KUALA LUMPUR (June 12): UEM Land Holdings Bhd (UEML) is taking a 51% stake in a proposed high-end residential resort development in Desaru, Johor, with an estimated gross development value (GDV) of RM5.4 billion. The project is in collaboration with Khazanah Nasional Bhd's subsidiary Desaru Development Corp Sdn Bhd (DDC), which will own 49% of the venture.
UEM Land said in a statement on Monday that the land for the proposed 20-year development — 25 parcels totalling about 678.7 acres — will be acquired from DDC for a total of RM485.3 million. The acquisition and development of the land will be undertaken by three joint-venture entities that are 51:49 owned by UEM Land and DDC.
"The proposal is in line with UEM Land Group's continuous effort in sourcing new landbank and property development opportunities to improve and sustain its long-term earnings growth," the statement read.
The price tag for those land parcels is just a shade under the market valuation of RM485.7 million by independent valuer Asettz Sdn Bhd (formerly known as Colliers Jordan Lee & Jaafar Sdn Bhd), UEM Land said in the statement.
A payment of RM48.6 million, being 10% of the price tag, is to be paid immediately to the vendor, with another 10% due within 12 months. The remaining 80% will be paid in instalments, staggered bi-annually over 4½ years from the second year onwards.
Subject to the necessary approvals, the proposed development, which surrounds two golf courses, is targeted to commence by 2013. To be positioned as an exclusive high-end residential resort development, it will comprise bungalows, semi-detached houses, link homes, townhouses and serviced apartments or condominiums as well as a beach club.
UEM Land will provide RM97.1 million in shareholder advance to the JV entities, at 0.5% above the prevailing base lending rate, to cover the first 20% of the purchase consideration. The remaining capital requirements, future development costs and working capital will be funded by a mix of bank borrowings, internal funds, further shareholder advances or an issuance of redeemable preference shares.
UEM Land will also provide project and development management services to the JV entities at a rate of 2.5% of the total development costs, and provide marketing and sales services for 1.5% share of the sales revenue.
Khazanah, through DDC, is spearheading the development of Desaru as an international tourist destination. The completion of the 27km Senai-Desaru Expressway in June 2011, which cuts travel time between Johor Baru and Desaru, is expected to be a catalyst for the area's development, the group said.
This story appeared in The Edge Financial Daily on June 12, 2012.
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