Notes from the Spice agreement

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A few kind souls managed to view the actual agreement for the Spice convention centre and this is now presented here in the public interest.

The agreement proper can only be viewed by appointment at the MPPP office. No photocopies or snapshots are allowed. Those who view the agreement are only allowed to take handwritten notes within the two-hour time slot allowed. (Why not make public the entire agreement on the MPPP website in line with CAT and Freedom of Information? After all, the project is of public interest.)

Some questions arise:

  • Have all MPPP councillors been given a copy of the agreement? Chinese press reports suggest rumblings of discontent among MPPP councillors.
  • Was there a MPPP full council meeting to approve the agreement and the RM50m cost (to be absorbed by the MPPP) before the agreement was signed by the MPPP and SP Setia? When was the MPPP budget for this approved?
  • Is the traffic impact assessment for academic purposes only?
  • Why no social impact assessment?
  • Am I seeing correct regarding the 1500 additional homes allowed to SP Setia in return for building Spice? Not only 87 units/acre but now 120 units/acre in some places? Are these densities higher than what is allowed under the Penang Island Local Plan, which has not yet been revealed even though it was approved in 2008?
  • How much do all the assessment and development charge waivers plus the cost of the land to be provided for affordable housing add up to? These should be added into the state/MPPP’s cost.
  • Is it true that only 2000 parking bays are to be provided even thought the capacity of the convention centre will be 6000?
  • Why the haste in the approval of the Spice project? What happened to due diligence?

These are legitimate questions, but somehow I am not expecting any real answers.

Here are the notes from the agreement:

CONCESSION AGREEMENT

Signed on 19 August 2011 between Majlis Perbandaran Pulau Pinang (MPPP) and the concessionaire, Eco Meridian Sdn Bhd (Company Number 909427K), a subsidiary of SP Setia, with registered office at Setia Corporate Tower.

The agreement was signed:

  • for MPPP — YDP of MPPP Hjh Patahiyah Ismail, Ahli Majlis Tan Hun Wooi and Setiausaha Perbandaran Ir. Ang Aing Thye
  • for or on behalf of Eco Meridian Sdn Bhd- CEO/President Tan Sri Dato Sri Liew Kin Sin in the presence of Executive Vice President Dato’ Chang Khim Wah.

Concession agreement for the Build-Operate-Transfer (BOT) of the

  1. Subterranean Penang International Convention & Exhibition Centre and complimentary F & B outlets / offices
  2. Refurbishment and rectification works of PISA indoor stadium
  3. Refurbishment and rectification works of aquatic centre

Construction commencement date: 6 months from vacant possession

Project site: surrounding existing PISA i.e. Lot 11569, 11543 and part of Lot 7481, Mukim 12, Jalan Tun Dr Awang, Daerah Barat Daya, Pulau Pinang.

Area of site: 24 acres

Land status

MPPP is the owner of:

  1. Leasehold land held under Pajakan Negeri 3000 for Lot 11569, measuring 12,937 square metres, expiring on 23/12/2096.
  2. Freehold land held under Geran 60007 for lot 11543, measuring 22438 square metres.
  3. Leasehold land held under Pajakan Negeri 2827 for Lot 7481, measuring 67,520 square metres, expiring 20/1/2087

all of which are in Mukim 12, Daerah Barat Daya at Jalan Tun Dr Awang.

Concession Rights

  1. MPPP contributes RM50 million
  2. Concession period: 30 years. Can apply for two more terms beyond concession period of not less than 15 years per term (both parties have expressed interest).
  3. Concession fee of RM1,000 for project for 30 years.
  4. Hotel site will be in part of Lot 7481 measuring 136,699.8 square feet (3.1381956 acres) sold and transferred to concessionaire.
  5. Additional density (means additional residential units to be added onto a development through the utilization of the development rights) – 1,500 units of residential units above permissible maximum density subject to Article 4.
  6. All assessment rates, quit rent for sPICE, PISA, indoor stadium, aquatic centre, car park (but not hotel site and retail outlets on project site) shall be borne by MPPP during the concession period. Concessionaire has right to apply/appeal to MPPP for waiver, exemption or reduction of assessment rates but MPPP is not obliged to grant.

Sale of Hotel Site

  • Hotel purchase price: RM13,669,980.00 (RM100 p.s.f). Concessionaire had asked for RM60p.s.f.
  • 99 year lease: category of land use “building”, express condition “hotel”.

ARTICLE 4 – DEVELOPMENT RIGHTS

4.1. MPPP unconditionally and irrevocably grant concessionaire and/or any of its related Corporation to the right to additional density of any development carried out within the island of Pulau Pinang over and above the maximum permissible density for the land, provided always that the total sum of such development rights utilized and spread over all projects within the island does not exceed 1,500 residential units.

4.2 Such development rights are only exercisable during the Concession Period and if the development rights are not completely exercised by the end of the Concession Period or prior to any early termination as provided for by this agreement, the balance portion of the development rights that remain unutilized shall lapse and will have no further effect, for the avoidance of doubt, the development rights are only exercisable by the concessionaire or its related corporation and not transferable.

4.3.a The Fast Track Consideration procedure shall be adhered to by MPPP.

4.3.b Exercisable during the Concession Period.

  • No development charges, built-up area control or selling price control imposed by MPPP on any additional density utilized in such development for the additional density only. For avoidance of doubt such waiver shall only be in relation to the additional density utilized and accordingly all other units within the development shall be subject to current guidelines.
  • No requirement by MPPP or concessionaire to provide for low cost or low medium cost housing in such development for additional density only.
  • The utilization of development rights within any development land will be subjected to a specific ceiling cap on additional density / development rights:
Category of land with permissible density based on existing guidelines Proposed final applied density (includes units arising for both development rights and current maximum permissible density)
  • 15-30 units per acre which qualify for upgraded density of 87 units per acre.
  • 15 -30 units per acre but do not qualify for 87 units per acre.
  • All other categories
  • 120 units/acre

 

  • 87 units/acre

 

  • Double the current maximum permissible density.

 

Required to provide open space, must comply with local authority.

4.4 Development rights may be exercised either exclusively in one single development or in multiple development in Penang Island but always in accordance of the agreement.

Article 4A – Low Medium Cost (LMC) housing

4A.1 Concessionaire to build not exceeding 450 LMC housing units.

  • Built up area not exceeding 650 square feet.
  • Selling price to commensurate with the prevailing price at the point of construction but not lower than RM72,500 (under Housing Development Guidelines) provided State government provide a piece of state land (LMC land) at no cost to concessionaire within 20 years from the execution of the Agreement. Failing which concessionaire shall not be obliged to build it.
  • Entire LMC must be constructed within five years from the date of LMC land being provided and delivered to the Concessionaire.

4A.2 Land must be suitable for development without requirement for excessive earthworks, piling or retaining wall. Entire 450 LMC must be on the same piece of land in reasonable matured establishment. 450 LMC units shall be carried out by the Concessionaire or by any related corporation.

4A.3 Shall not be entitled to build any other types of properties whatsoever on the LMC land unless consent is granted by MPPP.

4A.4 Proceeds from such sales shall be the sole entitlement of the LMC developer.

4A.5 The concessionaire shall be entitled to a corresponding exemption of the quota requirement to provide low cost or LMC in any proposed development to be carried out by the concessionaire or any related corporation within the state of Pulau Pinang.

Preparation of Drawings and Building Plans

f) MPPP shall waive all charges, fees, demands normally payable to obtain Applicable Approvals for the Project and construction of Project Facilities.

  • If the Concessionaire fails to complete the Project Facilities within the Scheduled Project Completion date (unknown), the Concessionaire is to pay MPPP RM20,000 per day as penalty.

Intentions by Concessionaire and MPPP

MPPP Letter of Intent – Traffic Impact Assessment (TIA) is compulsory but not Social Impact Assessment.

Concessionaire’s Letter of Reply – TIA will be submitted for academic purposes only.

MPPP Letter of Intent – 1500 residential units and 450 LMC units to be built simultaneously.

 

Concessionaire’s Letter of Reply

  • within 20 years from the execution of the Agreement failing which concessionaire shall not be obliged to build it.
  • Land for the LMC units must be provided by MPPP.
  • If the provided land is bigger than necessary, the Concessionaire is entitled to build more LMC units.

MPPP Letter of Intent – specifies compliance of project to Green Building Index principles.

Concessionaire’s Letter of Reply – GBI principles shall be incorporated into the design. However the decision as to whether to submit and obtain GBI accreditation is subject to residual budget.

Specific demand in MPPP Letter of Intent – “Kos pembinaan sekurang-kurangnya RM250,955,249.00 (not including hotel building).”

Additional demands in Concessionaire’s Letter of Reply

  • A one-time Concession Fee of RM1000.00 for the entire 30 year period.
  • The proceeds of all property sales to go to EMSB or SP.Setia related companies.

MPPP Letter of Intent – offer to sell at RM100psf

Concessionaire’s offer for land price in Letter of Reply – RM60psf

Finalised agreement –
RM100psf

Breakdown of MPPP’s RM50 million ‘contribution’ to Concessionaire

1. RM10 million to be paid immediately after execution of Agreement.

2. RM5 million to be paid within 7 days after external road widening.

3. RM10 million to be paid within 7 days after repair/refurbishment of PISA.

4. RM10 million to be paid within 7 days after repair/refurbishment of Aquatic Centre.

5. RM5 million to be paid within 7 days after piling works for sPICE.

6. RM5 million to be paid within 7 days after basement construction for sPICE.

7. RM5 million to be paid within 7 days after roof construction of sPICE.

Anticipated cost of the project

RM
Piling 18,491.849
sPICE 130,193,570
Refurbish and rectify PISA indoor stadium 23,884,630
Refurbish and rectify aquatic centre 6,370,000
External and ancillary works 38,337,200
Preliminaries 10,864,000

Total construction cost

228,141,249.00

Consultancy fees (10%)

22,814,000

TOTAL

250,955,249

 

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Aranda Del Rio

Anil Here is an article of interest to you. “Want better jobs? Build denser cities” by Ryan Avent – Less crowded cities leave little room for enterprise experimentation and development of talent The American economy’s famous upward mobility rested in part on middle-class access to rich, entrepreneurial cities. This machinery is breaking down, however, mostly because upward mobility strikes too many residents of rich places as too messy a pursuit to accommodate. During the Industrial Revolution, for instance, millions of workers flooded into fast-growing cities. This produced slums, but it also allowed poor workers to take advantage of opportunities in… Read more »

Erwin

Poor workers must have strong determination to upgrade their competecies, knowledge and abilities to command better paying jobs. Unfortunately many of them choose to wait for hand-outs and subsidies and their children adopt the same mentality for generations to come (socialism thinking?).

Why Greece is in trouble but not Germany is a testimony to this simple fact.

As Penang becomes attractive to talented people with better purchasing power, the poor-and-always-poor people can only complain in disdain on everthing they cannot afford, without a slightest idea that they could afford to upgrade their skills if they want to.

Erwin

Anil

Any comment on this Malaysian Insider article:

Bumi quotas inflating property costs, say developers

http://www.themalaysianinsider.com/malaysia/article/bumi-quotas-inflating-property-costs-say-developers/

Shukri

Property developers will be forced to raise prices of residential properties by as much as 20 per cent due to rising cost of building materials The Real Estate and Housing Developers’ Association Malaysia (Rehda), however, does not think this will lead to a property glut. “In Malaysia, there are very few investment portfolios that one can hold. Besides stocks and bonds, the other alternative is property and one can never go wrong on that,” Rehda president Datuk Michael Yam Kong Choy claimed. Rehda is optimistic that property prices will pick up in the second half of this year and 2012,… Read more »

Ong Eu Soon

You can find the town and country planning act 1976 at http://www.google.com.my/url?sa=t&source=web&cd=1&sqi=2&ved=0CCMQFjAA&url=http%3A%2F%2Fwww.agc.gov.my%2FAkta%2FVol.%25204%2FAct%2520172.pdf&ei=Vjd5TtP-M46zrAfq_9TJDw&usg=AFQjCNFVMTsIcPj1X-DLlKUt26KmDpWWUw

Read for yourself which clause allow the development density to go above permissible maximum density. Section 32 of the act brief touch on alteration of local plan that affect the density and development charges. Section 35 allow the power to make rules which can be used to waive the development charges. This 2 sections of the ACT have been widely abused by the state authority including the Kai Sue administration.

Meer

Just read Article 4A, low-cost housing with built-up area of only 650 sq-ft per unit? Do the state government think that they want to house monkeys over there? Be generous to the poors lah. And the cost is how much? 72500 per unit? That works out to about 111/sqft. What cheap material the developer want to use. And again, the state government is turning a blind eye on this? So, what’s the difference if we vote again BN next GE?

glenn

convention centers around the world are funded by the state to bring in foreign investments which ultimately benefit the people. in our case, a rm50m contribution by the state (with good intention) is merely one sixth of the estimated total construction cost of rm300m. the developer of course will need to come up with some source of funding. due to brilliance of our cm, he has swapped 1,500 units of “empty air” for the remaining rm250m. in return, the developer has to actually “earn” the remaining funds to construct spice. now you don’t expect cm to be blowing his own… Read more »

Nk Khoo

Which government gives free money for a BOT project in the world? Mind to enlighten me?

Empty air is for LGE only, other Penagites and even their grandchildren have to pay the price for … million(s in) profit from the 1500 extra units.

glenn

how are other penangites going to pay rm millions for the 1,500 units? in what way? let’s do simple arithmetic to have a feel for the finances involved in the project. take pisa for example. assuming that the occupancy rate is super fantastic and booked three weekend-days per week for the entire year. the annual revenue (before deducting for utility bills, manpower and maintenance costs) works out to be 52 x 3 x rm21k/day = rm3.276m (current weekend rental rates is rm 21k/day). say the profit margin is 30%. thus, the annual net income = 30% of rm3.276m = rm0.9828m.… Read more »

Jimmy

Premium, quit rent, spc charges, and god know what else, are borne by MPPP. Is that what you call creative financing?

Salute lah LGE. Maybe Penang should’ve been governed by Penangites. Now, where did that Chow Koon Yeow go?

glenn

not sure what premium or spc charges are we referring to but no way will it be anywhere near rm250m. the money gotta come from somewhere. from federal government, perhaps?

nkkhoo

Hong Kong tycoon Superman Lee invested USD1 billion in Singapore Suntec convention center without getting a single cent donation from Singapore government. How on earth he can make money from Suntec? For exhibition hall operator, the sources of income are more than rental fees. – Be an expo organizer – Be a hotel provider (SP Setia has do so) – Be a sport event organizer – Rent out office space – Rent out retail space Your assumption of 3 day per week is too low for a well-organized exhibition hall. Suntec Singapore occupation rate is almost 100%. Your RM21K rental… Read more »

Ong Eu Soon

By allowing the development density to go up as high as 100 units per acre without a mandatory transit oriented development, LGe is fast tracking the island into a big ghetto. Soon the people will realise how bad is LGe and they will start cursing this Cheap Minister of Darul Sampah for creating more Rifle Range type of slums all over the island.

Ong Eu Soon

This is a clear case where LGe (allegedly) directly interfere in the decision of MPPP. Eceryone know that sPICE is his pet project. LGe (appears to be) bending the rules and regulation to have his pet project built at the cost of selling away our rights. This is a pure abuse of power. LGe has no rights to provide leeway for developer to escape from fulfilling the duty of building LMC units. In this case the MPPP has allowed the developer or any other party to build on behalf of the Concessionaire. LGe also has no rights to make the… Read more »

Ong Eu Soon

I am seriously contemplating of bringing the case to the state appeal board. Time to stop the state authority to abuse the trust of the people.

Bruce Li

action speaks louder.
go ahead and appeal to redeem your reputation.

nkkhoo

I support you morally for whatever legal action to stop LGE from selling off your island.

Work with BN lawyers on this, I believe they will get free service to you.

Ong Eu Soon

When a development project go above the permissible maximum density, it take away the space for tree planting. The development charge is levied to make developer pay for not providing tree planting. The exempt of development charges can only be made if it is regarding any rectification related to tree preservation.

Ong Eu Soon

This is an unfair and lopsided concession which is against public interest. How can LGe give such terribly unfair terms to Eco Meridian? The concession allowed the developer the rights to build extra 1500 units of residential units above permissible maximum density and allowed it to spread over all EMSB projects within the island throughout a 30-year period. The rights to go above permissible maximum density is subjected to the levy of development charge. Although Section 35 of the town planning act 1976 provide the state the authority to make rules that allow exemption from development charge but it should… Read more »

josephlim66

Anybody know what is the completion period and LAD if there is any delay in completion?

nkkhoo

RM20,000 compensation per one day delay if my memory is correct.

PETER LAI

sPICE is called People’s Park at the banner mini showcase outside the indoor stadium of PISA during Chinese New Year period. It’s is touted as the recreational park open to the public free of charge. Suddnely. the people’s park is becoming the envy of many who fear some authority profiteering from such dealings ? I am sure the Penang Government has reasons to keep mum on too much revealing and eventually the people will understand the matter clearly. No matter what, the people of Bayan Baru area in general welcome a major facelift, upgrade and continuoys maintenance of PISA. PISA… Read more »

nkkhoo

Malaysia ends up like a failed nation, one main reason is its people will accept whatever screw-up from the race-based party as long as the leader is same color with them.

… million(s in) profits for SP Setia from all sorts of side concessions from a 250 million project with RM50 million free money is (questionable) in any standard.

Anthony Tan

I support the idea of having a large convention centre in Penang to give Penangites an opportunity benefit from the Business Tourism industry. I have given comments on this blog many times in defending to have the project. When I visited the displays on the information of proposed sPICE project at PISA, I have felt uncomfortable with SP Setia to be the BOT. As an established developer, the information display was a poor job/show as compared to the many SP Setia development project launches I have attended. Now after getting deeper into the drawn up project agreement, I find that… Read more »

sembang forum

please read comment on :

Black Cat, White Cat – Both Catch The Mouse

http://masterwordsmith-unplugged.blogspot.com/2011/09/black-cat-white-cat-both-catch-mouse.html

To the developers, it matters little which cat catches the mouse for them. The mouse is Penang’s land. The cats we the rakyat adopted only to see them go feral.

LTH

under breakdown of MPPP’s 50M contribution for the various works,

are the amounts payable by MPPP within 7 days upon the COMMENCEMENT or COMPLETION of the stipulated categories of works?

If it’s upon COMMENCEMENT, then (they) will be entitled to collect a total of 25M in 6 months time for items 2 to 4, upon site possession and immediately starting work which they easily can).

Not forgetting they should by now have already collected 10M for item 1 (i.e execution of agreement which has been signed and sealed by both parties for good measure).

LTH

nkhoo.com

Why not make public the entire agreement on the MPPP website in line with CAT and Freedom of Information? After all, the project is of public interest.

===

Because the golden son wants to hide something from public.