E&O to tie up with Japanese firm for apartment project

Niche property developer Eastern & Oriental Bhd (E&O) will be collaborating with a Japanese real estate group to develop a serviced-apartment project in the heart of Kuala Lumpur.

The company said in a filing with the stock exchange that it has entered into a shareholders’ agreement with Mitsui Fudosan Asia Pte Ltd (MFA) for the proposed joint venture via Patsawan Properties Sdn Bhd, an indirect subsidiary, for the development of the project over the 0.58-ha plot owned by Patsawan.

As part of the collaboration, E&O had also executed a sale and purchase agreement with MFA for the disposal of a 49% stake in Patsawan to the latter for a total cash consideration of RM82.37mil.

MFA is wholly-owned subsidiary of Mitsui Fudosan Co Ltd, a top Japanese property developer.

“Barring any unforeseen circumstances, the completion of the proposed disposal is expected to be on March 27, and the proposed development on the land under the proposal is expected to commence in third quarter of 2015 and complete by first quarter of 2020,” E&O said.

The land, which had been proposed to be developed into 298 units of service apartments, is located in the city center of Kuala Lumpur at the intersection of Jalan Kia Peng and Jalan Conlay.

“The E&O Group expects to realise an estimated one-off gain of approximately RM48.8mil, net of among others, the real property gains tax payable, from the proposed disposal as at March 20, 2015,” the company said.

“Samudra would fund its portion of investment in Patsawan via internally generated funds, advance from its shareholders and/or external borrowings, the breakdown of which cannot be determined at this juncture,” it added.

E&O expects the proposed joint venture and development to free up the company’s cash flow.

“The cash together with the total consideration receivable by Samudra shall be utilised by the group for, amongst others, reinvestment in other projects, repayment of bank borrowings and working capital purposes,” it explained.

E&O pointed out that this new proposed partnership would be its third collaboration with Mitsui. This, it said, was expected to continue to create greater awareness of the E&O group’s profile in the Japanese property market thereby attracting Japanese purchasers for the proposed development for the land as well as other projects within the E&O group.

“The proposal is expected to pave the way for future collaboration between the E&O Group and Mitsui,” it said. - By The Star