Monday, August 10, 2015

1MDB on course to reduce debt to manageable level


1MDB is on course to reduce their borrowing to a more manageable level with their latest announcement to sell 54,250 sq ft of TRX land for Affin Bank Berhad's future headquarter in the Kuala Lumpur Financial District.

Despite recycled accusation, it is understood that 1MDB intend to keep borrowing at the more manageable level of RM10-15 billion.

Just like Tabung Haji, there is a common Director between 1MDB and Affin Bank. 1MDB's Chairman, Tan Sri Lodin Wok Kamaruddin is a non-executive Director of Affin Bank and Cheif Executive of LTAT.

Hopefully there is no more headline chasing blog posting to accuse the deal as a bailout using the armed forces pension fund. Political oversimplification were made with inadequate understanding of property market. 

The bad publicity created on Tabung Haji had scared local corporations and funds away while foreigners gobbled up land parcels for Stage 1 of the TRX. [Read Property Lifestyle here.]

The New Straits Times below:
Affin Bank buys TRX land for new HQ

10 August 2015 @ 6:53 PM

KUALA LUMPUR: 1Malaysia Development Bhd Real Estate (1MDB RE) has inked a deal with Affin Bank Bhd today to acquire a plot of land measuring 823,439 sq ft in the Tun Razak Exchange (TRX) to develop its new headquarters (HQ) for RM255 million.

The plot, earmarked for a 35-storey Prime Grade A office block, will bring the Affin Group’s financial services entities to co-locate under one roof and cater for the Group’s future expansion plans.

Affin Bank’s new head office would be part of TRX’s financial quarter, essentially the Central Business District of TRX that occupies the most visible corner of the site, fronting both Jalan Tun Razak and Jalan Sultan Ismail.

“We are pleased with the progress we are making in our negotiations with local and international parties, and we are happy to have Affin Bank with us as we continue to realise our aspirations to create a world-class financial district," said 1MDB RE CEO Datuk Azmar Talib in a statement.

The Sale and Purchase agreement was signed following extensive negotiations that began in 2012, and it covers the development rights to build a commercial tower for a consideration of RM255 million.

The development will have a Gross Floor Area (GFA) of 823,439 sq ft, with the price per sq ft GFA of approximately RM310.

Affin Bank’s new head office has an attractive plot ratio of 15.2, while the entire TRX district – which will boast an urban central park and amenities such as on-site water treatment system and district cooling plant – has a plot ratio of 6.8.

At a separate press conference, meanwhile, Affin Bank managing director and chief executive officer (CEO) Kamarul Ariffin Mohd Jamil said: “We have been sourcing for a suitable location that meets our requirement, with the right price. There was a need as the bank, together with other entities within Affin Group, has been growing and we need more space for everyone under one roof.”

He added that the land has been independently valued at RM261 million. Kamarul Ariffin said Affin will pay 10 per cent deposit for the acquisition and the remaining 90 per cent upon presentation of the registration title.
Noticeable is the payment terms are similar to that of Tabung Haji but was psyched as a bad deal and bailout.

The claim of bailout is unfair because Affin Bank have been in negotiations with TRX since 2012. So it is not a rushed deal that would be typical of any bailout.

Affin is one of the many local financial institution thus is a suitable occupant for KLFD.

As explained in the case of Tabung Haji, the same practises applies. Lodin had abstained from taking part in the decision making process and the consideration to buy were professionally done.

The land deal of RM255 million is a small discount to the valuation made by CH Williams Talhar and Wong. With a plot ration of 15.2, the GFA is of 823,439 or RM310 per sq ft.

Other nearby lands are getting only plot ratios of between 8-10.

TRX land are better deals despite the impression of TRX land are commanding higher price than the surrounding site. That is not quite true. The German embassy land was purchased by MRCB at RM3,100 psf.

The Master builder will be responsible to provide site-wide infrastructure including transport connectivity, water management, district cooling and a sizeable public realm.

More in 1MDB press release here.

Buyers will be getting fully serviced plots on net land with high plot ratios, with different plots having different plot ratios.
 
One of TRX’s USP is the ease of doing business as it aims to create a business ecosystem within TRX for ease and convenience, access to larger pool of talents, close proximity to customers and suppliers, and opportunities for peer networking

The point is this is a business deal and it should be seen strictly from a business perspective. There are places and time for politics elsewhere.

In the meanwhile, 1MDB is responding to recycled allegations againt them:
Issued on 10 August 2015

1MDB remains focused on rationalisation plan despite recycled allegations

Tun Dr. Mahathir Mohamad in his latest blog posting today recycled old and unproven allegations, which have been addressed by 1MDB in various statements shared with the media.

On 30 June 2015, in our response to one of Tun Mahathir’s postings, 1MDB have provided a detailed explanation on the flow of funds from our investment in the joint venture with PetroSaudi International.

We have also explained, on several occasions, our rationale for the price we paid in the acquisition of our energy assets. As we had explained in our statement dated 30 June 2015, 1MDB believe that the value we paid for these assets - which may have involved a premium in certain instances, as is common when acquiring another business - is commensurate with their existing and future potential.

These recycled allegations not only cast aspersions on 1MDB but also impacts the day-to-day operations of the company. 1MDB have repeatedly responded to these unfounded allegations by Tun Mahathir as evidenced in our statements on 10, 16, 18 and 30 June 2015.

1MDB would now like to remain focused on the successful implementation of our rationalisation plan, which was presented to the Cabinet on 29 May 2015.

Since then, 1MDB has been making good progress, beginning with the repayment of a US$975 million (approx. RM3.6 billion) loan and execution of a binding term sheet with International Petroleum Investment Company (IPIC) that will ultimately result in the reduction of approximately RM16 billion of the company’s debt.

We have also appointed an independent real estate consultant for monetisation of the company’s land parcels in Bandar Malaysia, Air Itam and Pulau Indah.

With regards to Bandar Malaysia, 1MDB have received expressions of interest from 40 local and international parties to be development partners for our 486-acre Bandar Malaysia project, who are now in a detailed due diligence process.

1MDB is also now in due diligence with shortlisted local and international parties in relation to a sale of our investment in Edra Global Energy Berhad.

Collectively, these tangible actions by 1MDB will significantly reduce debt and ensure the long term sustainability of our three core assets, namely TRX, Bandar Malaysia and Edra Global Energy.


17 comments:

Anonymous said...

So we are to take your word for it? You really expect people to believe that lodin stayed out of decision making and negotiations despite being on both end of the parties privy to discussions? How do you think outsiders are going to view malaysia? It really is a stupid move. When pieces are put, this will still seem like a bailout due to the presence of lodin.

An what's funnier is the fact that if 1mdb didnt exist, the government of the day would have had all the money for itself instead of having a dumb company headed by an imbecile who is in dire need of cash. You cant paint it any other ways breeck. Sorry.

hasan said...

Thanks very much Affin Bank.

Anonymous said...

Affin's purchase makes TH's purchase look stupid. Affin paid 255 mil and will get 823,400 sq ft Commercial Building. TH got vacant land and nothing else. Land size not much different 1.56 ac to 1.25 ac. Affin paid 10% downpayment only, balance after title issued. TH paid 100% even before anything done.

TH 188.5 mil holding cost of say 5.9% pa for 5 years until building completed, that's about 30 mil in interest. Belum kira lagi SPA legal fees, stamp duties, contract documents, admin coste, etc that would run into millions more. Before any building stand constructed on the site.

What a farce investment by TH.

Anonymous said...

Harga yang dibayar oleh Affin Bank telah membongkar kemungkaran harga yang dibsyar oleh Tabung Haji.

Affin Bank dapat commercial tower seluas 823,400 kaki persegi, Tabung Haji dapat tanah kosong, untuk buat futsal kot.

azmi mohd yusoff said...

The qestion still what happen to all the billion ringgit????

Anonymous said...

Just wondering IF the brouhaha about 1MDB didn't surface, would it rationalize things? Mark of well-managed company?

Sharul Nizam said...


wow. We should all rejoice. Najib memang terror la.

Financial misadventures that affecteverybody. Now using some magic from MOF, details of which we will never know, hutang dikurangkan.

Hail to the emperor with no cloth!!

hasan said...

The approved plot ratio for TH land is 10.47, thus for 1.6 acre the gross floor area is about 729,717 which translates to about RM258 per square feet. If TH puts in another say RM500+ per square feet for construction/marketing cost, the total cost for TH will be say RM800 per square feet. TH then could sell the completed building at say RM2000-00 per square feet, thus making a neat profit of RM1,200 per square feet which translates into RM875,660,400 million profit. No?

Anonymous said...

woah... what a statement!!!
reduce debt to manageable level.

this is done via selling asset?? 1mdb asset can be categorized into 2; land and the IPP - correct, yes. One is passive i.e. it can not generate revenue (it can only increase in value but once sold, then its done). The other one is an active asset, the IPP which generate revenue. But the Q raised here, are the revenue generated sufficient to cater for say interest payment of the loans? (after removing the cost factor, the net gain?). Based on current and previous financial obligation, 1mdb had to request for all sort of things from the gomen to help meet its own financial obligation.

Fact of the matter is 1mdb is a going concern company. It has confirmed IOU in the form of Bonds commitments where a substantial portion is in USD denominations. How the hell will it be able to meet all of these commitments. The business model used by 1mdb is at best (being diplomatic here) ala 'Pak Man Telo' hybrid.

So what are these people (you included) are proposing and hollering is in order to solve this 1mdb debt - is sell off passive asset (i.e. land) which will then be used to service some of the financial obligation. Next to raise IPO based on the available IPP on hand to raise capital which will in turn used to also assist in the payment of debts. huh? all for the sake of servicing debt only?

WoW? remind me again, what was the original purpose of raising the capital in the first place. Here is the thing, 1mdb lack of cash has forced it to relinquish the Project 3B back to TNB... so again, i repeat, what is 1mdb business model.... because the way I look at it, i can not differentiate it from the model used by Pak Man Telo.

I just failed to see how you can glorify a failure, really i cant. to have a start up company that is supposed to be Najib WoW factor, his legacy etc... so screwed up that one would say "1MDB on course to reduce debt to manageable level" to be considered a success. what a loser!!! I mean, if 1mdb we to report, "new level of revenue breaking previous Q to Q margin", hell, i got no issue if najib then want to blow his horn as hard as he likes... i mean, go ahead...
but this... is no different with the GLC senario... all thoses BoD, CEO, MD that keep reporting lowering Q report in terms of revenue, profit, even losses... year after year of just swapping seat... i can do that, anyone can... because, this is all bullshitting.

bottom line, 1mdb is screwed up - so what next?

rdgs/2020

Anonymous said...

hahahahaha

finally as ADMISSION of mismanagement

an ADMISSION that 1MassDestructiveBomb is problematic to the tune of RM42 BILLION debt

Anonymous said...

Anon 2.55

Check back your fact on tabung haji. Makes no sense!

Anonymous said...

Anon 12.05

Affin has to build that 823,000.sq ft bldg.

TH paid 10% and the bal.90% after the s&p is completed. Same with affin.

Geez where did you learn rm255 mil can get you land plus bldg? The benchmark????

You have every right to be critical but get your facts right! Looks like you are arguing using your own tampered information.

Anonymous said...

12.20

If you had not immerse yourself with rhetorics and read thru you wud hv found that 5 plots are still held by 1mdb.

No need to teach something so basic like active and passive investment. Best taught for the benchmark.

Talk business. Not rhetorics.

Anonymous said...

thanks Affin for saving 1mdb.

Anonymous said...

Apa yang nak dibanggakan dengan jualan ni. Tanah tersebut telah dirompak dari kerajaan bukan tanah 1MDB pun. Yang menjadi persoalan, mana duit RM42 Billion yang dihutang tu? Duit yang dilenyapkan dengan pelaburan PetroSaudi, dimanakah hilangnya? Kalau seseorang mencuri, apabila sampai ke mahkamah, bolehkah kita cuma memberitahu kepada hakim, dah ada orang sanggup membayar wang curi tersebut dengan si pencuri menjual barang lain yang juga dicuri. Jadi semua kena tutup mulut dan kes selesai?

Anonymous said...

I am anon 12.05. Yes I admit i was factually wrong about the comparison between Affin and TH. apologies.

However, i thought 1mdb is about acquiring land, developing it (into commercial devt or whatever viable) and then selling it to investors for a business profit. I was wrong indeed. 1mdb is about buying land cheaply from the government, i.e. People's property, and then selling it at very high price to friendly parties for profit.

Friendly parties? Tabung Haji is also GLC right? And Affin Bank is owned by LTAT right? And Wok Lodin is associated with 1mdb, TH and Affin Bank, right? I hope i am wrong too and would like to believe that Affin and TH are Arab investors.

Anyway, my comparison on the Affin and TH was off the mark. I accept my mistake and i will not claim an Arab donator had wrongly advised me. My bad.

Anonymous said...

In the first place, why did 1MDB incur so much debt? Any sensible CFO would have advised the opposite. Never to borrow what you cannot repay. Now, selling of asset...

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