This article first appeared in The Edge Malaysia Weekly on March 25, 2024 - March 31, 2024

THE PNB Project 1194, a redevelopment of the former Malaysia Airline System Bhd (MAS) headquarters in Jalan Sultan Ismail, Kuala Lumpur, is expected to be completed and open its doors to tenants and visitors in August this year.

This will add to the supply of office space and hotel rooms that is owned by Permodalan Nasional Bhd (PNB), alongside the PNB Merdeka 118, Menara Maybank, Menara PNB in Jalan Tun Razak and Perdana Kuala Lumpur City Centre, to name a few.

In a statement in response to questions from The Edge, PNB confirmed that PNB Project 1194 — named after the lot number of the site — is expected to be completed around August this year.

“Currently, the office construction is in its final stages, awaiting the issuance of the Certificate of Completion and Compliance (CCC). Simultaneously, interior design works for the hotel are underway, with an anticipated completion around August 2024,” it says.

The former MAS headquarters was acquired for RM130 million back in 2006, which means it has taken PNB almost two decades to complete the redevelopment since the old building closed its doors to tenants and visitors.

The project entails the redevelopment of the 35-storey office building and the development of an adjoining 50-storey hotel and serviced apartments tower. Work on the project started in 2012 when the plan was approved.

The main contractor is Ahmad Zaki Sdn Bhd (AZSB), a wholly-owned subsidiary of Ahmad Zaki Resources Bhd (AZRB). When contacted by The Edge, AZRB group managing director Datuk Seri Wan Zakariah Wan Muda declined to comment on why the project had yet to be completed.

AZRB has been struggling financially over the last few years. The last time the company made a full-year profit was in the financial year ended Dec 31, 2018, when it registered a net profit of RM14.23 million.

Despite having made losses in the last five years, the group looks set to complete the project. However, it is worth noting that the group was served with Liquidated Ascertained Damages (LAD) of RM44.8 million by a contract customer on Dec 7, 2020.

In the financial results filing for the quarter ended Dec 31, 2023, AZRB said its subsidiary AZSB had submitted appeal letters to the contract customer, requesting a waiver of the LAD. As a result, a waiver amounting to RM15.7 million was granted.

On June 11, 2021, AZSB had also requested for an extension of time (EOT) to revise the project completion date from Jan 11, 2020, to Oct 28, 2020. This shows AZSB had requested a retrospective EOT.

However, a source familiar with the project says that the delay in its completion was due to the hotel, as the renovation works for the office building had been completed. “Basically, they finally decided on Hilton Conrad [as the hotel operator] after a few other plans earlier for other operators were shelved. Builders’ work is close to full completion, while the balance to complete is the interior design works.”

According to market talk, before PNB decided to award the hotel operator contract to Hilton Conrad, it had considered running the hotel itself. PNB has a hotel operating unit, Attana Hotels & Resorts, that manages brands such as Perdana KLCC, Perdana Kota Bharu, Espira Kinrara, Villea Port Dickson, Villea Morib and Villea Rompin Resort & Golf.

In its statement to The Edge, PNB says Hilton was selected for its esteemed reputation and track record as a global hotel operator. The decision was made following careful consideration and recommendation by a hospitality consultant who had extensively assessed various other hotel options, it says. “Our Conrad Kuala Lumpur will be the first hotel in Malaysia under Hilton’s luxury and lifestyle brand, ‘Conrad’.”

The project will add to the Grade A office buildings and luxury five-star hotels in Kuala Lumpur’s Golden Triangle area. Be that as it may, the office and hotel components are expected to receive the Green Building Index (GBI) accreditation with a GBI Platinum target for the hotel, according to PNB.

“The office component will also have the added appeal of having Malaysia Digital status, thus affording tenants certain benefits and advantages,” says the state-owned asset management firm.

The office component comprises 25 floors of office space with a total net lettable area of about 170,000 sq ft. The 50-storey hotel will feature 481 rooms and an array of amenities, including 12 multifunction rooms, a banquet hall with a capacity of about 500 guests, fully equipped gym facilities, a 25m infinity pool and four dining outlets, according to PNB.

PNB is a major real estate owner in the city centre. It recently moved its headquarters to PNB Merdeka 118, following the building’s completion, from the 40-year-old Menara PNB in Jalan Tun Razak, resulting in a major vacancy of the prime asset.

The 40-storey office building comes with an annex building and four levels of basement car park. It has a gross floor area of 868,825 sq ft and net lettable area of 449,212 sq ft, with a frontage on Jalan Tun Razak’s main thoroughfare.

PNB is undertaking actions to “integrate the features of Menara PNB and Perdana KLCC to create a more attractive offering”, says the group. Perdana KLCC is located adjacent to Menara PNB in Jalan Binjai.

PNB says the group is currently developing an asset management strategy to reposition Menara Maybank to take advantage of its proximity to one of KL’s most culturally significant heritage districts.

“Any plans to redevelop or a major refurbishment will have to be carefully evaluated to consider market demand and the potential ROI (return on investment). Accordingly, we have strategically phased the refurbishment plans for Perdana KLCC, including recent upgrades of the hotel lobby and F&B areas.

“As mentioned earlier, we are also looking at refreshing the retail component of the property to complement the hotel component and the nearby Menara PNB, which is an office building,” says PNB, on its plans to refurbish Perdana KLCC.

Apart from Menara PNB, Perdana KLCC, Menara Maybank and Project 1194, PNB also owns CIMB Hub, a 22-storey office building in Jalan Sultan Ismail with a four-level podium block and six-level car park with a 673,268 sq ft of gross floor area and 360,000 sq ft of net lettable area.

The fund management group also owns Menara Tun Ismail Mohamed Ali in Jalan Raja Laut, a 26-storey office building with an eight-level car park. The building offers 623,284 sq ft of gross floor area and 292,865 sq ft of net lettable area.

In addition, its portfolio includes Menara I&P 1, Menara Dungun, Bangunan Setia 1 & 2 and Wisma Tune in Damansara Heights; Plaza VADS in Taman Tun Dr Ismail, KL; and Menara Heitech Village in Subang Jaya, Selangor.

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