Sunrise property pact latest to be called off

PETALING JAYA: The termination of Sunrise Bhd’s put and call option agreement involving RM767mil worth of properties is the latest major cancellation to hit the property sector.

The proposed agreement signed with Malaysia Commercial Development Fund Pte Ltd (MCDF) gives MCDF the right to buy Sunrise’s MK20, a mixed development project in Mon’t Kiara, for RM767mil during the option period.

MCDF paid RM36.9mil as option deposit to the developer, which would now be refunded given the deal’s cancellation.

According to Aseambankers, Sunrise’s proposed deal was supposedly a build-then-sell concept with profit recognition upon completion in 2013.

It said the deal could be called off due to rejection by the relevant authorities, or the two parties failed to secure the funds needed for the project.

Given Sunrise’s net gearing level of 52% as of end-June, the deal’s termination would provide the developer some breathing space until ongoing projects with unbilled sales of RM1.3bil were delivered by financial year 2010, it said.

“The termination of the en bloc sale of MK20, however, has lowered earnings visibility beyond financial year 2011 as it could have raked in more than 25% in profit before tax margin amid falling construction costs,” Aseambankers noted.

Last month two deals were aborted: Dutaland Bhd’s proposed joint-venture agreement with Stonehage Westcity Property Fund Ltd and Merrill Lynch (Asia Pacific) Ltd involving properties worth RM1.8bil, and the proposed sale of Menara Citibank to IOI Corp Bhd for RM734mil.

Six property-related deals, including the above, have been cancelled since August, indicating the cautious outlook for the sector, according to one research house.

It said there was a likelihood of further cancellations, especially by investors from countries badly affected by the global economic crisis such the United States, Europe, Hong Kong and Singapore, and those from countries whose currencies had depreciated sharply.

“We maintain a cautious view on Malaysian property. We prefer property investment asset owners over developers due to their more defensive earnings,” the research house added.

By The Star