Malaysia's 1MDB says price of land sold to Malaysia-China group may be adjusted

1MDB said the land's price might be adjusted to reflect liabilities tied to the land and relocation costs of an air base on the site.
1MDB said the land's price might be adjusted to reflect liabilities tied to the land and relocation costs of an air base on the site. PHOTO: REUTERS

KUALA LUMPUR - Malaysia's state investment fund 1Malaysia Development Berhad (1MDB) has said that the price for a giant piece of land it sold to a Malaysia-China group might be adjusted to reflect liabilities tied to the land and relocation costs of an air base occupying the site.

It issued the statement on Tuesday (Jan 5) after critics questioned the big discrepancy between what 1MDB had announced on the 60 per cent sale of the Bandar Malaysia township project to Iskandar Waterfront Holdings (IWH) and China's state-run China Railway Engineering Corp (CREC), and what CREC told the Hong Kong Stock Exchange on Monday (Jan 4).

1MDB had said the 60 per cent stake was sold for RM7.41 billion (S$2.4 billion). But CREC said in a filing on the Hong Kong stock exchange that the acquisition cost was RM5.28 billion - or RM2.13 billion short of what 1MDB had announced.

1MDB president Arul Kanda said that "adjustments may be made to the RM7.41 billion land sale valuation", as the deal will have to take into account a issue of Islamic bonds, or sukuk, tied to Bandar Malaysia and the air base's relocation.

The company and the IWH-CREC consortium have until June this year to complete the deal.

 

The final sale price will depend on whether Bandar Malaysia's liabilities "can be passed to the consortium, for example, the remainder contract costs for relocation of the existing facilities and the Bandar Malaysia sukuk debt".

The Edge business newspaper said on Tuesday (Jan 5) that relocating the air base would cost RM2.7 billion, including land acquisition and construction of new facilities.

It said some money for the relocation had been spent, with the outstanding amount at RM1.9 billion.

The Bandar Malaysia land had also issued Islamic bonds with a nominal of RM2.4 billion. Of this, RM1.6 billion had been drawn down, The Edge said.

The 197ha land in Sungai Besi at the edge of the Malaysian capital is to be turned into a mixed township, and will contain the Kuala Lumpur terminus for the high-speed railway line from Singapore.

The remaining 40 per cent of the project will remain with 1MDB, which is wholly owned by Malaysia's Ministry of Finance.