Semarak20 a difficult sell for Felcra amid property overhang

Structural and plan changes will be difficult due to the project already being at an advanced stage of construction, says expert

by FARA AISYAH/ pic by ARIF KARATONO

FELCRA Bhd will find it difficult to find a buyer or interested parties to help revive the stalled Semarak20 project as Kuala Lumpur (KL) City Centre faces a massive commercial unit overhang.

The project, which was about 42% completed as of September last year, would not appeal to buyers as structural and plan changes would be difficult due to the project already being at an advanced stage of construction, said one property expert.

The RM1 billion estimated gross development value project in Jalan Semarak, which is just a few kilometres from the town centre, has been plagued by problems and dragging state-owned Felcra’s financials.

An industry expert said it is “a very challenging site” to sell, largely due to the current mismatch of product and design.

“What the project requires is a comprehensive revamp, but unfortunately the construction is at quite at an advanced stage.

“It is a total loss on what has been sunk in to date,” the industry expert told The Malaysian Reserve.

The mixed development on a 1.63ha site on Jalan Semarak includes the Menara Felcra office tower, a 43-storey serviced apartment block, a mall and an international convention centre.

It is not known whether works are continuing at the site.

Felcra’s new CEO Mohd Nazrul Izam Mansor in January this year was reported as saying the RM1 billion project is 42% complete. He said the delay was due to financial mismanagement of the previous administration.

It was reported that Felcra had invested over RM200 million into the project.

Chairman Datuk Mohd Nageeb Abdul Wahab in October last year said the agency would need another RM400 million to complete the project, a price tag that the agency cannot afford.

Mohd Nageeb, who was appointed to the role on Oct 1, said the project had diverted from its initial plan, which did not require any capital from Felcra.

It was initially agreed that the project contractor would finance the construction of the project. However, it was later decided that Felcra’s subsidiary, Felcra Properties Sdn Bhd, will foot the bill for the entire development.

Felcra has been considering various options including selling the property, but the slowdown in the real estate market dampens that prospect.

Felcra was in talks with several parties to revive the botched project. The period of discussion ended in March 2019.

Earlier this month, KPMG Malaysia on behalf of Felcra Properties had put up a notice related to the project in a business daily.

The notice was an invitation for expression for the Semarak20 project including “to acquire” the project “on an ‘as is where is’ basis, joint venture, or other acquisition structure to be proposed by interested buyers”.

KL is already having a major glut of commercial properties as new units enter the market. Rental rates for commercial and office properties have nosedived in recent quarters. Potential tenants are spoilt for choice including cheaper options for units on the outskirts of KL.

For the first three months of this year, Malaysia has 13,013 unsold completed units of serviced apartments worth RM10.18 billion.

PPC International Sdn Bhd MD Datuk Siders Sittampalam said the Semarak20 project will face a challenge in take-up rates.

“For the office tower, I think they are facing competition from the Tun Razak Exchange. Secondly, I think the previous sentiments might have affected the project badly,” he said, adding that the project “has been quiet” and not much is known about the progress.