KUALA LUMPUR (May 6): Practice Note 17 (PN17) company Ivory Properties Group Bhd (KL:IVORY) is selling a double-storey detached commercial building known as The Birch House in George Town, Penang for RM18 million to settle its bank borrowings.

In a filing with Bursa Malaysia on Tuesday, the group said the property, currently leased to a third-party restaurant chain, generates insufficient rental income to cover loan installments.

Consequently, the loan has fallen into default, prompting the financier, Bank Islam Malaysia Bhd (KL:BIMB), to initiate legal action against Ivory Properties. The case has progressed to a summary judgment application and has been transferred from the Kuala Lumpur High Court to the Penang High Court.

Given these circumstances, Ivory Properties has decided that selling this non-core asset to raise funds for loan repayment is in the company's best interest. Ivory Properties anticipates a net gain of about RM7.28 million from the property sale, which is expected to be completed by the third quarter of this year.

Of the RM18 million in sales proceeds, RM10.5 million will be used to immediately settle bank borrowings, while RM7.5 million will be allocated for working capital.

Ivory Properties slipped into PN17 status in August 2022 after its external auditors, Messrs KPMG PLT, issued a disclaimer of opinion on the company’s audited financial statements for the financial year ended March 31, 2022 (FY2022) and raised doubts regarding Ivory Properties' ability to continue as a going concern.

According to KPMG, Ivory Properties reported a net loss of RM79.51 million during FY2022, and the group’s liabilities exceeded its current assets by RM60.22 million.

The financial difficulties primarily stemmed from its wholly-owned subsidiary, Ivory Gleneary Sdn Bhd (IGSB), which incurred liquidated ascertained damages (LAD) totalling RM73.6 million owed to purchasers of Phase 3 of the Penang Times Square — The Wave and Commercial — as of the cut-off date on March 31, 2024.

As of end-June 2024, IGSB recorded accumulated losses of RM74.5 million, with an additional RM500,000 loss incurred between April and June. It was also sued by BIMB over an outstanding payment of RM19.8 million.

In September last year, Ivory Properties appointed interim liquidators to initiate the winding-up of IGSB as part of its regularisation plan.

As of end-2024, the group’s cash and bank balances stood at RM1.69 million, while its short-term borrowings totalled RM58.01 million.

Shares of Ivory Properties closed down 0.5 sen or 20% to two sen on Tuesday, giving the property developer a market capitalisation of RM9.8 million.