Malaysia’s biggest real estate project, Bandar Malaysia in Kuala Lumpur, was in turmoil last week after the government canceled without warning a deal with its Chinese-Malaysian master developer, citing repeated failure to meet payment obligations.
The 196.7ha development is meant to be a new business district in the Malaysian capital and a major transport node, hosting the terminus of the planned Kuala Lumpur-Singapore high-speed railway and connecting metro, rail and road links.
The jilted party is a joint venture between Malaysia’s Iskandar Waterfront Holdings (IWH) and state-owned China Railway Engineering Corp (CREC), which at the end of 2015 secured rights as the master developer by agreeing to purchase a 60% stake in the Bandar Malaysia project from scandal-ridden state property fund 1Malaysia Development Berhad (1MDB).
After announcing the collapse of the deal on 3 May, the Malaysian government turned to China’s richest man, Wang Jianlin, and his property-entertainment conglomerate, Dalian Wanda Group, to step into the breach as master developer of the scheme.
Talks between the Malaysian government and Wang Jianlin are at an advanced stage, according to Singaporean newspaper The Straits Times, with the agreement awaiting approval from China’s financial regulators.
Such approval is far from certain with China’s ongoing crackdown on capital outflows intended for property, but a deal could be signed during a trip by Malaysian Prime Minister Najib Razak to Beijing this week, the Straits Times reported.
Malaysia annulled the IWH-CREC deal because "despite repeated extensions being granted, IWH CREC failed to meet the payment obligations outlined in the Conditions Precedent under the [share sale agreement]," said the government-owned developer, TRX City. "As a result, the share sale agreement between the parties stands null and void with immediate effect."
IWH and CREC refuted this claim, say reports.
Furthermore, IWH-CREC may be trying to recover its position on the mega scheme. News site The Malaysian Insight reported today that IWH boss Lim Kang Hoo has flown to China to appeal in person for Beijing’s help in restoring IWH-CREC’s role as Bandar Malaysia’s master developer.
The sudden cancellation of the IWH-CREC agreement shook Malaysia’s stock market briefly last week as traders feared it signalled a freeze on Chinese investment in Malaysia, Reuters reported.
Attention is now drawn once more to the debt burden of 1MDB, which is at the centre of several international money laundering probes.
Image: Artist’s render of the planned 196.7ha Bandar Malaysia business district in Kuala Lumpur (TRX City)