Published August 11, 2009

Hap Seng unit buys 50% of Inverfin for about RM310m

Citibank Malaysia says not in talks to sell its 50% stake in the company

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(KUALA LUMPUR) Hap Seng Consolidated Bhd has bought half of Inverfin Sdn Bhd, owner of Menara Citibank in Jalan Ampang, Kuala Lumpur, for about RM310 million (S$127.5 million), according to a report in Malaysia's Business Times.

Its subsidiary, Hap Seng Realty Sdn Bhd bought all interests in Inverfin owned by CapitalLand Ltd and Amsteel Corp Bhd.

The remaining half of Inverfin is owned by Menara Citi Holding Co Sdn Bhd.

A Citibank Malaysia spokesman said it is not in talks to sell its 50 per cent stake in Inverfin.

Late last year it wanted to sell its interest in Inverfin to IOI Corp Bhd but the deal fell through.

The Amsteel stake comprising two million shares is at present charged to RHB Investment Bank Bhd.

This confirmed a report carried in Malaysia's Business Times on June 30 that Hap Seng was interested to buy half of Menara Citibank.

Inverfin is a special-purpose entity and investment company formed for the sole purpose of owning and operating Menara Citibank.

At the end of August 2007, Inverfin issued medium-term notes of RM160 million to selected investors where it charged Menara Citibank as security in respect of the notes.

Menara Citibank is built on a parcel of freehold land, measuring 12,694 sq m and has a net lettable area of 68,156 sq m.

Inverfin is the proprietor of Menara Citibank and shares the use of five levels of basement car parks with the proprietor of an adjacent property known as 'Hotel Nikko'.

The purchase price of Inverfin is based on 50 per cent of the net asset value of the company as at June 30, after taking into account the agreed property value of Menara Citibank which is fixed at RM607.45 million.

It is understood that Hap Seng is paying RM850 per square foot (psf) of lettable area.

The transacted prices of prime office buildings within the Golden Triangle and the Central Business District were in the range of RM800 to RM1,200 psf of lettable area.

The gross rental revenue based on the latest audited accounts of Inverfin for the financial year ended Dec 31, 2008 was about RM48.76 million, giving a gross yield of 8.03 per cent.

Inverfin's operating profit was RM38.13 million, giving a net yield of 6.28 per cent.

The rental revenue and operating profit are expected to improve with the rent rollover for year 2009 onwards, Hap Seng said in a statement to Bursa.

Hap Seng said that the purchase is consistent with the group's corporate business direction of expanding its property division both for development and investment holding.

Menara Citibank is located in an established commercial precinct and is expected to rise further in popularity.

Hap Seng said that it proposes to borrow from banks up to RM200 million to pay for the purchase, while the balance will be paid by internally generated funds.

With the acquisition, Hap Seng's gearing ratio is expected to increase from 1.06 to 1.14 based on its audited accounts as at Dec 31, 2008.