KUALA LUMPUR (Nov 24): Construction outfit Varia Bhd (KL:VARIA) said the group will lead the development of a commercial project in Kuala Lumpur on a land parcel owned by Citaglobal Bhd’s (KL:CITAGLB) unit, under a deal that grants Varia full entitlement to the project’s development profits.
In a bourse filing on Monday, Varia said the development will be undertaken by its wholly owned unit Varia Crest Sdn Bhd (VC) jointly with Citaglobal's subsidiary Citaglobal Property Development Sdn Bhd (CPD).
The collaboration involves a 6,410-square-metre leasehold tract in Mukim Bandar Kuala Lumpur, which CPD expects to register under its name upon completion of the title perfection process.
Under the agreement, VC is granted the right to develop the land, with the project encompassing office and commercial spaces.
In return for contributing the land, CPD “shall be entitled to a combination of cash consideration and in-kind property entitlement within the development”. The exact composition and specifications of the units will be finalised at the detailed design stage.
Meanwhile, Varia will take full ownership of the project’s upside. "The development’s profit shall be fully attributable to VC, and CPD shall use its best efforts to support VC in maintaining the projected profit level and shall refrain from taking any action that may [cause] VC's entitlement to fall below the agreed estimate," the filing read.
The JV is subject to several conditions precedent to be fulfilled within four weeks of signing, including VC procuring a corporate guarantee from Varia in favour of CPD.
Varia said the development will be financed through a combination of internally generated funds, sales of properties and bank borrowings.
The project is expected to be completed within 36 months from the approval of the building plan.
Shares in Varia settled three sen or 3.92% higher at 79.5 sen on Monday, valuing the group at RM341.60 million. The stock is down over 5% year to date.
Meanwhile, Citaglobal closed half a sen or 0.63% higher at 80.5 sen, giving the company a market capitalisation of RM342.59 million. Its shares have risen more than 10% year to date.