Pudu jail development takes on Malaysian perspective

From a morbid historical site to an upcoming iconic Malaysian integrated development, UDA Holdings Bhd chairman Datuk Johari Abdul Ghani explains how he got the project to transform the former Pudu jail site into a multi-billion ringgit mix-development, the Bukit Bintang City Centre (BBCC).

“The project has taken a different approach now as all partners are Malaysians – it will be a Malaysian project. Previously, it was a proposal by a foreign entity from China and now with Eco World Development Group Bhd and Employees Provident Fund (EPF) in the consortium, it makes a lot of difference to develop the site as well as not to steer away from our social responsibility agenda.

“Eco World is a reputable partner and Tan Sri Liew Kee Sin has vast experience and stellar track record under his belt. He (Liew) understands our agenda and is accommodative. Additionally, EPF has the resources and is comfortable to work with reputable partners,” Johari tells StarBizWeek.

UDA, Eco World and EPF formalised an agreement to jointly develop the BBCC project with a gross development value of RM8bil. The project will be carried out via a special purpose vehicle (SPV) – BBCC Development Sdn Bhd.

The SPV will pay UDA development rights of RM1bil while the gross development cost of the project is estimated at RM6bil.

UDA, owned by the Ministry of Finance Inc, recently engaged Eco World as its partner. UDA is the government agency tasked with urban development and the promotion of bumiputra participation in urban areas.

To recap, a Chinese construction firm, Everbright International Construction Ltd, was tipped to secure the project with an RM2bil investment into UDA in 2011 but the plan fell through.

Last June, UDA decided to partner Eco World, whose key personnel including Liew are mostly from SP Setia Bhd with experience in big projects such as the multi-billion ringgit Battersea, London project, also an urban regeneration project like the BBCC.

UDA decided on the partnership after failing to find a suitable partner from a list of 10 companies which submitted proposals. Of the 10, Johari shares that half of them did not have strong balance sheets to undertake a project of this magnitude.

Eco World came into the picture because it has the experience as well as the financial strength.

Johari explains that several of the bumiputra developers who submitted their proposals had the financial strength and good ideas for the project but these developers wanted control of the project with at least a 51% stake.

He says UDA wanted joint participation and not any party having outright control of the project. Johari says UDA’s commitment to the project is such that the chief financial officer and two other senior management personnel will be seconded to oversee the project.

“Thus, UDA will not only benefit from the value of the land but also fulfil our responsibility and at the same time train our people. We have to learn as this is our biggest project to date,” Johari says.

He adds that Eco World had no hesitation over the 50% bumiputra participation in the project. “The company understood our social responsibility,” Johari says.

Another dimension to the project is UDA’s commitment to help bumiputra contractors and developers, which Johari says have a stigma attached to them for work delays.

“We now have to erase the stigma that bumiputra contractors and developers are associated with work delays. We will get the right bumiputra companies with good track records,” he says.

Johari strongly believes this will be a true Malaysian project.

“Eco World is a Malaysian company. And they have a good team and experience,” he says, adding that EPF has also worked with a number of the senior management from the company when they were with SP Setia working on the Battersea project.

“With this kind of talent, if we can bring them together as a showcase development in our city, why not?” he asks.

To date, the project had attracted some interest from Japan’s Mitsui Fudosan Co Ltd and Zepp Live Entertainment Inc, an unit of Sony Music Entertainment Japan.

“I don’t think there is an issue to be raised in this project. A mega-size project such as this needs investors, buyers, customers and also stakeholders.

“The way we structured our project under the SPV ensures direct participation from UDA, Eco World and EPF.

“It is structured similar to the Battersea project. No one can have total control.

On the development rights, Johari expects UDA to receive a cash portion out of the total once all the necessary aprovals are obtained

Approval for the development order is expected in six months and once that is settled, he wants to quickly do the groundbreaking.

He says UDA will also have the option to use proceeds from the development right to acquire some property that will then be built into offices or hotels.

“UDA plans to own the malls with our partners. That will generate about RM180mil a year,” Johari says. Estimates of UDA’s portion from the mall’s recurring income is between RM80mil and RM90mil.

The BBCC project, a redevelopment of the 19.4-acre former Pudu jail site, will comprise a mixed residential and commercial development with a proposed world-class master plan, consisting strata offices, office towers, a hotel and serviced residences. There will also be a lifestyle mall which will include a Malaysian grand bazaar, a retail mall, food and beverages as well as entertainment components.

“I am very confident of the project although some people are saying oversupply of malls and offices.

“We are bringing something unique here where it will be catalyst development in that area. connectivity. In fact, we are teaming up with Mitsui that has 70 malls in Japan,” he says.

On the relisting of UDA, Johari says the idea to re-list is to tap the capital market and acquire more landbank.

“It is still in the pipeline. with this project this will be more attractive. We will continue to engage with our shareholders on this matter,” he says.