KUALA LUMPUR: Debt-ridden Perak Corp Bhd and ARX-YSC Sdn Bhd will develop 424.699 acres of vacant leasehold land in Hulu Bernam Timor, Muallim, Perak, four years after signing a joint venture agreement (JVA).
The company has signed a supplemental agreement (SA JVA) with ARX-YSC on August 16, 2023, to change, amend, and supplement certain aspects of the JVA.
Perak Corp, a 52.9 per cent-owned subsidiary of Perak State Development Corp owns the land with the term expiring in May 2108.
The company said in a stock exchange filing yesterday that the proposed development will allow the company to raise funds for its business operations, improving its total cash flow situation and strengthening its financial position as part of its regularisation efforts.
It anticipates that contributions from the proposed development will begin in the fiscal year ending December 31, 2024, and will continue until the project is completed.
The company said that the projected development is expected to be completed by the end of 2028, barring any unforeseen circumstances.
According to the Bursa filing, Perak Corp had acquired the land in November 1997, when the original cost of investment was RM41.82 million. The net book value of the land as of December 2022 was RM46.94 million.
It said an independent valuer had valued the land at RM117.45 million as of December 31, 2022, based on the market value basis.
According to the filing, one parcel of land has been charged to CIMB Bank Bhd in exchange for a loan facility issued to Perak Corp's wholly-owned subsidiary, PCB Taipan Sdn Bhd. The loan amount due to CIMB is believed to be no more than RM38 million. The remaining three parcels of land are free of encumbrances.
Perak Corp agreed to offer the land for a proposed development to be carried out by ARX-YSC that will take five years to construct under the JVA.
They intended to subdivide the land into 124 individual titles for industrial use and/or other uses to be mutually agreed to by both parties.
Perak Corp is entitled to a profit share estimated at RM9.50 per square foot based on the net land area as specified in all subdivided individual titles to subdivided units or lots.
However, Perak Corp will only receive 20 per cent of the net profit if the sale or subsale of any land, subdivided unit, or lot exceeds RM9.50 per square foot.
Despite this, Perak Corp's JVA claim is subject to a minimum total profit share of RM129.5 million, calculated at RM7 per square foot (based on the land's total gross size of 424.76 acres).
Perak Corp explained in the stock exchange filing yesterday that the JVA was signed in 2019 at a time when the group and Animation Theme Park Sdn Bhd, the operator of the now-defunct Movie Animation Park Studios (MAPS) theme park in Meru Raya, Ipoh, were threatened by potential legal actions.
However, Perak Corp refrained from publicly revealing the JVA at the time owing to concern about the implications of the defaults, it claimed.
Perak Corp said that this was authorised under the Bursa Securities listing standards since the facts of the situation in regard to the JVA were in flux at the time, and hence disclosure was postponed until a more appropriate time.
Following that, the company fell into Practise Note 17 (PN17) status in February 2020 as a result of a payment default and being unable to declare solvency.
It also experienced corporate restructuring and in-house management enhancements, all of which resulted in Perak Corp and ARX-YSC being unable to implement and carry out their respective obligations and duties as stipulated in the JVA.
"Since then, the parties have attempted to renegotiate the JVA but have failed to reach a common ground on how to proceed with the transaction. After a change of management in January 2023, the parties revisited the matter and now agree to pursue the transaction through the supplemental agreement to the JVA," it said.