PETALING JAYA: TRX City Sdn Bhd never got the money it was supposed to receive from the US$3bil that was raised in 2013, although different statements in 2013 said that money would be used to develop the 70 acres of land.

Instead, TRX City, the property arm of 1Malaysia Development Bhd (1MDB), had to carve out land parcels to sell in order to fund its infrastructure which cost about RM3bil.

The bulk of those land proceeds was also “advanced” to 1MDB.

The source said TRX had to do a lot of fire-fighting, manage expectations and perceptions and at the same time, raise funds to build the road and tunnel systems in order to attract local and foreign investors to buy into the project. The 1MDB scandal blew up in 2015.

When Lendlease became its joint venture partner in a 60:40 deal to develop the 17-acre lifestyle quarter, the Australia-based property and infra-structure group’s entry “boosted confidence” and gave the 70-acre project “a lot of credibility”, the source said.

“There were a lot of challenges,” the source said.

That 70 acres were initially parked under another Finance Ministry (MoF) entity - Pelaburan Hartanah Bumiputra Bhd.

According to the National Audit Department in an audit report on 1MDB on May 15, 2018, that 70 acres were purchased for RM302.38mil, or about RM100 per sq ft (psf), in 2010.

Originally Kuala Lumpur International Financial District (KLIFD), it was renamed Tun Razak Exchange after Malaysia’s second Prime Minister Tun Abdul Razak in 2012.

That 70 acres were conceptualised as a financial centre the likes of London’s Square Mile . To differentiate itself from the financial centres of Singapore and Hong Kong, TRX will promote Islamic banking and finance. Hence, the courtship of Middle Eastern funds.

According to a March 12, 2013 press release, a proposed 50:50 joint-venture Abu Dhabi Malaysia Investment Company Ltd (ADMIC) between 1MDB and Aabar Investments PJS will be the “first major multinational anchor investor” in TRX with an initial funding of US$6bil. Aabar is a 95.47% subsidiary of state investment fund, International Petroleum Investment Corp (IPIC).

One month later, 1MDB, in an April 15 2013 statement, said it had raised US$3bil. The US$3bil notes, issued by 1MDB Global Investments Ltd with an interest rate of 4.4% a year, are due 2023.

“TRX did not see a single cent of it,” a source said. The May 15, 2018 audit report said the Aabar deal was “not realised” and this impacted TRX’s development phase.

The report also said TRX sold five plots of land totalling RM1.358bil to build TRX’s infrastructure, of which RM1.095bil were “advanced” to 1MDB.

News of the US$3bil and ADMIC fizzled out. In 2014, Australia’s property and infrastructure group Lendlease became its JV partner to develop the 17-acre lifestyle quarter.

The on-going 1MDB investigations is today raising concerns among stakeholders whether the international financial centre will become a reality, or will it be merely “a cluster of state-of-the-art buildings.”

“Will TRX, as an international financial centre, be aborted? Will stake holders be asked to go slow?” a stakeholder asked.

Lendlease said in a statement it seeks to engage with relevant ministries at “the earliest opportunity”.

It is developing retail mall The Exchange TRX. “Government clients are key customers in each of the regions in which we operate and are instrumental players to all successful urban regeneration projects led by Master Developers to deliver city-defining, positive impacts.

“While Lendlease strategy is based on long-term trends, we continuously assess changing political dynamics as they arise.”

The new government has said it would review mega projects started by the previous government.

Aside from the emerging uncertainties, funding has been, and continues to be, an issue as banking systems in Malaysia and elsewhere try to reduce exposure to anything related to 1MDB, a source said.

1MDB Real Estate Sdn Bhd was restructured and renamed TRX City Sdn Bhd at the end of 2015.

Most of the stakeholders bought land there the same year.

Although TRX is scheduled to be operational by the first quarter of 2019 starting with Indonesia’s Mulia group Exchange 106, Malaysia’s tallest skyscrapper, investigations and uncertainties are casting a pall over the TRX branding. The Klang Valley’s huge over supply of office space is another issue.

Of late, questions have also been raised whether government-linked corporations (GLCs) will move to the financial centre.

The previous government promised stakeholders that GLCs will move there to fill up the office space.

The removal of goods services tax and the new government are expected to boost Malaysia’s economy and bring about a more buoyant market but problems from the over supply goes deeper than these two taxes and a new government.

The TRX Exchange MRT Station is expected to be the busiest along the Sq Buloh-Kajang 51km line. But that will only happen when TRX is completed and occupied.

The 1MDB investigations, still in its initial stage, may well be TRX City’s challenge it has to endure.