Written by Joy Lee
KUALA LUMPUR: Property developer Mah Sing Group Bhd has
secured the development rights for a 4.08-acre (1.63ha) parcel along Jalan Tun
Razak-Jalan Pahang, which formerly housed the Pekeliling flats, with a
potential gross development value (GDV) of RM900 million.
In a statement yesterday, Mah Sing said its wholly owned
subsidiary, Grand Pavilion Development Sdn Bhd, had entered into a joint
venture (JV) agreement with privately-held Asie Sdn Bhd and its unit, Usaha
Nusantara Sdn Bhd, to undertake a niche development named M Sentral there. Under the agreement, Usaha Nusantara will
grant Grand Pavilion the sole right to develop the land for RM106.6 million, to
be settled in RM63.96 million cash and a 40% stake in Grand Pavilion. Mah Sing
will hold the remaining 60% in Grand Pavilion. The cash consideration of
RM63.96 million for an effective 60% stake in the land works out to RM600 per
sq ft, according to back of the envelope calculations by The Edge Financial
Daily, which observers noted was a very good deal for Mah Sing, especially
given the lack of a sizeable land for redevelopment within the city centre. While
there have been few large transactions in the immediate vicinity of the
project, it is difficult to find land priced below RM1,000 psf in the heart of
the city, observers say. The recently aborted deal between UDA Holdings Bhd and
Nadayu Properties Bhd, for instance, had priced land along Jalan Sultan Ismail
at RM1,400 psf. Recent land transactions
around the KLCC vicinity was transacted at between RM2,000 and RM2,600 psf,
with the notable exception of the Lai Meng school land on Jalan Ampang, which
was acquired by Magna Prima Bhd at about RM1,500 psf during the recent
financial crisis.
Mah Sing’s 4.08-acre parcel is part of the largest
privatised urban regeneration project in Kuala Lumpur measuring some 58 acres
that’s estimated to have total GDV of RM9 billion to which Asie has been
granted full rights and approvals for a mixed development. The latter comprises
residential and commercial properties as well as community, leisure, recreation
and infrastructure facilities on 15 parcels of development land. The land also
comes with five air rights. Leong says Mah Sing is also looking at M&A
deals to play a bigger role in property development. “The potential for this JV is good because of
the 58-acre size of the whole development. We will be able to tap into that
opportunity. And this land is one of the last few sizable land parcels in Kuala
Lumpur,” Mah Sing group managing director and chief executive Tan Sri Leong Hoy
Kum told The Edge Financial Daily yesterday.
Under the development plans, there is also a provision for a
skybridge connection from M Sentral to the remaining 54 acres. This is in line
with the understanding between Mah Sing and Asie that the former may be the
potential JV partner for other parcels within the land, subject to terms and
conditions to be mutually agreed upon. “We are planning the development for the
first parcel as well as the overall concept for the 58 acres,” Leong said. The development has the potential of becoming
a transportation hub as it is within walking distance to the monorail and LRT
stations and easily accessible by public transportation, he added.
Mah Sing’s share price rose four sen to RM2.44 at
yesterday’s close. The stock is hot on the radar of analysts as the counter has
12 “buy” calls on it. OSK Research initiated coverage on Mah Sing late last
month with a “buy” call and fair value of RM3.01 while CIMB Research
recommended the stock as its top pick for the property sector with target price
of RM3.30.
According to its website, Asie was established in 1977 with construction and property development as its core business. The company has been involved in other regeneration projects for the Kuala Lumpur City Hall. Asie’s shareholder is Citivest Sdn Bhd. Filings from the Companies Commission of Malaysia showed shareholders of Citivest are Abu Khalil Akasah and Nik Rahimah Wan Ahmad, both of whom are believed to be connected to the Perlis royal family.
The 4.08-acre development is subject to authorities’
approval and is expected to commence by the first half of 2012 and to be
developed over five years. Currently, Mah Sing has a landbank of about 900 acres,
excluding the new parcel, with estimated GDV of RM14 billion over the next five
to seven years. Mah Sing, which has been aggressively growing its landbank of
late with acquisitions in Jalan Ampang, Batu Ferringhi (Penang) and Cyberjaya
since early this year, has a total of 34 projects in the Klang Valley, Penang
and Johor Bahru. Leong also recently
said the group is looking at possibly acquiring a large tract of land of more
than 1,000 acres to develop a new township, adding that it is also exploring
acquisition opportunities in Kota Kinabalu, Sabah. “We are looking for landbank
that can have a quick turnaround. Like this (new) one, we will be able to
launch it quite fast as it is ready,” he said.
The new area, more commonly known as the Pekeliling flats,
is ready for immediate development as demolition works, soil investigations and
partial earthworks have already been completed, Mah Sing said. The Pekeliling flats, officially known as the
Tuanku Abdul Rahman flats, were the second high-rise apartment buildings in
Kuala Lumpur when they were constructed in the mid-1960s to provide affordable
housing to city dwellers. After outliving their usefulness and becoming an
eyesore, the flats were demolished, the settlers relocated and the land
earmarked for redevelopment.
The group noted that it is in sound financial position to
take on new projects. Mah Sing issued a seven-year redeemable convertible
secured bonds to raise RM325 million for land acquisition two months ago.
Executive director Steven Ng told the media in June that Mah Sing had cash in
hand of about RM750 million. Leong said
it is eyeing more government projects, including the development of the Rubber
Research Institute land in Sungei Buloh and the Sungai Besi land currently used
by the Royal Malaysian Air Force. “We are also looking at M&A (merger and
acquisition) deals. We don’t rule out acquisitions to play a bigger role (in
property development) and enhance shareholders’ value. We are keen to acquire,”
Leong said, but added that he could not comment on any potential deals at the
moment.
“At the moment, we are looking to kick-start the first
parcel first. We may be given the right to develop the other parcels in stages.
We are really excited about the project and are confident that it will go
well,” he said.
This article appeared in The Edge Financial Daily, August 3, 2011.
