KUALA LUMPUR (Sept 28): UOA Development Bhd is selling UOA Corporate Tower in Bangsar South to 76.55%-owned UOA Real Estate Investment Trust (UOA REIT) for RM700 million.
In a bourse filing, UOA Development said its shareholders will receive a special dividend of one sen per share upon completion of the related-party transaction.
UOA Corporate Tower, a 38-storey office building erected on a provisional parcel of property measuring 22,927 sq ft, is being sold at a 2.5% or RM18 million discount, the group said.
The building, whose net book value stood at RM586 million as at the close of the financial year ended Dec 31, 2019 (FY19), is being sold for a gain of RM114 million.
From the RM700 million proceeds, RM646 million or 92.9% will be used to fund the development of its properties, namely District K, Jalan Ipoh, Phase II of the UOA Business Park in Shah Alam, Lot 2507 in Kerinchi, Kuala Lumpur and V50, Bangsar South. The total estimated cost of these properties is RM1.36 billion.
Another RM32.36 million would be used as working capital, and a further RM21.24 million would be used to pay the special dividend.
On the rationale of the sale, UOA Development said it would help improve its cash flow. As of June 30, the group's cash pile stood at RM1.1 billion, of which RM622.2 million was maintained in housing development accounts.
The group said it also intends to fund its development land acquisitions and the development of investment properties via internally generated funds instead of borrowings to keep its gearing level low. Its gearing was 0.02 times as of FY19.
Meanwhile, the group's earnings per share (EPS) are expected to increase to 27.76 sen, from 21.07 sen as at FY19, following the disposal. Net assets per share would decline to RM2.43 from RM2.58.
The sale is subject to shareholder approval at an extraordinary general meeting.
In a separate filing, UOA REIT said it would be financing part of the purchase consideration via a private placement, which will raise RM278 million, and by securing RM352 million via its RM422 million five-year revolving credit facility.
With regard to the private placement, UOA REIT said the placement units may be allocated to major unitholders and connected persons.
The RM278 million in proceeds is based on an indicative issuance price of RM1.21 per unit for 229.8 million units, which is 54.3% of UOA REIT's 422.87 million unit capital.
Following the completion of the placement, UOA REIT's unit capital would increase to 652.67 million units.
Pro forma distribution per unit is expected to increase to 9.23 sen, from 9.11 sen as of FY19.
"UOA Corporate Tower will complement the existing property portfolio of UOA REIT that comprises purely office buildings," said UOA REIT.
"The acquisition of UOA Corporate Tower (which was completed in 2016) will also lower the average building age of UOA REIT's property portfolio from approximately 18 years as at Dec 31, 2019 to approximately 16 years.
"The manager believes that remaining a pure-play office REIT with a younger property portfolio would likely attract more investors' interest in UOA REIT," the REIT added.
UOA REIT's NLA, meanwhile, would increase to 2.07 million square feet after factoring in the 732,871 sq ft in NLA from the UOA Corporate Tower.
UOA REIT would also realise a net unrealised gain of RM16.4 million from the purchase.
UOA Development's share price was up two sen or 1.27% to RM1.59 as at 3.30pm, valuing the group at RM3.38 billion. UOA REIT units were last traded at RM1.23, giving it a market capitalisation of RM520.13 million.