Parkson Retail Group Ltd, which operates 100 stores in Asia has inked a 20-year tenancy agreement for a commercial space in Wuzhou City, China.
The agreement was inked between the group's indirect wholly-owned subsidiary Nanning Brilliant Parkson Commercial Co Ltd, and the landlord Wuzhou Sankee Investment Co Ltd.
Parkson Retail Group executive director and chairman Tan Sri Cheng Heng Jem said the transaction contemplated under the tenancy agreement is regarded as an acquisition of assets under the listing rules.
Cheng said the entering into the tenancy agreement as a tenant will require the group to recognise the property as the right-of-use assets.
"On the basis of the acquisition of right-of-use assets under the tenancy agreement, the amount recognised by the group is RMB86.52 million (about RM51.91 million)," he said in a filing with Bursa Malaysia yesterday.
The amount was calculated with reference to the present value of the rental payments as discounted using a discount rate that is equivalent to the company's incremental borrowing rate during the entire term of the tenancy agreement.
The tenancy agreement is in respect of the tenancy of the first to the fourth floor of Sunshine 100 Sankee City, Wuzhou City, China.
Parkson Retail Group said the tenancy of the property plays an important role in the development of its business in Wuzhou City and is in line with the group's development strategy in Guangxi Zhuang Autonomous Region.
The group is involved in the operation and management of a network of department stores in China. According to the group's website, it operates 38 stores in China, as well as 42 in Malaysia, 15 in Indonesia, and four in Vietnam.
It believes that the tenancy will have a positive impact on the future development of the company.
The total rental (inclusive of tax) of the property comprises a fixed rental of about RMB1.94 million for the 1st to 3rd year, percentage rental for the 4th to 5th year, and guaranteed rental or percentage rental (whichever amount is larger) for the 6th to 20th years.
The group said the guaranteed rental shall be about RMB15.77 million per year for the 6th to 8th year, RMB17.74 million per year for the 9th to 11th year, RMB19.96 million per year for the 12th to 14th year, RMB22.45 million per year for the 15th to 17th year, and RMB25.26 million per year for the 18th to 20th year.