GuocoLand to sell Menara Guoco to Tower REIT for RM242m

KUALA LUMPUR (March 2): GuocoLand (Malaysia) Bhd is selling Menara Guoco in Damansara Heights here to Tower Real Estate Investment Trust (Tower REIT) for RM242.1 million cash, in a related party transaction (RPT).

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 one sen.

In a bourse filing today, GuocoLand said its indirect wholly-owned subsidiary DC Offices Sdn Bhd has entered into a conditional sale and purchase agreement with MTrustee Bhd, the trustee of Tower REIT for the proposed disposal.

The proposed disposal is deemed to be a RPT as GuocoLand is a major unitholder of Tower REIT.

GuocoLand said the exercise represents an opportunity for the group to realise its investment in the property. It is also in line with group’s strategy to focus on property development.

"The group is continuously evaluating business opportunities in the property development sector," it said, adding that the proceeds from the proposed disposal will be used to repay bank borrowings and for working capital.

Menara Guoco is 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 to 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.

In a separate filing, Tower REIT said the proposed acquisition is in line with the objective to grow the distributable income and to provide unitholders with regular and stable income distributions by expanding its existing portfolio of real estate to include quality properties with stable recurring income.

As at Feb 6, 2020, the building has an occupancy rate of about 97.1% and is expected to increase Tower REIT's pro forma occupancy rate for its portfolio to 59.8% from 48.1%.

Upon completion of the proposed acquisition, Tower REIT's consolidated asset base is expected to increase about 42.3% to RM814.3 million and the average building age of its property portfolio is expected to decrease to 18 years from 23.

The proposed disposal is expected to be completed by the third quarter of 2020.

At the time of writing, GuocoLand’s share price was down 3 sen to 63 sen, for a market capitalisation of RM441 million, while Tower REIT slipped one sen to 73 sen, bringing to a market capitalisation of RM208 million.

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