11/09/06  (The Edge News)  -  Boustead Holdings Bhd and Properties Bhd are setting up an Islamic plantation real estate investment trust (REIT), Al-Hadharah Boustead REIT, involving the proposed disposal of nine oil palm estates measuring 17,474.9ha and two palm oil mills for RM500 million.

In a statement on Sept 11, the companies said a trustee would be appointed, while Boustead REIT Managers Sdn Bhd, which is now a subsidiary of Lembaga Tabung Angkatan Tentera (LTAT), would act as the management company of the REIT.

Boustead Properties will sell six estates of 6,891ha for about RM252.75 million, while Boustead Holdings' subsidiaries will sell three estates of 10,583.9ha and two palm oil mills to the trustee for a total of RM247.25 million. The assets will be leased back.

In conjunction with the listing of the REIT on the Main Board, Boustead REIT Managers will undertake a public offering of 220 million new units in the REIT, which has a proposed fund size of up to 490 million units.

The proposed shareholders of Boustead REIT Managers comprises Boustead Holdings, LTAT, Irat Properties Sdn Bhd and Yayasan Warisan Perajurit.

The nine estates and two mills had an aggregate market value of RM517.71 million and net book value of RM222.1 million as at Dec 31, 2005. Eight of the estates and the two mills are in Peninsular Malaysia, while one estate is in Sarawak.

Boustead Holdings and Boustead Properties will received RM94.26 million and RM135.74 million in cash, respectively, which will be used to repay borrowings, and as working capital.

Their gearing will, respectively, improve to 0.99 times from 1.19 times and to 0.26 times from 0.36 times.

The companies said they intend to retain the new units to be issued as consideration for the proposed disposal of their assets as long-term investments for stable distribution of income and yield.

The disposals are expected to result in a gain of about RM184.9 million and RM134.75 million, respectively, for Boustead Holdings and Boustead Properties, for the year ending Dec 31, 2006, while their earnings per share will improve by 30.9 sen and 52.8 sen.