Amid lack of progress in Bandar Malaysia, Rafizi questions 1MDB's RM3.5b debt

Rafizi claimed that 1MDB had secured a RM2 billion loan from AmBank and issued RM1.5 billion in sukuk bonds privately to Lembaga Tabung Haji (LTH) and Permodalan Nasional Berhad (PNB) to fund the development of Bandar Malaysia in Sungai Besi. — Picture by Choo Choy May
Rafizi claimed that 1MDB had secured a RM2 billion loan from AmBank and issued RM1.5 billion in sukuk bonds privately to Lembaga Tabung Haji (LTH) and Permodalan Nasional Berhad (PNB) to fund the development of Bandar Malaysia in Sungai Besi. — Picture by Choo Choy May

KUALA LUMPUR, May 12 — Putrajaya must explain what happened to some RM3.5 billion in funds raised by 1Malaysia Development Berhad through loans and Islamic bonds over the past four years for its Bandar Malaysia project, when there has not been any visible progress in the ambitious development, a PKR lawmaker said today.

Pandan MP Rafizi Ramli claimed that 1MDB had secured a RM2 billion loan from AmBank and issued RM1.5 billion in sukuk bonds privately to Lembaga Tabung Haji (LTH) and Permodalan Nasional Berhad (PNB) to fund the development of Bandar Malaysia in Sungai Besi.

This includes the relocation of military facilities from the existing air force base to other locations in the country, but Rafizi said there has hardly been any movement.

"The first phase (of the project) is to relocate military facilities. To how many locations we don't know, but we probably only can confirm that the main camp will go to Sendayan in Negri Sembilan," he said at a news conference here.

"But if you go to Sungai Besi now, it (air force base) is still there. Hardly anything has happened," he added.

In June 2011, 1MDB signed several agreements with the federal land commissioner to take over ownership of the Sungai Besi airport land and with the Negri Sembilan state government to acquire land in Sendayan as the replacement site for the Royal Malaysian Air Force base.

The agreements were to pave the way for the development of Bandar Malaysia, which 1MDB claimed will have “attractive elements” to “promote livability as a distinctive character of Greater Kuala Lumpur”.

The Bandar Malaysia masterplan presents a mixed development focussed on promoting work/life balance with the inclusion of open green spaces, a “people’s avenue” and higher learning institutes.

Rafizi today claimed that LTH and PNB had entered a “high-risk” investment by subscribing to the RM1.5 billion in sukuk bonds issued by 1MDB, arguing that the performance of the bonds is impossible to track due to the fact that they are privately issued and not rated.

The PKR vice-president added that even if the bonds came with prime land from 1MDB’s land bank as collateral, neither LTH nor PNB are capable of unlocking the land’s actual value as they lack the expertise required to push high-end property developments.

“Land on its own does not have much value, because it cannot be unlocked. That’s the problem with 1MDB now, it was given very high value land in Jalan Tun Razak and Bandar Malaysia but this land is almost worthless unless you have a large sum of money to develop these lands and unlock their value.

“Even if 1MDB cannot pay the RM1.5 billion and these lands are transferred to LTH and PNB, it remains a land bank. Which means LTH and PNB have to source for huge funds to develop the land, and then you can unlock the value,” Rafizi said.

Last week, reports of LTH’s controversial land investment hit media headlines after it was revealed that it bought a plot of land in the Tun Razak Exchange (TRX) about a month back from 1MDB, which is currently saddled with a RM42 billion debt.

A blog called “The Benchmark” first raised speculation on the purchase when it published purported documents of the controversial transaction that critics now claim could be a bailout for 1MDB.

The expose sparked outrage among lawmakers from both sides of the political divide, including even Umno leaders like Tan Sri Muhyiddin Yassin, Datuk Seri Hishammuddin Hussein and Khairy Jamaluddin, and fueled concerns raised previously over 1MDB’s dealings.

Civil service pension fund Kumpulan Wang Amanah Pencen (KWAP) has since reportedly agreed to buy a parcel of land and building that will be turned into its new headquarters at the TRX at a price which is 15 per cent cheaper than LTH’s purchase.

According to a report by The Star Online, KWAP pay between RM1 billion and RM1.2 billion for a 40-storey building and land at the TRX in Kuala Lumpur.

Quoting sources, the report said that KWAP will be purchasing the land at about RM2,300 per sq ft.

In comparison, LTH reportedly paid RM188.5 million at RM2,773 psf for its part of the TRX land, which is 43 times what 1MDB paid four years ago when it purchased the plot for just RM4.5 million at a rate of RM64 psf.

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