Proposed L&G-Mayland JV fair and reasonable

by **Cals** Thu 23 Jan 2014, 18:34

Business & Markets 2014

Written by Wei Lynn Tang of theedgemalaysia.com

Thursday, 23 January 2014 09:56

KUALA LUMPUR: The proposed joint venture (JV) between Land and General Bhd (L&G) and Malaysia Land Properties Sdn Bhd (Mayland) to acquire and develop a piece of commercial land in Ampang, Kuala Lumpur, for RM118.5 million cash is deemed fair and reasonable, said independent adviser KAF Investment Bank Bhd.

The JV sees Pillar Quest Sdn Bhd (PQSB), wholly-owned subsidiary of L&G, and Positive Valley Sdn Bhd (PVSB), wholly-owned subsidiary of Mayland, purchasing and developing a parcel of commercial leasehold land measuring about 22,934 sq m from Bingo’s Golf Sdn Bhd (BGSB). The JV company is known as Xtreme Meridian Sdn Bhd (XMSB).

KAF said the purchase consideration of RM118.5 million (about RM450 psf) is reasonable and below the comparable transactions ranging from RM505 psf to RM710 psf.

The land in Jalan Ampang Kiri has an estimated gross development value (GDV) and gross development cost (GDC) of RM788.7 million and RM558.4 million respectively. Estimated profit stands at about RM230.3 million.

The land has been approved for two commercial plots, comprising four blocks of 45 to 47 stories of serviced apartments, including a nine-storey podium with shops, car parks and one storey of basement car park.

KAF said the basis for arriving at the financial commitment, which serves to finance the development costs and working capital requirements of XMSB, is fair.

“The financial commitment shall be provided by the JV and shareholder parties [XMSB and BGSB] via shareholders’ advances and or corporate guarantees for the credit facilities to be secured by XMSB.

“Based on their respective shareholding proportions, PQSB will contribute up to RM126.77 million, while PVSB’s portion is up to RM126.72 million,” it said.

Upon completion of the share subscriptions, PQSB and PVSB will hold 50.01% and 49.99% equity interests in XMSB respectively.

KAF said the rationale for the JV in leveraging each party’s collective strengths in property development is deemed reasonable.

“Furthermore, the L&G group will be able to share the risks associated with the proposed development, such as financial and development risks, together with the Mayland group, while continuing to benefit from the share of associated profits arising from the proposed development,” it said.

This article first appeared in The Edge Financial Daily, on January 23, 2014.