KUALA LUMPUR (Dec 6): Property developer IOI Properties Group Bhd plans to acquire five-star hotel W Kuala Lumpur (W KL) in Jalan Ampang, KL for RM270 million, cash, from property group Tropicana Corp Bhd.
IOI Properties, via its indirect subsidiaries IOI PFCC Hotel Sdn Bhd and Flora Development Sdn Bhd, has signed a sale and purchase agreement with Tropicana’s unit, Tropicana Residences Sdn Bhd (TRSB), for the proposed acquisition, according to Tropicana's filing on Wednesday.
The acquisition came on the heels of a major asset buy by IOI Properties' chief executive and major shareholder Lee Yeow Seng last month. The tycoon, via his private firm Shenton 101, emerged on Nov 1 as the sole bidder to redevelop Singapore’s Shenton House for S$538 million (about RM1.87 billion). Built in the 1970s, Shenton House is one of the oldest buildings in Singapore’s Raffles Place central business district.
W KL is a 25-storey hotel with 150 rooms. As at Dec 31, 2022, its audited net book value was RM265.135 million.
According to Tropicana, the group's original cost of investment in W KL is RM364.01 million, comprising the purchase consideration of about RM43.45 million for the land, which was completed in year 2010, as well as year-to-date development costs amounting to around RM320.56 million as at Oct 31 this year.
Tropicana said the disposal of W KL represents an opportunity for the group to immediately unlock the value of its investment asset, as the disposal consideration translates to a price per key of approximately RM1.8 million. The deal is expected to provide the group an estimated net pro forma gain on disposal of RM7.41 million.
“Upon completion of the proposed disposal, Tropicana Group is able to improve its financial performance and realise a gain, and thereby strengthen its cash flow position,” said Tropicana, which is controlled by its founder, group executive vice-chairman and major shareholder Tan Sri Danny Tan Chee Sing.
Of the disposal proceeds, RM105 million will be channelled to fully repay W KL’s existing bank borrowings, while another RM164.86 million will be allocated for partial repayment of the group’s existing bank borrowings, Tropicana said.
As of Sept 30 this year, Tropicana’s total borrowings stood at RM3.26 billion, of which RM2.162 billion was long-term loans, while the remaining RM1.098 billion was short-term loans.
Tropicana said the proposed disposal, expected to be completed by the first quarter of next year, would enhance the group’s net assets in the future, as the disposal proceeds will be used to partially repay its bank borrowings, which will subsequently improve the company’s gearing.
Tropicana more than halved its net loss to RM10.34 million in the third quarter ended Sept 30, 2023 (3QFY2023) from RM26.27 million a year earlier, on completion of its disposal of two parcels of freehold development land in Kajang and Genting Highlands, as well as a continuous cost rationalisation exercise to reduce overall expenses.
Shares in Tropicana settled one sen or 0.82% higher at RM1.23 on Wednesday, giving the group a market capitalisation of RM2.83 billion.
Shares in IOI Properties settled two sen or 1.17% lower at RM1.69, valuing the company at RM9.31 billion.