The land and building in Penang is part of the E&O Group's 240-acre phase one of the Seri Tanjung Pinang mixed development project (see pic).
In a Bursa Malaysia filing yesterday, E&O said the building was completed in May this year and subsequently leased to hypermarket retail operator Tesco for a 20-year period.
The rental receivable from the building, which has about 269,418 sq ft of gross floor area and 1,042 car park bays, is RM7.6mil per annum.
The E&O Group acquired the land in May 2004 for RM13.6mil while the construction cost of the building, incurred from March 2009 to May 2011, was RM54.2mil.
Based on the audited consolidated financial statements of E&O as at March 31, 2010, the carrying amount of both the land and building was about RM19.22mil.
Proceeds from the disposal of the land and building will be utilised for working capital or repayment of bank borrowings.
As at 30 June 2011, the total bank borrowings of the E&O Group amounted to about RM752.9mil.
Assuming the entire proceeds from the disposal of the land and building were utilised to pare down borrowings, the annual savings in interest is expected to be about RM6.55mil (based on an average interest rate of 5% per annum).
In its statement, the E&O Group said “the disposal of the land and building is in line with its strategy of preserving capital value and strengthening the balance sheet via realising cash resources which can then be deployed in other projects and investments to maximise returns, or for repayment of borrowings.”
The disposal of the land and building is expected to be completed by the first quarter of 2012.
By The Star
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