UEM Sunrise, KLK in RM20bil joint Iskandar venture

Lee (left) and Izzaddin exchanging the MoU agreement.

Lee (left) and Izzaddin exchanging the MoU agreement.

KUALA LUMPUR: UEM Sunrise Bhd and Kuala Lumpur Kepong Bhd (KLK) are pooling their resources to develop 3,000 acres of each other’s landbank in Johor’s Iskandar Malaysia with a total gross development value (GDV) of RM20bil.

This marks plantation giant KLK’s maiden foray as a property developer in Iskandar Malaysia, but it is the second such project for the company’s chief executive officer, Tan Sri Lee Oi Hian.

Lee had teamed up with tycoons Tan Sri Surin Upatkoon, Tan Sri Wan Azmi Wan Hamzah and Singaporean magnate Wee Ee Chao in January last year to buy a 44-acre plot in Puteri Harbour from UEM Sunrise for RM401mil via Liberty Bridge Sdn Bhd.

The deals inked yesterday involve UEM Sunrise’s land in Gerbang Nusajaya and KLK’s vast plantation estate north of Iskandar Malaysia in Kulai, both of which are freehold.

KLK is to lead the development in Gerbang Nusajaya under a 60:40 joint venture (JV) called Scope Energy Sdn Bhd with UEM Sunrise, while’s KLK’s Kulai land, dubbed Fraser Metropolis, will be managed by Aura Muhibah Sdn Bhd, a 60:40 unit of UEM Sunrise and KLK, both companies said in filings with the stock exchange.

The Gerbang Nusajaya project, measuring 500 acres, is worth some RM5bil. The much larger 2,500-acre Fraser Metropolis is expected to generate a GDV of RM15bil.

Both parties have agreed to develop phase 1 of Fraser Metropolis using half of its 5,000-acre landbank, although KLK has granted Aura Muhibah the option to acquire a further 500 acres there.

UEM Sunrise and KLK are planning a mixed development for Fraser Metropolis, which has been earmarked to be the next residential, commercial and industrial hub in the northern tip of Iskandar Malaysia and 30 minutes drive from Johor Baru. 

Similarly, the Gerbang Nusajaya project is poised to be mixed-use. The land titles for the respective plots will be parked under the JV companies.

UEM Sunrise told Bursa Malaysia that it expected to book RM380mil in land sale gains from paring down its stake in Gerbang Nusajaya. KLK will also see a net gain on disposal of RM816.8mil from the Fraser Metropolis land.

Notably, UEM Sunrise and KLK are to exchange their land at the same price tag of RM871.2mil, but the parcels in Gerbang Nusajaya were valued at a higher RM40 per sq ft versus Fraser Metropolis’s RM8 per sq ft.

This was to compensate for the existing infrastructure in Gerbang Nusajaya, RHB Research Institute analyst Loong Kok Wen told StarBizWeek.

UEM Sunrise executive director Datuk Izzaddin Idris told the media at a briefing that the properties were scheduled to be launched in the second half of next year, targeting Malaysian as well as foreign buyers.

Loong believes the JV is a win-win for both parties because it would allow KLK to unlock value from its massive plantation landbank, while giving the latter’s property arm a reputable partner in UEM Sunrise, the master developer of Iskandar Malaysia’s Nusajaya.

The collaboration would also help UEM Sunrise spread out the risk in Gerbang Nusajaya, which was too huge for the company to complete on its own, a PublicInvest Research analyst said.

But demand for the properties may be hard to gauge as the market is going through a soft patch due to the various cooling measures, according to the analyst.

Work on Fraser Metropolis is scheduled to start in 2017 and be staggered over 15 years. The project in Gerbang Nusajaya, also slated to begin in 2017, has an eight-year timeframe.

Separately, Izzaddin said UEM Sunrise planned to roll-out affordable homes in Gerbang Nusajaya next month priced at between RM150,000 and RM200,000.

The group was aiming for sales of RM3bil this year, but Izzaddin noted that it was “conscious of market conditions.”

Some 5,000 acres out of UEM Sunrise’s 11,000-acre landbank in Nusajaya had yet to be developed, he added.