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City&Country: Surprise sale of The Icon’s East Wing

On Christmas eve, Mah Sing Group Bhd announced that it was selling en bloc the East Wing of The [email protected] Razak, this time for RM226.5 million or RM860 psf (based on net lettable area of 263,435 sq ft), to TS Law Realty Sdn Bhd.

Under the deal, TS Law Realty, an investment holding company, will enjoy a monthly rental guarantee of RM1.3 million, which works out to RM46.8 million or 7% yield for three years.

Some 301 parking bays located at the podium and basement levels are included in the sale.

East Wing and West Wing make up The [email protected] Razak, a purpose-built Grade A office building with more than 500,000 sq ft of lettable space in the vicinity of the prime Kuala Lumpur City Centre. Its design boasts large floor plates of about 30,000 sq ft for each floor. The certificate for occupation has been issued. With the proposed sale of East Wing, the project is fully sold.

West Wing had been sold en bloc to Koperasi Permodalan Felda in July 2007 for RM174.4 million or RM715 psf based on a net lettable area of 243,830 sq ft. This deal also comes with a 4-storey basement car park plus a 7% guaranteed rental yield for three years from the date of possession.

East Wing has a total floor area of 278,182 sq ft. Mah Sing said the space will be leased out to offset the rental guarantee it is giving TS Law Realty.

The latest proposed transaction of East Wing comes on the heels of Mah Sing's forfeiture of a RM42.67 million deposit from Prompt Symphony Sdn Bhd. In 2007, Prompt Symphony signed a sale and purchase agreement with Mah Sing's wholly-owned subsidiary Star Residence to buy East Wing for RM237 million or RM900 psf. This excludes a “put” and “call” option agreement signed between the parties for the sale of not less than 301 car parking bays in The [email protected] Razak for RM18 million.

Mah Sing did not provide any rental guarantee to Prompt Symphony. It said on Dec 24 that Prompt Symphony has defaulted on paying the balance of the purchase price.

Prompt Symphony is an 80:20 special purpose vehicle set up by Kuwait Finance House KSC and Autron Corp Ltd. Meanwhile, Kuwait Finance House Malaysia Bhd (KFHMB), in responding to a recent newspaper report on the aborted deal, has clarified that it was not a contractual party to the aborted purchase of the East Wing. KFHMB also said it did not have any interest in the transaction and that it continues to seek potential investment opportunities in line with the government's objective of making Malaysia an international Islamic financial centre.

At press time, there has been no reply to queries sent to KFH in Kuwait through KFHMB on the aborted deal. According to KFHMB, it could not reach the manager in Kuwait. At the same time, questions directed at KFHMB on whether it had any role in the cancelled transaction were also not answered.
When contacted, Mah Sing Group declined to elaborate on the details of the forfeiture clause or whether a similar clause is included in the deal with TS Law Realty.

Mah Sing also would not say how the deal with TS Law Realty was struck or how long the negotiations have taken.

Who is behind TS Law Realty? A search with the Companies Commission of Malaysia website revealed that the investment holding company, formerly known as Senadi Pesona Sdn Bhd, was registered in 1995 and has a paid-up share capital of RM150,000 comprising 150,000 shares of RM1 each. These shares are equally held by its directors Saw Geok Ngor and Datuk Law Tien Seng.

According to the website of Chuai Heng Group of Restaurants (a subsidiary of TS Law Group), the 57-year-old Law is the founder of the TS Law Group. The group is engaged in a wide variety of businesses ranging from food and beverages, investment and development of land and properties to production and trading of steel materials, development of iron ore and pellets logging, services, travel, consumer products and media production.

These are operated through the group’s subsidiaries, which include TS Law Holding Sdn Bhd, Chuai Heng Restaurant Sdn Bhd, JK Ji Seng Marketing Sdn Bhd, Prince Café & Bistro, Six Happiness Restaurants Sdn Bhd, ZG Nan Fang Holidays (M) Sdn Bhd and LTS Properties (M) Sdn Bhd. Employing 1,500 people, the group has revenues exceeding RM1 billion.

Law, also known as David Law, ranked 36 in 2009 Forbes Asia Malaysia rich list with a net worth of US$105 million (RM355 million). He made it to the list in 2008 after cashing out his 12% stake in Australian iron ore mining company Midwest Corp Ltd to Sinosteel Corp — one of China’s biggest suppliers of raw materials to Chinese steel mills — in the same year. Law was the deputy chairman prior to the takeover exercise. Midwest Corp was taken private in September 2008.

The entire property investment portfolio of TS Law Realty is not immediately known, nor are the group's property-related plans. Calls made to Law's office were taken by Law's personal assistant who said both Law and the group's property division CEO were not in Malaysia and hence could not be reached for comment.

It could not be determined if Law and Mah Sing's Tan Sri Leong Hoy Kum knew each other before the deal was sealed or whether they have other business interests together.

Property consultants say Mah Sing obtained a good deal for East Wing compared to the sale of Menara Citibank, located within the vicinity of Jalan Ampang.

Last August, Menara Citibank was part-sold to Hap Seng Consolidated Bhd at RM828 psf based on the building’s net lettable area of 733,634 sq ft.

Menara Citibank sits on a freehold site of about 136,637 sq ft. Hap Seng Consolidated bought the 50% stake from CapitaLand Ltd and Amsteel Corp Bhd — the remaining 50% equity stake of Inverfin is held by Menara Citi Holding Co Sdn Bhd.

“It is a good price for Mah Sing in today’s market, and it [the group] has done well to sell it [The Icon’s East Wing] quickly,” DTZ Debenham Tie Leung (Malaysia) Sdn Bhd executive director Brian Koh tells City & Country.

Star Residence had in 2006 paid RM53 million for the about 39,461-sq-ft commercial plot on which The Icon sits.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 788, Jan 11-17, 2010.

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