CM LGE's FAQ on Skandal Banglo Manggis comprehensively picked apart

My replies (in blue) to CM Lim Guan Eng's Taman Manggis/Bungalow Scandal FAQ post today:

The real story behind the sale of Taman Manggis land and the bungalow house controversy (En/Bm/Cn)

CM LIM GUAN ENG·MONDAY, 11 APRIL 2016

Introduction

UMNO and Barisan Nasional have been making various false accusations against the Penang state government and Chief Minister Lim Guan Eng over the sale of Taman Manggis land and the Chief Minister’s house. Through the BN-controlled mainstream media, the state government and the CM have been continuously attacked with false accusations. The following is the true story behind the issue.

Background of Taman Manggis Land

Taman Manggis land is located at the junction of Jalan Zainal Abidin and Jalan Burmah in George Town, Penang. According to a 2001 layout plan submitted by the National Housing Department (under the Housing Ministry) Taman Manggis was designated "for future development". A declassified Penang state EXCO minutes in 2005 shows that the BN state government had wanted to tender out the land to private developers for mixed-development projects with shop houses and government quarters.


LSS: It was a suggestion brought up for discussion that was not even approved. Even if it was approved, it would still be govt quarters with shops on the ground floor- public housing for civil servants - and not sale to a private company. 

The fact that the DAP Penang Govt was still able to sell this land in 2009 shows that this proposal in 2005 did not proceed.



Another EXCO minutes in 2007 shows that the BN state government rejected the federal government's application to build public housing in Taman Manggis.

LSS: This is a blatant lie. The 2007 letter was from the federal govt to take ownership of the land of the ENTIRE Taman Manggis affordable housing project which is a standard practice by the federal govt - not just the 1.1 acres for phase 2. Please read the letter carefully and don't lie anymore.




In 2010, Kuala Lumpur International Dental Centre (KLIDC) had purchased the 1-acre land which was earmarked as “future development” via open tender to build a hospital to promote medical tourism.

For public and affordable housing, the Penang state government has allocated another 11-acre piece of land in Jalan S.P. Chelliah.

LSS: Again this is incorrect. The houses in the Chelliah project starts at RM72,500 +RM20,000 for a carpark. It is not a direct replacement for the PPRT projects in Taman Manggis Phase 2 where houses would be for rental at RM100 per month or sold for RM40,000 each.

In any case, why should it need to be a replacement when both projects can proceed together? Is it because Penang already have too many affordable homes already?


Open tender means awarding to the company that paid the highest price per square foot. KLIDC was the highest bidder in the open tender exercise.

The Penang State Tender Board that granted the bid to KLIDC is chaired by the Penang State Secretary. The Penang Chief Minister is not a member of the Tender Board.

LSS: It was never an open tender. Please know the difference.

A Request for Proposal (RFP) is an invitation to enter into negotiations. When the successful party is chosen, they have been granted the opportunity to negotiate with the owner/developer for the work, but they have not yet been awarded the contract.

In contrast, a call for tenders (or open tender) is a more formal, detailed process that gives the bidders the assurance that if they put forward the best bid, judged according to the criteria set out in the tender, they must, in accordance with the law, be awarded the job.

A RFP would NOT be an open tender.
A RFQ (Request for Quotation) would be an open tender.

In the Taman Manggis case, it is not an open tender at all. To even come close to anything considered as open, they would also have to open up all the bid proposals - whether the winner or the losers - to the public for scrutiny.

And it is also severely restricted in terms of bidders who have experience running a specialised medical center. (see picture)

At best, the Taman Manggis land project can be called a "Restricted Request for Proposal".


Accusation by BN against the Penang state government on the Taman Manggis land sale is not new. In 2012, Penang UMNO Youth Chief Shaik Hussein Mydin had accused Chief Minister Lim Guan Eng of corrupt practices in relation to the sale of Taman Manggis land to KLIDC, but he later apologised before a High Court Judicial Commissioner in his chambers and withdrew the accusation against Lim Guan Eng in open court.

LSS: In 2012, you had not bought your bungalow from a person who was clearly related to the owner of the KLIDC owner at an unbelievably low price compared to both the JPPH and Market valuation.

You bought your no-swimming point bungalow in July 2015 - which is why this is now a big controversy.


Background of Lim Guan Eng’s Bungalow House


1) In 2008, Phang Li Koon bought a bungalow house built in the 80s at No. 25, Pinhorn Road, Penang for RM 2.5 million.

2) On 1 July 2009, a 3-year tenancy agreement was entered with Chief Minister Lim Guan Eng and signed at RM5,000 rental per month. The tenure was later extended for another 3 years to 30 June 2015.

3) Because the renting of her house to Lim Guan Eng had resulted in BN and BN-friendly NGOs making false allegations against Phang, it had caused her undue stress. Thus, in early 2012, she gave a verbal agreement to CM’s wife, Betty Chew to sell them the house at RM2.8 million. Betty Chew then verbally requested Phang to give her more time to which Phang agreed.

4) In 2014, Lim Guan Eng and Phang executed an agreement dated 23 June 2014 whereby she agreed to grant him a 5-year option tenure to purchase the said property at RM2.8 million with a deposit of RM100,000.

5) Shortly before the extension tenancy expired on 30 June 2015, Phang decided to dispose off the property for good based on the understanding pursuant to the Option Agreement in 2014 pertaining to the agreed sale price of RM2.8 million. Lim financed the purchase through a bank loan of RM2.1 million and RM700,000 cash down payment.

6) Phang felt uneasy about the demonstrations and funeral rites held in front of the house by pro-BN NGOs as well as Molotov cocktail thrown inside. The sale & purchase agreement was signed on 28 July 2015. The valuation for stamp duty by the federal government was for 27 August 2015 and was set at RM4.27 million.

LSS: Firstly, there is evidence that Phang Li Koon had taken a substantial housing loan. She had also admitted she paid for an undisclosed renovation cost.

It is very likely that Miss Phang had foregone property appreciation value worth millions and actually lost her own money in the sale to the CM as the cost of her bank loan interest costs of estimated RM700,000 over the 7 years period, legal cost and renovation cost is unable to be covered by the total rental received and the RM300,000 gross profit.

Secondly It she was concerned about the fengshui and the negative experience, she could have put the property on sale on the market to sell to someone else other than the Chief Minister. It is unlikely that the new purchasers who are not the Chief Minister would be receiving similar demonstrations.

Thirdly, according to Section 165 of the Penal code as administered by MACC, it is expressively stated that it is inappropriate that a public servant (which the CM is) pay grossly undervalued prices for property (which is the case) - especially from a related or interested party.

Phang Li Koon is certainly an interested party as:

1) The KLIDC owner, Datuk Tang had admitted that Phang is his employee and later turned business partner for over 20 years and stated that Phang is in charge of his Penang business. KLIDC had received favorable concessions from the Penang Govt that had increased the value of their land.

2) One of her managers in the companies that she co-owns with Datuk Tang, Winbond Management and Consultancy. was made a Penang City Councillor by the state govt in the year 2014-2015

3) One of the other companies that she co-owns with Datuk Tang, Magnificent Emblem Sdn Bhd is involved in property development and has projects which they applied to the State govt and also bid for a project for workers quarters from the state-owned Penang Development Corp in 2014.

7) There was a claim that the Chief Minister said he did not know the value of his house. That was taken out of context. The Chief Minister was asked what he thought of an allegation by UMNO that his house was worth RM6.5 million. It was in response to that question that he said he did not know.

LSS: So, did you or did you not know the JPPH and/or Market valuation? Please state it directly instead of us hearing all those funny excuses.
In Phang’s statutory declaration dated 22 March 2016, she emphasised that she was not pressured or forced by the CM or any party to sell her house at RM2.8 million, a price she agreed to in 2012 and subsequently confirmed in the option agreement in 2014. She sold it at her own free will on a willing buyer and willing seller basis. There was no special benefit gained by her for selling the house to him.


False accusation 1
On 17 March 2016, UMNO MP for Tasek Gelugor, Shabudin Yahya accused in Parliament that Lim Guan Eng had bought his house cheaply and this was connected to the sale of government land in Taman Manggis to KLIDC.


Facts:
Phang Li Koon has never been a shareholder nor a director of KLIDC. Her companies are not subsidiaries of KLIDC and KLIDC is not a subsidiary of her companies. Phang through a statutory declaration dated 22 March 2016 stated very clearly that she is “not a director nor shareholder of KLIDC…...also not involved in the management of the company.”

LSS: Already answered above. You do not have to directly be a director or own shares in or be involved in the management of the company to be "linked" or "related" to the company.

False Accusation 2:
Gerakan claimed that Taman Manggis land was sold cheap at RM11 million and the land could easily fetch RM22.4 million.

Facts:
The Taman Manggis land was sold to KLIDC in 2010 by open tender for RM11.5 million. Two years later, in 2012, Gerakan claimed that the price was RM22.4 million and agreed to buy at that price. Gerakan created a “special purpose vehicle”, Taman Manggis Phase Two Sdn. Bhd which it claimed had the RM22.4 million from unnamed sources to purchase the said land.


The company then paid 1% earnest deposit of RM224,000.00 to the state government but finally could not raise the 99% balance of the purchase price to pay the remainder RM22 million. The RM224,000.00 deposit paid by the Gerakan-owned company was forfeited by Penang state government at the end of 2012.

So far no one knows what happened to the RM22 million which Gerakan claimed to have raised for the purchase.

LSS: Proof of funds was shown in a bank draft for RM22 million . The reason why the deal did not proceed is that the Penang Govt did not even bother to give the terms of sales or give to Gerakan a sales and purchase agreement - a normal practice that the Penang govt signs with other purchasers of state land - despite Penang Gerakan asking for this numerous times.

Further to this, it was discovered that the land was already charged by KLIDC to a bank in the year 2011. It is possible that the Penang State Govt may have committed fraud by attempting to sell and illegally forfeiting the deposit for the sale of something which does not even belong to them anymore.

Here is proof the the SPECIFIC debenture of the bank loan charged in 2011:

False Accusation 3
Now in 2016, Gerakan claimed that the Taman Manggis land was worth RM45.3 million in 2010 based on private valuation comparisons and that the government lost RM 33.8 million from selling the land at only RM 11.5 million.

Facts:

The federal government's Valuation Department in 2009 valued the Taman Manggis land at RM 8.5 million. It is impossible for the value of the land to increase by 500% in just one year from RM 8.5 million to RM 45.3 million in 2010.

If Gerakan doubts the federal government's valuation then they should question the federal government instead of targeting the state government.

However, the best objective test of valuation is by open tenders. Unlike the federal government that does not practice open tenders, Taman Manggis was sold by open tender to the highest bid, which was RM 11.5 million.

LSS: The valuation by the JPPH would be based on what land conditions was existing then. For example, a piece of land with conditions for agricultural use only or with a low plot ratio would be worth a lot less than a piece of commercial land.

Similarly, a piece of land with a condition for public housing use only or for medical use only would be worth a lot less if the conditions were changed to commercial use.

Until today, the Penang Govt does not show us what conditions were pre-existing on the land at the point of their RM8.5 million valuation.

Had the Penang govt changed the use of land at the point of tender to commercial with a high plot ratio, the JPPH valuation would be a lot higher.

Which is why doubts exist why the land use condition was changed from 100% medical facilities use only to 70% commercial just one year after the tender - significantly increasing the value of the land.

Here are some examples of transactions for land designated as commercial which is very nearby the Taman Manggis land (including one just 300m away) in 2010-2011.

One was an official JPPH record stating that a 20,268 sf piece of land (half parking lot and half occupied by an old two story shop) was sold for RM13.5 million (RM661 psf) just 3 months before KLIDC was awarded the land 47,916sf land for RM11.5 million (RM232 psf) just 300 meters away.

And there is also a 2011 advert for sale for another piece of 22365 sq.ft old bungalow land also along Jalan Burma for RM 894.25 psf at RM20.2 million with the seller clearly saying the value of this is in the conversion to commercial land and not the bungalow.

RM661psf to RM894psf vs RM232psf.

False Accusation 4

The previous BN state government accused the present state government of having sold the land that was planned for low cost housing (PPR) and why the land can be used for hospital but not for PPR.

Facts:
One of the earliest documents is a plan by the National Housing Department (Jabatan Perumahan Negara) in 2001 which marked the Taman Manggis land as “Future development”. In other words, there was no specific low-cost PPR project planned.

However, minutes of Penang State EXCO meeting on 28 September 2005 shows that the BN state government wanted the land tendered out to private developers for a mixed development project with shop houses and government quarters.

According to the 2005 EXCO minutes, the then EXCO from Gerakan, Teng Chang Yeow proposed that the Taman Manggis land be allocated for a mixed development project with “shop houses and government quarters”. The Chief Minister at that time, Koh Tsu Koon agreed and called for the land to be tendered out to private developers so that the state government did not have to bear the high construction cost.

Finally, on 28 March 2007, during an EXCO meeting, the BN state government officially rejected the federal government's application to build public housing in Taman Manggis.

The density for commercial development is always higher compared to housing, not just in Penang but throughout Malaysia. Former federal Minister for Housing and Local Government Chor Chee Heung said the minimum size of land for public housing should be at least 2 acres. Hence, it is normal that commercial development such as hospitals enjoy higher density and height limit not available to housing schemes.

LSS: Already well explained above. As for the development density, did you know that for Phase 1 and Phase 2 of the housing project on 4.9 acres of land, the density would only be 120 units for 1 acre? That is well within allowable limits of public housing and certainly lower than the 160 units per acre that the Penang Govt had recently approved for two condominium blocks City of Dreams project  in Tanjung Pinang.

In any case, the development density is what the Penang State Govt says it is as the Penang Govt, for some unexplained reason, has been unable to gazette and approve the Penang Local Plan yet - despite the plans being 8 years overdue and having promised one almost every year since 2008.

False Accusation 5
UMNO/BN claimed that the DAP-led state government has neglected building public housing in Taman Manggis.


Facts:

There was no plan for public housing in the 1-acre Taman Manggis land even by the previous BN administration. In 2013, an 11-acre land at Jalan SP Chelliah was provided by the present state government to build 2,093 units of affordable housing (following federal government guidelines). It is about 10 times the size of the Taman Manggis land. Construction started in March 2015 and it is already 20% completed as of March 2016.

LSS: I do not have the figures for this but I would like to once again stress that RM72500 +RM20,000 carpark homes at Chelliah is not a direct comparison with RM40,000 homes in Taman Manggis.

False Accusation 6
On 23 March 2016, Minister of Urban Wellbeing, Housing and Local Government, Abdul Rahman Dahlan claimed that there is a sub-sale of the Taman Manggis land by KLIDC to "flip" it to a third party for profit.


Facts:
The land search title shows that the land title is still registered to KLIDC. If there is any attempt to sell the land to a third party, KLIDC has to get consent from the state government. Not only was no such consent given, there was no application by KLIDC to the state government.

LSS: Again you are lying to the rakyat again. Since the year 2014, KLIDC no longer had any employees, any other business or any other assets save for the piece of Taman Manggis land. It was essentially a shell company holding only the land. Rahman Dahlan had accused ans shown the signed and stamped agreements dated November 11, 2015 that was selling 100% of the shares of the two companies holding the land and project at a price of .RM70.6 million.

Such change in share-holdings of the company owning the land would not be reflected in the land titles which would still show the company as being the owner of the land. 

However, since this was a privatization agreement, the Penang govt would have to give approval for the change of shareholder. Whether such approvals were given or not is up to the Penang govt to say.

But the hard facts are these:
- Land previously allocated for public housing had been sold in 2010 in a selective RFP for an undervalued RM11.5m.
- No development on land until today but the project was not cancelled. even though it had broken the concession agreement terms
- There were attempts to flip the land and project for RM70.6m - a gain of RM59.1m

Since there are few vacant commercial lots still available on the main Jalan Burma road which the KLIDC land is, it is hard to find a direct comparison. However, I found another plot of land nearby that was listed not too long ago in Sept 2015.

This plot has many similarity with the KLIDC land but have some key differences.

It is only slightly smaller in size, also zoned as commercial and is also leasehold 99 years. The asking price in Sept 2015 was for RM47 million for 45,193 sq ft or RM1,040 psf.

If the slightly larger 48,438 square feet KLIDC land was to use this price, it would already be worth RM50,347,000.

But this KLIDC land should be worth more compared to the advertised land for the following reasons:
1) The location is better as it is actually fronting the main Jalan Burma road and opposite the New World shopping complex compared to the advertised land which is slightly off the main road.
2) This land has received building approval and the necessary permits and licenses
3) The land had recently been renewed and extended to the maximum 99 years leasehold tenure.
4) The approved plot ration is quite high as it has been approved for at least 24 floors (down from 30 floors previously).

A plot with a higher plot ratio will have greater potential to generate higher value, as it could build more gross floor area to generate higher income. So, investors do not just rely on purchasing a large piece of land but look at the approved plot ration too.

Thus from a property valuation point of view, the KLIDC land is certainly worth more than RM50 million. 

A RM59.1 million profit is for a piece of vacant land that still remains a piece of vacant land is certainly not bad.

But the potential profit is actually much higher as the land was allowed by the state govt to be charged to the bank soon after the RFP was awarded and a full loan of RM11.5m was given. 

So the total cost of ownership would really just be the interest costs for 5 years.

Assuming a 20 year 6% loan for RM11.5m, the interest costs for 5 years would be RM3.77m.

Thus costs could be RM3.77 million which will give you an asset worth RM70.6 million now - an almost 19 times return or a profit of RM66.6 million!

Not a bad piece of private business at the expense of a low-cost housing project affecting 272 poor families.

As proven above, Miss Phang Li Koon's boss certainly got a very good deal courtesy of the Penang State Govt.

False Accusation 7
On 5 April 2016 Abdul Rahman Dahlan changed his stance and now says that it was not the Taman Manggis land which was sold to a third party but rather the owner of KLIDC sold his shares in the company to a third party.

Facts:
Companies Commission of Malaysia (CCM) record shows that there is no change in KLIDC shareholding.

LSS: Rahman Dahlan did not change his stand. It is still a share sales agreement. Many people had laughed when Lim Guan Eng and the Penang EXCO had held up outdated CCM documents from August 2015 to try to prove a share sales agreement dated November 2015

Even MalaysiaKini had pointed this out (and probably laughed at you too) - forcing you to admit that it was a stupid idea to show up outdated CCM documents - especially since updates to CCM may take month and that the share sales would probably have been aborted after BN had exposed this deal.

Please remember that the share sales agreement which are now admitted to have been signed by KLIDC owners had a final payment date of 22nd March 2016 - whereas Tasek Gelugor MP Datuk Shabudin had exposed your undervalued bungalow and Taman Manggis scandal in parliament on 17th March 2016 - meaning that in all probability, BN had stopped this back-door deal from conclusion.

False Accusation 8
Abdul Rahman Dahlan also claimed that the state government has changed the Taman Manggis development to 30% hospital and 70% commercial purpose.

Facts:
The land title clearly states the expressed condition as only for development of hospital (66%) and service suites/hotel (34%) to cater for patients and their families, which can only be rented out and not to be sold.

Penang is currently the top medical tourism destination in Malaysia, catering to about 50% of medical tourists in the whole country. According to the federal government, about 1,000 patients a day come to Penang to seek medical treatments. Hence, there is a need to expand medical tourism facilities in the state.

LSS: It is not a false claim. There are official letters from for this where the state government had changed the land conditions in 2011 - just one year after the tender was awarded. The Company then went ahead with this revised land conditions to apply and got for a loan from AmIslamic Bank.

Please prove that these documents exposed by RPK are false:

Those documents clearly show that the initial land condition was 100% medical facility which was then shockingly changed to 70% commercial. It was only after those documents were exposed at that time did the Penang Govt changed the terms down to 66% medical facility and 33 % hotels/service apartments - still an improvement in commercial value from the original 100% medical facility.

Also, it is incredible that the Penang State Govt had allowed the project to continue to be idle land after almost 6 years. Based on the privatization agreement (leaked by Datuk Huan Cheng Guan in "Why special favours for KLIDC ??"), this project should already have been cancelled a long time ago and the land taken back.

Conclusion

This is clearly an attempt to smear the impeccable reputation and run down the clean administration in Penang which has received praise by the annual Auditor-General Reports for its yearly budget surpluses and reduction in the state debts by 90%. Penang owes the least debt to the federal government, at RM69 million, compared for example, to Pahang's RM2.9 billion. Furthermore, Penang is the only state government in Malaysian history to be praised by Transparency International in 2009 for practicing open tenders.

LSS:  The crux of the matter is that the Penang Chief Minister had bought a house from a person who has employee-boss relations spanning over 20 years with the owner of a company awarded a state project at a price that is shockingly undervalued. 

This already seems to fulfill many conditions of Section 165 of the Penal Code. Whether you have committed any wrong-doing, we will leave it to MACC to finish their investigations.

There are still many unanswered questions of whether there were other business dealings with Phang Li Koon's other companies with the Penang Govt and why was KLIDC Sdn Bhd seemingly getting favorable treatment in terms of changes to land use conditions, no termination of their contract despite not completing their project over 6 years, still allowing KLIDC to receive planning and building approvals even though they no longer had any employees and were technically bankrupt and many more.

But in the meantime, I disagree that the DAP Penang Govt has an impeccable reputation.  Far from it. 

For example, the Penang Govt owes very little to Federal Govt now because the Federal Govt had agreed to take over your water assets in the year 2011 and forgive your debt in return for a 45 years long rental payment of RM15 million a year - it is still a commitment.Essentially, you changed the outstanding bank loan into a hire purchase loan.

Did you know that the year 2009 is 6 years ago now and was way before the above shady Taman Manggis land deal? 

In the year 2010 and 2011, Penang was tops in investment too but have fallen drastically - but you don't mention it. Have a look:

Also, the Penang State Spending has increased up to 400% since 2008 and the Penang Govt had to continue selling whatever land and assets that it has to cover.  Anybody can sell assets to cover out-of-control operational spending - but it is certainly not a sustainable long-term strategy.

Read and dispute this post here of Penang's financial management being an unsustainable bloat.

As for the Taman Manggis land sale scandal,  did you realize that this is just the very tip of the iceberg of land deals done by the Penang State Govt?

What else lies beneath?

-----
PS. I do hope that the Chief Minister does have a read of what I wrote to give him an idea of our concerns.

But I know he won't reply as he had recently said 

"Saya tidak mahu buang masa de­ngan penulis blog. Ini buang masa. Saya nak tangani perkara ini di peringkat menteri. Saya tidak mahu buang masa.  

“Hormatlah saya sebagai Ke­tua Menteri. Saya nak jawapan daripada pihak menteri bukan daripada pihak bukan-bukan,” katanya. 

I am just a pihak bukan-bukan and you are the Chief Minister. I understand why you won't reply. 

But respect should be earned and not demanded.