This article first appeared in The Edge Malaysia Weekly on June 3, 2019 - June 9, 2019
THE ambitious RM5 billion Empire City Damansara (ECD1) project that was launched in 2011 by Mammoth Empire Holding Sdn Bhd (MEH) may finally see light at the end of the tunnel, if things go as planned for its joint venture (JV) with Exsim Group.
For the past few years, there has been a fair bit of newsflow on ECD1, from the glitzy “Party of The Century” that MEH threw in 2015 to showcase the development that was attended by American socialite Paris Hilton, to not-so-flattering reports of the company being strapped for cash and the construction delays faced by the project.
For executive director Datuk Danny Cheah, reports of MEH having insufficient funds may soon be water under the bridge as the group looks to clear some RM300 million of its debts — comprising loans taken from AmBank and Maybank — within the next two months.
“Soon we will not have that kind of pressure [to settle the outstanding loans] and the group can start afresh,” he tells The Edge in an interview.
The settlement of the group’s debts comes on the heels of the sale of multiple assets it had — including a 65-acre tract that was meant for Empire City Damansara 2 in Petaling Jaya and 4.5 acres of undeveloped land that was part of ECD1 — to Exsim, a former timber company turned property developer.
Neither Cheah nor Exsim have confirmed the price tag for the parcels of land, though reports have pegged it at RM800 million.
Previous reports stated that property developer Aset Kayamas Group had paid RM236 million or RM270.90 per sq ft for 20 out of the 65 acres. However, Cheah says the deal with Aset Kayamas was terminated, as mutually agreed by both parties.
“There were certain conditions precedent, which could not be met, so both parties (MEH and Aset Kayamas) decided to terminate the sales and purchase agreement last year and the money has been refunded [to them] . Exsim is now the [sole] owner of the 65 acres of land,” says Cheah.
Exsim’s plans for Empire City
Exsim says its entry into the project is as a strategic partner to MEH for the ECD1 project, and not as a white knight.
“We are JV partners and we see this so-called problem as an opportunity. We like the concept of ECD and its strategic location,” says Michelle Siew, head of corporate communications at Exsim.
The Mammoth-Exsim JV company plans to complete the outstanding five developments for ECD1 that have a gross development value (GDV) of close to RM800 million. This includes two projects called QUB and QUAD+ that comprise multipurpose suites, the MacGuffin Hotel, the Autograph luxury hotel and Tower G.
These projects are expected to be completed within the next two years. Each component will be undertaken by a special-purpose vehicle set up by Exsim and MEH.
The JV company, however, will be making some changes to a few of the hotel blocks under construction.
“This is part of the strategic collaboration with Exsim. We intend to change these blocks to apartments instead of hotels. However, this is still in the discussion stage,” says Cheah.
The HCK Tower, which is still under construction, is targeted to be completed by the first quarter of next year.
Exsim will be in full control of the developments on the 4.5 acres and 65 acres while MEH will be responsible for ensuring the infrastructure, which includes the bridges to connect to these developments, is completed.
On the 4.5 acres, Exsim plans to have two developments — Mossaz Tower and Paxtonz Tower — with a combined GDV of over RM690 million. The former is a 39-storey tower, which will house 1,117 suites with six different layouts and built-ups ranging from 314 to 494 sq ft. The latter will offer 775 suites with built-ups of 332 to 526 sq ft in a 23-storey block.
“We see a growing demand for compact suites due to their versatility. The Mossaz and Paxtonz towers are designed to cater for young entrepreneurs,” says Siew.
The suites are expected to be completed in 48 months, with a soft launch scheduled this month.
As for the 65-acre tract, Exsim intends to turn it into a mixed-use development with a GDV of RM9 billion. The first phase will be affordable houses (rumah mampu milik) that are scheduled to be launched in September.
When asked about the commercial space oversupply situation in the Klang Valley, Cheah and Siew acknowledge the concern but say it will come down to fundamentals which, in the case of Empire City, are supported by its strategic location and secured tenants such as HCK Capital Group Bhd and MyEG Services Bhd.
On Exsim’s cash flow, Siew says the group sustains itself with its unbilled sales, which are expected to grow from RM2.3 billion now to RM2.8 billion by the end of the year.
Meanwhile, MEH will be using its entitlements from the JV to fund the completion of Empire City Mall. It is worth noting that Exsim will not be involved in the mall as the company has no experience in such projects.
Empire City Mall to be fully operational by 2022
The mall, the “baby” of MEH that will boast two million sq ft of net lettable area and house the largest ice skating rink in the country, is now at 80% completion.
Though its construction is expected to be completed in the next two years, it will only be fully opened for business by 2022, once the unfinished portions of ECD1 are completed.
“Previously, we had a different [way] of thinking. The direction in the last three years had been to provide a lot of incentives to retailers, including international brands, to come in, thus we spent millions of ringgit in capex to lure them [as tenants] for the mall.
“However, we have had a rethink of this direction in the past year and we realised that we were actually wrong. If the retailers come in with us spending the millions but there are no customers, they would need to close shop and leave,” says Cheah.
“So now, we have [realigned] the focus to get the population in first by completing all the high-rise developments surrounding the mall, then the retailers will be knocking on our doors [and not the other way around] and we would have more favourable terms in terms of rental [agreements].
“In the next six to nine months, we expect to complete the infrastructure portion, which is the bridges connecting to the mall. [Previously,] we were affected by the delays in the construction of the Damansara-Shah Alam Elevated Expressway (DASH) as there is some interfacing between our project and theirs. As we understand that the national interest should come first, we have decided to let them complete their part first before proceeding with ours,” he adds.
For some, it may appear that MEH has had to give up control of the development that it had held for the past eight years, but Cheah says the group has not deviated much from its prime objective, which is to own the mall — one for which he has travelled the world to get the right “feel” for its structure and interior.
“MEH’s intention from day one has been to own the mall and that is still intact. For the Empire City development, let me sum it up in this way: Rome was not built in a day, so similarly, a city of this [magnitude] cannot be built overnight. It has to evolve over time and it really takes time,” he stresses.
If the JV succeeds in completing the development, it would do right by those who had long invested in the project in the hope of owning a piece of prime property with a Damansara address.
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