KLIA Aeropolis carved out of KLIA operating agreement; gets long-term land lease of 99 years

• The development and land lease agreements with the government of the land surrounding KLIA have been years in the making.
• Previously, the short-term lease was a major factor making investing in KLIA Aeropolis less attractive, as MAHB could only grant investors leases until 2034, coinciding with the end of its concession to operate KLIA.
• As such, the company has been engaging the government to tweak the leases of the land surrounding KLIA to 99 years.

KUALA LUMPUR (Nov 21): Putrajaya has agreed to carve out the KLIA Aeropolis lands from its existing operating agreement (OA) with Malaysia Airports Holdings Bhd (MAHB), providing a major boost for the airport operator to develop the land surrounding Kuala Lumpur International Airport (KLIA) in Sepang.

At the same time, Putrajaya has agreed to extend the expiring land leases in KLIA Aeropolis to 99 years.

In a filing with Bursa Malaysia on Monday (Nov 21), MAHB said a supplemental agreement between its wholly-owned subsidiary Malaysia Airports (Sepang) Sdn Bhd (MA Sepang) and Federal Lands Commissioner had been entered into on Nov 17 to carve out the lands from the OA for the development of KLIA Aeropolis.

The existing OA was signed in February 2009, which is effective for 25 years until Feb 11, 2034. However, on April 12, 2019, MAHB announced that the Cabinet had approved the extension of MAHB’s concession to operate 39 airports in the country from 2034 to 2069.

“Therefore, consequent to the (supplemental agreement), MA Sepang will retain the remaining 47 lots of land measuring 23,111.04 acres (9,352.71ha) for the continued purposes of KLIA airport operations, to be held under the OA and land lease agreement,” it added.

Additionally, MAHB has finally managed to secure the development rights to 41 lots of land, totalling 8,537.31 acres (3,454.93ha), for its KLIA Aeropolis for a period of 99 years beginning Nov 17.

It said a development agreement between its wholly-owned subsidiary KLIA Aeropolis Sdn Bhd (KASB) and the government had been formalised on Nov 17, which grants KASB the development rights to the lands in KLIA Aeropolis.

“A land lease agreement was also entered into between KASB and [the] Federal Lands Commissioner, which formalises KASB’s acceptance of a 99-year lease of the KLIA Aeropolis lands commencing from Nov 17. It also gives the rights to KASB to occupy, use, control, manage and sublease the KLIA Aeropolis lands,” it added.

The development and land lease agreements with the government of the land surrounding KLIA have been years in the making. Previously, the short-term lease was a major factor making investing in KLIA Aeropolis less attractive, as MAHB could only grant investors leases until 2034, coinciding with the end of its concession to operate KLIA. As such, the company has been engaging the government to tweak the leases of the land surrounding KLIA to 99 years.

Meanwhile, the execution of the development and land lease agreements, as well as the supplemental agreement, are expected to contribute positively to the group’s future earnings.

“They are not expected to have any material effect on the group’s share capital, substantial shareholders’ shareholdings, net assets per share, earnings per share and gearing for the financial year ending Dec 31, 2022,” said MAHB.

MAHB shares closed down six sen or 0.99% to RM6.01 on Monday, bringing it a market capitalisation of RM9.97 billion.