Amcorp to buy over TEE Land from TEE International for $55 mil

Malaysia’s Amcorp Group plans to pay just over $55 million for a controlling stake in local developer TEE Land.

Amcorp, controlled by Azman Hashim, will buy a 63.28% stake in TEE Land from its existing parent company, TEE International. It will also buy over a separate 5.5% stake in TEE Land held directly by TEE International’s controlling shareholder, Phua Chian Kin, popularly known as CK.

At 17.9 cents per share, the selling price represents a premium of 9.1% over TEE Land’s last traded price of 16.9 cents on Jan 9. However, the proposed transaction price is below TEE Land’s net asset value of 31.9 cents as at Nov 30, 2019.

According to TEE International, it will be able to book net proceeds of $48.27 million. “The disposal of our stake in TEE Land will help to improve TEE Group’s financial position, free up cash to be used in our core engineering and infrastructure businesses, as well as other complementary businesses,” says Eric Phua Boon Kin, interim group CEO of TEE International.

“We can also make strategic investments or acquisitions that can help us progressively build our recurring revenue streams,” says Eric, the younger brother of CK, who stepped down in September after he was found to have made unauthorised money transfers from the company to entities controlled by himself.

The funds have since been reinstated in full.

Pricewaterhouse Coopers Risk Services Pte Ltd has been appointed as an external investigator to look into this matter.

If Amcorp is successful in acquiring the stakes from TEE International and CK, it will make a mandatory

general offer at the same price of 17.9 cents to buy over the remaining TEE Land shares from other shareholders. Amcorp plans to keep TEE Land’s listing status.

TEE Land has a couple of existing projects in the pipeline, notably, 35 Gilstead. When TEE Land bought the freehold site then occupied by Casa Contendere condominium back in November 2017, it was the company’s largest ever property project.

Developers who tee off together cost government $147 mil a year in land sale revenue: NUS study

A study by the National University of Singapore (NUS) Business School has raised a red flag over property developers who exchange information on the green.

Senior executives of real estate development firms who have informal exchanges with their peers while golfing acquired government land parcels at 14.4% lower bid prices, according to the study.

Between November 2010 and May 2014, these lower bid prices translated to losses in land sale revenue for the government of more than $147 million per year.

On average, this amounts to about 0.2% of government revenues and around 1% of total land sale proceeds.

“Senior executives such as directors and CEOs gather information through informal social networks to improve their companies’ performance,” says Professor Sumit Agarwal, a Low Tuck Kwong Distinguished Professor in Finance and coauthor of the study.

“While information sharing is not prohibited by law, governments whose fiscal revenue relies on a large proportion of land sale revenues must be prudent of developers’ behaviour on the golf course to ensure a competitive land auction market,” he adds.

Evaluating how informal interactions via golf games affect information exchanges, the study compared data including the golfing activities of senior executives of land bidding property development firms with the bidding results of government land auction announcements.

According to the study, golf patterns of corporate top executives rose sharply following the semi-annual releases of the government’s land sale schedules in Singapore.

Relative to the week before such announcements, developers increase the frequency of golf games with other developers by 14% in the first week after the land sale announcements, and 24% in the second week.

Notably, it found that the sale prices of new residential units are about 8% lower when senior executives of real estate development firms have informal exchanges while golfing.

In addition, the study noted such land transactions by informed bidders generate short-term negative spill-overs to other properties in the vicinity.

According to the study, the prices of neighbouring projects are about 9.9% lower within 30 days after the land auction results are publicised.

“The ripple effect is seen when these lower land transaction prices send a negative signal indicating a downward market trend for property prices,” Agarwal says.

The study was co-authored by Professor Sing Tien Foo, head of Department of Real Estate and Director of Institute of Real Estate and Urban Studies (IREUS), together with Assistant Professor Qin Yu and PhD student Zhang Xiaoyu of the Department of Real Estate at the NUS School of Design and Environment. –