Gabungan AQRS to sell One Jesselton hotel, suites — source

KUALA LUMPUR: Gabungan AQRS Bhd, which inked a memorandum of understanding (MoU) with Singapore-based Tera Capital Pte Ltd to jointly develop its One Jesseltown Waterfront project in Kota Kinabalu, Sabah, may cash in on its hotel and serviced suites there for between RM400 million and RM500 million.

On top of that, the group may also bag a similar amount from the sale of residential condominiums in the same 6.28-acre (2.54ha) mixed development, a source familiar with the matter said.

It is understood that the units, which are said to be priced above RM1 million, will be marketed to buyers in Singapore and China, which are among locations where Tera Capital has offices and is active in the hotel and real estate scene.

Under the MoU, which was announced by Gabungan AQRS via a filing with Bursa Malaysia yesterday, Tera Capital would appoint a related company to promote and market the respective residential units in the project.

It would also bring in a “partner-contractor” to form a joint venture (JV) with Gabungan AQRS’s wholly-owned subsidiary, Gabungan Strategik Sdn Bhd, for the construction of the project.

On top of that, Tera Capital will provide full hotel management and operation services to the hotel and serviced suites, which Gabungan AQRS will develop according to the design concept provided by the former.

The MoU is valid for three months for the parties to discuss further details of the project and decide on the final scope involved. It was inked following the signing of a non-disclosure agreement between the two parties on March 21.

According to Gabungan AQRS, the proposed JV is in line with its long-term strategic plan to retain the One Jesselton Waterfront development as recurring income assets. Apart from the hotel, suites and residential units, the development will also house a premier lifestyle shopping mall, office tower, and ancillary services and facilities.

The project is worth a total of RM1.5 billion and is a JV between Gabungan AQRS and Suria Capital Holdings Bhd.

Last December, the mall in the project was given a RM100 million loan from the Tourism Infrastructure Development Fund following the accreditation of the site as a tourism-orientated development by the tourism and culture ministry of Malaysia.

The project is expected to benefit from its proximity to the proposed bus rapid transit and Sabah International Convention Centre in Kota Kinabalu, Gabungan AQRS said.

Recently, Macquarie Research initiated coverage of the group with a “buy” call and a target price of RM1.80.

“We believe [Gabungan] AQRS will start leveraging its relationships with state governments and government-linked companies in FY17 (financial year 2017) to secure contracts of upcoming infrastructure projects in Malaysia,” it said in a July 10 report.

It also expects the group to partner with its peers in bidding for East Coast Rail Link (ECRL) packages as some 70% of the project’s RM55 billion construction value is estimated to be awarded to Chinese contractors.

The research house highlighted that Gabungan AQRS already partnered with the ECRL’s leading Chinese state-owned enterprise, China Communications Construction Company Ltd (CCCC), when it awarded piling works of the Sungai Besi-Ulu Kelang Elevated Expressway project to CCCC and Econpile Holdings Bhd in December last year.

Shares in Gabungan AQRS closed unchanged at RM1.40 apiece yesterday, with a market capitalisation of RM547.29 million.

This article first appeared in The Edge Financial Daily, on July 21, 2017.

For more stories, download TheEdgeProperty.com pullout here for free.