3 lessons from 1MDB’s TRX land sale to Tabung Haji

PETALING JAYA (May 8): Malaysia's wealthy pilgrims’ fund Lembaga Tabung Haji (TH) has confirmed that it bought land for RM188.5 million in the Tun Razak Exchange (TRX) financial district to build a high-end condominium tower.

The purchase was first leaked online two days ago and it took Tabung Haji one day to confirm the purchase, deny another purchase and also lodge a police report that its internal papers have been unlawfully published.

The deal is controversial for, among other things, the vendor is 1MDB Real Estate (1MDB RE), a unit of the government-owned 1Malaysia Development Bhd (1MDB) which is under a government audit for questionable deals in the past and a RM48 billion debt.

Here are the three things we can learn from the revelation and its aftermath.

1 No business property development in TRX yet

Thus far, there has been no announced development project for a business tower in the 28.3ha TRX, which was touted as an international financial hub in Kuala Lumpur. All projects announced have been for residential or lifestyle development and Tabung Haji has denied buying land for a signature tower.

Apart from Tabung Haji's condominium tower, another 6.88ha in TRX is being developed in a joint venture between international developer Lend Lease and 1MDB RE for a Lifestyle Quarter.

Lend Lease has a 60% stake in the joint venture while 1MDB RE holds the remaining stake. It is not known how much the land was priced. With a gross development value of about RM8 billion, that joint venture is a mixed-use project comprising a retail mall, residential towers and a hotel connected to a multi-layer central park and the largest mass rapid transit station in Kuala Lumpur.

The TRX Master Plan includes a total of 25 buildings and more than 21 million square feet of total building gross floor area (GFA) with a development period of 15 years.

Phase 1 is slated for completion in 2017/2018 with four investment grade A office towers, including the Signature Tower, a lifestyle retail mall, up to two five-star hotels, up to five upscale residential towers, and 8.1ha of open spaces.

2 Rising number of leaks from government or government-linked companies

Earlier this year, whistle-blowers revealed that the government had bought a new private jet for government leaders. Putrajaya never revealed its plans despite an announced budget cut due to lower oil revenues.

1MDB's debt woes, too, and alleged suspicious financial dealings were also hidden until revealed by whistleblower site Sarawak Report in the past few months.

And until this week, nobody even knew that Tabung Haji was keen on developing projects in TRX, and not other notable developers, such as S P Setia, EcoWorld or MRCB, which have bought nearby prime land.

Neither did 1MDB announce potential sales in TRX, which has got off to a slow start since it was officially launched in 2012 after a year's delay over the ownership of the government land.

What is significant is that the Lend Lease joint venture was announced and only signed months later, unlike the Tabung Haji purchase.

3 Tabung Haji flip-flop over purchase

Amazingly, Tabung Haji chairman Datuk Seri Abdul Azeez Abdul Rahim had first denied the contents of the blog that revealed the fund's purchase. He admitted to a miscommunication after his officials confirmed they bought land for a condominium tower.

Also amazing considering that Tabung Haji's managing director Tan Sri Ismee Ismail also sits on the 1MDB board. Was there any conflict of interest declared, or did Ismee refrain from taking part in the Tabung Haji purchase decision?

Would a company chairman not be told of a RM188.5 million purchase, or for that matter any other big purchase? By his managing director who is on the 1MDB board?

Or was this such a deep dark secret on a need-to-know basis within Tabung Haji? What does it say of other Tabung Haji purchases then, considering that it is funded by savings made by would-be pilgrims?

To be fair, it would appear that Tabung Haji did get a good price for the TRX land but it is not as good as what 1MDB paid for the land, that is, at RM64 per square feet against the RM2,773 per square feet in the Tabung Haji purchase.

That is a lot of money for what was a few years ago was just government land for civil servants.