KUALA LUMPUR (June 1): Malaysian Resources Corp Bhd (MRCB) is partnering with its largest shareholder, the Employees Provident Fund (EPF), to jointly develop three parcels of leasehold land in Bukit Jalil into an integrated development, which will have a potential gross development value (GDV) of RM21 billion over a 20-year period.
MRCB said its 85%-owned subsidiary Rukun Juang Sdn Bhd has signed a subscription and shareholders’ agreement (SSA) with EPF’s wholly-owned unit, Tanjung Wibawa Sdn Bhd, to form a joint-venture (JV) company called Bukit Jalil Sentral Property Sdn Bhd (BJSP) to jointly develop the vacant land, measuring a combined 76.14 acres (30.81ha).
Rasma Contractors Sdn Bhd, a private vehicle controlled by former federal territories minister Datuk Seri Raja Nong Chik Raja Zainal Abidin, holds the remaining 15% stake in Rukun Juang.
Back in late April last year, MRCB announced to Bursa Malaysia that the group had accepted a letter of intent from EPF, in which the provident fund expressed its intention to subscribe for an 80% interest in the entity that will hold the land.
The vacant land is currently owned by the government and will be awarded to Rukun Juang as payment in exchange for its involvement in the privatisation project to refurbish and upgrade the National Sports Complex in Bukit Jalil, costing a total of RM1.34 billion.
MRCB said independent property valuer C H Williams Talhar & Wong Sdn Bhd in a certificate dated May 9 appraised the land at RM405 per sq ft, for a total of RM1.43 billion.
Once Rukun Juang received the land from the government, which is expected to be in July 2017, MRCB said it will be immediately disposed of and channelled into BJSP for RM1.43 billion.
Under the SSA, both Rukun Juang and Tanjung Wibawa will be subscribing for new shares and new redeemable preference shares in BJSP, which will be issued at RM1 apiece.
Rukun Juang will pay up to RM285.23 million for a 20% stake in BJSP, while Tanjung Wibawa will pay up to RM1.14 billion for the remaining 80% stake, in cash.
However, MRCB said Rukun Juang will not have to pay for its 20% stake in BJSP in cash, as it will be capitalised from the amount it owed in respect of the land disposal.
As for the mode of payment, MRCB said it will be done in two tranches.
The first tranche of payment will only commence once MRCB has received necessary approvals for the land to be disposed of and channelled into BJSP, while the second tranche of payment is only due after securing a development order.
As for the integrated development on the land, MRCB said it has the potential for a mixed development comprising residential and commercial properties, with expected gross development cost of RM14.66 billion, which could yield a GDV of RM20.67 billion and a gross development profit of RM6.01 billion.
“The development is proposed to be launched in three phases, with a project horizon of 14 years. The proposed development has the potential to position itself against mixed development projects such as Empire City, Pantai Sentral Park and Bangsar South,” it added.
“As the property development project is a large-scale project that is expected to span across 20 years, shareholders have agreed to include the call and put options in the share subscription agreement to accord them with the flexibility to regulate their shareholdings in BJSP, if necessary, during the early to middle stages of the proposed JV,” said MRCB.
MRCB is also the project delivery partner of EPF’s property development arm, Kwasa Land Sdn Bhd, a role that will see it developing the main infrastructure for the new 1,600 acres of the Kwasa Damansara township.
MRCB has proposed a cash call to raise fresh capital to pare down debts and to finance the refurbishment of the National Sports Complex in Bukit Jalil. Being the largest shareholder holding a 33.55% stake, EPF has given its undertaking to subscribe to the rights issue, which will cost the provident fund over RM728 million.
This article first appeared in The Edge Financial Daily, on June 1, 2017.