Utama EDITORIAL 1MDB 1MDB Myths: Did 1MDB really buy TRX and Sungai Besi land too...

1MDB Myths: Did 1MDB really buy TRX and Sungai Besi land too cheap?

I still laugh whenever certain people on social media or politicians comments on how 1MDB tried to cheat Tabung Haji by selling land at RM2,700psf which they bought for a pittance from the govt.

This appears to be one of the most widely-believed and often repeated propaganda (and frankly, untruth) about 1MDB is that they bought land very cheap from the government in some sort of a sweet-heart deal. This myth also seems to be a major source of the hate for 1MDB.

Not withstanding the fact that 1MDB is 100% government-owned and bought the land from the govt, it can be said to be a left-pocket right pocket deal.
For example:

I have an apple on my left hand and RM50 on my right hand. I completely own my left and right hand – hence my total net worth is RM50 plus an apple. 

Now, I pay RM50 to my left hand and the apple and RM50 is now on my right and left hand respectively – my total net worth is still RM50 plus an apple. 

So, I don’t really understand what sweetheart deal this is since after the transaction, things really remains the same.

So, if things remain the same then why do it using 1MDB?

Well, the govt wanted a focused company to do something different with the land.

So why not ask Sime Darby, SP Setia or some other GLC companies to do this? Or perhaps, Khazanah?

Well firstly, Sime Darby and SP Setia are not entirely govt owned and are listed entities and have significant private ownership – thus selling land at these prices does not make sense and plus, those companies may not have the appetite or in line with their plans to do these projects.

Whereas Khazanah’s 100% owned UEM Land has its hands full with the Iskandar Region.

In any case, the government wanted to do things different – hence 1MDB was asked to undertake this job. If you don’t try new approaches, we would forever have the same-old same old.

Whether this was the right or wrong decision at that time is debatable. Remember that hindsight is 20/20. And you could also have asked the question why Petronas (being an oil company) was tasked to work with a private company to build KLCC when you could have passed it to UDA to develop then.

Many years from now when TRX and Bandar Malaysia are completed and successful, perhaps people would look back and judge that asking 1MDB to build it would also have been the right decision then – much like how people look back favourably on the KLCC project or even the KL Sentral projects.

Okay, enough diversion, Back to the TRX and Sungai Besi land valuations.

 

We start with TRX

Remember when Tun Mahathir wrote this back in April 2015 and we all got really upset and wanted Najib’s blood served on a tray?
  • Purchase of 70 acres of land in Jalan Tun Razak for RM320 million i.e: RM64.00 psf. Land last sold in the area was at RM7,000 psf. 
  • 20. It should be noted that TRX land is close to land recently sold at RM7000.00 psf. Assuming the market price is RM3000.00 psf the true value of this land is 6 billion Ringgit. The Government has therefore lost 5 billion plus because 1MDB paid only RM320 million. 

To put it bluntly, Tun Mahathir essentially lied thru his teeth – just like how he lied that he sacked the Lord President and all supreme court judges because the Lord President complained the Agong’s renovations were too noisy. Or that it only cost Barisan Nasional RM10 million campaign spending for each General Elections (yeah, right). Or that the did not manage to raise a single dollar from Middle Eastern countries to build IIUM (IIUM was mostly funded by the Middle East countries. IIUM even says that in their website).

It is unbelievable that such an experienced leader like him would not have known any better regards how land development is actually priced.

Firstly, the RM7,000psf price that Tun M mentioned is actually RM7,209.80 per sq ft and was for only a small piece of land measuring 29,127 sq ft (compare to 3,049,200 sq ft for TRX’s 70 acres).

This land was located right next to Pavilion KL (between Grand Millenium KL hotel and the Pavilion mall) and was bought by the Pavilion owner from the Hong Leong family in 2010 – breaking all sales records and above market expectations of RM3,000psf. It is likely that if someone else, other than the Pavilion owner bought it, they would not have offered so much.

No other transacted prices for land in Kuala Lumpur have even come close to that price since.

Twenty nine thousand Sq feet of land right next to KL’s most successful and prestigious mall for expansion purposes by Pavilion owner and sitting on an established strip of real estate complete with roads and completed water, electricity, communications and road infrastructure – land which you can immediately start building on straight-away.

And you want to compare to Three Million sq feet of run-down urban land that needs to be completely redeveloped, infrastructure put in place and many years from even able to start building on? Oh please… how to even start comparing?

The TRX land is essentially an urban redevelopment project. What this means is that 1MDB has to do the following to redevelop the entire area:

  • Evict the squatters, pay compensation and provide for alternative housing or replacement premises.

It took 1MDB almost two years to negotiate, settle, compensate and relocate all the squatters (which included the Imbi Palace, government flats and some wet markets) and had to pay more than RM100million in compensation.

  • Demolish the existing structures on the land.
  • Flatten the entire area and start digging.

These are the before and after pictures of that area.

If you use Google Maps to zoom into that area (bottom right image above), you will see it is now essentially flat land with big holes in it. Again, this cost hundreds of millions of ringgit that 1MDB has to pay.

And if you notice the bottom right image again, you will see that a big piece of the land is left untouched as TRX is committed to allocate 20 acres out of the 70 acres as a park. Yes, 20 acres of land that you cannot sell – so how do you even compare to the small 29k land next to pavillion and say the price is the same? You comparing strawberry with durian?

  • Build the common infrastructure for the TRX master development – including building of roads and traffic dispersal tunnels (if not, the entire place would be one massive traffic jam) , underground structures, and the installation of underground power and sewerage utilities, waste-water treatment plant etc.

You think all these don’t cost money? Ask Lim Guan Eng how much does building a tunnel cost (his tunnel project is RM6.3 billion). Who is going to pay? Of course 1MDB pay lah.

All in all, 1MDB has spent and committed to spend billions to get to this stage. Arul Kanda recently revealed “1MDB will spend RM3 billion to upgrade Jalan Tun Razak to build infrastructure and direct connections to the highways – MEX, Smart and so on.”

The individual plot buyers and the govt are not going to be building these roads and tunnels and other infrastructure – 1MDB has to pay for all these.

  • Design and obtain approval for the Masterplan including dividing into individual lots

Big parts of the 70 acre land is also lost here as you have to allow land for open space and roads and other infrastructure – certainly not comparable to the 29k sq feet Pavilion land at RM7k psf which you can fully develop on.

  • Obtain Development orders and approved plot ratios for each lot.

And only after you have spent billions and did all the above then you can move to the final stage, which is:

  • Market and sell the individual plots.

Thus, the actual price of the land before TRX can sell it for the RM2,700psf, RM4,300psf or RM4,700psf at each ready plot is really RM320million + Billions.

Yup, the cost of the TRX land to 1MDB is really RM320million + Billions.

Certainly not as what Tun Mahathir and most people believe – “Buy at RM64.00psf when the land is valued at RM7,000psf and govt lost RM5 billion”.

That’s just stupid. And I really wonder why so many people got cheated so easily.

(by the way, Tabung Haji was given a great deal to buy at RM2,700 psf when other recent transacted deals at TRX was priced at RM4,300psf to RM4,700psf). I wonder who cheated who.

Now we move on to Bandar Malaysia

Again, Tun Mahathir lied through his teeth when he said this:

  • Purchase of 495 acres of land in the former Sungai Besi TUDM airport (now known as Bandar Malaysia) about RM 363.5 million i.e: at RM 91.00 psf. Estimated value RM1,000 psf.  
  • 21. With regard to the Sungai Besi Airport land, 1MDB paid 363.5 million Ringgit for 495 acres – i.e at RM91 psf. Assuming market price for this land is RM1000 psf. the Government lost approximately 20 billion Ringgit.

Firstly, reality check. Have you ever heard of anyone in Malaysia having paid RM20 billion to buy a piece of undeveloped land? No?

Who in Malaysia could even afford RM20 billion to buy a piece of land and at RM1,000 psf for 495 acres?

Let’s compare with similarly large pieces of undeveloped land prices sold by govt in recent years – one piece larger than Bandar Malaysia and one piece smaller.

April 2013 – Selangor Govt sells 474.29 hectares (about 1170 acres) to Tropicana Land at about RM25 psf payable totaling RM1.3b in installments over a staggering twenty years!! This piece of land (previously known as Canal City) is just below Kota Kemuning and besides CyberJaya and serviced by 4 major highways.

Sept 2014 – Penang Govt sells 99 hectares (about 244 acres) of land at Batu Kawan at about RM45psf  totaling RM484 million payable in  installments over a generous 5 years. This piece of land is just right next to the 2nd Penang Bridge.
As you can see the land prices are between RM25 to RM45psf and is much lower than the RM91psf that Tun Mahathir said 1MDB stole Sungai Besi/Bandar Malaysia land at – and 1MDB didn’t get any installment plans from govt either unlike the two other comparison deals.
Already, we can laugh at the RM1,000 psf that Tun Mahathir said it was worth.

And of course after getting the land, 1MDB still had to do what they did with the TRX –  relocate, demolish structures, flatten land, build infrastructure etc before they even can sell the land at values anywhere near the RM1,000psf that Tun M said it should be sold at.

And worse… even before 1MDB could do all those “relocate, demolish structures, flatten land, build infrastructure etc” stuff, the govt imposed another condition on 1MDB before they could even take possession of the land.

1MDB must buy the land for, build and equip eight military facilities for the government first at 1MDB’s cost.
I am sure many of you all did not know this.

1Malaysia Development Bhd (1MDB) has awarded a RM2.1 billion contract to develop eight sites in the relocation of Pangkalan Udara Kuala Lumpur which will be transformed into Bandar Malaysia. 

Lembaga Tabung Angkatan Tentera (LTAT) will undertake the development through its wholly-owned subsidiary Perbadanan Perwira Harta Malaysia (PPHM), 1MDB said in a statement. 

It said that the relocation involves various units of the Royal Malaysian Air Force (RMAF), Royal Artillery Regiment (31 RAD) and the air wing of the Royal Malaysian Police (RMP) from the old Sungai Besi airport. 

PPHM is the turnkey contractor to design and build installations at the eight locations including three new sites – the RMAF base in Sendayan, Negeri Sembilan, the 31 RAD base in Kajang, Selangor and the RMP air wing base in Subang, Selangor. 

The land in Sendayan for the RMAF base and in Subang for the RMP air wing base was recently purchased by 1MDB. 

The strategic development company will also be contributing funds towards the improvement and upgrading of specialised equipment as part of the relocation exercise.

The RM2.1 billion tender to LTAT is on top of the money they spent buying the 400 acres plus in Sendayan and the other pieces of land that 1MDB had to pay to buy and also on top of the RM363.5 million that 1MDB already paid to the govt.

I am not sure which other property company in Malaysia would be willing to pay RM363 million, then pay RM2.1 billion and then pay hundreds of million to buy land and then wait several years for the military to relocated to the new facilities that 1MDB had to buy and pay to build – before they can even start working on the land.

Here are some pictures of the 8 military bases that 1MDB had to build

You think buying land, building and equipping 8 military facilities is cheap?

Thus, the cost of the Bandar Malaysia land to 1MDB is certainly not RM91psf @RM363.5 million.

The true cost is RM363.5 million + hundreds of millions to buy replacement land and RM2.1 billion to build replacement facilities + whatever development and infrastructure cost that comes after that.

SUMMARY

And all the above is just financed by RM1million from the government + 1MDB having to borrow money (and paying interest).

Under Tun M days, this kind of company would probably be given RM5 billion or RM10 billion paid up capital and then asked to go develop the land – no need to worry about repaying back the loan plus interest.

In 1MDB’s case, Najib did it differently and asked 1MDB to be self-sufficient to develop it but this means having to worry about repaying back the loan and interest.

Very different isn’t it? Which model is more responsible?
Okay, great. Now I know what’s the real deal.

So, how come Tun M said the value is RM1,000psf and all the opposition politicians don’t tell me about all these replacement sites and hidden cost etc?

Well, they want you to hate 1MDB and believe there is massive songlap (even though all the auditors could not find any evidence of money missing from 1MDB) and to hate Najib.

To tell you the true story would mean they don’t achieve their common aim to remove Najib as Prime Ministers.

So, they just lie and hide all these stuff from you.
But why didn’t 1MDB and Najib tell us about all these?
Well, they did – numerous times. But no one listened.

Plus, your cybertrooper friends and “independent” media portals such as MalaysiaKini and Malaysian Insider etc don’t really want to carry news that is favourable to the government or contradict the lies that the (now dead) Pakatan politicians spin.

Just like how many of you will probably have never heard of the news of the largest lawsuit damages ever awarded by a court in Malaysia in Oct 2014.

RM557million in damages awarded against one person by a court verdict

 
Yup. I wonder why you have never even heard of the story of the largest damages ever awarded in history against an individual person in Malaysia.
And have you ever heard any PKR or DAP representative comment on this? Strange, isn’t it?
Exit mobile version