Tabung Haji should come clean on land deal with 1MDB, says DAP

PETALING JAYA (May 7): Lembaga Tabung Haji (LTH) chairman Datuk Abdul Azeez Abdul Rahim (pictured, below) should clear the air over reports that the pilgrims’ fund had allegedly bailed out debt-laden 1Malaysia Development Bhd (1MDB) by forking out RM722 million for two plots of land in Kuala Lumpur city centre, said DAP.

DAP assistant national publicity secretary Zairil Khir Johari said reports published by business daily Malaysian Reserve and an anonymous blog showed that LTH planned to buy two pieces of land totalling 2ha in Tun Razak Exchange (TRX), 1MDB's 28ha mixed development project.

Tabung Haji is a government-linked financial organisation that facilitates savings for Muslims planning pilgrimages to Mecca.

Based on information from sources as well as from the blog which had uploaded what it claimed to be internal documents on the deal, Zairil said it appeared the minister in charge of the fund had "fast tracked" the "sweetheart deal".

LTH allegedly paid RM722 million for the two plots or between RM2,860 and RM3,900 psf, which the Bukit Bendera MP described as "unbelievably exorbitant" as 1MDB bought the land for RM64 psf four years ago.

"This issue would not be such a major concern to the public if LTH was a private developer gambling its money on a high-risk project. Unfortunately, LTH, as the Malaysian haj pilgrim funds board, should facilitate and manage the savings of Muslims towards fulfilling of the fifth pillar of Islam – the holy pilgrimage to Mecca. With such a responsibility on its shoulders, investments made by LTH should be shariah-compliant and not overtly risky so as not to jeopardise the savings of millions of pilgrims.

"As my family and I are also depositors with LTH, I am shocked by this unnecessarily high-risk investment decision," he said in a statement today.

"I, therefore, call upon the chairman of LTH, Datuk Abdul Azeez Abdul Rahim to declare the veracity of these allegations. If all that has been said is true, then both Azeez and the minister in charge of LTH, Datuk Seri Jamil Khir Baharom, should resign their posts immediately, as this desperate bailout attempt is nothing less than a betrayal of the trust of Malaysian Muslim pilgrims" he said, noting that the RM722 million was allegedly paid in cash.

Quoting sources, The Malaysian Reserve in its report said LTH had agreed to buy a piece of land to develop a 40-storey apartment block for RM194 million.

The same report also said LTH wanted to develop a "Signature Tower", a 74-storey office building at RM3,900 psf at the second plot of land but the deal had apparently been aborted.

According to the documents published by the anonymous blog, the minister had on April 13 allegedly approved LTH's investment panel’s proposal dated March 30 on the two transactions.

This despite a risk assessment report by the LTH's risk management team on April 9, which considered the project to be "high risk" because of the lacklustre property sector as a result of weakening demand and a challenging macro-economic outlook.

The report also cited difficulties for buyers to obtain financing, post-GST drop in property transactions and oversupply of luxury condominiums in the Klang Valley, the bulk of it located in the city centre where TRX is.

The report also highlighted concerns over TRX's slow pace of development and worries over major global investors from Qatar and Abu Dhabi who were reviewing their investments in
TRX.

The report also cautioned about a potential reputation risk to LTH, given the controversies surrounding 1MDB, including its RM42 billion debts.

Citing examples, the risk assessment report noted a drop in property prices in the area since end of 2013, with comparable transactions showing land being sold for between RM649.49 psf in Jalan Ceylon and RM2,266.85 psf in Jalan Changkat Ceylon.

"As anyone can tell, this is nowhere near the RM2,860 to RM3,900 psf price paid by LTH," Zairil said.

Given such a high-risk scenario, it was doubtful if LTH would be able to recoup its projected investment of RM3.2 billion, which included RM2.4 billion development costs.