KUALA LUMPUR: Eastland Equity Bhd has proposed a renounceable rights issue of up to 294.8 million shares with up to 147.4 million free detachable warrants to fund the acquisition of development land in Kota Kinabalu.

According to the group's filing with Bursa Malaysia, the issuance has an indicative price of 13.5 sen per rights share on the basis of six rights shares for every five Eastland shares and one warrant for every two rights shares subscribed for.

The indicative issue price represents an 11.8% to the theoretical ex-rights price of Eastland shares, based on the five-day volume weighted average market price (VWAP) of the shares.

The warrants will be convertible into one new Eastland share per warrant at a yet to be determined exercise price.

According to Eastland, the proceeds of the issuance will go towards the proposed acquisition of 2,181.8sqm of leashold development land in Kota Kinabalu, with any excess funds going towards the repayment of bank borrowings and working capital.

In the same filing, Eastland informed that its unit, FBO Land (Setapak) Sdn Bhd, had entered into a conditional sales and purchase agreement with property developer PCK Properties Sdn Bhd for the cash purchase of the land for RM23.26mil.

According to Eastland, the land is a commercial property within Kota Kinabalu Central Business District, which accommodates prime office buildings, commercial shop houses, shopping complexes and notable hotel establishments.

The land has been approved for a proposed mixed-commercial development consisting of a 28-storey three-star hotel and 28 storeys of hotel suites with four levels of retails lots, six levels of multi-storey carpark and a basement.

The project has an estimated gross development value of RM356.92mil and gross development cost of RM282.05mil. It is targeted to commence in the first quarter of 2018, and is expected to contribute positively to the earnings of the group.

"The Proposed Acquisition is in line with Eastland’s strategy to diversify its property development into new geographical areas," said Eastland.

"The Board is of the view that the prospects of the Proposed Development is good due to the strategic location of the Land within the high-growth area of central Kota Kinabalu and its close proximity to the main tourist attractions such as Sabah’s popular Sunday market."

It added that Phase 2 of its Bandar Tasek Raja property development has commenced and the project is expected to be completed within three years.

Trading in Eastland shares was halted from 9am to 10am on Monday. At 11.10am, the counter was trading 0.5 sen lower at 16.5 sen on the back of 140,000 shares done.