PETALING JAYA (Feb 24): The disputed RM1.1 billion mixed-use development in Section 13 here by Star Media Group – which publishes The Star English daily – and pipe-maker JAKS Resources Bhd’s 51%-owned subsidiary JAKS Island Circle Sdn Bhd stems from a contentious joint development agreement (JDA) struck in 2010, reported The Edge weekly.
The development currently comprises a 15-storey office tower, 17-storey commercial-cum-education block, podium, 34-storey residential block and two 25-storey residential blocks.
The initial deal was questioned as firstly, it was signed a mere three weeks before the Malaysian Chinese Association’s (MCA) especially fraught three-way presidential elections that saw Tan Sri Chua Soi Lek emerge as the victor, leading to a reshuffling of Star Media's board and management.
MCA, via its investment vehicle Huaren Holdings Sdn Bhd, holds a controlling stake of 40% in the group.
Secondly, Star Media was questioned over its decision to choose JAKS, which had no proven property development track record, to undertake the project when the group had possessed cash reserves of almost RM700 million at that point.
Thirdly, Star Media and JAKS were to have jointly applied for RM50 million in banking facilities to finance part of the project, which was deemed as strange given that the group already owned the 24,568 sq m parcel.
Following much criticism, amendments to the JDA were announced in August 2011, stating that Star Media would sell the land to JAKS for RM135 million, with payment to be fulfilled in cash and in kind – in this case, a 15-storey office tower, said The Edge.
To ensure that the tower would be completed and handed over in time, JAKS had to provide a RM50 million bank guarantee to the group.
Under the agreement, the tower would be completed within three years of JAKS receiving vacant possession; if JAKS cannot meet this deadline, the contract would be automatically extended by 12 months at a cost of 8% interest per year to the contractor.
The project now has a GDV of RM1.1 billion, up from the initial RM370 million estimated.
However, Star Media eventually called on the guarantee because the project had been delayed by two years, and it refused to give JAKS an extension, causing JAKS Island Circle to have to pay RM50 million to the financial institutions.
JAKS Island Circle had in response applied for a High Court injunction to stop the banks from releasing the money to Star Media, saying the group’s decision is without basis and that it had in fact prevented the completion of the tower.
The development plan for the entire project was approved by Majlis Bandaraya Petaling Jaya on Aug 16, 2012, and given that the tower construction should have taken three years and JAKS estimated construction to begin at the end of 2012, the tower should have been delivered in late 2015 or early 2016.
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