31 October 2014

1MDB: Price for real estate asstes is commensurate

  31 October 2014

PETALING JAYA: 1Malaysia Development Bhd (1MDB) has refuted claims that it had overpaid for real estate assets, and believes the price it had paid is commensurate.

1MDB has been subjected to claims that it had overpaid for its 234 acres in Air Itam, Penang, for RM1.38bil which it had bought last year.

It was announced that the land was planned for 9,999 units of low-cost and affordable houses in the Air Itam estate.

“The size of the land acquired will allow us to build close to 10,000 affordable homes, and we intend to use the remaining parcel of land – which would be of a considerable size – for other development purposes from which we would expect to generate significant value.

“As such, we are confident of adding to the overall value of the land, and believe that the price we paid is commensurate with this,” the government-owned fund said in a statement.

It added that it was reflected in the prices that other developers had paid to acquire land in neighbouring areas which, at over RM200 per sq ft, was substantially higher than what 1MDB had paid.

“We understand that in one instance, dating back to 2013, approximately 9.8ha in Air Itam were purchased for RM267.4mil, about RM251 per sq ft, for a mixed-use development,” it pointed out.

1MDB also rubbished claims that it had overpaid for its energy assets, citing that it looked at a long-term view and broader synergies.

“We take a long-term view and consider broader synergies for the group, as well as the social and economic impact on the country, when we evaluate assets and forecast economic returns.

“As such, we believe that the value we paid for these assets – which may have involved a premium in certain instances, as is common when acquiring another business – is commensurate with their existing and future potential,” it said in the statement.

1MDB’s foray into the power sector kicked off in 2012, when it bought the power-generation assets of Tanjong plc, Genting Sanyen Sdn Bhd and Jimah Energy Ventures Holdings Sdn Bhd for a combined total of RM12bil.

The fund said like any other company, it only acquires assets when it is convinced that they represent compelling value for its business.



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