KUALA LUMPUR: Dijaya Corp Bhd has signed a sale and purchase agreement (S&P) with the Selangor government to purchase a big tract of land in the state for a total purchase consideration of RM1.3 billion.
Dijaya’s wholly owned subsidiary, Sapphire Index Sdn Bhd, signed the S&P with Menteri Besar Selangor (Inc) and Permodalan Negeri Selangor Bhd (PNSB) to acquire 1,172 acres of land located in Canal City.
The land is situated near established townships including Putra Heights, Kota Kemuning and the upcoming Bandar Rimbayu. The RM1.3 billion price tag translates into RM25 psf.
Dijaya plans to develop a township in the area, which will include a mix of residential and commercial properties earmarked for launch within two years. The master plan will incorporate recreational areas, such as parks and lakes, as well as other public amenities.
Dijaya will pay for the land purchase via a deferred payment method spanning over a period of up to 20 years. The purchase consideration comprises land purchase price of RM587 million, interest cost, share of gross development value (GDV) and profit entitlement from the development of the land.
The company said in a filing with Bursa Malaysia yesterday that with the inclusion of 11 new land parcels, the property developer’s undeveloped landbank will expand to 2,000 acres from 800 acres, while the GDV will increase to a potential RM70 billion.
“This land development through smart partnership with PNSB is expected to contribute significantly to the group’s prospects in the coming years. Dijaya intends to progressively fund the acquisition and development cost via internally generated funds and bank borrowings,” the company added.
Dijaya will fork out RM50 million for the deposit and two advance payments on or before six months from the date of the S&P agreement. The remaining RM537 million will be remitted over 12 yearly instalments, together with interest of 5% per annum of up to RM252 million.
Thereafter, PNSB will be entitled to 5% of the land’s GDV at a minimum of RM432.21 million and a minimum profit entitlement of RM26 million, which will be made in 18 payments and three payments respectively.
The land was earlier awarded to IJM Land Bhd by the previous state government to construct an 18km canal in Canal City that will link Sungai Klang and Sungai Langat for flood mitigation purposes.
However, the plan was aborted in 2011 by the current caretaker state government because the completion of the SMART tunnel in Kuala Lumpur was seen as a sufficient flood mitigation plan.
As compensation for the money spent in building the canal, IJM Land was given 1,900 acres of land in the area, which the group later renamed Bandar Rimbayu. Dijaya’s proposed 1,172-acre land acquisition constitutes the remaining acreage of Canal City.
“This is a significant acquisition for the group as large tracts of land in the Klang Valley with immediate development potential are fast becoming scarce,” said Dijaya group CEO Datuk Yau Kok Seng in a press statement.
Dijaya group managing director Datuk Dickson Tan said the company is excited by the acquisition.
“The deferred payment terms coupled with our low up front capital outlay bodes well for its viability. With strong prospects for capital appreciation due to excellent accessibility, this project can potentially generate a GDV of up to RM20 billion when fully completed over its 15- to 20-year targeted development timeframe.
“This acquisition will serve to further strengthen Dijaya’s presence in the three key growth regions of Malaysia, namely the southern region of Johor, the central region of greater KL, as well as in the northern state of Penang,” he added.
This article first appeared in The Edge Financial Daily, on April 16, 2013.