LAST week, Selangor Dredging Bhd (SDB) announced to Bursa Malaysia that it has entered into an agreement to sell 16 parcels of land in Damansara Heights to a little-known company, Bukit Selesa Development Sdn Bhd (BSDSB), for RM71 million cash.
At first glance, the sale could be a relief for SDB, considering the property developer has been facing hiccups in developing the prime residential land for years.
Nine years ago, SDB had planned to build 21 bungalows priced at RM10 million each — called Damansara 21 — on the site, which is on a hillslope. However, the project was once slapped with a fine, and work was stopped by Dewan Bandaraya Kuala Lumpur (DBKL). Later, the government imposed a freeze on hillslope developments. To make matters worse, residents in the vicinity protested against the project.
Many are curious to find out how BSDSB will resolve the problems faced by SDB and monetise the land after it has bought it.
Given that, it is not difficult to fathom why there are conditions attached to the sale. The agreement is conditional upon BSDSB obtaining an amended development order (DO). The transaction could take up to six years to complete.
To safeguard its interest, BSDSB would only pay a big chunk of the RM63.9 million purchase consideration three months after the day following the expiry of 36 months from the date when the agreement becomes unconditional or the day following the issuance of new titles and getting approval for a building plan for BSDSB’s intended project pursuant to the amended DO.
BSDSB, whose ultimate shareholder is Webcon Sdn Bhd, plans to modify the existing DO and develop a residential project.
Meanwhile, a search on Companies Commission of Malaysia’s website reveals that the directors of BSDSB are Tan Seng Kim, Mohamed Rosli Shahin and Yeow Boon Ban. The company is wholly owned by Webcon Development Sdn Bhd, which, in turn, is wholly owned by Webcon Sdn Bhd (Webcon).
Tan, Mohamed and Yeow are also directors and shareholders of Webcon. Yeow is the largest shareholder with a 38.73% stake, followed by Tan (18.75%), Datuk Chee Yew Fei (16.67%), Cheong Chang Kok (12.5%), Chee Peck Wan (10.35%) and Mohamed (3%).
Webcon could not be reached for comment on the land deal and it did not respond to The Edge’s email.
A spokesperson for SDB, when asked why the company has decided not to go ahead with the project, says, “The company respectfully declines further comment. Please refer to the announcement for information.”
A property player opined that for the price tag, the new owner would need a development that would provide it with returns on his investment.
The original plan to build 16 bungalows, priced at RM10 million each, is considered not commercially viable as the land costs RM71 million.
The property player says one option to maximise returns would be to build condominiums. However, this could mean more money needs to be spent to fortify the site.
“Will the purchaser spend more on piling to strengthen the slope?” he asks, noting such work would push up costs and, hence, a higher selling price for the properties.
He opines that the purchaser has done the right thing by asking for a delayed payment and setting other conditions.
One property observer points out that currently, land parcels in Damansara Heights are being sold at RM500 to RM600 psf, but these are generally flat ground. In comparison, SDB’s parcels are going for RM418.77 psf.
A valuer says SDB’s land is on a very steep slope and as such, the price is reasonable.
He opines that the new owners could look at building terraced houses or semi-detached homes, which bring higher returns.
SDB’s disposal consideration is higher than the combined audited net book value of RM50.07 million and related development expenditure of RM20.83 million. Thereby, it makes a gain of about RM93,900.
The original parcel measures 250,347 sq ft but the area valued is 169,542 sq ft. It is unclear what happened to the remaining 80,805 sq ft. Some reckon that the plot may have been surrendered to the local authority or set aside for roads. Nevertheless, it could be worth RM33.84 million.
To recap, in August 2005, SDB bought 250,347 sq ft of land for RM50.074 million, or RM200 psf. It had planned to develop a gated and guarded enclave comprising luxury bungalows with an estimated gross development value of RM210 million.
In 2008, the project was met with resistance from some quarters in the vicinity following an Aug 27 incident where a retaining wall separating Medan Damansara and the site collapsed.
SDB was fined RM100,000 and issued a stop-work order for flouting certain building rules. But even as SDB was rectifying the problems, a landslide occurred in Bukit Antarabangsa — not too far from the tragic Highland Towers collapse of 1993 — on Dec 6, which saw 14 bungalows destroyed and several people killed. The government immediately issued a freeze on several hillslope developments, including SDB’s.
In November last year, it was reported that SDB had obtained the green light for the project in September 2014 to build 16 bungalows. The company, however, decided to put the project on hold due the challenging economic conditions.
This is not the first time SDB has had dealings with Webcon.
In 2011, SDB had bought a 36,339 sq ft parcel in Hulu Langat, Selangor, for RM31 million from Webcon. Webcon had already obtained a development order to build 540 condo units on the freehold land located in Cheras South. It had earlier entered into an agreement with Syarikat Perumahan Negara Bhd (SPNB) to develop the parcel. However, the deal was later terminated.
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