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1MDB black hole widens again as Bandar Malaysia deal unravels

An artist's impression of Bandar Malaysia - Graphic: theedgeproperty.com

I was midway writing a follow-up to my earlier piece ‘Black hole of 1MDB’, when news broke that the Bandar Malaysia deal had fallen through.

In that earlier piece, I had estimated that very conservatively 1MDB stood to gain RM12bn in revaluation surpluses from its two main land banks (RM7.2bn from its 486-acre Bandar Malaysia/Sungai Besi land and RM5.1bn from the 70-acre TRX land) – without doing any work at all! Recall that 1MDB had acquired its two main land banks at dirt cheap prices – RM65psf for the TRX land and RM76psf for the Bandar Malaysia/Sungai Besi land.

That RM12bn in revaluation gain was a conservative figure. Perhaps 1MDB could have gained up to RM15bn, based on prevailing land market value back then. Bandar Malaysia alone accounted for about half this figure or more. As 1MDB had already booked in RM5.0bn into its account, this means it (and indirectly the Malaysian government) still had an additional RM7-10bn to cushion further 1MDB losses.

Indeed, the total of RM12-15bn in revaluation surpluses would have come in handy in papering over the black hole of 1MDB and settling the US$6.5bn Ipic mess. There were at least $4.2bn of questionable transactions by 1MDB, including a $2.1bn payment to a firm with a similar name, Aabar Investments PJS Ltd.

The Malaysian government had been counting on receiving RM7.4bn from the sale of a 60 per cent stake in the firm managing Bandar Malaysia as part of the 1MDB rationalisation plan. The plan was to sell it to a consortium comprising Iskandar Waterfront Holdings (IWH) (60 per cent) and China Railway Engineering Corp (CREC) (40 per cent).

As they say about the best-laid plans…. Even back then, the China-led consortium seemed to be disputing the value of the 60 per cent stake, reportedly claiming it was worth only US$1.2bn (RM5.3bn) instead of RM7.4bn.

Full article on Aliran website.