KUALA LUMPUR • Malaysia's newest financial district is taking shape and drawing investment after spending years mired in controversy for its links to an embattled state investment fund.
The Tun Razak Exchange, or TRX, reached critical mass for its initial phase after HSBC Holdings this month said it will invest US$250 million (S$347 million) to build its local headquarters in the development, said TRX City chief executive officer Azmar Talib.
The 28.3ha site in downtown Kuala Lumpur has at times been the focus of domestic furore surrounding 1Malaysia Development Bhd (1MDB), a government fund which has spurred criminal and regulatory investigations worldwide.
Named after Prime Minister Najib Razak's father and the country's second premier, the TRX development has a projected sales value of RM40 billion (S$13 billion).
"It did have an impact in the past," Mr Azmar said in an interview at the project's gallery near the construction site, referring to the unwelcome spotlight as 1MDB made global headlines for possible money laundering and embezzlement. "We are, however, now in a better position."
Construction at TRX is proceeding 22 hours a day and the first office building is set to open by the end of 2018. A new mass rail transit may soon stop within the development. The project, which started around 2013, will be completed over the next 15 to 20 years, the company said.
TRX City was formerly the property arm of 1MDB, and Mr Azmar's team had to battle negative perceptions of the development as investors became increasingly wary of any project linked to the fund.
The purchase of a plot of land in the district by Lembaga Tabung Haji, the national Hajj pilgrims fund, sparked protests and a public outcry on social media in 2015, prompting Datuk Seri Najib to order the trust to sell it just days after the acquisition was disclosed.
Second Finance Minister Johari Abdul Ghani said in May last year that troubles surrounding 1MDB had deterred banks from extending funding to TRX's project partners.
TRX City is now under the Finance Ministry after an ownership transfer this year.
"The transfer has provided us with more stability and has boosted confidence in the development," Mr Azmar said. "TRX is a national project and we are glad we can now deliver the project unencumbered by unrelated matters."
Troubles still swirl around 1MDB, with the United States Justice Department saying last week it is seeking to recover a further US$540 million in assets it alleges were purchased with money misappropriated from the fund.
And while TRX will enhance the Kuala Lumpur skyline, it may also exacerbate a supply glut that has garnered the attention of policymakers. The vacancy rate for prime office space around Kuala Lumpur was higher than the regional average last year, and monthly rentals are also the lowest among regional cities, said the central bank.
TRX is filling a market gap for built-to-specification office space catering to the financial industry.
The HSBC investment, Mr Azmar said, is a "very significant milestone" after four years of courtship.
Another international financial institution has signed a long-term lease for an office block, he said, without giving details.
Indonesia's Mulia Group is developing a 106-storey Signature Tower, which will be taller than the nearby Petronas Twin Towers when ready by mid-2019.
Also in the plans is a retail mall with a rooftop park the size of up to seven soccer fields within the lifestyle quarter that TRX is developing with Australia's Lendlease Group, Mr Azmar said.