This article first appeared in The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023
PROPERTY developer UEM Sunrise Bhd (UEMS) has placed a portfolio of assets in Kuala Lumpur — comprising hospitality, retail, parking bays and district cooling systems — up for sale. If sold, the assets — which include the Hyatt House and Publika Shopping Gallery — could fetch as much as RM1 billion, industry experts estimate.
UEMS has hired real estate agency CBRE | WTW as the exclusive marketing agent to seek potential buyers.
When contacted for confirmation, UEMS did not deny the planned asset sales. Instead, the company tells The Edge that it is rebalancing its asset portfolio as part of what it calls the “Triage” stage of its three-phased strategic turnaround plan, introduced towards the end of 2021, in anticipation of an improving economy as the nation adjusted to the Covid-19 pandemic environment.
“The strategy was to implement curated measures in the mid to long term and transform the company into an effective and balanced real estate player,” UEMS says.
The first phase, Triage, runs from 2022-2023, followed by Stabilise (2024-2025) and Sustain (2026 and beyond). During the Triage phase, UEMS will prioritise issues needing immediate attention following the financial performance in both 2020 and 2021 caused by the impact of the pandemic. “This includes the monetisation of various assets and non-strategic land in addition to the reinforcement of several pipelines,” UEMS says. It did not name the assets that it had identified for sale.
UEMS posted a net loss of RM277.28 million on the back of RM1.14 billion in revenue in the financial year ended Dec 31, 2020, and a net loss of RM213.05 million on the back of RM1.18 billion in revenue in FY2021.
However, in FY2022, UEMS returned to the black, posting a net profit of RM80.54 million. It recorded a revenue of RM1.47 billion, of which 72% was from property development, 21% from land sales and asset divestment, and 7% from property investments and others.
“The company is now in the second year of Triage and continues to strengthen its fundamentals, streamline core capabilities, build product pipeline, improve balance sheet quality and further grow profitability, before it enters the Stabilise phase,” UEMS adds.
“Regardless of the plan, the monetisation of its assets — if any — will be thoroughly evaluated to ensure that UEMS can provide value to the company’s long-term sustainable growth with positive impact to its stakeholders.
“In the event of a required regulatory disclosure, UEM Sunrise will undertake the necessary steps to disclose as required by relevant regulatory bodies in due time as the process is still ongoing,” it points out.
The Edge had observed that over the past few weeks, real estate agency CBRE | WTW had been placing “For Sale” advertisements asking interested parties to contact them for enquiries, along with the closing date for the offers.
One advertisement read, “Opportunity to own a renowned hotel in Mont’Kiara, KL” and was described as a four-star hotel located within a mixed development that includes a retail plaza.
A second advertisement read, “For sale — Retail Plaza & Car Park”. This ad listed three separate assets: two in Mont’Kiara and one in Kuala Lumpur city centre. A third advertisement invited offers for district cooling systems in Puteri Habour, Iskandar Puteri Johor and Solaris Dutamas, Kuala Lumpur.
The Edge has managed to identify the hotel asset in the first advertisement as the 299-room Hyatt House, located within the Arcoris mixed development in Mont’Kiara. Arcoris also offers a 53,000 sq ft retail component and 1,400 parking bays.
It is noteworthy that the hotel and the retail component/parking bays are being sold separately. Based on a back-of-the-envelope calculation, property experts place the value of the three components at RM365.5 million. This is based on a pricing of RM770,000 per room, RM40,000 per parking bay and RM1,500 psf for the retail space. However, it is learnt that UEMS is hoping to fetch RM1 million per room for the asset.
In its annual report for the financial year ended Dec 31, 2021, UEMS says Arcoris, a freehold asset, has a net book value of RM299.83 million as at Dec 31, 2021.
UEMS is also seeking a buyer for 1,776 parking bays in Mont’Kiara. The Edge understands that these bays are located at Solaris Dutamas. UEMS has also placed the central cooling district system in Solaris up for sale.
While no advertisements were seen for the sale of Publika — the retail component within Solaris — sources tell The Edge that UEMS is keen to dispose of it. It is learnt that UEMS is marketing the retail asset to selected parties. Valuers peg the value of the mall and parking bays at around RM551 million.
Yet another asset up for sale is a retail component with a net lettable area of 23,000 sq ft and 880 parking bays, which was described as located in a mixed-use development at the “intersection of Jalan Sultan Ismail and Jalan Ampang”. These assets, understood to be part of Summer Suites, are said to be worth RM78.5 million.
During its quarterly results announcement in February, UEMS said that the group’s performance this year will also be supported by land sale transactions entered in 2022. These include the sale of the remaining 1,777 acres it owns in Tapah, Perak, for RM75.5 million and the sale of 67.7 acres in Gerbang Nusajaya, Iskandar Puteri for RM85.6 million.
Meanwhile, in the Stabilise phase of its turnaround, which begins next year, UEMS will focus on the internal transformation of the company’s people, processes and overall portfolio. In the third phase, Sustain, UEMS will carry through the momentum that has been built in the previous two phases to position the company for long-term sustainable growth.
Closing at 25 sen last Friday, UEMS has a market capitalisation of RM1.26 billion and was trading at one-fifth of its unaudited net asset per share of RM1.32 as at end-2022.
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