Hap Seng buys 50pct of Menara Citibank for RM303.5m (Aug 7, 2009)

KUALA LUMPUR: Hap Seng Consolidated Bhd is buying a 50% stake in Menara Citibank for RM303.5 million from Singapore's CapitaLand Ltd and Amsteel Corporation Bhd.

Hap Seng said today it was acquiring CapitaLand's entire 30% stake in Inverfin Sdn Bhd -- owner and operator of the 50-storey building in Kuala Lumpur. It was also acquiring the entire 20% stake in Inverfin from Amsteel. Menara Citi Holding Co. Sdn Bhd owns the other 50% stake in Inverfin.

Hap Seng said it would fund the RM303.5 million purchase of Menara Citibank with RM200 million bank borrowings and the rest from own funds.

Inverfin is a special purpose entity and investment company for the sole purpose of owning and operating Menara Citibank.

Hap Seng Amsteel shares in Inverfin are charged to RHB Investment Bank Bhd. On Aug 30, 2007, Inverfin issued medium term notes of RM160 million to selected investors wherein Inverfin had charged Menara Citibank as security.

"The purchase price for the sale Shares (purchase price) is based on 50% of the net asset value of Inverfin as at June 30, 2009, after taking into account the agreed property value of Menara Citibank which is fixed at RM607.45," it said.

It added the proposed acquisition was consistent with Hap Seng's corporate business direction to expand the group’s property division both for development and investment holding.

The transacted prices of prime office buildings within the Golden Triangle and the Central Business District were in the range of RM800 to RM1,200 per sq.ft. of lettable area.

Hap Seng said the gross rental revenue based on the latest audited accounts of Inverfin for the financial year ended Dec 31, 2008 was about RM48.76 million, giving a gross yield of 8.03%. The operating profit was RM38.128 million, giving a net yield of 6.28%. The rental revenue and operating profit are expected to improve with the rent rollover for Year 2009 onwards.

"The attractive price coupled with the potential rental growth will offer an excellent capital appreciation potential and an immediate substantial rental income stream," it said.

The gross rental revenue based on the latest audited accounts of Inverfin for the financial year ended 31 December 2008 was approximately RM48.76 million, giving a gross yield of 8.03%. The operating profit was RM38.128 million, giving a net yield of 6.28%. The rental revenue and operating profit are expected to improve with the rent rollover for 2009 onwards.

At the signing ceremony, Hap Seng Group Group managing director Datuk Edward Lee Ming Foo said: “Menara Citibank is indeed a gem of a property. Its superior location in the Kuala Lumpur City Center offers unparalleled access to premier retail and commercial amenities. At the same time, the building is also surrounded by an extensive range of public transportation infrastructure.”

Lee said the demand for prestigious office space in the heart of the Golden Triangle has not waned despite the global economic downturn. “Based on our experience in the market, we expect demand to remain robust, if not improve, while supply is naturally kept limited in super-prime areas such as these.”

The 50-storey Menara Citibank is an office building that sits on a parcel of freehold land measuring approximately 12,700 square meter (sq.m). It has a net rentable area of approximately 68,000 sq m.