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Affin Bank buys land from 1MDB

TRX 1MDB

KUALA LUMPUR (Aug 11): Affin Bank Bhd, which is controlled by Lembaga Tabung Angkatan Tentera (LTAT), is paying RM255 million cash to buy a parcel of land in the Tun Razak Exchange (TRX) — a property development project wholly owned by 1Malaysia Development Bhd (1MDB).

Affin Bank, a wholly-owned unit of Affin Holdings Bhd, announced that it entered into a sales and purchase agreement (SPA) with KLIFD Sdn Bhd, a unit of 1MDB, to acquire the tract measuring 54,266 sq ft, near Jalan Tun Razak, Kuala Lumpur.

The purchase price translates into RM4,699.07 per sq ft (psf) — a record land transaction price in the Kuala Lumpur city centre.

According to Affin Holdings group chief executive officer (CEO) Kamarul Ariffin Mohd Jamil, the land has been independently valued at RM261 million. This means that the banking group is buying it at a discount.

Affin Bank is the second government-linked company that has bought land in the TRX after Lembaga Tabung Haji, which paid RM188.5 million, or RM2,780 psf for a 1.56-acre (0.64ha) tract there.

Tabung Haji’s land deal met with public outcry, especially from its depositors, three months back. With hindsight, the pilgrim fund seems to have struck a better deal with RM2,780 psf compared with RM4,699.07, the price that Affin Bank is paying now.

The debt-laden 1MDB is probably the ultimate king of deals given that the strategic development fund paid only a total of RM194 million, or RM64 psf, to buy the 70 acres of land in the TRX from the government in 2010 with plans to develop it into a financial hub.

1MDB’s wholly-owned unit 1MDB Real Estate Sdn Bhd, the master developer of the TRX and Bandar Malaysia, said: “The financial district is investing close to RM3.8 billion for its infrastructure, and the amount is factored into the selling price of the land.”

The SPA was signed following extensive negotiations that began in 2012, and covers the development rights to build a commercial tower, said TRX.

Part of the TRX land was originally supposed to go to Pelaburan Hartanah Bumiputera Bhd, a government agency. But it was instead sold by the government to 1MDB to be used for the development of the TRX.

The land acquisition does not require approval from shareholders because the purchase price is barely 3.2% of Affin Holdings’ net assets of RM7.95 billion as at Dec 31 last year, according to the announcement to Bursa Malaysia.

The announcement also pointed out that Tan Sri Lodin Wok Kamaruddin, the chairman of 1MDB, is the company’s deputy chairman. Lodin is also the chief executive of LTAT, which owns a 35.28% stake in Affin Holdings.

The group noted that Lodin’s common directorships do render him an interested party of the acquisition under Bursa’s listings requirement.

Speaking at a press conference yesterday, Kamarul, who is also the CEO and managing director of Affin Bank, pointed out that the development will have a gross floor area (GFA) of 823,439 sq ft. Based on the purchase price of RM255 million, the price per gross floor area will be at RM309.67 per sq ft, while the plot ratio will be 15.2 times.

“We have been sourcing for a suitable location that meets our requirement, with the right price. There was a need as the bank, together with other entities within Affin group, has been growing and we need more space for everyone under one roof,” he said.

“This is a prime location and having Affin’s new head office here will definitely reinforce our branding and position in the market. And with everyone under the same roof, it is our hope that this will generate better synergies and more collaboration within the Affin group,” said Kamarul.

He noted that Affin will pay a 10% deposit for the acquisition and the remaining 90% upon presentation of the registration title. It will be financed by internal funds.

This article first appeared in the digitaledge Daily on Aug 11, 2015. Subscribe here.

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