PETALING JAYA: After talks to acquire Tropicana City Mall and Tropicana City Office Tower lapsed more than a year ago, CapitaMalls Malaysia Trust (CMMT) is revisiting the acquisition of the two properties for RM540mil.
Including the acquisition fee and expenses, the total acquisition cost amounted to RM565mil, CMMT said in a statement.
In 2013, the price tag for the transaction was believed to have ranged between RM550mil and RM650mil but the deal fell through due to disagreement on the sale and purchase terms between CMMT and the vendor, Tropicana Corp Bhd .
Sources said Tropicana intended to sell the two buildings at a higher price.
This time, CMMT intends to fund the proposed acquisition through debt and/or equity fund raising in such combination to be determined later. It expects the transaction to be completed by the third quarter of this year.
Manager of CMMT, CapitaMalls Malaysia REIT Management Sdn Bhd (CMRM), said the proposed acquisition was subject to the satisfactory completion of due diligence, which included a building audit and valuation exercise.
“The completion of the sale and purchase is further subject to fulfilment of various conditions precedent in the agreement signed,” it added.
CMRM chairman David Wong Chin Huat said the proposed acquisition would expand CMMT’s income and geographical portfolio so that it could continue to deliver stable returns for its unit holders.
“Tropicana City Mall is located to the west of Kuala Lumpur targeting the rising middle and upper-middle income population,” he said.
CMMT’s portfolio includes Sungei Wang Plaza in Kuala Lumpur, The Mines in Seri Kembangan, East Coast Mall in Kuantan, Pahang and Gurney Plaza in Penang.
Tropicana would see its borrowings narrow to RM1.95bil from RM2.41bil and net gearing improve to 0.52 times from 0.72 times upon the disposal of the assets.
“This disposal is another key milestone in the group’s de-gearing initiative aimed at monetising the significant value of its sizeable asset base and further enhancing shareholder returns,” Tropicana said in a separate statement. The property developer intends to utilise RM460mil to repay its debts, RM75.5mil for working capital and RM4.5mil for the expenses of the transaction.
Tropicana expects to register a fair value gain of RM13.1mil for the financial year ended Dec 31, 2014 (FY14) with an additional disposal gain of RM13.5mil to be recognised in FY15 from the proposed sale.
Based on Tropicana’s FY13 figures, the two buildings’ net book value of RM521mil gives the developer a fair value gain of RM197mil after taking into account total development cost of RM324mil.
However, the assets would no longer contribute to Tropicana’s earnings following the completion of the sale of the properties, which contributed RM21.8mil (excluding any fair value adjustments) to its net profits for FY13.
The two freehold commercial buildings, situated at SS20/27, Petaling Jaya, are worth RM532mil based on C H Williams Talhar & Wong Sdn Bhd’s appraisal dated yesterday.
Tropicana City Mall comprises four storeys of retail space and four levels of car park. It opened in December 2008 with a net lettable area of 448,248 sq ft.