Naza’s property arm, Naza TTDI Sdn Bhd, will receive 65 acres of prime land in the Jalan Duta area in Kuala Lumpur for building a RM628mil expo centre for Malaysia External Trade Development Corp (Matrade).
The centre and other projects planned on the land would have a combined estimated gross development value (GDV) of RM15bil over a 10-year period.
Observers have questioned whether Naza has landed a sweetheart deal and if the project will yield the best returns on a valuable government asset. Naza TTDI group managing director SM Faliq SM Nasimuddin is aware of the level of scepticism.
“There has been much talk about the deal since we announced it. We will be having a press conference, maybe early next week, hopefully, to talk about it. At this juncture, however, the master plan has not been approved,” he told StarBizWeek after a function on Thursday to mark the rebranding of the Naza Talyya hotel business.
He says phase one of the project comprises the expo centre, which will be on that 65 acres together with a hotel, a shopping mall and one office tower. This will be ready in four years.
He adds that the company is currently talking with investors in the hotel and retail sectors on their participation in the project.
“We would like their involvement and contribution. It is a big piece of land, and their experience and presence will help to ensure its success.”
On the possible strategy of carving out parcels of the project land to different parties, he says Naza “is looking to develop what we can, but will also enter into various joint ventures with foreign and local developers and contractors.”
An analyst, who declined to be named, says the deal lacks clarity. “On what basis was the land awarded to them? If private negotiations are the way to go, does this mean government land banks like the ones in Jalan Cochrane, Ampang and Sungai Buloh, will go the same way?” he asks.
“There are other government-linked companies that are in construction and property development. They could all be parties to a restricted tender if the Government does not want to have an open tender.
“This would at least give the whole deal a vague semblance of transparency, if not total transparency. Without calling for a tender, the Government may not be maximising returns on its assets.”
Another sticky point is the current soft climate. Property consultants have their reservations, given the scale of the development. It has everything – condominiums, hotel, expo centre and shopping malls.
“They have to get their master plan right. When MRCB (Malaysian Resources Corp Bhd) got the KL Sentral project, it did the right thing by anchoring the place as a transport hub and got two five-star hotels in to upgrade the image of Brickfields,” says the analyst.
The market value of the land is also a subject of debate. Says valuer Elvin Fernandez of Khong & Jaafar: “The straight analysis of this is that the price per square foot (per sq ft) is RM222. In order to equate the price to a current market value, one has to discount it at an acceptable rate of return.
“Based on a five-year period, we would arrive at a discounted per sq ft value of about RM150.”
Several land deals of between two and three acres were done in the Jalan Ipoh area at over RM600 psf this year. If the gross development value of all the projects totals RM15bil, that means it will be high-density development.
Another source values the land at between RM350 and RM500 per sq ft. In Malaysia, the land cost would make up between 10% to 20% of the total GDV of RM15bil. In Singapore, land cost could go up to 50% of GDV, while in Hong Kong, 65% of GDV.
A property consultant, who declined to be named, says Naza got a fair price for the land.
“They did not get it for a song. They are planning the convention centre for Matrade over a period of time. That means the land price is being paid for that period of time,” he says.
By The Star (by Thean Lee Cheng)
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