Highlight Ivory caught in the middle of PRSB-DBKL dispute

by **Cals** Fri 20 Sep 2013, 17:34

Highlight Ivory caught in the middle of PRSB-DBKL dispute
Business & Markets 2013
Written by Kamarul Azhar of theedgemalaysia.com
Friday, 20 September 2013 16:36

IVORY PROPERTIES [] Group Bhd has stepped into what appears to be still an unresolved dispute between Plaza Rakyat Sdn Bhd (PRSB) and Dewan Bandaraya Kuala Lumpur (DBKL).

Last week, DBKL, which is the original owner of the 15.3-acre Plaza Rakyat site, came out to deny media reports that it has entered into negotiations with Ivory to take over the Plaza Rakyat project.

City Hall reiterated its stance that it had terminated its joint-venture agreement (JVA) with PRSB on April 2010 and that the latter has “no legal standing to enter into any pacts with any third parties” for the project. It added that it has “no knowledge of any agreement between PRSB and Ivory”.

Industry observers say DBKL’s statement raises questions on whether there was communication with City Hall on the conditional acquisition and rehabilitation agreement (ARA) signed a week ago between Ivory and PRSB, formerly controlled by Tan Sri Ting Pek Khiing but now administered by a nominee of a group of lender banks.

“There could be some miscommunication there,” says an industry observer.

In an immediate response to DBKL’s statement, Ivory said it had made it clear in a statement to Bursa Malaysia the previous Friday that the ARA was subject to the approval of DBKL and the entering into a new or amended JVA with DBKL.

“Neither Ivory Properties nor Ivory Place Sdn Bhd (IPSB) has ever represented that DBKL has already consented to the takeover of the Plaza Rakyat project by IPSB,” it clarified.

Penang-based Ivory has been eyeing the redevelopment of Plaza Rakyat as its first major attempt to venture into the Klang Valley.

Though a small developer with a market capitalisation of RM263 million, Ivory has shown its ambition in reviving the project, with plans to generate a gross development value (GDV) of RM8 billion from Plaza Rakyat.

Under the conditional ARA with PRSB, Ivory is to acquire the lease and development rights of the site for RM400 million. According to the agreement, the first tranche of RM200 million is payable within 24 months of the ARA, while the balance is staggered over a seven-year period.

While the RM400 million goes to PRSB, which is now under the watch of administrator AdamPrimus, Ivory has also proposed to pay up to RM560 million to DBKL, being a share of the project’s GDV, RM40 million to the purchasers of units in the stalled project, RM38 million in outstanding quit rent and other assessments and RM22 million consultant fees.

The total works out to RM1.06 billion for the 15.3 acres, or RM1,590 psf, which is deemed the market price for land in the vicinity.

However, it is still a big unknown whether DBKL will accept what was offered by Ivory.

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Ivory Properties Group has been eyeing the redevelopment of Plaza Rakyat as its first major attempt to venture into the Klang Valley

“For DBKL, the question is whether it will be happy with RM560 million in the form of an entitlement to the project’s GDV, or if it could get a better deal by taking back the entire project,” says a property executive.

He says at one point, PRSB and DBKL were thought to have settled the dispute. “I don’t remember there was a statement from DBKL objecting to the tender put up by AdamPrimus over the past three months.”

AdamPrimus, the administrator of PRSB, declined to comment.

Industry players say it is crucial to satisfy DBKL as Ivory needs to get City Hall to change the current 88-year lease of the site to 99 years to entice property buyers and obtain approval for a higher plot ratio in its new development plan so that it could churn out a GDV of RM8 billion from the project.

“All these are before we start talking about the technical challenge, which may involve demolishing the existing structure as pile caps may not fit with the new development plan,” says the property executive, whose firm was initially keen, but ended up not submitting a bid.

The Edge had recently reported that many established developers, though initially keen on the project, had shunned from bidding for the Plaza Rakyat site because of lingering concerns about the dispute between PRSB and DBKL. The absence of major bidders could have cleared the path for Ivory, except that it will have to face DBKL.

City Hall had in April 2010 unilaterally terminated the JVA and lease agreement it entered into with PRSB in December 1992, which the latter contested.

With the termination of the JVA, the revival of the Plaza Rakyat project, stalled since 1998, has been left hanging. While DBKL had tried to take back the project, the High Court had in May 2011 granted an injunction against City Hall from repossessing the land after PRSB invoked an arbitration clause in the JVA and lease agreement.

Since then, there has been no update on the proceedings, with the latest development being DBKL’s denial that it had given consent for PRSB to engage with a third party to rehabilitate the project.

This article first appeared in The Edge Malaysia Weekly, on September 16, 2013.