BANK Negara Malaysia overpaid for the land it bought from the Finance Ministry for RM2.066 billion, said property valuers polled by The Star.

The proceeds from the sale of the 27.27ha plot were subsequently used to service 1Malaysia Development Bhd’s debt obligations.

The report said although the transaction was concluded at RM703.44 per sq ft (psf), the special-purpose vehicle created by the ministry to undertake the transaction initially wanted “four figures on a psf basis”, but the price was negotiated down.

It said there was “no need” for BNM to pay RM703.44 psf for the land, which the bank wanted for its own training purposes due to its location next to BNM’s Sasana Kijang complex.

In another ministry transaction in 2016/17, said the report, the price psf for a 7.7ha plot near the palace was beaten down from RM1,000 to RM775.

A ministry release on May 24 said the RM2.066 billion from the sale of Lot 41, and Khazanah Nasional Bhd’s redemption of investments amounting to RM1.199 billion, were used to service 1MDB’s debt obligations.

The ministry paid RM6.98 billion on behalf of 1MDB between April 19 last year and May 11, said a May 22 statement.

On BNM’s purchase, The Star spoke to five valuers, four of whom compared the parcel with the ministry’s sale of a 7.7ha plot located near the palace to Jakel Land Sdn Bhd in 2016/17.

That plot was put up for tender at a reserve price of RM833.3 million, or RM1,000 psf, in the first quarter of 2016.

The ministry dropped the price in a second open tender later that year. The sale was concluded at RM774.90 psf, or RM646 million, 22% below the original advertised reserve price.

Those polled used the Jakel land sale as “the market benchmark”, although it is about a third of the size of BNM’s land.

“We have two plots of land sold at about RM700 psf around the same time, in the same area. Because BNM’s land is bigger, on a psf basis, BNM’s psf should be a lot lower than Jakel’s RM775 psf,” a valuer told the daily.

“So, let’s drop that to RM500 psf, although I am not saying the price should be that.”

BNM Governor Muhammad Ibrahim said the transaction was done at arm’s length and concluded after “several months of discussion”.

Finance Minister Lim Guan Eng has revealed that 1MDB cannot meet its debt obligations on its own, and needed the ministry to pay off nearly RM7 billion of its debts and interests last year.

Funds that 1MDB claimed originated from its sale of power plants as part of its “rationalisation programme” had, instead, come from BNM through the land deal.

BNM, on January 4, said it had agreed to purchase a plot from the government for about RM2 billion after several months of discussions.

1MDB is the subject of money laundering investigations in at least six countries, including the US, Switzerland and Singapore. In civil suits, the US Department of Justice alleges that US$4.5 billion (RM18 billion) has been misappropriated from the state investor. – May 30, 2018.