MARC Ratings has affirmed the rating of AAAIS on PNB Merdeka Ventures Sdn Berhad’s (PNBMV) Merdeka Sukuk Wakalah Programme of up to RM6.0 billion with a stable outlook.
The affirmed rating is equalised with the AAA/Stable corporate credit rating of Permodalan Nasional Berhad (PNB) which is based on publicly available information. The rating equalisation is premised on the unconditional and irrevocable rolling guarantee from PNB to cover any shortfall in principal repayments and profit payments on the Merdeka Sukuk Wakalah.
PNBMV is wholly owned by PNB and was set up to undertake the 40-acre Merdeka 118 development in the vicinity of Stadium Merdeka and Stadium Negara in Kuala Lumpur. The development comprises several components, chiefly the 118-storey Menara Merdeka Maybank (formerly known as Menara Merdeka 118), a single tower with 84 floors of office space, a 17-floor luxury hotel and a three-floor observation deck. Adjacent to the tower are a seven-floor retail mall which is expected to open in November 2026, and sites earmarked for the future construction of two residential towers and a serviced apartment building. PNBMV is also the landowner and custodian of Stadium Merdeka and Stadium Negara, both of which are listed as National Heritage sites.
PNBMV has leased the entire 84 floors of office space in the tower to PNB under a triple net master lease agreement. PNB undertakes all property-related expenses, including quit rent, insurance and repair costs, in addition to the monthly net rental and service charge. PNBMV is therefore not exposed to the occupancy risks or other risks associated with the office component of the tower. As at date, about 70% of the 1.6 million sq ft of net lettable area (NLA) of the office tower has been sub-leased: 40% or 33 floors to Maybank, 20% to PNB, and about 10% to other tenants. Occupancy is expected to increase to approximately 90% over the next five years. The office tower is expected to generate an annual net property income of around RM137.0 million.
Lease agreements for 81% of the 750,324 sq ft of NLA in the retail mall have either been signed or are under negotiation to be signed with tenants at an indicative average rental rate of RM11.92/sq ft. Meanwhile, the two residential apartment buildings, with an estimated combined gross development value (GDV) of RM2.0 billion, are targeted to be launched in 1H2027. The serviced apartments, to be launched later, will have an estimated GDV of RM745 million. The residential apartment and serviced residence components are exposed to demand risk given competing developments in Kuala Lumpur.
The Merdeka 118 development has so far incurred a development cost of RM10.6 billion, largely funded by two earlier sukuk programmes that have since been restructured into the current rated issuances. The upcoming residential projects are expected to add a further RM1.4 billion in development cost and will be funded through a mix of borrowings and equity injections.
The rolling guarantee covers any shortfall for the periodic distribution and upcoming principal repayments throughout the entire sukuk programme through automatic renewal on each profit payment date. Upon completion of the entire project, cash flow generation from recurring income streams could amount to about RM500 million to RM600 million p.a. over the medium term.