Gadang to jointly develop tract in Johor

Gadang to jointly develop tract in Johor
Business & Markets 2013
Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com
Friday, 27 December 2013 09:44


KUALA LUMPUR: Gadang Holdings Bhd has formed a joint venture (JV) to develop its tract in Johor Baru for an estimated gross development (GDV) value of RM1.8 billion.

In an announcement to Bursa Malaysia, Gadang said its wholly-owned unit Achwell Property Sdn Bhd had entered into a JV agreement with Capital City Property Sdn Bhd for the development and construction of the proposed integrated development, which spans across 12 acres (4.85ha).

According to the announcement, Capital City will pay Achwell a value equivalent to 16.7% of the final GDV of the project, which is up to a maximum sum of RM323 million that includes the market value of the land of RM57.5 million — a sum exceeding Gadang’s market capitalisation of RM208 million.

Achwell will be paid an initial cash consideration of RM2 million upon the execution of the agreement and it has the option to receive from Capital City up to 20% of the balance consideration via a contra of units within the projects and the balance thereof to be paid in cash.

Capital City will settle the entitlement sum within 66 months of the date of commencement and the final GDV of the project will be adjusted upon completion of the project.

Gadang said in its announcement that the JV is expected to provide a steady income stream, which generates a large bulk of its earnings from civil engineering jobs.

It said the JV will enhance the reputation and track record of Gadang group as a property developer.

“The proposed JV is expected to contribute positively to the future earnings and earnings per share of the Gadang group,” it said.

Gadang views that the proposed JV and the project will enhance the group’s future earnings and strengthen its profile in Johor Baru following the launch of its commercial and residential development Jentayu Residensi in 2011.

“With the proposed retail podium expected to form approximately 70% of the GDV of the project together with the hotel and SoHo [small office/home office] suites, the group believes that this new line of product in the Johor market has potential to receive positive response,” said Gadang.

The group expects to benefit from the strategic location of the project, which is located in Jalan Tampoi that has convenient access via interlinking highways, the Tebrau Highway and the Skudai Highway.

“The proposed JV presents an opportunity for Gadang to gain a foothold to be an integrated commercial development,” it said.

The integrated development will consist of a retail podium with 10 levels of car park, three SoHo blocks comprising 15 levels of office suites and a two-tower hotel suite.

The plans for the project have been submitted to the appropriate authorities.

“As at the date of this announcement, the approvals from the appropriate authorities have yet to be obtained,” said Gadang.

The development is expected to be completed not later than 66 months from the date of commencement, which will be 60 days from the date of approval of the first building plans received from the appropriate authorities.

Gadang said all costs will be borne by Capital City. “Capital City shall be solely responsible to carry out, implement and develop the project and be responsible for the project,” it said.

Capital City is a private limited company whose directors are Siow Chien Fu, Edwin Tan and Colin Tan. Siow is the founder of Sunbuild Development Sdn Bhd and RDC Arkitek Sdn Bhd. Edwin and Colin are the group managing director and chief executive director of Hatten Group Sdn Bhd respectively.


This article first appeared in The Edge Financial Daily, on December 27, 2013.