UOA Real Estate Investment Trust (UOA REIT) is buying UOA Corporate Tower in Bangsar South, Kuala Lumpur from its parent, UOA Development Bhd for RM700 million cash.
UOA Corporate Tower is a 38-storey office building measuring 22,927 sq ft. It is being sold to UOA REIT at a 2.5 per cent or RM18 million discount, the developer said in a filing with Bursa Malaysia.
The building, which was completed in 2016 has a net book value of RM586 million as at the close of the financial year ended December 31, 2019 (FY19) and is being sold for a gain of RM114 million.
UOA Development said from the total RM700 million proceeds, RM646 million or 92.9 per cent will be utilised to fund the development of District K on Jalan Ipoh, Phase II of the UOA Business Park in 110 Shah Alam, Lot 2507 in Kerinchi, Kuala Lumpur and V50, Bangsar South.
The total estimated outstanding cost of these properties is RM1.36 billion, it said.
The group said RM32.36 million would be used as working capital, and RM21.24 million would be used to pay a special dividend of one sen per share upon completion of the related-party transaction.
UOA Development owns 76.55 per cent of UOA REIT.
On the rationale of the sale, it said the deal would help improve its cash flow.
As of June 30, the group's cash pile stood at RM1.1 billion, of which RM622.2 million was maintained in housing development accounts.
In a separate filing, UOA REIT said it would finance part of the purchase consideration via a private placement, to raise RM278 million. It will secure RM352 million via its RM422 million five-year revolving credit facility.
UOA REIT said the UOA Corporate Tower will complement its existing property portfolio of office buildings.
It said the acquisition of the office tower will also lower the average building age of UOA REIT's property portfolio from about 18 years as at December 31, 2019 to around 16 years.
UOA REIT's net lettable area (NLA) would also increase to 2.07 million square feet after factoring in the 732,871 sq ft in NLA from the UOA Corporate Tower.