Sunday, January 1, 2012

Calvary-Exsim deal becomes riskier

At the recently convened Calvary Church EGM on 16 Dec 2011, the Board of Deacons sought the approval of the members to vary the terms of the Calvary Church-Exsim Development Sdn Bhd joint venture on the commercial plot of land adjoining the Calvary Convention Centre (CCC) project.

The variation sought was to allow the title and ownership of the land to be transferred to Exsim upon the receipt of the amount of RM20 million, out of the total agreed purchase price of RM55 million. The variation was approved by the members.

Under the previously approved terms, the title to the land was to be transferred to Exsim only after the receipt of the full sum of RM55 million. However, this situation is not desirable as it would mean that Calvary Church, as land owner, will be a party to every sale and purchase agreement that will be signed in respect of the apartments sold. This, in turn, will result in severe tax implications as highlighted in our previous article on this issue.

(Read Calvary Enters JV with Property Developer dated 22 October 2011.)

One of CT’s readers had sent the article to all the deacons and pastors of Calvary Church, and having taken note of the concerns raised by CT, the Deacons have now come up with the above variation in the terms.

Whether this new revised Agreement will enable the church to avoid Income Tax on the Church’s share of profits from the Development, is too early to tell. Such a risk remains, so does the questions of ethics. Jesus did say that we ought to “give to Caesar what belongs to Caesar” when He was asked if one should pay taxes.

Aside from the issue of tax, the new revised terms, raises a new risk. Previously, the title was to be transferred to Exsim only after the full sum of RM55 million is received. If the Development project is successful, Exsim will have to pay the Church in full in order to secure the title to the land and to enable them to sub-divide and transfer the strata titles to the apartment purchasers.

Now, if the title is transferred to Exsim after they pay only RM20 million, Exsim is no longer under any pressure to pay up the balance RM35 million.

Exsim may have promised to pay the RM35 million in staggered payments over the next 4 years and this may be clearly stated in the agreement but the fact is the church has no collateral or further control over the land. Exsim can very well stretch out the payment over the next 10 years or ask for a discount. In the worse case, the matter may end up in the civil courts for years.

Two Directors of Exsim have agreed to guarantee the RM35 million balance amount but however, their personal net worth is unknown and therefore, it is difficult to ascertain if their guarantee is worth the outstanding debt. Besides, enforcement of guarantees can only be commenced after ALL ATTEMPTS of recovery from Exsim have been executed.

This is the most obvious sign that Pastor Prince Guneratnam (PG) has become so desperate to get his CCC built that basic common sense and rationale no longer prevailed.

PG’s desperation bodes well for Exsim.

Why was Exsim selected to be so “blessed” by Calvary Church remains a big question mark?

Who is Exsim?

Actually, very little is known about this joint venture partner of Calvary Church. As reported in our earlier article, Exsim Group is a small, industrial and commercial lot developer, which recently undertook a residential condo development called the “The Treez” in Bukit Jalil.

From the Exsim website and “The Treez: brochure, the “the Treez” project was developed by Jalilmax Development Sdn Bhd,.

A search at the Companies Commission revealed that Jalilmax was incorporated on 8-8-2005. The directors of Jalilmax are Lim Aik Hoe, Lim Tau Fong and Lim Aik Kiat. Exsim Development Sdn Bhd is listed as the current owners of Jalilmax.

On the other hand, Exsim Development Sdn Bhd was incorporated only on 14-10-2009 with a paid-up capital of only RM100,000. Its directors are Chong Peck Ee, Loo Yoke Foong, Puang Wan Ching and Wong Siong Lin.

The directors of Exsim and Jalilmax are totally different people. Perhaps, the information
available from the Companies Commission has not been updated but the fact remains that Jalilmax was set up earlier and taken over by Exsim only after 14-10-2009.

With only a paid-up capital of RM100,000, Exsim does not even qualify to apply for a Developer’s Licence. The law requires a Developer to have a minimum paid-up capital of RM250,000 before they can be issued a licence to commence any property development.

It is quite likely that Exsim will incorporate a new subsidiary company to undertake the development of Calvary’s commercial land as is normally the case with property development groups where the holding company remains purely an investment holding company while the subsidiaries are the actual developers. This is to protect the holding company from legal liabilities should any development goes sour or gets entangled legally or financially.

The gross development value (GDV) of Exsim Group’s total projects are a mere fraction compared to the GDV of the big players like Sunway, Glomac, Sime Darby, MK Land, SP Setia, and Sunrise whose GDVs run into tens of billions of ringgit.

So is PG taking a “gamble” with a small company like Exsim? He certainly is!

With the 2013 Pentescostal World Conference in Kuala Lumpur looming near, PG is desperate. He had already announced to the world that he is hosting the conference in CCC and so, it will be a huge loss of face for him, if the CCC is not completed in time.