BRDB ... Jul10

It is taking over from Dubai World, an investment arm of the Dubai government, a joint-venture agreement with UEM Land Bhd to undertake the RM2.3 billion Residential North high-end mixed development in Puteri Harbour in the Iskandar Development Region, Johor.

Its wholly owned subsidiary Ardent Heights Sdn Bhd had entered into a conditional sale of shares agreement with Singapore-incorporated Limitless Holdings Pte Ltd to acquire the latter’s entire 60% stake in Haute Property Sdn Bhd, which has been granted by UEM Land to undertake the development on an 111-acre parcel of land in Puteri Harbour in Nusajaya.

Ardent would acquire Limitless’ 60% shareholding in Haute comprising 600,000 shares of RM1 apiece for a nominal sum of RM1. However, Ardent will reimburse Limitless RM75 million, for which the latter had advanced to Haute for partial payment of the development rights.

Ardent would also pay RM1 million as full and final settlement of about RM10 million advanced by Limitless to Haute to meet the latter’s operating and development expenses.

UEM Land owns the remaining 40% stake. Haute had on Dec 19, 2007, inked the development agreement with UEM Land, as the master developer of the Puteri Harbour development, and Bandar Nusajaya Development Sdn Bhd, as the registered owner of the land. Limitless is a wholly owned unit of Limitless LCC, a global integrated master developer and a unit of Dubai World.

The proposed share purchase will enable the BRDB Group to leverage on its property development expertise to participate in the growth of the Iskandar Development Region. This is consistent with BRDB’s business strategy of improving profitability for the BRDB Group and increasing shareholder value in the long term.

The proposed development is expected to be carried out in six phases over seven years with the construction of phase one expected to start in the third quarter of 2011.

Based on a preliminary feasibility study, the proposed development is expected to generate a gross development value of about RM2.3 billion and gross development profit of about RM700 million.

The purchase consideration of RM1 was arrived at on a willing-buyer willing-seller basis, after taking into consideration Haute’s negative shareholders’ funds of RM233,676 based on its unaudited financial statements as at Dec 31, 2009.

Ardent’s investment in Haute would be financed by internal funds and/or bank borrowings, whereby the exact mix of borrowings and funds would be determined later. BDRB said the proposed transaction was expected to be completed by November 2010.

Going forward, UEM Land should be happy that it has found a more financially sound partner in BRDB.

However, industry observers say the deal is expensive as RM50 psf, based on BRDB’s stake in the JV, although the locations of the project will enable it to enjoy the benefits of other ongoing developments.
It remains to be seen whether BRDB gas scored a good deal, as much will depend on how IDM will perform in the coming years.

As at march 31, 2010, its gross cash stands at Rm144 million, its total borrowings amount to RM801 million, resulting in a gearing of about 40%. Should the RM145 million for IDM be considered in BRDB’s borrowings, its gearing would rise to about 50%.