This article first appeared in The Edge Malaysia Weekly on February 26, 2024 - March 3, 2024
FOR a mid-size property developer, YNH Property Bhd has invested significantly in property joint ventures (JVs) relative to its total assets and cash holdings.
According to YNH’s latest annual report, as at June 30, 2023, the group had invested about RM1.1 billion in JVs involving 17 properties in the Klang Valley, Perak, Kuala Pilah in Negeri Sembilan as well as Seberang Perai in Penang.
While it is common for property developers to enter into JVs to expand their reach, it is not as common to put a huge amount of capital into ventures in which they do not have full equity ownership. In YNH’s case, the investments in JVs are huge relative to its cash holdings of RM16.8 million as at Sept 30, 2023.
YNH’s JVs attracted attention a year ago. The company itself lodged a police report contending that certain individuals were putting up fake news that was tantamount to criminal intimidation related to the company’s business. The reports raised concerns that prompted investigations.
In late October last year, the external auditor, Baker Tilly Monteiro Heng PLT, in a qualified opinion, expressed concerns about YNH’s inventories as at June 30, 2023, including RM1.1 billion paid in respect of JVs and turnkey contracts entered into with landowners for property development work. In a letter dated Dec 4, 2023, the audit firm said it “did not wish to seek reappointment as external auditor”, just three days before YNH’s shareholders’ meeting on Dec 8. YNH had on Nov 29, 2023, withdrawn the ordinary resolution to reappoint its audit committee chairman as an independent director after she chose not to seek re-election, owing to “her own business commitments” upon expiry of her term.
In the first week of this year, YNH’s share price took a tumble. The sell-down reduced the market capitalisation of the property developer by more than 85% to its current levels of RM330 million. The sell-down was largely prompted by margin calls and concerns about the company’s JVs.
YNH dismissed the notion that it had ploughed money into JVs that were not being developed.
A company spokesperson tells The Edge: “Work on all our JV development projects have commenced and are in various stages of progress. Some projects are in the planning stage — from a design, product mix, pricing and architectural perspective — while others are pending approval from the relevant authorities.”
Sunway deal
Among the JVs, a 5.098-acre plot in a prime location in Desa Sri Hartamas that YNH has proposed to dispose of to the Sunway Group for RM170 million has attracted much attention. There is an upside of RM50 million to the price tag should the property come with a higher plot ratio.
There have been several rounds of queries from Bursa Malaysia Bhd on the proposed sale because that piece of land was a JV with Great Wall Park Sdn Bhd, for which YNH had already forked out RM239.5 million between June 2016 and March 2020.
In April 2022, YNH ended the JV with Great Wall Park. It turned the JV agreement into an outright purchase of the land from Great Wall Park for RM150 million.
YNH will recoup the RM239.5 million deposit from the sale of the land to Sunway Group for RM170 million. Great Wall Park is to return RM89.5 million to YNH. The latter says it will make RM20 million from the sale.
The formal disclosure about the 2022 transaction was made to Bursa Malaysia only last month as the company’s share price came under some selling pressure and it received repeated queries from the authorities. YNH stated that the delay in the announcement was due to an “oversight”.
What is surprising about the deal is that a search with the Federal Territories Lands and Mines Office shows that there has been no change in the land title over the past two decades. Imbuhan Sempurna Sdn Bhd, which acquired the land from Puncak Permata Sdn Bhd in November 2002, remains its registered owner.
Privately held Imbuhan Sempurna was equally owned by Yu Chon Lan and Yu Choon Sing from 2002 until the first half of 2017, when its current owners — Yu Teong Wei and Lau Sheng Ming — emerged.
Great Wall Park appears nowhere in the title. In relation to this, YNH, which is 32.6%-controlled by Datuk Dr Yu Kuan Chon, told Bursa Malaysia in May last year that the land’s current registered proprietor was Imbuhan Sempurna, while Great Wall Park was deemed to be the “first beneficial owner”.
Imbuhan Sempurna’s role “is to hold the [Desa Sri Hartamas] property in trust of the beneficial owner”, said YNH, while stating that both Lau and Teong Wei were in no way related to YNH or its major shareholders.
The group also attributed the delay in the land title transfer to administrative purposes, whereby submissions to various authorities either had to be done or were on-going for the registration of the land to Kar Sin Sdn Bhd, a wholly-owned subsidiary of YNH.
YNH expected the deal with Sunway to be completed by August last year but the transaction has yet to go through.
Registrar’s caveat
The Edge conducted a land search recently and found that the Desa Sri Hartamas property had been under a Registrar’s caveat since Sept 25 last year. A Registrar’s caveat is normally put in place to protect the state’s interest and to prevent erroneous transactions or fraud.
YNH, which has expressed confidence that the land disposal to Sunway would take place, says the Registrar’s caveat is based on the need for further clarification and documentation required by the relevant authorities.
“The sale will take place as soon as the caveat is lifted,” says the company.
Apart from the Desa Sri Hartamas land, a random land search of some of YNH’s other JV properties in the vicinity of the Sri Hartamas area found that the Registrar’s caveat was also placed on three other parcels last September and October.
The properties include a 5.06-acre parcel, for which YNH had entered into a JV with Triple-H Auto Parts Sdn Bhd and paid a deposit of RM72 million; and a 2.66-acre plot, in which the company had invested RM54.5 million in a JV with Archmill Sdn Bhd.
Data from the Companies Commission Malaysia (SSM) shows that Triple-H is equally owned by Ng Bing Tiam @ Goh Kee Sang and Yew Hock Ming, who is also a shareholder of Archmill Sdn Bhd. According to SSM, Archmill is owned by Metropolis Garden Park Sdn Bhd, which in turn is owned by Yew and Manogaran P A Devanathan.
Yew, the common shareholder in the two JV companies, used to be employed at a brokerage. He was reprimanded by Bursa Malaysia in July 2016 for engaging in manipulative or false trading activities at Rapid Synergy Bhd and YNH Property, both of which are linked to Dr Yu.
The third JV in the Sri Hartamas area comprises four land parcels covering 12.3 acres, for which YNH has paid a deposit of RM129.5 million. The JV is with Aras Pilihan Sdn Bhd, which is 80%-owned by Zafri Zainudin and 20%-owned by Abdul Fatah Alias.
Among the 17 JVs that YNH has entered into, the highest deposit paid by YNH was RM239.5 million, in relation to the Desa Sri Hartamas land, followed by RM207.3 million for a 5.14-acre parcel near Sri Hartamas, where the group’s Solasta Dutamas project is located.
Disposal of assets
The disposal of assets, which will reduce YNH’s debts and remove the ambiguity of the various JV agreements, is the key to lifting sentiment on and confidence in the company.
In relation to monetising the land, YNH inked an agreement with Sunway Real Estate Investment Trust last month to dispose of a retail mall in Mont Kiara for RM215 million. The company plans to dispose of another mall in Manjung.
The next disposal that would serve as a catalyst for YNH is the sale of the 5.098-acre plot in Desa Sri Hartamas to the Sunway Group.
The deal is mired in YNH’s belated announcements to Bursa Malayisa in relation to transactions of the land (see “Timeline of Desa Sri Hartamas land”).
More than seven years have passed since YNH’s subsidiary Kar Sin paid its first deposits to Great Wall Park in relation to the Desa Sri Hartamas land, which has remained undeveloped and is being used as an open-air car park. YNH is clearly unable to extract full value for now.
In addition, Sunway Living Space Sdn Bhd, which is part of the Sunway Group, also has a caveat on the land.
The agreement between Kar Sin and Sunway Group has been extended for the fourth time to May 12, 2024. The stumbling block has been the authorities’ caveat on the land.
A key catalyst for YNH’s revival is the lifting of the caveat, which would pave the way for the disposal of the land to the Sunway Group. Until then, watch this space.
See also ‘YNH says is it not aware of investigations by authorities’
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