This article first appeared in The Edge Malaysia Weekly on October 3, 2022 - October 9, 2022

HCK Capital Group Bhd, which stepped in to rescue the Empire Remix 2 project in Subang Jaya’s USJ1 in 2019, is being roped in to resuscitate the abandoned Empire Remix 1 located nearby after an earlier attempt to turn around the ailing project failed.

Sources say that in the event HCK Capital, a company controlled by businessman Tan Sri Clement Hii, emerges as a white knight to take over the project, it may have to pump in as much as RM900 million for the construction and infrastructure to complete Empire Remix 1.

The ailing project is located across the road from Empire Remix 2 (which has been renamed Edumetro). Both projects were originally launched by True Renaissance Development Sdn Bhd, a unit of Mammoth Empire Holding Sdn Bhd (MEH). However, MEH, the developer behind Empire Subang, was unable to complete the projects due to financial difficulties.

Less than 30% of Empire Remix 1 had been completed before the project came to a halt. As a result, 2,500 buyers — who have collectively paid RM500 million through end financing, excluding their down payment and bank interest for their property — have been left with nothing to show for it.

In 2019, landowner Dergahayu Sdn Bhd, which owns the 11-acre site, got into a legal tussle with True Renaissance due to the project delays. Dergahayu then took over Empire Remix 1 but failed to complete the development. At its launch in 2012, Empire Remix 1 had an estimated gross development value (GDV) of RM2.3 billion.

HCK Capital subsequently stepped in and took over Empire Remix 2, injected RM300 million to cover the construction, infrastructure and other costs and is scheduled to complete four of the five blocks by the first quarter of 2023. The project has a GDV of RM850 million.

When contacted, an HCK Capital spokesman tells The Edge, “We have been asked to come in, and will only do so if the project is still feasible. As a developer, we would prefer to start on a clean slate with our own land bank than to clean up someone else’s mess. We took over Remix 2 because we had bought three towers en bloc. And when the original developer stopped work, we had little choice [but to step in].”

Last Thursday, True Renaissance held a creditors’ meeting, where the creditors holding 90.7% of the value of the total debts voted in favour of having a white knight — Subang Sentral Sdn Bhd, a subsidiary of HCK Capital — come in to complete the project. The creditors here refer to the 2,500 buyers of the Empire Remix 1 project.

HCK Capital had agreed to step in provided there were no liquidated ascertained damages (LAD) and developer interest bearing scheme (DIBS) to be paid by them to the purchasers. It also said it would not ask the buyers to top up their purchase price despite the increase in construction costs.

It is learnt that while buyers had purchased their SoHo units for between RM450 and RM550 per sq ft, similar units are valued at between RM850 and RM950 psf in the current market.

There were buyers who were against a white knight coming in without any compensation given to them for the delay.

The project has already been delayed by five years. With the project now expected to take three to five years, the total delay could be as many as eight to 10 years.

It is worth noting that not every creditor has to vote in favour of HCK Capital for work to commence. All that is required is a 75% majority — in value of total debt owed to the creditors — to be able to carry out the court-sanctioned corporate voluntary arrangement (CVA).

A CVA was chosen as it is usually difficult to negotiate with a large number of creditors, which in this case stands at 2,500, and a scheme not sanctioned by the court would require 100% support, which is very tough to obtain. Last Thursday’s meeting was court-sanctioned and the results of the meeting will be reported to the court.

What happens if HCK Capital fails to take over?

A source says that if this happens, there may be little chance of having the project revived any time soon. Moreover, True Renaissance has a mountain of debt on its books and is unlikely to be able to meet the compensation demands of its buyers.

A search on the Companies Commission of Malaysia website shows that as at June 30, 2021, True Renaissance had total liabilities of RM657.16 million while its total assets stood at RM123.267 million. It also had accumulated losses of RM537.36 million.

“All legal issues of Remix 1 should be properly cleared by the existing stakeholders before we can decide to mobilise our resources,” says the HCK Capital spokesman.

The Edge understands that HCK Capital is likely to use bridging financing, internal funds and sales proceeds to fund the project. It will be entitled to complete the unsold towers and keep the proceeds in return for rescuing the development.

Should HCK Capital step in, Empire Remix 1 is expected to be renamed and will likely be a mixed-use development comprising residential, commercial and retail components. The SoHo units that have been sold are expected to be completed first, within five years, while the rest of the development could take up to seven years.

Meanwhile, the former Empire Remix 2, which has been repositioned as an integrated education city and renamed Edumetro, comprises five blocks — A, B, C, D and E — that sit atop a three-storey podium.

Tower A and B (The New Duo A & B comprising dual-key Solo suites) and Tower D commercial complex were acquired en bloc by HCK Capital. Block C comprises SoHo units purchased by 2,000 buyers from True Renaissance.

Edumetro will house a Segi campus, which will move in by mid-2023, and the Imperial International School. The podium, which was initially slated for just retail, will now house the education and retail components as well as a co-working and lifestyle space.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.