Buyer for land near palace?

KUALA LUMPUR (July 11): All eyes are on the price tag that the ministry of finance (MoF) could fetch for the two parcels of land that it has put up for sale near Damansara Heights at the time when the property market is experiencing a slowdown.

The transacted prices for the two parcels would set a new benchmark, which may not necessarily be higher than previous records, for the land and real estate nearby.

Sources in the known revealed that there had been just lukewarm interest in the tract so far, although it is in the prestige area near to the palace and in Jalan Tuanku Abdul Halim.

The status of the tenders remains sketchy, but it is learnt that the MoF has recently selected a winning bidder for the larger parcel, measuring 19.14 acres (7.75ha), and the name was submitted to the cabinet less than two weeks ago for approval. One source said it is a listed company.

The other parcel is about 9.74 acres. However, it is learnt that there were no bids received for the smaller Bukit Ledang parcel. As such, the MoF may now look at an alternative tender process.

To recap, in March, the government sought for buyers for the 19.14-acre tract in Jalan Lembah Ledang fronting Jalan Tuanku Abdul Halim (previously known as Jalan Duta). At that time, the advertisement stipulated that the reserve price of the parcel was RM1,000 per sq ft (psf), or RM833.3 million in total.

The advertisement specified that an integrated development could be built on the freehold parcel, which has a plot ratio of six. Each of the tender documents, costing RM3,000, also required bidders to include an RM1 million bank draft with each application for the bid to be considered. The closing date for the tender was April 6, 2016.

Subsequently, a second advertisement calling for tender for the same parcel was placed in the following month with lower requirements. This time, the reserve price was reduced and set at RM900 psf or a total of RM750.31 million. The plot ratio was also reduced to 1:5 and the advertisement said the land is for major commercial use. There was no longer a requirement to submit an RM1 million bank draft together with the tender document. The closing date for this tender was on May 9, 2016.

Since the appearance of the advertisement, according to sources, several real estate agents have maintained that the more realistic land price in the area is between RM700 psf and RM900 psf, rather than RM1,000 psf.

When asked what was his opinion on the reason for the changes in the price and plot ratio, Stanley Toh, director of valuation and real estate agency firm LaurelCap Sdn Bhd, said: “The value in the area would be lower in comparison with other areas in Kuala Lumpur despite the affluent address, and because of the proximity of the land to the palace, the development will be low-density, caused by height restrictions.”

“The land area is huge. At 19 plus acres and based on [the] quantum factor, the price per sq ft should be lower than that of a vacant bungalow plot of land,” Toh added.

He pointed out that since the access road leading to the land is through Jalan Semantan, a traffic impact assessment report will have to be conducted in order to identify if the density is able to cope with the existing traffic. “Judging by the constant congestion along Jalan Semantan, the chances of getting a high density is pretty slim,” he told The Edge Financial Daily.

It is said that the change in pricing may have occurred because the MoF had not received the response it had hoped for. Moreover, potential bidders may have provided feedback on issues, such as limited accessibility to the site and height restrictions because it is too close to Istana Negara. This may have prompted the MoF to make the changes in plot ratio and asking price.

One industry player said the lower price would allow for money to be channelled to improve road access.

In the Bukit Ledang advertisement, it states that the reserve price is RM700 psf or RM297.03 million. The land use of the freehold parcel has been categorised as integrated development and has a plot ratio of four. The closing date for the tender was April 27, 2016. Because there were no tenders submitted for this parcel, The Edge Financial Daily understands that a selective tender will be conducted, whereby a few companies may be picked by the MoF and asked to put in their offers.

A recent deal, which took place in the area, was the sale of 9.01 acres by KH Estates Sdn Bhd for RM150 million. KH Estates is a 58-42 joint venture (JV) between Dutaland Bhd and Olympia Industries Bhd. The land forming part of a JV development project in Sri Hartamas/Mont'Kiara known as Kenny Heights was sold to Semanja Hartamas Sdn Bhd. The deal was done at RM382 psf.

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This article first appeared in The Edge Financial Daily, on July 11, 2016. Subscribe to The Edge Financial Daily here.