Sunday, April 22, 2012

EGM Update: Calvary Church to Sell Church Properties

As the Calvary Convention Centre (CCC) gets built, the pressure on Senior Pastor Prince Guneratnam (PG) and his Deacons to raise the money to pay the Contractors also begins building up.

The slowdown in members’ giving and the failure to secure additional loans despite the assistance of Exsim, is forcing PG to resort to premature selling of the bungalows around the main Church Sanctuary in Damansara Heights. 

At a specially convened EGM last Friday, 20 April 2012, he sought the approval of the members for a general mandate to sell 5 out of the 6 bungalows to raise the shortfall in funds required to complete the CCC. 

CCC Progress Update

Before the Resolution was put to the vote, Deacon Ngeow Zoo Gin presented an update of the progress of the construction of the CCC. He informed the members that the physical completion is expected to be in August this year, with the Certificate of Fitness anticipated to be issued by March next year. The Church hopes to be able to hold the Good Friday and Easter services at the CCC next year.

Financial Update

He shared that the challenge is to raise RM97.6 million being the Balance of the Construction Cost of RM200 million by 31 December this year. 
The Church projects an Income Surplus of RM5.8 million for the rest of this year including fund-raising and after netting off the Interest Payable to the Banks on the loans drawn down. 

The balance of the loans available for draw down is RM28.8 million while the balance of Sales Proceed of the commercial land due from Exsim is RM36.5 million. 

After taking into account of the above, the net cash shortfall is RM36.5 million.

Proposal to sell Bungalows

To partly meet this required funding, a mandate is now being sought from the members to sell the 5 bungalows.  

Deacon Ngeow explained that based on the valuation done on one of the bungalows in April last year which was RM400 per sq ft, the total estimated value of the 5 bungalows is RM22.7 million. A recent verbal estimate by the same Valuer puts the market price at RM450 per sq ft.

CT notes that, in his estimation of the value of the bungalows, he did not elaborate whether he imputed any value for the building or taken into consideration the fact that all the bungalows are not “livable” as they have been renovated for Church ministry use. 
He has also obviously not considered the possibility that a few of the bungalows, being situated nearby or adjoining the main Church Sanctuary may not be able to sell or be able to fetch the market price that he expects.

He said that the bungalows may be sold either individually or on an en-bloc basis. There are discussions ongoing with several parties for sale on an en-bloc basis. The sale of the bungalows may be an outright sale or a sale with an option for the Church to buy back.   

Resolution Proposed

The Resolution proposed encompasses the following points:-

1.    That the Board of Deacons is authorized to sell any or all of the 5 bungalows along  Jalan Damansara Permai namely the Antioch Bungalow (No. 2), Capernaum Bungalow (No. 3), Berean Bungalow (No. 15), Bethel Bungalow (No. 21) and Bethlehem Bungalow (No. 27) on the following terms:-

a.  That the Sale Price be fixed at an average market price at the very least, determined after 2   independent Valuations have been carried out in respect of the property or properties intended to be sold.

b.  That the property or properties be sold to person/s or body corporates who are not in a conflict of interest position with members of the Board of Deacons or Pastors.

c.  That the terms of the sale may, if required, include a buyback clause at a price of up to 35% higher than the Sale Price, exercisable over a 5-year period.  

d.   That the proceeds of the sale/s, be used exclusively to defray the cost of such sale/s and to fund the continued construction of the CCC.

e.   That the full details of the sales/, once transacted,  are notified by displaying such details on the    Church notice board or the next General Meeting immediately following such transaction.

2     That the Trustees of the Church and the relevant members of the Board of Deacons be authorized to execute all documents.

3.   That this Resolution will be valid until 2014 AGM or unless sooner revoked.

The Resolution was put to the vote and was approved by the members. Out of the attendance of 310 members at the EGM, only one lone brave hand went up to object to the sale of the bungalows. 

Proposal to set up a SPV to manage CCC
Deacon Chow Sang Hoe presented a preliminary report on the issue of maintenance of the CCC and marketing of the facilities to the public to generate income to cover the maintenance costs. 

The present decision of the Board of Deacons is to set up a separate entity outside the Church to run the management of CCC. Towards this, the proposal is to incorporate a new company, that is, a Special Purpose Vehicle (SPV) to be owned and held by a professional Corporate Trustee in trust for the Church or a Trustee Company set up by the Church. 

The SPV, will, in turn, appoint external service providers to maintain and to market the facilities. The committee had approached 13 service providers and 8 had expressed an interest to handle the functions. From the 8, the committee has selected 5 to submit their proposals by end of this month. However, 1 service provider has since declined while the remaining 4 service providers have yet to submit their proposals.  

Deacon Chow lamented that it is a challenge to get a service provider for CCC because  the church has imposed a requirement that Sundays are reserved for the Church’s use. He acknowledged that in the secular world, most exhibitions, forums and seminars are held over the weekends and therefore, it is hard to market CCC’s facilities. He appealed to the members to pray for this matter.

CT Comments
Although the Resolution to sell the bungalows was passed, the actual sale of the properties will be challenging. The close proximity of the bungalows to the main Church Sanctuary will be a matter of concern as well as a bargaining point for potential buyers due to the traffic congestion and parking problems on Sundays and during other services on weekdays. 

Even if PG goes back on his earlier assurance that he will not sell and close down the main church here (it is highly probable that he will sell, out of desperation to raise funds), the buyers will still be concerned what the future development will be on this site.  

On another note, even if all the 5 bungalows are sold for RM22.7 million (assuming any further appreciation balances out the cost of sale), there will still be a shortfall of RM3.8 million for this year. This is on the assumption that Exsim pays up the RM36.5 million this year as projected by Deacon Ngeow.

However, this is a big question mark. Under the Terms of Sale of the commercial land to Exsim, Exsim has the right to terminate the Sale and Purchase Agreement, should they fail to obtain the Development Approval from the authorities. If this happens, the church has to refund every sen paid by Exsim todate. 

This will be disastrous to the Church!