IGB makes first foray in Indonesia

KUALA LUMPUR (June 19): IGB Corp Bhd is making its maiden foray into Indonesia, where the cash-rich property developer is acquiring a piece of land in West Jakarta for US$30.8 million (RM97 million). In a statement to Bursa Malaysia yesterday, IGB said its wholly-owned subsidiary, IGB International Ventures Sdn Bhd, and British Virgin Islands-based joint venture partner Aspire Horizon Ltd will acquire the piece of land measuring 1.1ha.

“The property has potential for development by virtue of its location, and the JV is expected to contribute positively to the earnings of IGB Group in future,” IGB said. IGB and Aspire Horizon have established JV entity Wilmer Link Ltd on a 52:48 shareholding basis. Wilmer will in turn acquire a special purpose vehicle (SPV) which will own the land in Indonesia, according to IGB.

Under the arrangement, IGB said it will advance up to US$5 million to Wilmer to partially finance the acquisition of the land. Details of the potential development were not specified but IGB, which plans to finance its Indonesian venture with internally generated funds and borrowings, indicated that the proposed venture will involve development and management of real estate. “The JV will serve as a platform for IGB’s first foray into Indonesia if the SPV business is successful, which will provide an avenue for expanding the revenue base of IGB Group,” said IGB, which has also expanded its landbank in Malaysia.

IGB said in a separate statement to the exchange that it has purchased a 9,607 sq ft tract of freehold land in Ipoh, Perak, for RM3.3 million from Chin Peck Soo Holdings Sdn Bhd (CPS) According to IGB, the land will accommodate a hotel development worth RM32.2 million.

The amount, which includes the cost of the land, will be funded via a combination of internally generated funds and borrowings. “The land acquisition is in line with IGB Group’s direction and strategy to expand its Cititel hotel brand to further contribute to the group’s recurring income base,” IGB said. According to the company, CPS had in 2010 obtained planning approval for the construction of a 12-storey, 210-room hotel on the tract. Cash-rich IGB has the financial muscle to undertake its latest acquisitions.

The firm stands to rake in close to RM1 billion under its 76%-owned subsidiary Krisassets Holdings Bhd’s plan to distribute cash proceeds from the planned disposal of two retail properties — Mid Valley Megamall, and The Gardens Mall — into a real estate investment trust.

This story appeared in The Edge Financial Daily on June 19, 2012.