This article was first published on TR Emeritus on 10 August 2014.
*Mr Chua Thian Poh was also recently named as an adviser to the non-profit organisation Honour (Singapore).
Yesterday (9 Aug), it was announced that billionaire property tycoon Chua Thian Poh, who is the Chairman and CEO of public-listed company Ho Bee Land Ltd, was awarded this year’s National Day highest award – the Distinguished Service Order (‘Property tycoon receives top National Day Award‘).
He is said to have received the award for his “leading role in the Chinese community” and “contributing to its diverse groups”, from business and social services to medical and clan organisations.
Mr Chua is also the President of the Singapore Federation of Chinese Clan Associations; Honorary President of the Singapore Chinese Chamber of Commerce and Industry; as well as Chairman of the Ren Ci Hospital, Business China, and the Board of Trustees of the Chinese Development Assistance Council.
On top of that, he is a long-time grassroots leader, serving as Chairman of Bishan East Citizens’ Consultative Committee.
According to ST (‘Chinese community leader gets top honour’, 9 Aug), Mr Chua had not been successful in business for many years. His fortunes changed after starting the Ho Bee group of companies and ventured into property development.
Ho Bee then became a leading developer of luxury homes, the highlight being its development of the prestigious residential enclave of Sentosa Cove on Sentosa Island. A pioneer developer in Sentosa beginning in 2003, Ho Bee is today Sentosa Cove’s biggest developer, building a total of multiple high-end condominium, terrace housing and luxurious villa projects [Link].
At $38 million, it worked out to $206 per sq ft based on a land area of 184,636 sq ft of Coral Island. It was the sole bidder for the en bloc sale of Coral Island. The land was said to be able to accommodate 24 bungalow lots. Each bungalow has its own private berth for a 40-ft boat. Coral Island is one of five islands created at Sentosa Cove.
The tender for the 99-year leasehold site offered by Sentosa Cove Pte Ltd (SCPL), a subsidiary of Sentosa Development Corporation (SDC), was closed in Nov 2004. Ho Bee’s bid was 21% less than the lowest price at which SCPL had previously awarded other bungalow plots, which were sold individually.
At the time, Mr Chua was quoted saying, “We hope to reciprocate the confidence SCPL has shown in awarding Coral Island to us by developing it into distinctive and exclusive homes for the rich and famous.”
It was reported that Coral Island was the third parcel of land that Ho Bee clinched at Sentosa Cove. On its two earlier parcels, Ho Bee developed a 200-unit condo called The Berth, and eight terrace houses. These 2 plots were clinched in a maiden tender at Sentosa Cove by Ho Bee in December 2003, a year earlier.
For Sentosa Cove, the government eased rules to enable foreigners to buy landed properties there. In general, foreigners are not allowed to buy landed properties in Singapore.
In 2006, the Auditor-General issued its report for the Financial Year 2005/06, which mentioned about land sales by SCPL. As stated, SCPL is a company set-up by Sentosa Development Corporation (SDC), a statutory board under the purview of the Ministry of Trade and Industry (MTI).
It its report, AGO highlighted deficiencies in the procedures for land sales in SDC. It specifically mentioned that in one tender in Nov 2004, 24 land parcels were sold to a sole tenderer significantly below valuation. It also said that the tender was “neither published nor was the required advice of the Chief Valuer obtained”.
And in the maiden land tender case in Dec 2003, AGO said a former director of the SCPL was allowed to tender for sales of land through a company he controlled, about a month after he “retired” from the board of SCPL. Apparently, before his “retirement”, he was already involved as a board member in deliberating on the Sentosa Cove land sales, AGO said.
Part of AGO’s report for the Financial Year 2005/06:
As it turned out, the said company and director referred to by AGO were none other than Ho Bee and Mr Chua Thian Poh. Mr Chua’s Ho Bee group was involved in both Sentosa Cove land tenders mentioned in AGO’s report – Dec 2003′s and Nov 2004′s.
Indeed, BusinessWeek also confirms Mr Chua’s directorship in SCPL [Link]:
“Mr. Chua holds board positions in many other companies and business organizations, including Board Member of Sentosa Cove Pte Ltd (wholly-owned subsidiary of Sentosa Development Corporation) since November 1996.”
As revealed by AGO, after 33 days he “retired” from SCPL, Mr Chua was allowed to tender for sales of Sentosa Cove land through Ho Bee in the tender in Dec 2003.
MTI defended SDC and Chua Thian Poh
On 6 Mar 2007, MTI issued a press statement to public to clarify AGO’s findings on Sentosa Cove land sale [Link].
MTI defended SDC saying that selling land in a complex mixed development such as Sentosa Cove, it would not achieve “best value” using the normal government methods. SDC therefore formed a private company SCPL to undertake the land sale, adopting practices commonly used in the private sector to better meet market needs.
“These have proven to be effective,” MTI said.
MTI acknowledged AGO’s findings that 24 bungalow parcels were indeed awarded to a sole bidder, Ho Bee Investments Pte Ltd, at a price below valuation.
“This tender exercise took place in November 2004, the year after the SARS outbreak. As it was the first en-bloc sale of bungalow plots, it was then unclear how much risk premium developers were prepared to bear for such en-bloc sites,” MTI said.
“The SCPL thus made a commercial decision, which took into consideration the prevailing market sentiment and the fact that the bid price was still substantially higher than what SDC had paid the State for the land. In addition, being the first en-bloc sale, the valuation process may not have adjusted adequately for the higher perceived risks and uncertainties.”
“SCPL’s key consideration was to maximize the returns from the overall portfolio of land sites in Sentosa Cove, and not that of individual plots. What happened subsequently bears out SCPL’s judgement, as their decision to proceed with the award was followed by the steady build up of market confidence and sales momentum for Sentosa Cove,” it added.
In the Dec 2003′s land sale incident, MTI confirmed that the tender was launched on 22 October 2003. MTI said it “would not be fair or practical” to disqualify SDC or SCPL Board members from participating in Sentosa Cove land sales.
“To put things in context, SDC and SCPL Board members are not disqualified from participating in Sentosa Cove land sales. It would not be fair or practical to do so since we had invited respected individuals with real estate experience to sit on the Board,” MTI said.
“Instead, to ensure transparency and fair competition, Board members wishing to participate in any sale of sites have to declare their interest in writing, and submit a confidentiality undertaking.”
MTI then proceeded to defend Mr Chua Thian Poh. It said, “In this particular instance, the said director, Mr Chua Thian Poh, completed his term of duty as a board member on 31 Oct 2003. He was thus no longer subject to the disclosure requirement.”
“Notwithstanding that, he declared his interest and submitted a confidentiality undertaking on 2 December 2003, and participated in the open land tender exercise that closed on 3 December 2003. Mr Chua’s company, Ho Bee Developments Pte Ltd, submitted bids for 4 land parcels, and won the tender for 2 plots, as it was the highest bidder (out of at least 3 bids for each parcel),” MTI added.
Following the Auditor-General’s observations, MTI said that SDC had reconciled its sale practices with the requirements of the Government’s Instruction Manual (IM), and obtained MOF’s exemption from certain provisions.
“SDC will also further review and tighten the procedures for its Sentosa Cove land sales,” MTI said.
PAC felt SDC’s land sales process not fully addressed
Following the publication of AGO’s report, the Public Accounts Committee (PAC) of the Parliament consisting of MPs, examined the AGO’s report and published its own findings in May 2007 [Link].
PAC said that the departure from the normal government procedures in SDC would cause the public to view the Sentosa Cove land sales as “not being transparent, fair and competitive”.
With regard to allowing ex-directors to participate in the land sales, PAC said MTI had informed the Committee that “SDC had put in place a set of governance measures since October 2003 to ensure transparency and competition”.
“These include requiring all board members to provide a confidentiality undertaking on all privileged information pertaining to Sentosa Cove and the land sales, and to declare their interest if they intend to participate in the sale of sites. Board members participating in sale of sites will not participate in the evaluation of tenders,” PAC said.
“SDC has further tightened these measures to ensure that directors and ex-directors who participate in Sentosa Cove land sales do not have an unfair advantage,” PAC added.
In particular, board members will no longer have access to privileged information pertaining to Sentosa Cove land sales. Board members will be reminded to declare their interest before the close of a sale exercise and those who have done so must excuse themselves from participating in the evaluation of proposals, said PAC.
“The Ministry (MTI) is therefore of the view that there is no need to impose a moratorium period on ex-directors transacting with SDC as they would not have had access to privileged information,” PAC disclosed.
However, PAC also felt that the inherent weakness of SDC’s land sales by “private treaty” was not fully addressed.
“Direct negotiation with a prospective buyer may not result in the best price as compared with an auction, especially, in a rising market. It is also open to abuse as leaked information on reserve price, for example, puts a prospective buyer with such information at an advantage over others,” PAC said.
PAC also noted, “The additional control of not providing board directors with privileged information will not prevent public perception of conflict of interest as directors and exdirectors participating in the sales of land will have access to more background information than others.”
PAC recommended that the procedures and guidelines in question be further reviewed so that land sales by the SDC not only comply with the principles of fair competition, maximizing total returns to Government and transparency, but are also seen as such by the public.
The PAC, the nations highest authority in Parliament responsible for overseeing government expenditures and, ensuring transparency and accountability in government financial operations, did not penalize anyone for the lapses in SDC, as highlighted by AGO. It merely recommended that the government should “further reviewed” the procedures and guidelines “in question”.
The SDC land sale incidents happened during the transition period from George Yeo to Lim Hng Khiang. George Yeo was the Trade and Industry Minister from Jun 1999 to Aug 2004. Lim Hng Khiang took over from him in Aug 2004. The Dec 2003 SDC’s land sale incident happened under George Yeo’s watch while the Nov 2004′s was under Lim Hng Khiang.
George Yeo, of course, was later voted out by Aljunied residents in the 2011 GE.