This article first appeared in The Edge Malaysia Weekly on July 8, 2024 - July 14, 2024

THE decision to sell the 160-year-old Penang Turf Club (PTC) — which sits on the largest undeveloped tract of land in George Town — has generated “overwhelming interest” among local and international companies looking to bag the valuable parcel for redevelopment, including at least two prominent property developers, say sources.

If sold, the PTC land and seven other plots owned by the club, which add up to 203.4 acres and hold recreational or residential titles, may fetch an estimated RM2.6 billion.

Sources tell The Edge that Tan Sri Desmond Lim Siew Choon of Pavilion Kuala Lumpur fame is one of the developers said to have shown an interest in the PTC land  and that he was in Penang recently to view the land. He is understood to be on the lookout for a good location on the island to build Pavilion Penang shopping centre to add to his chain of malls in the Klang Valley.

Another interested party appears to be Sunway Bhd (KL:SUNWAY), whose unit Sunway Healthcare is said to have been shortlisted to buy the 600-bed Island Hospital in Penang.

Located in Batu Gantong, the PTC land is about three times the size of Tun Razak Exchange in Kuala Lumpur as the adjoining parcels with freehold titles and a leasehold bungalow on Penang Hill offer a collective  8.86 million sq ft. The two largest parcels are the flat PTC land with a recreational title measuring 118.14 acres (5.15 million sq ft) and a hillside parcel measuring 73.32 acres (3.19 million sq ft), which is currently a durian plantation.

Six other components offer a combined 11.04 acres. Of the six, five — vacant and developed pieces of land at the corner of Jalan Brook and Jalan Jesselton — are located adjacent to the PTC. The vacant land comprises 26 detached plots (179,778 sq ft) and the Jalan Brook and Jalan Jesselton land (9,258 sq ft) while the built-up segments comprise 17 Brook Garden bungalows (127,441 sq ft), the Penang Retirement Resort (126,928 sq ft) and five double-storey detached houses (37,0128 sq ft) (see map). One other asset owned by the club is a bungalow on Penang Hill (41,469 sq ft).

Three trustees hold these assets and a land title search reveals them to be 91-year-old Goh Eng Toon, 85-year-old Teh Choon Beng and 78-year-old Ong Eng Khuan.

Subsequent to the decision to sell the PTC, One Asia Property Consultants (Pg) Sdn Bhd was hired as the exclusive marketing agent to dispose of the assets. At the end of June, One Asia placed advertisements inviting bids for the land, describing it as “Penang Island’s Most Prestigious Land”. The closing date for the submission of tenders is Nov 29, 2024.

When contacted, One Asia’s chief operating officer Lim Ewe Tatt tells The Edge: “The response has been overwhelming. We have Bursa Malaysia-listed developers showing interest and we have had queries from China/Hong Kong, Singapore and Indonesia.”

Bidders must make an offer for all eight components individually. However, the vendor retains the right to sell any of the smaller components before Nov 29. At the same time, the successful bidder of the turf club track will have to buy whatever remains unsold after Nov 29.

“It will take two months to select the successful bidder after the closing date and the PTC will hand over the club to the buyer by 2025,” says Lim, adding that the purchaser will be responsible for obtaining all the necessary approvals, including the approval for the conversion of land use.

He highlights that the purchaser must have good financial standing and be able to show proof of funds. For this purpose, an investment banker has been hired to vet the submissions.

Asked if the state has any restrictions on foreigners buying land in Penang, Lim says there is none. Nevertheless, he points out that they would need the approval of the Foreign Investment Committee.

How much will the land fetch? An industry source puts the price of the turf club land at RM400 psf. This means the 118.14 acres of land could be worth RM2.06 billion. Because the land area is huge, based on quantum factor, the price per sq ft could be lower. It is noteworthy that the new owner will likely have to surrender some of the land to build a proper access road. It is learnt that the value of the remaining components is estimated at RM600 million.

Should the assets be sold for RM2.6 billion and the amount divided equally among the PTC’s 600 members, each member could get roughly RM4 million. The PTC members had approved the sale at an extraordinary general meeting on June 10. 

This is not the first time the sale of the land has been in the news.

In 2007, there was an ambitious plan for a RM25 billion project called the Penang Global City Centre offering shopping complexes, two five-star hotels, commercial and residential properties, a state-of-the-art cultural centre, a mini-philharmonic centre and a 10.5ha park on the land. Development was expected to take 18 years.

Abad Naluri Sdn Bhd, in which Equine Capital Bhd had a 25% stake, was said to have signed a deal with the PTC in 2004 to buy the land for RM488 million. As part of the deal, Abad Naluri had to relocate and construct a new RM375 million race course in Batu Kawan and hand it over to the PTC in 2007. The balance was to be paid in cash to the club.

However, the deal fell through in 2008 following strong public opposition as well as a dispute between the turf club and Abad Naluri. Then chief minister Lim Guan Eng rejected Abad Naluri’s proposal because of its failure to submit the requisite plans as required by the state.

In 2010, the PTC called for bids for a 57.3-acre parcel along Persiaran Jesselton Selatan, which a year later was won by Berjaya Land Bhd (KL:BJLAND). Berjaya Land bought the parcel for RM459 million, or RM184 psf, to develop high-end residential projects.

As the 118.14-acre turf club land is classified as recreational, the successful buyer would need to convert the land use to either residential, commercial or both. This means that while the buyer is likely to pay the prevailing market price for recreational land, it must be prepared to cough up the additional cost to convert the land use. Recent reports say the conversion to commercial status could cost an additional RM1 billion, which raises the question of whether it is worth paying RM3.6 billion for the assets.

An industry observer opines that the PTC should have done its research and decided on the best use for the land prior to putting it up for sale. “It is unclear what the new owner will have to go through to get the development order (DO). It would have been better if the PTC had obtained the DO and then placed the land for sale.”

“Penang is considered the next hot spot for real estate development with the light rail transit (LRT) and three bypass highways to be constructed and the reclaimed Silicon Island to be turned into the next industrial and logistics hub for the island,” says VPC Alliance (Malaysia) managing director James Wong, when asked for his comments. He notes that the PTC’s 202.5 acres represent the largest prime real estate available on Penang Island for sale.

Wong estimates that the land may command a market value of RM4.16 billion. In the event the 118.14 acres of the PTC land is converted to commercial use, he would put the value of the tract at RM3.86 billion, based on RM750 psf; the 73.32 acres of hill land at an estimated RM87 million, or RM30 psf; and the residential plots at RM216 million, or RM450 psf.

He adds that if the hill land can be converted into a mixed-use development, the value could reach RM1.437 billion, based on RM450 psf, which would bring the market value of all the PTC’s assets to RM5.6 billion. These valuations are also contingent upon the ability of the buyer to obtain regulatory approval for higher density in this area upon rezoning, he points out.

On what he thinks is the most suitable development for the site, he refers to the ex-Kuala Lumpur Turf Club land on which the iconic KLCC development now sits. The PTC site is almost double the size, he points out. “Compared with the development model of KLCC, the most suitable development for the PTC site would be a ‘city within a city’ concept that includes an integrated development of office towers, hotels, serviced apartment blocks, data centres, a shopping mall and a private hospital with wellness facilities and a lot of green spaces, parks and water features surrounding these developments.”

Wong notes that KLCC is zoned as a City Centre Commercial (CCC) with a plot ratio of 1:10 while the PTC site is a prime location close to the Penang city centre. There is also a lack of prime commercial land on Penang Island available for sale. Thus, he expects the call for tender to draw considerable interest from local and international developers as well as institutional funds.

Asked for his thoughts, ExaStrata Solutions Sdn Bhd CEO and chief real estate consultant Adzman Shah Mohd Ariffin says, “It is estimated that the value of recreational land of the said size to be about RM180 to RM250 psf while residential land is about RM300 to RM450 psf and commercial land, perhaps around RM400 to RM500 psf, depending on location, accessibility, size, shape and terrain.”

Adzman observes that while the entire tract is about 202.5 acres, more than 70 acres of it is hilly and difficult to develop. For the remaining land area, comprising the racing turf, nine-hole golf course and handful of bungalows, he believes a market study is needed to determine the best use and market demand and supply to enable a good masterplan to be drawn up.

“Assuming 129 acres will be available immediately for redevelopment, future development will need to consider improving accessibility directly to the site if the objective is to achieve highest value, which normally could be commercial in nature. The development could even be a satellite commercial hub similar to Mid Valley in Kuala Lumpur with a development mix which may include serviced apartments, retail, hospitality, recreational and commercial uses such as education, medical, hotel and even some iconic office towers,” he says.

He adds that depending on the component mix and concept, a back-of-the-envelope calculation of the gross development value based on just a minimum plot ratio of 1:2 over the total land area could already be RM4 billion to RM5 billion. However, the developer may need to project the absorption of the properties over a longer period due to current market conditions. 

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