This article first appeared in The Edge Malaysia Weekly on February 7, 2022 - February 13, 2022

PELABURAN Hartanah Bhd (PHB) will take full control of 12-year-old Empire Shopping Gallery in Subang Jaya, Selangor, by end-February, as Mammoth Empire Holdings Sdn Bhd (MEH) has decided not to repurchase the mall, which it developed and currently manages. PHB has hired a new mall management firm for the shopping centre as MEH prepares to hand over operations.

The latest developments flow from a sale and purchase agreement inked by the parties five years ago when MEH sold Empire Shopping Gallery to PHB for RM570 million in cash. The deal granted MEH a call option to buy back the mall on the fifth anniversary of the sale as well as the right of first refusal to buy the mall should PHB decide to dispose of it within the five years. Although MEH had sold the retail asset to PHB, it continued to manage the shopping centre.

The five years come to an end this month. When contacted, MEH group executive director Datuk Danny Cheah tells The Edge: “It will be five years in February 2022. We are not going to exercise the option.” He adds that MEH will hand over the management of the mall to PHB by end-February, as the contract will soon expire.

In 2017, The Edge reported that MEH had divested the mall to raise much-needed funds and quash rumours of further delays in the completion of the RM5 billion Empire City Damansara (ECD1) project near Damansara Perdana, Selangor. It was also reported that, had MEH decided to buy back the mall — which has a gross built-up area of 600,000 sq ft and a net lettable area of 350,000 sq ft spread over five levels — it would have had to fork out RM670 million or pay PHB the market value of the asset at the time, whichever is higher.

The Edge has been given to understand that MEH, which has been operational since 2002, had a sentimental attachment to the asset because it was Empire Shopping Gallery and the Empire Hotel, adjacent to the mall, that raised its profile in 2010.

Cheah, along with group managing director Datuk Sean Ng Yee Teck, founded MEH. Between 2010 and 2014, he went on an aggressive expansion, starting with Wolo Bukit Bintang in 2012 and venturing into Australia. MEH launched Empire Remix in USJ, Selangor, and Empire Residence and ECD1 in Damansara Perdana, and bought a 64-acre tract for ECD2.

As the business grew, so did the company’s debts, delaying the completion of several projects. MEH was pressured into divesting some of its commercial assets and land to help pare down its debts and for working capital.

In 2019, the group sold two assets: the four-star Wolo Bukit Bintang in Kuala Lumpur to HYM Group for RM115 million; and a 61-acre tract in Damansara Perdana to Exsim Development Sdn Bhd for RM760 million.

More recently, it sold a 20% stake in Empire City Mall in Petaling Jaya to glovemaker Rubberex Corp (M) Bhd for RM180 million. Rubberex will co-develop the mall via special-purpose vehicle Alliance Empire Sdn Bhd, whose shareholders are Alliance Premier (60%), Exsim and JT Momentum Sdn Bhd (20%) and Rubberex (20%). Alliance Premier is the vehicle of Ng and Cheah, whereas JT Momentum is a vehicle of Binastra Construction Sdn Bhd’s Datuk Jackson Tan Kak Seng.

MEH, which will continue to own and operate the Empire Hotel in Subang, also controls two hospitality assets in ECD1: McGuffin Hotel and Autograph.

Asked whether it plans to sell the retail asset now that MEH has decided not to repurchase it, PHB tells The Edge that it will not be selling the mall and that its “current occupancy [rate] and yield are good relative to the prevailing market”.

According to PHB, as with other malls, Empire Shopping Gallery was adversely affected by the pandemic. It says: “Ever since the Movement Control Order and the interstate travel ban were lifted in 3Q2021, we have seen a gradual improvement in the traffic to Empire Shopping Gallery.” And compared with city centre malls, Empire Shopping Gallery and other neighbourhood malls saw better shopper traffic in 2021.

As it is involved in property investment and property development, state-owned PHB has several other prominent retail assets in its portfolio, including Nu Sentral Retail Mall in Kuala Lumpur, The Shore Shopping Gallery in Melaka, PJ33 in Petaling Jaya and Lotus’s Setia Alam in Shah Alam.

PHB says Empire Shopping Gallery will be managed by the same company that manages Nu Sentral, and that the mall will undergo an asset enhancement. Some RM20 million has been allocated for mall refurbishment, including improving its façade as well as upgrading facilities and amenities such as toilets and vertical transport (escalators, travelators and lifts). It will also work on improving the tenancy mix.

On whether the mall will be renamed, PHB says: “Yes, we plan to adopt a new name.”

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