In 1993, Tan Sri Lim Kim Hong, the prolific entrepreneur better known as the Mattress King, bought 70 acres of plantation land in Shah Alam for RM4 per sq ft.
For 15 long years, that land remained dense, undeveloped and unmonetised. Lim bought the land just because he had money, but with no solid plan to develop it.
In the 90s, Lim was already an old hand in corporate Malaysia. Having made his first million at 18 selling woodwork, Lim had since delved into mattresses, electronics and the stainless steel business.
Lim was riding high from his mattress venture, being the founder of Dreamland Malaysia Bhd (now known as FACB Bhd). He famously cashed out his 55% stake in 1995 for RM350mil.
Diversifying his interest, he ventured into China where he set up a total of 14 factories there dabbling in stainless steel pipes, power plants and air conditioners.
In 1999, feeling bullish about the electronics business, Lim had via his vehicle Sumurwang Development Sdn Bhd acquired a controlling interest in Sanyo Industries (M) Bhd and changed its name to I-Bhd.
The competitive nature of the electronics home appliances business with its razor thin margins forced the company to call it a day and change its business direction.
That was when i-City was conceived in 2005 as a RM1.5bil township development.
Today, Lim has grand designs of turning the 70-acre i-City into a RM9bil ultrapolis complete with a theme park, ICT-related businesses and connectivity.
It isn’t all talk, as some 20% of the 70-acre development has been completed with its theme park now attracting 90,000 visitor arrivals on a weekly basis.
Lim’s latest project is the launch of his flagship The Jewel@i-City, an Athens-like building which he says will set a benchmark pricing of RM1,480 per sq ft for Shah Alam when it is launched in 2016.
“I never said I wanted to be the biggest developer in town, but I do want to be a chilli padi and make waves,” declares Lim.
For those who disbelieve that Shah Alam will ever reach the likes of KL City Centre, Lim says: “Do you know that in terms of infrastructure, Shah Alam is the best in Malaysia. Over time, you will see the multinationals move their offices to locations with better connectivity. We are strategic, 20 minutes from KL and 40 minutes to KLIA. With the completion of The Jewel@i-City, you will see even more migration to Shah Alam,” says Lim.
The RPT
As part of Lim’s vision to create his dream ultrapolis, I-Bhd announced a RM702mil fund-raising exercise in February, which consisted of rights, bonus issue, warrants and convertible stocks.
Significantly, it entailed a related party transaction (RPT) which involved Lim injecting his private land into the listed entity for 15 times its original purchase price.
I-Bhd would be issuing convertible securities amounting to RM502.3mil for two parcels of land in i-City and one parcel of land in KLCC. The remaining RM200mil rights issue was for investment in its shopping mall and working capital.
Via the RPT, Lim injected a total of 20.63 acres into I-Bhd for RM502.3mil. Some 19.58 acres were for i-City land, injected at RM60 per sq ft from his original cost of RM4 per sq ft in 1993.
Lim is quick to say that he is not at all cashing out of I-Bhd and is in fact reinvesting into the company.
“First of all, there was an agreement signed in 2005 between me and I-Bhd where it was stated that the landowner would only be entitled to the value of the land while profits will be accrued to I-Bhd. The payment of the land to the landowner is pegged to the sales collection so that I-Bhd will have better cash flow management,” he explains.
Lim’s private vehicles would only be paid based on the land price at that point in time.
Deputy chairman Datuk Eu Hong Chew says the agreement clearly states that the development of the land must come with a return of 23%.
“The landowner’s approach is to ensure that I-Bhd gets at least 23% return and historically he has agreed to a lower selling price for the land with reference to the market valuation to ensure I-Bhd achieves this target,” says Eu.
Lim adds that in 2005, the land price of i-City was in fact RM80 per sq ft according to land valuer Jones Lang & Wooten.
“We actually injected the land into I-Bhd at a 25% discount. Also, let me emphasise that instead of being paid money, I am being paid in convertible shares, a strong sign that I am reinvesting into my company,” says Lim.
I-Bhd is issuing Lim’s private vehicles with a combination of 5-year irredeemable convertible unsecured loan stocks and redeemable convertible unsecured loan stocks for a total of RM433.3mil.
Currently Lim, via Sumurwang Sdn Bhd and Sumur Ventures Sdn Bhd, owns some 79% of I-Bhd.
Lim’s relationship with Khalid
There are strong murmurs in the market of Lim’s handy relationship with Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim.
Afterall, Lim first purchased the 70 acres of I-City land in 1993 from Permodalan Nasional Bhd (PNB) when Khalid was its CEO. Khalid was CEO of PNB from 1979 to 1994.
Khalid’s support for Lim was again obvious when PNB became a 20% investor in Dreamland back in the 90s. At the same time, Dreamland was also made PNB’s investment vehicle to China, where it was almost routine for Lim to bring PNB officials and facilitated investment opportunities between PNB and China officials.
“Yes, Khalid and me have gone back a long way. I am grateful for all his help. However, to say that I-Bhd is dependent on the present administration is inaccurate. I am an entrepreneur with a big vision. There is a lot of effort required in what we do. We are selling properties to the public and we fund our own infrastructure,” he says.
Rumours put to rest
Lim puts to rest rumours that the RM55mil interchange which links the Federal Highway directly into his development was funded by the state government.
“The interchange linking the Federal Highway to i-City was half funded by I-Bhd, while the other half was funded by other developers in the area,” says Lim.
I-Bhd will be investing an additional RM35mil in i-City infrastructure. This does not just benefit our development, but the surrounding areas in Shah Alam,” adds Lim.
The entire Shah Alam will be get
ting a boost in terms of connectivity with the proposal to build a light rail transit (LRT) line from Glenmarie to i-City, and link it to the mass rapid transit (MRT) in Sungai Buloh, Selangor.
News reports have indicated that the main stations will be in Glenmarie, Stadium Shah Alam, i-City, UiTM, Bandar Baru Klang, South Port and Bandar Sultan Sulaiman.
The LRT 3 is going to be 30 km-34 km with projected ridership of 22,000 passengers per hour per direction.
“Have you seen what has happened whenever the LRT or MRT experience happens in other parts of the world like Singapore and Hong Kong? Property prices appreciate significantly and businesses mushroom all around the area. The LRT would definitely fast-track our ambitions to rouse Shah Alam,” says Lim.
For its first quarter to March 31, 2014, net profit grew 23.9% to RM6.1mil on the back of a 65% increase in revenue to RM44.9mil.
Property development was its biggest contributor at 73% while the leisure segment contributed 21.3%. The remainder came from property investments.
The property development revenue of RM32.7mil was more than double its previous revenue of RM14.4mil.
Eu says that with RM400mil of unbilled sales as of end-December 2013 and RM1.6bil of launches for 2014, I-Bhd is on target to generate annual revenues of RM500mil for its property development sector over the next two to three years.
Out of its RM9bil worth of development, i-City has a further RM6.5bil to be launched from the balance of land.
Lim says he never planned to introduce the theme park concept into I-Bhd. When he first proposed the idea, it was more of a “online enhancement” project to attract people to I-City.
“My team disagreed with me. So did Datuk Eu!” laughs Lim.
“They felt spending RM10mil to light up the place was a bad idea. All I wanted to do was attract the crowd here. And initially it was free,” he said.
So, RM10mil was invested, and the City of Digital Lights with its million LED lightscapes was first unveiled to the public in December 2009.
“We were pleasantly surprised when visitors started posting pictures of their visits on Facebook and YouTube. A year later when we started charging people, and visitors still came. That was when we decided that the theme park model was workable,” says Eu.
