Over the past year, Penang-based property developer Ivory Properties Group Bhd (Ivory Prop) seems to have lost more money in aborted ventures than the cash it has in its kitty.
Earlier last week, Ivory Prop announced the termination of a purchase involving 4.9 acres of freehold land on Penang Island valued at RM142.8 million. With the termination, the property group had to forfeit the deposit of RM14.3 million that was paid to the vendor.
The reason for the termination is because the company, with cash of RM9.7 million, could not meet the balance of the financial obligations within the stipulated time. Ivory Prop stated that it had requested for a six-month extension to the deal but the vendors demanded an interest payment of RM6 million and an additional monthly payment, which the group could not meet.
The Penang-based property developer blamed the prolonged Covid-19 pandemic for not being able to secure the financing to complete the deal, which was first mooted towards the end of June last year.
It is perplexing how Ivory Prop went into the agreement a year ago as the Covid-19 situation was already a global pandemic by then, and the hardest hit sector was property. It obviously read the market wrong.
Moreover, it could not afford to make mistakes as by then, a substantial sum of its capital was tied up in another aborted land deal in Sitiawan, Perak, and its cash was down to RM20.5 million.
In the Sitiawan transaction that was rescinded in June last year and revived in subsequent months, Ivory Prop was to acquire 64 acres for RM133.9 million. After the deal was rescinded, it was owed RM42.6 million by the vendors and another RM13.4 million in agreed liquidated damages.
Ivory Prop said the rescission would have an impact on its books if it failed to get the money back from the vendor.
For a fairly seasoned property company, it is strange that it is going into deals only to run into difficulties and having its capital tied up or forfeited. The money would certainly have come in handy in the current tough times.