1MDB Stake Sale Price ‘Reasonable’

PETALING JAYA: The whopping RM7.41bil price tag for the sale of 1Malaysia Development Bhd’s (1MDB) 60% stake in Bandar Malaysia is considered reasonable, based on the valuation of surrounding plots of land within the vicinity.

In a research report, UOB Kay Hian Malaysia Research said the price paid by the purchasing consortium was “fair” given the asking prices for land in the surrounding and more developed areas ranged between RM350 per sq ft and RM650 per sq ft, particularly within the Taman Desa and Seputeh areas.

“Although Bandar Malaysia’s land is still not developed, 1MDB has secured approval in principle for the development’s masterplan with an average gross plot ratio of 4.05-times,” it said.

The research house believes that a development of this magnitude would require the significant part of the land to be earmarked for infrastructure requirements, including for the inner-ring roads, walkways and the rail-related infrastructure.

“Assuming a 70% efficiency ratio for the development, with a land price-to-gross development value ratio of about 20%, an indicative pricing which we believe the development could fetch would be RM1,300 per sq ft to 1,600 per sq ft.”

The 486-acre land in Sungai Besi, which 1MDB acquired from the federal government for RM400mil, is now valued at RM12.35bil by the consortium. According to 1MDB’s annual report, the purchase of the land was completed in 2013.

UOB Kay Hian added that the RM7.41b acquisition price tag excluded the debts that would have to be assumed by the consortium, which totalled about RM2.4bil.

“Taking this into account, the implied price tag for the acquisition would rise to RM8.85bil, or about RM696.74 per sq ft.

“The bonds were mainly raised to fund the relocation of the Royal Malaysian Air Force and the police air wing bases which currently occupy the Bandar Malaysia land.”

According to AmResearch, the RM7.4bil price tag for the 60% stake in Bandar Malaysia is RM12.3bil or around RM697 per sq ft if the project’s RM2.4bil sukuk debt that was to be assumed by the purchasers was included.

“This compares with the lowest transacted price of RM2,700 per sq ft at the Tun Razak Exchange although the average gross plot ratio for the former is around four times, compared with the latter’s reported figure of 10.5 times.”

–THE STAR ONLINE

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