KUALA LUMPUR (June 28): AmanahRaya Real Estate Investment Trust (REIT) is planning to dispose of Holiday Villa Beach Resort & Hotel Spa in Langkawi, Kedah for RM145 million, cash, to trim its borrowings.

AmanahRaya REIT is expected to record a gain of RM45 million from the disposal, which it said is in line with the trust’s growth strategy to unlock and realise higher returns on its investments at a favourable price.

Pacific Trustees Sdn Bhd, on behalf of AmanahRaya REIT, on Wednesday entered into a sale and purchase agreement with Plenitude Gateway Sdn Bhd, a wholly-owned unit of Plenitude Bhd to sell the 4-star beach resort hotel building with 238 rooms, the trust's filing on Wednesday (June 28) showed.

Acquired for RM55 million in February 2007, the trust said it is currently leased by Langkawi Holiday Villa Sdn Bhd (lessee) — an indirect wholly owned unit of Advance Synergy Bhd — and operated as a Holiday Villa brand and named Holiday Villa Beach Resort & Spa Langkawi. The existing lease term is 10 years, from July 13, 2016 to July 12, 2026, with an option for another 10-year renewal.

According to the trust, the disposal price was arrived at after taking into account the market value of RM104.74 million at end-December as appraised by the independent registered valuer Rahim & Co International Sdn Bhd.

Of the RM145 million gross proceeds, the REIT will use RM70 million for repayment of borrowings, RM45 million for lessee compensation sum, RM25 million for new investment and RM5 million for estimated expenses relating to the proposed disposal.

Post disposal, AmanahRaya REIT’s total borrowings will be reduced to RM566.14 million from RM636.14 million, while gearing will improve to 42.33 times from 45.04 times.

The exercise is slated to be completed by the first quarter of 2024.

Shares of AmanahRaya REIT closed up half a sen or 1.08% at 47 sen on Wednesday, translating into a market capitalisation of RM266.61 million.