The Penang Turf Club saga

It is located on prime land which is also the most difficult to develop.

THE weakened ringgit and the Penang Transport Master Plan (PTMP), which has been put in place to ease traffic congestion in the state, have improved the prospects of property development on the island.

Overseas and local investors are showing keen interest to participate in joint-venture projects in Penang.

One of the prime parcels of development land on the island that has attracted interest once more is the Penang Turf Club, where the controversial Penang Global City Centre (PGCC) project was supposed to have been developed.

It is one of the largest piece of prime property and perhaps one of the most difficult to develop because of its controversial past.

In the 2008 general election when the opposition-led government took over Penang, the re-development of the turf club by a private company called Abad Naluri Sdn Bhd was one of the prime issues.

The value of the Penang Turf Club (PTC) land has doubled from RM185 per sq ft since 2011, making it the most expensive prime development land in Penang.

Sold to Berjaya Land at RM185 per sq ft in 2011, the remaining PTC land is estimated to be worth between RM350 and RM400 per sq ft today, if converted with planning approval for residential or mixed development usage.

After selling about 23ha to Berjaya Land, there is 81ha of land left in PTC for development.

Thrills: The turf club is the place where exciting races are held during the weekends.

Assuming the valuers are right in their estimates, at RM350 per sq ft, potential buyers would have to fork out about RM3bil for the land.

In comparison with other prime land in Hong Kong or Singapore, the price is still cheap, especially in light of the weaker ringgit.

However, the cost of developing a mixed-development scheme at the PTC land is much more than what it was when Abad Naluri made the proposal for the PGCC project.

Abad Naluri was an associate company of Equine Capital Bhd, in which the latter used to hold a 25% stake.

The rise in land prices, cost of development and new development charges implemented since 2011, had turned the development of the PTC into an expensive affair.

Whoever wants to take over the remainder of the PTC land would have to arrange a similar deal that Abad Naluri had offered the turf club members in 2004.

It involved building a new equestrian club in Batu Kawan that is estimated to be two to three times more expensive than the RM375mil club proposed by Abad Naluri in 2004.

Depending on the quality of finishes, the development cost for a new turf club in Batu Kawan would be around RM600mil to RM1bil.

CA Lim proprietor Lim Chien Aun says: “The investor will have to build another equestrian club in Batu Kawan or somewhere else in the state and the cost will be between RM600mil and RM1bil, if the new club is similar in size and assuming it has the same facilities as the one proposed by Abad Naluri in 2004.

“The actual cost would also depend on the quality of finishes and components of the race course,” he says.

Then there is the gross development cost, which is about RM300 per sq ft for a project with just 12 units per acre, comprising largely linked houses and other low-rise properties with built-up areas averaging about 3,000 sq ft.

The gross development cost of such a project would be around RM2.3bil, according to a local player in the development and construction industry.

There are also the development and infrastructure contribution charges of RM15 per sq ft, introduced since 2011, which would work out to be around RM115mil and RM139mil for such a scheme.

In 2004, the development cost for a similar project in a prime area would be around RM200 per sq ft, while the development charges for residential properties then were only RM5 per sq ft.

“It is not surprising if the PTMP proposal and the currency situation today has renewed interest in the property, as the price of such a prime property and the cost to develop it overseas would be astronomical,” Raine & Horne Malaysia senior partner Michael Geh said.

The Penang Turf Club’s present building at Batu Gantong.

The PTMP, put in place by the state government to set up an integrated transportation hub which will include an LRT line, trams, and new highways, has boosted the value of prime properties on the island, according to Geh.

Geh says that there aren’t that many properties similar to the PTC land.

“In terms of location, the property is next to Taman Jesselton, a prime and well-known neighbourhood on the island.

“The property has also been gazetted for mixed-development under the Penang Structure Plan 2007,” he says.

Lim of CA Lim says that investor would need to pay the rezoning fee and conversion cost for the property, which is based on the percentage imposed by the local council on the difference between the value of the land before it was rezoned and the value after it has been rezoned.

For the PTC land, Lim says the rezoning fee will be over RM100mil, depending on the percentage imposed by the local council and the state authorities.

“Although the PTC land has been gazetted as mixed-development, it has yet to receive commercial or mixed use status, as no rezoning fees and conversion cost has been paid to the state government,” Lim added.

The PTC has a controversial history. When the members of the turf club were prepared to weigh the best bids for the re-development, among the companies that put in proposals were Berjaya Group and T Ananda Krishnan’s Usaha Tegas Group. Abad Naluri, which has Datuk Patrick Lim as a prime mover, upstaged the other players.

In 2002, Abad Naluri, an associate of Equine Capital Bhd, proposed to purchase the 104ha of the PTC for RM488mil.

Under the agreement, Abad Naluri is required to build a new turf club in Batu Kawan, estimated to cost about RM375mil, as a part payment in kind for PTC.

The balance of RM103mil is to be paid to PTC, when the new race course is completed in 2008. A deposit was paid to the turf club.

In 2007, the RM25bil PGCC project was launched by then Prime Minister Tun Abdullah Ahmad Badawi.

The mammoth scheme was designed to accommodate a retail complex, convention centre, a performing arts centre, condominium towers, hotels, serviced apartments, and offices.

When the new state government took over in March 2008, it quickly announced that the PGCC project could not proceed, as no approval from the local authorities had been given.

In October 2008, Equine sold its entire 25% stake in Abad Naluri to Kiara Ikhtisas Sdn Bhd for RM2mil.

It is located on prime land which is also the most difficult to develop - By David Tan (The Star)

No comments