After more than a decade of delay, property developer SP Setia Bhd expects to start working on the RM6 billion KL Eco City, opposite Mid Valley Megamall in Kuala Lumpur, by early next year.
SP Setia first announced its intention to develop the land almost a decade ago, but had faced problems with squatters in the area, among other things.
In its filing to the stock exchange yesterday, SP Setia said Kuala Lumpur City Hall or Dewan Bandaraya Kuala Lumpur (DBKL) had finally formalised the privatisation of the 10ha cluster of land parcels in the Kampung Haji Abdullah Hukum area.
The land is being alienated to KL Eco City Sdn Bhd (KLEC), which is owned by SP Setia and Yayasan Gerakbakti Kebangsaan on a 60:40 basis.
With net saleable area of 5.7 million square feet, SP Setia proposes to build a retail podium, three boutique office blocks, strata-titled office suites, three office towers, three residential towers and a serviced apartment tower.
The proposed development will also include a new KTM Komuter train station that will be integrated with the existing Abdullah Hukum LRT station.
Railway Asset Corp (RAC) has mandated SP Setia to deposit RM42.09 million in land bond to ensure construction of the train station.
Under the privatisation agreement, SP Setia must pay DBKL RM105.92 million, less the premium already paid, over 36 months.
As soon as SP Setia starts construction, it has to deposit RM10.55 million as performance bond with DBKL.
It also has to cough up a minimum guaranteed profit of RM191.96 million for the proposed development.
These are in addition to the initial agreement that DBKL be taking 20 per cent of the project’s net profits.
The privatisation is conditional upon SP Setia paying DBKL RM11.4 million, being the difference between the actual construction cost of the low medium cost Apartment Abdullah Hukum 1 and the purchase price offered to the squatter families on the DBKL land.
The deal also requires SP Setia to pay RM10.59 million, being 10 per cent of the residual land value and RM1.62 million, being the land value for Plot F of the DBKL cluster of land.
SP Setia said these payments to DBKL will not have a material effect on its gearing for the year ending October 2011.
SP Setia estimates the KL Eco City’s gross development cost to total RM5 billion.
News Source: Business Times