Joint venture with Temasek terminated due to “bad’ market conditions for residential properties: InvestPenang exec director

Business Processing Outsourcing Prime (BPO Prime), the joint venture (JV) between Temasek Holdings and Penang Development Corporation (PDC), was mutually terminated due to grim market conditions.

InvestPenang executive director Lee Kah Choon told Malay Mail on Thu (8 Aug) that the decision to terminate the RM1.3 billion JV (S$429 million) was made based on the findings of a survey conducted by a consultant, which revealed that the residential property market is currently on the low side.

“The investment environment for residential properties turn bad (banks cut down on granting housing loans; property price falling etc),” he said. “As a result, the joint venture parties decided to terminate the project.”

A Temasek spokesperson was quoted by Malay Mail as saying that Temasek and its JV partners “have carefully deliberated on it and the parties have come to an agreement not to proceed with the development of BPO Prime in Penang, principally due to market conditions”.

However, the spokesperson said that Temasek will “remain open to investment opportunities in Malaysia”.

The JV was entered into by Temasek and PDC — with Economic Development Innovations Singapore Pte Ltd (EDIS) as the provider of project management services — four years ago for the purpose of building the integrated mixed-development BPO Prime project on 6.8 acres of land in Bayan Baru, located in the southwest of Penang Island.

According to Lee, the project aims to create offices and residential units global business services (GBS) and their workers, with funding for the office tower channelled from the sale of housing units in the same development.

However, given the cancellation of the JV, PDC has begun to build an 80,000 square feet office space [email protected] on the site where GBO Prime was originally planned.

Previously in 2017, investPenang general manager Loo Lee Lian told The Edge Financial Daily that Temasek and EDIS were “reviewing the design” for a similar reason, namely the “current market condition” at the time.

“The [business] model is for the residential units to be sold and the commercial units — for lease, and it is supposed to encompass a ‘work-play and live’ concept, so that those who work in BPO can stay there. So it is a comprehensive package altogether. It is integrated,” said Loo, adding that Temasek and EDIs had “asked valuers to look at the property market again, especially the residential segment in Penang and [other parts of] Malaysia”.

In 2014 — the year a memorandum of understanding on the project was signed by the three parties to set up the JV — the Penang government estimated that BPO Prime would be completed between five and 10 years.