MBPP leases two derelict George Town heritage buildings for close to RM3.88mil over 45 years

The Penang Island City Council (MBPP) has leased two of its own heritage buildings in George Town to Mutiara Land Builders Sdn Bhd, in a deal projected to bring in close to RM3.88 million over 45 years — and it's a clean example of how a council can turn a derelict heritage asset into income without spending its own money on restoration.

Both buildings were awarded through open tender, with MBPP Mayor Datuk A. Rajendran confirming the winning bid was decided on rental value: Mutiara Land Builders secured the lease by offering the highest rent.

The structure: "15+15+15"

Both leases run on the same model — an initial 15-year term with two further 15-year renewal options, subject to the tenant meeting its lease conditions, for a maximum 45 years. It's a structure worth knowing if you're ever dealing with a council-owned heritage asset yourself: the council keeps recurring rental income and periodic leverage (compliance checks at each renewal) without carrying restoration costs or operating risk.

Kampung Kolam: a derelict shophouse row, restored on the tenant's dime

The larger of the two buildings sits in Kampung Kolam, inside George Town's UNESCO World Heritage core — a row of Grade II-listed shophouses that had been declared unsafe and left vacant for years. Mutiara Land Builders is putting in RM450,000 to restore it, with all restoration work required to comply with the George Town World Heritage core zone's conservation guidelines, and approved building plans due within six months before work can start.

In exchange, MBPP is giving the tenant a six-month rent-free period to cover the restoration window — a fairly standard trade in heritage leases: the tenant fronts the capex, the council recoups it through waived rent rather than cash.

Once operating, the building will hold ground-floor commercial units and a tuition centre upstairs. Rent is RM12,000 a month, stepping up 5% every five years, which works out to roughly RM2.2 million over the first 15-year term alone. One unit goes to MBPP itself at no cost, for the council's own use — and as part of the deal, the tenant will provide 20 free tuition places a year.

Mount Erskine: a smaller bungalow, a smaller number

The second building — the Elsiedale Bungalow, on Lebuhraya Halia 2 in Mount Erskine — will become a standalone tuition centre. Rent starts at RM5,000 a month, rising 5% every three years, projected at about RM994,000 over the first 15 years.

Combined, the two buildings' first-term rent alone comes to roughly RM3.2 million — before the two renewal terms that push the 45-year projection to RM3.88 million.

Why this is worth watching beyond these two buildings

MBPP has been actively pushing heritage-asset funding and restoration this year — separate from this deal, the council has been the subject of several other 2026 heritage-allocation announcements. Taken together, it points to a council treating its heritage portfolio less as a maintenance burden and more as a monetisable asset class, using tenant-funded restoration and long, escalating leases as the mechanism.

Cover photo: the Kampung Kolam heritage shophouse row before restoration. Photo: Buletin Mutiara.