STATE-controlled oil company Petroliam Nasional Bhd’s wholly-owned subsidiary, KLCC Holdings Sdn Bhd, and its partner Qatari Diar Real Estate Investment Co are understood to have invited interested parties for a pre-screening process for its RM5 billion project in the city centre, dubbed Cititower.
The deadline for expression of interest was Aug 21, a source says, adding that the contract attracted a number of the larger construction players in the country.
To be exact, the development is coming up on a 1.6ha plot located in the eastern corner of the Kuala Lumpur City Centre, sandwiched between Suria KLCC and the Asy-Syakirin mosque, which faces the KLCC Park.
“Petronas is basically looking for expressions of interest. It’s quite a large job, so, of course, the larger construction companies are looking at it. It should be a competitive affair,” the source says.
A check with the Companies Commission of Malaysia indicates that Cititower Sdn Bhd (formerly known as KLCC Utilities Sdn Bhd) is owned equally by KLCC Holdings and QD Asia Pacific Ltd — a unit of Qatari Diar Real Estate Investment, which in turn is a unit of the Qatar Investment Authority (QIA).
In April this year, Maybank Investment Bank Bhd and CIMB Investment Bank Bhd inked a deal with Cititower for a 20-year RM3.2 billion syndicated Islamic term loan.
Thus, it makes sense for the construction to start soon. Some of the specifics for the development include the construction of a nine-storey retail podium, a 59-storey hotel, an 80-storey office tower, a linkway between Suria KLCC and the project, a ramp in Jalan Ampang and landscape works, among others.
According to the letter requesting expressions of interest, the project is targeted to kick off in the first quarter of 2016. The piling work has already begun on the site. “Construction basically comprises structural works (excluding piling works), architectural, mechanical and electrical, façade cladding, interior fit-out, external works and other associated works,” documents viewed by digitaledge Weekly indicate.
Some of the information about the contractors that is sought by Cititower includes completed projects, current projects and project referees, among others.
While things are still fluid, the Fairmont, Raffles or Swissotel brands could have a hand in the 59-storey hotel, considering that the Qatari investment arm and Saudi Arabian prince al-Waleed Talal’s Kingdom Holdings Co control FRHI Hotels & Resorts.
However, in June this year, rumours were rife that Prince al-Waleed and the Qataris had appointed Deutsche Bank and Morgan Stanley to conduct the sale. Collectively, the two could have as much as 75% equity interest in FRHI.
The two partners have strong credentials. As at Dec 31, 2013, KLCC Holdings registered an after-tax profit of RM776 million on revenue of almost RM3.9 billion. Its non-current assets stood at RM20.4 billion and current assets in excess of RM5 billion. On the other side of the balance sheet, it had long-term borrowings of RM7.7 billion and short-term debt commitments of RM4.5 billion. Reserves were more than RM7.8 billion.
KLCC Holdings is the controlling shareholder of KLCC Property Holdings and KLCC Real Estate Investment Trust with a 64.7% stake.
KLCC Property Holdings (fundamental: 1.90; valuation: 2.10) was floated on Bursa Malaysia in August 2004 but in 2013, the company undertook a corporate restructuring where the group was converted into a stapled structure known as KLCCP Stapled Group — the existing ordinary shares of KLCC Property were stapled with the units of KLCC Real Estate Investment Trust. In May 2013, KLCCP Stapled Securities was listed on Bursa Malaysia under REITs.
Some of the properties in the group include the 88-storey Petronas Twin Towers, the 58-storey Menara 3 Petronas, the 29-storey Menara ExxonMobil, the 36-storey Menara Dayabumi, the 49-storey Menara Maxis and the Mandarin Oriental Hotel, Kuala Lumpur.
Qatari Diar Real Estate Investment was established by QIA — the sovereign wealth fund of the state of Qatar — in 2005. As at January 2012, it was capitalised at US$4 billion and had more than 49 projects being developed or in the planning stage in Qatar and 29 other countries around the world with a combined value of over US$35 billion.
The Cititower project commenced in January 2012 and is expected to be completed by mid-2020.
The property market has softened considerably recently, which would indicate that the partners could be looking to time their developments in what they see as the next up cycle of the property market.
Some developers are taking a cautious stance as a few companies, including Tan Sri Syed Mokhtar Albukhary’s Tradewinds group and state-controlled unit trust company Permodalan Nasional Bhd, are looking at building skyscrapers of more than 100 storeys while developments, such as the 70-acre Tun Razak Exchange with a gross development value of RM40 billion in the heart of Kuala Lumpur, could saturate the market for commercial properties.
Recently, some property companies have scaled back launches and revised sales targets as a result of the challenging market conditions.
This article first appeared in digitaledge Weekly, on August 31 - September 6, 2015.