1 LETTER TO PROSPECTIVE SHAREHOLDERS FROM THE CHAIRMAN
May 8 , 2008
Dear Prospective Shareholders:
The Carlton Savannah Hotel is the first real estate investment in the Trinidad &Tobago market that has the distinction of being a part of the Preferred Hotels group of Luxury Hotels.
Carlton Savannah REIT (Jamaica) Limited (the “Company”) is a vehicle designed to bring the unique benefits of the Carlton Savannah Hotel and Health Club & Spa as an investment property to stock market investors via an offer of Shares for subscription in the company.
This offer seeks to combine two key elements: a real estate investment and a share offer to bring the benefits of greater liquidity, geographic diversification, currency diversification and stable dividend flow to the shareholder Applicants.
The Company has already entered into an agreement which will allow it to utilize the funds raised in the Offer to acquire sixteen (16) of the Apartments of the Carlton Savannah Hotel together with the Hotel’s Health Club & Spa. These assets are income generating and promise to deliver a stream of dividends to the shareholders of the Company.
The Company intends to list on the Jamaica Stock Exchange and in time to also be listed on the Trinidad & Tobago and Barbados Stock Exchanges. When approved, the benefits of listed stock investing will be available to Applicants and these include:
· Tax-free dividends
· Liquidity of a ready market for the shares
· Strong valuation for shares
We invite you to participate in the offer and encourage others to do the same.
Sincerely,
ChairmanCarlton Savannah REIT (Jamaica) Limited
[1] www.preferredhotels.com
Sunday, May 11, 2008
DEFINITIONS
In this Prospectus, the following words and phrases shall, unless the context otherwise requires, be read and construed as having the following meanings ascribed thereto:
“Act”
The Companies Act of Jamaica, 2004
“Additional Rent”
means, in respect of each Apartment, a sum equal to 1/55th of the Owners Share of Rent.
“Agreements for Sale (Apartments)”
the sixteen (16) Purchase and Sale Agreements to be entered into by the Developer and CSRSL whereby the Developer agrees to sell the sixteen (16) Apartments (and all the Fittings and Fixtures applicable thereto) to CSRSL by way of the Deeds Transferring Beneficial Interest (Apartments) and the Sub-Leases (Apartments).
“Agreement for Sale (Spa)”
the Purchase and Sale Agreement to be entered into by the Developer and CSRSL whereby the Developer agrees to sell the Health Club & Spa (and all the Fittings and Fixtures applicable thereto) to CSRSL by way of the Deeds Transferring Beneficial Interest (Spa) and the Sub-Lease (Spa).
“Allotment”
the allocation and issuance of Shares to Applicants
“Apartments”
all those three room luxury apartment units comprised in the Hotel
“Applicant”
the person or organization by whom an Application is made
“Application”
the application on the prescribed form for the subscription of Shares comprised in the Offer, duly completed and delivered to the Lead Broker together with payment in full of the subscription price for the amount subscribed
“Application Form”
the original application form provided at the end of this Prospectus or in the local newspapers when published therein
“Approved Payment Method”
manager’s cheque issued by any commercial bank operating in Jamaica made payable to “KPMG/Carlton Savannah REIT (Jamaica) Limited Share Offer”
“Broker to the Offer”
any of the brokers identified in Section 6 of this Prospectus, including the Lead Broker
“Carlton Savannah Hotel” or “Hotel”
the hotel which is under construction on the Lands (as defined in the Agreements for Sale (Apartments) ) and which is to be known as the “Carlton Savannah Hotel” comprising the Apartments, the Facilities including the Health Club & Spa and the Public Areas
“Carlton Savannah Hotel
Operating Agreement” or the “Hotel Operating Agreement”
“Carlton Savannah Limited”
the agreement to be entered into by each Owner , the Carlton Savannah Owners Association Limited and Carlton Savannah Limited
the Hotel Operating Company, being a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of the Republic of Trinidad & Tobago having its registered office at Eleven Albion Street · PO Box 478 in the City of Port of Spain in the Island of Trinidad
“Carlton Savannah Owners’
Association Limited”
a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of the Republic of Trinidad & Tobago having its registered office at Eleven Albion Street · P.O. Box 478 in the City of Port of Spain in the Island of Trinidad.
“Carlton Savannah REIT (Jamaica) Limited” or the “Company”
a company duly incorporated under the Companies Act of Jamaica, 2004 having its registered office at 7 Stanton Terrace, Kingston 6
“Closing Date”
the time of closing of the Offer, as set forth in Section 5 of this document (subject to such extension as the Directors may determine)
“Company”
Carlton Savannah REIT (Jamaica) Limited
“CSRSL”
Carlton Savannah REIT (St. Lucia) Limited, which is an international business company established under the laws of Saint Lucia and having its registered office situated at 1st Floor, Bourbon House, Bourbon Street, P.O. Box 1695, Castries, St. Lucia
“Deeds Transferring Beneficial Interest (Apartments)”
The sixteen (16) Deeds of Agreement to be entered into by the Developer and CSRSL pursuant to which (i) the beneficial interest in the Apartments are transferred to CSRSL and (ii) the Developer undertakes and agrees to grant the Sub-Leases (Apartments).
“Deed Transferring Beneficial Interest (Spa)”
The Deed of Agreement to be entered into by the Developer and CSRSL pursuant to which (i) the beneficial interest in the Health Club and Spa is transferred to CSRSL and (ii) the Developer undertakes and agrees to grant the Sub-Lease (Spa).
“Developer”
Balton Properties Limited, a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of Trinidad & Tobago with its registered office at Eleven Albion, Corner Albion & Dere Streets, Port of Spain, in the Island of Trinidad.
“Development”
shall mean the Developer’s development known or to be known as Carlton Savannah situated at Cascade in the Ward of St. Anns in the Island of Trinidad comprising the Property and such other lands adjacent to or adjoining the Property as may be acquired by the Developer from time to time and all buildings and installations from time to time constructed or installed or to be constructed or installed thereon including but not limited to the Facilities.
“Directors”
the Directors of the Company
“Dividend Policy”
the policy outlined at Section 9
“Escrow Agent”
M. Hamel Smith & Company
“Facilities”
the restaurant, bar, banqueting, Health Club & Spa, swimming pool and other recreational facilities and driveways, walkways, parking areas, water, sewerage and drainage systems and other facilities and amenities to be used and enjoyed as part of the Carlton Savannah Hotel, inclusive of the furnishings, fittings, equipment and appliances from time to time installed therein by the Developer, at its cost and expense in connection with the operations of the Carlton Savannah Hotel
“Fittings and Fixtures”
the items specified in Part 2 of Schedule 4 of the Share Purchase Agreement which shall form part of and be located in the respective Apartments and Health Club & Spa
“Floor Plan”
the floor plans of the Hotel of which it forms part prepared by the Developer’s Supervising Architect
“FSC”
the Financial Services Commission of Jamaica
“Guest”
individual or group of individuals collectively occupying a Room for which a hotel Rate is paid
“Health Club & Spa”
shall mean the gym and spa constructed or to be constructed on the Development intended to be used and enjoyed with the Apartments for the benefit of the Guests and other visitors to or patrons of the Hotel and shall include the space in the Hotel more particularly described in Schedule 3 of the Sub-Lease (Spa).
“Health Club & Spa Underlease”
means the lease agreement to be entered into between CSRSL, Carlton Savannah Limited and the Developer whereby CSRSL leases the Health Club & Spa to the Developer
“Hotel”
the hotel building or buildings containing the Apartments and Health Club & Spa constructed or to be constructed on the Development
“Hotel Completion Target Date”
June 30, 2008, being the date by which the Developer proposes to complete construction of the Hotel
“Hotel Opening Date ”
the date on which the Hotel, or part thereof, is opened for business
“Hotel Operating Company”
Carlton Savannah Limited
“Hotel Operations”
the rental operation of the Rooms and Suites conducted at the Hotel in accordance with the terms of the Carlton Savannah Hotel Operating Agreement
“Interim Monthly Rent”
means a sum, in respect of the two year period commencing with the Opening, which is equal to 8.5% of the Purchase Price Apartment.
[Note: Inclusive of the Health Club & Spa, after 15% Trinidad & Tobago tax and the expenses of the REIT, the dividend yieldis forecasted to be 6.3% per annum in the first two years.]
“Investment Property Income”
means the combined total of the Rent and the Spa Lease Payments
“J$”
dollars in the currency of Jamaica
“JSE”
The Jamaica Stock Exchange
“Lead Broker”
NCB Capital Markets Limited
The Atrium: 32 Trafalgar Road
Kingston 10, Jamaica
Tel: 876-960-7108: Toll free 1-888-4WEALTH (1-888-493-2584)
“Net Operating Profit”
shall be the aggregate Rates (as that terms is defined in the Hotel Operating Agreement) (including interest income on cash balances), less On Site Expenses and other expenses incurred in the upkeep and maintenance of the Hotel, after a deduction for repair and/or replacement of furnishings and Public Areas, save and except income and costs related to the spa, gym, shop(s), tour desk, and the food & beverage operation in the Hotel, all such Onsite and other expense being at the sole discretion of the Hotel Operating Company but in accordance with the Uniform System of Accounts for the Lodging Industry
“Offer”
the offer of the Shares for subscription
“Offer Price”
J$5.91 per Share
“On Site Expenses”
the direct and indirect expenses paid or incurred by the Hotel Operating Company and attributable to the Hotel Operating Company's performance of its duties hereunder, (including general and administrative, marketing, property operations payroll and payroll expenses, energy costs, property insurance, security, reserve for replacement, finance charges on overdrafts and working capital, depreciation) and in accordance with the Uniform System of Accounts for the Lodging Industry
“Opening Date”
the time of opening of the Offer, as set forth in Section 5 of this Prospectus
“Operating Year”
Shall initially refer to the twelve (12) month period commencing on the Hotel Opening and thereafter to subsequent twelve month periods
“Owners”
the holders of the terms of years created by the sub- leases of the Apartments and Health Club & Spa granted by the Developer and shall be extended as necessary to include any mortgagees or charges of the Owners
“Owner’s Rent
Account”
the account within the internal ledgers of the Hotel Operating Company into which the Owners’ Share of Rent including CSRSL’s share (along with other Owners) of Rent shall be placed
“Owners’ Share of Rent”
65% of Net Operating Profits PROVIDED HOWEVER that should the Owners’ Share of Rent be a negative sum (a loss) in any one or more years Owners shall not be required to make or pay any contribution to such loss, but such loss shall be carried forward and be deducted from any future profits prior to any future distribution of the Owners’ Share of Rent
“Pre-Practical Completion Date”
65% of Net Operating Profits PROVIDED HOWEVER that should the Owners’ Share of Rent be a negative sum (a loss) in any one or more years Owners shall not be required to make or pay any contribution to such loss, but such loss shall be carried forward and be deducted from any future profits prior to any future distribution of the Owners’ Share of Rent
means the date which the Vendor’s architect certifies is the date ten days before practical completion of each Apartment will be achieved
“Property”
the lands, forming part of the Development, more particularly described in Part 1 of Schedule 3 of the Share Purchase Agreement
“Public Areas”
all the public and operation areas of the Hotel (being any area which is not deemed to be an Apartment and excluding any area which is deemed to be or to be appurtenant to the restaurant, Health Club & Spa and shop(s) (if any) inclusive of the furnishings, fittings, equipment and appliances for the Hotel Operations from time to time installed therein by the Developer, at its cost and expense, such areas to be outfitted and finished in keeping with the standard set by similar high quality international properties in the hotel industry
“Purchase Price Apartments”
the Jamaican dollar equivalent of US$12,837,227.00 (which is the price of 16 Apartments) using the forward rate as agreed with the lead broker; or such lesser sum as determined in accordance with this Prospectus and includes fixtures, fittings and furniture for the Apartments in respect of which the amounts will be apportioned at a later date
“Purchase Price Spa”
the Jamaican dollar equivalent of US$4,588,873.00 (which is the price of the Health Club & Spa) using the forward rate as agreed with the lead broker; or such lesser sum as determined in accordance with this Prospectus and includes fixtures, fittings and furniture for the Health Club & Spa in respect of which the amounts will be apportioned at a later date
“Rates”
the monies paid by Guests for occupation of a Room or a Suite
“Registrar”
the Registrar whose name is set out in Section 6 or such other persons as may be appointed by the Company from time to time to provide the services of registrar for the Company
“REIT”
means Carlton Savannah REIT (Jamaica) Limited
“Rent”
means the Interim Monthly Rent and the Additional Rent, or either of them as the context requires
“Room”
a single allocated bedroom space within an Apartment
“Sale Completion Date”
“Share Purchase Agreement”
has the meaning ascribed to it in Clause 4.6.7
the agreement made among: (1) the Developer, CSRSL and the Company for the purchase by the Company from the Developer of 100% of the issued share capital of CSRSL
“Shares”
all or any of the 212,330,270 common shares with no par value in the capital of the Company the subject of this Offer
“Spa Lease Payments”
mean the rental payments derived from the Health Club & Spa Underlease
“Sub-Leases (Apartments)”
the sixteen (16) Deeds of sub-lease to be made between the Developer and CSRSL pursuant to which the Developer will grant sub-leases of the Apartments to CSRSL for a term of 98 years from the 1st day of January 2005
“Sub-Lease (Spa)”
the Deed of sub-lease to be made between the Developer and CSRSL pursuant to which the Developer will grant a sub-lease of the Health Club & Spa to CSRSL for a term of 98 years from the 1st day of January 2005
“Suites”
single allocated bedroom space within an Apartment plus a sitting room
“TT$”
dollars in the currency of Trinidad & Tobago
“Uniform System of
Accounts for The
Lodging Industry”
the standard system of accounting rules, as published by the New York Hotel Association
“USD$”
dollars in the currency of the United States of America
“Act”
The Companies Act of Jamaica, 2004
“Additional Rent”
means, in respect of each Apartment, a sum equal to 1/55th of the Owners Share of Rent.
“Agreements for Sale (Apartments)”
the sixteen (16) Purchase and Sale Agreements to be entered into by the Developer and CSRSL whereby the Developer agrees to sell the sixteen (16) Apartments (and all the Fittings and Fixtures applicable thereto) to CSRSL by way of the Deeds Transferring Beneficial Interest (Apartments) and the Sub-Leases (Apartments).
“Agreement for Sale (Spa)”
the Purchase and Sale Agreement to be entered into by the Developer and CSRSL whereby the Developer agrees to sell the Health Club & Spa (and all the Fittings and Fixtures applicable thereto) to CSRSL by way of the Deeds Transferring Beneficial Interest (Spa) and the Sub-Lease (Spa).
“Allotment”
the allocation and issuance of Shares to Applicants
“Apartments”
all those three room luxury apartment units comprised in the Hotel
“Applicant”
the person or organization by whom an Application is made
“Application”
the application on the prescribed form for the subscription of Shares comprised in the Offer, duly completed and delivered to the Lead Broker together with payment in full of the subscription price for the amount subscribed
“Application Form”
the original application form provided at the end of this Prospectus or in the local newspapers when published therein
“Approved Payment Method”
manager’s cheque issued by any commercial bank operating in Jamaica made payable to “KPMG/Carlton Savannah REIT (Jamaica) Limited Share Offer”
“Broker to the Offer”
any of the brokers identified in Section 6 of this Prospectus, including the Lead Broker
“Carlton Savannah Hotel” or “Hotel”
the hotel which is under construction on the Lands (as defined in the Agreements for Sale (Apartments) ) and which is to be known as the “Carlton Savannah Hotel” comprising the Apartments, the Facilities including the Health Club & Spa and the Public Areas
“Carlton Savannah Hotel
Operating Agreement” or the “Hotel Operating Agreement”
“Carlton Savannah Limited”
the agreement to be entered into by each Owner , the Carlton Savannah Owners Association Limited and Carlton Savannah Limited
the Hotel Operating Company, being a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of the Republic of Trinidad & Tobago having its registered office at Eleven Albion Street · PO Box 478 in the City of Port of Spain in the Island of Trinidad
“Carlton Savannah Owners’
Association Limited”
a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of the Republic of Trinidad & Tobago having its registered office at Eleven Albion Street · P.O. Box 478 in the City of Port of Spain in the Island of Trinidad.
“Carlton Savannah REIT (Jamaica) Limited” or the “Company”
a company duly incorporated under the Companies Act of Jamaica, 2004 having its registered office at 7 Stanton Terrace, Kingston 6
“Closing Date”
the time of closing of the Offer, as set forth in Section 5 of this document (subject to such extension as the Directors may determine)
“Company”
Carlton Savannah REIT (Jamaica) Limited
“CSRSL”
Carlton Savannah REIT (St. Lucia) Limited, which is an international business company established under the laws of Saint Lucia and having its registered office situated at 1st Floor, Bourbon House, Bourbon Street, P.O. Box 1695, Castries, St. Lucia
“Deeds Transferring Beneficial Interest (Apartments)”
The sixteen (16) Deeds of Agreement to be entered into by the Developer and CSRSL pursuant to which (i) the beneficial interest in the Apartments are transferred to CSRSL and (ii) the Developer undertakes and agrees to grant the Sub-Leases (Apartments).
“Deed Transferring Beneficial Interest (Spa)”
The Deed of Agreement to be entered into by the Developer and CSRSL pursuant to which (i) the beneficial interest in the Health Club and Spa is transferred to CSRSL and (ii) the Developer undertakes and agrees to grant the Sub-Lease (Spa).
“Developer”
Balton Properties Limited, a company duly incorporated under the Companies Act Chap. 81:01 of the Laws of Trinidad & Tobago with its registered office at Eleven Albion, Corner Albion & Dere Streets, Port of Spain, in the Island of Trinidad.
“Development”
shall mean the Developer’s development known or to be known as Carlton Savannah situated at Cascade in the Ward of St. Anns in the Island of Trinidad comprising the Property and such other lands adjacent to or adjoining the Property as may be acquired by the Developer from time to time and all buildings and installations from time to time constructed or installed or to be constructed or installed thereon including but not limited to the Facilities.
“Directors”
the Directors of the Company
“Dividend Policy”
the policy outlined at Section 9
“Escrow Agent”
M. Hamel Smith & Company
“Facilities”
the restaurant, bar, banqueting, Health Club & Spa, swimming pool and other recreational facilities and driveways, walkways, parking areas, water, sewerage and drainage systems and other facilities and amenities to be used and enjoyed as part of the Carlton Savannah Hotel, inclusive of the furnishings, fittings, equipment and appliances from time to time installed therein by the Developer, at its cost and expense in connection with the operations of the Carlton Savannah Hotel
“Fittings and Fixtures”
the items specified in Part 2 of Schedule 4 of the Share Purchase Agreement which shall form part of and be located in the respective Apartments and Health Club & Spa
“Floor Plan”
the floor plans of the Hotel of which it forms part prepared by the Developer’s Supervising Architect
“FSC”
the Financial Services Commission of Jamaica
“Guest”
individual or group of individuals collectively occupying a Room for which a hotel Rate is paid
“Health Club & Spa”
shall mean the gym and spa constructed or to be constructed on the Development intended to be used and enjoyed with the Apartments for the benefit of the Guests and other visitors to or patrons of the Hotel and shall include the space in the Hotel more particularly described in Schedule 3 of the Sub-Lease (Spa).
“Health Club & Spa Underlease”
means the lease agreement to be entered into between CSRSL, Carlton Savannah Limited and the Developer whereby CSRSL leases the Health Club & Spa to the Developer
“Hotel”
the hotel building or buildings containing the Apartments and Health Club & Spa constructed or to be constructed on the Development
“Hotel Completion Target Date”
June 30, 2008, being the date by which the Developer proposes to complete construction of the Hotel
“Hotel Opening Date ”
the date on which the Hotel, or part thereof, is opened for business
“Hotel Operating Company”
Carlton Savannah Limited
“Hotel Operations”
the rental operation of the Rooms and Suites conducted at the Hotel in accordance with the terms of the Carlton Savannah Hotel Operating Agreement
“Interim Monthly Rent”
means a sum, in respect of the two year period commencing with the Opening, which is equal to 8.5% of the Purchase Price Apartment.
[Note: Inclusive of the Health Club & Spa, after 15% Trinidad & Tobago tax and the expenses of the REIT, the dividend yieldis forecasted to be 6.3% per annum in the first two years.]
“Investment Property Income”
means the combined total of the Rent and the Spa Lease Payments
“J$”
dollars in the currency of Jamaica
“JSE”
The Jamaica Stock Exchange
“Lead Broker”
NCB Capital Markets Limited
The Atrium: 32 Trafalgar Road
Kingston 10, Jamaica
Tel: 876-960-7108: Toll free 1-888-4WEALTH (1-888-493-2584)
“Net Operating Profit”
shall be the aggregate Rates (as that terms is defined in the Hotel Operating Agreement) (including interest income on cash balances), less On Site Expenses and other expenses incurred in the upkeep and maintenance of the Hotel, after a deduction for repair and/or replacement of furnishings and Public Areas, save and except income and costs related to the spa, gym, shop(s), tour desk, and the food & beverage operation in the Hotel, all such Onsite and other expense being at the sole discretion of the Hotel Operating Company but in accordance with the Uniform System of Accounts for the Lodging Industry
“Offer”
the offer of the Shares for subscription
“Offer Price”
J$5.91 per Share
“On Site Expenses”
the direct and indirect expenses paid or incurred by the Hotel Operating Company and attributable to the Hotel Operating Company's performance of its duties hereunder, (including general and administrative, marketing, property operations payroll and payroll expenses, energy costs, property insurance, security, reserve for replacement, finance charges on overdrafts and working capital, depreciation) and in accordance with the Uniform System of Accounts for the Lodging Industry
“Opening Date”
the time of opening of the Offer, as set forth in Section 5 of this Prospectus
“Operating Year”
Shall initially refer to the twelve (12) month period commencing on the Hotel Opening and thereafter to subsequent twelve month periods
“Owners”
the holders of the terms of years created by the sub- leases of the Apartments and Health Club & Spa granted by the Developer and shall be extended as necessary to include any mortgagees or charges of the Owners
“Owner’s Rent
Account”
the account within the internal ledgers of the Hotel Operating Company into which the Owners’ Share of Rent including CSRSL’s share (along with other Owners) of Rent shall be placed
“Owners’ Share of Rent”
65% of Net Operating Profits PROVIDED HOWEVER that should the Owners’ Share of Rent be a negative sum (a loss) in any one or more years Owners shall not be required to make or pay any contribution to such loss, but such loss shall be carried forward and be deducted from any future profits prior to any future distribution of the Owners’ Share of Rent
“Pre-Practical Completion Date”
65% of Net Operating Profits PROVIDED HOWEVER that should the Owners’ Share of Rent be a negative sum (a loss) in any one or more years Owners shall not be required to make or pay any contribution to such loss, but such loss shall be carried forward and be deducted from any future profits prior to any future distribution of the Owners’ Share of Rent
means the date which the Vendor’s architect certifies is the date ten days before practical completion of each Apartment will be achieved
“Property”
the lands, forming part of the Development, more particularly described in Part 1 of Schedule 3 of the Share Purchase Agreement
“Public Areas”
all the public and operation areas of the Hotel (being any area which is not deemed to be an Apartment and excluding any area which is deemed to be or to be appurtenant to the restaurant, Health Club & Spa and shop(s) (if any) inclusive of the furnishings, fittings, equipment and appliances for the Hotel Operations from time to time installed therein by the Developer, at its cost and expense, such areas to be outfitted and finished in keeping with the standard set by similar high quality international properties in the hotel industry
“Purchase Price Apartments”
the Jamaican dollar equivalent of US$12,837,227.00 (which is the price of 16 Apartments) using the forward rate as agreed with the lead broker; or such lesser sum as determined in accordance with this Prospectus and includes fixtures, fittings and furniture for the Apartments in respect of which the amounts will be apportioned at a later date
“Purchase Price Spa”
the Jamaican dollar equivalent of US$4,588,873.00 (which is the price of the Health Club & Spa) using the forward rate as agreed with the lead broker; or such lesser sum as determined in accordance with this Prospectus and includes fixtures, fittings and furniture for the Health Club & Spa in respect of which the amounts will be apportioned at a later date
“Rates”
the monies paid by Guests for occupation of a Room or a Suite
“Registrar”
the Registrar whose name is set out in Section 6 or such other persons as may be appointed by the Company from time to time to provide the services of registrar for the Company
“REIT”
means Carlton Savannah REIT (Jamaica) Limited
“Rent”
means the Interim Monthly Rent and the Additional Rent, or either of them as the context requires
“Room”
a single allocated bedroom space within an Apartment
“Sale Completion Date”
“Share Purchase Agreement”
has the meaning ascribed to it in Clause 4.6.7
the agreement made among: (1) the Developer, CSRSL and the Company for the purchase by the Company from the Developer of 100% of the issued share capital of CSRSL
“Shares”
all or any of the 212,330,270 common shares with no par value in the capital of the Company the subject of this Offer
“Spa Lease Payments”
mean the rental payments derived from the Health Club & Spa Underlease
“Sub-Leases (Apartments)”
the sixteen (16) Deeds of sub-lease to be made between the Developer and CSRSL pursuant to which the Developer will grant sub-leases of the Apartments to CSRSL for a term of 98 years from the 1st day of January 2005
“Sub-Lease (Spa)”
the Deed of sub-lease to be made between the Developer and CSRSL pursuant to which the Developer will grant a sub-lease of the Health Club & Spa to CSRSL for a term of 98 years from the 1st day of January 2005
“Suites”
single allocated bedroom space within an Apartment plus a sitting room
“TT$”
dollars in the currency of Trinidad & Tobago
“Uniform System of
Accounts for The
Lodging Industry”
the standard system of accounting rules, as published by the New York Hotel Association
“USD$”
dollars in the currency of the United States of America
DISCLAIMERS AND FORWARD LOOKING STATEMENTS
Disclaimers
3.1 This Prospectus has been reviewed and approved by the Directors of the Company and they collectively and individually accept full responsibility for the accuracy of the information given herein and confirm that, after having made all reasonable enquiries, and to the best of their knowledge and belief, (i) the information is true and accurate in all material respects and is not misleading in any material respect, (ii) any opinions, predictions or intentions expressed herein on the part of the Company are honestly held or made and are not misleading in any material respect, (iii) that all proper inquiries have been made to ascertain and to verify the foregoing, and (iv) this Prospectus does not contain any untrue statement of a material fact or fail to state a material fact necessary in order to make the statements herein, in the light of the circumstances under which they are made, not misleading.
3.2 Each person receiving and relying on the Prospectus acknowledges and agrees that: (i) such person has been afforded a meaningful opportunity to review and has received, additional information considered by such person to be necessary to verify the accuracy of the information contained in this Prospectus, (ii) such person has not relied on the Company or any persons affiliated with the Company or any selling agent appointed by the Company in connection with its investigation of the accuracy of such information or its investment decision, and (iii) no person has been authorized to give information or to make any representation concerning the Company or the offer for subscription or the shares issued pursuant thereto or to provide information or to make any representation whatsoever in connection with this Prospectus other than as contained in this Prospectus and information given by duly authorized officers and employees of the Company in connection with the Applicants’ verification of the information contained in this Prospectus and that, if given or made, such other information or representation should not be relied upon as having been authorized by the Company or any affiliate.
3.3 Neither the delivery of this Prospectus nor the offering, sale or allotment of any shares hereunder shall under any circumstances imply that there has been no change in the business, results of operations, financial condition or prospects of the Company since the date of this Prospectus.
3.4 In making an investment decision, Applicants are expected to make their own assessment of the Company and the terms of the offer for subscription herein, including the merits and risks involved.
Neither the FSC nor any Governmental agency or regulatory authority in Jamaica has made any determination on the accuracy or adequacy of this Prospectus.
3.5 No representation or warranty, expressed or implied, is made by any selling agents appointed by the Lead Broker as to the accuracy or completeness of the information set forth herein including, without limitation, information in respect to the Company and nothing contained in this Prospectus is, or shall be relied upon, as a promise or representation, whether as to the past or future. The Lead Broker has not independently verified any such information and assumes no responsibility for its accuracy or completeness.
3.6 This Prospectus contains summaries believed to be accurate with respect to certain terms of certain documents, but reference should be made to the actual documents (copies of which will be available to prospective Applicants upon request made to the Company) for complete information with respect thereto, and all such summaries are qualified in their entirety by such complete information.
3.7 Each Applicant should consult his/her own advisors as to the legal, tax, business, financial and related aspects of subscribing for Shares in this Offer.
3.8 Neither the Company, nor any of its respective representatives is making any representation to any Applicant regarding legal, tax, business, financial and related aspects concerning subscription for Shares in this Offer, and Applicants should not consider this Prospectus as a recommendation by the Company that the Applicant should subscribe for or purchase any Shares. Each Applicant must make its own investigation and evaluation of the Company.
3.9 This Prospectus is intended for use in Jamaica and is not to be construed as an offer of any of the Shares outside of Jamaica. In any event, the distribution of this Prospectus and the offering of the Shares in certain jurisdictions are restricted by law. The Company requires that anyone who receives this Prospectus inform themselves about and observe such restrictions. 3.10 This Prospectus does not constitute, and may not be used for or in connection with, any offer to, or solicitation by, anyone in any jurisdiction other than Jamaica.
3.11 The Shares may not be offered or sold in the United States of America to or for the account or benefit of any U.S. person except pursuant to transactions not subject to the registration requirements of the Securities Act of the United States of America and applicable state securities laws.
Forward Looking Statements
3.12 Except for the historical information concerning the Company contained in this Prospectus, certain matters discussed in this Prospectus, including without limitation the discussions of future plans and financial projections, contain forward‑looking statements. Forward-looking statements are statements that are not about historical facts and speak only as of the date they are made. Although the Company believes that in making any such statements its expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Applicants are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. Future events or circumstances could cause actual results to differ materially from historical or anticipated results.
3.13 When used in this Prospectus, the words “anticipates”, “believes”, “expects”, “intends” and similar expressions, as they relate to the Company, are intended to identify those forward‑looking statements. These forward‑looking statements are subject to numerous risks and uncertainties. Once this Prospectus has been signed by or on behalf of the Company, the Company undertakes no obligation to update publicly or revise any of the forward-looking statements in light of new information or future events, including changes in the Company’s financial or regulatory position, or to reflect the occurrence of unanticipated events. There are important factors that could cause actual results to differ materially from those in forward‑looking statements, certain of which are beyond the Company’s control. These factors include, without limitation, the following:
· economic, social and other conditions of Jamaica or Trinidad & Tobago, including actual rates of growth of the Jamaican and Trinidad & Tobago economies, instability, high domestic interest rates or exchange rate volatility;
· adverse climatic events and natural disasters;
· changes in regulatory policy adversely affecting the revenues or expenses of the Company;
· any other factor(s) negatively impacting on the realisation of the assumptions on which the Company’s financial projections are based, and
· other factors identified in this Prospectus
3.1 This Prospectus has been reviewed and approved by the Directors of the Company and they collectively and individually accept full responsibility for the accuracy of the information given herein and confirm that, after having made all reasonable enquiries, and to the best of their knowledge and belief, (i) the information is true and accurate in all material respects and is not misleading in any material respect, (ii) any opinions, predictions or intentions expressed herein on the part of the Company are honestly held or made and are not misleading in any material respect, (iii) that all proper inquiries have been made to ascertain and to verify the foregoing, and (iv) this Prospectus does not contain any untrue statement of a material fact or fail to state a material fact necessary in order to make the statements herein, in the light of the circumstances under which they are made, not misleading.
3.2 Each person receiving and relying on the Prospectus acknowledges and agrees that: (i) such person has been afforded a meaningful opportunity to review and has received, additional information considered by such person to be necessary to verify the accuracy of the information contained in this Prospectus, (ii) such person has not relied on the Company or any persons affiliated with the Company or any selling agent appointed by the Company in connection with its investigation of the accuracy of such information or its investment decision, and (iii) no person has been authorized to give information or to make any representation concerning the Company or the offer for subscription or the shares issued pursuant thereto or to provide information or to make any representation whatsoever in connection with this Prospectus other than as contained in this Prospectus and information given by duly authorized officers and employees of the Company in connection with the Applicants’ verification of the information contained in this Prospectus and that, if given or made, such other information or representation should not be relied upon as having been authorized by the Company or any affiliate.
3.3 Neither the delivery of this Prospectus nor the offering, sale or allotment of any shares hereunder shall under any circumstances imply that there has been no change in the business, results of operations, financial condition or prospects of the Company since the date of this Prospectus.
3.4 In making an investment decision, Applicants are expected to make their own assessment of the Company and the terms of the offer for subscription herein, including the merits and risks involved.
Neither the FSC nor any Governmental agency or regulatory authority in Jamaica has made any determination on the accuracy or adequacy of this Prospectus.
3.5 No representation or warranty, expressed or implied, is made by any selling agents appointed by the Lead Broker as to the accuracy or completeness of the information set forth herein including, without limitation, information in respect to the Company and nothing contained in this Prospectus is, or shall be relied upon, as a promise or representation, whether as to the past or future. The Lead Broker has not independently verified any such information and assumes no responsibility for its accuracy or completeness.
3.6 This Prospectus contains summaries believed to be accurate with respect to certain terms of certain documents, but reference should be made to the actual documents (copies of which will be available to prospective Applicants upon request made to the Company) for complete information with respect thereto, and all such summaries are qualified in their entirety by such complete information.
3.7 Each Applicant should consult his/her own advisors as to the legal, tax, business, financial and related aspects of subscribing for Shares in this Offer.
3.8 Neither the Company, nor any of its respective representatives is making any representation to any Applicant regarding legal, tax, business, financial and related aspects concerning subscription for Shares in this Offer, and Applicants should not consider this Prospectus as a recommendation by the Company that the Applicant should subscribe for or purchase any Shares. Each Applicant must make its own investigation and evaluation of the Company.
3.9 This Prospectus is intended for use in Jamaica and is not to be construed as an offer of any of the Shares outside of Jamaica. In any event, the distribution of this Prospectus and the offering of the Shares in certain jurisdictions are restricted by law. The Company requires that anyone who receives this Prospectus inform themselves about and observe such restrictions. 3.10 This Prospectus does not constitute, and may not be used for or in connection with, any offer to, or solicitation by, anyone in any jurisdiction other than Jamaica.
3.11 The Shares may not be offered or sold in the United States of America to or for the account or benefit of any U.S. person except pursuant to transactions not subject to the registration requirements of the Securities Act of the United States of America and applicable state securities laws.
Forward Looking Statements
3.12 Except for the historical information concerning the Company contained in this Prospectus, certain matters discussed in this Prospectus, including without limitation the discussions of future plans and financial projections, contain forward‑looking statements. Forward-looking statements are statements that are not about historical facts and speak only as of the date they are made. Although the Company believes that in making any such statements its expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Applicants are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. Future events or circumstances could cause actual results to differ materially from historical or anticipated results.
3.13 When used in this Prospectus, the words “anticipates”, “believes”, “expects”, “intends” and similar expressions, as they relate to the Company, are intended to identify those forward‑looking statements. These forward‑looking statements are subject to numerous risks and uncertainties. Once this Prospectus has been signed by or on behalf of the Company, the Company undertakes no obligation to update publicly or revise any of the forward-looking statements in light of new information or future events, including changes in the Company’s financial or regulatory position, or to reflect the occurrence of unanticipated events. There are important factors that could cause actual results to differ materially from those in forward‑looking statements, certain of which are beyond the Company’s control. These factors include, without limitation, the following:
· economic, social and other conditions of Jamaica or Trinidad & Tobago, including actual rates of growth of the Jamaican and Trinidad & Tobago economies, instability, high domestic interest rates or exchange rate volatility;
· adverse climatic events and natural disasters;
· changes in regulatory policy adversely affecting the revenues or expenses of the Company;
· any other factor(s) negatively impacting on the realisation of the assumptions on which the Company’s financial projections are based, and
· other factors identified in this Prospectus
SUMMARY OF KEY INFORMATION
4.1 The following summary information is derived from and should be read in conjunction with, and is qualified in its entirety by, the full text of this Prospectus.
4.2 You are advised to read this entire Prospectus carefully before making an investment decision about this transaction. Your specific attention is drawn to the Risk Factors in Section 10 of the Prospectus.
4.3 If you have any questions arising out of this document or if you require any explanation, you should consult your stockbroker, licensed investment advisor, attorney-at-law, accountant or other professional advisor.
4.4 Offer Structure
ISSUER: Carlton Savannah REIT (Jamaica) Limited
AUTHORISED SHARE CAPITAL 500,000,000 Shares
NO. OF OFFERED SHARES: 212,330,270 Shares, amounting to 100.00% of the Company’s issued share capital after the Offer
OFFER PRICE J$5.91 per Common Share
HOW PAYABLE: In full on application
4.2 You are advised to read this entire Prospectus carefully before making an investment decision about this transaction. Your specific attention is drawn to the Risk Factors in Section 10 of the Prospectus.
4.3 If you have any questions arising out of this document or if you require any explanation, you should consult your stockbroker, licensed investment advisor, attorney-at-law, accountant or other professional advisor.
4.4 Offer Structure
ISSUER: Carlton Savannah REIT (Jamaica) Limited
AUTHORISED SHARE CAPITAL 500,000,000 Shares
NO. OF OFFERED SHARES: 212,330,270 Shares, amounting to 100.00% of the Company’s issued share capital after the Offer
OFFER PRICE J$5.91 per Common Share
HOW PAYABLE: In full on application
THE INVESTMENT OPPORTUNITY
The Carlton Savannah Hotel located in Port of Spain, Trinidad consists of fifty five (55) two-bedroom fully furnished[1] Apartments that are being sold to institutional investors such as the REIT as well as individual investors. Each Apartment is fully configured to be able to be converted into three separate rooms to accommodate up to 165 guest rooms. Upon signing the Purchase Agreement for the Apartments, the REIT also signs an operating agreement to allow the hotel operating company to manage the Apartments in the pool of available hotel rooms. The REIT’s return on investment will come from its proportional share of the profits generated by the hotel rooms, which is been split 65% to investors and 35% to the hotel operating company, and the lease payments from the hotel’s Health Club & Spa.
[1] Furnishings include beds, dining table, writing tables, LCD Flat Screen TVs, artwork, washer/dryer, 4-ring counter top stove, small fridge/freezer, music center and accessories.
[1] Furnishings include beds, dining table, writing tables, LCD Flat Screen TVs, artwork, washer/dryer, 4-ring counter top stove, small fridge/freezer, music center and accessories.
4.6 The Selling Process of Apartments in The Carlton Savannah Hotel
4.6.1 The legal process by which the Company will acquire the 16 Apartments in the Hotel is set out in detail in the legal opinion (herein called the “Legal Opinion”) provided for the Company by M. Hamel-Smith and Co, a firm of Attorneys-at-Law practising in Trinidad & Tobago. M. Hamel-Smith and Co has given, and has not, before delivery of a copy of the Prospectus for registration, withdrawn its written consent to the issuance of this Prospectus with the statements herein referring to the Legal Opinion being included in the form and context in which such statements have been included.
4.6.2 The Legal Opinion is one of the documents available for inspection and should be read in its entirety for a full understanding of the legal process of the acquisition and the risks involved therein. What follows is only a summary of some of the salient issues.
4.6.3 The Legal Opinion states: “It is customary in Trinidad and Tobago that in condominium development schemes, which are akin to the present Development, buyers of units acquire leasehold interests rather than freehold. Where as in the present instance the title to the Lands commence with a 199 year lease from the State commencing in 1904 the only option in fact is a leasehold arrangement.”
4.6.4 Thus, “ownership” of an interest in real property is achieved by way of a “head lease” from the State, or a “sub-lease” from the person holding the head lease.
4.6.5 Balton Properties Limited (herein called “the Developer”) is the owner of the Carlton Savannah Hotel and the land on which it is being constructed by virtue of being the lessee for the unexpired terms of years granted by three (3) Head Lease Agreements (199 years from 6th September 1904). Copies of the Head Lease Agreements are available for inspection.
4.6.6 CSRSL has been created to be the vehicle by which the Company will acquire and hold an interest in the Apartments and the Health Club & Spa. It will initially be owned by the Developer but full ownership of it will be transferred to the Company on the Sale Completion Date pursuant to the Share Purchase Agreement which was executed by the Company, the Developer and CSRSL on the 7th day of May 2008.
4.6.7 The Sale Completion Date shall occur on or before 14 days of the Closing date of the Offer at which time:
4.6.7.1 The Company will have indicated to the Developer the number of Apartments it will purchase as a result of the funds raised by the Offer;
4.6.7.2 All the issued shares in CSRSL will be transferred to the Company in exchange for the payment by the Company to the Developer of 100% of the Purchase Price Spa and 70% of the Purchase Price Apartments. The remaining 30% of the Purchase Price Apartments, with respect to each Apartment, will be paid over to the Escrow Agent who shall have power to transfer same to the Developer on the Pre-Practical Completion Date and subject to the terms of the Escrow Agreement.
4.6.7.3 The Agreements for Sale (Apartments) and the Agreement for Sale (Spa) will be executed and pursuant to which the Developer agrees to sell the sixteen (16) Apartments and the Health Club & Spa (and all the Fittings and Fixtures applicable thereto) to CSRSL. These Agreements provide that the Apartments and Spa will be transferred to CSRSL by way of the execution and delivery of the Deeds Transferring Beneficial Interest (Apartments), the Deed Transferring Beneficial Interest (Spa) the Sub-Leases (Apartments), and the Sub-Lease (Spa).
4.6.7.4 The Agreements for Sale (Apartments) will be in the form of Deeds and will be stamped and registered in the Land Registry in the offices of the Registrar General of Trinidad & Tobago as soon as practicable after execution.
4.6.7.5 The Deeds Transferring Beneficial Interest (Apartments) will be executed and delivered to the Escrow Agent in undated form, with the Escrow Agent having power to complete and deliver same on the Pre-Practical Completion Date and subject to the terms of the Escrow Agreement. When dated stamped and registered these Deeds will effect the transfer of the beneficial interest of the Developer in the 16 Apartments to CSRSL. and establish the priority of the interest of CSRSL in the 16 Apartments. In these Deeds the developer also covenants to grant, on demand, the Sub-Leases (Apartments)which will pass full legal title to CSRSL and grants CSRSL a Power of Attorney to act in the name of the Developer to so grant these sub-leases.
4.6.7.6 The Deed Transferring Beneficial Interest (Spa) will be executed, stamped and registered in the Land Registry in the offices of the Registrar General of Trinidad & Tobago as soon as practicable after execution and will effect the transfer of the beneficial interest of the Developer in the Health Club & Spa to CSRSL. The registration of this Deed will establish the priority of the interest of CSRSL in the Health Club & Spa. In this Deed the Developer also covenants to grant, on demand, the Sub-Lease (Spa) which will pass full legal title to CSRSL and grants CSRSL a Power of Attorney to act in the name of the Developer to so grant the said sub-lease.
4.6.7.7 The Sub-Lease (Spa) will also be executed by the Developer and CSRSL but will be held outside of the jurisdiction of Trinidad & Tobago to defer the stamp duty which will become payable within two months of such introduction, currently 7% of the purchase price or value of each Apartment. The sub-lease may be introduced into the jurisdiction at any time thereafter and be stamped and registered thus passing the legal title in the Apartments and Health Club & Spa to CSRSL. Until such stamping and registration the Developer will hold such legal title in trust for CSRSL.
4.6.7.8 If the Hotel or part thereof has opened, The Hotel Operating Agreement will be executed between the Hotel Operator, the Owners Association and CSRSLand will grant the Operator the right to Operate and manage the Hotel and grant CSRSL the right to receive Rent.
4.6.7.9 The Health Club & Spa Underlease will be executed granting the Operator an operating lease of the Health Club & Spa. This underlease will not pass any beneficial or legal interest in the Health Club & Spa to the Operator.
4.6.7.10 One share in the Carlton Savannah Owners’ Association Limited, in respect of the Health Club & Spa, will be transferred to CSRSL. Upon completion of the purchase of the Apartments, CSRSL, like all purchasers of Apartments in the Hotel will receive a beneficial interest in one (1) share in the management operations of the Development per Apartment purchased i.e. one ordinary share in the Carlton Savannah Owners’ Association Limited by virtue of which purchasers will have an interest in the “common areas” of the Development and the right to exercise rights under the Hotel Operating Agreement.
4.6.8 If (a) the period for completion of construction of the sixteen (16) Apartments and the Health Club & Spa is extended for any period expiring two (2) years after the Hotel Completion Target Date, or (b) the Hotel Opening Date is deferred for a period of more than one (1) year after June 30 2008, then and in either such case CSRSL shall have the right to terminate the Agreements for Sale (Apartments) and the Agreement for Sale (Spa) (and consequential documents) whereupon all monies paid by the Company to the Developer under the Share Purchase Agreement shall be repaid to the Company and the Developer and the Company shall be released and discharged from their respective obligations thereunder. It is to be noted that where an Apartment has not reached pre-practical completion stage only 70% of the purchase price will have been paid on it at that stage. The interest of the purchaser will have been noted on the land registry in Trinidad in respect of both complete and incomplete sales and the purchaser (CSRSL) will be entitled to seek to place a lien on the land to assist with the enforcement of its right to recovery of all funds paid.
4.6.9 The remaining term of the sub-lease Apts and the Sub Lease Spa is 95 years in both cases, approximately coinciding with the remaining term of the Head Lease between the Developer and the State of Trinidad and Tobago. It is intended that the leasehold reversion under the Head Leases will be vested in the Owners' Association at the time of expiry of the sub-leases so the association will be in a position to negotiate a renewal with the State at that time. Strictly speaking at expiration of the lease the tenant can be evicted but it is generally expected that the State would be willing to negotiate for the grant of a new term or the sale of the freehold estate. No 199 year lease has ever reached its expiration in Trinidad and therefore it cannot be said with any conclusiveness how the Government of the day will deal with the matter.
At worst, therefore, the investment can be regarded as a 95 year investment with a potential opportunity (but not a legally enforceable right) upon expiration of the Head Leases to negotiate either (a) the acquisition of the freehold reversion, or (b) the grant of a new lease
4.7 The actual number of Apartments that CSRSL may beneficially own may vary to be less than or greater than sixteen (16) depending on the net proceeds raised during the Offer. The Share Purchase Agreement permits the Company to potentially acquire additional capital or real estate assets which form part of the Carlton Savannah Hotel at the sole discretion of the board depending on the subscription levels of the Offer. If however, the net proceeds from the Offer are less than the Purchase Price, the Company will not acquire the sixteen (16) Apartments and Health Club & Spa; instead it will select Apartments from the list of 16 Apartments and possibly the Health Club & Spa and any excess proceeds from the Offer will be refunded to Applicants after deduction of administrative and other expenses.
4.8 The Company will by virtue of 100% ownership of CSRSL receive regular income flows from its proportionate share of the Rent associated with the Hotel and Spa Lease Payments for the Health Club & Spa.
4.9 CSRSL has entered into a Health Club & Spa Underlease agreement with the Hotel Operating Company who will manage the Health Club & Spa. The Spa Lease Payments for the first year in the Health Club & Spa Underlease will be 6% of Purchase Price Health Club & Spa, which will be payable monthly. Thereafter, Spa Lease Payments will increase by 3% annually. Terms and conditions are detailed in the Health Club & Spa Underlease, which is available for inspection.
Withdrawal
4.10 If the Offer fails to raise the Jamaican dollar equivalent of US$2 million, using the Bank of Jamaica weighted average rate on the Closing Date, the Company reserves the right to withdraw the Offer and refund the proceeds raised from the Offer to Applicants.
Balton Properties Limited
4.11 Balton Properties Limited is a Trinidadian Company with its registered office at Eleven Albion Street. PO Box 478 in the City of Port of Spain in the Island of Trinidad, and is the developer of the Carlton Savannah Hotel, the vendor of the Apartments and the lessee for the Health Club & Spa Under-Lease.
Real Estate Investment Trust (REIT)
4.12 In general, a REIT is an entity that:
• combines the capital of many investors to acquire or provide financing for real estate investments;
• allows individual investors to invest in professionally managed, large-scale, real estate assets; and
• pays a significant amount of its annual profits as dividends to shareholders..
Tax Status of Carlton Savannah REIT (Jamaica) Limited
4.13 The Company will receive its proportionate share of the Rent of the Carlton Savannah Hotel plus the monthly Spa Lease Payments from the Hotel Operating Company for the lease of the Health Club & Spa. This is expected to be subject to 15% withholding tax in Trinidad & Tobago with no further corporate or withholding taxes in Jamaica as a result of the CARICOM treaty on double taxation.
4.14 Companies listed on the Jamaica Stock Exchange can distribute dividends tax free to their respective shareholders. The Company will distribute 95% or greater of the Investment Property Income received from the Hotel Operating Company, net of operating expenses of the Company, as dividends to the shareholders of the Company.
4.15 In addition, any capital gains on the sale of shares of the Company, as with all companies listed on the Jamaica Stock Exchange, are free of taxes for persons or entities not in the business of trading.
Dividend Policy for Carlton Savannah REIT (Jamaica) Limited
4.16 The dividend policy on the ordinary shares of the Company established by the Directors of the Company is to distribute 95% or greater of its proportionate share of the investment property income generated by the operations of the Carlton Savannah Hotel, net of expenses of the Company, as dividends to its shareholders. This dividend policy may be subject to review from time to time by the Company’s Board.
4.6.1 The legal process by which the Company will acquire the 16 Apartments in the Hotel is set out in detail in the legal opinion (herein called the “Legal Opinion”) provided for the Company by M. Hamel-Smith and Co, a firm of Attorneys-at-Law practising in Trinidad & Tobago. M. Hamel-Smith and Co has given, and has not, before delivery of a copy of the Prospectus for registration, withdrawn its written consent to the issuance of this Prospectus with the statements herein referring to the Legal Opinion being included in the form and context in which such statements have been included.
4.6.2 The Legal Opinion is one of the documents available for inspection and should be read in its entirety for a full understanding of the legal process of the acquisition and the risks involved therein. What follows is only a summary of some of the salient issues.
4.6.3 The Legal Opinion states: “It is customary in Trinidad and Tobago that in condominium development schemes, which are akin to the present Development, buyers of units acquire leasehold interests rather than freehold. Where as in the present instance the title to the Lands commence with a 199 year lease from the State commencing in 1904 the only option in fact is a leasehold arrangement.”
4.6.4 Thus, “ownership” of an interest in real property is achieved by way of a “head lease” from the State, or a “sub-lease” from the person holding the head lease.
4.6.5 Balton Properties Limited (herein called “the Developer”) is the owner of the Carlton Savannah Hotel and the land on which it is being constructed by virtue of being the lessee for the unexpired terms of years granted by three (3) Head Lease Agreements (199 years from 6th September 1904). Copies of the Head Lease Agreements are available for inspection.
4.6.6 CSRSL has been created to be the vehicle by which the Company will acquire and hold an interest in the Apartments and the Health Club & Spa. It will initially be owned by the Developer but full ownership of it will be transferred to the Company on the Sale Completion Date pursuant to the Share Purchase Agreement which was executed by the Company, the Developer and CSRSL on the 7th day of May 2008.
4.6.7 The Sale Completion Date shall occur on or before 14 days of the Closing date of the Offer at which time:
4.6.7.1 The Company will have indicated to the Developer the number of Apartments it will purchase as a result of the funds raised by the Offer;
4.6.7.2 All the issued shares in CSRSL will be transferred to the Company in exchange for the payment by the Company to the Developer of 100% of the Purchase Price Spa and 70% of the Purchase Price Apartments. The remaining 30% of the Purchase Price Apartments, with respect to each Apartment, will be paid over to the Escrow Agent who shall have power to transfer same to the Developer on the Pre-Practical Completion Date and subject to the terms of the Escrow Agreement.
4.6.7.3 The Agreements for Sale (Apartments) and the Agreement for Sale (Spa) will be executed and pursuant to which the Developer agrees to sell the sixteen (16) Apartments and the Health Club & Spa (and all the Fittings and Fixtures applicable thereto) to CSRSL. These Agreements provide that the Apartments and Spa will be transferred to CSRSL by way of the execution and delivery of the Deeds Transferring Beneficial Interest (Apartments), the Deed Transferring Beneficial Interest (Spa) the Sub-Leases (Apartments), and the Sub-Lease (Spa).
4.6.7.4 The Agreements for Sale (Apartments) will be in the form of Deeds and will be stamped and registered in the Land Registry in the offices of the Registrar General of Trinidad & Tobago as soon as practicable after execution.
4.6.7.5 The Deeds Transferring Beneficial Interest (Apartments) will be executed and delivered to the Escrow Agent in undated form, with the Escrow Agent having power to complete and deliver same on the Pre-Practical Completion Date and subject to the terms of the Escrow Agreement. When dated stamped and registered these Deeds will effect the transfer of the beneficial interest of the Developer in the 16 Apartments to CSRSL. and establish the priority of the interest of CSRSL in the 16 Apartments. In these Deeds the developer also covenants to grant, on demand, the Sub-Leases (Apartments)which will pass full legal title to CSRSL and grants CSRSL a Power of Attorney to act in the name of the Developer to so grant these sub-leases.
4.6.7.6 The Deed Transferring Beneficial Interest (Spa) will be executed, stamped and registered in the Land Registry in the offices of the Registrar General of Trinidad & Tobago as soon as practicable after execution and will effect the transfer of the beneficial interest of the Developer in the Health Club & Spa to CSRSL. The registration of this Deed will establish the priority of the interest of CSRSL in the Health Club & Spa. In this Deed the Developer also covenants to grant, on demand, the Sub-Lease (Spa) which will pass full legal title to CSRSL and grants CSRSL a Power of Attorney to act in the name of the Developer to so grant the said sub-lease.
4.6.7.7 The Sub-Lease (Spa) will also be executed by the Developer and CSRSL but will be held outside of the jurisdiction of Trinidad & Tobago to defer the stamp duty which will become payable within two months of such introduction, currently 7% of the purchase price or value of each Apartment. The sub-lease may be introduced into the jurisdiction at any time thereafter and be stamped and registered thus passing the legal title in the Apartments and Health Club & Spa to CSRSL. Until such stamping and registration the Developer will hold such legal title in trust for CSRSL.
4.6.7.8 If the Hotel or part thereof has opened, The Hotel Operating Agreement will be executed between the Hotel Operator, the Owners Association and CSRSLand will grant the Operator the right to Operate and manage the Hotel and grant CSRSL the right to receive Rent.
4.6.7.9 The Health Club & Spa Underlease will be executed granting the Operator an operating lease of the Health Club & Spa. This underlease will not pass any beneficial or legal interest in the Health Club & Spa to the Operator.
4.6.7.10 One share in the Carlton Savannah Owners’ Association Limited, in respect of the Health Club & Spa, will be transferred to CSRSL. Upon completion of the purchase of the Apartments, CSRSL, like all purchasers of Apartments in the Hotel will receive a beneficial interest in one (1) share in the management operations of the Development per Apartment purchased i.e. one ordinary share in the Carlton Savannah Owners’ Association Limited by virtue of which purchasers will have an interest in the “common areas” of the Development and the right to exercise rights under the Hotel Operating Agreement.
4.6.8 If (a) the period for completion of construction of the sixteen (16) Apartments and the Health Club & Spa is extended for any period expiring two (2) years after the Hotel Completion Target Date, or (b) the Hotel Opening Date is deferred for a period of more than one (1) year after June 30 2008, then and in either such case CSRSL shall have the right to terminate the Agreements for Sale (Apartments) and the Agreement for Sale (Spa) (and consequential documents) whereupon all monies paid by the Company to the Developer under the Share Purchase Agreement shall be repaid to the Company and the Developer and the Company shall be released and discharged from their respective obligations thereunder. It is to be noted that where an Apartment has not reached pre-practical completion stage only 70% of the purchase price will have been paid on it at that stage. The interest of the purchaser will have been noted on the land registry in Trinidad in respect of both complete and incomplete sales and the purchaser (CSRSL) will be entitled to seek to place a lien on the land to assist with the enforcement of its right to recovery of all funds paid.
4.6.9 The remaining term of the sub-lease Apts and the Sub Lease Spa is 95 years in both cases, approximately coinciding with the remaining term of the Head Lease between the Developer and the State of Trinidad and Tobago. It is intended that the leasehold reversion under the Head Leases will be vested in the Owners' Association at the time of expiry of the sub-leases so the association will be in a position to negotiate a renewal with the State at that time. Strictly speaking at expiration of the lease the tenant can be evicted but it is generally expected that the State would be willing to negotiate for the grant of a new term or the sale of the freehold estate. No 199 year lease has ever reached its expiration in Trinidad and therefore it cannot be said with any conclusiveness how the Government of the day will deal with the matter.
At worst, therefore, the investment can be regarded as a 95 year investment with a potential opportunity (but not a legally enforceable right) upon expiration of the Head Leases to negotiate either (a) the acquisition of the freehold reversion, or (b) the grant of a new lease
4.7 The actual number of Apartments that CSRSL may beneficially own may vary to be less than or greater than sixteen (16) depending on the net proceeds raised during the Offer. The Share Purchase Agreement permits the Company to potentially acquire additional capital or real estate assets which form part of the Carlton Savannah Hotel at the sole discretion of the board depending on the subscription levels of the Offer. If however, the net proceeds from the Offer are less than the Purchase Price, the Company will not acquire the sixteen (16) Apartments and Health Club & Spa; instead it will select Apartments from the list of 16 Apartments and possibly the Health Club & Spa and any excess proceeds from the Offer will be refunded to Applicants after deduction of administrative and other expenses.
4.8 The Company will by virtue of 100% ownership of CSRSL receive regular income flows from its proportionate share of the Rent associated with the Hotel and Spa Lease Payments for the Health Club & Spa.
4.9 CSRSL has entered into a Health Club & Spa Underlease agreement with the Hotel Operating Company who will manage the Health Club & Spa. The Spa Lease Payments for the first year in the Health Club & Spa Underlease will be 6% of Purchase Price Health Club & Spa, which will be payable monthly. Thereafter, Spa Lease Payments will increase by 3% annually. Terms and conditions are detailed in the Health Club & Spa Underlease, which is available for inspection.
Withdrawal
4.10 If the Offer fails to raise the Jamaican dollar equivalent of US$2 million, using the Bank of Jamaica weighted average rate on the Closing Date, the Company reserves the right to withdraw the Offer and refund the proceeds raised from the Offer to Applicants.
Balton Properties Limited
4.11 Balton Properties Limited is a Trinidadian Company with its registered office at Eleven Albion Street. PO Box 478 in the City of Port of Spain in the Island of Trinidad, and is the developer of the Carlton Savannah Hotel, the vendor of the Apartments and the lessee for the Health Club & Spa Under-Lease.
Real Estate Investment Trust (REIT)
4.12 In general, a REIT is an entity that:
• combines the capital of many investors to acquire or provide financing for real estate investments;
• allows individual investors to invest in professionally managed, large-scale, real estate assets; and
• pays a significant amount of its annual profits as dividends to shareholders..
Tax Status of Carlton Savannah REIT (Jamaica) Limited
4.13 The Company will receive its proportionate share of the Rent of the Carlton Savannah Hotel plus the monthly Spa Lease Payments from the Hotel Operating Company for the lease of the Health Club & Spa. This is expected to be subject to 15% withholding tax in Trinidad & Tobago with no further corporate or withholding taxes in Jamaica as a result of the CARICOM treaty on double taxation.
4.14 Companies listed on the Jamaica Stock Exchange can distribute dividends tax free to their respective shareholders. The Company will distribute 95% or greater of the Investment Property Income received from the Hotel Operating Company, net of operating expenses of the Company, as dividends to the shareholders of the Company.
4.15 In addition, any capital gains on the sale of shares of the Company, as with all companies listed on the Jamaica Stock Exchange, are free of taxes for persons or entities not in the business of trading.
Dividend Policy for Carlton Savannah REIT (Jamaica) Limited
4.16 The dividend policy on the ordinary shares of the Company established by the Directors of the Company is to distribute 95% or greater of its proportionate share of the investment property income generated by the operations of the Carlton Savannah Hotel, net of expenses of the Company, as dividends to its shareholders. This dividend policy may be subject to review from time to time by the Company’s Board.
REASONS FOR THE OFFER
5.1 The Company is seeking to raise the Jamaican equivalent of US$17,426,100.00 using the forward exchange rate as agreed with the lead broker on the Closing Date of the offer of 212,330,270 shares to the investing public in Jamaica. The Shares are being offered by Subscription to the investing public. Each share is being offered at the price of J$5.91 per share.
5.2 The conversion rate of J$ to US$ will be the forward exchange rate as agreed with the lead broker. Shares must be bought in quantities of at least 10,000 per transaction.
5.3 The proceeds of the Offer will be used to fulfil the Company’s contractual obligations to the Developer under the Share Purchase Agreement; the proceeds will be applied to the sixteen (16) Apartments and Health Club & Spa in the table that follows:
5.2 The conversion rate of J$ to US$ will be the forward exchange rate as agreed with the lead broker. Shares must be bought in quantities of at least 10,000 per transaction.
5.3 The proceeds of the Offer will be used to fulfil the Company’s contractual obligations to the Developer under the Share Purchase Agreement; the proceeds will be applied to the sixteen (16) Apartments and Health Club & Spa in the table that follows:
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