Capital World to sell most of its space at its Johor mall to Mustafa for RM368 mil
The deal is said to "fast-track Capital World's turnaround", says Capital World's CEO Hoo Khee Leng.
Capital World, on Jan 27, announced that it will sell most of its space, including retail units, at its Capital City Mall in Johor Bahru to retailer Mustafa, for RM368 million ($113.6 million).
This is Mustafa’s first foray into the Malaysian market.
The 11-storey Capital City Mall is located in Johor Bahru’s Tampoi suburb and was completed in April 2018. It has 1,602 strata-title retail units with a total net lettable area of 902,994 sq ft. The mall is part of a freehold integrated development in Tampoi. The integrated development includes a 315-room hotel, an 18-storey tower with 630 serviced suites, and 690 serviced apartments spanning three blocks.
The mall opened in October 2018 but has been shut since February 2020 as the company and one of its key subsidiaries ran into financial difficulties and had to seek court protection from creditors while they restructured their debts. The mall is expected to reopen in the second half of 2023.
The assets sold by Capital World include 591 unsold retail units, 374 accessory parcels and 2,181 car parking spaces. The unsold retail units have a combined net lettable area (NLA) of 641,216 sq ft. The 374 accessory parcels, which include alfresco and multipurpose areas, come up to a total of 1.28 million sq ft.
The consideration comes after Capital World and Mustafa entered into a commercial option to purchase on Nov 18, 2022. The option took effect a month later. The price is based on the independent valuation report dated Aug 15, 2022. The report was prepared by VPC Alliance (JB) Sdn Bhd.
As part of the agreement for the sale, Capital World will also build a four-storey cold storage facility within the mall for Mustafa.
Capital World is a property developer that works with land owners on a joint-venture (JV) basis to enhance the value of their real estate assets. The company exited a scheme of arrangement in April 2022 after having restructured about RM187 million of debt. It had about RM166.3 million of net assets as at Sept 30, 2022.
For the 1QFY2023 ended Sept 30, 2022, the company made a loss of RM3.3 million.
According to Capital World, the proceeds from the sale will give the company “the financial muscle to build and complete these remaining components of the integrated development and pursue other real estate opportunities, including helping Mustafa identify potential sites in Malaysia and Indonesia to develop into mega stores”.
On the move, Mustaq Ahmad, Mustafa’s managing director says, “Having established ourselves in Singapore… we believe the time is ripe for us to get into Malaysia, more so now that pandemic restrictions are out of the way.”
He adds: “One of our key challenges until now has been finding an appropriate site. Capital City Mall meets many of the requirements for our first flagship store in Malaysia, given its close proximity to Singapore, ample floor area and ideal floor plates.”
Hoo Khee Leng, Capital World’s CEO, says, “Having Mustafa as a key player in our integrated development is a major catalyst for Capital World as they have what it takes to run a thriving retail business given that they are a household name in Singapore. We fully expect the mall, as well as the rest of the integrated development, to be well received now that international travel has resumed. This deal with Mustafa will also fast-track Capital World’s turnaround and restore value to shareholders as we work towards getting the company’s share trading suspension lifted.”
Shares in Capital World last traded 0.5 cent after they were suspended for trading on Feb 14, 2020. The company has till April 30 to submit a trading resumption proposal to the Singapore Exchange Regulation.
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