Sapura Resources in KLCC development

KUALA LUMPUR: Sapura Resources Bhd has proposed a joint venture with KLCC (Holdings) Sdn Bhd (KLCCH), a wholly-owned subsidiary of Petroliam Nasional Bhd (Petronas), to establish a commercial development on a piece of land in Kuala Lumpur.

The land measuring 7,605 sq m will comprise an office tower, convention centre, retail podium and other components parties to the JV may mutually agree in writing.

"The proposed JV would enable the company to diversify into property development. Given that the land is located in a prime area within the Kuala Lumpur city centre, the company is optimistic on future demand," Sapura Resources said in an announcement to Bursa Malaysia on Tuesday, July 19.

The JV will also invest in facilities and infrastructure complementing the proposed development, it said.

Sapura Resources and KLCCH will collaborate via a JV vehicle known as Impian Bebas Sdn Bhd. The former will purchase a 51% stake in Impian Bebas for a total cash consideration of RM110.67 million, which will be payable 21 days after the JV becomes conditional. KLCCH will hold the balance.

"The sum of RM110.67 million was arrived at on a willing-buyer-willing-seller basis after taking into consideration the agreed aggregate initial equity contribution to be made by the parties of RM217.1 million. This is equivalent to the prevailing market value of the land as agreed between the parties," said Sapura Resources.

The board of Impian Bebas will consist of four directors nominated by Sapura Resources and three by KLCCH.

Sapura Resources will fund the RM110.67 million with borrowings. As a result, its gearing ratio will increase to 1.09 times from 0.47 times following the acquisition, as its borrowings grow to RM193.8 million from RM83.1 million.

The company added that the commercial development will be funded by Impian Bebas with the equity received from the JV parties, though external funding may be sought if the amount proves insufficient.

It said other details, including the project's gross development value, cost, duration and estimated profit will only be determined after the project plan is finalised.

Sapura Resources' acquisition of a controlling stake in Impian Bebas is expected to be completed by Jan 31, 2012.

Under the proposed JV, KLCCH will guarantee and underwrite the lease and/or tenancy of the retail podium and convention centre, while Sapura Resources will do the same for the office tower. Both guarantees are to last 15 years and involve a rental rate agreed by both parties.

"The land is in a prime location, being adjacent to the KLCC Convention Centre and within walking distance from Suria KLCC shopping mall and the KLCC Park. As such the development is expected to attract strong interest from tenants," it said.

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