PETALING JAYA: Guocoland (Malaysia) Bhd has proposed to dispose of Menara Guoco in Damansara Heights to Tower Real Estate Investment Trust (Tower REIT) for RM242.1 million cash, in a related party transaction.
It is expected to realise an estimated net gain on disposal of RM6.8 million for Guocoland, which represents a consolidated earnings per share of 1 sen.
Guocoland told Bursa Malaysia that its indirect wholly owned subsidiary DC Offices Sdn Bhd had on Monday entered into a conditional sale and purchase agreement (SPA) with Tower REIT’s trustee MTrustee Bhd for the exercise.
The proposed disposal is deemed to be a related party transaction as Guocoland is a major unitholder of Tower REIT.
Menara Guoco is a a 19-storey office building which forms part of an integrated commercial development known as Damansara City, comprising another office building, a hotel, a retail mall, serviced apartments and car parks.
DC Offices acquired the development rights in respect of the property in 2012 and completed the construction in 2015 with a total cost of investment of RM165.1 million as at Feb 6, 2020.
The investment objective of Tower REIT is to invest primarily in a portfolio of real estate including quality office buildings, commercial properties, residential properties and industrial properties in order to provide its unitholders with regular and stable distributions as well as to achieve medium to long-term growth in its net asset value per unit.
Tower REIT’s portfolio comprises two commercial office buildings located in Kuala Lumpur.
For Guocoland, it represents an opportunity for the group to realise its investment in the property as well as in line with the group’s strategy to focus on property development. Proceeds from the proposed disposal will provide the group with the necessary funds for existing working capital requirements.
“In addition, the repayment of bank borrowings using the proceeds from the exercise is also expected to result in interest savings, which would improve the group’s overall cash flow management.”
The exercise is expected to be completed by the third quarter of 2020.
At the midday break, Guocoland’s share price was down 3 sen to 63 sen, while Tower REIT slipped 1 sen to 73 sen.