Published October 23, 2008

I-Bhd and CapitaLand venture to build mall in limbo

Klang Valley deal yet to be inked, which means Reit listing uncertain too

By PAULINE NG
IN KUALA LUMPUR

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THE global financial crisis has thrown plans by CapitaLand to jointly develop an international-class shopping mall in the Klang Valley with Malaysian builder I-Bhd into a bit of uncertainty.

Property executives told BT the Singapore-listed developer had entered into a memorandum of understanding to build the mall with an estimated gross development value (GDV) of half a billion ringgit but, because of the anxiety created by the current financial turmoil, had yet to ink the deal.

Earlier, in July, mainboard-listed I-Bhd had revealed the company was negotiating with a number of foreign institutional investors with a view to establishing a 70:30 joint venture (JV) to build the shopping complex component - the second phase component - of i-City. A 29-hectare intelligent township in Shah Alam, i-City's total GDV is estimated at RM2 billion (S$840 million). Shah Alam is the Selangor state capital located 25-30 km from the Kuala Lumpur city centre.

Saudi Al Rajhi Bank acquired 36 of the 44 units of three- and five-storey office suites to be built in the first phase, for an en bloc price of RM95 million, or RM457 per square foot - said then to be a new pricing benchmark for Shah Alam.

Property executives said CapitaLand was to own 70 per cent of the proposed JV firm, which would buy a 6 ha plot for the 800,000-odd sq ft mall. As a specialist mall operator, CapitaLand would manage the centre upon its completion.

The company may have also looked at another retail mall in Shah Alam: the 1.23 million sq ft mall which Singapore-based Lend Lease Asian Retail Investment Fund 2 acquired a half share in with a unit of Malaysian-listed SP Setia and plans to build at an estimated GDV of RM750 million.

Under that agreement, the JV firm Greenhill Resources bought 12.3 ha of freehold land from SP unit Bandar Setia Alam for about RM120 million or RM90 psf.

CapitaLand has talked about plans to float a retail real estate investment trust (Reit) on the local exchange, consisting initially of three shopping malls worth RM2 billion. Should the deal with I-Bhd proceed, it is likely the mall when finished would also be injected into the Reit. It already has a listed commercial Reit in partnership with the Quill Group.

'It's meaningless until the JV is signed, but nobody knows what's going to be happening this quarter, or the one after, so there's some holding back,' a property player observed.

Bloomberg yesterday reported another listed developer, YNH Property, was delaying the sale of part of a RM2.1 billion tower in Kuala Lumpur, citing the global credit crisis as a reason.

i-City has been a long time in the offing, planned a decade ago as SumurCity before it was scuttled by the Asian financial crisis. Still, the project is said to have the backing of the Selangor state government and I-Bhd's biggest shareholder is state-owned trust fund Permodalan Nasional.

Reports have said the township would contain some 12 office blocks, three data centres, a five-star hotel and a boutique hotel when fully completed in 10 years. There will also be two blocks of 24-storey residences. The population catchment based on a 15km radius is estimated at 1.5 million people.

According to a property consultant, Malaysian asset prices are generally still 'status quo' for the moment. 'There are foreign institutions wanting to come in to do JVs because they see opportunities,' he said, noting that, in terms of country risk, Singapore and Malaysia are practically the only two countries in South-east Asia that global funds would consider.