Sunway and Iskandar Investment to jointly develop RM413m land

KUALA LUMPUR (Dec 4): Sunway Bhd via its wholly-owned subsidiary Sun City Sdn Bhd (SunCity) will enter into a joint venture (JV) with Iskandar Investment Bhd's (IIB) wholly-owned Iskandar Assets Sdn Bhd (IASB) and Harmony Impulse Sdn Bhd (HISB) for a mixed development project on land worth RM412.73 million.

HISB in a separate agreement has agreed to purchase the land from IASB in two parcels; Pendas North Land, a 412.75 acre plot in Mukim of Pulai for RM221.28 million and Western Pendas South Land, a 366.32 acre plot in Mukim of Tanjung Kupang for RM191.45 million.

"The attractive land price of RM12.16 per square foot is expected to generate an estimated gross development value (GDV) of RM12 billion over a period of 17 years," said Sunway in a filing with Bursa Malaysia yesterday.

With the acquisition, Sunway's landbank in Iskandar Malaysia with increase to 1,558 acres, propelling toward becoming one of the largest land owners in the high growth region, it said.

"This sizeable landbank is located immediately adjacent to the existing Medini Zone F leased to Sunway Iskandar Sdn Bhd by IIB commencing Sept 1, 2012. It is expected to generate substantial synergies with Sunway's proposed development there as well as create the potential for an even larger and more integrated township development".

IIB, which is a 60% owned subsidiary of Khazanah Nasional Bhd is the master developer for Iskandar Malaysia. Sunway believes that its partnership with IIB's subsidiary IASB will enhance the profile of its integrated development in Iskandar and draw greater foreign interest.

"The partnership with IIB is also expected to benefit Sunway's proposed development as it will have timely knowledge of proposed developments in surrounding areas and the development plan can be optimised so as to ensure maximum synergies with IIB's other catalytic developments in the Iskandar Malaysia region," Sunway said.

The Sunway group aims to further strengthen its foothold in Johor based on the growing potential in the region from both local and foreign investors.

"As of first half of 2012, Iskandar Malaysia has secured RM10.67 billion of new committed investment, making the total cumulative committed investment in Iskandar Malaysia for the period from 2006 until end June 2012 equal to RM95.45 billion," it said.

"Increased domestic investors' interest and confidence was evident as about 62% of the total investments in Iskandar Malaysia came from local investors. This figure compares to only 45% local investment in 2008".

Interest in the region is expected to develop further hinged on recently completed projects like Legoland and Puteri Harbour Indoor Theme Park for tourism, Newcastle University and Marlborough College in EduCity, as well as transportation improvements via the Coastal Highway connecting Johor Bahru to Nusajaya and the planned Southern Link.

The subscription and shareholders' agreement (SSA) signed yesterday sets out that SunCity and IASB will hold stakes in a 60:40 ratio in HISB, the JV vehicle.

The two sale and purchase agreements (SPA) signed stipulate that the land acquisition be on an "as is where is" basis, according to a filling on Bursa Malaysia yesterday.

For both pieces of land, the total consideration of RM412.73 million is to be paid in six instalments with the deposit paid upon 14 days from the date of SPA.

In the case of Pendas North Land worth RM221.28 million, the balance payment must be paid in five annual instalments within a 60 month period from the SPA. For the RM191.45 million Western Pendas South Land, such a balance must be paid in five annual instalments within 72 months and 120 months from the date of SPA.

Sunway group provide a shareholder advance to HISB equivalent to 60% of the deposit under the SPA to enable HISB to pay the deposit, while IASB on its part will deem the equivalent 40% paid.

The full amount of the deposit is to be capitalised into ordinary shares and redeemable preference shares when the SSA becomes unconditional, it said.

This story first appeared in The Edge Financial Daily edition of Dec 5, 2012.