This article first appeared in The Edge Malaysia Weekly on December 2, 2019 - December 8, 2019

BOUSTEAD Holdings Bhd — which has yet to complete the sale of the Royale Chulan Bukit Bintang Hotel, a transaction it entered into 22 months ago — is evaluating the possible disposal of a second asset in Jalan Bukit Bintang.  

 A few months ago, Boustead had invited bids for two adjacent parcels of land on the corner of Jalan Bukit Bintang and Jalan Pudu and set a collective reserve price of RM172 million for the plots, which are currently being operated as a parking lot.  The government-linked company continues to receive enquiries about the 1.71-acre parcel, even after a tender exercise closed in July.

“Yes, we did invite tenders for this parcel of land. The tender exercise closed in July,” a Boustead spokesman says when asked to confirm the authenticity of a document sighted by The Edge, inviting interested parties to submit their offers. “However, the bids we received were not up to expectations and, as such, we have put this matter in abeyance.”

Nevertheless, Boustead has continued to receive interest from both local and overseas individuals, the spokesman says.“At this juncture, we are still evaluating [our options] and have not reached any conclusion on this parcel of land.”

The two parcels — where the former Cathay Cinema and Pavilion Cinema were located — are registered under Pavilion Entertainment Centre (M) Sdn Bhd. Pavilion Entertainment is equally held by Boustead and Yew Capital Management (M) Sdn Bhd. The original plan was to build a commercial complex and serviced apartments on the site.

Although Boustead did not specifically say why it had conducted the tender exercise, it is worth noting that the group posted its first net loss in 17 years in the financial year ended Dec 31, 2018 (FY2018).  The loss amounted to RM469 million on revenue of RM10.19 billion. In addition, the conglomerate has yet to complete the sale of the Royale Chulan Hotel. In February 2018, Boustead inked a deal to sell the hotel for RM197 million. So far, it has received only 10%, or RM19.7 million as deposit from the purchaser, Singapore-listed Hotel Royal Ltd.

In the first nine months ended Sept 30, Boustead’s net loss widened to RM153.1 million from the previous corresponding period. Revenue rose 6% to RM7.79 billion. Borrowings as at Dec 31 last year were RM7.53 billion, of which RM4.86 billion were short term. By Sept 30 this year, its total borrowings had increased to RM8.19 billion with short-term borrowings at RM4.55 billion. Cash balances stood at RM1.16 billion and it has RM1.42 billion in current receivables.

In an announcement dated Aug 30, Hotel Royal informed the Singapore Stock Exchange that Boustead had agreed to further extend the completion period of the conditions precedent in the sales and purchase agreement to Dec 31 from Sept 14, so the company has sufficient time to obtain the required approvals from the respective federal and state authorities. The purchase is expected to be completed one month after the conditions precedent are met.

In July, Boustead aborted plans to buy multiple pieces of leasehold commercial land totalling 10.34 acres in Bukit Jalil for RM172.78 million from its largest shareholder, Lembaga Tabung Angkatan Tentera. Boustead did not say why it had aborted the deal that was executed in December 2016.

The tender documents sighted by The Edge show that the Bukit Bintang parcels — Lots 20006 and 670 — are freehold lots measuring 74,023 sq ft and 990 sq ft respectively. The Mass Rapid Transit line runs underground adjacent to Lot 20006. Based on the reserve price of RM172 million, the psf price for the combined 75,013 sq ft parcel is RM2,293 psf.

A property valuer contacted by The Edge says that at RM2,293 psf, the price is fair for the Bukit Bintang area.  Another valuer tells The Edge, “If the seller is able to find a buyer at the reserve price it is a very good price.”

It is worth noting that just 750m away from the site, Tan Sri Desmond Lim Siew Choon of Malton Bhd and Pavilion Real Estate Investment Trust set a new record for land prices in the city when he purchased a small parcel of land next to Pavilion Kuala Lumpur for RM7,209 psf.

A search on the Companies Commission of Malaysia website on Pavilion Entertainment shows that the directors of Pavilion Entertainment are Choo MeiLeen, Chan Hua Eng, Datuk Seri Ghazali Mohd Ali, Koo Hock Fee and Long Chay Tai. Yew Capital Management is held by Theng Realty Sdn Bhd (64.7%) and Cathay Investments Sdn Bhd (35.3%).

In 2017, the founding family of Cathay Organisation’s Cathay movie theatre chain sold its cinema operations for S$230 million to mm2 Asia. The sale included 19 cinemas in Malaysia and the rights to the Cathay brand name. Cathay Organisation managing director Choo MeiLeen said the decision to sell the 80-year-old business was difficult.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.