Newsbreak: Syed Mokhtar may be seeking buyer or investor for Bukit Bintang project

This article first appeared in The Edge Malaysia Weekly, on February 11, 2019 - February 17, 2019.

Lot 342 is a prime tract opposite Pavilion Kuala Lumpur in Bukit Bintang

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TAN Sri Syed Mokhtar Albukhary is believed to be looking for a buyer for a 3.46-acre parcel of prime land near the bustling tourist zone of Bukit Bintang. If he is able to find one, the tycoon may be able to net a premium of 60% to 85% from the sale, based on the latest transactions in the area.

Sandwiched between Jalan Raja Chulan and Jalan Conlay, the tract is just a stone’s throw from the popular Pavilion Kuala Lumpur shopping centre.

Two separate sources tell The Edge that potential purchasers have been approached to put in offers. Another source says Syed Mokhtar is open to any form of collaboration, including a joint venture, to develop the site.

Valuers note that the tycoon had bought the land at a much lower price than the current market value.

It is widely known that Syed Mokhtar won the parcel on which Restoran Seri Melayu was located via a tender, possibly in 2010, but the title was not transferred until 2017. Known as Lot 342, the land was then owned by the Federal Lands Commissioner.

After the successful bid, the restaurant was dismantled and a groundbreaking ceremony was held at the site in July 2012 to unveil what was to be the world’s first Harrods Hotel and Residences. At the same time, it was revealed that Syed Mokhtar and Tan Sri Desmond Lim Siew Choon, who at the time had taken a long lease on an adjacent parcel, Lot 297, from Dewan Bandaraya Kuala Lumpur (DBKL), would be partners in the multi billion-ringgit integrated project called Harrods Square.

However, Syed Mokhtar and Lim parted ways when the Harrods Hotel project did not materialise. Lim is controlling shareholder and non-executive chairman of Malton Bhd and chairman of Pavilion REIT.

Records sighted by The Edge show that Syed Mokhtar, via a company known as Ketapang Abadi Sdn Bhd, paid RM325.5 million or RM2,161.22 psf for Lot 342 — a freehold land parcel measuring 150,609 sq ft — in December 2017. Meanwhile, Lim’s Armani Hartajaya Sdn Bhd bought Lot 297, a leasehold parcel, for RM101.06 million or RM1,872.36 psf in April 2017. Lim is planning a project called Pavilion Square on the site.

How much would Syed Mokhtar’s Lot 342 be worth today? Valuers contacted by The Edge say it may fetch RM3,500 to RM4,000 psf. A valuer who pegged the land at the higher end of the price range based it on recent transactions in the vicinity. “Prime land such as this is scarce in the city centre,” he remarks. In March 2018, the Social Security Organisation (Socso) purchased a 81,291 sq ft parcel in nearby Jalan Kia Peng for RM323 million, or RM3,973.24 psf, from Malaysian Resources Corp Bhd.

At RM4,000 psf, Lot 342 would be worth RM602 million today. However, the valuer cautions that land value is only as good as the approved plot ratio.

Another valuer has a more conservative valuation. Even with a development order in hand, he appraises the land at RM3,500 psf, or RM527 million in total.

A document sighted by The Edge shows that Ketapang Abadi plans to build three blocks with rooftop facilities. The buildings will offer 1,223 serviced apartments and 350 hotel rooms on top of a two-storey retail podium.

So why is Syed Mokhtar selling the land when it was transferred to him only about two years ago?

Industry experts reckon that it is because he has several other land parcels in Kuala Lumpur that have yet to be developed. These include the former Crowne Plaza Mutiara and adjoining Kompleks Antarabangsa parcels, measuring six acres in total. The buildings on the sites were demolished about seven years ago.

Also uncompleted are Menara Tun Razak in Jalan Raja Laut, and a 12.2-acre site in Belfield, Kampung Attap. Syed Mokhtar has undeveloped land outside Kuala Lumpur as well.

One industry observer, however, is sceptical that potential buyers will offer a significant premium for Lot 342. “Who will pay that kind of money in the current market? Maybe a China investor?”

He feels Syed Mokhtar may not be serious about selling and may only be floating a trial balloon for “price discovery” purposes, and perhaps inject the land into one of his companies. “He may do what he did with DRB-Hicom (Bhd),” he comments.

Last year, Syed Mokhtar carried out a land swap with DRB-Hicom under which the conglomerate gave up its real estate, including land and a golf resort in the Klang Valley, to its controlling shareholder in exchange for industrial land in Tebrau, Johor, and RM299.7 million cash.

DRB-Hicom’s list of real estate includes 2,268.43 acres, together with buildings, in Shah Alam, Klang, Puchong, Jalan Tun Razak, Batu Caves, Johor Baru and Terengganu, valued at RM1.93 billion in total. In return, DRB-Hicom received 1,243.45 acres of freehold land in Tebrau, Johor.

DRB-Hicom said it netted a gain of RM848.4 million on the disposal.

Syed Mokhtar used Kelana Ventures Sdn Bhd, his investment vehicle, to acquire the assets. Kelana Ventures also wholly owns Ketapang Abadi, which owns the parcel in Bukit Bintang.

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