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Wednesday, December 16, 2009

KFH backs out of buying Menara YNH for RM920mil

PETALING JAYA: YNH Property Bhd is seeking legal recourse against Kuwait Finance House (M) Bhd (KFH) for backing out of a commitment to buy a 45-storey office tower worth RM920mil.

YNH told Bursa Malaysia yesterday it had been notified by KFH in writing that the latter would “no longer be proceeding with the formalisation of the sale and purchase (S&P) agreement as per the terms and conditions of the offer letter dated Jan 11, 2008” for the en bloc purchase of Menara YNH, located along Jalan Sultan Ismail, Kuala Lumpur.

“As such, the board will consult our legal advisors on all of the options available to our group, including but not limited to specific performance and/or seeking damages from KFH,” YNH said.

A YNH spokesman told StarBiz the deal “went sour” because KFH wanted to purchase the property at a lower price than initially agreed.

“It was all an issue of pricing. The property market has softened by about 20% since we entered into the agreement nearly two years ago. KFH wanted to buy at a lower price while we wanted to maintain the original value,” he said.

“We’re not going to sell at a cheaper price because the location and yield in the area are good.”

The spokesman said YNH was seeking legal advice from its lawyers and was confident of a positive outcome.

“An option is to sell the property to the highest bidder and claim the difference from KFH. The agreement is legally binding,” he said.

He also said KFH’s decision to pull out of the deal would not have a negative impact on YNH.

“It’s not a problem as we can sell it to other parties. We have had a lot of interest in the tower.”

He said preliminary earthworks had commenced at the project site and actual construction was expected to begin in a few months.

YNH head of corporate services Daniel Chan was quoted in a news report in August that the deal with KFH “is basically firmed up” although the S&P agreement had yet to be signed.

“As far as we are concerned, the signing of documents is just a formality,” he said.

An analyst from a local bank-backed brokerage said that while the property market had softened, it should not have an impact on YNH.

“The economy is already on the upturn and property prices will also be on the uptrend. The yields in the area are also good and the company can always find other buyers,” he said.

KFH offered to purchase a 50% interest in YNH Land Sdn Bhd’s proposed 45-storey office tower in early 2008. YNH Land is a unit of Kar Sin Bhd, which in turn is a wholly-owned subsidiary of YNH Property.

In a previous note to Bursa, YNH said the office tower was located in the Golden Triangle area where “most prestigious five-star hotels and upmarket office spaces” were located, with easy accessibility and close proximity to efficient public transport facilities like the Putra light rail transport and KL monorail stations.

By The Star (by Eugene Mahalingam)

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