THE proposed realignment of the Sungai Buloh-Serdang-Putrajaya (SSP) line — to cut through the Bandar Malaysia development in Sungai Besi as opposed to certain parts of Pandan and Cheras — would have an impact on the large swathe of relatively undeveloped land just outside of the Kuala Lumpur city centre and would notably help Bandar Malaysia’s developer, 1Malaysia Development Bhd (1MDB).
While this has stirred up the Opposition, it perhaps comes as no surprise that Bandar Malaysia could be connected to the SSP line, which is also known as MRT2 under the Klang Valley Mass Rapid Transit project.
This is because there would have been some overlap between certain sections of the existing LRT system, the ongoing MRT1 and the originally proposed MRT2 alignment in Pandan and Cheras. Meanwhile, it is in the interest of the government that Bandar Malaysia receives a strong catalyst.
Until recently, the government had not planned for an MRT station in Bandar Malaysia, except for a terminal for the proposed Kuala Lumpur-Singapore High Speed Rail (HSR).
Most developers would agree that having a HSR terminal alone would not be effective in spurring the 1MDB project. The HSR could also take longer to materialise compared with the MRT2, which looks certain to commence construction next year with a five-year deadline.
Real estate experts say the 495-acre development would receive a big boost from having both MRT2 connectivity and HSR. 1MDB recently revised the total gross development value of Bandar Malaysia from RM20 billion, which it had estimated a few years earlier, to RM150 billion over a 10 to 15-year period.
“This is a clear signal of intent by the government to turn Bandar Malaysia into a new central transport hub. Compared with the HSR, which has yet to be finalised, there will be a clearer timeline as to when the MRT2 will become operational,” says an executive director of a major property development company.
Developers seem excited by the proposed MRT2 connectivity in Bandar Malaysia. Most foresee as many opportunities there as in the ongoing Kwasa Damansara mixed-use development in Sungai Buloh, where a subsidiary of the Employees Provident Fund is the master developer. In Kwasa’s case, the master developer has begun the tender process for developers to present their respective request for proposal to co-develop the pre-divided parcels.
According to developers, a competitive bidding structure would ensure that the Bandar Malaysia tract will be transacted at high valuations, hence maximising the value for 1MDB and its owner, the Ministry of Finance. This should not be a problem as most of the development has been earmarked for highly-in-demand residential projects, thanks to its prime location, as opposed to offices and commercial developments that are prevalent in the Kuala Lumpur city centre, they note.
Nonetheless, Opposition politicians were quick to take a swipe at the proposed MRT2 connectivity in Bandar Malaysia. They alleged that it is a scheme to bail out debt-laden 1MDB by making Mass Rapid Transit Corp Sdn Bhd (MRT Corp) pay high prices up front for some parts of the land to build the rail line. MRT Corp has denied this, saying that it need not acquire land to build the underground rail.
Opposition MPs have also claimed that the proposed realignment to connect to Bandar Malaysia will deprive the densely populated Cheras and Pandan of the new line, although this argument is debatable, with MRT Corp saying that the realignment would benefit an even larger catchment area and get more people to use the rail system.
That said, there is no denying that 1MDB appears keen on monetising its assets, including the 70-acre Tun Razak Exchange tract in Jalan Tun Razak and Bandar Malaysia tract that it had purchased cheaply from the government.
In February, 1MDB’s new president and executive director, Arul Kanda Kandasamy, said the firm would sell development rights or undertake joint-venture projects with interested parties in Bandar Malaysia. This is part of the overall scheme to unlock value and strengthen 1MDB’s cash flow to deal with its hefty debt load of some RM42 billion.
When contacted, Ho Chin Soon Research Sdn Bhd director Ho Chin Soon says while one cannot dispute the prime valuation of the Bandar Malaysia tract, the value will be determined by how the master developer apportions its landbank.
“First, they (the master developer) will need to work out how much land the HSR terminal will take up, which could be substantial. The areas surrounding the terminal would be more suitable for higher-end residential and commercial developments, while the rest of the landbank can be used for affordable housing projects,” he says.
Given the nature of the development, Ho is not surprised about the proposed MRT2 connectivity, in addition to the HSR terminal.
“What is clear is that the realignment [of MRT2] makes sense as more riders will be served, from Sungai Besi all the way to Putrajaya. The HSR terminal will also serve as a tourist hub for incoming visitors from Singapore, which would turn the area into a commercial hotspot.”
At the same time, the MRT2 connectivity would make sense of the earlier proposed development of affordable apartments in Bandar Malaysia under the PR1MA initiative.
Despite the positive news, questions remain about whether 1MDB can kick off the development in line with the MRT2 schedule. It is worth noting that 1MDB still has to deal with the relocation of the occupants of the land — currently used as an airfield serving the Royal Malaysian Air Force (RMAF) — at a cost of RM1.6 billion.
Bandar Malaysia Sdn Bhd, an indirect subsidiary of 1MDB, had last year partially issued RM1.5 billion out of a total nominal value of RM2.4 billion under a sukuk murabahah exercise to finance the relocation of the RMAF operation in Sungai Besi.
But given that 1MDB’s cash flow issues and troubles with meeting interest payments are well documented, and that the monetisation exercise concerning its highly geared power assets are still being sorted out, interested developers should expect some hurdles before Bandar Malaysia can start gathering momentum.
This article first appeared in The Edge Malaysia Weekly, on April 6 - 12, 2015.
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