KUALA LUMPUR: Ho Hup Construction Co Bhd's RM1 billion Flex project in Bukit Jalil will be put on hold as the company has chosen to sell the project's 3.09-acre land for RM110 million in cash.

According to its filing with the stock exchange today, the primary aim of this decision is to bolster the company's financial position.

The transaction entails Ho Hup's wholly-owned subsidiary, Bukit Jalil Development Sdn Bhd (BJD), selling the land to Exsim Development Sdn Bhd's subsidiary, Exsim Persiaran Jalil Sdn Bhd.

As part of the deal, existing contracts with consultants, contractors, and project purchasers will be terminated. Additionally, Exsim Persiaran Jalil will absorb BJD's outstanding development charges, totaling RM10.6 million.

According to Ho Hup's filing, Exsim Development is owned by the Lim brothers—Lim Aik Hoe, Lim Aik Kiat, and Lim Aik Fu.

"In consideration of the proposed disposal, the purchaser intends to suspend the existing Flex project and terminate all contracts with the existing consultants and contractor, as well as the existing end purchasers," Ho Hup said.

Ho Hup said that an estimated RM21 million has been received from existing end purchasers for the sale of 185 units constituting commercial shops, offices, and/or small office-versatile office (SOVO).

The land, designated for the Flex project, was originally intended for the construction of two tower blocks housing SOVO units, a hotel, and serviced apartments atop an eight-storey podium with retail spaces.

The land was granted a development order issued by City Hall for a mixed development project on Feb 25, 2022, which was amended subsequently on July 14, 2022, and Dec 15, 2023.

Ho Hup said that it plans to allocate RM80 million from the sale to debt reduction, after earmarking portions of the proceeds for bank loan repayments, purchaser refunds, and payments to consultants and contractors.

Despite the land's net book value of RM119.42 million, Ho Hup anticipates incurring a one-off net loss of RM9.92 million from the disposal.

Viewing the disposal as an opportunity to improve liquidity and shore up its financial standing, especially with the Flex project already underway and significant capital needs ahead, the company expects this move to lower its gearing ratio from 1.49 times to 1.31 times.

As of Dec 31, 2023, the total bank borrowings of the Ho Hup Group were RM509.14 million, the filing showed.

Ho Hup said the completion of the land sale, scheduled for the third quarter of 2024 pending shareholder approvals, is a strategic maneuver aimed at navigating the company through its financial hurdles.