This article first appeared in The Edge Malaysia Weekly on December 9, 2019 - December 15, 2019
IF the houses in Damansara Heights are deemed to be the most desirable in Kuala Lumpur, wouldn’t commercial properties in the area also be much sought after?
Some savvy investors seem to think so, and they have snapped up the 137 strata units, comprising about 210,000 sq ft of commercial space, in Plaza Damansara that were put up for sale by Permodalan Nasional Bhd (PNB).
The units are mainly shopoffices in Plaza Damansara 1 (PD1) and Plaza Damansara 2 (PD2).
PNB had asked for RM169 million for the 137 units, according to documents sighted by The Edge.
In response to queries, the government-linked investment company says more than half of the transactions have been completed while the rest are awaiting approvals from the “relevant authorities”, without elaborating (see Q&A with PNB).
PNB first put these properties on the market in July last year via realtor Rahim & Co. What is interesting, however, is that Rahim & Co, which is 49%-owned by PNB, did not execute the sales despite having received bids for a number of the units from various parties.
An email from Rahim & Co to prospective buyers in July 2018 said it was seeking “binding offers for the acquisition” of PD1 and PD2 and advised interested parties to submit an offer in writing by Aug 8 that year. The email also said the asking price for each of the 16 blocks in PD1 was about RM4.8 million and RM24 million for all six blocks in PD2.
Each block in PD1 has five floors — ground, mezzanine, Levels 1, 2 and 3 — while those in PD2 have three floors each. Each floor in a block is considered a unit.
When contacted by The Edge, Rahim & Co says, “Yes, we received offers and presented them (to PNB) for consideration. However, they were not accepted.” Its spokesperson adds that its appointment by PNB ended after the tender closed.
PNB declined to comment when asked why it did not let Rahim & Co proceed with the sales.
Plaza Damansara was built in the 1980s by Syarikat Perumahan Pegawai Kerajaan, which was jointly held by the Minister of Finance Inc (29.91%) and Island & Peninsular Bhd (70.09%). I&P, which was PNB’s flagship property company, subsequently bought over MoF Inc’s stake. In 2009, PNB injected its interests in several listed and unlisted property companies into I&P and amalgamated with SPPK.
PD1 and PD2 are popular for their bars, pubs and fine-dining eateries. The commercial spaces, which abut onto Jalan Setia Bakti, Jalan Medan Setia 1 and Medan Setia II, are also rented out as offices.
When asked why it decided to sell the 137 units, PNB says, “As part of our overall strategy, we undertake a comprehensive review of our real estate portfolio from time to time, especially under the prevailing economic conditions. When the need arises, we restructure the portfolio if some of the assets no longer fit in with the overall strategy. The proceeds from the divestment will be redeployed to other investments that fit our portfolio better.”
In December 2018, four months after Rahim & Co’s tender closed in August, PNB went on to ink deals with various parties, without the property consultancy firm.
PNB would not say who finally brokered the sales.
After weeks of investigation, The Edge managed to obtain a list that details the units available for sale, their size and the asking price for them. It is learnt that the asking price was set at a 10% to 20% premium to the valuation done by a registered valuer.
The Edge also managed to obtain sales data from the National Property Information Centre. A cross check between the asking price list and Napic data reveals that some of the units were sold at above the asking price while others of similar size were sold at below the asking price.
The Edge was able to obtain the transaction figures for 130 of the 137 units. Of the 130, some 54 went for more than the asking price while 76 were disposed of at below the asking price.
For example, the asking price for Block 15 comprising five floors — 15-G, 15-M,15-1,15-2 and 15-3 — was RM4.77 million but Sycamore Holdings Sdn Bhd purchased it for RM6.03 million. The company also purchased Blocks 17 and 21 for RM5.82 million each.
The asking price for the ground floor of Block 39 (tenanted by hairdressing salon Shawn Cutler) was RM1.389 million but it was sold for RM1 million to a Thevandran Ragavan (see “The new owners in Plaza Damansara”).
Two units on the ground floors of Blocks 63 and 67 were sold at a discount of about 40%. The asking price for 63-G was RM1.34 million but it was sold for RM700,000 while the asking price for 67-G (occupied by Esteel Metal Industries) was RM1.36 million but PNB sold it for RM700,000 — both also to Thevandran.
PNB’s asking price for four floors of Block 50 — 50-G, 50-M, 50-2 and 50-3 — was RM3.73 million but they were sold for RM2.5 million to Safeguards Properties Sdn Bhd.
Checks by The Edge unearthed another interesting set of transactions.
An individual named Arthur William Abernethy paid RM6 million for Block 49, which was priced at RM4.68 million by PNB. Two doors away, Bumi Land Sdn Bhd bought Block 53 for RM4.5 million when its asking price was RM4.64 million and Block 57, priced at RM4.72 million, for RM4.5 million. It is worth noting that the floor size of Blocks 49, 53 and 57 is about the same.
Bumi Land, which is owned by Thevandran, bought about RM12 million worth of the units while Thevandran himself purchased RM6 million’s worth. This means he effectively bought RM18 million worth of space at Plaza Damansara.
Interestingly, though some of the properties were sold at below asking price, PNB says it was happy because it had received more than what it had asked for in total. It declined to give the actual amount all 137 units were sold for.
“PNB has achieved a combined sales value for both Plaza Damansara 1 and 2 that is higher than the indicated amounts combined, as well as the total valuation. Apart from pricing, our consideration includes certainty of selling the entire 137 strata units in PD1 and six units in PD2. The deal that was entered into provided that certainty,” it explains.
Napic data also reveals that the PD1 blocks were sold to three individuals and nine companies while the PD2 blocks were sold to just one person.
The Edge understands that the rental rates are being increased by the new owners as the tenancies come up for renewal. It is learnt that prior to the emergence of the new owners, the rise in the rates was marginal.
At least two of the tenants tell The Edge that the rent for some of the leases has risen by a whopping 50%.
A tenant with multiple units in Plaza Damansara, however, concedes that the rent charged by PNB was “ridiculously low”.
“The rent was about RM4,000 to RM5,000 a month for a ground floor unit,” he says. The typical size of the ground floor units is between 1,100 and 1,400 sq ft. The recent increase, the tenant notes, is more reflective of current market rates. He says he welcomes the new landlords and expects them to be more actively involved and invest in upgrading the properties.
The question is, shouldn’t PNB have refurbished the properties to earn higher recurring rental income instead of selling them?
The new owners in Plaza Damansara
Based on National Property Information Centre data obtained by The Edge and cross checks, it appears that the bulk of the properties in Plaza Damansara was sold to a group of related parties using various companies as well as individually.
First interconnected group: This group of buyers comprises Divine Wonders Sdn Bhd, Safeguards Properties Sdn Bhd, Digital Dollars Sdn Bhd, Bumi Land Sdn Bhd and Thevandran K Ragavan. They are linked either through common shareholders, common directors, same business address, same company secretary or the same auditors. Collectively, they bought around RM78 million worth of properties from PNB.
Safeguards Properties bought 21 of the 137 strata units put up for sale for around RM15 million.
Safeguards Properties is owned by Safeguards Corp Sdn Bhd ,which is in turn owned by Eighth Jewels Systems Sdn Bhd.
The shareholders of Eighth Jewels Systems are Darmendran Kunaretnam (40%) and Mohd Yusof Nurin (60%). Darmendran and Mohd Yusof are also Eight Jewels directors.
The company secretary for both Eighth Jewels and Safeguards Corp is Christopher Gerard Danker.
Safeguards Properties’ business address is 50-1, Plaza Damansara, which is the same as that of Divine Wonders, whose shareholders are Haridas Suppiah (98%), Sivanesan Banaya (1%) and Ahmad Shaukhi Said (1%). Divine Wonders also shares its auditor, SK & Co, and company secretary, Danker, with Safeguards Corp.
Divine Wonders bought four full Blocks — 22, 24, 28 and 34 — for a total of RM16 million. It also bought various other floors in other blocks for another RM19 million, bringing its total purchase to RM35 million.
As for Digital Dollars, all but two shares in the company are held by Darmendran, who is linked to Safeguards Properties and Eighth Jewels. The auditor of Digital Dollars is SK & Co, the same as Safeguards Properties.
Digital Dollars purchased a number of properties, including three floors in Block 79 (RM2.2 million) and four floors in Block 81 (RM3.2 million).
Bumi Land’s sole shareholder is Thevandran Ragavan. Bumi Land bought three blocks for about RM12 million while Thevandran himself bought eight floors in different blocks for about RM6 million. Thevandran has an office in Plaza Damansara called Thevan Realty. He also jointly owns a company called Taiko Voyage Sdn Bhd with Haridas of Divine Wonders. Danker is the company secretary. Taiko also shares the same address as Safeguards Properties.
Second interconnected group: Urusprima Sdn Bhd, Astral Corp Sdn Bhd, Gedung Mekar Sdn Bhd. The three firms collectively bought RM14 million worth of properties from PNB.
The shareholders of Urusprima are Aziq Arif Mohd Ariffin (90.91%), Primabumi Holding Sdn Bhd (4.55%), Tan Sri Mohd Ariffin Mohd Yusuf (2.27%) and Datin Abedah Seman (2.27%) while Datuk Shahrir Abdul Jalil owns one share. Primabumi Holdings is jointly held by Mohd Ariffin (90.15%) and Abedah (9.85%). The directors are Azuan Arif Mohd Ariffin, Azad Arif Mohd Ariffin and Suriani Omar. Its company secretary is Wong Wai Cheng.
Urusprima is linked to Gedung Mekar Sdn Bhd. The shareholders of Gedung Mekar, which bought Block 18, are Azuan Arif (99.5%), Shahrir Abdul Jalil (one share) and Datuk Mohd Hashim Shamsuddin (0.5%). Gedung Mekar and Urusprima share the same business address and company secretary,Wong. They also have the same auditor — Alan Chin & Associates.
Astral Corp, which purchased Block 6 and Block 8, is also linked to Urusprima and Gedung Mekar. All but two shares in the company are owned by Azad Arif. The two shares are held by Primabumi Holdings Sdn Bhd. Wong is also their company secretary. Urusprima, Gedung Mekar and Astral Corp share the same business address, 3rd floor Wisma Prima, Jalan Sri Semantan, Damansara Heights.
Other buyers include Sycamore Holdings Sdn Bhd, which bought three full Blocks — 15, 17 and 21 — and four floors of Block 19 for over RM22.6 million, all above PNB’s asking price. Each block has five floors — ground, mezzanine, first, second and third.
Nuswarna Development Sdn Bhd paid about RM25 million for several blocks — above the asking price of RM 24 million.
Yet another purchaser is Megmoni Sdn Bhd, which purchased Block 25 for RM5.58 million against the asking price of RM4.68 million.
‘Total price consideration for properties well above valuation’
Below is PNB’s response to The Edge’s queries on the sale of properties at Plaza Damansara in Damansara Heights:
The Edge: Based on an advertisement that appeared in mid-2018, PNB put Plaza Damansara 1 and 2 (PD1 and PD2) up for sale. We understand the sale of the properties was completed in late 2018. Rahim & Co was originally hired as the exclusive marketing agent and is understood to have received bids. However, it did not finalise any sale. Were the sales subsequently completed and who was the agent?
PNB: Sales and purchase agreements (SPAs) for all the units were executed in end-December 2018. To date, the sale of more than half the [total of 137 strata] units has been completed while the remaining units are currently pending approval from the relevant authorities.
How much did PNB sell the assets for? Based on a document sent to prospective buyers, Plaza Damansara 1 should have been able to fetch above RM141 million. Was PNB able to close the deal at that price? Plaza Damansara 2 had a reserve price of RM24 million. How much was it sold for?
Given that we hold a vast portfolio of properties and have a prominent role in the nation’s property landscape, it is not our practice to disclose details with respect to specific transactions. However, suffice to say that the total price consideration for the properties concerned is well above the valuation.
Based on documents from Napic, many of the ground-floor units priced at more than RM1 million each were subsequently sold for RM700,000. For example,Unit 39-G was priced at RM1.389 million but sold for RM1 million. Units 63-G and 63-I were priced at RM1.334 million and RM951,500 respectively, but went for RM700,000 and RM500,000. Why?
Napic data also reveals that several full block (ground, mezzanine, and the first, second and third floors) sales were for far less than the asking price. For example, Block 22 was priced at RM4.69 million but sold for RM4 million. Block was priced at RM2.47 million but transacted for RM1.3 million. Was PNB forced to sell below the reserve/asking price?
Apart from pricing, our consideration includes the certainty of selling the entire 137 strata units in PD1 and six units in PD2. The deal that was entered into provided this certainty. As mentioned in the response to the earlier question, PNB achieved a combined sales value for PD1 and PD2 that is higher than the indicated amounts combined, as well as the total valuation.
Several tenants say rental rates have increased by 50% to 100% in 2019. If the new owners were able to raise the rates, why didn’t PNB try to get higher rents?
The decision to divest both properties was part of a strategic move to ensure alignment with our overall strategy. Divesting these assets enabled us to recycle our funds to realise the value of our investment at very strong multiples and invest in other opportunities.
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