Soi Lek: I ensured transparency in MCA's purchase of office tower

BDO Advisory Services advised me that for long-term investment, MCA should invest in an office tower in the Kuala Lumpur city centre. This was to provide an additional source of income for the party.

The idea was to avoid a situation in which MCA was overly dependent on dividends from its shares in The Star.

This was especially so, given that the advent of the internet and social media was challenging the continued viability of traditional media.

I subsequently conveyed this message to Dr Fong Chan Onn, the chairperson of the MCA investment committee. We agreed that the MCA should keep an open mind about future investments.

At the presidential council meeting on 24 May 2011, Fong reported that he had received an invitation to purchase Menara Multi-Purpose in the centre of Kuala Lumpur.

The council unanimously agreed that the committee should prepare a letter of intent to do a due diligence study of the office tower, including the tenancy agreements and the tower’s financial obligations.

We also needed the services of a reputable valuer to conduct an evaluation of the tower.

Menara Multi-Purpose was a 40-storey high-rise office tower. It had a net leasable floor area of 512,265sq ft, with 416 car park bays and a monthly gross rental income totalling RM2.15 million.

One month later, at the presidential council meeting of June 28, 2011, Fong (photo) reported that an evaluation on the price, bank interest rate and repayment tenure had been completed. Again, the committee unanimously agreed to appoint Fong to negotiate with the management of Menara Multi-Purpose.

The anchor tenant for the building was Alliance Bank, which also used the building as its headquarters. Fong was also directed by the committee to talk to Alliance Bank about a loan to purchase the building.

I expressed the hope that the negotiations would ensure that the monthly rental collected from the building would be enough to cover the monthly loan repayment.

I knew the purchase of the building would involve a substantial sum of money from the MCA. I told Fong he would have to update both the presidential council and central committee from time to time.

This was to ensure that senior party members understood the long-term objective of the proposed purchase. It is also important to get everyone on board so they would support any recommendations put forward by BDO Advisory Services and the investment committee.

The central committee meeting on 19 July, 2011 again deliberated on the purchase of Menara Multi-Purpose. At this meeting, BDO Advisory Services tabled a proposal regarding funding.

According to this report, the party would not face any cash shortfall from the proposed purchase. The meeting unanimously agreed that Fong should secure a commitment from Alliance Bank that it would remain as the anchor tenant. MCA would also obtain a loan from Alliance Bank if the interest rate was reasonable.

It was also at this meeting that I warned all members of the central committee that should the party purchase the building, it would not be wise for any MCA leader to occupy the penthouse on the top floor. I argued that the penthouse was too luxurious to be used as a political office or for holding political functions.

At the central committee meeting on Sep 27, 2011, Fong tabled an update. He reported that after a long series of negotiations, the purchase price was set at RM375 million. The MCA would take a loan from Alliance Bank totalling RM220 million.

Once the sales and purchase agreement was signed between the MCA and Menara Multi-Purpose, the building would be handed over to the MCA.

Deal sealed after unanimous, transparent decision

On Oct 25, 2011, the presidential council unanimously agreed to engage a legal firm to prepare the sales and purchase agreement and also accept the bank loan agreement. The meeting also agreed to appoint the president, secretary-general and treasurer-general to sign on behalf of the party. Thus it was that the acquisition of the building was completed on Dec 22, 2011.

After the signing of the sales and purchase agreement, BDO explained that as a political party, the MCA could ask for stamp duty exemption from the finance minister. I discussed the matter with the prime minister, and he kindly consented to the total stamp duty exemption.

This saved the party RM12.3 million, of which RM11.2 million was the stamp duty on the deed of assignment and RM1.1 million was the stamp duty on the loan agreement.

The Alliance Bank agreed to be the anchor tenant, and the first loan instalment totalling RM1.23 million was made on 1 January, 2012 with an effective annual interest rate of 5.11 percent.

The process of purchasing Menara Multi-Purpose involved several presidential council and central committee meetings to ensure that every member understood the long-term advantages the MCA would enjoy by owning a fully tenanted office building in the city centre. In this case, there was also an anchor tenant who was using the premises as its corporate headquarters.

After the 2013 election, however, several senior leaders grumbled that the purchase was not done transparently. One minister even said there was no guarantee that Alliance Bank would continue to house its headquarters in the building as the tenancy agreement was only for three years.

He argued that I should have negotiated a long-term lease with the bank through a long-term agreement and not something that needed to be renewed every three years.

The comment revealed his ignorance about rental agreements and long-term leases. But I can understand why this particular minister took such a view. He was behaving like a cheerleader for my successor, Liow Tiong Lai. In such circumstances, this sort of ignorance is both common and acceptable in MCA factional politics.

Not surprisingly, a subsequent cabinet reshuffle resulted in this particular individual being appointed as a minister. The development came as a surprise to both party members and political observers because it was believed he was already at retirement age.

After all, he had already served for many years at the federal and state levels. He was also known for singing about the need for party renewal, and in particular the importance of giving young people the opportunity to serve in the government.

Clearly, being a cheerleader for those in power can be rewarding.

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CHUA SOI LEK is a former health minister and MCA president. - Mkini