UEM to sell Kiara Bay land for RM85 mln, but keeps devt rights worth RM94 mln

KUCHING: UEM Sunrise Bhd (UEM Sunrise) will dispose of a 4.01 acre land in Kiara Bay, Kepong for RM85 million while also retaining development rights of the disposed land that is valued at RM93.5 million.

The property developer’s 50 per cent owned subsidiary, Mega Legacy (M) Sdn Bhd (MLSB) entered into a sales and purchase agreement (SPA) with Melati Ehsan Holding Bhd’s (MEHB) wholly-owned Pembinaan Kery Sdn Bhd (PKSB) for the disposal of a 4.01 acre parcel of land in Kiara Bay for RM85 million.

Separately, MLSB also entered into a development rights agreement (DRA) with PKSB to develop the disposed land. Under the DRA, MLSB will be responsible for marketing and selling the completed property units developed on this land.

The development rights are valued at either RM93.5 million or an aggregate of the RM85 million land purchase price plus 20 per cent of the project profit, whichever is higher.

According to analyst AmInvestment Bank Bhd

This timing gap between proceeds from land disposal and payment of the development rights value provides Mega Legacy with sufficient time to arrange and manage its cash flow commitments.

AmInvestment Bank Bhd (AmInvestment Bank) analyst

(AmInvestment Bank), the purpose of the SPA is to allow MLSB to repay its debt obligations and allocate a portion of proceeds as working capital for the launch of its upcoming project, Residensi ZIG.

Meanwhile, the DRA is understood to be essential in ensuring that the development of the disposed land aligns with Kiara Bay’s current conceptual and development master plan of which MLSB is the master developer.

MLSB will receive full payment of RM85 million post completion of disposal during the first half of financial year 2024 (1HFY24), but first payment of development rights to PKSB will only begin take place after the official project launch on the land in question.

“This timing gap between proceeds from land disposal and payment of the development rights value provides Mega Legacy with sufficient time to arrange and manage its cash flow commitments,” the analyst remarked.

But given that UEM Sunrise plans to launch Residensi ZIG which has a gross development value of RM646 million in Kiara Bay by 3QFY23, AmInvestment guides that they expect new launches on the subject land will not be likely in the nearterm due to UEM Sunrise prioritising better cash flow management.