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 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.
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.