Thursday, November 12, 2009

Oh Deeper

PETALING JAYA: Property investor and developer GuocoLand Bhd has agreed to buy a condominium project being constructed at Kuala Lumpur City Centre (KLCC) which may have set a new benchmark price for an en bloc purchase in that area.

GuocoLand, a member of the Hong Leong Malaysia group, announced late on Wednesday that its wholly-owned subsidiary, Astute Modernization Sdn Bhd, had entered into a share sale and purchase agreement with Eriton Sdn Bhd, Mohd Shukri Abdullah and Deepak Jaikishan a/l Jaikishan Rewachand to acquire the entire equity of Titan Debut Sdn Bhd for RM71mil cash.

Titan Debut had in April signed an agreement with Oval Residences Sdn Bhd to buy all the 140 units of serviced apartments, known as Oval Apartments, for RM404.58mil cash.

Construction of Oval Apartments was about 30% completed and was expected to be ready by December next year, GuocoLand said. The project is located along KLCC's Jalan Binjai.

The proposed acquisition was expected to increase the gearing of GuocoLand from 8% to 22%, the company said.

The net book value of Titan Debut was RM86,735 as at end-July, GuocoLand added.

Given the price that GuocoLand would be paying for Titan Debut and the latter's net book value, it is believed this means the owners of Titan Debut would make a profit of about RM70.9mil from owning the project for a mere four months. This truly makes it a titan of a debut for the owners.

As for GuocoLand, the price of RM71mil for Titan Debut, and RM404.58mil to develop Oval Apartments, which would have a total built-up area of 586,356 sq ft, means it would be paying about RM810 per sq ft for the apartments.

This is probably a record price for an en bloc purchase of a condominium project in Malaysia.

Even so, the price appears to be a fair one, and GuocoLand can choose various options, including selling the serviced apartments individually for RM1,600 per sq ft or more, when they are completed. The price could rise on completion of construction, which would be double its current price.

That is a reasonable target as One KL, a luxury condominium being developed by Datuk Chua Ma Yu, was being sold at an average of RM1,400 per sq ft, while The Binjai, developed by KLCC Holdings Bhd, was expected to be sold at about RM2,000 per sq ft.

Hong Leong Malaysia controls GuocoLand through GuocoGroup Ltd, which is listed in Hong Kong. GuocoGroup is also the major shareholder of GuocoLand Ltd, listed in Singapore.

GuocoLand Singapore has expanded its pipeline of projects in Singapore and China well, and its share price had more than doubled to S$4.78 yesterday. That gave it a market value of S$4.2bil (RM9.6bil), almost five times the size of GuocoLand's market value of RM2bil.

Hong Leong Malaysia's chief Tan Sri Quek Leng Chan may be trying to replicate GuocoLand Singapore's success in Malaysia, as a fund manager said: “He is now seen to be investing almost half a billion ringgit here” through GuocoLand.

The Star
Friday 10 August 2007

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