Deja vu: An aerial view of Pusat Bandar Damansara in Kuala Lumpur. Lim succeeds in getting a Canadian pension fund this time around which agrees to invest RM485mil in a JV with Pavilion Group for the Pavilion Damansara Heights project.
PETALING JAYA: In his typical style, Tan Sri Desmond Lim has once again managed to rope in a strategic foreign partner for a large-scale development in Kuala Lumpur. The low-profile property baron, who owns the Pavilion Group of malls, has managed to partner Canada Pension Plan Investment Board (CPPIB) in a joint venture (JV) for the development of his massive project in Pusat Bandar Damansara (PBD).
This comes at a time when the high-end property market is witnessing a slowdown and some developers are holding back launches. The emergence of CPPIB, with an investment of RM485mil for a 49% interest in a JV with the Pavilion Group, is seen as a shot in the arm that could help Lim in his Pavilion Damansara Heights development.
A property consultant close to the Pavilion Group said that the entry comes at a time when the development in Damansara is going into its second phase.
“The JV with the Canadian pension fund will involve the development of two plots of land. Development of the second phase is slated to start in the first quarter of next year,” said the consultant.
According to reports, the second phase of development comprises commercial, residential and retail segments, with the added element of public transportation.
The first phase of Pavilion Group’s plans for PBD is for a total rejuvenation of the 9.5acre site into a commercial and residential hub replete with office towers, private residences, a hotel and retail mall.
It used to house nine blocks of office buildings, which are being torn down. In its place, nine office blocks are being built, with the highest at 20 floors. There are also several service apartment blocks being built there.
The office blocks are being sold at RM1,400 per sq ft, while property consultants say the service apartments are to be sold next year starting from RM1,600 per sq ft.
“The entry of the Canadian fund is at about RM1,500 per sq ft, which is a good deal for them considering the ringgit has weakened,” said a consultant.
In the transaction announced on Tuesday, CPPIB will be pumping in cash to help develop projects on two plots of land totalling some 15 acres within the PBD area that has a total of 46 acres.
The other stakeholders in the PBD area are the Hong Leong group’s Guocoland (M) Bhd that has 8.5 acres that is nearing completion, while Selangor Properties Bhd has 13 acres.
Originally, Selangor Properties was the land owner of all the land and had developed the previous PBD.
Lim’s interest in PBD started years ago with the 9.5 acres that used to belong to Johor Corp (JCorp), the investment arm of Johor. He, however, went through a long-drawn legal battle with JCorp before it was resolved in September 2013.
The tussle was settled when JCorp and its companies exchanged that piece of land for RM500mil cash and 266,668 sq ft of future office space in the redeveloped PBD. The office space was to be delivered in two portions of 186,667 sq ft and 80,000 sq ft, respectively.
JCorp subsequently exchanged that 186,667 sq ft of future office space, valued at RM140mil, for the existing V Square building and 964 parking bays (both built by Malton Bhd) in Petaling Jaya, while Malton got the rights to a space equivalent to RM140mil in the redeveloped PBD.
In March last year, Lim increased his presence in PBD when, via Jendela Mayang Sdn Bhd, he bought 6.34 acres next to the former JCorp land from vendor Selangor Properties for RM450mil, or RM1,628 per sq ft. Jendela Mayang is linked to Lim.
The RM485mil from CPPIB is enough to cover the cost of Lim’s second plot of land.This is not the first time that Lim has gone into a JV to develop a project.
In his mid-50s now, Lim shot into prominence in 2002 when he emerged as the white knight to take over the development of a prime piece of land along Jalan Bukit Bintang that used to house the Bukit Bintang Girls School. That land, measuring 12.6 acres, is now known as KL Pavilion.
In 2006, Kuwait Finance House (KFH), the Persian Gulf state’s biggest Islamic lender, helped to finance the development cost of KL Pavilion when it took a 49% stake in the project and bought both the residential towers.
KFH invested US$135mil and took part in managing and developing Pavilion. News reports have noted that the project achieved internal rates of returns that reached 25%. Malton, which Lim is executive chairman, was the contractor for the project.
KFH took up a stake in the developer’s Pavilion Hilltop residential project in Mont’Kiara. Slated for completion in 2017, the project has a gross development value (GDV) of RM1.18bil.
In 2011, Lim went into a partnership with Qatar Holding LLC to develop the Banyan Tree Signatures Pavilion Kuala Lumpur at an estimated cost of RM700mil. The project, slated for completion by end-2016, includes a luxurious hotel-plus-residences. It will have a GDV of RM1.4bil. Lim’s Lumayan Indah Sdn Bhd has a 51% stake in the project with Qatar Holding to hold the remaining 49%.
