This article first appeared in The Edge Financial Daily on March 9, 2018 - March 15, 2018

KUALA LUMPUR: DRB-Hicom Bhd intends to swap its real estate, including land and a golf resort in the Klang Valley, with its controlling shareholder Tan Sri Syed Mokhtar al-Bukhary for industrial land in Tebrau, Johor, and RM288.7 million cash.

DRB-Hicom is expected to realise a net gain on disposal of about RM849.4 million from the asset swap deal.

The list of real estate — including 2,268.43 acres (918ha) of land together with buildings erected on them located in Shah Alam, Klang, Puchong, Jalan Tun Razak, Batu Caves, Johor Baru and Terengganu to be disposed of by the diversified conglomerate — are collectively valued at RM1.93 billion, compared with the total market value of RM1.43 billion.

In return, DRB-Hicom will obtain 1,243.45 acres of freehold industrial land in Tebrau, Johor, according to a filing with Bursa Malaysia.

“Given the size, location and market value of these assets, it would be time-consuming and costly to dispose these assets separately to individual buyers,” the group said in the filing.

“The proposed disposals offer an attractive opportunity for the company because it is able to deal with one single party for the exchange of various types of properties located in various states in Malaysia, with the land in Johor, which is sizeable and strategically located land in Mukim Tebrau, with cash proceeds that can be used by the group to meet its financing repayment obligations,” it added.

Syed Mokhtar owns a 55.92% shareholding in DRB-Hicom through his 90%-owned unit Etika Strategy Sdn Bhd, while Tan Sri Mohd Khamil Jamil holds the remaining 10% in Etika.

The tycoon’s investment vehicle — Kelana Ventures Sdn Bhd and its wholly-owned subsidiary Prisma Dimensi Sdn Bhd — will acquire the assets.

Syed Mokhtar owns a 99.99% stake in Kelana Ventures, while his spouse Puan Sri Sharifah Zarah Syed Kechik al-Bukhary holds the remaining one share.

DRB-Hicom said it will utilise RM281.7 million of the cash consideration for the scheduled repayment of its Islamic Medium Term Notes, while the remaining RM7 million for estimated expenses relating to the disposals.

With the Johor industrial land to be obtained from Prisma Dimensi and Kelana Ventures, DRB-Hicom said its prospective industrial land bank would increase from 600 acres to 1,843 acres.

In a statement, DRB-Hicom managing director Datuk Seri Syed Faisal Albar said the transaction will signify a shift in focus for the group’s properties sector, aiming to leverage the group’s vast experience in industrial property development.

“With the incoming land bank in Johor, the group is in an advantageous position to tap into the high demand for industrial parks especially from Singapore, and DRB-Hicom intends to develop this into a high-tech and modern industrial park once the property market recovers from its current slumber,” he said.

“Having a core focus for each of our main sectors is important. While there is course potential in the hospitality industry, we feel that DRB-Hicom’s strengths lie in different areas. This exit will allow us to have a leaner and more focused properties portfolio, making it easier to harness these strengths and push towards excellence in industrial property development,” Syed Faisal said.