KUALA LUMPUR (Aug 17): Debt-ridden Perak Corp Bhd, a 52.9%-owned subsidiary of the Perak State Development Corp, will jointly develop four pieces of land in Hulu Bernam Timor, Muallim, Perak, with ARX-YSC Sdn Bhd, a private limited company engaged in construction, property consultancy services and real estate activities — nearly four years after the two companies signed a joint venture agreement (JVA).

In a filing with Bursa Malaysia on Thursday (Aug 17), Perak Corp said it had on Wednesday entered into a supplemental agreement to the JVA entered into on Sept 10, 2019 with ARX-YSC to vary certain terms of the JV. ARX-YSC director Ivan Ang Ri Xiang holds a 52% stake in the company while another director Yu Swee Ching owns the remaining 48%.

Under the JVA, they plan to subdivide the land into 124 individual titles for industrial use and/or other uses to be mutually agreed to by both parties.

Perak Corp owns the leasehold land whose term expires in May 2108. Spanning a total of 424.7 acres, the four pieces of land are currently vacant.

One piece of land is currently charged to CIMB Bank Bhd for a loan facility granted to Perak Corp's wholly-owned subsidiary PCB Taipan Sdn Bhd. The loan sum payable to CIMB is estimated at not more than RM38 million. The other three pieces of land are free from any encumbrances.

Perak Corp had acquired the land in November 1997. The original cost of investment was RM41.82 million, while the net book value of the land as at end-December 2022 was RM46.94 million.

Perak Corp said independent valuer Messrs Firdaus & Associates had valued the land at RM117.45 million as at Dec 31, 2022 based on the market value basis. The forced sale value of the land is valued lower at RM82.21 million.

Under the JVA, Perak Corp is to provide the land for the proposed development, which will take five years to complete. ARX is to develop the land.

Perak Corp is also entitled a profit share to be calculated based on RM9.50 per sq ft to be calculated based on net land area as stated in all the subdivided individual titles to the subdivided units or lots. However, the 20% of the net profit is only payable to Perak Corp if the sale or sub sale for any land or subdivided unit or lot is more than RM9.50 per sq ft.

Notwithstanding this, Perak Corp’s JVA entitlement is subject to a minimum total profit share of RM129.5 million to be calculated based on RM7 per sq ft to be calculated based on the land’s total gross area of 424.76 acres.

Meanwhile, Perak Corp explained that the JVA was signed in September 2019 at a time when the group was threatened by potential legal actions due to the potential defaults in various loans and borrowings by Animation Theme Park Sdn Bhd — the operator of the now-defunct Movie Animation Park Studios (MAPS) theme park in Meru Raya, Ipoh — and Perak Corp.

However, due to the uncertainty on the impact of the defaults, Perak Corp had refrained from publicly disclosing the JVA at that time.

Perak Corp said this was permitted under the listing requirements of Bursa Securities, as the facts of the matter in relation to the JVA were in a state of flux then and thus disclosure was withheld until a more appropriate time.

Thereafter, the company had also slipped into Practice Note 17 (PN17) status in February 2020, as a result of a default in payment and its inability to declare solvency. It also underwent a corporate restructuring and in-house management enhancement; all of which resulted in Perak Corp and ARX-YSC being unable to implement and carry out their respective obligations and duties as stated in the JVA, Perak Corp added.

"Since then, the parties had attempted to renegotiate the JVA, but failed to reach a common ground on how to proceed with the transaction. After a change of management in January 2023, the parties revisited the matter and now, agree to pursue the transaction through the supplemental agreement to the JVA."

Perak Corp intends to use the entitlements from the proposed development to meet its obligations under the supplemental agreement to pay the costs for conversion of land use, subdivision, renewal of lease period and valuation fee; and the balance to serve debts and for working capital requirements of the group.

It added that the proposed development provides an avenue for the group to raise funds to channel towards its business operations, which will improve the group’s overall cash flow position as well as strengthening its financial position as part of its regularisation effort.

"The proposed development is part of the measure to raise the necessary cash required for the group’s business regularisation plans, which are still in the midst of being finalised as at the date of this announcement," it said.

Contribution from the proposed development is expected to start from the financial year ending Dec 31, 2024 until the expiry of the project. However, the proposed development is still subject to the approvals of its shareholders at an extraordinary general meeting to be convened.

Barring any unforeseen circumstances, the proposed development is expected to be completed by the end of 2028.

Perak Corp shares were untraded on Thursday. It last closed at 28.5 sen, giving the company a market capitalisation of RM28.5 million.