KUALA LUMPUR (Aug 14): Johor-based property developer Paragon Globe Bhd (KL:PGLOBE) said it has entered into a deal to undertake its first serviced apartment project in Johor Bahru, with an estimated gross development value (GDV) of RM1.49 billion.

The group expects to realise a profit of about RM334.45 million from the project, which will consist of four towers, each comprising 36 floors with 2,552 serviced apartments.

The expected gross development cost is about RM1.15 billion, Paragon Globe said in a statement on Wednesday.

Paragon Globe said its wholly-owned subsidiary, PGB Desa Heights Sdn Bhd, inked a development rights agreement with Tropicana Danga Bay Sdn Bhd, a 60%-owned indirect unit of Tropicana Corp Bhd (KL:TROP).

The agreement grants PGB Desa Heights the right to develop two prime freehold land parcels totalling 7.13 acres (28,844 square metres) in Johor Bahru's Danga Bay waterfront development. In exchange, PGB Desa Heights will pay Tropicana Danga Bay RM102.46 million, which represents 10% of the project’s estimated net development value.

The project is set to commence in February 2025 and be completed within four years.

According to Paragon Globe, the funding for the proposed development is expected to be financed via internally-generated funds or bank borrowings. As of end-March, the group had total borrowings of RM141.58 million, while its cash and bank balances stood at RM25.39 million.

“We have always been confident of the growth of Johor Bahru's housing market and with the Johor Bahru-Singapore RTS Link set to commence operations by 2027, we anticipate strong demand for quality and sustainable serviced apartments in the region,” said Paragon Globe’s executive chairman Datuk Seri Edwin Tan Pei Seng.

“This project aligns with our vision to meet the evolving needs of the community and capitalize on the opportunities presented by this transformative infrastructure development,” he added.

Paragon Globe slipped into the red for the financial year ended March 31, 2024 (FY2024) after two consecutive years of profitability. The group recorded a net loss of RM1.24 million in FY2024, compared to a net profit of RM3.95 million the previous year, due to higher costs and a lower fair value gain on other investments and investment properties.

The group has been actively acquiring land of late, including two parcels in Plentong, Johor for RM34.96 million from EKL Holdings Sdn Bhd. Prior to that, the group inked agreements in May and June to acquire two other Plentong plots, one measuring 9.84 acres for RM13.5 million, and another measuring 14.85 acres for RM28.56 million.

Paragon Globe is controlled by its executive chairman Datuk Seri Edwin Tan Pei Seng and his brother, Datuk Seri Godwin Tan Pei Poh, who also serves as the group’s executive director. The duo hold a 51.8% stake in Paragon Globe through their private vehicle, Paragon Adventure Sdn Bhd.

Shares of Paragon Globe finished 1.5 sen or 3.85% lower at 37.5 sen on Wednesday, giving it a market capitalisation of RM276.1 million.