Salcon ventures into Australia with planned A$230m residential project

KUALA LUMPUR (July 1): Salcon Bhd is buying a plot of freehold commercial plot in Australia, together with a car park and a two-storey office building erected on it, for A$37.88 million or RM112.55 million, cash, to redevelop it into a high-rise residential development with an estimated gross development value of A$230 million or RM683.38 million.

The development will comprise 336 residential units with a retail podium space, according to Salcon, which specialises in water and wastewater management engineering, in a bourse filing yesterday.

Salcon said its indirect wholly-owned subsidiary Salcon Development (Australia) Pty Ltd has, on June 29, entered into a contract of sale with K & E Rogers Pty Ltd to acquire all the 2,125 sq m plot located at 16-22 Claremont Street, South Yarra, Victoria, Australia, together with the car park and office building.

Salcon Development, newly incorporated on June 27, is a wholly-owned unit of Salcon Development Sdn Bhd, which in turn is a wholly-owned unit of Salcon.

“Given the general slowing down in the Malaysian property market, the group seeks to diversify its property development portfolio overseas. This acquisition will allow the group the opportunity to establish a presence in the Australian property market, where the demand for Australian properties has remained strong in key cities such as Melbourne, in particular in the inner city areas,” said Salcon.

The South Yarra suburb of Melbourne is situated approximately 4km south-east of the Melbourne Central Business District, it said.

The purchase consideration for the property was arrived at following an International Expression of Interest bidding exercise conducted for the property, and on a willing-buyer and willing-seller basis after taking into consideration the market value of properties in the surrounding area, and the potential development of the property, said Salcon.

Salcon may seek external financing to fund the proposed acquisition, as well as property’s future development cost. If it funds the purchase entirely via bank borrowings, its gearing will rise from 0.14 as at Dec 31, 2015, to 0.33.

It expects the proposed buy to be completed by the last quarter of 2016.

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This article first appeared in The Edge Financial Daily, on July 1, 2016. Subscribe to The Edge Financial Daily here.