The construction group said in an announcement yesterday that it had proposed to buy 1.65 acres in TRX via its indirect wholly owned subsidiary WCT Precious Development Sdn Bhd (WCTPD) from 1MDB Real Estate Sdn Bhd's (1MDBRE) wholly-owned unit KLIFD Sdn Bhd for RM223 million or RM3,098 per square foot (psf).
In the same announcement, WCT also said its wholly owned subsidiary, WCT Bhd (WCTB), had accepted a letter of award worth RM754.83 million from 1MDBRE for the proposed construction and completion of infrastructure and roadway works at TRX.
According to WCT, its TRX land purchase, which would likely be completed by the fourth quarter of 2017, would be financed by way of contra against a corresponding milestone payment as agreed under the contract for infrastructure and roadway works (referred herein as the Infra Contract) in the property.
The contract sum would be paid via three milestone payments according to work done.
“The purchase consideration for the land purchase will be payable by WCTPD by way of set off against the corresponding milestone payment of the contract sum payable by 1MDBRE to WCTB under the Infra Contract, and therefore, the land purchase will not have any material impact on the gearing of the WCT Group,” it said.
WCT said its proposed acquisition of the TRX land, which came with a Plot Ratio of 10.8, was part of the company’s strategy to seek continuous business opportunities with development in prime locations with strong growth and earnings potential.
It pointed out that its proposed development, which would comprise a tower block of high-end serviced apartments with complementary retail components, had an estimated gross development value (GDV) of RM1.1 billion.
“The land is strategically located within TRX. With its excellent location and its planned world-class infrastructure, together with excellent accessibility and connectivity, WCT is confident that the proposed development will be well received by the prospective investors and purchasers,” said WCT Holdings Bhd's managing director Taing Kim Hwa.
Meanwhile, works under the Infra Contract would commence tomorrow and will be completed within two years from the commencement date.
WCT said that in the event the sale and purchase agreement (SPA) is terminated due to no fault or breach by WCTPD, the parties would negotiate for an alternative piece of land within the TRX development.
And in the event the negotiations for the sale and purchase of an alternative plot fall through, payment of the contract sum would revert from the milestone payments to periodic interim progress payments.
On the other hand, in the event the Infra Contract is terminated, WCTPD may elect either to terminate or to complete the SPA, the group said. The land purchase, however, is subject to the approval of the Economic Planning Unit.
In a separate statement, 1MDBRE said WCT won the bid among 11 companies through a tender process, which was executed through a multistage evaluation process.
“The infrastructure contract package makes up a significant part of TRX’s comprehensive infrastructure programme that will turn the financial district into the best connected address in Kuala Lumpur.”
The two-year contract will cover underground road structures, installation of direct buried utilities, at-grade and elevated roadways, as well as associated earthworks, and mechanical and electrical works. This follows an earlier award of an earthworks and substructure contract package in April 2013 that WCT won worth RM169 million.
1MDBRE’s parent 1Malaysia Development Bhd (1MDB) is currently undergoing a rationalisation exercise to pare down its debt. The heavily indebted state investment fund, which has debts totalling RM42 billion, has been putting its assets, including land and power plants, up for sale to manage its cash-flow problems.
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In the TRX development alone, three deals had taken place before that of WCT.
WCT is now paying for the land at a much lower price compared with Affin Holding Bhd’s 1.25-acre purchase for RM4,699 psf in August (Plot Ratio: 15.2 times / RM255 million) and Indonesia’s Mulia Group 3.4-acre deal for RM4,490 psf in May (Plot Ratio: 15 times / RM665 million).
Affin's land deal is a record land transaction price in the Kuala Lumpur city centre. The banking group, which is controlled by Lembaga Tabung Angkatan Tentera, expects to relocate its headquarters there.
Meanwhile, Mulia Group expects to start work soon on its proposed 90-storey 'Grade A+' office building known as TRX Signature Tower. It will also have supporting ancillary facilities including retail, trading hub and other business facilities.
WCT’s deal, however, is slightly higher than Lembaga Tabung Haji’s TRX 1.56-acre purchase for RM2,780 psf in May this year (Plot Ratio: 10.47 times / RM188.5 million).
Tabung Haji is still in the midst of looking for buyers to dispose of the land after the purchase drew criticism, including from the fund’s members. Prime Minister Datuk Seri Najid Razak has also advised Tabung Haji to sell the land.
1MDB paid only a total of RM194 million, or RM64 psf, to buy 70 acres of land in the TRX from the government in 2010, with plans to develop it into Kuala Lumpur's dedicated business and financial hub.
1MDB expects TRX to be home to some 40,000 knowledge workers. In order to attract global multi-national and financial services corporations to set up base in TRX, the government of Malaysia is offering several tax incentives for owners and tenants that fall under TRX's marquee incentives such as accelerated capital allowances (100% over 2 years), stamp duty retention and 50% additional tax deduction on renovation expenses.
Designed by US-based Machado Silvetti, the TRX masterplan entails four precincts, which are: (a) Financial Quarter; (b) Lifestyle Quarter; (c) Park Quarter; and (d) Urban Quarter.
There are 25 plots of land altogether with a total of 25 buildings built offering over 21 million square feet of gross floor area. TRX will be home to Malaysia's largest underground subway, a mass rapid transit (MRT) interchange station serving two lines.
The entire development will be certified as Leadership in Energy and Environmental Design Development (LEED-ND) and Green Building Index (GBI) Township. TRX will be equipped with Smart City Infrastructure comprising TRX Security, Urban Operating System, Digital Homes, Mobile and Wireless Cloud and Smart Waste System among others.
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Early this year, 1MDB roped in Australia's largest property developer Lend Lease to jointly develop TRX's Lifestyle Quarter, which is the focal point for TRX, that will be built over 16.8 acres of land within the TRX.
This precinct will form the “front door” or entrance to TRX for visitors and will seamlessly integrate a multi-layered 13-acre central park together with the MRT station, a high-end shopping mall with a total space of 2 million square feet, three residential towers atop the mall and two hotel blocks.
It was speculated that retail tenants in the the Lifestyle Quarter may include American upscale fashion retailer Nordstrom, a Jamie Oliver restaurant and Japanese retail giant Takashimaya. Interested parties for the Lifestyle Quarter's hotel blocks had also been narrowed down to a few luxury brands, including Chimera, Rosewood Hotels and Resorts, and Hilton-owned Waldorf Astoria.
The Lifestyle Quarter, valued at over RM8 billion upon completion, will be designed by London firm Grimshaw Architects, an agency that has worked on New York's Fulton Center, the city's newest transit hub.
To recap back in April 2013, 1MDB awarded its first package of earthworks to WCT. In September 2014, 1MDB signed a 20-year concession agreement with Veolia Water Technologies Southeast Asia for wastewater treatment and recycled water supply in TRX.
More recently, government-linked property developer Malaysian Resources Corporation Berhad (MRCB) surprised the market when it won the deal to buy the 1.86-acre German Embassy Land at Jalan Kia Peng for RM3,188 psf, or RM259.1 million.
Singapore listed property developer, Oxley Holdings Ltd bought a 3.42-acre piece of freehold land in Jalan Ampang for RM3,325 psf, or RM446.7 million in November 2013. The following month saw KSK Land Sdn Bhd buying a 3.95-acre freehold parcel at Jalan Conlay for RM3,299 psf.
In September 2010, Urusharta Cemerlang Sdn Bhd, whose parent company owns the Pavilion KL shopping mall, bought a tiny strip of leasehold land in front of the mall from Singapore billionaire Kwek Leng Beng for a record price of RM7,209 psf.