(May 13): News in the past week that pilgrims’ fund Lembaga Tabung Haji and another statutory fund, pensioners’ fund KWAP, have both bought plots of land in the Tun Razak Exchange (TRX) development from cash-stricken 1Malaysia Development Berhad (1MDB) has created public outcry.
The uproar has not been limited to the fact that a statutory body holding depositors' savings in trust had bought the land but also the fact that 1MDB only paid RM64 per square foot when it obtained the land for the 30ha development from the federal government four years ago.
Now, five years after it was first announced, the flagship development project has not attracted foreign investments the way it was touted.
TRX, formerly known as the Kuala Lumpur International Financial District, was first announced in 2010, and had a false start when a ground-breaking the same year was indefinitely postponed.
1MDB's major partner for the project was supposed to be the Abu Dhabi-based Mubadala Development Company, but to date, there has been no official confirmation on the amount of investment made by the Middle-East consortium in TRX.
In 2012, Prime Minister Datuk Seri Najib Razak established a task force to oversee the completion of TRX over 15 years.
It wasn't until three years later, in 2015, that 1MDB's real estate arm, 1MDB RE, finally announced a joint venture to develop the Lifestyle Quarter of TRX, after striking a deal with Australian construction giants Lend Lease.
Lend Lease, as per the deal announced in March this year, owns a 60% stake in the joint venture, while 1MDB RE holds the rest.
Even so, no details of the financial arrangements with Land Lease have been released – whether Land Lease is injecting cash into the joint venture, price per square foot and 1MDB RE’s contribution. Until and unless those details are revealed, it is impossible to assess if this was a good deal for 1MDB.
Though TRX was touted as a financial hub, the current development entails a retail mall, a hotel, and several residential towers.
The estimated completion date for this initial phase has been set at between 2017 and 2018.
The gross development value (GDV) of this quarter is RM8 billion, a small portion of the initial estimate of RM40 billion GDV for the entire TRX project.
Construction of the country's biggest Mass Rapid Transit (MRT) station is also due for completion in 2017.
TRX was supposed to host 25 buildings with 3,800 residential units, with Najib previously claiming some 250 of the world's best companies would set up shop in the financial district.
To date, there had been no official announcement of global conglomerates joining in TRX, except for Lend Lease – which had developed the Kuala Lumpur City Centre (KLCC) and other key developments in Malaysia previously.
Over the years, 1MDB had progressively raised more questions than answers about its dealings.
It currently sits on debts of around RM42 billion, after going on a global bond-raising exercise, and even keeping funds in the Cayman Islands.
It has admitted to cash-flow problems and is undergoing a strategic review, which could include disposing of some of its assets.
Formerly the site of civil servants quarters, 1MDB's recent sale of 0.63ha of TRX land to Tabung Haji is 43 times higher than the cost 1MDB paid for it, while the sale of another plot to KWAP is more than 30 times the purchase cost.
Tabung Haji, when it bought the land which it now intends to sell off amid public pressure, only intended to build a residential tower.
KWAP's decision to buy the land in TRX for between RM1 and RM1.2 billion and develop a 40-storey building as its new headquarters, would make it the first confirmed office space development in TRX. – The Malaysian Insider