Real estate experts are perplexed how one of the most coveted land parcels in Malaysia, Bukit Tunku was divested at a significant loss, reported the Asia News Network.
It is “beyond comprehension” that land bought by property developer Thriven Global Bhd in Bukit Tunku ten years ago was recently sold at a loss of RM11.4 million, said Siva Shanker, Head of Axis REIT Managers Bhd and immediate past-president of Malaysian Institute of Estate Agents (MIEA).
“It’s one of the most sought-after residential addresses and there is no indication that prices of properties there are coming down,” he told The Star when contacted on Wednesday (13 April).
Siva explained that Bukit Tunku, previously known as Kenny Hills or Bukit Kenny, is an upscale residential area where there is strong interest from very long-term investors and owner-occupiers.
“There is no speculation there. Land there should be able to fetch top dollar, especially from the super rich.”
Likewise, PPC International Managing Director Datuk Siders Sittampalam is baffled why a property within Bukit Tunku was transacted at a loss. “Unless there are restrictions that we do not know about, the land should be sold at a premium.”
Meanwhile, CBRE|WTW Managing Director Foo Gee Jen noted that the planning guidelines for Bukit Tunku are very stringent. “If one were to buy to speculate for high-density development, he may face difficulties. So, in this situation, he may resell at a loss.”
On Tuesday, Thriven revealed that its 51-percent-owned subsidiary Mulpha Argyle Property sold 2.5 acres of land at Bukit Tunku to real estate firm Mount Well Sdn Bhd for RM27.5 million (RM249.84 psf), translating to a loss of about RM11.4 million.
The company said the investment cost in the land stood at RM30.75 million (RM279.32 psf) in 2007. But as of 31 December 2016, it had a net book value of RM38.38 million (RM348.69 psf).
Ghazie Yeoh Abdullah, Managing Director of Thriven Group, explained that the sale would help the firm recoup cashflow and allow it to divert capital towards profitable developments. This is because the property, which is earmarked for bungalows, failed to generate returns wanted by the company.
“At over two acres, we could only build six bungalows for around RM19 million each. The focus of the company right now is to develop affordable projects worth over RM100 million. So that (Bukit Tunku) land did not fit into our present strategy.”
Despite the loss, the sale is still positive in terms of cashflow. “We sold at a loss because we have decided to recoup the cashflow of RM20 million, which we will redeploy into our projects, providing us with better returns.
Moreover, the actual loss to Thriven is smaller is it only held a 51 percent stake in the unit that owned the land. It will also help the company repay the loan for the land, which has a high interest rate of eight percent per year.
The sale is expected to result in a net proceeds of RM19.85 million after deducting about RM7.12 million to repay the lenders.
“After this transaction, we will take over the company and use its tax loss as an asset. With the projects we have and the potential ones, there is no harm in having a tax-loss company to offset the profitability of the future projects,” Ghazie added.
Popular development around Bukit Tunku is:
Image sourced from Malaysia Chronicle
Radin Ghazali, Content Writer at PropertyGuru, edited this story. To contact her about this or other stories email radin@propertyguru.com.my
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