JKH buys 334 perches of Colombo 2 land from Cargills for Rs. 4.2 b

Monday, 2 October 2017 00:23 - - {{hitsCtrl.values.hits}}

In a move reinforcing its bullishness in the real estate and property business, premier blue chip John Keells Holdings (JKH) has bought an estimated 334 perches of Colombo 2 land from Cargills Group for Rs. 4.2 billion last week.

In a brief filing to the CSE, Cargills (Ceylon) Plc said its fully-owedn subsidiary Dawson Office Complex Ltd. disposed its investment properties at Dawson Street and Vauxhall Street, Colombo 2 for Rs. 4.2 billion to Vauxhall Land Developments Ltd. The purchase price works out to Rs. 12.58 million per perch.

As per Cargills’ 2016/17 Annual Report, the Vauxhall Street plot is 1.5 acres (240 perches) with two buildings that were worth Rs. 2.34 billion. The Dawson Street plot is 94 perches worth Rs. 800.3 million.

There was no disclosure from JKH on the acquisition but the group is likely to use the new land for future developments.

In its 2016/17 Annual Report, the company said given the increased lifestyle preference towards convenience housing, the group will continue to identify properties in suitable locations to address the growing demand for residential apartments in the mid to higher end of the market.

In light of this, the group said it has entered into a Memorandum of Understanding with a partner in relation to a prospective property development project in central Colombo. Subject to the finalisation of the project concept, cost parameters and other approvals, the project is expected to be launched in early 2018.

JKH also said the group was in discussion for the acquisition and development of other similar properties which it expects to launch in the near future subject to due diligence and meeting commercial considerations.

The acquisition of Cargills Group land, the first major specific transaction for FY18, however is unrelated.

As at end FY17, the JKH Group’s land and buildings were worth Rs. 40 billion whilst total assets were Rs. 277.3 billion.

For Cargills, the disposal at an estimated Rs. 1 billion profit will boost its financial strength. In end FY17, the group had Rs. 8.8 billion worth of freehold land and Rs. 2.3 billion worth of freehold buildings.

In FY17, the Cargills Group grew top line by 18.5% to Rs. 85 billion and after-tax profit by 35% to Rs. 2.3 billion. Operating profit rose by 47% to cross the Rs. 5 billion mark. Retained earnings amounted to Rs. 8.2 billion and Rs. 8.3 billion in reserves.

In the first quarter of FY18, Cargills Group revenue grew 9.1% to Rs. 22.88 billion resulting in operating profit growth of 10.5% to Rs. 1.6 billion. Profit before tax rose 2.1% to Rs. 1.24 billion but Profit after Tax declined 1.6% to Rs. 795 million.