Bangsar land swap: The hidden party

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The land swop deal involving S P Setia and the government has raised several issues of public interest.  This is another of those fancy so-called ‘public-private partnerships’; but there is also a third – and hidden – party involved. Who is it?

Under the land swap:

Part A: S P Setia will receive 40 acres of super-prime land on Federal Hill (opposite KL Sentral), currently used by the Health Ministry, from the government.

Part B: In exchange, S P Setia will build a 1M1H health complex (at a cost of around RM700 million) for the government on 55 acres of Setia Alam land (valued at RM60psf).


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Some concerns and questions:

1) S P Setia builds a health care complex for over RM800 million (including the land cost) and in return is given super-prime land with a GDV ranging from RM6 billion to RM11 billion.

This reminds me of how the Penang government, under the BN administration, allowed a developer to take over land reclamation rights worth billions of ringgit in GDV in exchange for building an expressway at a cost of a few hundred million.

2) It is not clear if the land swop deal is via direct negotiations or open tender.

Could the government have got a better return by treating the two deals as separate rather than linking the two? What the government should have done, if it hadn’t done so, is to split Part A and Part B i.e. tender the Bangsar land (Part A) independently, and then use the proceeds to pay for the 1NIH complex (Part B). Part A and Part B would be coincidental but unrelated.

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Why link the two?

3) This then leads to the issue of pricing. The imputed land cost of the Jalan Bangsar land is just over RM400 psf. Bank research units say this is comparable to property in Bangsar.

Is this a fair reflection of market value for Jalan Bangsar land though?

Why is this land considered to be super-prime? Maybank puts transacted land prices in the area at RM646-1,050psf.

On top of that, apart from fronting Jalan Bangsar, the site lies opposite KL Sentral, which means there is a likelihood that it could be used as a public transport interchange, perhaps for MRT. This could easily add a further premium to the land value.

So many listed companies have bought and own property across the road at MRCB’s Sentral. So there is a valuation point here. Also Bandaraya, another listed company, has assets in Bangsar. As does IGB at Mid-Valley. So there are many reference points to ascertain the real value of the land.

4) The PM’s Department granted approval in principle to S P Setia’s 50 per cent associate Sentosa Jitra Sdn Bhd. But who owns the other 50 per cent of the associate? So much for transparency.

The Edge gives us a clue (notice the names mentioned):

On S P Setia’s partner for the Bangsar project, a check with the Companies Commission of Malaysia shows that the other 50% stake in Sentosa Jitra is held by Mekar Gemilang Sdn Bhd, which in turn, is owned by Che Aladita Che Amdan and Ahmad Zaed Saleh Hamdi.

A search on Ahmad Zaed shows various filings with Bursa Malaysia on transactions related to MMC Corp Bhd and Tradewinds Corp Bhd. The two companies are closely associated with Tan Sri Syed Mokhtar Al-Bukhary.

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Ahmad Zaed was a shareholder in several private vehicles linked to the tycoon. Meanwhile, Che Aladita was on the board of Pilecon Engineering Bhd which was delisted early last year.

Here’s one example of a Tradewinds deal involving Ahmad Zaed. His name is also mentioned here in Kit Siang’s blog.

Look at all the data below, and you tell me if this deal is really in the public interest in terms of getting the best deal for the government’s land along Jalan Bangsar.

LAND SWAP DATA SUMMARY

Part A: IMR land along Jalan Bangsar owned by government

(expected to be developed into integrated residential/office complex)

Area: 40.22 acres (43,560 sq ft per acre) on Federal Hill, opposite Sentral, potential MRT interchange landbank

Effective land cost imputed by the deal:

  • RM402psf, about the same as market value, checked with valuers (per RHB Research);
  • RM460psf or RM805m, against recently transacted land prices prices of RM646-1,050psf (Maybank);
  • RM523m-871m, against price of residential bungalow land in Bangsar of RM300-500psf (CIMB Research)

Estimated plot ratio:

  • 9 (RHB),
  • 7.1, assume same as KL Eco City (Maybank),
  • 4-5 (CIMB Research)

Efficiency ratio: 65% (RHB); 75% (Maybank)

Average selling price:

  • RM800psf, benchmarked with KL Sentral (RHB);
  • RM650psf, based on average asking prices of selected Bangsar properties RM420-1,150psf (Maybank)
  • 1,200psf (CIMB)
  • 20% premium to KL Eco-City’s RM1,200psf?

GDV:

  • 8.2b (RHB);
  • RM6b (Maybank),
  • RM8-10b (CIMB);
  • RM11b

Govt’s share of profits from development: 20%

Part B: Setia Alam land owned by Bandar Setia Alam Sdn Bhd, 100% subsidiary of S P Setia

New integrated 1N1H health and research complex (six research centres, five of which currently situated on Jalan Bangsar land) for Health Ministry

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Area: 55.33 acres in Precinct 9, west of Setia City (Precinct 1), not far from Tesco

Estimated land cost: RM60psf (Maybank)

Construction cost: RM600-700m (per RHB, Maybank)

Approval in principle granted by PM’s Dept on 24 Sept 2010 to S P Setia’s 50% associate Sentosa Jitra Sdn Bhd (but who owns the other 50%?). Issued capital: RM4 (Currently dormant)

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18 Comments on "Bangsar land swap: The hidden party"

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justice
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justice

Who valued Setia Alam land at RM60 psf? Last heard at least three times more than that transacted if you are benchmarking bungalow land value between these two locations?

Salahuddin
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Salahuddin

First of all it is a Swap not Swop

Yes it sucks.

Apathetic citizens combined with the ridiculous cries of save us PKR, (just another crony aparatus waiting to get their piece of the action), are the reasons why this theft continues.

There is no political party in this country that can offer real change WITH effective government.

You want to send a message at the next election ? Then vote for some unknown independent on the ticket or cast a null vote.

CPL
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CPL

As a regular user of Jelutong Expressway now called Lebuhraya Tun Dr Lim Chong Eu, I appreciate that it is toll free except for the congestion at Lebuh Macallum and Weld Quay. IJM should have built flyovers so that traffic is non interrupted all the way. Yes, it looks like a super good swap deal for IJM but at least the rakyat need not pay toll

Real Estate guy
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Real Estate guy

SP Setia Bhd is already part of the GOC – Govt Owned Companies as more than 50% of its shares are held by govt controlled funds or under the PNB/EPF stable.

It is another case of ‘i help you make more money, if you help me in return’ – they need to create more of such deals…

How much money can you spend in Malaysia IF the funds are illicit or from corrupt practices?

aca
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aca

no wonder that liew said ali-baba and UMNO cronyism working well. darn, this 1Malaysia is nothing but another way of milking the country dry. Gosh, will the mainstream paper expose this …?

Jonathan
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Jonathan

Was there a graveyard there previously at the Health Ministry land at Bangsar…

Lastchance
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Lastchance
THE ONLY WAY IS TO CHANGE THE GOVERN OR ELSE OUR NEXT GENERATION IS GOING TO PAY FOR IT A VERY HARD WAY. MILLIONS OF MALAYSIAN ARE SUFFERING DAILY WITH HIGH COST OF LIVING AND LOW PURCHASING POWER. BUT ONLY FEW THOUSANDS ARE LIVING IN LUXURY ON YOUR TAX / HARD EARNED MONEY. THIS IS HOW THEY MAKE … FAST MONEY AND BECOME FILTHY RICH THRU’ BIG SUM PROJECT. THE AUTHORITY CONCERNED LIKE BANK NEGARA SHOULD CHECK THE TRANSFER OF MONEY AND MACC CAN JUST SIMPLY ASK AROUND,… ASK THE CONSULTANTS, CONTRACTORS, SUB-CON, ENGINEERS ETC ETC … PRICING, COST OF… Read more »
tupingera
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tupingera

it pays to be a crony

Bigjoe
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Bigjoe

You have got to be kidding if you think you have the numbers to figure out the deal and the players. SP Setia is one of the best developer in the country. You think UMNO/BN is that stupid to give them money they can earn for themselves?

The issue is where is the difference in the money going. SP Setia gets only a bit of it…

wira
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wira

I believe you are on the right track, Big Joe. 🙂
Pay attention to the partner.

donplaypuks
Guest
It’s obviously a crony deal. You forgot the direct-nego RM650 million Matrade crony deal with TTDI Naza where again the GDV from development is in th eregion of $8 or $10 billion!! Clearly Najib has no intention of fulfilling his promise of “Open Tender” when he first became PM; not when he has no mandate yet as an truly elected PM. And I seriously doubt this UMNO/BN direct-nego over the top give away deals modus operandi will stop even then. If Najib has any real intention of walking the talk, the Bangsar land should be auctioned by open bidding and… Read more »
K S Ong
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K S Ong

This is the type of experience Najib refers to which Pakatan lacks. Privatization and exchange deals, gained through half a century of experience, deemed ‘win-win’ – but at the expense of the public(?). In case of failure, there is always the ‘private gain, public liability’ concept to fall back on.

leekh
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leekh

…. They make the proposal to the self-serving politicians…. Everybody is happy.

tan, tanjong bungah
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tan, tanjong bungah

Hi everyone,

Anil, as suggested by you that such public-private projects should be in separate parts A and B to optimise returns to the govt., i.e. returns for development to the people.

But, why should UMNO do this? By linking them together as one, UMNO and BN would further enrich their cronies and crony companies at the expense of the people! Such continous and planned outrageous profits to cronies go to show things never change, still blatantly enriching themselves and their cronies!

Jamaluddin
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Jamaluddin

The land in Bangsar is not IMR.

IMR is in Jalan Pahang, besides KLGH.

Presently, the land in Bangsar is occupied by Public Health Institute, Health Management Institute, Health Behavioral Institute and a dental clinic.
All are under the Ministry of Health.

Habib RAK
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Habib RAK

There is no doubt that this is a crony deal. The numbers are way too obvious that this is a “sweetheart” deal. … We can ask all the right questions but UMNO/BN will bulldoze this through. Only the rakyat can stop them by booting them out in the next general election.