The Edge Financial Daily, 9 May 2014 - Tropicana unlocks RM448.4m from Bukit Bintang land sale

The Edge, 9 May 2014

KUALA LUMPUR: Tropicana Corp Bhd is partnering with Hong Kong-listed Agile Property Holdings Ltd to jointly develop 3.138 acres (1.269ha) of prime land near Bukit Bintang in Kuala Lumpur.

The two property developers have formed a joint venture called Offshore Triangle Sdn Bhd, which will acquire eight parcels of land near Bukit Bintang for RM448.4 million cash, or RM3,280 per sq ft (psf).

The land sale will enable Tropicana to unlock its landbank value and in turn help to pare down its borrowings. Its group chief executive officer Datuk Yau Kok Seng said the group has allocated RM145 million of the proceeds for debt repayments. Tropicana’s net gearing is expected to bring down to 0.32 times from the net gearing of 0.55 times as at end-2013.

The net gain of RM145 million will translate into an incremental net earnings per share of 11 sen.

“This is a meaningful transaction and milestone for Tropicana as it crystallises the value of our Jalan Bukit Bintang landbank [in] a strategic tie-up at the project level with a highly reputable partner in Agile Property,” said its group executive vice-chairman Tan Sri Danny Tan at the signing ceremony yesterday.

The proposed land acquisition is earmarked for a mixed commercial development and is expected to be completed within three to five years.

The transaction price is comparable to recent deals in the city centre.

In 2013, KSK Group Bhd paid RM568 million or RM3,299 psf for a 172,149 sq ft parcel of land next to Prince Hotel and Residence Kuala Lumpur. Singapore-listed developer Oxley Holdings Ltd recently paid RM3,300 psf or RM446.7 million to the Loke Wan Yat estate for a 135,356 sq ft parcel in Jalan Ampang.

Commenting on the group’s W Hotel & Residence project near KLCC, Yau said Tropicana had no immediate plan for an en-bloc sale.

“We have appointed the super structure contractor [China-based] and have already completed the foundation works,” he said, adding that construction is still ongoing and the project is expected to be completed by 2016.

The 1.28-acre development, which is being developed into a 55-storey W Hotels and Residences, was first announced three years ago.

The company had indicated in the past its plan to dispose of some of its landbank as part of its de-gearing exercise. In March, Tropicana disposed of 308.7 acres in Tropicana Aman (Canal City) to Eco World for RM471 million.

Tropicana City Mall in Petaling Jaya is one property that has been earmarked for divestment to raise fresh funds to bring down borrowings.

Yau said Tropicana is still in talks with interested parties.

“We are always looking for a strategic partner,” he said. Tropicana is also known for its flagship developments — Tropicana Golf & Country Resort and Tropicana Indah, also in PJ.

CapitaMalls Malaysia REIT Management Sdn Bhd was in talks last year to purchase the Tropicana City Mall and office tower from Tropicana, but the deal fell through.