Bandar Malaysia, the country's biggest real estate project, is looking for a new master developer after the government made a surprise announcement last night to cancel a deal with a Malaysia-China consortium, saying the buyers failed to meet payment obligations.
In late 2015, Malaysia's Iskandar Waterfront Holdings (IWH) and China Railway Engineering Corp (CREC) jointly secured rights as the master developer with a RM7.41 billion (S$2.4 billion) winning bid to buy a 60 per cent stake in the project.
The Malaysian government, through a unit of state fund 1Malaysia Development Berhad (1MDB), was to hold the remaining 40 per cent stake, which has a projected sales value of RM150 billion.
Bandar Malaysia sits on prime real estate in Sungai Besi at the edge of downtown Kuala Lumpur. Its size of 196.7ha is nearly five times the area of the iconic Kuala Lumpur City Centre project that includes its large park.
The Malaysian government had touted the IWH-CREC agreement as a major deal to help 1MDB reduce its heavy debt burden. But the development is important to the government for another reason: It will house the Kuala Lumpur terminus for the high-speed rail (HSR) link from Singapore.
Bandar Malaysia sits on prime real estate in Sungai Besi at the edge of downtown Kuala Lumpur.
Number of years over which Bandar Malaysia, the country's biggest transport hub, is to be built in phases.
The HSR project is not likely to be affected as development has now been taken over by TRX City, which is fully owned by the Ministry of Finance.
TRX City said its share sale agreement (SSA) with IWH-CREC had lapsed.
"This is because despite repeated extensions being granted, IWH- CREC failed to meet the payment obligations outlined in the conditions precedent under the SSA. As a result, the agreement between the parties stands null and void with immediate effect," said TRX City. Iskandar Waterfront and CREC have not responded to queries.
"TRX City will immediately be inviting expressions of interest for the role of master developer of Bandar Malaysia, with full ownership being preserved by the Ministry of Finance," the company added.
The project's finances and its future have a direct bearing on the leadership of Prime Minister Najib Razak. It was Datuk Seri Najib, who is also Finance Minister, who backed the setting up of 1MDB in 2009.
He was chairman of 1MDB's advisory board when the state fund borrowed billions of dollars to buy local and foreign power plants, landing the state fund with as much as US$11 billion (S$15.3 billion) in debts at one point.
It was also Mr Najib who announced that the Malaysian terminus station for the 350km HSR link will be in Bandar Malaysia.
To be built in phases over 25 years, Bandar Malaysia will be the country's biggest transport hub, with MRT lines, KTM Komuter intercity trains and the airport's Express Rail Link line converging there.
China's Alibaba group in March said it will be involved in a so-called Digital Free Trade Zone in Kuala Lumpur, with its Kuala Lumpur Internet City hub to be located in Bandar Malaysia.
1MDB's debts are being cleared, with its power plants sold off to a China company in 2015 for US$2.3 billion. Two weeks ago, 1MDB agreed to pay US$1.2 billion to an Abu Dhabi wealth fund as part of a resolution over a debt dispute.
The cancellation of the IWH-CREC deal has now brought to the forefront again the question of 1MDB's debts.