Business

Saturday July 16, 2011

The unending saga of Putra Place

By ANGIE NG
angie@thestar.com.my


PUTRA Place, which includes The Mall shopping complex, was one of the most exciting commercial properties in Kuala Lumpur in the late 1980s. Opened around the same time as the Putra World Trade Centre and the Umno headquarters, the development spurred businesses in and around Chow Kit Road and brought more life to the neighbourhood which was just a stone's throw away.

But from the mid 1990s onwards The Mall lost its lustre as newer and bigger shopping malls mushroomed in Kuala Lumpur. Coupled with the financial trouble faced by its owner Metroplex Bhd after the Asian financial crisis broke out in 1997, Putra Place, which also houses the Legend Hotel and Putra Place office tower, became embroiled in a legal tussle that has lasted close to 10 years.

And just when it was thought that the long-drawn legal tussle over Putra Place had come to an end via a court-sanctioned auction that would have seen the entry of a new owner and the injection of money to refurbish the complex, there was another injunction.

Metroplex, which is owned by Lim Siew Kim, the daughter of the late gaming tycoon, Tan Sri Lim Goh Tong, obtained a court injunction on July 1 to stop Sunway Real Estate Investment Trust (Sunway REIT) from taking possession despite it having won the bid for Putra Place in the auction.

Untapped potential: The Mall lost its lustre as newer and bigger shopping malls mushroomed in Kuala Lumpur.

According to Sunway REIT, it had already paid in full the auction price of RM513.945mil to Commerce International Merchant Bankers Bhd (CIMB) which was the principal banker that had seized Putra Place from Metroplex because of debt default.

Sunway REIT had also registered the title to Putra Place under its name at the KL Land Registry and on June 30. Sunway Group boss Tan Sri Jeffrey Cheah and his top executives held a press conference to reveal its plan to rebrand and refurbish the complex. He says that Putra Place will be called Sunway Putra Place.

Cheah adds that Sunway REIT has plans to upgrade and refurbish the shopping mall and turn it into an iconic tourist and commercial hub.

But it was not to be, as Metroplex obtained the injunction the next day, just hours before it was required by another court order to hand over possession to the new owner.

Metroplex has alleged that the auction sale of Putra Place was not in order. But Sunway REIT's manager, Sunway REIT Management Sdn Bhd, and trustee, OSK Trustees Bhd, have maintained that they had followed the proper procedures in the public auction on March 30.

The Court of Appeal will be hearing the arguments of both sides when it meets soon. Meanwhile, Sunway REIT is unable to move in as the new owner or take over the management of Putra Place.

The saga Putra Place is embroiled in is principally due to Metroplex's debt. The long-drawn dispute between Metroplex and its creditors dates back to December 2000, when Metroplex announced that it had failed to redeem its 1995/2000 bonds and had defaulted on its loan facilities with various lenders.

Since November 2004, there had been several winding-up petitions served on Metroplex and its subsidiaries.

On Dec 22, 2006, Heng Ji Keng and Michael Joseph Monteiro of Ferrier Hodgson MH Sdn Bhd were appointed as the provisional liquidators of Metroplex was delisted from the Main Board of Bursa Malaysia on May 15, 2007.

According to its audited accounts for the financial year ended Jan 31, 2010, the parent company disclosed that Metroplex and certain of its subsidiaries had defaulted in the repayment of certain bank borrowings amounting to RM1.48bil. The Metroplex group had total borrowings of RM1.5bil as at Jan 31, 2010.

The March 30 auction of Putra Place was in fact the fourth attempted public auction of the property. In the first auction in April 2008, Putra Place was put up for auction at a reserve price of RM705mil, but no bids were received. A second auction was scheduled on April 16, 2009, and the price was then reduced by 10% to RM634.5mil. However, it did not take place after Metroplex had obtained an ex-parte restraining order (RO) restraining all legal actions against the Metroplex group of companies.

By the time the RO was set aside on April 3, there was insufficient time for Metroplex and its lenders to put up sufficient advertisements ahead of April 16. Advertisements had to be made twice before the auction.

CIMB then made an application to the court for the auction date to be set aside and the next auction date was subsequently fixed on August 20, 2009. The auction was also not successful.

In Jan 2010, CIMB applied for a third auction date to be fixed and it was set originally for May 27, 2010 with the reserve price being fixed at RM571.05mil (a reduction of 10% from the previous reserve price of RM634.5mil).

The third auction also did not work out and was subsequently postponed to June 28, 2010, to enable the parties to comply with the necessary advertisement requirements both in the country and abroad. Again, no buyer was found during the third auction.

Finally, at the fourth auction on March 30 this year, Sunway REIT's bid of RM513.945mil was accepted.

But the saga, as events in the last two weeks have shown, is not over yet. For Sunway REIT and Sunway Group, which have built a reputation as savvy mall developers and managers, this is a tussle which they are not accustomed to.

The outcome of this latest tussle for Putra Place will be watched with great interest, not just by developers and mall operators, but also by bankers and lawyers.

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