Taman Manggis Land was to be sold for RM46.6M – Terbongkar SPAs Dissected

Datuk Tang Yong Chew got a really sweet deal on Taman Manggis land – a tidy profit of anything between RM19.7 million cash profit (RM20 million cash minus KLIDC paid up of RM300k) to RM35.6 million in transaction profit (i.e. RM46.6 million minus RM11 million).

Kenneth Lee

I have been taking a closer look at the Terbongkar SPAs which were kindly shared by RPK recently on Malaysia  Today, and below are some of my observations which legal eagles and eager beavers can analyse and calculate themselves. I have put in references to Sections of the KLIDC Terbongkar SPA so that you can see it for yourself.

First things first, there are warranties written down in both the SPAs for KLIDC and sister company Victoria International Medical Centre Sdn Bhd (VIMC) that say that the statements made in the SPAs are true and accurate.

So if the SPAs are authentic, then the statements made there must be correct. See Section 8.01. Whether the SPAs are still in draft form or not is beside the point, because the lawyers for the seller (i.e. Datuk Tang Yong Chew and his companies) who prepared the SPAs would have checked the statements before drafting them.

This is even more so because the lawyers who prepared the SPAs were Datuk Tang’s own lawyers. But the SPAs seem pretty complete to me, except for the name of the buyer yet to be filled in.

So if the contents of the SPAs are real, then based on the SPAs themselves, this is what Datuk Tang Yong Chew who owns and controls KLIDC and VIMC was planning to do.

First, he wanted to sell KLIDC which owns Taman Manggis Land for cash of RM18 million – See Section 3.02(a). This sale of KLIDC was subject to the buyer taking over the company with total debts of RM24.9 million (which means that the purchase price goes up by RM24.9 million, making it RM42.9 million since the buyer is assuming all of the company’s debts) – See Sections 1.06 and 1.07 which states that the buyer will buy the shares subject to the “Charge and Debt”.

Nowhere in the SPA talks about KLIDC clearing the debts first.

KLIDC’s debts include a bank loan of RM8 million (comprising RM5 million term loan and RM3 million overdraft – not stated how much was drawn down) – See Section 1.06 (i). To secure this bank loan, KLIDC charged the Taman Manggis land to the bank.

It is important to note two points here – one, basically they tendered for the land and paid RM11 million for it. But they did not really cough up RM11 million but only RM3 million, because they borrowed RM8 million from the bank to buy the land. Two, are they allowed to charge the land in the first place since the land has restrictions on use of development “yang bukan untuk dijual kepada orang ramai”? Just a question for now, since this would depend on KLIDC’s agreement with the Penang State when they got the land.

The other debts of KLIDC of RM16.9 million were owed to companies linked to Datuk Tang Yong Chew, including VIMC of RM9.8 million and Winbond Properties Sdn Bhd of RM3.07 million – See Sections 1.06(ii) and 1.06(ii)(d). I wonder if Winbond Properties Sdn Bhd is part of the same Winbond group of companies in which Ms. Phang Li Koon, seller of LGE’s bungalow, is a shareholder and director of with her business associate Datuk Tang Yong Chew. I cannot seem to find any info on this Winbond company online anymore as all links to it have been very strategically removed – either “not found” or “no longer available”.

If it is part of the same group she is involved in, then she cannot really deny that she has no ties to the Taman Manggis land deal or development, can she? We will have to wait for the results of the investigation before commenting further.

Back to the sale transaction, also important to note is that the sale of shares of both KLIDC and VIMC (held by Datuk Tang through Tang Renewable Engineering Sdn Bhd which he owns and controls) were inter-conditional – meaning that they must both be done otherwise, or no deal.

The purchase price for VIMC was for a total of RM3.7 million (explained below). Meaning that the KLIDC transaction is actually worth RM18 million (payable in cash), plus assumption of debts totaling RM24.9 million, plus RM3.7 million if you add the VIMC transaction value – See Sections 1.05, 3A.01 and 3A.02.

So this brings us to the point that the flip for the Taman Manggis land (after Penang State change of land use conditions from PPRT to medical centre and service suites, Penang State renewal and extension of lease tenure to 99 years and the hospital permission) is actually for a grand value of RM46.6 million. This is not too far off from the RM48 million figure which blogger and Facebooker Lim Sian See recently projected for it based on the land prices in that area today.

The KLIDC 2015 financials revealed by LSS also shows that KLIDC’s paid up capital was only RM300k. So it was not RM3 million that they coughed up, but in fact only RM300k. This supports the idea that KLIDC bought Taman Manggis land almost entirely using borrowed monies, and which will all now be repaid through the flip.

Which goes to the point that Datuk Tang Yong Chew got a really sweet deal on Taman Manggis land – a tidy profit of anything between RM19.7 million cash profit (RM20 million cash minus KLIDC paid up of RM300k) to RM35.6 million in transaction profit (i.e. RM46.6 million minus RM11 million).

Whether it is RM19.7 million or RM35.6 million in profits, all we know is that it is definitely not a bad deal for something bought five years ago without any development works or progress being done on it.

There are other observations about the SPAs on how all cash payments will be used to settle debts owed to Datuk Tang Yong Chew and companies linked to him, and how eventually they will all go back into his pocket. Or other observations about how Taman Manggis land must be KLIDC’s only asset since there are references to real property gains tax in there. But I will not bore you with those, since you can read the SPAs yourselves. They read like a compelling Barry Wain or John Grisham.

Just in case you are wondering how I arrived at RM3.7 million transaction value for the VIMC transaction, Datuk Tang Yong Chew owns and controls Tang Renewable Engineering Sdn Bhd. This company owns 100% of VIMC. VIMC has a joint venture with KLIDC to develop the Taman Manggis land. Datuk Tang is selling VIMC for RM2 million (payable in cash) subject to the buyer taking over VIMC with all its debt. VIMC owes a bank RM7 million and Tang Renewable RM4.5 million, but KLIDC in turn owes VIMC RM9.8 million, so net debt of VIMC is RM1.7 million. This means that the sale price for VIMC is actually RM2 million + RM1.7 million, or total RM3.7 million.

Despite the question marks the whole Bungalow-gate saga has raised, I am sure that all those involved will tell you that flipping Taman Manggis land is not wrong. That might be true, but it is wrong if the journey to your profits is facilitated by devious unlawful means. At best, it raises questions of “the tort of misfeasance” perhaps?

All I know is that Datuk Tang Yong Chew’s phone should start ringing off the hook, since everyone wants to buddy buddy him now. He certainly has good friends in high places in Penang who will help him towards buying many expensive houses with swimming pool.