WEST MALAYSIA PROPERTY NEWS
Analysts Say More To Be Done To Bring Tropicana’s Debt Down
Capitamalls To Buy Tropicana City Mall For Rm565 Million After A Call Off In 2013
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espite of the successful sales of its two significant assets, Tropicana Corp Bhd’s gearing is said to remain high and there are more to be done to reduce its piling debts according to a property analyst. It is reported that 460 million from the Ringgit Malaysia 565million deal with Capitamalls Malaysia Trust recently is used in Tropicana debts’ repayment which reduced the group’s borrowing from 2.4 billion to 1.95 billion ringgit.
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Tropicana City Mall
n October of 2013, CapitaMalls Malaysia Trust (CMMT) had decided not to pursue further with the acquisition as “both parties are unable to mutually agree on the terms of the sale and purchase agreement”.
CapitaMalls Malaysia REIT Management Sdn Bhd, the manager of CapitaMalls, said it intended to fund the acquisition through debt and/or equity fund raising in a combination to be determined later.
CapitaMalls Malaysia REIT Management announced on Aug 23, 2013 it had received a letter of intent from Tropicana Corp to explore the opportunity to explore the purchase of the four-storey shopping mall and 12-storey office tower.
“Upon completion of the acquisition, CapitaMalls’ property asset value will increase by approximately 16.7 per cent to approximately RM 3.8 billion from RM3.2 billion.
Whilst for 2015, CapitaMalls Malaysia Trust is acquiring the Tropicana City Mall and Tropicana City Office Tower from Tropicana City Sdn Bhd for RM540 million. In a filing to Bursa Malaysia, CapitaMalls said the costs, including the acquisition fee, would be RM565 million. The acquisition will be subject to the satisfactory completion of due diligence, which includes a building audit and valuation exercise.
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“The proposed acquisition is expected to be completed by the third quarter of 2015,” it said. Tropicana City Mall, a four-storey shopping complex, enjoys an occupancy rate of about 89.2 percent, with an established mix of Malaysian and international retailers including AEON BIG, Golden Screen Cinemas, Jatomi Fitness and UNIQLO. On the other hand, the 12-storey Tropicana City Office Tower enjoys full occupancy, with
anchor tenants include Tropicana Group, CIMB Securities and radio broadcaster Star RFM. The property is strategically located at the intersection of two major highways - SPRINT and Lebuhraya Damansara Puchong. The mall is served by feeder buses from nearby Kelana Jaya and Taman Bahagia light rail transit stations and come July 2017, a mass rapid transit station at Taman Tun Dr Ismail is expected to commence operations.
The analyst also stated that due to its sky high gearing, it is possible that the company is now exploring ways to unlock its value, which could be through outright sale of land or even mulling a corporate exercise. Perhaps Tropicana could consider embarking on a Reit exercise, as this would achieve the objectives of de-gearing and value creation, the analyst said. It is also suggested that the best strategy for the group is to grow its operational profits instead of landbanking, in a report published by The Star online. Meanwhile, last year Tropicana in a statement announced that the group had identified some of its 2 billion ringgit worth of assets to be sold for the next two years so they could raise cash to decrease the amount of debts they have. The said assets are including land, property investments as well as noncore assets sited primarily in the Klang Valley and Iskandar Malaysia. The group’s Chief Executive Officer, Datuk Yau Kok Seng said the group intended to reduce its then gearing ratio of 0.616 times to 0.3 times by 2016.
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