MARC Ratings has assigned a preliminary rating of AAAIS to PNB Merdeka Ventures Sdn. Berhad’s (PNBMV) proposed Merdeka Sukuk Wakalah Programme of up to RM6.0 billion with a stable outlook.
The assigned rating is equalised to Permodalan Nasional Berhad’s (PNB) corporate credit rating of AAA/Stable 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 proposed Sukuk Wakalah.
PNBMV is wholly owned by PNB and was set up to undertake the Merdeka 118 development on about 40 acres in the vicinity of Stadium Merdeka and Stadium Negara, comprising several components – Merdeka 118, a single tower with 84 floors of office space, a 17-floor luxury hotel and a 3-floor observation deck; a 7-floor retail mall, adjacent to the tower; and two residential towers as well as one 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. Developed in phases, the Merdeka 118 tower has been completed while construction on the retail mall is slated for completion by 4Q2025. The construction on the residential towers and serviced apartment building has yet to commence.
As at date, about 70% of the 1.64 million sq ft of net lettable area (NLA) has been sub-leased: 40% or 33 floors to Maybank Group, 20% to PNB-related companies, and about 10% to other tenants. The office tower is expected to generate an annual net property income of around RM160.0 million. MARC Ratings notes that under a triple net master lease agreement with PNB, PNBMV is not exposed to the occupancy and operational risks of the tower. PNB will lease the entire 84 floors of office space in the tower and undertake all property-related expenses, including quit rent, insurance, and repair works, in addition to the monthly net rental and service charge.
For the retail mall, which is expected to commence operations in 3Q2026, the rating agency understands that leases signed and under negotiation accounted for about 70% of the total 750,300 NLA of retail space as at date, at an average rental rate of RM10.7/sq ft. The apartment buildings are targeted to be launched beginning 3Q2026 with the two residential towers carrying an estimated combined gross development value (GDV) of RM2.0 billion; the serviced apartments have a GDV of RM745 million. MARC Ratings views that both of these components are exposed to market risk given competing developments in Kuala Lumpur.
The project has so far incurred a development cost of RM7.0 billion that has largely been funded by proceeds from issuances under two unrated sukuk programmes with a total outstanding of RM5.39 billion. The remaining construction cost for the retail mall and apartment building components will add RM2.7 billion, for an estimated total project cost of RM9.7 billion. The total project cost is being funded through a financing mix comprising the sukuk proceeds and equity injections. Proceeds from the proposed Sukuk Wakalah will largely be used to repay the outstanding under the unrated sukuk programmes.
The rolling guarantee will be renewed automatically on each profit payment date and will cover any shortfall for the periodic distribution of upcoming principal repayments and profit payments throughout the entire sukuk programme. Upon completion of the entire project, cash flow generation from recurring income streams would amount to about RM400 million p.a. over the medium term.