement dated 28 October 2010 on the above subject matter. The Company is pleased to furnish the following additional information requested by Bursa Securities for public release: –

1. The approximate area of the Lands.

Total area of the Lands to be leased is 17.9412 hectares.

2. The existing use of the Lands.

At present the Lands are vacant except for a decommissioned water treatment plant and quarters.

3. Whether any valuation was carried out on the Lands. If so, the name of the independent registered valuer, date and method of valuation and quantification of the market value.

The Company did not appoint any independent registered valuer to conduct any valuation on the Lands for the purpose of finalizing the terms of the Agreement.

4. The terms of any arrangement for payment of total rental fees of RM39,580,450 on a deferred basis.

The annual rental fee is Ringgit Malaysia Two Hundred Thosuand (RM200,000-00) for the first to 5th year and automatically be revised to an increase of 20% every subsequent 5 years.

5. The estimated time frame to complete the Agreement.

Pursuant to the terms of the Agreement, the Parties are required to fulfill the conditions precedents within one (1) year from the date of the Agreement or to such date as may be extended by the Lessor before completing the Agreement.

Barring any unforeseen circumstances, it was expected to complete the Agreement by year 2015.

6. The particulars of all liabilities to be assumed by the Lessee arising from the Agreement.

Based on the intention of the Lesser as shown in the Agreement, the purpose of entering the Agreement was to enable the Lessee to construct, develop and operate a nature-themed tourism and leisure development resort to be known as Ecofun Theme Park Resort or by any other title as assigned by the Lessee (‘the Project’).

Arising from the Agreement, the liabilities to be assumed by the Lessee arising from the Agreement are as follows: -.
i) annual rental fee ;
ii) utility bills payable to the appropriate authority ;
iii) annual assessment to local council ;
iv) planning permission fees payable to local council ; and
v) insurance policies to cover against all risks.

7. The intended application of the rental fees received.

The rental fees arising from the Agreement represents as an additional income to PBA Holdings Bhd’s Group, which shall be used for its working capital purposes.

This announcement is dated 2 November 2010.

Query Letter
content

We refer to your announcement dated 28 October 2010 in respect of the
abovementioned matter.

In this connection, kindly furnish Bursa Malaysia Securities Berhad (“Bursa
Securities”) with the following additional information for public release : –

1. The approximate area of the Lands.
2. The existing use of the Lands.
3. Whether any valuation was carried out on the Lands. If so, the name of the
independent registered valuer, date and method of valuation and quantification
of the market value.
4. The terms of any arrangement for payment of total rental fees of
RM39,580,450 on a deferred basis.
5. The estimated time frame to complete the Agreement.
6. The particulars of all liabilities to be assumed by the Lessee arising from
the Agreement.
7. The intended application of the rental fees received.

Kindly furnish Bursa Securities with your reply within one (1) market day from
the date hereof.

Yours faithfully

TAN YEW ENG
Head, Issuers
Listing Division
Regulation

TYE/YLS
c.c:- Head, Market Surveillance Department, Market Supervision Division,
Securities Commission (via fax)

Amended Announcement
Company Name : PBA HOLDINGS BHD
Subject : LEASE AGREEMENT BETWEEN A WHOLLYOWNED
SUBSIDIARY OF PBA HOLDINGS BHD AND SIM
LEISURE CONSULTANTS SDN BHD
Announcement Details:

1. INTRODUCTION

PBA Holdings Bhd (“PBAHB” or “Company”) wishes to announce that its
subsidiary, Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (“PBAPP” or
“Lessor”) had on 28 October 2010 entered into a Lease Agreement with Sim
Leisure Consultants Sdn Bhd (“SLC” or “Lessee”) to lease the lands held under
Lot Nos. PT 1, 535, 384, 377 and 231, part of Lot Nos. PT 15, 383, Mukim 2 and
part of Lot No. PT 54, Mukim 1, Teluk Bahang, Daerah Barat Daya, Pulau
Pinang (“the Lands”) (hereinafter referred to as “Agreement”).

2. PARTICULARS OF THE LANDS

2.1 The details of the Lands are as follows:-
i) Lot No. PT 1 (HS(M) 1), Mk. 2, Daerah Barat Daya, Pulau Pinang
ii) Part of Lot No. PT 15 (HS(D) 5), Mk. 2, Daerah Barat Daya, Pulau
Pinang
iii) Part of Lot No. 383 (GM 69), Mk. 2, Daerah Barat Daya, Pulau Pinang
iv) Lot No. 535 (GM 94), Mk. 2, Daerah Barat Daya, Pulau Pinang
v) Lot No. 384 (GM188), Mk. 2, Daerah Barat Daya, Pulau Pinang
vi) Part of Lot No. PT 54 (HS(D) 13700), Mk. 1, Daerah Barat Daya, Pulau
Pinang
vii) Lot No. 377 (GM 186), Mk. 2, Daerah Barat Daya, Pulau Pinang
viii) Lot No. 231 (GM 153), Mk. 2, Daerah Barat Daya, Pulau Pinang

2.2 The total net book value of the Lands based on the latest audited financial
statements of PBAPP as at 31 December 2009 is Ringgit Malaysia One Hundred
and Ninety Three and sen Seventy (RM193.70) only.

2.3 The Lands are currently rezoned for use as a recreational park land suitable for
theme parks. It is a free hold land with no encumbrances.

3. INFORMATION ON THE PARTIES TO THE AGREEMENT

3.1 PBAPP

PBAPP is a company incorporated in Malaysia under the Companies Act, 1965
and having its registered office at Level 32, Komtar, 10000 Penang and has an
authorised share capital of RM300,000,001.00 divided into 300,000,000 ordinary
shares of RM1.00 each and 1 special rights redeemable preference share of
RM1.00 each of which 165,114,082 ordinary shares of RM1.00 each and 1
special rights redeemable preference share of RM1.00 each have been issued and
fully paid-up. All the ordinary shares of PBAPP are held by PBAHB, while the
special rights redeemable preference share of RM1.00 each is held by State
Secretary, Penang, a body corporate established under the State Secretary Penang
(Incorporation) Enactment, 1988.

The principal activity of PBAPP is to undertake the business activity of a water
supply system which comprises abstraction of raw water, treatment of water,
supply and sale of treated water to Consumers for the State of Penang.

3.2 SLC

SLC is a company incorporated in Malaysia under the Companies Act, 1965 and
having its registered office at No. 243, (1st Floor), Victoria Street, 10300 Pulau
Pinang and has an authorised share capital of RM1,000,000 divided into
1,000,000 ordinary shares of RM1.00 each of which 1,000,000 ordinary shares of
RM1.00 each have been issued and fully paid-up.
SLC is owned by the following parties:-
Shareholders of SLC No. of Shares held %
Sim Choo Kheng 640,000 64
Paul Anthony Blunt 160,000 16
Tan Khoon Keong 100,000 10
Yeoh Guan Eek 100,000 10
SLC is principally engaged in the business of theme park construction and
consultants work.
(PBAPP and SLC are collectively herein referred to as “the Parties”).

4. RATIONALE

4.1 With the Agreement, this will enable the Lessee to construct, develop and operate
a nature-themed tourism and leisure development resort to be known as Ecofun
Theme Park Resort or by any other title as assigned by the Lessee (‘the Project’);

4.2 As part of the Corporate Social responsibilities of PBAHB Group, this will also
enable the Penang State to further develop its tourism industry especially related
to environmental friendly activities as well as to create an economic spin-offs for
the Penang State which may provide jobs for the local people and business
opportunities to the traders; and

4.3 The Agreement will also benefit PBAHB Group in the long run as PBAHB
Group will receive total rental fees of Ringgit Malaysia Thirty Nine Million Five
Hundred and Eighty Thousand and Four Hundred and Fifty (RM39,580,450) only
in 60 years’ lease period.

5. KEY SALIENT TERMS OF THE AGREEMENT

5.1 Rent per year: Ringgit Malaysia Two Hundred Thousand
(RM200,000) per annum for the first to 5th year and
automatically be revised to an increase of 20% every
subsequent 5 years.

5.2 Duration of Lease: Sixty (60) Years from Effective Date of Lease.

5.3 Effective Date of Lease: One (1) year from Delivery Date of the Lands.

5.4 Delivery Date of the Lands: Upon compliance of all Conditions Precedent by the
Lessor and the Lessee.

5.5 Expiry Date of Lease: Sixty (60) Years from Effective Date of Lease.

5.6 The Agreement is conditional upon the fulfillment of the following Condition
Precedents:-
(i) the Lessor shall, at its own cost and expense, apply for the approval of the
appropriate authority or authorities for the conversion of the existing
category of use of the Lands to Building and or Theme Park and
Recreational or to an appropriate category of use as prescribed under the
National Land Code and or the Penang Land Rules 2005 or by any
relevant laws for the time being in force in Malaysia to facilitate for the
development and operation of the Project;
(ii) the Lessor shall, at its own cost and expense, apply to the appropriate
authority or authorities for the rezoning of the Lands or any part thereof
(as the case may be) that are/is for the time being specifically zoned to
facilitate for the development and operation of the Project therein;
(iii) the Lessee shall, at its own cost and expense, obtain or cause to be
obtained from the appropriate authority the official approval of the
Building Plan relating to the development of the Project on the Lands.
The Lessee shall upon receipt of the said approval furnish the original
copy thereof to the Lessor for noting together with a copy of the same for
the Lessor’s retention and record;
(iv) the Lessee shall, at its own cost and expense, obtain or cause to be
obtained from the appropriate authority’s official Planning Permission for
the development and operation of the Project on the Lands. The Lessee
shall, upon receipt of the Planning Permission, furnish the original copy
thereof to the Lessor for noting together with a copy of the same for the
Lessor’s retention and record;
(v) the Lessee shall, at its own cost and expense secure the Commencement
Work Order from the Majlis Perbandaran Pulau Pinang and furnish the
original copy thereof to the Lessor for noting together with a copy of the
same for the Lessor’s retention and record;
(vi) the Lessee shall ensure that all acts, approval, permits, and whatever
things required to be done, secured and complied under the provisions of
the relevant law(s), by-law(s), statutory rule(s), enactment(s),
ordinance(s), regulation(s), and any written law(s) for the time being in
force in Malaysia prior to the commencement of construction and
operation of the Project are done, secured and complied by the Lessee;
(vii) should the written approval from the Department of Environment or any
statutory authority or authorities governing the environmental matters and
or compliance to any provisions of environmental law(s) be required and
applicable as a precondition for the construction, implementation and or
operation of the Project on the Lands, the Lessee shall, at its own cost and
expense obtain or cause to be obtained such written approval and or
comply with the provisions of such environmental law(s). The Lessee
shall furnish the original copy of the written approval issued by the said
governing authority or authorities for the Lessor’s noting together with a
copy of the same for the Lessor’s retention and record. If applicable, the
Lessee shall produce evidence of its compliance to the statutory
provisions of the law(s) that shall be complied by the Lessee prior to the
commencement of the construction and operation of the Project on the
Lands;
(viii) the Lessor shall secure the approval of the Suruhanjaya Perkhidmatan Air
Negara in respect to the Lessor’s leasing of the Lands to the Lessee
hereunder this Agreement and comply to the statutory requirement(s)
prescribed by the Water Services Industry Act 2006 (Act 655) and any
subsidiary legislations and or rules enacted thereunder and any written
law(s) governing the water supply and services industry and the water
assets of a water operator;
(ix) the Lessee shall ensure that, apart from complying with the provisions of
the law(s) as specifically provided in this Agreement, the provisions of
any written laws applicable in respect to the development, construction,
implementation and operation of the Project on the Lands shall forthwith
be complied by the Lessee;
(x) the Lessee shall take all appropriate actions and execute all acts and
things as any other developer undertaking construction of a project similar
to the Project herein would do to ensure not only that the Lands are
suitable for the development and operation of the Project but also that all
safety aspects and matters including but not limiting to safety to human
and animals and all environment issues have been addressed and that
appropriate measures have been implemented in respect thereto;
The Lessee shall, at its own cost and expense, take Workmen Insurance
Policy/Public Liability Policy (hereinafter referred to as ‘the Policy’) from
a reputable insurance company covering the risk of bodily injury, injury
resulting in permanent disability and or death inflicted against or suffered
by any person or persons in consequence of any act of negligent on the
part of the Lessee’s employee(s), it’s agent(s), personal(s), contractor and
or any person(s) acting under the authority of the Lessee therein the Lands
and furnish the original copy together with a copy of the Policy to the
Lessor for noting and for purposes of record. Such coverage under the
Policy shall be adequate and that the policy is not terminated, void or
lapse for default in the payment of premium or for any reason whatsoever.
The Lessee hereby undertakes and covenants to the Lessor that the Lessee
shall renew or cause the Policy be renewed as and when it is due for
renewal and shall ensure that the Policy is valid and enforceable
throughout the enforceability of this Agreement and the Lease Period. It
shall be the obligation of the Lessee to furnish to the Lessor the original
copy of the Policy for the Lessors’ noting together with a copy thereof for
the Lessors’ purposes of record. The Lessee shall also furnish a duly
certified copy of the duly renewed Policy as and when the same is
renewed; and
(xi) the Rent and any monies payable by the Lessee to the Lessor upon
execution of this Agreement have been fully paid by the Lessee.

5.7 In the event a Party or the Parties is/are unable, incapable or fails to comply any
of the terms and conditions as here above specified within One (1) year from the
date of Agreement or to such date as extended by the Lessor, the Agreement shall
automatically terminate becomes null and void and of no further effect
whatsoever save and except that the Lessor shall refund free of interest the Rent
duly paid and any monies paid by the Lessee (if any) upon the execution of the
Agreement.

6. BASIS AND JUSTIFICATION OF ARRIVING AT THE RENTAL RATE

The total rental income of Ringgit Malaysia Thirty Nine Million Five Hundred
and Eighty Thousand and Four Hundred and Fifty (RM39,580,450) only arising
from the Agreement for the sixty (60) years’ lease was arrived after thorough
negotiations on a “willing buyer willing seller” basis.

7. FINANCIAL EFFECT

7.1 Share Capital and Substantial Shareholders’ Shareholdings
The Agreement will not have any effect on the share capital and substantial
shareholders’ shareholdings of PBAHB.

7.2 Earnings per share

The Agreement will not have any material effect on the earnings and earnings per
share of PBAHB Group for the year ending 31 December 2010 but it was
envisaged that the Agreement will contribute positively to the future earnings of
PBAHB Group.

7.3 Net Assets per share and gearing

The Agreement will not have any material effect on the net assets and gearing of
PBAHB for the year ending 31 December 2010.

8. APPROVAL REQUIRED

As the highest percentage ratio applicable to the Agreement is 6.3% only, hence
the Agreement is not subject to the approval of the shareholders of PBAHB.
Subject to the approval from National Water Services Commission (or
“Suruhanjaya Perkhidmatan Air Negara”) to be obtained by the Lessor as part of
the conditions precedents of the Agreement, the Agreement is not subject to the
approval of any other governmental authorities.

9. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS

None of the Directors or substantial shareholders of PBAHB or persons
connected to them has any interest, direct or indirect, in the above transaction.

10. DIRECTORS’ RECOMMENDATION

Having considered the rationale and all other aspects of the above transaction, the
Board is of the opinion that it is in the best interest of the Company to proceed
with the Agreement.

11. DOCUMENT AVAILABLE FOR INSPECTION

The Agreement is available for inspection during normal business hours on
Mondays to Fridays (except public holidays) at the Registered Office of the
Company at level 32, Komtar, 10000 Penang for a period of three (3) months
from the date of this announcement.
This announcement is dated 28 October 2010.