Major acquisition: A file photo of the 3 Damansara development where Lagenda Properties’ new corporate headquarters will be located.
KUALA LUMPUR: Lagenda Properties Bhd
’s RM52mil office tower acquisition in Petaling Jaya, which will be its new corporate headquarters, is set to provide a strategic base for the Perak-based group to springboard its expansion into other states as an affordable housing developer.
Managing director Datuk Jimmy Doh said the acquisition of the office tower aligns with Lagenda’s growth strategy as the group expands its presence and increases its headcount.
“The location of the 3 Damansara office tower is strategic, as it sits between our key projects in the northern states (Kedah and Perak) and our oncoming sizable projects in Johor,” he told StarBiz.
Doh noted the building enjoys a prime position at the intersection of the Sprint and LDP highways.
“This prime location not only enhances Lagenda’s brand visibility and reputation, but also positions us favourably to attract top talent and significantly boosts foot traffic to Lagenda’s sales gallery.
“Ultimately, for us to keep providing affordable housing to the underserved market, we need to attract capable talent within the industry and a centralised location will allow us to achieve this and foster a sense of unity amongst our employees and stakeholders.”
Additionally, Doh stressed that the acquisition of the office tower is by no means a “shift in direction or strategy” for the developer of affordable housing .
“We remain 100% committed and focused to the development of purely affordable housing. Our commitment to affordable housing remains unwavering and is at the core of Lagenda’s mission.”
Doh remains positive about the outlook of the affordable-housing segment in Malaysia.
“Considering the substantial shortage of affordable housing across most states, we will continue to drive strong demand in the foreseeable future. Our aim is to emerge as the preferred developer for affordable housing in the country.”
Lagenda announced last Tuesday that its wholly-owned subsidiary, Lagenda Harta Sdn Bhd, had entered into an unconditional sale and purchase agreement with Mtrustee Bhd (trustee for Capitaland Malaysia Trust) to acquire the 3 Damansara Office Tower for RM52mil cash.
The 12-storey office building is connected to the 3 Damansara mall and adjacent residential towers known as Tropics Condominium.
Phillip Capital in a report said the main purpose of the acquisition is to provide a larger space as Lagenda expands and makes this new office its corporate headquarters to handle projects in Kedah, Perak, Pahang and Johor.
“Lagenda is expected to occupy about 35% to 40% of the building, while the remaining units will be rented out for recurring income.
“The rental income is expected to more than offset the interest expense of this acquisition (around RM1.8mil) as the building reaches 80% occupancy.”
Doh said negotiations are ongoing with several interested tenants.
“We are confident of achieving an occupancy rate of at least 80% within a year of completing the acquisition, including the space occupied by our own team.
“We have done a stress test and are confident that the transaction will be a positive addition to Lagenda by way of an additional income stream.”
Phillip Capital said it deemed the purchase price to be fair, noting that the market value of the building ranges around RM50mil to RM55mil.
Lagenda plans to finance 80% of the acquisition (RM41.6mil) via borrowings, which will likely increase its current net gearing level to 0.09 times from 0.05 times, it said.
Following the acquisition, Phillip Capital said it is making no changes to its earnings forecast.
Meanwhile, AmInvestment Bank said Lagenda’s staff in Kuala Lumpur currently operate from leased offices in Phileo Damansara, Petaling Jaya.
“In line with the group’s expansion initiative, Lagenda requires larger office space to accommodate its growing workforce in Kuala Lumpur.
“The newly acquired 3 Damansara Office Tower is intended to serve as the company’s future headquarters, replacing the current one in Manjung, Perak.”
Earlier last week, StarBiz reported that Lagenda plans to launch over 7,000 homes across Perak, Kedah and Johor this year.
The group launched 4,800 homes in 2022.
According to Doh, Lagenda has so far launched close to 2,900 units with 4,300 units more targeted for the rest of the year.
Among these launches is the group’s entry into Johor, with an expected 600 units in Mersing.
Lagenda currently has a remaining landbank of almost 4,700 acres across the states of Perak, Kedah, Pahang, Johor and Selangor.
For its second quarter ended June 30, 2023, Lagenda’s net profit dipped to RM33.19mil from RM50.38mil in the previous corresponding period.
Revenue in the quarter stood at RM196.38mil from RM258.55mil a year earlier. Basic earnings per share came in at 3.96 sen, versus 6.03 sen previously.
For the six-month period ended June 30, 2023, Lagenda’s net profit stood at RM72.52mil compared with RM97.39mil in the previous corresponding period while revenue was at RM377.34mil compared with RM451.30mil previously.
