Great Eastern bought The Weld from Cycle & Carriage Malaysia in 2003 for RM150 million.
KUALA LUMPUR: Great Eastern Life Assurance (M) Bhd, a unit of Singapore-listed Great Eastern Holdings Ltd, is calling for bids for the Menara Weld office building and The Weld Shopping Centre located within the Golden Triangle of Kuala Lumpur. The insurer has set a reserve price of RM270 million for both assets.
The landmark building — comprising a 26-storey office tower and an adjoining six-storey retail mall — are located at the corner of Jalan Raja Chulan and Jalan P Ramlee. The insurer purchased the commercial asset 16 years ago.
An advertisement that appeared over the weekend for the assets states that the sale of the building is being conducted through a tender exercise. According to the advertisement, the buildings, which offer 400,000 sq ft in net lettable area (NLA), sits on 68,932 sq ft. According to Great Eastern’s website, the building has four levels of basement parking and 445 car park bays. The office’s NLA is 269,953 sq ft. The closing date for the tender is Dec 4, 2019.
At a reserve price of RM270 million, the deal works out to RM675 per sq ft for the commercial space. Industry sources say the potential purchaser would need to pump in some money to upgrade parts of the building. Is it worth tearing down and redeveloping the site? At RM270 million, it would translate into paying RM3,917 per sq ft (psf). It is understood that the land is freehold.
The price appears to be on the higher side for land transactions in the area. A valuer who declined to be named pegs the land value in the area at a maximum of RM2,800 psf. Another says the commercial land may be worth just RM1,800 psf.
Nevertheless, at least two real estate experts reckon there will still be parties who are keen on purchasing the asset with the view of redeveloping it, due to The Weld’s proximity to their existing asset. One example is Hap Seng Consolidated Bhd, which has three office buildings nearby.
Property valuer James Wong, managing director of VPC Alliance (M) Sdn Bhd, says that at RM675 psf, the purchase would be a good buy. He thinks it would make sense for Hap Seng to purchase the property as the company already owns the nearby Menara Hap Seng 1 & 2, which are on Jalan P Ramlee. Hap Seng, he notes, is also becoming a big player in office development as it is developing a few office buildings in KL Metropolis off Jalan Duta in Kuala Lumpur.
A check on Hap Seng’s 2018 annual report shows that the group is now constructing Hap Seng 3 at the junction of Jalan Sultan Ismail and Jalan P Ramlee. Once completed, the three minarets will be called Plaza Hap Seng and will offer a total of 900,000 sq ft in NLA.
It is unclear why Great Eastern is selling the asset. But it is noteworthy that Kuala Lumpur is facing an office and retail space oversupply.
Moreover, Great Eastern operates the office block at Equatorial Plaza in Jalan Sultan Ismail, which is just 500m from Menara Weld. The new Grade A office building, which was completed last year, was reportedly purchased for between RM450 million and RM500 million. It has a total NLA of 460,000 sq ft, and is believed to be about 60% occupied.
Great Eastern bought The Weld from Cycle & Carriage Malaysia in 2003 for RM150 million, before upgrading it for an estimated RM15 million.
The retail component once comprised the Weld Supermarket, which is said to be the city’s first supermarket. Built in the 1960s, the supermarket was demolished and replaced with the current The Weld Shopping Centre in the late 1980s. The office tower was subsequently added in 1994.