Property Deals: Integra Tower, TRX, Renaissance KL are the deals of the decade

This article first appeared in The Edge Malaysia Weekly, on December 30, 2019 - January 05, 2020.

Integra Tower was the only office building to be sold for over RM1 billion during the decade. Photo by Low Yen Yeing/EdgeProp.my

TRX spans 72 acres and has a gross development value of RM40 billion. Photo by Reuters

The Renaissance Hotel was the largest transacted hotel asset based on room inventory (910 rooms) ever transacted in Kuala Lumpur. Photo by Kenny Yap/The Edge

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THE local property sector has seen a few distinct trends in the past decade. There was an uptick in the number of integrated developments, such as the Tun Razak Exchange (TRX), Bukit Bintang City Centre (BBCC) and KL Eco City, driven by the popularity of Mid Valley City, KLCC and KL Sentral.

Another trend was the increase in joint-venture developments, such as TRX Lifestyle Quarter (TRX LQ), BBCC and Kwasa Land, that allowed the parties to mutually benefit from venturing into large-scale developments.

The relocation of foreign missions and the sale of their land was yet another trend. The British and French governments sold their large landed properties and moved into office buildings. Even the Germans sold two of their valuable landed assets in Kuala Lumpur.

Between 2010 and 2019, we also saw multiple records being set — the highest price per sq ft land deal, the biggest sum paid for an office block and the sale of the hotel with the largest room inventory.

As we have done in the past five years, The Edge reached out to seven real estate agents and property valuers to list their top 10 deals. But this year, the focus is on the deal of the decade. The survey reveals that most of the deals of the decade were in the Klang Valley.

The seven surveyed are Rahim & Co International CEO of real estate agency Siva Shanker, CBRE|WTW managing director Foo Gee Jen, Exastrata Solutions Sdn Bhd CEO/chief real estate consultant Adzman Shah Mohd Ariffin, Savills Malaysia executive vice-president of asset management Alvin Tan, LaurelCap Sdn Bhd executive director Stanley Toh, Zerin Properties head of agency Shuchita Balasingam  and JLL Malaysia country head Y Y Lau.

 

Top picks

Six of the seven chose the sale of the 39-storey, Grade A Integra Tower in The Intermark as the deal of the decade. In April 2015, Kumpulan Wang Persaraan (Diperbadankan) (KWAP) purchased the 760,715 sq ft office building with 850 parking bays from BlackRock Inc for RM1.065 billion and a three-year guaranteed yield of 6%. BlackRock subsequently cancelled the guarantee and paid KWAP RM16 million upfront.

Integra Tower made it to Foo’s list as this was the only office building to be sold for over RM1 billion during the decade. For Lau, it was both the price and that it marked KWAP’s first domestic investment.

Savills’ Tan concurs: “It is still one of the best-specified commercial office buildings in the city and commands among the highest rents in its peer class.”

Siva, whose firm Rahim & Co executed the deal, points out that it was “BlackRock’s game-changing integrated development that raised the bar for office buildings in Kuala Lumpur”.

 

Tun Razak Exchange

The tax benefits and land deals offered by 1Malaysia Development Bhd’s former unit, 1MDB Real Estate Sdn Bhd (now known as TRX City Sdn Bhd), caused a stir but were, nevertheless, significant.

Five out of the seven property experts surveyed gave their vote to TRX as the Deal of the Decade. Launched in 2010 as the Kuala Lumpur International Financial District, it spans 72 acres and has a gross development value (GDV) of RM40 billion.

Referring to several of the transactions within TRX, including Affin Bank Bhd’s purchase of a 1.25-acre parcel for RM255 million and Mulia Property Development Sdn Bhd’s purchase of a 3.42-acre plot for RM665 million, Foo says: “This project is expected to accelerate Kuala Lumpur into becoming the next financial hub of the region, to rival or complement Singapore.”

Tan says the TRX LQ development is a landmark deal as it marked Australian property developer Lendlease’s first foray into the capital. With a GDV of RM10 billion, the lifestyle quarter provides 5.5 million sq ft of gross floor area of retail, hospitality, residential and campus/office, all integrated with the country’s first 10-acre rooftop park, he says.

Another noteworthy deal is that of HSBC Bank Malaysia Bhd, which will move its headquarters to TRX. Tan describes it as a “pivotal moment in Kuala Lumpur when banking institutions are starting to converge in the purpose-built, integrated district”.

“The RM1 billion deal is at a prominent corner of TRX, where Jalan Tun Razak and Jalan Sultan Ismail meet, and will be one of the best-specified office buildings in the country when completed in 2021,” he says.

LaurelCap’s Toh zeroes in on the Affin Bank land purchase, noting that the deal saw land prices in the city centre reach new heights. “The transaction is analysed at a whopping RM4,699 psf. Perhaps the land, with an approved plot ratio of 15:2, helps to justify the sale.”

 

Within the Golden Triangle

The property experts consider the sale of Renaissance Hotel Kuala Lumpur to be almost as significant as the TRX deal. IGB Corp Bhd sold the hotel in Jalan Sultan Ismail for RM765 million in 2016.

“The sale of this landmark hotel was a long time coming after 10 years on the market. It demonstrates the continued appetite for Malaysian hospitality assets shown by foreign investors amid a much cheaper ringgit,” Siva says.

Lau points out that it is “the largest transacted hotel asset based on room inventory (910 rooms) ever transacted in Kuala Lumpur, possibly even nationwide”.

“The sale is significant because of the length of time the asset was on the market, as it is an iconic landmark in the Kuala Lumpur city centre. It was finally purchased for RM840,000 per room by S Alam Group,” Toh says, adding that it was transacted at a fair price.

Real estate history was created in 2010 when Tan Sri Desmond Lim’s Urusharta Cemerlang (KL) Sdn Bhd purchased 29,127.11 sq ft of land in the capital for RM210 million. The land, located between Grand Millennium Hotel and Pavilion KL, was purchased from Singaporean billionaire Kwek Leng Beng’s CDL Hotels (M) Sdn Bhd. Today, the Pavilion Elite mall and serviced residences are sited on this parcel.

This deal was picked by four out of the seven estate agents.

“Lot 1195 Jalan Bukit Bintang was transacted at RM7,209.78 psf, setting the record for a landmark transaction in the country,” Toh says.

Adzman points out that the price was about 2.4 times the estimated value at the time, even though the tract was rather small for an iconic development.

The sale of Wisma Selangor Dredging in Jalan Ampang also caught the attention of the property experts. In 2017, Selangor Dredging Bhd sold the office building for RM480 million.

Siva’s reason for selecting the deal is that it was sold at a price significantly higher than the market and “a surprising 30% above the property’s last valuation”.

“The transacted price of RM480 million, which translated into RM1,323 psf, is perhaps one of the most expensive for an en bloc office tower transaction, taking into consideration that the office market in Kuala Lumpur City Centre has been poor with depressed yields. The purchaser, Golden Eagle Sdn Bhd, was farsighted as the asset has tremendous redevelopment potential in the future,” Toh says.

The sale of Prince Court Medical Centre (PCMC) made it to the top 10 list too. PCMC was sold by Khazanah Nasional Bhd to IHH Healthcare Bhd for RM1.02 billion.

“It is a significant transaction for 2019, when market sentiment and the number of large transactions have been low. The property is an iconic landmark and located in a very attractive location,” Toh says.

Lau’s table also lists the sale of the country’s first shopping centre — Ampang Park Shopping Centre at the Jalan Ampang, Jalan Tun Razak junction — which was built in 1973. The government acquired the land to make way for an underground walkway for the MRT line.

 

Diplomatic move

In late 2012, S P Setia Bhd subsidiary Setia Hicon Sdn Bhd purchased the British High Commission land in Jalan Ampang for RM295 million. The UK government had received the land in exchange for Carcosa Seri Negara, the former residence of the British High Commissioner, which has been declared a heritage building.

“This was the sale of the final and most valuable real estate asset belonging to the British government in Malaysia,” Siva says, adding that Rahim & Co had managed the tender exercises for the British government since 1990. His firm managed to sell the asset at an almost 50% premium to the reserve price. Six years later, in November 2018, Setia Hicon sold the parcel with a development order for RM449.2 million or RM3,350 psf to Agile Property Development Sdn Bhd, which is part of China-based Agile Group Holdings Ltd.

“The deal is significant as it is the most expensive transaction (on a psf basis) in Jalan Ampang. In addition, the price translates into RM3,350 psf, which is a good price for the vendor, especially in this economic climate,” Toh says of his selection.

In 2015, the 8-acre French Embassy land in Jalan Ampang was sold. The purchaser, Putrajaya Ventures Sdn Bhd, a wholly-owned unit of Putrajaya Holdings Sdn Bhd, paid RM894 million.

Siva highlights that the offer for sale of this parcel came up around the same time as the German government’s property, adding that the 8-acre parcel of prime land is one of the largest to be sold in the city centre.

“This high-profile transaction also continued the trend of Western governments disposing of their high-value property assets in Malaysia,” he says.

The French Embassy land made it to Tan’s top 10 list, too.

“As a result of the changing ways in which diplomacy is conducted and the changing functions of foreign missions, the French government disposed of the prime 8-acre city centre site, located at the precipice of the Golden Triangle, for RM900 million. The French Embassy relocated to the nearby Integra Tower, like its British counterparts who moved to Menara Binjai,” he says.

 

Deals involving large parcels

Taking the lead from previous successful integrated developments, the decade saw several major projects. As one expert says, “While the deals had higher barriers to entry, it also allowed higher densities and the projects were better future-proofed because of the diverse overall offering.”

Foo, Tan and Adzman list the Employees Provident Fund’s wholly-owned subsidiary Kwasa Land Sdn Bhd’s Sungai Buloh land deal as significant this decade. In August 2011, it was decided that the former Rubber Research Institute of Malaysia land in Sungai Buloh would be redeveloped into a new city of Greater Kuala Lumpur known as Kwasa Damansara township.

The EPF had purchased the 2,330-acre land for RM2.3 billion from the Malaysian Rubber Board. Foo says the development will be transport-oriented with the MRT 1 and MRT 2 lines originating from there.

Another major ongoing integrated development of the decade is BBCC. The 19.4-acre parcel is the site of the former Pudu Prison. BBCC Development Sdn Bhd is a special purpose vehicle (SPV) set up to jointly develop the project on a 40:40:20 partnership between UDA Holdings Bhd, Eco World Development Group Bhd and the EPF. UDA, as the landowner, has assigned the development rights to the SPV.

Foo describes the project as a “benchmark project for unlocking the value of heritage asset”, while Lau says it was “a historical prison where many infamous criminals were executed, and the project has been marked as a significant national-level development. The prison was built in 1895, and was also a former Chinese burial ground”.

Pusat Bandar Damansara is another notable transaction. In 2013, the Desmond Lim-linked Impian Ekspresi got hold of the PBD land following a four-year dispute with Bukit Damansara Development Sdn Bhd, an indirect subsidiary of Johor Corp.

In 2015, Canada Pension Plan Investment Board bought a 49% stake in the Pavilion Damansara Heights development being built on the PBD site. Zerin’s Shuchita says the 9.57-acre parcel at the heart of the commercial area of Damansara Heights is of a substantial size. And the development — featuring offices, hotel, residential and retail components — is complemented by two MRT lines directly connected to it. “Pavilion Damansara Heights is a game changer for the Damansara Heights neighbourhood,” she says.

 

On the outskirts of KL city centre

Mammoth Empire Holding Sdn Bhd, the developer of the behemoth Empire City Damansara project in Petaling Jaya, has been on a selling spree for the past two years. Mammoth Empire has sold several of its assets, including Empire Subang Shopping Centre, Empire Remix, a 61-acre parcel that was earmarked for the Empire City Damansara 2 project and The Wolo Kuala Lumpur.

“This is significant because of the sheer number of transactions that took place and the size and type (development land, hotel, commercial and retail). Mammoth Empire managed to stave off a cash flow crisis with these strategic transactions,” Shuchita says.

Adzman also picked Mammoth Empire for its transactions within Empire City Damansara. He cites the sale of a 33,340 sq ft space in the podium level below MyEG Tower to Cuspaci Bhd for RM20 million, or RM600 psf, in the third quarter of 2018. In September 2018, Mammoth Empire sold another commercial space, also in the podium level below MyEG Tower, for RM35.4 million, or RM780 psf.

In November 2018, MEH sold yet another 16,441 sq ft commercial space to Excel Force MSC Bhd for RM9.86 million or about RM600 psf. “The price was considered high at RM600 to RM780 psf for suburban commercial space,” says Adzman.

The “buying and selling” of 1 Mont’Kiara was considered significant for two reasons. Singapore-based ARA Asset Management Ltd bought the building in 2010 and sold the office component in 2018.

“The sale of a mixed office and mall development was considered rare and the price was below market valuation,” Adzman says. ARA purchased the office and mall from Aseana Properties Ltd, an associate of Ireka Corp, for RM330 million.

ARA then sold the office component to members of Saudi Arabia’s Alrajhi family for RM122 million, which marked the family’s first purchase in Malaysia. The asset was on Shuchita’s list as it was ARA Asia Dragon Fund’s first purchase in Malaysia.

The Hilton Kuala Lumpur in KL Sentral hotel transaction was compelling enough to be one of the top 10 deals of the decade. The hotel was sold to Daito Trust Construction Co Ltd for RM497 million in 2017.

“This was the more prominent of the hotel sales in recent years in Kuala Lumpur. Although it shows that good quality hospitality transactions are still healthy in the capital, at RM988,000 per key, this was lower than market expectations,” Shuchita says.

Toh concurs. “At RM988,000 it  is not the most expensive ever transacted in the Klang Valley, but it is a relatively good buy for the purchaser. The property industry expected the price to be at least RM1 million per room, given the popularity of the hotel and its branding.”

 

Other notable transactions

EcoWorld’s purchase of 26 pieces of leasehold land in Kuala Selangor, measuring 2,198 acres, for RM1.18 billion in September 2015 made it to the top 10 list for Foo and Toh. To be developed as a self-contained township with a GDV of RM15 billion, it is expected to be one of the largest township developments on the fringe of Kuala Lumpur.

“The history of the land has been marred with lawsuits and entanglements with the Selangor government for years. Nevertheless, the vendors managed to pull off the transaction and at RM12.33 psf, it sets an optimistic mood for the area and the period,” Toh says.

Another deal that made headlines when it was executed was the sale of the Nasi Kandar Pelita land. Singapore-based Oxley Holdings Ltd purchased the freehold land, measuring 135,356 sq ft, in Jalan Ampang, which also included six bungalows and Chef Choi restaurant, for RM446.67 million or RM3,300 psf from the executors of the estate of Leong Mai Leng.

The purchase immediately set the benchmark for land prices in the area.

“The land achieved a record price for 2013 for a parcel of land in a zone with a standard plot ratio of eight,” Adzman says.

The Putra Place deal made it to Lau’s list. Previously known as The Mall and Legend Hotel, Lau says it was one of the largest property transactions via a public auction in the country.

 

 

Bandar Malaysia and Kampung Baru in focus

The Bandar Malaysia project on the former Sungai Besi airport land in Kuala Lumpur was announced exactly a decade ago, and it is finally taking off next year.

The project was first announced in 2011 by 1Malaysia Development Bhd, the master developer of the site. However, a deal inked in 2017 to develop the site did not materialise. The 486-acre, RM140 billion GDV development was recently resuscitated and will be developed by a 40:60 joint venture between the Ministry of Finance Inc subsidiary TRX City Sdn Bhd and IWH-CREC Sdn Bhd.

Shuchita Balasingham, head of agency at Zerin Properties, says, “It will be interesting to see what transactions take place here — which plots, at what price, will there be strategic joint ventures to develop Bandar Malaysia and with whom, especially since this will be a stop for the KL-Singapore High-Speed Rail. It will be interesting to see what unique features or developments come in here.”

Another development that the industry is keeping a watch on is the redevelopment of Kampung Baru. The government has offered RM1,000 per sq ft to the landowners.

CBRE|WTW managing director Foo Gee Jen expects the redevelopment to draw more investments into the area, which he describes as a “300-acre gold mine heritage land located in the centre of Kuala Lumpur, but was bypassed by development and modernisation”.

In the new decade, property experts also expect to see an increase in asset sales by government-linked companies as they roll out their rationalisation exercises. They are also hopeful for a change in legislation for en bloc sales of aged stratified buildings in the capital to achieve optimal plot ratios.

Other anticipated developments are the potential revival of Plaza Rakyat and the former Duta Hyatt Hotel in Kuala Lumpur, as well as what lies ahead for hypermarkets in the country, given the challenging retail environment.

 

 

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