Freed of 1MDB taint, Malaysia’s tallest tower opens its doors

Published October 23, 2019, 8:17 PM

by Martin Sadongdong & Antonio Colina

By Reuters

KUALA LUMPUR – Malaysia’s tallest skyscraper is ready to take in tenants from December, its developer said on Wednesday, looking to move past its links to the 1MDB scandal and focus on making headway in an oversupplied property market.

A general view of The Exchange 106 in Kuala Lumpur, Malaysia, October 23, 2019.  (REUTERS/ Lim Huey Teng/MANILA BULLETIN)
A general view of The Exchange 106 in Kuala Lumpur, Malaysia, October 23, 2019.

Exchange 106 is the first project to be completed in the Tun Razak Exchange (TRX), a new financial district in capital Kuala Lumpur that was started by now-defunct state fund 1Malaysia Development Berhad (1MDB), from which about $4.5 billion was misappropriated according to prosecutors.

The 492-metre (1,614 ft) tower, taller than Malaysia’s Petronas twin towers, came under scrutiny in March last year after the then government of Prime Minister Najib Razak, who co-founded 1MDB in 2009, bought a 51% stake in the project. He acquired the stake just two months before he was ousted in a general election amid popular anger over corruption.

But with the completion of the 106-storey glass and steel tower, and support from the new administration led by Najib’s former mentor-turned-foe, Mahathir Mohamad, Indonesian developer Mulia Group believes the specter of 1MDB is now behind them.

In February, Finance Minister Lim Guan Eng declared the TRX “detoxified” of 1MDB’s taint, after a review found that the government would be able to recover its opportunity cost and investments, according to local media reports.

The building, which has a sweeping view of the city, already has a fifth of its 2.6 million square feet of rental space locked down, with its first tenants expected to come in between December and June, said Mulia official Patrick Honan.

“We expect the take up to grow to 1.3 million square feet by the end of next year,” Honan said during a media tour.

Some potential tenants include a top Fortune 500 global consulting firm, a Hong Kong-based personal care brand, e-commerce platforms, and a serviced office and co-working brand.

Besides Exchange 106, HSBC (HSBA.L) and Affin Bank (AFIN.KL) are building a tower each in the TRX, and Australian property firm Lendlease (LLC.AX) is building a shopping mall, hotel, and several condominiums.

However, Kuala Lumpur’s office rental market outlook “remains cloudy”, as new buildings that have no major tenants end up competing with existing office space, global property consultant Knight Frank said in its H1 2019 report on Malaysian real estate.

Honan remained optimistic, saying that confirmed and prospective tenants are looking at the big picture of the future potential of the TRX. “We will see dramatic moves in occupancy once the full TRX development is complete,” he said.