Sometimes, some land deals would surprise me. Reported in The Star, this one surprised me tremendously. EcoWorld has proposed to buy 2,198.4 acres of land in Kuala Selangor for RM1.181 Billion for a mixed eco township with a gross development value (GDV) of about RM15bil. This is approximately RM12.33 per sq ft. According to EcoWorld, this price is at a discount of 0.7 percent versus the value of the lands. Overall land cost vs GDV is thus at 7.9 percent, considered low but do note that this depends on the final GDV number which can change depending on the type of developments and relevant economic circumstances.
Some planned developments include 1,400 acres of mixed eco township development to be known as “Eco Gardens” consisting mainly landed and high rise residential homes. There would also be a 518 acres of integrated gated industrial hub to be known as Eco Business Park V. Another 280 acres would be for Laman Indah which is an affordable homes project. The estimated RM15 Billion GDV will be for a development period of 15 years. This piece of land is approximately 45km from Kuala Lumpur city centre, 40km from Petaling Jaya city centre and 18km from Sungai Buloh town centre.
This purchase would be undertaken by its unit, Paragon Pinnacle Sdn Bhd (PPSB). The deposit for this acquisition would be funded by internal funds while the balance deposit and balance sum will be funded through a combination of internal fund, bank borrowings and/or equity funding. EcoWorld also said that its management intends to acquire this sizeable piece of strategic land without over-extending its balance sheet. Thus, it would be inviting “like-minded” institutional, private equity, corporate partners to co-invest and fund PPSB. This would of course reduce EcoWorld’s stake in PPSB but it will maintain a minimum of 30 percent equity to ensure the group continues to enjoy a meaningful share of the development profits. This deal is expected to be completed by the second quarter of 2016.
Latest Update: Reported in The Edge. This acquisition may face some problems after the Mentor Besar Incorporated Selangor (MBI) said that one tract; the 14 pieces of land that EcoWorld is acquiring from Mujur Zaman Sdn Bhd (MZSB) are currently involved in an ongoing legal case.
Land acquisition of this size is never easy and development of this scale is likely to garner huge attention as it is being undertaken by one of the largest developers in Malaysia. I support this development because this is going to extend the availability and location choices into a much wider choice. I think it will benefit the market, especially those who are okay to stay slightly further away and driving instead. Anyway, the distance of Klang into KL city centre, as per Google Map is already at least 40km. I have many colleagues who are driving from Klang to office everyday. My office is in downtown KL. Yes, would love to drop by when the deal has materialised. Happy waiting.
written on 23 Sept 2015
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