Aspen Group to focus on affordable housing

GEORGE TOWN: Affordable housing, widely sought after by the growing middle-income group, has led local developer Aspen Group to launch the first affordable development project to cater to this community.

Its chief executive officer Datuk Murly Manokharan said unlike other developers that incorporate low or low-medium cost homes within their projects to fulfil the quota, Aspen was the first to focus on only affordable homes.

“As a business entity, we have been told that there was a variety of pricing for affordable homes. It was either RM500,000 or RM400,000. 

“We see RM300,000 as affordable and have worked with the state to achieve this. We were not asked by the state to build these homes, but we see this as a necessity.

“It does not bring us huge returns but if planned well and with the right landbank, we can achieve returns according to the economies of scale,” he said.

He added that the company is also looking at making affordable homes its core business.

“There is a huge demand for this sector. Though we are new and small, we have no commitments to shareholders. We are happy with smaller profit margins.

“This is a deliberate business model. We are looking at a gross development profit of RM400 million,” he said, adding that the company would utilise Singapore’s Housing and Developmet Board (HDB) model with further fine-tuning.

He said a 0.6km road from the present Mount Erskine market would be built as an alternative access road connecting its development.

The project called Tri-Pinnacle on Lebuhraya Halia, Tanjung Tokong will feature 390 low medium cost units of 650 sq feet priced at RM72,500 each and 859 units of affordable units of 800 sq feet costing RM299,000 each.

The property to be sited on a 4ha piece of  land behind The Peak development by Ivory Property would begin in the third quarter of the year with a RM95.5 million Islamic financial facility from the Malaysian Building Society Berhad (MBSB).

Established in 2013, Aspen has projects with a gross development value of RM8 billion that would be developed over 10 years including its Vision City in Batu Kawan that is anchored by Swedish chainstore, Ikea.

Murly said Aspen aims to change the perception that low medium cost units are plagued with problems.

“A lot of effort has been put into the design to ensure internal and external qualities are met, including facilities, making it similar to the condominiums one would find in town.

“We are also looking into upgrading the low medium cost in terms of design and outlook, and there is the cross subsidy element between this and affordable units,” he said.

Speaking at a press conference after the signing ceremony between Aspen and MBSB, Murly said in order to reduce the building cost, there would only be one category for low medium cost and affordable units, respectively.

Asked if there were any incentives by the state for carrying out a purely affordable housing development, Murly said speedy approvals were the only incentive.

The units are available to those registered with the state’s affordable housing eligibility board, he said, adding that there were 30,000 people on the state’s list.

“There is only so much the state can do on its own and that is why they asked private developers to help,” he said.

Meanwhile, MBSB president and chief executive officer Datuk Ahmad Zaini Othman said loan packages would be made attractive for buyers but they are free to seek their own financial arrangements.

“We are mindful that these are affordable houses so the package ought to be competitive and not be too pricey and we will put in more protection such as insurance schemes,” he said.

For more stories, go to www.fz.com, the website for freedom of expression and fairness in articulation.

This article first appeared in The Edge Financial Daily, on May 29, 2014.

Leave conveyancing to lawyers

THE National House Buyers’ Association (HBA) would gladly defend purchasers’ rights against lawyers but is unable to uphold Datuk Zaid Ibrahim’s concern for them. I am referring to his article in The Star (May 5) titled: End the conveyancing monopoly.

First of all, he says that the conveyancing fee paid by purchasers to their solicitors, based on the scale set out in the Solicitors’ Remuneration Order (SRO), is too high for the routine, mechanical work that they do.

Admittedly, the monotonous work is not very difficult compared to litigation. But the fee is not for the work of the conveyancing solicitor but for the liability he or she bears. The fee is based on the value of the property, hence, it varies.

If the transaction fails because of the neglect of the solicitor, the damages recoverable from the Malaysian solicitor would be calculated, like the fee, on the basis of the value of the property in question.

English practice

No doubt the scaled fee has been abolished in England and solicitors have lost their monopoly of such work.

This happened as a consequence of the introduction of the registration of titles system replacing the titles deeds system in respect of residential properties in England. Before this, the English solicitor had a number of responsibilities: creating the title deeds; keeping them safe in his office; and, most importantly, being able to vouch to a future purchaser that the property is indeed safe to buy.

These functions have now been taken over by the state in England and in Malaysia much earlier. But the responsibility is still that of the lawyer.

When it was introduced in England, the scaled fee was also intended by society to serve as a subsidy to lawyers for doing unprofitable work; litigation for the poor. With the abolition of scaled fees in England, the state has had to fund legal aid. In England, lawyers are paid by the state but not in Malaysia.

These payments by the state have become a constant point of attrition between the state and the Bar in England because of the ballooning financial allocation that has to be made every year.

Malaysian practice

In Malaysia, volunteer lawyers of the Malaysian Bar’s legal aid service receive not a penny from the state but pittance from the Legal Aid Fund.

This is the one important aspect in which the Malaysian lawyer bears a greater responsibility for the public, in exchange for retaining scaled fees, than the English solicitor. The Malaysian lawyer is able to observe the “cab-rank rule” better (Rule 2 Practice and Etiquette Rules 1978).

The “cab-rank rule” holds that a lawyer must be available to any client who requires his services, like taxis waiting in rank; the taxi driver has no choice but to accept the passenger who wants him; subject to certain conditions, most importantly, he is too poor to afford the services of a lawyer

As a fused profession – advocates and solicitors – in Malaysia, lawyers are able to observe the “cab-rank rule” in litigation and in non-litigation matters.

The English solicitor does not have to observe this rule at all; only barristers do and only with respect to litigation in higher levels of court. The Malaysian lawyer handles both conveyancing and litigation at all levels of court.

In addition, Malaysian lawyers pay an annual contribution, whether they earn conveyancing fees or not, to the Legal Aid Fund operated by the Malaysian Bar.

Discounted legal fees

We do acknowledge that the amount of work that has to be done should be, and is, taken into account in the scaled fees. However, in a case where the purchase transaction is governed by the Housing Development (Control & Licensing) Act, 1996 (HDA transaction), or where a loan is obtained to finance a HDA transaction, a permitted lower scale of fees will apply – to as low as 35%. (See Table 2)

Such discounted legal fees are certainly to the benefit of purchasers. Regardless that the said sale & purchase agreement is in statutory form, professional insurance still have to be purchased by lawyers to cover all circumstances.

To my mind, the scaled fees work better for the lower income group. Without the scaled fees, I think lawyers will likely charge more for lower-end properties because the amount of work involved is often the same as higher-end properties.

In the case of purchase of a low-cost house, it entails having to apply for the formal consent of the state authorities, land office and sometimes the local council on top of having to recite the status of the property in the sale & purchase contract – that’s more tedious work than a higher-end freehold property.

With the compulsory discount, I do not think house buyers for low- and medium-cost houses are overcharged.

Solicitors’ Remuneration Order (SRO)

The Solicitors’ Remuneration Order 2005 (the SRO 2005) came into force on Jan 1, 2006. It was gazetted on Dec 31, 2005. Check out the SRO 2005 athttp://www.hba.org.my/faq/solicitor/SolicitorsRemunerationOrder2006.pdf

New scale fees are prevalent: Some legal fees are of a fixed sum (fixed fee) and others are fixed by means of a scale (scale fee).

For ease of reference, a brief table of the current scale fees for transfers and charges is worked out as follows. (See Table 1)

The SRO was drawn up by the Solicitors’ Costs Committee comprising representatives of the judiciary, the Attorney-General – who are there to protect public interest – and the Bar Council under the Legal Profession Act.

Monopoly or encroachment

We would also like readers to know that lawyers do want to keep their monopoly (and scaled fees) from encroachment by other professionals or upstart quacks. But they also observe the same restrictions against themselves; no encroachment on the turfs of others; a lawyer is required to earn his/her living only by lawyering; not by moonlighting; Rule 44 Practice and Etiquette Rules 1978.

By concentrating on legal practice to earn their living they are expected to and they do become better and better at it for the public benefit ultimately.

As to the monopoly mentioned in the article, who should we allow to do conveyancing work if not the lawyers? The “conveyancers” in the UK (those allowed to do conveyancing, other than solicitors) have to sit for exams rather like the solicitors to be qualified.

I don’t know how they are regulated but I would think that it has to be a regulated body because stakeholders’ monies are involved.

Chang Kim Loong is the honorary secretary-general of the National House Buyers Association. - The Star

Conglomerate Sime to remain largest shareholder of E&O

KUALA LUMPUR: Sime Darby Bhd will retain its remaining 22% stake in niche property developer Eastern & Oriental Bhd (E&O) after selling a 9.9% stake toMorning Crest Sdn Bhd, a company substantially held by Datuk Terry Tham Ka Hon.

Sime Darby group chief financial officer Tong Poh Keow said this meant Sime Darby would be E&O’s largest shareholder.

“Sime will have an estimated gain of RM56mil from the disposal of 110 million shares for RM319mil, or RM2.90 per share.

“This gain will only be recognised after full payment has been made with its first 10% payable on signing the sale and purchase agreement,” she told reporters at Sime Darby’s announcement of its third quarter financial year 2013/2014 results here.

Tham, who is also E&O managing director, was among three parties who collectively sold a 30% equity interest in E&O to Sime Darby for RM766mil between 2011 and 2013. Tham sold a 12.2% stake then. The other two parties were Tan Sri Wan Azmi Wan Hamzah and Singapore-based GK Goh Holdings Ltd.

Tong said the group bought the stake earlier because E&O was a niche developer operating in areas where Sime would like to have a foothold, namely Penang andIskandar Malaysia in Johor.

She said while “that strategy has not changed”, the group considered this “as a strategic disposal”.

Tong said E&O, which is known for its Seri Tanjung Pinang development in Penang, had now arrived at a “critical” stage of its development which involved land reclamation.

E&O is in the final stages of getting the necessary approvals for Seri Tanjung Pinang phase two after receiving the Federal Department of Environment’s conditional approval last month.

The next step would be to apply to the Penang state government to endorse phase two of its master plan. It hopes to get state approval by the fourth quarter of this year.

Tong said there was “clear communication” from the E&O management team and “this was how we evaluated this decision.” - The Star

Terry Tham says he is in E&O for the long haul

PETALING JAYA: The managing director (MD) of Eastern & Oriental Bhd (E&O) Datuk Terry Tham Ka Hon (insert pic) has said that buying the shares of the company at a premium to the market price was firm indication of his commitment to see through the progress of the property developer.

He hopes that the purchase of the 110 million shares would dispel the notion that he would no longer be part and parcel of the company when his term as MD comes under review in August.

“I’m here for the long haul. I am not about to retire. I will also be giving an option to my top management to purchase an equity stake in the company to enjoy the fruits of its success,” told StarBiz in an interview.

The 61-year-old Tham entered into an agreement to acquire the block at RM2.90 per share from Sime Darby Bhd, a transaction that will cost him RM319mil, on Wednesday.

The announcement to the stock exchange stated that Tham had the option of inviting the senior management of E&O to participate in the purchase of the block of shares that make up 9.9% of the property developer.

Tham said the core team in E&O comprised 16 people who have been with him for many years and have played a role in building up the company from an entity with a market capitalisation of RM150mil to RM3bil over the years.

“The team has been intact since I sold down (in 2011) … now they will have an opportunity to make money as well when the company makes money. It would be a shame to build this team and see them leave,” he said.

In August 2011, Tham and two other major substantial shareholders collectively sold 30% of E&O to Sime Darby at RM2.30 per share. The other two shareholders in the deal that drew criticism were Tan Sri Wan Azmi Wan Hamzah and GK Goh Holdings Ltd of Singapore.

Sime Darby purchased the 30% block at RM2.30 when the market price was less than RM1.70.

The transaction drew criticism on several fronts. It ranged from Sime Darby allegedly circumventing a mandatory general offer (MGO) on E&O to allowing Tham and the other two shareholders to cash out at a price that was a premium to the market.

The pricking issue of an MGO came about because Tham would continue to remain as MD of E&O with 5.1% after the entry of Sime Darby. Hence, Sime Darby and Tham were perceived to be parties acting in concert.

However, the Securities Commission, after much deliberation ruled in October 2011 that Sime Darby and Tham were not parties acting in concert and that the conglomerate need not undertake an MGO.

An actuary by qualification who joined the construction industry by accident, Tham said that he had approached Sime Darby to purchase the stake in view of his three-year term as MD was falling due in August this year.

“I had to make a decision. I believe the company is attractive. So, why not put in more money in an investment that I believe in?” said Tham.

E&O has carved a niche for itself as a developer of high-end properties. The jewel in its portfolio of assets is the Seri Tanjung Pinang project on the island of Penang that is built on reclaimed land.

After the success of the first phase of the project, the company is working on starting its second phase by early next year, assuming all approvals are obtained.

The second phase involves reclaiming 760 acres, of which some 60 acres are to be given to the Penang state government.

Apart from the 60 acres, as part of the agreement to the land reclamation concession, E&O is also to claim 130 acres in Gurney Drive for the state government.

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No extra payment for condo buyers

PUTRAJAYA: Some 50 house buyers can breathe easy now that the Federal Court has put to rest a case where a property development company was demanding they pay extra for their units, resultant from the difference in the actual built-up area and the (estimated) area.

A five-member panel chaired by Court of Appeal president Justice Md Raus Sharif unanimously denied Ken Property Sdn Bhd leave to appeal against a prior court order that 57 residents of Ken Damansara Condominium do not have to pay the adjusted price demanded by the developer upon issuance of their strata titles.

Lawyers for the buyers disclosed yesterday the decision made on May 20.

The decision put an end to Ken Property’s attempt to claim the difference in purchase price based on the difference in the actual built-up area and the (estimated) area stated in the statutory Sale and Purchase Agreement (SPA) under Schedule H of the Housing Development (Control and Licensing) Act 1966.

It was reported that the claims against the 57 unit owners ranged between RM2,000 and RM10,000.

The panel – whose other members were Chief Judge of Sabah and Sarawak Justice Richard Malanjum and Justices Suriyadi Halim Omar, Zaleha Zahari and Ramly Ali – also ordered Ken Holdings to pay the residents RM10,000 in costs.

The buyers were represented by K. Shan­muga and Azira Aziz while Datuk Loh Siew Cheang, Brian Foong and Eolanda Yeo appeared for Ken Property.

On March 17, 2011, residents of Ken Damansara filed a suit against Ken Property for a court declaration that they need not pay an adjusted price after having agreed to a lower amount in a prior SPA.

They argued that since there was no difference between the floor area stated in the strata title and the building plan, no question of adjusted prices arises.

On June 14, 2013, the Shah Alam High Court ruled in favour of the residents, saying the Adjusted Purchase Price is to be measured based on the difference between the approved building plans and strata title, without reference to the area stated in the recital of the SPA.

Justice Dr Prasad Sandosham Abraham also ordered Ken Property to refund money paid by 31 plaintiffs from 22 units with regard to the adjusted price.

The judge further ordered the defendant to execute the Memorandum of Transfer to the 57 plaintiffs (who own the 40 condominium units) and to pay RM40,000 in costs.

Ken Property attempted to reverse this decision in the Court of Appeal, but had its application denied with RM15,000 in costs on Nov 20 last year. - The Star

Eastern and Oriental targets RM1.2b sales

KUALA LUMPUR: Eastern & Oriental Bhd (E&O) is targeting to boost its FY15 sales to RM1.2bil, of which London would contribute RM280mil, Penang RM380mil, the Klang Valley RM60mil and Johor RM480mil, says CIMB Equities Research.

 It said on Monday that at a semi-annual analyst briefing, the deputy managing director Eric Chan reassured analysts that the three-year combined net profit target of RM450mil to RM500mil "is still very much intact despite FY14's subdued earnings".

 It said the results for the financial year ended March 31, 2014 were above expectations as net profit exceeded its forecast by 7%.

 CIMB Research said this was due to strong recognition of profits from the Penang and Kuala Lumpur projects as management focused on accelerating construction works.

 "E&O proposed a final single-tier dividend of three sen, which was below our forecast of 3.75 sen. We make no changes to our FY15/16 dividend forecast as we expect a rebound in earnings to boost dividends," it said.

 The research house pointed out E&O sold RM730mil worth of properties in FY14, up 38% on-year but 27% below the original target of RM1bil. Some 51% of its new sales were from Penang and 49% from Kuala Lumpur.

 However, the fourth quarter sales fell 26% on-quarter but rose 6% on-year to RM190mil. The relatively weak sales were because E&O failed to launch the last block of the Penang condos or Medini due to tougher property market conditions and slow approvals.

 "This is a disappointment. Unbilled sales increased 25% to RM900mil," it said. - The Star

Errant developers face jail and RM500,000 fine

PETALING JAYA: Errant housing developers can now be hit with hefty fines and jail terms if they abandon their projects.

Under the amendments to the National Housing Development (Control and Licensing) Act 1966, which would take effect from June, developers of abandoned projects may be fined RM500,000 and jailed for up to three years.

The changes also enable house buyers to terminate sale and purchase agreements with developers if there was no progress for six consecutive months or more and seek a refund of deposits within 30 days.

House Buyers Association secretary-general Chang Kim Loong said the changes offered house buyers more legal safeguards against errant housing developers.

He said it was a reflection of the Government’s concern for house buyers’ rights and a move to ensure that developers kept to their obligation of completing projects.

He commended former Urban Wellbeing, Housing and Local Government Minister Datuk Seri Chor Chee Heung for helping to pave the way for the amendments in 2010.

“The pertinent changes include making errant developers criminally liable by meting out jail sentences upon conviction.

“The new laws also enforces liquidators, as de-facto developers, to abide by the Act,” he said.

However, Chan said changes should also be made to other laws to further streamline the construction industry.

He said among the laws being reviewed where those pertaining to housing developers regulations and sale and purchase agreements under Schedule (G,H,I,J) together with the Strata Management Act, Strata Title Act and Strata Tribunal Act.

“Since all these laws relate to the welfare of house buyers and cross-reference each other, they should be launched simultaneously to avoid potential conflicting legal views,” he said.

Chan said the drafting process involving the amendments were nearing completion and that the changes were expected to be announced by the ministry.

On April 3, Deputy Urban Wellbeing, Housing and Local Government Minister Datuk Halimah Mohd Sadique announced to the Dewan Rakyat that the amendments to the Housing Development (Control and Licensing) would come into effect on June 1.

From 2009 to Feb 28 this year, the ministry had classified 206 housing projects as abandoned.

Out of these, 149 had since been revived with 22,868 homes built. - The Star

Good news for housebuyers

THE Federal Government has bought 80.94ha of land in Teluk Bahang for the 1Malaysia People’s Housing Scheme (PR1MA), said Datuk Shah Headan Ayoob Hussain Shah (BN -Teluk Bahang).

He said he had checked with PR1MA Corporation Malaysia which confirmed that the land had been bought for the Federal Government’s initiative for affordable housing.

He said this is response to a question raised by Jagdeep Singh Deo (DAP - Dato Keramat) during the latter’s winding-up speech at the state assembly yesterday.

Jagdeep had asked how many of the 133,000 PR1MA units to be built nationwide would be built in Penang.

In response to Shah Headan’s reply, Jagdeep said he was happy to receive the news that a piece of land had been bought for the housing scheme.

“Hopefully by next month, I can get a positive reply that PR1MA will be carried out in Penang, where the project will be carried out and the timeline for the project.

“We will try to assist to expedite the project because this type of housing is important,” said Jagdeep who is the state Housing, Town and Planning Committee chairman.

In his winding-up speech earlier, Jagdeep had also said that applicants of low-cost, low medium-cost and affordable houses were facing difficulty in obtaining bank loans.

He said the rejection rate was 50%, adding those who were successful in obtaining the loans were slapped with high interest rates.

Jagdeep also said applicants for public housing units in Penang must be at least 21 years old and a voter in the state.

He said this was a new condition set by the Selection Process Enhancement Committee.- The Star

Property buyers may be affected by rate hike

LIM Lian Hong, executive director of Raine & Horne International, defines “living dangerously” as when one overcommits and finds oneself in the red once too often. It also means not being able to meet a financial emergency.

Being a property professional, he explains “living dangerously” against a property sector backdrop. He says there is the tendency to commit oneself to a property, or a few properties, when prices are on an uptrend.

Since early 2009 and until last year, the interest in property investment has been tremendous. Young people aged 25 onwards had piled onto the property market.

Lim says there are two fundamentals about a property purchase. It provides the owner with a rental income. It offers capital appreciation. There two factors interplay against each other, says Lim.

In Malaysia, the pursuit for capital appreciation far outweighs that of rental return.

Over the past several years, Lim has overheard the comment time and again that property prices will “surely go up”. So everybody jumps on the bandwagon.

“Because of the high prices today, the rental income may not be that attractive. But they say, ‘never mind.’ This means capital appreciation is a more powerful incentive,” says Lim.

Property prices in the Kuala Lumpur City Centre (KLCC) was about RM1,000 per sq ft about 10 years ago. The question to him was: “Is it worth buying?”

His answer: “How much return do you want?”

If the unit is 2,000 sq ft, the price of the property will be RM2mil. In order to get 5% gross, you need to get a rental of slightly more than RM8,300 a month for the investment to be viable. At that time, KLCC did not offer that kind of yield.

If they were able to get 50% or more of what they had put in – their equity, so to speak – at the end of the investment, they do not mind the small return because the amount they expect at the end of the investment is expected to outweigh their “initial losses”.

The scenario today is different. Prices have spiked a lot.

“If it is to have a roof over one’s head, one will have to buy if one can afford it.

“But if one were to buy with the hope of further capital appreciation, one may think twice.

“If the property is RM500,000 and a RM200,000 down payment is made and RM300,000 is in the form of a loan, your commitment or responsibility is RM500,000, not RM300,000 because the total price of the unit is RM500,000, and also because the life span of the loan is X number of years,” says Lim.

Of late, there has been renderings that Bank Negara may increase the overnight policy rate (OPR) by 25 basis points (bp) in July. If this becomes a reality, the base lending rate (BLR) on which mortgage rates are based will go up.

VPC Realtors (KL) Sdn Bhd director James Wong is of the view that important though the interest rate and returns may be, it is demand and supply that determine prices.

Wong says an increase of 0.25% in the BLR will not have a significant impact on borrowers for low cost and affordable housing priced between RM45,000 and RM450,000.

There will only be a marginal increase of RM5 to RM53 per month for loan repayment compared to the current interest rate for a 30-year loan tenure with a 20:80 loan margin, he says.

“As for high-end residential properties, most buyers are financially secure. They are either a cash buyer or they buy with minimum loan margin. Hence, an increase of 0.25% per annum will be insignificant,” says Wong.

As for the speculators, Wong says some would have unloaded their purchases after the introduction of anti-speculative measures in the last Budget 2014.

“Those who bought properties to flip, if they are unable to service the loan, they will be forced to sell. But it will not be as easy as before due to the real property gains tax,” says Wong.

While the anticipated increase in BLR may result in buyers taking a wait-and-see stand, it is the loan tenure and the subsequent rise in monthly repayments that will impact borrowers significantly, although thus far, the loan tenure is expected to be unchanged.

If the property is priced at RM400,000, the buyer will have to fork out at least RM120,000 as down payment at a 30:70 loan margin, excluding legal fees and stamp duty compared with a RM80,000 down payment if it were a 20:80 loan margin.

“Young professionals between 25 and 35 years may not be able to afford to buy a house even at RM400,000 if Bank Negara restricts the borrowing guidelines by reducing the loan margin,” says Wong.

The current monthly repayment for a RM450,000 property with loan margin of 20:80 is RM1,760 for 30 years (loan amount: RM360,000). If the loan tenure is reduced to 20 years, the new monthly repayment will be RM2,220.

Says Wong: “This is an increase of 26% of the lending cost”.

On the effect of the anticipated increase in interest rates on rent, Wong says there is no effect at all. Housing rental, he says, is mainly determined by supply and demand. - The Star

E&O ups the game with Seri Tanjung Pinang project

EASTERN and Oriental Bhd’s (E&O) development of the Seri Tanjung Pinang project showcases that Malaysian developers have what it takes to undertake unique and challenging projects on reclaimed land in the likes of Dubai’s Palm Jumeirah.

The land for the two phases of Seri Tanjung Pinang (STP) has to be reclaimed from the sea off the north-east coast of Tanjung Tokong in Penang. The reclamation for the 240-acre phase one incurred some RM500mil and a development cost of a further RM1bil, for an after tax margin of around 15%.

Construction of the bigger scale phase two comprising two islands of 760 acres and a further 131 acres that will be surrendered to the state government for development of a new expressway, a new Gurney Drive promenade and a parallel linear park for the public, will take place after a decade from the start of STP phase one.

Given its more massive scale in deeper waters and against a creeping inflation backdrop, the total reclamation and development cost for STP phase two will undoubtedly be much higher.

In a recent interview with StarBiz in Penang, E&O managing director Datuk Terry Tham stresses E&O’s commitment to the project and that the company is expending substantial resources, time and effort to ensure the project sets a new benchmark in seafront development and waterfront living that will make Penang and the country proud.

From the proposed masterplan of STP phase two, the project will further etch the E&O brand name as one of the leading names in property development and hospitality locally and internationally.

“Through STP phase one, we have demonstrated that we are not afraid to take on challenges such as the revival of a project that was abandoned for many years. Even during testing economic conditions, E&O has proven that its team is innovative and creative in how we designed and developed the project into a unique masterplanned seafront development that is now a thriving community,” Tham says with pride.

He stresses that E&O is ready to comply by all conditions set by the authorities, which include a detailed environmental impact assessment (DEIA) study that has received approval with conditions.

“As a responsible developer, E&O has appointed Malaysian consultants familiar with local conditions as well as reputable international consultants with the experience and expertise of reclamation projects worldwide, to verify and help monitor that each stage of reclamation work is consistent with international standards, irrespective of whether it is imposed on us. In short, if the authorities state a requirement, E&O will readily comply. Other reasonable and justifiable concerns would also be addressed seriously and responsibly.”

Tham says as phase one kicked off in 1995 at a difficult economic time and with a high initial acquisition and investment outlay, the company had adopted a more prudent and proven development model that delivered practical and liveable homes.

“For STP phase two, we have engaged leading and renowned international and local architects and planners to create a development concept that will raise the current benchmark even further,” he says.

Reclamation technologies

Tham says reclamation work for the STP phase one and Dubai’s Palm Jumeirah both employed one of the most extensively used reclamation technologies in the world, the Sand Replacement Method, which was also used for Singapore’s Tuas Biomedical Park 2, the Disney Theme Park in Hong Kong and the Betuweroute Railway in the Netherlands.

E&O is in the final stages of getting the necessary approvals for the STP phase two project after receiving the Federal Department of Environment’s (DOE) approval with conditions for the DEIA study on April 10 this year.

The company had submitted the necessary applications to the Penang state government for its endorsement of the phase two masterplan and hopes to obtain the state’s approval by the fourth quarter of this year. Reclamation work is to take three to five years and the development of STP phase two will take up to 15 years.

If all goes well, the materialisation of the STP project is expected to provide many years of good earnings streams to E&O and its shareholders, notably the major shareholder Sime Darby Bhd which acquired a block of 30% in E&O in 2011.

Sime Darby bought up to 273 million E&O shares and 60 million irredeemable convertible secure loan stocks for a total of RM766mil from Tham, Tan Sri Wan Azmi Wan Hamzah, GK Goh Holdings Ltd and some connected parties. After selling their shares to Sime Darby, Tham, G.K. Goh and Wan Azmi still remain as E&O’s shareholders with a 5.1%, 3.5% and 2.9% stake respectively.

The price paid at RM2.30 a share was at a 60% premium over its last closing price of RM1.45 when the deal was announced on Sept 9, 2011.

Sime Darby’s purchase of the E&O shares stirred up some controversy as minority shareholders claimed they were sidelined and sought for Sime Darby to be compelled to undertake a mandatory general offer for the remaining shares in E&O.

In December 2011, a minority shareholder Michael Chow sought a court order to compel the Securities Commission (SC) to force Sime Darby to make a general offer for shares in E&O but Chow had since dropped his appeal to challenge theHigh Court judgment on Dec 9, 2013 that struck out his application for a judicial review against the SC’s decision not to compel Sime Darby to make a general offer for the remaining shares in E&O.

Sime Darby had said that it acquired the non-controlling 30% stake as a logical step in strengthening its market position and that it was not acting in concert with any of the vendors of the E&O shares.

The plantations-based conglomerate had based the purchase price of the E&O shares at RM2.30 a share largely on the realisable net asset value (RNAV) of E&O going forward.

The RNAV of E&O came to an average of RM2.91 a share based on available information on E&O’s landbank of around RM3.2bil then.

Sime Darby’s ability to leverage on E&O’s technical skills and strong brandname in the upscale luxury residential segment will open up wider opportunities for the group to further build up its capability as a developer.

The value of E&O is also invariably underpinned by the company’s management led by Tham and his deputy managing director, Eric Chan.

Tham, who founded the E&O group, has agreed to be around for at least three years to helm E&O as its managing director. Meanwhile he is grooming a number of key personnels in E&O, including his deputy Chan, to ensure a smooth succession in the company should he decide to call it day at the company.

With the three year period coming up this August, Tham and his team’s commitment to ensure the materialisation of the STP phase two project will undoubtedly be closely monitored by the shareholders and the public alike.

Asked on his vision, Tham says:

“Our vision is to see STP2 being developed into a new thriving township filled with modern amenities and facilities, yet embraces the history and heritage, culture and romance, that is the essence and soul of Penang. Created in sympathy with the environment, it will be a development we would be proud to showcase to the rest of the world.”

On whether he will see through the project to full completion, the 61-year-old Tham reflects realistically: “I’m not young anymore, and I pray that I can stay healthy and wise. On another note, the right to reclaim and develop STP2 is owned by Tanjung Pinang Development, a subsidiary of E&O. Hence, whether I am continuing will depend on the company, namely its board members, shareholders and stakeholders.”

Social needs

To meet the needs for affordable housing, Tham says the company has build 1,336 low medium cost housing units in Seri Tanjung Pinang phase one, which made up 67% of the total 1,989 houses built there. This is 7% more than the stated requirement in the concession agreement, he adds.

Responding to concerns raised by some non governmental organisations about the environmental impact of the STP project on sedimentation and erosion at Gurney Drive, Tham explains that the concession given by the state government in 1990 provides for reclamation and development in phases of approximately 980 acres.

“The previous owners of the concession company did commence reclamation works but the project was twice abandoned and the partially reclaimed land then left idle. In 2004, E&O assumed the rights, obligations as well as liabilities of the concessionaire and proceeded to complete the reclamation of STP phase one in 2005.

“Therefore, it should be acknowledged that sedimentation and siltation causing mudflats along Gurney Drive were already in existence, well before E&O came on board. Upon completion of STP phase one reclamation, E&O’s project became viewed as the contributing factor towards the mudflats, however, with no reference point and earlier study, a scientific conclusion cannot be drawn on the extent of its contribution. But what is important is the lesson learned, for both regulatory authorities as well as developers, and that mistakes should not be repeated at STP phase two,” he says.

The project director/team leader for STP phase two’s DEIA Report, Prof Datuk Sharifah Mastura Syed Abdullah, explains that the environmental impacts of STP phase two covering the 5km impact zone have been addressed in the DEIA study, which comprises three comprehensive volumes of nearly 1300 pages and includes technical graphs and data.

“The pertinent issues of focus covered in the DEIA have also been raised by the DEIA Review Panel, NGOs and public individuals and include the environmental impacts of reclamation works, trade-offs particularly with regard to mangroves and fishing grounds; concerns for the fisher communities who are directly impacted by the project; and traffic issues arising from the new development. Each of these issues has been addressed in the DEIA with corresponding mitigating measures,” she points out.

Sharifah says the width of the land reclamation along Gurney Drive that varies between 100m and 600m will extend over the existing mudflats whilst creating a new coastline with land that has been proposed as a linear public park for the people of Penang.

“The hydraulic modelling carried out has shown that the proposed project will not be causing any sedimentation along the shoreline. Notwithstanding this, as a precaution against sedimentation, it has been proposed that silt curtains be used during the construction stage. Furthermore, the effectiveness of the silt curtains will be monitored as part of the environmental monitoring programme during the construction phase.”

The configuration and shape of the proposed STP phase two project and extension of Gurney Drive were guided by the hydraulic modelling studies that aimed to optimise the hydraulic regime of the area and prevent the reoccurrence of mudflats.

In addition, she says the project proponent is mandated by the authorities to carry out bathymetry surveys along Gurney Drive pre- and post-reclamation to verify the predictions of the hydraulic modelling exercise with respect to erosion and sedimentation issues. - The Star

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