CPN : ประชุมผู้ถือหุ้นเช่าที่บางใหญ่ Dec 11, 2012

1. Presentation Material
The Transaction of Entering into
A 30-Year Land Lease Agreement
For
Analyst Meeting of
Central Pattana Public Company Limited
11 December 2012
Independent Financial Advisor

2. Content
PAGES
• Transaction Details 3
• Details of the Connected Transaction and the Asset Acquisition Transaction 10
• Key Information about Vantage 11
•Key Details regarding the Shopping Complex 12
• Rationales for the Transaction 13
•Risk Factors Related to Developing the Shopping Complex 14
•Why does CPN Need to Enter into the Lease Agreement with Vantage? 16
•Land Value Appraised by the First Independent Appraiser 17
•Land Value Appraised by the Second Independent appraiser 18
•IFA Opinion on the Fairness of Value – Method 1 19
•IFA Opinion on the Fairness of Value – Method 2 20
•Opinion of the IFA regarding the Connected Transaction 21
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3. Transaction Details

4. Transaction Background
Central Pattana Public Company Limited (“CPN”) plans to enter into a 30-year land lease agreement with
Vantage Ground Company Limited (“Vantage”) to let land plots with approximate areas of 98 rais, 1 ngan and
96.1 sq.wah or 39,396.1 sq.wah. Vantage is CPN’s connected person.
Such land plots are located at the intersection between Kanjanaphisek Road and Rattanathibet Road in
Nonthaburi Province.
The purpose of entering into such long-term land lease agreement is to secure land plots for developing and
constructing a large-scale shopping complex.
The transaction in which CPN will enter into a 30-year land lease agreement with Vantage is regarded as a
connected transaction related to asset or service and an asset acquisition transaction.
CPN’s BOD meeting no.6/2012 held on 9 November 2012 considered and approved CPN to enter into the 30-
year land lease agreement with Vantage, subject to an approval from the EGM No.1/2013 to be held on 18
January 2013.
CPN will enter into such long-term land lease agreement after it obtains an approval to do so from the EGM
No.1/2013.
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5. The 30-Year Land Lease Agreement
Lessor Lessee
Vantage • Lease Agreement of land (98 rais, 1 ngan and 96.1
sq.wah or 39,396.1 sq.wah)
• For the purpose of developing and constructing a
large-scale shopping complex
• The lease term is 30 years starting from the date of
entering into the agreement
In return, CPN will make payments totaling 5,098.68 million Baht to Vantage
consisting of :
• Upfront payment for the total amount of 654.96 million Baht
• Annual rental payments for the total amount of 4,443.72 million Baht to be
made over the 30-year lease term
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6. Details regarding Land Plots CPN Will Let from Vantage
Location
Sao Thong Hin Sub-District, Bangyai District, Nonthaburi
Total Leased Areas
98 rais 1 ngan and 96.1 sq.wah (39,396.1 sq.wah)
Source: CPN
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7. Details regarding Annual Rental Payment over the Entire Lease Term
Over the entire 30-year lease term, CPN will make total annual rental payments of 4,443.72 million Baht.
Annual Rental Payment
(Unit: Millions of Baht)
300 268.98
233.89
250
203.39
200
176.86
153.79
133.73
150 116.29
101.12
87.93
100
50
5.28
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
year
Source: CPN
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8. Tentative Schedule for the Transaction
28 Nov 2012 Late Jan 2013
• Approval from the • EGM No.1/2013 • Construction
Board of Directors held to approve the commencement
to enter into the 30- • XM Date transaction • Date of entering
year land lease into the 30-year
agreement land lease
agreement
9 Nov 2012 18 Jan 2013 Feb 2013
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9. Independent Financial Advisor
Report

10. Details of the Connected Transaction and the Asset Acquisition Transaction
Details of the CPN will enter into a 30-year land lease agreement with its connected person for the purpose of developing a new
transaction shopping complex. This transaction is regarded as a connected transaction and an asset acquisition transaction.
Lessor : Vantage Ground Company Limited (“Vantage”)
Relevant parties a company in the Central Group which is CPN’s major shareholder and controlling person.
Lessee : Central Pattana Public Company Limited (“CPN”)
Period CPN will After obtaining an approval from the Extraordinary General Meeting of Shareholders No.1/2013 to be held in January
enter into the contract 2013
Major terms and • CPN may commence construction of the shopping complex after it enters into the land lease agreement with
conditions Vantage.
• CPN may let areas in the shopping complex to one or several tenants throughout the lease term.
Lease payment that CPN will make to Vantage consists of:
Lease payment to 1) Upfront Fee: The total amount of which is 654.96 million Baht.
Vantage 2) Annual Rental Fee: The total amount to be made throughout the 30-year lease term is 4,443.72 million Baht.
Conditions for •Disclose the transaction to the SEC and the SET
entering •Obtain an approval to enter into the transaction from the meeting of shareholders. At least three-fourths of total
into the transaction number votes of all shareholders who attend the meeting and who have the right to vote are required.
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11. Key Information about Vantage
Business Information
Company Name Vantage Ground Company Limited (“Vantage”)
No. 306 Silom Road, Suriwongse Sub-District, Bangrak District,
Registered Address Bangkok Harng Central Some Members of
Department Store the Chirathivat Family
Date of 9 December 1991
Incorporation
Nature of Business Acquire, sell and let land and properties
99.98% 0.02%
Paid-up Capital 85 million baht (consisting of 850,000 paid-up shares with a par
(Millions of Baht) value of 100 baht each)
Vantage Ground
Company Limited
Major Shareholder Harng Central Department Store Company Limited (99.98 %)
and % of Stake Some members of the Chirathivat Family (0.02 %)
Board of Directors Some members of the Chirathivat Family
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12. Key Details regarding the Shopping Complex
•Gross Floor Area + Parking Area :
333,000 sq.m. 2013
•Net Rentable Area (excluding
department store) : 75,000 sq.m.
Year of Construction
Commencement
Area Development &
Construction Period
26 months
MRT Purple Line and Motorways No.81
Central Bangyai
Public Transportation Commercial
Project Operation Year
2015
Project Location
Sao Thong Hin Sub-District, Bangyai District,
Nonthaburi at the intersection between Kanjana
Pisek Road and Rattanathibet Road
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13. Rationales for the Transaction
Value Creation for CPN and Its Shareholders
1. 2. 3. 4.
Acquisition of Leasehold
Conformance to Long-Term Diversification of Economies of Scale
Right Associated with
Plan and Increase in CPN’s Business Risk
Strong Commercial in terms of Operation
Revenue
Potential Land Plot
•CPN will develop a large-scale • Land plots that CPN will let •Developing and running a new •Larger number of shopping
shopping complex on land from Vantage is located in the shopping complex will help to complexes in the CPN Group
plots it will let from Vantage.
highly populated area with diversify CPN’s business risk. would help to create
This will help to generate
sound revenue growth and good commercial potential. This is because its rental and economies of scale for CPN in
investment return for CPN in They are appropriate for service revenues will come terms of common use of PR
the long-term. developing a large-scale from a larger number of and marketing activities in the
• Total areas CPN will let from shopping complex. shopping complexes, thus group and in securing tenants
Vantage can also be used for •Such land plots are also reducing risk of relying on a for areas in CPN shopping
the expansion phase of the located close to the MRT few number of large shopping centers.
shopping complex. In Purple Line and the Motor Way complexes in generating a
developing the expansion No.81, thus making them good majority of revenue.
phase, CPN will take into for developing a large-scale
account all relevant factors and shopping complex.
key issues prior to doing so.
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14. Risk Factors Related to Developing the Shopping Complex (1/2)
Risk Factors Mitigation Strategies
1 Risk that CPN May Not Be Able to Let Areas in the Modern trade, shopping centers and department stores located in the nearby
Shopping Complex as Targeted
area do not directly compete with CPN’s new shopping complex which will be
developed to be a large-scale one.
CPN will leverage its experience and expertise which it has gained from
developing previous shopping center projects in developing and constructing
the new shopping complex as well as optimizing its merchandising mix to
enhance its occupancy rate.
CPN’s operating and marketing synergies with the Central Group would help
to secure and attract various tenants to the new shopping complex.
Risk that the Land Plots on which CPN Will CPN will develop and implement several measures to prevent or minimize
2 Develop the Shopping Complex May Face Flooding flooding impact during both development and operation phases.
in the Future
CPN will arrange for necessary insurance policies.
3 Risk that the Land Plots on which CPN Will CPN will develop and construct the shopping complex on the unexpropriated
Develop the Shopping Complex Are Located Close land plots. It obtained an approval from the Mass Rapid Transit Authority of
to the State’s Infrastructure Projects (i.e. the MRT
Purple Line and the Motorway No.81) Thailand to get access to some parts of the expropriated areas to facilitate
development and construction of its new shopping complex.
The land plots are not affected by the development and construction of the
Motorway No.81.
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15. Risk Factors Related to Developing the Shopping Complex (2/2)
Risk Factors Mitigation Strategies
4 Risk that CPN May Fail to Meet Construction & CPN has gained experience and expertise in developing and constructing
Development Schedule and Budget several shopping complexes with similar nature and scale in recent years.
CPN was able to meet their development & construction schedules and
budgets although some of which are large-scale projects (i.e. CentralPlaza
Rama 2).
Risk that Revenues from Some of CPN’s Existing As the three shopping complexes are located in different areas of Nonthaburi
5
Shopping Centers May Be Cannibalized by the and all of which have their own target clients, risk of cannibalization is
Launch of the New Shopping Complex projected to be minimal.
CPN’s Shopping Complexes
1 In Nonthaburi
1
3 2
2
3 Central Bangyai
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16. Why does CPN Need to Enter into the Lease Agreement with Vantage?
Rationale for the Transaction Supporting Reasons
Acquisition of Leasehold Right Associated with Entering into the long-term land lease agreement to obtain land plots with
1 Land Plots Which Are Appropriate for Developing
A Shopping Complex total areas of 98 rais, 1 ngan and 96.1 sq.wah (39,396.1 sq.wah) which are
located in Nonthaburi allows CPN to obtain land plots which are good for
developing a large-scale shopping complex thanks to their good strategic
location.
Such land plots which are in the highly populated area are also situated close
to the MRT Purple Line.
Developing and constructing a shopping complex on those land plots will help
to create value-added and sound long-term return for CPN and its
shareholders.
Alleviate the Risk that CPN May Not Be Able to Entering into the 30-year land lease agreement with Vantage allows CPN to
2 Procure Sufficient Land Plots with Sound obtain land plots which are good for developing and constructing a large-
Commercial Potential at A Reasonable Price
scale shopping complex.
The term of the lease agreement is sufficient for CPN to develop and operate
the shopping complex.
Major terms and conditions stipulated in the draft land lease agreement are
conducted on an arm’s length basis.
Mitigate the Risk that CPN May Not Be Able to Total land plots which CPN will let from Vantage are sufficient for developing
3 Collect Sufficient Land Plots for the Purpose of and constructing a shopping complex in both Initial Phase and Expansion
Developing and Constructing a Large-Scale Phase.
Shopping Complex
CPN management conducted feasibility study related to developing and
operating the new shopping complex and they deem that doing so would
help to generate sound return for CPN and its shareholders over the long-run.
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17. Land Value Appraised by the First Independent Appraiser
The value of land on freehold interest using market approach The value of 30-year land lease using income approach
1 Annual Rental Fee = average rental fee ratio over the appraised
2 freehold value
selected 7close land samples
Chose 4 closest ones to go
in the same area that currently
through a comparison and 1 Collecting market comparable 2
had actual bidding or Analyzing the data that has 30-
adjustment process data in both same and different
offering prices year contract in both same
area that has 10 – 30 years
and different area
contract
4 3 4 3 Average rental fee per year of
Adjusted land price / square wah Employing 3% of rental fee the 30-year lease contracts is
Calculating the land value from
after analyzing each sample along ratio over the freehold value approximately 3.16% of
equally average all adjusted
with target land on both external freehold
4 samples price / square wah
and internal factors
3% rental fee ratio over the freehold value, with 3% annual growth
Market Approach Approximate Value (Baht) PV
Value / Square wah 93,000 7% discount rate
Asset Value( 39,391.1 square wah) 3,663,800,000 Market value of 30-year leasehold rights = 1,871,000,000 Baht
Independent Financial Advisor Opinion :
Independent Financial Advisor Opinion : The valuation method employed is reasonable since it referred to both of the
The method employed by 15 Business Advisory to derive the freehold value actual information in the market nearby the land CPN rent from Vantage and
is appropriate. Since the samples included the land situated in the same long-term leases example in other areas. This method allows the closest
area with the appraised asset and all of the fair prices are referred from the market value of the land to be identified given that the location, commercial
actual biding and offering price occurring in the market. Moreover, 15 utilization possibility and contract life have been considered. Moreover, the
Business Advisory also made adjustments on the samples to make them be rental cash flows over 30 years are also discounted to gain a present value,
so close to the appraised land that the fair price of the land piece can be which means that the time value of money has been taken into the
identified. consideration.
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18. Land Value Appraised by the Second Independent appraiser
The value of 30-year land lease using market approach
1 Dividing the land into 3 parts for the purpose of 2 Collecting market comparables whose 3
valuation because it will allow Brooke Real Estate to Selecting 5 data with 30-year lease
characteristics are close to the target
adjust the comparable data in many perspectives to contract or have been offered a 30-
land. Those characteristics include
year rental agreement.
make it closest to the land being valued that the value size, general quality and location.
can be referred.
5 4 Evaluating each 5 market
Calculating the Weighted Quality
3 Score (WQS) of each land from the
comparables and the land being
valued by scoring them in the range of
formula ∑(A*B). 1 (Poor) – 5 (Very Good) upon the
weighted perspectives listed below:
Market data #1 #2 #3 #4 #5
2 6
Location
Adjusting rental value / offering rent Transportation
Each sample will be scored upon the
lists of the left. The scores are
value according to the ratio of land denoted as (B)
Facilities
being appraised WQS over each
market comparable’s WQS Potential
Each has its own weight used to
Physical
calculate WQS denoted as (A)
1 Size
7 Calculating the rental value of the 8
Independent Financial Advisor Opinion : land CPN is going into the lease Doing step 4-7 twice more to identify
the independent financial advisor believes that the method is contract from the adjusted rental the 30-year rent value of all 3 parts of
reasonable since it integrated all of the related factors affecting value / offering rent value of all 5 land.
the land rental value. Moreover, Brooke Real Estate has also market comparables.
adjusted the market comparable rental value as they seem
applicable in each affecting factors. All of these further support Part 1 Part 2 Part 3 1,978,000,000
the independent financial advisor to agree that the 30-year 224.3 710.6 1,043
rental value is referable. million million million million
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19. IFA Opinion on the Fairness of Value – Method 1
Method to verify the reasonableness of the rental fee CPN agreed to pay to Vantage for this related transaction
Method 1 Present value of rental fee to be paid over 30 years
Annual rental fee
PV
Discount rate = WACC (8.76%)
Rental value of 30-year leasehold rights at the contract date = 1,748,053,734 Baht Weighted Average Cost of Capital (WACC)
Ke Cost of Equity 10.35%
Market value of 30-year
leasehold rights appraised Rental value of 30- Kd Cost of Debt 5%
by 2 independent year leasehold rights
appraisers at Baht 1,871 at the contract date T Corporate Tax Rate 20%
million and Baht 1,978 Baht 1,748 million
million consecutively E/A 75% of investment cost*
The rental value of 30-year leasehold rights calculated by the independent D/A 25% of investment cost *
financial advisor is LOWER than the market values appraised by 2
independent asset appraisers. However, the fairness of rental value should Note : Referring from the ratio of interest bearing debts over the equity as
also be verified by method 2 which trying to derive the benefit and appeared on CPN Financial Statements at the end of 2011. The equity has
investment return of entering into the transaction. been adjusted to reflect the market value of investment properties.
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20. IFA Opinion on the Fairness of Value – Method 2
Method to verify the reasonableness of the rental fee CPN agreed to pay to Vantage for this related transaction
Method 2 Calculating project internal rate of return (IRR)
1 2 3
Verify main assumptions used in
calculating Free Cash Flow referring
Calculating Free Cash Flow of the
project over 30 years period
Calculating the project
internal rate of return (IRR) 14.80%
to CPN
Comparing with Comparing with Comparing with
CPN weighted average cost of capital (WACC) CPN required return average return from shopping mall investment
IRR
IRR IRR
14.80% 14% - 15% 14.80% 14.80%
WACC 8% - 12%
8.76%
IRR is greater than CPN WACC IRR is within the range of CPN required return IRR is greater than average return
from shopping mall investment
Source: Thai Appraisal Foundation in October, 2011
The independent financial advisor believes that the rental payment scheme
CPN has to pay to Vantage is REASONABLE
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21. Opinion of the IFA regarding the Connected Transaction
It is of the opinion of the Independent Financial Advisor that the transaction in which CPN will enter into the
30-year land lease agreement with Vantage for the purpose of developing and constructing a new shopping
complex is fair, creates business benefits for CPN and does not cause any unfair advantages to any parties as:
1 The transaction has provided 2 Major terms and conditions
Fair Pricing 3
benefits to CPN are fair
Allow CPN to obtain leasehold Rental payment that CPN will Major terms and conditions in
right associated with land plots make to Vantage is lower than the draft land lease agreement
with sound commercial potential those as appraised by two are fair and do not yield any
Enhance CPN’s revenue and help independent asset appraisers by unfair advantages to any
to generate sound return for the 5% -10%. particular party
company in the long-run Project IRR indicates that Major terms and conditions are
Diversify CPN’s business risk as developing and operating such conducted on an arm’s length
its rental and service revenues project will allow CPN and its basis
will come from larger number of shareholders to obtain a sound Allowing CPN to make annual
shopping complexes long-term return rental payments rather than a
lump sum one helps to relieve
CPN’s financial burden.
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