Boustead reclamation deal: Please explain

By Anil Netto,

Could someone please explain this deal to me. Despite my finance background, I am sorry I don’t understand.
Boustead was claiming RM60 million in compensation for scaling down its project in the world heritage zone in George Town.
In return for giving up that claim, it is now reportedly allocated land/reclamation area “very much less” than 100 acres in the southeast of Penang Island. How much less than 100 acres and how much is the gross development value of this land/reclamation area? (The Edge estimates that the entire 97-acre site could fetch RM870 million.)
Huh? They give up RM60 million in compensation and now they are allocated an area that could fetch hundreds of millions of ringgit? Could someone please explain with precise figures.
In the recent past, under BN rule, a couple of the major land reclamation deals in Penang – worth billions of ringgit in gross development value (GDV) – landed up with big property development companies. And what did the Penang state government get in return for handing over all this prime waterfront stretches? A pittance (whether in cash or kind) compared to the GDV. Are we seeing a continuation of this trend?
How much did the state government actually earn from all these deals? We need more transparency on all past and present land reclamation deals. We should demand a  detailed accounting that should be independently audited and made public.
This is the report in The Edge:

Boustead may get to reclaim land south of Penang Bridge
Written by Regina William
Tuesday, 14 September 2010 14:26
GEORGE TOWN: Boustead Holdings Bhd will be allowed to reclaim an area south of the Penang Bridge as compensation for scaling down its Royal Bintang Hotel project from 12 floors to five floors as required by Unesco for declaring George Town a World Heritage Site, according to sources.
They told The Edge Financial Daily that Boustead will be allowed to reclaim an area “very much less” than 100 acres between the existing Penang Bridge and the Penang Second Crossing (P2X) in Batu Maung.
The reclamation will be carried out to the south of Bayan Mutiara, which the state government recently tendered out to be developed in a bid to raise much-needed funds for its social programmes.
The state had made a request for proposals (RFP) for the multi-billion ringgit development of almost 100 acres (40.47ha) of land at Bayan Mutiara, which under the previous Barisan Nasional (BN) state government had been earmarked for a new state administrative centre.
The RFP, inviting local and regional players, is for the development of 62 acres of Bayan Mutiara, a new development area south of the Penang Bridge overlooking Pulau Jerejak, with the potential to develop an additional 35 acres via reclamation after the development of the initial 62 acres.
The reserve price of the Bayan Mutiara project is expected to be above RM200 per sq ft which would mean that the 97-acre site (62 acres with 35 acres to be reclaimed) could fetch over RM870 million.
It is learnt that Boustead is planning to develop the reclaimed area into an integrated township with upscale housing and commercial components.
With Boustead being allowed to reclaim the area, almost the entire eastern shoreline would be reclaimed from the south coastal area of Pantai Jerejak right until the end of Jelutong coastal expressway.
The reclamation is part of the compensation for Boustead due to its hotel project having to be scaled down in accordance with Unesco requirements.
After a year of negotiations and demand from Boustead for land as compensation for scaling down the project, it was agreed that the company would be allowed to reclaim land along the coast.
The state government and Boustead have agreed in principle to the proposal and Boustead has also backed down from its initial RM60 million compensation claim from the Penang Island Municipal Council (MPPP) and will only seek abortive costs for having to amend its plans. It is also learnt that both parties will move ahead to appoint a third party to ascertain the abortive costs.
With the talks having just been concluded, the paperwork is now being completed with Boustead preparing the draft agreement. t is learnt that Boustead would soon submit its amendments to the MPPP and proceed with the construction of its hotel, which had stalled at five stories. Sources said Boustead was fighting for time to complete the project by November.
The state government had directed the developer to scale down the project to meet Unesco’s requirement of 18 metres or five-storey height in the core heritage zone of Weld Quay following George Town’s inscription as a Unesco World Heritage Site on July 7, 2008.
In a report on April 5, Bousteaddeputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin was quoted as saying the height of the new Royale Bintang Hotel would be reduced, but that Boustead was seeking compensation, which could include land.
The Royale Bintang Hotel project was among four projects affected by the Unesco ruling in the core zone of the World Heritage Site in George Town.
There were no problems with the other three projects, namely Asian Global Business Sdn Bhd’s (AGB) Rice Miller Weld Quay Development in the core zone; Eastern & Oriental Bhd’s annexe building of the E&O Hotel in the buffer zone; and Low Yat group’s project along Jalan Sultan Ahmad Shah.
This article appeared in The Edge Financial Daily, September 14 2010.