KUALA LUMPUR (Nov 11): The Penang government’s investment arm, Penang Development Corporation (PDC) has sold its 49% stake in Tropical Island Resort Sdn Bhd (TIRSB), which owns part of Jerejak Island off Penang island, to Ideal Property Development Sdn Bhd for RM156 million.

The sale is expected to generate RM140.6 million in profit for PDC, after it accepted federal housing agency Urban Development Authority (UDA)’s offer to sell PDC’s stake to Ideal Property, said PDC general manager Datuk Rosli Jaafar in a statement today.

Rosli said UDA had brought in Ideal Property to jointly develop the 32.4-hectare piece of land, part of which houses the Jerejak Rainforest Resort & Spa (JRRS); and also to buy out PDC’s 49% stake in accordance to PDC’s conditions.

“Only when these conditions protecting PDC’s interests are fulfilled, the share sale agreement with Ideal Property’s subsidiary company, Q Islands Development Sdn Bhd was signed this year.

“The 10% deposit of RM15.6 million has been received by PDC. As payment will be made over a period of eight years, PDC shares will only be transferred after full payment is made in 2024,” he said.

Note that Ideal Property is one of the companies in the SRS Consortium that is tasked to undertake the Penang Transport Master Plan. 

Ideal Property is part of the Ideal Property Group, which includes Ideal United Bintang Bhd and Mega Sun City Holdings Bhd — both of which are listed on Bursa Malaysia.

Rosli said TIRSB, which incurred heavy operating losses since it commenced the resort's operations in 2004, closed it in May 2016, due to accumulated losses of RM40 million as at end 2015.

The state has approved UDA’s development plans to develop the 32.4-ha land into 1,200 units of residential development, a marina, four-and-five-star hotels, a theme park, an 11.5-km cycling track around the island and related infrastructure to promote tourism in the state.

The approval was subject to UDA’s compliance to Environmental Impact Assessment (EIA) requirements, which disallowed vehicles on the island.

The state government intends to gazette the remaining few hundred acres on the island as forest reserves, he said.

TIRSB was jointly set up in 1997 by the federal and state governments, with a paid-up capital of RM31.5 million.

PDC injected RM15.44 million into TIRSB for a 49% share, while UDA contributed RM16.07 million for a 51% share.

In 2001, the state government approved the award of 80 acres (32.4 ha) of leasehold land for 60 years (expiring in 2062) in Pulau Jerejak to TIRSB, at a price of RM12.95 million.

Rosli said the price per square feet (psf) came up to RM3.71, that was below the market value of RM47.6 million or RM13.65 psf back then.

“The land was sold to TIRSB at only 27% of the market price. The land title was transferred to TIRSB before the land premium of RM12.95 million was fully paid,” he said.

Meanwhile, PDC gave a RM3.4 million loan to TIRSB on Dec 28, 2007 but the loan principal and interest rose to RM4.4 million by 2016.

Rosli said one of PDC’s condition in accepting UDA’s offer was for the latter to settle the RM4.4 million loan separately from the sale of the 49% stake which it agreed and settled in April this year.

“PDC will receive a total of RM160.4 million and with this equity sale, PDC will recover its cost of investment of RM15.44 million, together with the shareholders’ loan and interest of RM4.4 million, which has also been paid by Ideal. PDC will make a profit of RM140.6 million,” he said.

UDA will have 100% control of TIRSB upon completion of the novation agreement, the statement added.