The Selangor Menteri Besar Abdul Khalid Ibrahim had once said that the state government would not comment on the questionable valuation of Talam’s RM676 million “bail out” because it had decided to take legal action against MCA.
However, the scandal took a U-turn last week when Khalid broke his silence and said that the acquisition of the questionable lands by state government-linked companies (GLCs) from Menteri Besar Incorporated (MBI) was intended for development.
He said the state stood to gain huge profits if the GLCs developed the land first instead of selling them as it is.
“The value of land is less than the value of development. The state has got enough knowledge on what to develop and enough power to approve the development,” Khalid said in an interview by Malaysiakini on 29 July 2012.
The remarks made by Khalid remind us the story of “Gambler and The Chicken”.
Once upon a time, a gambler always squandered his wife’s money on gambling. Despite being scolded by his wife to stop the bad habits, the gambler thought of many ideas to cheat his wife’s money. One day, he brought a chicken to his wife and told his wife to pay him all family weath for the chicken.
“This chicken is priceless because it can lay eggs. The chicks might have hatched from the eggs and the chicks would become hens, they will each lay eggs and those eggs will hatch and become more hens, which will lay more eggs that will hatch into chicks…therefore, this chicken will bring us great fortune and we can make huge gains”. Of course, the wife was not stupid to believe the gambler for this time. She gave him a slap and divorce with the gambler.
Does the chicken story sound familiar when Khalid used the intended development to justify the questionable valuation of the lands which are partially/fully submerged in water?
Well, Khalid may think that the Government have the power to approve a high-density mixed development project on a football field in Kelana Jaya, and so can approve the likes on land submerged in water.
What he fails to see is that not every land has the potential like the football field in Kelana Jaya, which is in the centre of matured residential and commercial area! While the Selangor MB may have the power to approve any development order but he certainly cannot guarantee buyers and investors for what is developed, unless, of couse, the cash rich GLCs are asked to “participate” again.
Prior to Selangor MB’s defense of the value of the land acquired from Talam based on the concept of gross development value (“GDV”), DAP Tony Pua has told the press that the Selangor government had managed to acquire the 13 parcels of land from Talam Corporation Bhd at a RM9.1 million discount. He said this was based on the difference in a private firm’s valuation of the land, which amounts to RM685 million, against the state’s valuation, which amounts to RM676 million.
While MCA Chua had criticized the move was a bailout and and raised questions on the apparent over-valuation of land acquired particularly, the bestari jaya land and Danau Putra land.
However, a month has passed and the Selangor Government still cannot produce evidence and basis of the alleged State’s valuation which amounts to RM676mil. The question of how the RM676m is arrived at remains unanswered.
A proper valuation and due diligence should be conducted on any land and properties acquired by Selangor State Government and/or Glcs. In this context, even though the acquisition of the land and properties are part of a debt recovery exercise, valuation remains as important as in any other sales and purchase transaction.
Failure to observe the checklist for land acquisition, the implication is serious and the damage could be much bigger than one could imagine than he thinks.
In order to illustrate this point, let’s take a closer look at the Danau Putra land.
We will keep aside Bestari Jaya land pending clarification from Selangor State Government on its basis of offering RM80,000 per acre despite the valuation by Talam’s valuer was at a lower value of RM60,000 per acre.
Danau Putra Land acquisition
The value appraised by Talam’s valuer is RM93.5 million and the encumbrances of the said land is RM35.6 million. Hence, the state government said they got excess of RM57.9 million (IRM93.5 million – RM35.6 million) to contra off against the amount to the state government by Talam.
However, the real market value is only RM30.43 million if based on what people willing to offer at the public auction. This real market value is not enough to cover the encumbrances of RM35.6 million. Hence, the state government actually did not recover any debt but instead assumed net liability (bank borrowings) of RM5.17 million (RM30.43 million – RM35.6 million).
In other words, the state government have foolishly assumed net liability of RM5.17 million bank borrowing and at the same time forgo RM57.9 million debts owing by Talam. In total, the state government has actual loss of RM63.07 million (RM5.17 million + RM57.9 million).
The above shows that the Selangor Government is actually worse off by embarking on the debt recovery exercise. Obviously, the cause for this nightmare is “over-valuation”.
Now, the loss of RM5,170,000 shown above is in the form of immediate cash outflow hidden in the encumbrances taken over by State. There is simply no proper explanation to it whether it is based on the RM9.1 discount as alleged by Tony Pua or the “GDV” concept mentioned by MB.
The State has to use its own resources to pay for the shortfall of RM5,170,000 besides losing the rights to recover any of the debts it set out to recover via contra.
The party who bears the shortfall will be the one who actually takes over the encumbrances either directly or by obtaining a loan to discharge the land from the encumbrances.
It is certainly a nightmare if the same scenario applies to all or most of the other 13 parcel of lands.
Malaysia People just want to know whether Khalid was too generous in accepting the questionable valuation or he is a man who lives in his own fantasy believing the water-lands can become wonderlands one day.