Highlight MRCB changes mind on Platinum Sentral sale

Business & Markets 2013
Written by Vasantha Ganesan of theedgemalaysia.com
Wednesday, 11 December 2013 15:33
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MALAYSIAN RESOURCES CORP BHD (MRCB) has shelved plans to dispose
of the 1½-year-old Platinum Sentral in KL Sentral after having only recently
invited for bids.
“We are keeping Platinum Sentral and we have no plans to sell it,” MRCB
group chief operating officer Mohd Imran Mohamad Salim tells The Edge when
contacted via email.
Imran, however, did not provide a reason as to why MRCB has decided not to
sell. MRCB had in fact appointed real estate agency CB Richard Ellis Malaysia
to handle the sale.
According to sources, the asking price for the buildings, owned by MRCB’s unit
MRCB Sentral Properties Sdn Bhd, was in the range of RM700 million to
RM750 million — in line with the gross development value of the property,
which was quoted at RM700 million.
The Edge understands that a handful of offers had come in from both local and foreign investors.
“The offers were very close to the price they [MRCB] were asking,” a source tells The Edge.
Platinum Sentral had a net book value of RM405.14 million as at Dec 31, 2012. It is situated on a 4.93ha site, with five blocks of low-rise
buildings that incorporate state-of-the-art campus-style office blocks, retail units, business centres, hospitality zones and green spaces.
Together, the five buildings — Blocks A, B, C, D and E — have a gross floor area of 980,000 sq ft and offer 635 parking bays. The total
net lettable area (NLA) of the office blocks is 449,973 sq ft and it is almost fully tenanted. The tenants include SME Corp, which occupies
Blocks B and C or 216,980 sq ft of space, and the Land Public Transport Commission, which is located in Block D and occupies 67,286 sq
ft.
The NLA of Block A is 91,490 sq ft while that of Block E is 69,621 sq ft. Other major tenants are the Performance Management & Delivery
Unit, Iclif Leadership and Governance Centre and SBM Malaysia Sdn Bhd. The NLA of the retail component, meanwhile, is 78,813 sq ft
with an occupancy rate of 20%.
It remains unclear whether MRCB has decided to keep these assets for recurring income or because the offers were not attractive.
In a report released by MARC Bhd on Aug 16, 2012, the rating agency had indicated that MRCB Sentral Properties’ RM400 million
commercial papers or medium-term notes programme was exposed to a refinancing risk. It had then an upcoming principal due in March
2013 — which has now been extended to 2017 — and RM80 million due on Sept 27, 2013. Thus, it had suggested that MRCB might opt
to dispose of Platinum Sentral or seek refinancing.
It appears that MRCB had in September paid RM20 million of the RM80 million that is outstanding and has rolled over the remaining sum
by issuing RM60 million of commercial papers for a six-month period ending March 27, 2014.
According to MARC, Platinum Sentral’s tenancy profile includes locked-in lease tenancy of between 3 and 15 years with upward rental
adjustments every three years. This would provide stable rent generation to support its debt servicing ability. The average rental for the
office space is RM8.70 per sq ft while that for the retail portion is RM6 psf.
Completed in 2012, Platinum Sentral is Malaysia’s first Platinum-rated building with Singapore’s BCA Green Mark. It also holds Malaysia’s
Green Building Index certification.
On Sept 2 this year, Imran’s father, Datuk Mohamad Salim Fateh Din, was appointed as group managing director. Salim made his entryinto MRCB in April via Nusa Gapurna Development Sdn Bhd and had injected
13.4ha of prime land into MRCB.
Meanwhile, for the nine months ended Sept 30, MRCB posted a net loss of
RM111.35 million against a profit of RM63.09 million in the previous corresponding
period. Revenue in the first three quarters declined 37.4% to RM607.49 million
from RM969.94 million.
The bulk of the losses were incurred in the third quarter due to a provision to the
tune of RM167 million, resulting in a loss before tax of RM121.5 million. This
included the provision and variation order for Lot G retail mall and office in the KL
Sentral development, additional construction cost for Lot A and the Eastern
Dispersal Link (EDL) in Johor Baru, provision for Lot A (Menara CIMB) and a
one-off fair value adjustment for Lot G office towers sales.
In an analyst briefing held last Friday, the management said the provision in the
third quarter ended Sept 30 would remove possible risk of earnings impairment
arising from the completed project. It added that no more provisions of this nature
are expected in 4Q2013 and the FY2014.
According to the management, the provisions is being pursued before it proceeds
with its rationalisation plans, which include unlocking and monetising asset value
via mergers and acquisitions or corporate exercises.
In this respect, it will identify and dispose of non-core assets and improve returns to the group though property development and land
inventory expansion.
MRCB said it would enhance its financial performance through toll collection at the EDL with the government’s approval. The Edge last
week reported that the government is reviewing its plan to take over the EDL and allow MRCB as the highway owner to collect toll.
In the year ended Dec 31, 2012, MRCB posted a revenue of RM1.28 billion and a profit before tax of RM134 million.