Aussie firm believed to have secured loan for TRX project

First of its kind for urban regeneration job in Malaysia

PETALING JAYA: An Australian property and infrastructure group is believed to have secured financing for the development of its 17-acre Lifestyle Quarter in the Tun Razak Exchange (TRX).

Work on the site has picked up considerable pace of late, sources said.

Lendlease Asia chief executive officer Tony Lombardo ( pic) declined to say how much loan financing the Australian group is seeking for its urban regeneration project – its first in Malaysia – but said both local and foreign banks are involved.

He expects the loan and financing arrangements to be completed by the end of October.

On whether Lendlease is seeking up to RM4.5bil in financing, Lombardo said the figure is “incorrect”. He declined to elaborate.

However, a financial daily reported in May that Lendlease was close to securing between RM2bil and RM3bil worth of financing for its Lifestyle Quarter.

For perspective, the success of Lendlease getting the financing it needs to progress with its 17 acres in Kuala Lumpur’s urban regeneration project is significant, sources said.

Lendlease was the first developer to wade into TRX. It is the only company to have signed a joint-venture (JV) agreement with TRX City Sdn Bhd, then known as 1MDB Real Estate Sdn Bhd, the property arm of 1Malaysia Development Bhd (1MDB) and the master developer of TRX.

Banks and a couple of government-linked corporations also bought land for development, but they are not JV partners.

Given its global presence and branding, the Australian group’s entry “boosted confidence” and gave the 70-acre project “a lot of credibility” when it entered into an agreement to jointly develop the retail lifestyle parcel with TRX City in 2014 in a 60:40 deal, with Lendlease holding the bigger stake.

TRX City subsequently sold several pieces of land in 2015. The 1MDB saga imploded and peaked in 2016.

Lendlease’s parcel is considered the jewel that is needed to hold all the different developments together.

According to Lombardo, the gross development value (GDV) of the Lifestyle Quarter is expected to exceed A$3bil, or more than RM9bil. Equity sunk as at June 30, 2018 is A$316.3mil, or about RM1bil, Lendlease Malaysia senior corporate affairs manager for Malaysia Norleen Abd Rahman said.

TRX’s planned developments are estimated to have a GDV of RM40bil, and Lendlease’s presence and success is crucial for TRX’s own success story.

Questions with regards to Lendlease and its plans for the 17 acres - which was also the largest parcel - did not abate even as Exchange 106, the focal point of TRX, began to take shape over the horizon averaging a speed of a floor every three days in 2017. Indonesia’s Mulia Group is building Exchange 106 and is seeking tenants today, likewise Lendlease.

TRX’s links to 1MDB may have impeded stakeholders from getting the financing, according to sources.

According to an earlier report, six banks had initially pledged their support, including Malayan Banking Bhd and CIMB Group Holdings Bhd and several foreign banks. However, one of the conditions for funding of the project is the commitment of a local bank and this was difficult to secure, as local banks were wary of exposure to 1MDB.

Having cleared those financing doubts now that it is about to secure the financing it needs, Lendlease is planning to launch its serviced apartments next year. Three par- cels have been earmarked for this, with two blocks per parcel.

The Lifestyle Quarter will have a total of 2,326 serviced apartment units.

The Australian group recently completed its leasing suites in Menara JCorp in Jalan Tun Razak as it prepares to negotiate with potential tenants, having already secured three anchors to take up 26% of its retail mall which has a net lettable area of 1.3 million sq ft.

Its three confirmed anchors are Japanese departmental store Seibu, a new concept cinema to be operated by Golden Screen Cinemas and Hong Kong-based supermarket Dairy Farm.

It is building its sales gallery now in order to launch its serviced apartments next year.

Lombardo also said the group has allocated RM4bil for new investments in Asia, as “Lendlease is looking to secure another two to three large-scale urban regeneration projects across Asia, similar in scale and size to Paya Lebar Quarter in Singapore and TRX Lifestyle Quarter in Malaysia over the next few years”.

He would like to look at one to two more projects in Malaysia, preferably in the urban regeneration category.

“Lendlease’s strength is in place making and creating the best integrated mixed-use places,” he said.

Quoting a World Bank report, he said 90% of Malaysians will be living in cities by 2050, compared to 74.5% as of 2016.