Company to use proceeds to repay loans and fund projects
PROPERTY developer TA Global Bhd is set to unlock A$245mil (RM827.8mil) from the proposed sale of its Sydney land, with the bulk of the proceeds to be used to repay borrowings, fund ongoing projects and on potential acquisitions.
The company, which has entered a put-and-call option deed with Karimbla Properties Pty Ltd, plans to dispose of the remaining 24.26 acres of undeveloped land at its Little Bay Cove development.
Through the sale, the group says it is set to unlock the value of the property, which is currently pending development, at about 29% premium to the indicative valuation.
According to its announcement to the stock exchange, TA Global plans to use A$120mil (RM407.6mil) to reduce its borrowings while A$100mil (RM339.7mil) will be used for the acquisition of properties or assets.
It says another A$20mil (RM67.9mil) will be channeled towards working capital for ongoing development projects.
TA Global executive director Kimmy Khoo tells StarBizWeek that most of the funds allocated as working capital will be used to help fund the ongoing projects in Malaysia.
“While we do not have allocations for specific projects, the funds will mostly be for the ongoing Malaysian projects,” she says.
Asked about the outlook for these projects, given the tough property market, she says the roll out of projects will continue despite the conditions.
“We cannot slow down or stop rolling out projects just because the market conditions are slow.
“It will have to take its natural course, and we need to be ready when it picks up.
“These projects have a long gestation period, so we remain confident about its prospects,” she says.
Australian property prices continue to soar, with analysts warning that the market there has peaked, while the property market in Malaysia remains soft.
Researchers at the Swiss bank, UBS warned last month that the Australian housing market has peaked and could crash if the country’s central bank raises rates by too much or too quickly.
Property in Australia has boomed, with recent government data marking growth in residential property prices at 10.2% year on year during the first quarter of 2017.
CNBC quoted UBS Economist George Tharenou as saying that any rash interest rate action from the Reserve Bank of Australia (RBA) could trigger a crash.
The Malaysian property market, on the other hand, has remained soft over the years due to various factors, including soaring prices and a mismatch between the supply and demand of residential properties.
In its latest annual report, the group had already indicated its plans to sell the remaining undeveloped land at its Little Bay Cove residential project.
In the report, the group said it was looking to de-gear and monetise some its development land bank at good return pricing.
As at March 31, 2017, the group’s total bank borrowings was at about RM2.59bil.
“With the strong residential marketing in Sydney and strong Australian currency, the group may consider selling the remaining undeveloped land of its Little Bay Cove residential project in Australia,” it said.
It also said that it expects future earning of the project development division to increase substantially from 2018 onwards, with aggressive sales and the rollout of the development projects in the two countries.
It is interesting to note that the buyer of TA Global’s Sydney land is a unit of Meriton Properties Pty Ltd.
The Meriton group, said to be Australia’s largest residential apartment developer, is owned by Australian billionaire real estate property developer Harry Triguboff, colloquially known as “high-rise Harry”.
He is the founder and managing director of Meriton as well as one of Australia’s richest people.
Meriton Group has designed, developed and built more than 68,000 apartments across the east coast of Australia.
The piece of land that Meriton is buying from TA Global, through its unit TA Little Bay Pty Ltd, is situated on the southern outskirts of the Sydney metropolitan area and about 12km to the south of the Sydney central business district.
Little Bay Cove is a 135,961.6 square meter (33.6 acre) freehold residential development master plan located towards the southern end of the eastern suburbs in the suburb of Little Bay, just south of Malabar in New South Wales, Australia.
The site is bound by The Coast Golf Club and Pacific Ocean to the east, Anzac Parade to the west, residential housing to the north and the Prince Henry Estate to the south.
The project includes a diverse range of dwellings mix comprising apartments, townhouses, semi-detached and free-standing houses within the enclave of parks and recreation areas, pedestrian
pathways and viewing lookouts.
TA Global expects to register an indicative gain before tax of A$102mil (RM346.4mil) after taking into consideration the unaudited net book value (NBV) of the property as at June 30 2017 of about A$138mil (RM468.7mil) and estimated incidental costs.
Its original cost of investment from October 2010 up to August 2014 was A$112.9mil (RM383.6mil).
In its announcement to the stock exchange, TA Global said the proposed sale is dependant on the approval of its shareholders, and if the deal goes through, it is expected to be completed by the end of 2017.
In its annual report, the group says it has 750 acres of land bank both locally and internationally, under its property development division, that it will gradually develop into residential, commercial or mixed development. Of the 750 acres, 185.92 acres are in planning and development stages and its expected total gross development value (GDV) is RM15.1bil.
In Malaysia, the property developer has carved a name for itself as a niche luxury lifestyle real estate company through its successful launches of Damansara Avenue, Damansara Idaman, Idaman Villas and Idaman Residence projects.