Thakral Corporation Ltd. : Investment in Residential Developments in Brisbane and Mackay, Queensland, and Gladesville, Sydney

ACQUISITIONS AND DISPOSALS
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ACQUISITIONS AND DISPOSALS :: NON-MANDATORY DISCLOSURE :: INVESTMENT IN RESIDENTIAL DEVELOPMENTS IN BRISBANE AND MACKAY, QUEENSLAND, AND GLADESVILLE, SYDNEY

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18-Jun-2013

THAKRAL CORPORATION LTD

(Incorporated in the Republic of Singapore on 7 October 1993) (Company Registration No. 199306606E)

ANNOUNCEMENT

INVESTMENT IN RESIDENTIAL DEVELOPMENTS IN BRISBANE AND MACKAY, QUEENSLAND, AND GLADESVILLE, SYDNEY, AUSTRALIA

The board of directors (the "Board") of Thakral Corporation Ltd ("TCL" or the "Company" and together with its subsidiaries, the "Group") is pleased to announce that its indirect wholly-owned subsidiary, Hanbest Limited ("Hanbest"), is in the course of negotiating final documents pursuant to non-binding terms sheets executed with (i) VG Projects Pty Ltd, trading as Pointcorp Developments (the "Developer") in relation to two projects in Queensland known as Vida and Gateway and (ii) DEP Pty Ltd for a project in Gladesville, Sydney known as Riviera (collectively, the "Projects").

Project A, branded as Vida, is located in West End in Brisbane, about 2 km from the Brisbane Central Business District ("CBD") south of Brisbane River. It comprises 148 apartments and two retail units with total gross sales value of about A$102 million. The property fronts on to the Brisbane River with riverside parkland, walkways and bikeways that link to the Brisbane CBD. The location is close to shopping and the South Bank cultural, entertainment and educational centre of Brisbane. The site is a few hundred meters from the local rowing club and from the Saturday markets held at the neighboring Davies Park about 5 minutes from the Vida Apartments.
TCL has committed to provide up to A$11.3 million towards the capital required for the acquisition of the land and development of Vida. Hanbest has already funded about A$1.2 million in January 2013 to assist in the acquisition of the first parcel of land for Vida, at 11 Buchanan Street ("B11"). The Company had announced on 25
February 2013 its participation in the project as proposed for the first parcel of land, before it was branded "Vida". Since then the Developer has acquired the adjoining land, 19-21 Buchanan Street ("B21") in the same special purpose entity, submitted for development approval for both sites at the same time and has commenced sales in April 2013. The capital commitment by TCL for the original project to be built on B11 was up to A$4.5 million.
The investment by Hanbest takes the form of an issuance of Notes by the special purpose vehicle (the "Vida SPV") which owns the land and will carry out the development. To-date A$1.2 million of Notes have been issued and are secured by a second mortgage over the B11 land. It is intended that all the Notes issued and to be issued will be secured by a second mortgage over both pieces of land, subject to senior lender consent.
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Hanbest will subscribe for additional Notes for about A$2.14 million to assist towards the cost of the sales and consultants by the end of June 2013. It will then progressively subscribe additional Notes for about A$1.33 million up to the date of financial close with the senior lenders for the construction finance. It is expected that by the time of financial close, a substantial portion of the total capital committed by TCL will be sold down to co-investors.
As the capital provided by Hanbest will initially exceed agreed loan to value ratios, the Notes will also be secured by other property owned by the Developer. This security will be released once the financial ratios are restored, which is expected to occur by the time of financial close with the senior lender.
A contract of sale for the acquisition of B21 has been executed between the vendor and deposit paid by the Vida SPV with settlement due in November 2013, when construction is expected to commence on both B11 and B21.
Since the launch of sales of Vida in April 2013, contracts for the sale of more than 74 per cent out of the 148 apartments having a gross sales value of A$62.4 million have been issued to buyers and awaiting exchange.
Final development approval from the Brisbane City Council is expected by end of June 2013. Discussions are currently underway with senior lenders. At the same time, information packs for builders to submit tenders for the construction have been distributed to a number of selected builders.

Artist impression of Vida Apartments:

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Documentation to give effect to the non-binding terms sheet previously executed is currently being prepared, under which TCL will commit to invest about A$2.5 million in the project known as Gateway in Mackay, in north Queensland. The investment will take the form of Notes to be issued by a special purpose vehicle ("Gateway SPV"). Most of the capital for this project is expected to be placed with co-investors at the time of draw down by the Gateway SPV.
Gateway is located in Mackay, which is about 1,000 km north of Brisbane in north Queensland on the east coast. It is a development of 56 one and two bedroom apartments located midway between the airport and the Mackay business centre. The site is adjacent to a proposed new neighbourhood shopping centre which will include a major national supermarket and specialities.
Contracts for the sale of more than A$18 million of stock, equal to more than 90% of the 56 apartments have been issued and are in the course of being executed.
The senior lender providing the construction finance has indicated that credit approval has been granted and a credit approved term sheet is expected to be issued shortly. Based on discussions with the senior lender, the security that is expected to be granted to Note holders will be in the form of a second ranking fixed and floating charge over the assets and undertaking of the Gateway SPV.
Conditions precedent to subscription of the Notes by Hanbest and the co-investor include credit approved senior finance for the construction on terms acceptable to TCL and exchange of sufficient contracts of sale with full deposits to cover the whole of the amount of the senior debt and most of the principal sum of the Notes. The level of sales already achieved should enable this condition to be met to TCL's satisfaction by the time of draw down in the next few weeks.
Gateway is expected to be funded commencing from the end of June and fully funded by mid July 2013. Construction commenced in April 2013 and completion is expected in Q2 to Q3 2014.

Artist impression of Gateway Apartments:

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The Developer, VG Projects Pty Ltd trading as Pointcorp Developments ("PC") is a boutique Queensland based property development group that has completed 8 residential, projects in Queensland Australia in Brisbane, Mackay and Townsville. It currently has a development pipeline of A$280 million. PC is a privately owned company formed by Chris Vitale and Paul Gedoun (the "Principals") in 2004. The Principals have strong balance sheets and on-going cash flow from non- development activities from other business interests in construction, mortgage broking and financial advisory services. It is a growing company that is well equipped to handle residential development of this nature.
The Group has also invested in the Sephora Apartments in Highgate Hill, Brisbane which achieved 100% pre-sales by the time the Group made its investment. With Vida and Gateway, the Group has a total of 3 projects with the Developer to-date.
The Group sees PC as an important partner to undertake a pipeline of future projects together.
More information on the Vida, Gateway and PC is available at http://www.pointcorp.com.au.

The Group has entered into non-binding terms sheet with DEP Pty Ltd ("DEP") to provide up to A$4 million towards the acquisition of the land and development of a site in Gladesville, about 8 km from the CBD, Sydney. The land has an approval for the development of 40 one, two and three bedroom units on the site, together with two retail suites. DEP holds an option to acquire the land, which is expected to be exercised in July 2013 with the payment of the deposit on the land. About 26 apartments have been sold with a gross sales value of about A$15 million. The gross sales value of Riviera is expected to be about A$29 million.
The Group will provide an initial draw down to assist in the acquisition of the land in July 2013 followed by provision of further funds at financial close of the senior debt for the construction of the building and to pay the balance of the land purchase price. The valuation of the land has been issued at a value higher than the purchase price. Hanbest will hold security over the contract of sale for the land. After financial close with the senior lender, and subject to senior lender approval, Hanbest will hold a second mortgage over the land.
It is expected that a substantial portion of the capital committed by Hanbest will be sold down to co-investors at financial close which is expected to be about September
2013.
Senior lenders have been mandated to provide credit approved terms sheets for the construction finance and tenders submitted by builders are being evaluated.
The project is located in an established area adjacent to shopping and the land backs onto a school. The apartments on the higher levels have water views.
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The funding of this project is subject to a number of conditions precedent which are currently progressively being satisfied.

Artist impression of Riviera Apartments:

The Group's portion of the investment in the Projects has and will be funded from its internal resources including bank facilities.

The Group's investment in the Projects is in the form of notes issued by the developers (the "Notes"). In the case of the Gateway and Riviera projects, the return is a fixed return and in the case of the Vida project, the return includes a fixed base return as well as participation in the project upside through additional interest out of the profits earned by the project. At the time of subscribing for the Notes, as the Projects are still in their early stages, the value of the Notes is equal to the issue price. As such, no independent valuation of the Notes is required.

In addition to the return earned on the capital invested by the Group in the Projects, the Group also earns fees through its investment subsidiary, TCAP Australia Pty Ltd ("TCAPA") in Australia, from fees charged for arranging participation in the capital
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required for the Project and an ongoing fee for participating in the management of the Projects.
The Group will also earn the difference between the return to be paid to co-investors and the return generated from the project when a portion of the capital committed to be provided by TCL is sold down to co-investors for each project. Potential investors to whom the sell down is effected are identified at an early stage and engaged in the transaction at an early stage.

The investment in the Projects is in line with the Group's stated intention to invest in investment opportunities to create a sustainable second revenue stream and contribute to positive shareholder value in the ordinary course of the conduct of its business.

None of the directors or the controlling shareholders of the Company has any interest, direct or indirect, in the investment in the Projects except for the Managing Director, Investments & Corporate, Mr. Jaginder Singh Pasricha, who is a minority shareholder holding 12.25% of the issued capital in TCAP Pte Ltd ("TCAP"), an indirect 51% owned subsidiary of the Company. TCAPA, a wholly-owned subsidiary of TCAP, originated, packaged and financed the Projects for which it will receive a fee on the Projects in due course.

No person will be appointed to the Board in connection with the investment in the Projects and no service contracts in relation thereto will be entered into by the Company.
On behalf of the Board
Natarajan Subramaniam
Independent Non-Executive Chairman
Singapore, 18 June 2013
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