The Bayan Mutiara deal and more reclamation

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Ivory Properties Group Berhad has received a letter of acceptance from PDC to buy and develop 103 acres of Bayan Mutiara land, south of the Penang Bridge.

The Bayan Mutiara site - Photo by Anil

The letter dated 25 July 2011, was for the ‘mixed development’ of 68 acres of existing land and 35 acres to be reclaimed. The project will be subject to terms in an agreement to be entered into.

According to an Edge weekly report (1 August 2011), Ivory and its partners will have to pay PDC about RM1bn over five to eight years as the land is being developed. That works out to about RM240 per square foot.

Some recent price comparisons:

  • CP Land Sdn Bhd disposed a parcel of land in the Queensbay area at Bayan Lepas for RM160 million or RM420psf. (Source: New Straits Times, 27 July 2011 edition)
  • Ivory entered into a conditional agreement last year to buy 0.49 hectares freehold land in Batu Ferringhi for RM25 million or about RM474psf. (Source: New Straits Times, 16 June 2011 edition)
  • Mah Sing Group Bhd acquired a 3.38-acre freehold plot of land in Georgetown for RM38.6 million or about RM262.19psf. (Source: The Edge Financial Daily, 19 October 2010 edition).
  • Berjaya buys part of Penang Turf Club land for RM184psf

The Edge quotes a company official as saying that three to four parties had submitted tender docutmcuments.

Ivory has only RM200m in shareholders’ funds, so it will have to seek co-developers and raise funds, including syndicated bank borrowings, for the project. This means it might have to work with other parties. “We’re in discussions with them to share the cost of the land and the profits but we’ll play a lead role in the project,” a company official was quoted as saying.

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Edge report explained that Ivory would manage construction on the land – likely to be mostly condominiums – but it intends to outsource the reclamation work though it will keep the valuable reclaimed land with coveted sea-front. Ivory says it will create a beach on the reclaimed land that will be open to the public.

The deal is good for Ivory, assuming property prices hold, as it will be getting prime sea-front land with two flyovers already there – built at public expense by PDC – to provide access to the coastal highway. GDV is reportedly estimated at RM10bn. Ivory is expected to generate sales of RM1.2bn per year if the project is completed within eight years. That’s a big leap from its revenue in 2010 of RM163m.

The PDC receives RM1bn for the sale of the land – a sum that can be used for development in the state considering the meagre amounts available in the state and MPPP budgets.

One question that arises is, why didn’t PDC sell only a part of the land and then use the proceeds to manage the rest of the land? There was a time when PDC developed entire ‘mixed development’ townships that included a range of affordable housing. This sort of development allows land to be allocated for social/affordable housing, public parks and green lungs, and public transport hubs. All these have an unquantifiable social benefit, which cannot be measure in ringgit and sen. A missed opportunity?

It is also crucial that an independent EIA and a hydrological study (by internationally recognised experts) be undertaken to ensure the project is ecologically sustainable.

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Mozilla
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Mozilla

I am writing as a concerned resident of Penang who is interested in good governance by the State. Recently, the State has proven that it can indeed walk the talk by revealing the contents of the concession agreement for E-Spice. Indeed, this is the Competency, Accountability and Transparency practices that the State advocates and the rakyat appreciates. As a concerned citizen of Penang, I wish to highlight that the financial and real estate market is rife with news regarding the sales of Bayan Mutiara land to Ivory. While Ivory is to be congratulated for having won the bid to secure… Read more »

tunglang
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tunglang

Penang Gomen has no money from Federal, so developers very happy and timely to dangle the Contra-for-Land deals with topped up dizzy demands for fantasy island style development at all cost ala Dubai’s Palm Jumeirah.
Soon Penang Island coastline will morph into artificial fill-in lands, rocky beaches and no Koay Kau! Except for rainy green horned wildebeests on shaky credit living.
Just like a guy with no money to woo pretty girl next door. Here comes the developer tow kay kia with an air of No Money No Talk (Business):

McSpice
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McSpice

I agree that “Penang Gomen has no money from Federal”. Rumour has it that BN has classified constituencies as “black”, “grey” and “white” areas: 1) At least RM2.5 million will be given to MPs in “white” areas where BN holds federal and state seats. 2) “Grey” areas, where BN and PR both hold seats or where the ruling federal coalition won marginally, will receive between RM1 million and RM2 million. 3) No special allocations would be made for “black” areas, where BN lost both state and federal seats in the historic Election 2008. This so called “special” allocation is an… Read more »

wira
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wira

Compare this open tender deal with the amount of money the previous state government received for granting the right to reclaim land opposite Gurney Drive, ostensibly for PORR, if that figure is ever released to the public.

I wonder how that right came under the possession of E&O.
Surely that valuable right to reclaim land from a prime piece of sea is also eyed by Sime Darby which is paying a high premium to acquire a piece of the action.

Syiok Syiok
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Syiok Syiok

Have someone assess the impact of land reclaimation at Bayan Mutiara to the beaches/fishermen nearby (Batu Maung, Teluk Lumbar etc) ?

We have seen how reclaimation project (at Tanjung Tokong) done to the once vibrant now swampy (forget about Kuih Kow fish, even resilient Mangroves still cannot survive there now) Gurney Beaches ????

Ong Eu Soon
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Ong Eu Soon

First, what is the rational to develop the land? Is there shortage of commercial space? No but an oversupply! Is there any shortage of housing? No, we have more housing units than the total households in Penang. We may not have a lot of lands when we resort to land reclamation to expand the land stock, why we just simply use it for non-essential need? Is the land to be use for building affordable housing for Penangites? Is the land is use for essential public utility like transit transit station or transit corridor? Waste processing utilities? This type of so… Read more »

Sze Tho
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Sze Tho

…Before you shoot your mouth off about oversupply, can you provide figures and facts to back it up? Non essential needs? Housing and commercial development is needed, for investments, business, and jobs. Reclaim land at high cost for affordable housing? Who is gonna do it? You? Absolute nonsense. Do you see Singapore doing it? Of course not. Reclaimed land is expensive, it must be maximized.

Sze Tho
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Sze Tho

…..your posts only exposes your incompetence Eu Soon. Incompetency? Very strong Engrish, huh.

mmc
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mmc

if its under gerakan, probably PDC gets no more than 30% of the said sum. the UMNO discount as usual.
as long as its open tender and no hanky panky, we should be supportive. part of the 1b proceeds can be used to develop more parks for the people. the state needs the money. we all know how the federal govt (BN) works against states under Pakatan.

tan, tanjung bungah
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tan, tanjung bungah

Hi everyone,

Some 34% of the total 103 acres would incur reclamation costs from the sea. Can someone provide the estimated quantum of the costs involved in such land reclamation?

Maybe, a better option could have been a setting-up of a statutory company by the State Govt to go into PPI partnership with Ivory Properties Group Bhd to give better returns to the govt., though of course the private sector needs to make good profits for their stakeholders as well!

Whichever is the case, most important is a proper independent EIA is presented, factoring in corporate social responsibility as well!