Business & Markets 2013
Written by Esther Lee of theedgemalaysia.com
Tuesday, 10 September 2013 10:13
KUALA LUMPUR: Ivory PROPERTIES  Bhd will be paying an estimated RM1.06 billion for its proposed acquisition of Plaza Rakyat project after taking into account the amount payable under the conditional acquisition and rehabilitation agreement it had signed.
Notably, the sum is not inclusive of the development cost that the Penang-based property developer will incur.
In an announcement to Bursa Malaysia, Ivory Properties said the development cost has not been determined yet as it has to submit the proposed development plans to the relevant authorities for approval first.
Last Friday, the company announced that its 65% owned subsidiary, Ivory Place Sdn Bhd, had entered into a conditional acquisition and rehabilitation agreement with Plaza Rakyat Sdn Bhd to revive the long abandoned project.
Under the agreement, Ivory Properties will pay RM400 million for the development rights on the project land — measuring 61,650 sq m — as well as the abandoned structures and lease which expires in 2081.
On top of that, Ivory Properties will also be responsible to remit up to a maximum of RM560 million from the proposed gross development value (GDV) of the project to Dewan Bandaraya Kuala Lumpur (DBKL); RM40 million for persons who had entered into an agreement with Plaza Rakyat and DBKL to purchase a parcel in the project previously; RM38 million in quit rent and other assessments that DBKL may claim up to Aug 31 next year; and payables of up to RM22 million for the consultants.
The multi-billion ringgit project in the city centre could be an accretive acquisition for Ivory Properties but it raises the question of how the company is going to finance the acquisition.
Ivory Properties’ projects in Penang pale in comparison with the RM8 billion GDV Plaza Rakyat project, which requires the company to have strong financial muscle in order to execute it.
The company is currently sitting on a cash pile of RM58.07 million while borrowings amount to RM287.99 million, bringing its gearing ratio to about 0.79 times. It raked in revenue of RM211.6 million for financial year ended Dec 31, 2012 and RM31.98 million in net profit.
In its announcement to Bursa Malaysia, Ivory Properties said the proposed acquisition was expected to be funded via internally generated funds, bank borrowings and/or proceeds from the capital markets or corporate exercises that have yet to be decided by the board at this juncture.
Some quarters believe that it could be possible for Ivory Properties to team up with others in the Klang Valley for the Plaza Rakyat development as the company had done with other projects in the past.
One of its most recent partnerships is with Tropicana Corp Bhd for the RM10 billion GDV Penang World City project that stretches over 102 acres of land.
Ivory Properties is also reported to be planning to kick off Phase 3, 4 and 5 of its RM1.54 billion GDV Penang Times Square development by the end of this year.
This article first appeared in The Edge Financial Daily, on September 10, 2013.
Publish date: 10/09/13