PETALING JAYA: The news last week of property developer Selangor Dredging Bhd (SDB) disposing of 16 pieces of vacant freehold land at Damansara Heights measuring 3.89 acres seems to have come and gone without much excitement.
In fact, the company’s share price was relatively flat last week – signifying that investor interest was not really piqued by the proposed deal.
The reason is probably because the details of the transaction suggests that it is no ordinary sale of parcels of land. It starts with the transaction period to complete the deal.
In a filing with Bursa Malaysia on Tuesday, SDB said the disposals of the land are expected to be completed by the third quarter of 2022.
A source familiar with the matter said Bukit Selesa may have plans to amalgamate the titles and look at a different type of development such as high-rise apartments instead of bungalow units.
“Completion of the deal will easily take 36 months,” a source said. “So as a condition precedent, they would need to get amendments for the DO,” he said.
Based on a search on the Companies Commission of Malaysia, Bukit Selesa has two directors – Tan Seng Kim and Datuk Chee Yew Fei – who were appointed on July 25, 2014 and Sept 28, 2016 respectively.
The company was incorporated on April 21, 2014. For the financial year ended Feb 28, 2015, Bukit Selesa registered a net loss of RM4,700.
In a filing with Bursa Malaysia, SDB said the disposals to Bukit Selesa for RM71mil will enable the company to unlock capital from being tied to the land and translate them into cash resources for working capital, apart from improving its cashflow position.
SDB purchased the plots of land in August 2005 for RM50.07mil. It expects the disposals to result in a gain of RM93.9mil.
The original development for the land is believed to be 21 bungalow units known as Damansara 21. Following protest by developers, the number was reduced to 16 bungalow units. However, analysts had said that the scaled down project would not be viable for SDB.
SDB explained that the disposal consideration of RM71mil is above the audited net book value of the land (RM50.07mil) and its related development expenditure (RM20.8mil) totalling RM70.91mil as at March 31, 2016.
Based on the disposal price of RM71mil, it works out to be about RM419 per sq feet, which is at the lower end of valuations for land in Damansara area. And taking into account that the transaction is to be completed over several years, the cost is even lower at today’s value, said a property consultant.
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According to SDB, the disposals will not have significant impact on its earnings per share, net assets per share and gearing for the financial year ending March 31, 2017.
For its first quarter ended June 30, 2016, SDB registered a net profit of RM4.6mil from a net profit of RM21.49mil in the previous corresponding period, while revenue slipped to RM61.35mil from RM64.11mil a year earlier.
For the three months ended June 30, 2016, SBD had cash and cash equivalents of RM158.94mil compared with RM163.75mil in the previous corresponding period.
According to property consultants Rahim & Co, Damansara Heights, originally a residential scheme for government servants developed by SPPK some 30 years ago, comprises a mixture of developments from terrace houses, semi-detached houses, detached houses and low-rise shops.
Over the years, the landscape has evolved to include high-rise residential and commercial buildings. The first office building that was built was Wisma Damansara by Selangor Properties in 1970, followed by Damansara Office Complex on Jalan Dungun, which at the time also housed the local stock exchange.
“In recent years, several gated schemes have come up in this location, namely Idamansara and Seventy Damansara by Eastern and Oriental Berhad; and Sri Beringin by SPPK.
“New and under construction developments include Twins Damansara, a mixed development comprising elements of office buildings, retail and residential buildings,” says Rahim & Co.
The property consultancy also points out that today, there are 25 purpose built commercial buildings in Damansara Heights housing some of Fortune 500 firms, including Caltex, Hewlett-Packard, Siemens, Ogilvy and Shell; colleges, restaurants, regulatory bodies and government departments.
“Almost all major financial institutions are also represented in this limited commercial enclave,” it said.
There will also be two MRT stations – Pusat Bandar Damansara and Semantan – within the vicinity.
Among the projects on the horizon include the two-phase Pavilion Damansara Heights mixed-use development, which is being undertaken by Tan Sri Desmond Lim Siew Choon in partnership with the Canada Pension Plan Investment Board.
According to reports, the development will have an anticipated gross development value of RM7bil.
Selangor Properties Bhd, which has about 30 acres of land bank in Damansara Heights, plans to refurbish Wisma Damansara, and later the 3.59 acres near the work-in-progress Semantan MRT station, known as Kompleks Pejabat Damansara where Wisma UN and other low-rise office buildings are located.
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