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RM8b BBCC development to kick off in 2Q

KUALA LUMPUR: The much-touted RM8 billion redevelopment of the former Pudu jail site here, to be known as Bukit Bintang City Centre (BBCC), will kick off as early as the second quarter of this year, after the site has been abandoned for nearly four years.

The 19.4-acre (7.85ha) piece of land, strategically located between Jalan Pudu and Jalan Hang Tuah, will get a new lease of life through a special purpose vehicle (SPV) owned by Eco World Development Group Bhd (40%), UDA Holdings Bhd (40%) and the Employees Provident Fund Board (EPF) (20%), which will jointly develop the land into a mixed residential and commercial project. 

Under a joint development agreement signed yesterday, landowner UDA will grant to the SPV — BBCC Development Sdn Bhd — full rights to carry out the development for RM1.013 billion. 

The proposed development will comprise a retail mall, an entertainment block, strata offices, office towers, a five-star hotel, and serviced residences.

In a filing with Bursa Malaysia yesterday, Eco World (fundamental: 0.95; valuation: 0.30) said the market value of the development rights to UDA was appraised by Henry Butcher Malaysia Sdn Bhd, which had valued it at RM967.1 million.

The RM1.013 billion development rights were arrived at on a willing-buyer, willing-seller basis after taking into consideration, among others, the scarcity of commercial and residential land in the Bukit Bintang area, being one of the hotspots in the city centre; the close proximity of the land to the prime retail and commercial area within the Kuala Lumpur golden triangle; and the potential gross development value to be generated from the development of RM8 billion based on management estimates.

“Having considered the factors ... the board is of the view that the landowner’s consideration, which represents a premium of approximately RM46.5 million or 4.8% over the development rights value, is a reasonable amount to secure the rights to develop this prime city centre site,” said Eco World.

Under the mode of settlement, BBCC Development will make the first payment of RM250 million to UDA within 17 business days from the fulfilment by BBCC Development of the conditions precedent set out in the joint development agreement, followed by the second payment of RM382 million and the remaining RM381.56 million.

Eco World said the amount payable by it towards the first payment amounting to RM100 million is expected to be funded via internal funds and/or bank borrowings.

“The actual amount of cash payable in respect of the second and final payments is also expected to be funded via internal funds and/or bank borrowings. [However,] the exact quantum of bank borrowings to be taken has not been determined at this juncture,” it added. 

Earlier at the signing ceremony, UDA chairman Datuk Johari Abdul Ghani said the BBCC will appeal to both local and international investors.

“We also want to maximise our returns in this project, which will then be used to finance other projects for the group in the future,” he said, adding that the development order (DO) is due to be obtained within the next six months.

Johari said construction work on the proposed development will begin as early as the second quarter of 2015.

He also pledged that 50% of the construction work for the development will be awarded to bumiputera companies. However, he said only qualified and experienced contractors will be eligible to participate in tenders for the project.

It is understood that tenders for the project are expected to be issued once the DO is obtained.

“The SPV will be jointly managed by UDA, Eco World and the EPF until the project is completed in eight years.

“It will have 10 board members, comprising four members each from UDA and Eco World, with another two members from the EPF,” he added. The position of chief executive officer (CEO) for the SPV will be tasked to Eco World.

Also present at the signing was Eco World non-executive director Tan Sri Liew Kee Sin and EPF CEO Datuk Shahril Ridza Ridzuan.

It was reported two years ago that the government had directed UDA to redraw the master plan for the redevelopment of the former Pudu jail land to allow increased participation of bumiputera companies in the real estate sector. 

A China-based construction company was reportedly tipped to redevelop the land with UDA, but this was later rejected by the finance ministry. 

The redevelopment of the former Pudu prison is in line with the government’s Economic Transformation Programme to further develop Greater Kuala Lumpur/Klang Valley as a key engine economic growth, said Johari.

Eco World shares closed up 1.78% at RM2.29 yesterday, bringing a market capitalisation of RM1.16 billion.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to theedgemarkets.com for details on a company’s dashboard.

 

This article first appeared in The Edge Financial Daily, on February 5, 2015.

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