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Friday, December 2, 2011

PKNS to raise RM700mil for some of its projects and increase land-bank

PETALING JAYA: The Selangor State Development Corp (PKNS) plans to raise RM700mil in a sukuk issuance to finance some of its projects and to purchase land.

“We recently announced over RM14bil worth of new mega projects to be implemented over the next two to five years. PKNS needs to gear up more if we were to undertake these mega projects ourselves as their gross development value ranged between RM1bil and RM3bil each,” PKNS general manager Othman Omar told StarBiz.

Othman: ‘To address the issue of insufficient financing for our projects, we are looking forward to more public-private collaborations with local and international partners, especially in building the high-profile projects.’

He said the money raised from the sukuk would allow it to probably carry out two or three projects.

“We have to be more innovative in our implementation strategy. We are evaluating an offer from a foreign investor to buy two of the towers at RM800 psf at our Datum Jelatek proposed mixed development worth about RM900mil in Kuala Lumpur, in exchange for a fixed-price construction contract,” he said.

Furthermore, he said, PKNS had received offers from investors to lease long term or to purchase en bloc its developments, thus reducing its exposure in the event that the property market slows down over the next few years.

“To address the issue of insufficient financing for our projects, we are looking forward to more public-private collaborations with local and international partners, especially in building the high-profile projects,” Othman said, adding that PKNS has zero gearing currently.

PKNS also revised the master plans for its 1,500 acre Selangor Science Park 2 in Cyberjaya and the 6,000 acre Bernam Jaya project in Selangor.

“We have spent RM1.15bil in land acquisition, earth works and infrastructure cost for the last five to 15 years, and it is time to realise part of its value,” he said.

The state development corporation had also seen a recent upgrade of its Ratings Agency Malaysia rating to P1/AA1 from P1/A1, which would translate into lower financing cost for its future developments.

“We are also setting up a special purpose acquisition company in order to retain some of the retail and office components from our projects before we can possibly inject them into a real estate investment trust (REIT).

In 2010, PKNS proposed a venture into the REIT industry with the injection of three properties Menara PKNS, Kompleks PKNS and SACC Mall with a combined value of RM270mil into AmanahRaya REIT (ARREIT) in exchange for new shares and cash, which would make PKNS the second largest shareholder of ARREIT with a 33% stake.

“We are looking forward to injecting more of our existing properties into this REIT and we are lining up potential properties from our more strategically-located redevelopment and urban regeneration projects in the Klang Valley,” he said.

Meanwhile, ARREIT yesterday announced that the two parties had mutually terminated the proposed transaction.

ARREIT told Bursa Malaysia that the conditional deal, which was entered into on Sept 2 last year, was called off in light of potential planned asset enhancements to be carried out by PKNS on the properties, which would affect their market values.

PKNS is projecting to end the year with its pre-tax profit surging to RM480mil from RM206mil in 2010.

“PKNS needs to be profit-driven in order to finance its social obligations. However, the profit is just a means to an end. If PKNS makes more profit, the money does not go to our own pockets but will be contributed back for the benefit of the five million Selangorians,” he said.

He said the more profit PKNS makes would mean that PKNS could contribute to building more low-cost and affordable housing, industrial and science parks to attract foreign direct investments and build more infrastructure developments for the state.

“We need to segregate between our economic and commercial projects and the social projects so as to get the best use of our land and thus optimise the return on these projects,” he said.

By The Star

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