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).
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 swap 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.
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.
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.
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?
- 8.2b (RHB);
- RM6b (Maybank),
- RM8-10b (CIMB);
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
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)