KUALA LUMPUR (12 JULY) – Parkson Retail Group Ltd (PRGL), a 54.97 percent-owned Hong Kong-listed subsidiary of Parkson Holdings Bhd, has signed a 20-year tenancy agreement for a commercial facility covering approximately 39,966 sq m in the Chinese city of Yichun. The tenancy agreement was entered between PRGL’s indirect wholly-owned subsidiary Jiangxi Parkson Shopping Centre Management Co Ltd and landlord Yichun Hong Lin Hotel Co Ltd, according to a bourse filing, in respect of tenancy of the first to fourth floors above ground level of Hong Lin World City and some shops located there.
The annual rental payable under the tenancy agreement is Rmb11.99 million for the first year, Rmb5.99 million for the second to fifth years, Rmb12.59 million for the sixth to seventh years, and Rmb13.6 million for the eighth to tenth years.
The annual rental is Rmb14.27 million for the eleventh to thirteenth year, Rmb14.99 million for the fourteenth to sixteenth year, and Rmb15.74 million for the seventeenth to nineteenth year. Finally, the twenty-first-year rental is Rmb16.52 million. According to the International Accounting Standards Board’s International Financial Reporting Standard 16 – Leases (IFRS 16), entering into a tenancy agreement as a tenant will require the PRGL group to recognize the property as right-of-use assets in the amount of Rmb92.25 million (equivalent to approximately RM59.7 million) calculated with reference to the IFRS 16.
“As a result, the signing of the tenancy agreement and the transaction anticipated thereunder will be considered an asset acquisition by the PRGL Group,” Parkson explained.
According to Parkson’s audited consolidated statement of financial position as of June 30, 2020, the asset acquisition has no meaningful impact on the company’s earnings for the fiscal year ending December 31, 2021 or the group’s net assets.
According to Parkson, PRGL feels that the property’s tenancy is critical to the group’s commercial development in Yichun and is in keeping with the group’s Jiangxi province development strategy. The board of directors believes that the tenancy will benefit the company’s future growth.
Parkson further stated that the board considers the lease agreement’s conditions are fair and reasonable, and that, after considering the foregoing reasons and benefits, the board feels the tenancy is in the best interests of the company and its shareholders as a whole.
Today, from 9 a.m. until 10 a.m., trading in Parkson shares was paused. Parkson shares declined 0.5 sen, or 2.63 percent, to 18.5 sen at 10.56 a.m., giving the company a market capitalization of RM202 million. A total of 328,100 shares were traded./n
