Shing Kwan Investment (Singapore) Pte Ltd, a member of the Shing Kwan group of billionaire S.P. Tao, took up these preference shares as part of a restructure exercise undertaken by ORCL in 2005.
Shareholders have been told that following redemption of the preference shares at a cost of Rs.3.74 billion, an anticipated surplus of Rs.472.8 million will be infused as working capital into the Havelock City project.
ORCL was restructured five years ago by writing off its accumulated losses by reducing its issued shares by nearly 90.7 million (15.53% of its issued share capital).
This was a unique exercise in that the entire burden was borne by Overseas Realty’s major shareholder, Shing Kwan Investment, with minority shareholders keeping their holdings intact.
"The Board of Directors of ORCL agree that the NCCRPS which are falling due on November 28, 2010 subsequent to a tenure of five years, must be redeemed in full by the company in accordance with the terms of redemption. Redeeming the NCCRPS will reduce a significant liability of the company and strengthen its balance sheet through the issuance of new equity," ORCL shareholders were recently told by circular.
Currently the WTC in the Fort belonging to ORCL is "one of the most sought after business addresses in Sri Lanka," its owners claimed.
Although occupancies have averaged over 80% since 2006, despite the unstable country conditions, occupancy last year was down to 68%.
"This decline was a result of two key factors. Firstly, the adverse security environment prevalent in the country caused disruptions to WTC operations, as a result of road closures and access restrictions. The global financial crisis saw several companies engaged in exports, airline services, telecommunications and IT either downsizing or shifting from the WTC to mitigate the impact of the crisis," ORCL shareholders have been told.
But the ending of the war in May 2009 had created unprecedented optimism in the country resulting in an increased demand for quality office space.
This has pushed up WTC occupancy to 70% in July this year and the owners are seeing a significant increase in interest for office space in the building encouraging them to expect that 75% occupancy will be achieved by December.
"Given the stable political environment and its premier position as the most sought after office space in Colombo, the company expects occupancy levels at the WTC to exceed 90% from the year 2011 onwards," the circular said.
Also, new tenants at the WTC are paying higher rents, a factor of great significance in terms of future operations and profitability.
Additionally, ORCL expects to be able to increase its revenues through higher rentals negotiated when existing agreements come up for renewal.
At Havelock City, 133 units from Phase 1 of the building have already been sold with the balance likely to be sold out "in the near future."
The development on 17 acres of land will on completion be the largest single residential-cum-commercial development in a contiguous site in Colombo. It will comprise 1,080 residential apartments, with a commercial complex, recreation and entertainment facilities.
ORCL said that the construction of Phase 1 of the project comprising two towers with 226 units took place under adverse conditions. However, with the investment environment in the country improving significantly there was increased interest in the development.
Right now the owners are in the latter stages of finalizing the designs for a state-of-the-art club house facility which will include guest lounge, swimming pool, gym and other recreational facilities.
"This club house will be unrivalled in comparison to facilities available to other residential developments in Colombo, giving the company an additional value proposition when marketing the developed residential units. The development of this facility is scheduled to begin towards the end of this year," ORCL said.
Piling work for the next residential towers under Phase 2 has been completed and the superstructure design is in progress with funding arrangements of US$ 40 million in place.
The Bank of Ceylon is Overseas Realty’s partners in this joint venture and Rs.473 million from the rights issue will be used for in Havelock City.
ORCL which expects increased demand for Phase 2 apartments said they will be released for marketing as soon as substantial sales are achieved for Phase 1.
"The shareholders of the company would benefit through increased returns due to the successful completion of this second phase of the project and the subsequent sales of the apartments, which is expected to be within the next three to four years," the circular said.
The company is also finalizing designs and drawings for the commercial development of Havelock City comprising retail space and office towers with the potential for a hotel/service apartments.
"The retail development, which would be the first stage of the commercial complex, will comprise of 400,000 sq. ft. of gross floor area and 275,000 sq. ft. of rentable floor area accompanied by a car park of 185,000 sq. ft. (700 parking spaces). This would be the largest shopping mall in Colombo of its kind," ORCL said.
The company noted that Sri Lanka currently does not have any commercial complex of world standard. With improving economic conditions and the government’s intention of promoting the country as a premier shopping destination in South Asia, ORCL had seen an immediate opportunity for a world standard commercial complex.
The commercial development will be undertaken by a joint venture company called Havelock City Pte Ltd in which ORCL has 85% with the balance 15% held by Mireka Capital Land (Pvt) Ltd where ORCL owns 60% and the Bank of Ceylon 40%.
Although the rights issue is not underwritten, the Shing Kwan group will subscribe to its entire entitlement of 82.41% of the total shareholding and if required take additional shares.
The issue in the proportion of one ordinary share for every two existing shares will be priced at Rs.15 per share, below the prices at which the share has been trading in recent months.
An extraordinary general meeting has been called on October 11 to consider a resolution enabling the rights issue.
source - www.theisland.lk
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