(MAY 8): 1Malaysia Development Berhad’s (1MDB) “sweetheart deal” with Lembaga Tabung Haji (LTH) allowed the debt-laden state investment fund to rake in a profit of RM184 million from the pilgrims’ fund, DAP lawmaker Zairil Khir Johari said today.
The Bukit Bendera MP said LTH overpaid 1MDB by at least RM500 psf for the 0.63ha it allegedly purchased.
“It must be noted that RM2,773 psf is still a very high price for LTH to pay, considering 1MDB bought the land for a mere RM64 psf four years ago in 2011.
“In fact, LTH’s own internal risk assessment report revealed that comparable transactions in the vicinity saw land being sold for between RM649.49 psf and RM2,266.85 psf,” said Zairil in a statement.
“At RM2,773 psf, LTH has paid at least RM500 psf more than other comparable recent transactions. This sweetheart deal has effectively allowed 1MDB to rake in a profit of RM184 million by acting as nothing more than a land broker.”
LTH, a savings fund for Muslims planning pilgrimages to Mecca, yesterday confirmed that it had bought a parcel of land from 1MDB's Tun Razak Exchange (TRX) project in the Kuala Lumpur city centre for RM188.5 million, which it claimed was a “discounted" price.
It planned to build a residential tower at the site, which will be undertaken by LTH subsidiary, TH Properties Sdn Bhd, which has wide experience in property and construction including its 2,071ha Bandar Enstek township located near the Kuala Lumpur International Airport.
But Tabung Haji denied that it had bought a second parcel of land from 1MDB at TRX as alleged in a blog called "The Benchmark" which leaked documents allegedly detailing Tabung Haji’s purchase of two plots of land at 1MDB's Tun Razak Exchange (TRX) project for a total of RM772 million.
Tabung Haji also did not cite the size of its acquisition, even though the anonymous blog claimed it was 0.63ha, or 1.56 acre.
Zairil said today that LTH had also not explained why it insisted on pressing on with the deal despite a “high-risk assessment” by its internal risk management team.
He said the report noted the current lacklustre property sector, softening of real-estate prices in KL, increasing difficulty for buyers to obtain financing, an oversupply of luxury condominiums in the Klang Valley, as well as the generally slow pace of development of the TRX project.
“In fact, the report even stated that LTH would face a reputation risk if it associated itself with 1MDB.
“With so many dissuasive factors, it is alarming that LTH would take on such a high-risk investment, and in doing so potentially place the savings of millions of haj pilgrims in jeopardy.”
Zairil said LTH must justify its investment decision, or risk it being seen as an unwise attempt to bail out 1MDB, which is saddled with RM 42 billion debts.
Yesterday, Tabung Haji chief executive officer (CEO) Datuk Johan Abdullah said that the RM188.5 million paid for the parcel of land in TRX was at a “discounted” price to current market value, and that the land’s value had been appraised by an “independent professional valuer”.
Zerin Properties chief executive officer Previndran Singhe told The Malaysian Insider the RM188.5 million price tag was a "fair price", taking into account the higher plot ratio, nett land area and tax incentives for the TRX project.
Depending on the product, size and quality, he estimated that the potential price of a condo unit in Tabung Haji’s latest acquisition to be "north of RM2,000 psf".
Previndran remained upbeat despite concerns over the softening property market and oversupply of luxury condominiums in the Klang Valley, noting that a property will do well as long as it has the 4Ps – product, price, place and promotion.
"Yes, I think the market can take some more, but the product must be good," he added in a text message. – The Malaysian Insider