The Edge Weekly 1MDB’s RM1.38 bil Penang land quandary

by **Cals** Sun 21 Sep 2014, 19:11

The Edge Weekly 1MDB’s RM1.38 bil Penang land quandary

Business & Markets 2014

Written by Asiah Yusof of theedgemalaysia.com

Saturday, 20 September 2014 11:18

KUALA LUMPUR (Sept 20): Many tax payers are not waking up to happy news this Saturday morning regarding state-owned 1MDB and its RM1.8 billion land deal in Penang.

In its cover story on the deal, The Edge Malaysia (Sept 22- 28) found that 1MDB had paid far more for the purchase of largely undivided land on the island state when compared with previous valuations.

It also appeared that building affordable homes on the land, reportedly the rationale for the purchase in the first place, would result in further potential losses of hundreds of millions ringgit.

Tracing the deal, the weekly found two groups of vendors for the land sale. The first group are all associated with prominent Penang tycoon Tan Sri Lim Gait Tong.

1MDB did two transactions with Lim’s companies. The first was the purchase of all of Farlim Properties from his holding company Farlim Holding Sdn Bhd, Sari Bunga Holdings Sdn Bhd and Gem Galajaya Sdn Bhd for RM338 million.

In the second deal, 1MDB acquired undivided shares in several plots of land from Farlim Group (which is controlled by Farlim Holding) for RM113 million.

The second vendor was Gerak Indera. According to filings with the Companies Commission of Malaysia (CCM), the shareholders who sold the company to 1MDB are Ng Kok Cheang and Mohammed Zubni Ismail, each holding a 50% stake.

Penang businessman Goh Choon Lye was briefly a director of Gerak Indera from Jan 6 to 29, 1997. Goh’s listed vehicle Penas Corp Bhd collapsed during the 1997/98 Asian financial crisis.

The 51-year-old resurfaced in a big way when he openly campaigned for Barisan Nasional at the last general election and was even described by the media as the adviser to 1MDB on building affordable homes.

Interestingly, Ng, who is also executive director of Multi-Purpose Capital Bhd, used to work for Penas Realty Sdn Bhd.

Gerak Indera owns undivided shares in at least 136 acres or 5.91 million sq ft of land.

When 1MDB disclosed these acquisitions under “significant events subsequent to the reporting period” in its March 31, 2013 accounts released after a year’s delay in April, 2014, it did not state the exact location of the plots of land.

Checks by The Edge revealed the plots are of various sizes, from large to tiny, and that the properties - terraced houses and shophouses - are scattered around Air Itam town.

There are between 1,200 and 1,400 dwellings on them with water, electricity and postal addresses.

What is intriguing is that these plots have multiple owners and although some have a very small share, without their agreement, the other owners cannot do anything on the land unless it is subdivided and issued separate titles.

Interestingly, the vendors - the Farlim group and Gerak Indera - were on opposing sides of legal suits that involved the trustees of some of the land that has now been bought by 1MDB.

Another finding, perhaps alarmingly, is that 1MDB is not registered as a shareholder in MY City Ventures Sdn Bhd - a RM2 paid-up company set up to do the Penang deals.

Filings with the Companies Commission of Malaysia (CCM) indicate that the move started on March 21, 2013, with the setting up of a company, MY City Ventures Sdn Bhd.

At the start, MY City had RM2 paid-up capital and two shareholders and directors ó Shairah Begum Kadar Bashah and Fatimah Sulaiman.

On April 11, 2013, MY City bought another RM2 company - Aluminium Development Co Sdn Bhd (ADCSB) - from 1Malaysia Development Bhd (1MDB).

On April 29, 2013, ADCSB bought Farlim Properties Sdn Bhd from Farlim Holding Sdn Bhd for RM338 million.

On the same day, ADCSB bought Gerak Indera Sdn Bhd for RM930 million.

One month later, on May 22, ADCSB was renamed 1MDB RE (Ayer Itam) Sdn Bhd, presumably to reflect that it is part of 1MDB.

In its 2013 annual accounts, ADCSB said the purchases were funded by direct advances from 1MDB, its ultimate holding company.

ADCSB also stated that MY City was its direct shareholder.

But CCM records as at Sept 17, 2014 -17 months after all these deals were done - show that the shareholders of MY City are still Shairah and Fatimah. And MY Cityís paid-up capital remains at RM2.

This means that legally, Shairah and Fatimah, as shareholders of MY City and not 1MDB are the owners of all the land and properties that were paid for by 1MDB.

Although 1MDB had installed directors from its group of companies as directors in MY City, it does not have a stake in the company.

The question is why has 1MDB not stepped in as a shareholder of MY City? Could it be a simple lapse in administration? Or is there more to it?

1MDB did not respond to questions posed by The Edge.

The thought provoking cover story also carried sidebars on Tan Sri Lim Gait Tong; ground tenants, a group related to a uniquely Penang custom of ground leasing; and whether 1MDB would again delay its FY14 accounts.

The Edge Malaysia Weekly is available at new stands and on subscription to the theedgemalaysia.com.

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