1MDB sells land plot for $70m in first asset sale to cut debts

A man walking past a 1MDB billboard at the funds flagship Tun Razak Exchange development in Kuala Lumpur, in this on March 1, 2015 file photo. -- PHOTO: REUTERS
A man walking past a 1MDB billboard at the funds flagship Tun Razak Exchange development in Kuala Lumpur, in this on March 1, 2015 file photo. -- PHOTO: REUTERS

MALAYSIA'S pilgrimage agency Tabung Haji has bought a plot of land for RM188.5 million (S$70 million) from the state-backed 1Malaysia Development Berhad (1MDB) - the first sale of the fund's assets as it tries to reduce its heavy debts.

Tabung Haji, a federal body that manages funds saved by Muslims for pilgrimages to Mecca, denied that it had bought a second property from 1MDB, as alleged by a previously unknown blog that has become a national talking point this week.

A top Tabung Haji official yesterday denied accusations by opposition politicians that the acquisition was a "bailout" move for 1MDB and that it paid too much for the plot.

The confirmation of the purchase yesterday was unusual as it was made by Tabung Haji only after The Benchmark blog published 44 pages of documents linked to the deal. The blog's contents went viral on social media.

Tabung Haji, or TH, which manages depositors' savings of some RM50 billion, said it bought the land to build a residential tower at the planned financial district, Tun Razak Exchange (TRX).

The 28ha TRX, owned by 1MDB, is about 3km from the Petronas Twin Towers and at the edge of the Bukit Bintang shopping district. The Tabung Haji statement said: "The investment is a commercial decision which fits with TH's risk appetite and has gone through all internal due processes."

A Tabung Haji official told The Straits Times that a 40-storey residential tower will be built on the 0.65ha site, which is roughly the size of a football field. He said the agency expects to spend another RM462 million to build the tower.

The gross value of the development is estimated by Tabung Haji to be RM828 million when it is ready in three years' time, he added, as TRX is slated to have an underground interchange station linking Greater Kuala Lumpur's MRT and LRT lines.

The purchase by cash-rich Tabung Haji has run into controversy as the land belonged to 1MDB, which is struggling with nearly RM42 billion of debts after buying 15 power plants and one desalination plant in six countries in just six years.

1MDB is wholly owned by the Ministry of Finance and its board of advisers is chaired by Prime Minister Najib Razak. Its debt problems and alleged financial mismanagement have been key factors behind former premier Mahathir Mohamad's calls for Mr Najib to step down.

To reduce its debts, 1MDB is trying to list its energy assets on the stock exchange. It is also working to sell off plots of land in its two main projects in Kuala Lumpur - the TRX and the Bandar Malaysia township.

Tabung Haji deputy chief executive Johan Abdullah denied yesterday that it was helping to bail out 1MDB. It bought the land after calculating an expected 27 per cent return on investment over a three-year timeframe, Datuk Johan was quoted by the New Straits Times daily as saying.

"This was not a bailout for 1MDB," he said at a briefing. "The market value of surrounding properties are much higher. We think it was a fair price to pay for it."

reme@sph.com.sg