This article first appeared in The Edge Malaysia Weekly on September 25, 2023 - October 1, 2023

CITI Malaysia, the local arm of US lender Citigroup, is seeking a buyer for its stake in Menara Citibank in Jalan Ampang, Kuala Lumpur, as part of its global real estate portfolio review. The 28-year-old office building, which Citi Malaysia co-owns with diversified group Hap Seng Consolidated Bhd, is said to have an estimated market value of RM700 million.

The 50-storey Menara Citibank is wholly owned by Inverfin Sdn Bhd, in which Menara Citi Holding Company Sdn Bhd (MCHC) owns 50% + 1 share, and Hap Seng Realty (KL City) Sdn Bhd the remaining 50% -1 share. MCHC is wholly owned by Citibank Overseas Investment Corp while the latter is owned by Hap Seng.

“MCHC is looking to divest its equity stake in Inverfin,” Citi Malaysia says when contacted by The Edge to confirm that there were plans to sell the building.

Citi Malaysia adds that the “decision to sell MCHC’s equity stake is part of an ongoing review of our global real estate portfolio, which contains both owned and leased locations” and not because Citi Malaysia sold its Malaysia consumer banking business recently.

In November last year, Citi Malaysia announced that it had completed the sale of its consumer banking business — which includes unsecured and secured lending portfolios, wealth management and retail deposits — in Malaysia to United Overseas Bank Ltd (UOB). Citi Malaysia’s focus is now on its institutional client franchise, as well as the Citi Solutions Centres in Kuala Lumpur and Penang, from where the bank services over 50 countries around the world.

Even if the sale materialises, Citi Malaysia points out that it has no plans to relocate from its current location, where it moved to in 2000.

“Citi Malaysia very recently exercised the option to renew our lease in Menara Citibank. This renewal includes securing additional successive options to renew well into the future,” it says. Citi Malaysia, which employs 4,000 people, also operates from four other locations — Menara Northam and One Precinct in Penang, Labuan Financial Park and Cheras, Kuala Lumpur.

At press time, Hap Seng managing director Datuk Edward Lee Ming Foo had not responded to questions from The Edge on whether the group had the first right of refusal to purchase Citi Malaysia’s stake, whether it had exercised the right and whether it would also consider selling its stake in the building.

The Lion Group built Menara Citibank in 1995. In 2000, it sold half of its stake in the building for RM75.25 million to Citi, which subsequently relocated its headquarters to the premises. The remaining 50% shares were held by Lion Group’s Amsteel Corp Bhd (20%) and CapitaLand Ltd (30%).

In August 2009, Hap Seng bought both Amsteel and CapitaLand’s shares in the building for RM243.52 million.

According to sources, Citi Malaysia sought a request for proposal a few months ago to select suitable real estate agents to conduct the sale process. Two firms have been appointed as joint marketing agencies to seek potential investors.

How much is Menara Citibank worth? It is a Green Building Index (GBI) certified Grade A building with 733,218 sq ft of net lettable area (NLA) and 1,500 parking bays.

In a June 2022 report, Malaysian Rating Corp Bhd (MARC) said that an independent valuation dated Dec 10, 2021, valued the asset at RM700 million. It did not name the independent valuer.

The rating agency added that due to downsizing of operations, key tenants had reduced their occupancy levels, leading to a decline of its total occupancy rate to 79.3% as at end-2021 from 81.2% in 2020. The report also noted that Citi Malaysia is leasing the building until 2024.

Real estate valuation firm Laurelcap Sdn Bhd executive director Stanley Toh estimates Menara Citibank’s market value to be RM680 million to RM700 million. “Menara Citibank is a monumental building located in a prominent location just next to KLCC. The anchor tenant, Citibank, which had sold their retail group business to UOB, will be occupying the space until 2024 while the acquirer has plans to continue the retail banking business at the building,” he says.

“Post Covid-19, we see many companies downsizing operations and reducing office space. This is also evident in Menara Citibank, where some key tenants have reduced their occupancy space. There will be challenges in the market with the completion of TRX and Merdeka 118 offering a combined office space of 2.3 million sq ft, which could put further pressure on occupancy and rental rates,” Toh adds.

Separately, an international property valuer who declined to be named provides a more conservative market valuation for the building. “I am of the opinion that the market value of Menara Citibank is RM500 million due to the age of the building and because what is for sale is only a 50% stake in the company which owns the asset.”

Companies Commission of Malaysia data shows that Inverfin recorded a net profit of RM14.25 million on revenue of RM30.73 million in the financial year ended Dec 31, 2022. The company had total liabilities of RM219.38 million, of which RM173.1 were current. Its total assets stood at RM755.05 million. Retained profit as at end-2022 was RM525.08 million.

It is worth noting that MARC had in March withdrawn its rating on Inverfin’s RM160 million bonds following the full redemption and termination of the RM160 million outstanding under the programme. 

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