Selangor to see net gain of RM550m from land sale to Tropicana Corp

KUALA LUMPUR: Selangor state investment arm Menteri Besar Inc (MBI) may gain much more after revising the terms of agreement on the sale of 1,172 acres in Kota Kemuning to Tropicana Corp.

Based on the initial estimated gross development value (GDV) for the self-contained township project, this could translate to a net gain of some RM550mil for Selangor.

Tropicana Corp told Bursa Malaysia on Thursday its unit, Sapphire Index Sdn Bhd (SISB), had signed a supplementary agreement that almost doubled MBI’s entitlement to a sum equivalent to 9% of the GDV from only 5%. There will also be no minimum entitlement and no minimum GDV.

The definition of GDV has been amended to “the total value of the development on parts of the lands by SISB based upon the actual sales of all units available for sale as evidenced by signed sale and purchase agreements by end-purchasers.”

In return for the higher MBI entitlement, interest payable by SISB, estimated at RM252mil, will be waived in relation to any of the instalments, including the instalments payable for the 308.72 acres from the total land which SISB is disposing to Eco Sanctuary Sdn Bhd.

When Tropicana (then Dijaya Corp) inked the agreement to buy the 1,172 acres from MBI unit Permodalan Negeri Selangor Bhd (PNSB) in April 2013 for RM1.3bil, it estimated that the township could potentially generate a GDV of up to RM20bil when fully completed.

Based on that forecast GDV, the boost in entitlement percentage could add RM800mil in the coffers for MBI over two decades. After deducting the interest waived, it amounts to about RM550mil.

Thursday’s agreement is the second supplementary agreement following the one signed in August last year which saw PNSB being appointed as an agent for MBI and the project manager to manage MBI’s interest.

SISB had then agreed to pay for the land based on RM18.02 per sq ft (psf) on net developable area. Accordingly, payment of the Eco Sanctuary land to MBI would be RM173mil instead of RM85mil and interest payable would be waived on payment.

In March 2013, SISB signed an agreement to sell 308.7 acres of the original land to Eco Sanctuary, which is wholly owned by Eco World Development Group Bhd. Tropicana said at the time that it would make a net gain of RM170mil from that RM470.7mil (RM35 psf) land sale.