State-owned China Railway Engineering Corporation and its local partner, Iskandar Waterfront Holdings, won the auction in a field of 40 bidders for 60% of Bandar Malaysia, a company that owns an area that will be redeveloped to transform the Kuala Lumpur cityscape.
Bandar Malaysia, or City of Malaysia, covers almost 2 sq.km in an old air force base some 7km from the city center. The plot belongs to 1Malaysia Development Berhad, a debt-ridden state fund that has beaten an end-of-year deadline by selling assets.
1MDB is embroiled in a management controversy that has affected Prime Minister Najib Razak, the fund's advisory board chairman. It was disclosed that as of Mar.31, 2014, the fund had debts of 42 billion ringgit.
1MDB signed a share sale and purchase agreement on Thursday with the China Railway consortium for the land and three companies that are to develop Bandar Malaysia with a mix of residential and commercial properties.
The parties have yet to finalize payment details, but the consortium is paying a 10% deposit and the deal should be completed by June.
"We have exceeded the target of our rationalization plan," Arul Kanda, president of 1MDB, told reporters about the sale price.
The land purchase is China's second major investment in Malaysia in a month following a 9.83-billion-ringgit deal by China General Nuclear Power (CGN) in November to acquire all 1MDB's energy assets in Malaysia and four other countries.
CGN paid cash for the assets and also assumed 7.43 billion ringgit of debt from Edra Global Energy, 1MDB's power-producing subsidiary.
The two China deals enable 1MDB to service short-term loans and avoid defaults, and leave the fund with only real estate developments for its core business.
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