KUALA LUMPUR (May 25): YNH Property Bhd’s land deal with Sunway Group Bhd seems to have hit a stumbling block as Bursa Securities has raised more questions on the transaction.
On May 16, YNH Property announced that it was disposing of a piece of land measuring 5.09 acres in Desa Sri Hartamas to Sunway’s wholly-owned subsidiary Sunway Living Space Sdn Bhd for RM170 million cash.
However, it was issued with the first query by Bursa Securities which had 26 questions, to which it replied on May 19.
On Thursday (May 25), YNH Property received a second query from Bursa Securities related to the land deal, and was required to provide its response within 24 hours.
In its reply to the query, YNH Property acknowledged the group had overlooked a few details and will seek advice from the adviser to rectify the oversight.
The group also pointed out that the inclusion of the specific condition precedent to seek approval of its shareholders is to fulfil the requirement by Sunway, arising from the negotiation.
It’s interesting to see if Bursa is satisfied with the latest response by YNH Property.
Below is YNH Property’s response to the second query:
1. Based on your representation made in the announcements, the Sub-Sale Agreement entered into on 18 April 2022 whereby the Vendor had purchased the Property from the First Beneficial Owner for a purchase consideration of RM150 million is deemed a transaction pursuant to Chapter 10 and Questions & Answers 10.2 of the Main Market Listing Requirements (LR). In this regard, you are required to calculate the materiality of the percentage ratios pursuant to Paragraph 10.02 of the LR and make announcement on the acquisition of the Property, if required, pursuant to Chapter 10 of the LR.
We acknowledge our oversight of such [an] announcement and shall seek advice from the Adviser to rectify this oversight.
2. To provide further clarification on the “various submissions to various authorities” with regard to the deferred registration for Kar Sin Bhd to be the registered proprietor by specifying the names of the authorities involved, type/description of the application submitted, the date of the application, current status of the application and the indicative timeline to obtain the authorities' approval.
Application in the name of the First Beneficial Owner to Jabatan Ketua Pengarah Tanah Dan Galian Persekutuan Wilayah Persekutuan Kuala Lumpur has been made on Oct 13, 2022 to obtain a final title after the compulsory acquisition by the government and it is estimated that the approval for the application with the final title can only be obtained in July or August 2023. Moreover, the Development Order (DO) approved by Dewan Bandaraya Kuala Lumpur (DBKL) requires annual renewal and currently the approval is given to the First Beneficial Owner based on support that the registered owner and the First Beneficial Owner is the same party and a change in ownership may interrupt renewal of the DO.
3. To clarify further on the rationale and reason for the inclusion of the specific Condition Precedent to seek approval of YNH’s shareholders if the Proposed Disposal is not subject to such shareholders’ approval.
The inclusion of the specific Condition Precedent to seek approval of YNH’s shareholders approval is to fulfil the requirement by the Purchaser arising from the negotiation.
4. Pursuant to Paragraph 9.03(1) of the LR, a listed issuer must make immediate public disclosure of any material information. Paragraph 9.04 of the LR also sets out some examples of events which may require immediate disclosure including, among others, the entry into a joint venture agreement and the acquisition or loss of a contract. In this regard, please clarify the basis/ justification and the materiality assessment undertaken by YNH to form the conclusion that no announcement was required for the Turnkey Construction Agreement entered into on June 20, 2016 and the subsequent termination of the said agreement on April 1, 2022.
5. To provide the salient terms of the Turnkey Construction Agreement entered into on 20 June 2016.
We acknowledge our oversight of such [an] announcement and shall seek advice from the Adviser to rectify this oversight.
6. To clarify further why the Vendor (as contractor) has to make upfront payment to the First Beneficial Owner (as developer) based on the agreed profit-sharing proportions ahead of the completion time of the Mixed Development. To comment if such term/arrangement is fair/reasonable and in the best interest of YNH.
The upfront payment by the Vendor is a requirement of the Turnkey Construction Agreement and in return of the upfront payment the Vendor secure the right to use the land as security to be pledged to financial institution to finance the operation of Vendor without restriction which is a fair commercial term for both parties.
7. To justify further on the rationale for the refund to be made conditional upon the successful selling of the said Property to the third party purchaser. In the event the Proposed Disposal does not go through and the Vendor is unable to find a new purchaser, please clarify whether the refund will continue to be held back by the First Beneficial Owner indefinitely. To also provide the salient terms and clauses relating to such refund. To comment if this arrangement is fair/reasonable and in the best interest of YNH.
In view for the First Beneficial Owner to agree to lower the selling price to RM150 million and for them to further agree to refund the differential amount of RM89.5 million, a generous reasonable time is required to be allowed to the First Beneficial Owner in order to secure repayment. In the event that the Vendor is unable to find a new purchaser, the Vendor may have to consider reviving the turnkey construction agreement to recover the amount paid to the First Beneficial Owner.
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