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UOA unit proposes to sell Kuala Lumpur office tower at discount to UOA Reit

A UNITED Overseas Australia (UOA) subsidiary has proposed to sell UOA Corporate Tower in Kuala Lumpur to UOA Real Estate Investment Trust (UOA Reit) for RM700 million (S$230.5 million) in cash.

Singapore and Australia-listed property group UOA is a majority unitholder in UOA Reit. The proposed sale is thus deemed a related party transaction.

The deal price is at a discount of RM18 million or about 2.5 per cent to the property's market value of RM718 million, UOA's construction and development division, UOA Development, said on Tuesday.

It added that this is justifiable after taking into consideration the planned utilisation of the proceeds, the rationale and benefits for the proposed disposal and the immediate net gain on disposal.

Malaysia-listed UOA Development said the proceeds will improve its cash flow and boost its earnings per share. Also, the group typically funds its development land acquisition and development of investment properties via internally generated funds instead of borrowings to keep its gearing level low.

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UOA Corporate Tower comprises a stratified 38-storey office building with a penthouse level, and the 22,927 square foot provisional property parcel it is erected on.

Below the building are a six-storey partial basement car park and a four-storey basement car park, but the car parks do not form part of the proposed sale.

The seller Distinctive Acres, wholly owned by UOA Development, has signed a conditional sale and purchase agreement with UOA Reit's trustee and UOA Development unit Paramount Properties. In 2014, Paramount Properties sold the provisional parcel to Distinctive Acres for RM48 million.

The UOA group intends to use the sale proceeds to partly fund its development of investment properties; for working capital purposes, which may also include future land banking activities; to issue a special dividend of one sen per share, amounting to about RM21.2 million; and to defray expenses relating to the proposed disposal.

Meanwhile, UOA Reit's manager said the proposed acquisition is in line with its strategy to acquire and invest in properties that are able to contribute to the long-term growth in UOA Reit's distribution per unit and/or net asset value per unit. This acquisition strategy includes acquiring a property that is strategically located, and has a high occupancy rate and diverse tenant mix.

To fund the proposed acquisition, UOA Reit is looking to undertake a private placement to raise up to RM280 million, at an issue price to be determined later by its board.

The proposed deal is expected to be completed in Q4 2020, UOA Development said.

Shares of UOA last traded at 68.5 Singapore cents on Sept 23.

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