The design of The Intermark buildings in Kuala Lumpur was long on grey concrete and that Brutalist, Bauhaus design popular in the 1960s and 1970s. In the current leasing climate that requires attractive office space which doesn't resemble a KGB jail, those buildings looked tired.
So in mid-2007, opportunistic developer MGPA acquired the entire city block for its MGPA Fund 2 and undertook a major re-vamp. The former layout comprised the Empire Tower, the three-star Crown Princess Hotel, City Square and the Ampang Plaza retail mall.
“We decided to reposition this sub-grade property to capitalise on demand for Grade-A space,” says Hugh Andrew, head of asset management for Asia ex-Japan at MGPA.
The total investment amount MGPA allocated for redevelopment of The Intermark properties was about M$2 billion ($665 million), including acquisition and construction costs.
Projects of this scale are a big bite for opportunistic property funds, and investors need to have confidence that their fund managers can follow through on the vision they ascribe to the knackered plot they bought on behalf of clients.
The Empire Tower was made-over into a 62-storey Grade-A office block renamed Vista Tower, which is now complete. The Crown Princess Hotel was re-developed into the Hilton Doubletree hotel. And City Square has become The Intermark retail podium, and that 's half-finished.
Ampang Plaza was torn down and is going to be replaced by a new Grade-A office block, the 39-storey Integra Tower, which will be finished in the third quarter of 2012. By that point, the development should look a lot better than its predecessor.
To finish off, a pedestrian bridge is being built and landscaping is being carried out to tie in connections between the new development and the iconic city centre buildings (such as the Petronas Towers) which are found nearby.
So, what does it add up to for investors? At this stage, MGPA could not give an estimate about the probable exit value of the project. The performance risk has been taken care of as the financing is locked in and the project is well on the way to completion, so it is now a question of finalising the leasing of the space and the ongoing robustness of the property cycle.