Magna Prima, Golden Rainbow View to jointly develop Lai Meng school land into a RM1.2 bil mixed development

• The development land was acquired by Magna Prima's wholly-owned subsidiary Twinicon (M) Sdn Bhd from Lai Meng Girls School Association in 2014 for RM148.15 million.

KUALA LUMPUR (Jan 18): Property developer Magna Prima Bhd is teaming up with Golden Rainbow View Sdn Bhd to jointly develop a mixed development with an estimated gross development value (GDV) of RM1.2 billion, on a 113,963 sq ft site previously occupied by the Lai Meng school here, which fronts the north-western side of Jalan Ampang. The school is currently unoccupied and not being used.

The development land was acquired by Magna Prima's wholly-owned subsidiary Twinicon (M) Sdn Bhd from Lai Meng Girls School Association in 2014 for RM148.15 million.

Magna Prima explained that over the years, it has been re-evaluating its options on the development land, including the possibility of disposing of the land. Most recently, the group had in June 2022, received an expression of interest to acquire the land at an indicative price of US$69 million (RM303.6 million), but it did not engage further on the expression of interest.

However, Magna Prima said it expects to derive a proforma loss from the proposed joint development as the group no longer intends to develop the land on its own due to high capital commitment. But it views the proposed joint development as a good opportunity as it allows the unlocking and monetisation of land at a consideration that represents a premium of RM201.8 million to the initial cost of investment and premium of 16.67% to the market value.

"For illustration purpose, in the event the group only receives the landowner’s entitlement of RM350 million in accordance to the terms and conditions of the development agreement, the group will record a net proforma loss of RM20.15 million over the 36 months period arising from the proposed joint development," said Magna Prima.

With the latest proposal, Magna Prima said the Lai Meng school will be demolished to make way for the mixed project. "Geographically, the site of the development land is located within the KL Golden Triangle. It is situated approximately 3km to the north-west of DBKL and about 800m to the north-west of KL City Centre."

In a filing with Bursa Malaysia on Thursday, Magna Prima said Twinicon has entered into a joint development agreement with Golden Rainbow View to undertake the RM1.2 billion mixed development on five parcels of adjoining land. The filing also showed that privately-held Golden Rainbow View is 70%-owned by Datuk Seri Wong Sze Chien, group chief executive officer and executive director at Tafi Industries Bhd, while the remaining 30% is held by Tafi Industries group managing director Datuk Seri Azlan Azmin.

Measuring 113,963 sq ft, the development will potentially feature commercial lots, small office home office (SOHO) units, service apartments, office suites and a hotel. The estimated gross development cost is RM650 million.

The land has an audited net book value of RM369.65 million. And based on the market value ascribed by independent valuer VPC Alliance (PJ) Sdn Bhd, the land is valued at RM300 million.

Under the development agreement, Twinicon will be entitled to 10% of the GDV of the project, or a minimum sum of RM350 million (landowner’s entitlement) for contributing the development land to Golden Rainbow View. The RM350 million sum represents a premium of 16.67% to the market value of RM300 million as ascribed by VPC Alliance.

"The project is expected to commence immediately upon the developer obtaining the development order from the relevant authorities, which is expected to be obtained by the third quarter of 2024 and to be developed over an estimated period of six years," it added.

Meanwhile, Magna Prima said the development land is currently being charged to Hap Seng Credit due to an outstanding bank borrowing of RM46.53 million owing to Hap Seng Credit as at Dec 31, 2023, which is due by June 2024. In this respect, Magna Prima intends to utilise RM45 million from the landowner’s entitlement for the settlement of the borrowings.

It also intends to allocate RM305 million from the landowner’s entitlement to part finance the working capital requirements of the group’s property development activities.

Additionally, Magna Prima also intends to utilise part of the landowner’s entitlement to fund the acquisition of landbank, joint ventures and/or development rights to support the group’s property development business, should such opportunities arise. It has yet to identify any potential landbank and/or development rights to be acquired.

The proposed joint development is subject to the approval being obtained from its shareholders at an extraordinary general meeting to be convened.

AmInvestment Bank Bhd has been appointed as the principal adviser for the proposed joint development.

Magna Prima shares closed up 0.5 sen or 0.78% at 65 sen on Thursday, giving it a market capitalisation of RM258.9 million. The stock has risen 44.4% over the past year and 58.5% so far this year.

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