Plaza Rakyat seeks white knight

By Kamarul Azhar Tuesday, 21 May 2013 12:27

KUALA LUMPUR: The long abandoned multi-billion ringgit mixed development project, Plaza Rakyat in Pudu, is once again up for sale. The 6.2ha project is one of the scars left by the Asian financial crisis in 1997. More than 15 years after the project was grounded, the court appointed receiver and manager to the now defunct Plaza Rakyat Sdn Bhd (PRSB), AdamPrimus, has called for interested parties to submit proposals for the rehabilitation of the project. “Interested parties with proven track record and strong financial background are invited to submit their proposal for the rehabilitation, completion, takeover and/or acquisition of Project Plaza Rakyat,” AdamPrimus said in a notice that appeared in a local newspaper yesterday. The Plaza Rakyat project was planned as a mixed development comprising shopping mall, hotel, serviced apartments and office tower with a gross development value (GDV) of approximately RM1.3 billion back in 1993. The project was slated to be completed by 2000. Now property projects in the area are going for as high as RM1,200 per sq ft as property values in the city have appreciated substantially. This is based on Gamuda Land Sdn Bhd’s mixed development project called The Robertson, situated next to the Plaza Rakyat site. The serviced apartment’s indicative price is RM1,200 psf. Gamuda Land bought the land at RM820 psf in 2010. Plaza Rakyat was supposed to be integrated with the near by Pudu Raya bus station to create a public transport hub, which includes the Plaza Rakyat LRT station. However, the Asian financial crisis in 1997 brought the project, which was ultimately controlled by Wembley Industries Holdings Bhd, to a halt. The substantial shareholder of Wembley Tan Sri Ting Pek Khiing, found himself saddled with a huge debt burden as the ringgit depreciated against the dollar. Ting’s flagship entity Ekran Bhd faced a multitude of problems after the government put on hold the construction of one of the largest hydroelectric dams in Asia, the Bakun Dam. The project was later awarded to Sime Darby Bhd after an open tender. While the five contiguous plots are among the last large development tracts in the middle of the city, property experts say it might not be an appealing job for a property developer to take on, given the complexity of legal and technical aspects. The project was abandoned in 1997 after the completion of the foundations and a six-storey basement car park. According to James Wong, the managing director of VPC Alliance (Malaysia) Sdn Bhd, a valuation surveyor, the viability of rehabilitating Plaza Rakyat hinges on the validity of the joint venture agreement between PRSB and Dewan Bandaraya Kuala Lumpur (DBKL), the concept and scale of the project, the rights of the purchasers and other issues. “It is not an easy project to take over. The previous developer pumped so much money into the project. It is unknown whether the new developer will have to compensate the ... previous developer,” said Wong. In 2010, DBKL terminated the joint venture to develop Plaza Rakyat and gave PRSB notice of its intention to take possession of the land due to the delays. However, PRSB brought the matter to arbitration. It followed with an application to the High Court of Malaya for an interim injunction preventing City Hall from repossessing the land subject to the resolution through arbitration. The injunction was granted in November 2011. The latest developments on the arbitration between PRSB and DBKL are not known. The new developer might also have to work with the original plan, as the foundations and car park have been completed. This might restrict the new developer from maximising the value of the project within the context of today’s property market, said Wong. While the prospect of netting big for developing huge tracts of prime land within the city could encourage developers to submit their proposals, Wong believes the complicated legal and technical aspects must be solved first. This article first appeared in The Edge Financial Daily, on May 21, 2013.