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Saturday, 13 January 2018 | MYT 12:00 AM

Fluttering about Bank Negara land purchase

THERE has been quite a bit of chatter surrounding Bank Negara’s purchase of 55.79 acres of government land near Bank Negara’s Sasana Kijang complex.

At RM2bil, or RM823 per sq ft (psf), this is viewed as a lot of money for a government agency to fork out when other government land were “sold” to other government entities, not at below market value, but way below market value, previously.

Maybe this is the beginning of government land deals going in different direction, that is, deals being done closer to market value. Or maybe this just a one-off thing.

Because not all information on the deal is available, there has been quite a bit of presumptions on the deal.

Although a press release dated Jan 4 has outlined that the central bank has earmarked the land to consolidate financial and Islamic banking educational centres under one location near the bank, there was this presumption that the bank overpaid the market value many times over for institutional land, which is of lower value than commercial land.

While we know what Bank Negara wants to do with the land, we don’t know what that 55.79 acres is categorised under.

Someone may say this piece of land cannot be compared with Tun Razak Exchange or Bandar Malaysia, both of which are commercial land and which carry higher values.

Only the vendor and buyer knows what the land is categorised under.

However, we do know that it is a single title, a portion of which was leased to Open University Malaysia, International Open College and International University of Malaya-Wales. We also know that pockets of Lot 41, which is the 55.79 acres, was used for staff quarters. Open University will be moving out from that land this year. Prior to this, the same buildings occupied by the educational centres were used by Public Works Department.

Going vertical

The other contention is that the bank does not need 55.79 acres to build a couple of buildings. Given that it is a public entity, it could have gotten that 50 acres by going vertical on five acres, assuming a plot ratio of 10, and it would have gotten that if the bank so wishes.

It could have bought some other parcels for much lower than RM823 psf.

At this point, it is necessary to point out that this transaction is based on a willing buyer and seller.

Bank Negara had expressed its intent to buy Lot 41 in 2016 and a certain price was mentioned. So it is not a deal that was hurriedly put together.

Not all land deals are based on rationality, bare bones valuation and the like.

In 2010, Urusharta Cemerlang Sdn Bhd, a company controlled by property magnate Tan Sri Desmond Lim, purchased 29,127 sq ft of vacant land in Jalan Bukit Bintang in the city where Pavilion Elite is currently located, from Singapore billionaire Kwek Leng Beng, for a record price of RM7,209 per sq ft.

This concept is known as marriage value in land valuation jargon where the buyer is prepared “to pay more than what the land is actually worth” because this second parcel lies next to his first parcel. One may argue, this is the corporate world whereas Lot 41 involves both government parties.

Well, Lot 41 is next to Lot 43, which is Sasana Kijang, a learning centre established by Bank Negara.

Which bring us back to our first point. Maybe the transaction at RM823 psf is the end of transactions where deals are done at below market value, even if it involves government parties. It seems that the Singapore government sells land to government entities involving private valuers. Lot 41 was privately and independently valued. The fact is, the government is a big land owner and it has prerogative to do what it likes as a land owner.