I read with much interest of the recent altercation in our Parliament between the finance minister and a former prime minister about the sale of the Malaysia Building which is located at 47-50 Gloucester Road on Hong Kong Island.
I am rather disappointed that our government has decided to dispose of the building. It shows yet again that government has no business to be in business.
I had suggested to the senior-most official in our Ministry of Finance in December 2017 that we should tear down the building and put up an ultra-modern green building in its place. That option is now irrelevant.
Our government agreed to purchase the 25-storey Lap House, as it was then called, on Feb 14, 1980.
The signatories of the sale and purchase (S&P) agreement were the then Malaysian commissioner Zainal Abidin Alias and John Chuang, the managing director of the Lap Heng Company. The sale was arranged by an agent from Richard Ellis & Co. The purchase price was HK$212 million.
The idea of purchasing a property in Hong Kong had been simmering since March 1979 and it was given a fillip with a brief visit by the then deputy minister of foreign affairs, Mokhtar Hashim, in mid-November 1979. He had proposed the idea to the then finance minister, Tengku Razaleigh Hamzah.
When Razaleigh visited Hong Kong en route to the United States in the second week of December 1979 for the celebration of the third anniversary of the opening of the Bumiputra Malaysia Finance (BMF) office in Hong Kong, it had been intimated to him that the owners of Lap Heng House were seeking offers for the building. The price mentioned was HK$250 million.
After the visit, Razaleigh had directed a team comprising of several senior civil servants to look into the possibility of acquiring the building. The team consisted of representatives from the Ministry of Finance, including its legal and valuation departments, the Prime Minister’s Department (Buildings), and Wisma Putra.
I was asked to liaise with BMF officials who had claimed that they had access to vendors of Lap Heng House. No senior official from the merchant bank was however available to assist the team during the visit.
It would seem that they had taken fright on hearing of the impending arrival of a team of professional civil servants and had hurriedly travelled out of Hong Kong. I recall a fruitless walk along Des Voeux Road, Central, with the team and a woman on a relatively sunny day. The woman, Carrie Woo, claimed to know of buildings that were available.
We were then led to believe that Lap Heng House had already changed hands because our government had been too slow in its response. The mission was then aborted.
Jan 30, 1980, a Wednesday, was a working day in Hong Kong. Our office was however closed to observe Prophet Muhammad’s birthday. That day I met a Caucasian woman who asked me if our government was interested in making any property purchases. I told that woman that we had been interested at an earlier stage. Arising from this disclosure, I received a call on Feb 4 from an agent of Richard Ellis.
When I first met the agent, I bluntly told him that we had a budget of HK$200 million. In actual fact, we had no budget whatsoever as the budget had lapsed with the end of the previous year. To my surprise, he did not seem put off by this relatively low offer. My implausible offer was a long shot, prompted by information obtained through the grapevine that BMF was seeking a prospective buyer for about HK$265 million.
Surprisingly the initial quote which the agent provided was HK$250 million. As the days went on, I stuck to my HK$200 million unauthorised offer while the agent was going lower and lower down to HK$232 million.
In the meantime, I was not able to convince any of my superiors in Wisma Putra to allow me to negotiate the price. The little Napoleons just would not have it. They would later penalise me for not obeying their orders.
I then decided to telephone directly the then secretary-general of the Ministry of Finance, Thong Yaw Hong, and he was a lot more helpful. He agreed to take up the matter with his minister.
Eventually when I met up with John Chuang. I enquired if he had a valuation for the building. Chuang gave me a copy of the valuation which was for HK$223 million. The valuation was by Jones, Lang Wootton and it was six months old.
On that basis, he agreed to a midpoint price of HK$212 million given my persistent offer of HK$200 million.
Fong Keh Chong and AB Marbeck of the Valuation Department had earlier valued the property at HK$230 million (the breakdown was HK$80 million for the building and the balance was for the land). KC Vohrah, the then treasury solicitor, had advised me of the correct procedures for the purchase. Mohd Salleh Ahmad of the Ministry of Finance encouraged me to pursue the deal.
The Ministry of Finance then authorised us to engage a lawyer and deposit a sum of HK$5 million as earnest money and inform the vendor’s lawyers of our intention to purchase the property. The law firm that acted for us was Hastings & Co. The young lawyer who handled the matter was Helen Kong, currently the managing partner of the firm.
On Feb 14, 1980, we formalised the S&P agreement and took possession of the building on June 1, 1980.
The first reception we held at the building was the Agong’s birthday celebration. In those days, the Agong’s birthday was always celebrated on the first Wednesday of June.
Interestingly both Teh Yik Koon in her ‘From BMF to 1MDB’ and Ian Robinson in his ‘The Joker’s Downfall’ trace the beginnings of BMF’s deeply flawed lending policy and practice to the first loan of US$292 million given to the Carrian Group to acquire Gammon House in December 1979.
Robinson makes the assertion on page 105 that “BMF was responsible for enabling the first phase of the Carrian story to become reality, and so legitimised George Tan and his relatively small company. Basically, the bank financed the start-up.”
BMF wanted to be the intermediary in the purchase of Lap Heng House in December 1979. I did not trust their officials and worked quietly on negotiating with the vendor without their involvement or knowledge. Luckily, Razaleigh acquiesced and we saved the government a huge sum of money.
It is reassuring that there is no record or mention of my role in the purchase of this building in any document in Wisma Putra. It was an agency that guarded these secrets well. Thong, the Ministry of Finance secretary-general however wrote and congratulated the secretary-general of Wisma Putra for this effort. A copy of this letter dated May 14, 1980 is in my possession.
Dato’ M SANTHANANABAN was the First Secretary at the Malaysian Commission in Hong Kong from November 1978 to July 1981.