MRCB scores a hat-trick

KUALA LUMPUR (Oct 29): Construction and property development outfit Malaysian Resources Corp Bhd (MRCB) scored a hat-trick yesterday with two major job wins, and the announcement of a joint-venture (JV) partnership to undertake the development of the Cyberjaya City Centre (CCC), which has a reported gross development value of close to RM10 billion.

The two jobs MRCB won were for the development and construction of the Kwasa Utama commercial development worth RM3.15 billion, and to regenerate facilities at the National Sports Complex in Bukit Jalil, Kuala Lumpur, worth RM1.63 billion.

MRCB told Bursa Malaysia it had entered into a management contract with Kwasa Utama Sdn Bhd (KUSB) worth RM3.15 billion, under which MRCB was appointed the management contractor for the development and construction of Kwasa Utama, a 29.82-acre (12.1ha) commercial development in the new Kwasa Damansara townwship in Sungai Buloh.

KUSB is 95% owned by the Employees’ Provident Fund (EPF) and the remaining 5% stake is held by Kwasa Land, which is wholly-owned by the EPF.

The 29.82-acre Kwasa Utama development, which will span over a period of 12 years from 2016 to 2027, is expected to comprise seven separate development plots. It will feature eight office towers, a hotel, an auditorium, and a common facility block.

These buildings will have a collective gross floor area of 7.91 million sq ft, with an estimated gross development cost of RM3.87 billion.

The management contract is conditional upon MRCB obtaining its shareholders’ approval for the proposed construction on or before April 30, 2016.

The group expects the management contract to become unconditional by the second quarter of 2016.

Meanwhile, Rukun Juang Sdn Bhd, in which MRCB has a 85% indirect stake held through MRCB Land Sdn Bhd, was awarded the job to refurbish the Bukit Jalil National Sports Complex and upgrade it into the Kuala Lumpur Sports City from the federal government after beating 10 other companies in an open tender undertaken by the Public Private Partnership Unit.

Rukun Juang entered into a privatisation agreement with the federal government for the job, which would cost RM1.63 billion, yesterday.

The cost of the project will be repaid by the government via the transfer of three leasehold tracts near the project site, totalling 92.5 acres and valued at RM1.6 billion, to Rukun Juang.

“Securing such a strategic land bank with development potential is in line with the company’s strategy of increasing its focus in the property development segment, as its core business,” said MRCB.

The development plans for the land have yet to be finalised at this juncture, but are expected to contribute positively to the company’s earnings and financial position in the future, it added.

The job will be undertaken in two phases. The first entails getting the stadium ready in 18 months to host the 2017 Southeast Asia (Sea) Games.

Once the Sea Games are over, Rukun Juang will commence the second phase of work no later than Jan 1, 2018, to turn the site — in three years — into the Kuala Lumpur Sports City, a fully-integrated sports hub, with world-class facilities and a sports-focused retail mall.

Rukun Juang will fund its obligations under the agreement via bank borrowings and/or advances from its shareholders.

Lastly, the group announced that MRCB Land will be forking out RM269.5 million to take up a 70% stake in CSB Development Sdn Bhd, a JV company which will purchase and undertake the CCC project, which comprises residential units, retail and commercial space.

MRCB Land inked a JV agreement with Cyberview Sdn Bhd, a government-owned company wholly-owned by the Minister of Finance, for the tie-up. Cyberview will take up the remaining 30% in CSB Development. for RM115.5 million.

“The parties have agreed to form a JV company, CSB Development, for the purpose of purchase and subsequently to carry out the development within the CCC Development Area 1, and CSB Development will also be given, among others, a first option over CCC Development Area 2, subject to terms and conditions to be negotiated,” MRCB said in its announcement yesterday.

The total area under CCC Development 1 is approximately 53.37 acres, while CCC Development area 2 is approximately 59.89 acres.

The proceeds from the JVC subscription payment will be used for the acquisition of land parcels within the CCC Development Area 1, amounting to RM348.75 million or RM150 per square foot, related land costs (RM31.38 million) and initial working capital (RM4.87 million).

MRCB Land will be the project management company for the CCC development, and shall receive a fee being a payment of 4% of the total construction of the project, excluding goods and services tax.

The two jobs — the regeneration of the national sports complex and the CCC development — will be funded by MRCB through bank borrowings and/or internally-generated funds, and/or equity fund raising.

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This article first appeared in The Edge Financial Daily, on Oct 29, 2015. Subscribe to The Edge Financial Daily here.