The transaction pertains to a 5.09-acre piece of land located in Desa Sri Hartamas, which was sold for a cash amount of RM170 million by YNH Property to Sunway Living Space Sdn Bhd.
Within 24 hours of the sale announcement on May 16, YNH Property were issued with a 26-question query by Bursa Securities, to which the group responded later on May 19.
However, the group received a second round of query from Bursa Securities yesterday and was required to provide a reply to the local bourse operator within 24 hours.
Bursa Securities requested clarification on numerous critical issues, revealing potential oversight and the lack of transparency regarding the land transaction.
YNH acknowledges oversight
Firstly, Bursa Securities advised YNH Property Bhd to assess the materiality of percentage ratios in line with Chapter 10 of the Main Market Listing Requirements (LR).
YNH Property, in its response to the query, acknowledged that it had overlooked a few details and will seek advice from its adviser in order to rectify the oversight.
Secondly, Bursa Securities requested for clarification on Kar Sin Bhd’s deferred registration as the registered proprietor by providing details on the names of authorities involved; the description, date and status of the submitted application; and the indicative timeline of the application process.
To this query, YNH Property said that an application dated Oct 13, 2022 had been submitted to the director-general of the Kuala Lumpur Land and Mines department. It estimates that the final approval will be obtained around July or August 2023.
The group added that a development order (DO) has already been obtained from Kuala Lumpur City Hall (DBKL) and that a change of ownership could disrupt the DO’s annual renewal process.
Thirdly, YNH Property explained to Bursa Securities that it included a non-compulsory “condition precedent” necessitating the approval of its shareholders for the land disposal in order to meet the buyer’s requirements.
Fourthly, Bursa Securities enquired why YNH Property did not publicly disclose information relating to the turnkey construction agreement dated June 20, 2016 and its termination dated April 1, 2023. The company has acknowledged its oversight on the matter and will work to rectify the issue.
The fifth query revolved around why the vendor is required to pay the property’s first beneficial owner upfront ahead of the mixed development project’s completion time.
YNH Property responded that the upfront payment was stipulated in the 2016 turnkey construction agreement, and enabled the vendor to use the land as security for its business loans without any restrictions.
This is a fair business deal for both parties, said YNH Property.
Lastly, Bursa Securities questioned the reason behind the conditional refund mechanism, which is contingent upon the property being successfully sold to a third party.
“In view for the first beneficial owner to agree to lower the selling price to RM150 million and for them to further agree to refund the differential amount of RM89.5 million, a generous reasonable time is required to be allowed to the first beneficial owner in order to secure repayment,” the group replied.
Given that the vendor fails to find a new buyer, it has the option of reviving the turnkey building agreement to recover the amount already paid.
The land transaction remains under Bursa Securities’ scrutiny for the time being.