This article first appeared in The Edge Financial Daily, on June 16, 2016.

KUALA LUMPUR: Hap Seng Consolidated Bhd is buying 36 parcels of freehold agricultural land with an aggregate land size of 1,449.52 acres (586.6ha) in Kuala Selangor for RM228.75 million to develop a mixed development with an estimated gross development value (GDV) of RM9.3 billion.

In a bourse filing yesterday, Hap Seng said the proposed buy will strengthen its presence in Peninsular Malaysia and provide it the opportunity to expand its land bank to sustain its core business as a property developer, besides enhancing its future earnings.

To effect the purchase, Hap Seng unit Euro-Asia Brand Holding Company Sdn Bhd entered into two sale and purchase agreements with vendors Shalimar (Malay) PLC and Indo Malay PLC.

It is buying 20 plots of land which collectively measure 734.82 acres from Shalimar for RM121.54 million or RM165 per acre. From Indo Malay, it is acquiring 16 plots measuring 714.7 acres for RM107.21 million or RM150 per acre.

It intends to develop “sought-after modern guarded-and-gated lifestyle residential properties with commercial components” on the Shalimar plots. The net book value of the tracts stood at RM37.58 million as at March 31, 2016. The project has an estimated GDV of the RM5 billion over a 15-year development period.

As for the Indo Malay plots, which had a net book value of RM36.48 million as at March 31, 2016, Hap Seng intends to develop them into a mixed development township with affordable housing, with an estimated GDV of RM4.3 billion over a 15-year period. It said this will cater to increasing demand for affordable properties among first-time homeowners, as well as students in Universiti Selangor.

All the 36 plots it is acquiring are located in the Kuala Selangor district and can be easily accessed via the Latar Expressway. The land parcels are also close to the Royal Kampung Kuantan Golf Club, and University of Selangor in Batang Berjuntai. The area is also renowned for firefly-watching.

“The proposed acquisition will provide us with the opportunity to establish a dominant presence in the north-western growth corridor of Selangor,” it said, adding that the different development concepts will cater to a wider group of purchasers such as first-time homeowners, the younger generation and upgraders.

“The company will also benefit from the supplies of a broader product mix ranging from premium to affordable products which will sustain its property development activities during economic uncertainties,” it added.

It intends to fund the purchase via bank borrowings, which it expects will raise its gross gearing ratio from 0.99 to 1.04, while its net gearing rises to 0.92 from 0.87, based on its audited consolidated financial statements for the year ended Dec 31, 2015.

Barring unforeseen circumstances, Hap Seng expects the deal to be completed in the third quarter of 2016.

The stock climbed two sen or 0.26% to close at RM7.60 yesterday, with a market value of RM18.26 million.