Tuesday, April 11, 2006

The Hotel Properties Limited (HPL) Saga

The HPL episode that sparked off a political storm in Singapore in 1996 has been buried alive by the PAP. But its ghost will continue to haunt those involved.

INTRODUCTION

It all started when the Stock Exchange of Singapore (SES) censured a publicly listed property development company called Hotel Property Ltd (HPL) for not seeking shareholders' approval for the sale of some of its condominium developments at a discount price.

Dr Lee Suan Yew, Lee Kuan Yew's younger brother, was on the board of directors of the company. He had purchased a unit in a condominium project developed by HPL called Nassim Jade.

Shareholders of HPL had been grumbling about the way business was conducted in the company especially when it came to dealings with the Lee family. Many of the shareholders were waiting to buy units at the said project. When the launch of the property never came to pass, the shareholders saw red and demanded an explanation.

The stock exchange authorities quickly announced that HPL had breached regulations. One day later, Lee Kuan Yew and his son, Lee Hsien Loong, publicly revealed that they too had bought HPL condominiums. The story made headlines and started tongues wagging. The story was then traced back to one Ong Beng Seng, a property tycoon in Singapore, and Managing Director of HPL.

Ong had developed two condominium projects at the choiciest districts of Singapore. One was the abovementioned Nassim Jade situated where opulent and expansive embassies and mansions were located around Nassim Road. The other, Scotts 28, was at the heart of Singapore's shopping and tourist district Scotts Road. Both projects consisted of condominum apartments valued at millions of dollars per unit before the property slump.

MORE RED FACES

It was also revealed that not only had Lee Kuan Yew, his brother and his son purchased these apartments, they were offered substantial discounts to boot. The apartments were due to be put on sale on the open market on 17 April 1995. Three days before the official launch, HPL conducted a "soft launch" where a select group of potential customers were invited to have first go at the apartments. This was not exactly an unheard of practice amongst property developers. The problem was that because HPL was a publicly listed company, it had shareholders to account to. Rules under the SES Manual Listing stated that approval had to be sought for transactions involving "connected persons" of the company involved and those persons' associates. The HPL did not seek the permission of its shareholders. Suan Yew, Lee's brother, was a non-executive director of the company.

At the soft launch, Madam Kwa Geok Choo, chose an apartment to buy. She was quoted a price of $3,578,260 (or $1,583 per square foot) for the apartment. This was a seven percent discount on the list price. Buyers at soft launches are usually given only a five percent discount.

Later, Kwa Geok Choo contacted her son, Hsien Loong, and told him of the Nassim Jade apartments upon which he called Aunty Pamelia Lee, wife of Uncle Suan Yew, and said that he and his wife, Ho Ching, were interested in buying the property as well. Aunty Pamelia then later came back to her nephew and offered him an apartment for $3,645,100 a discount of 12 per cent or $437,412 on the asking price. The Deputy Prime Minister accepted the offer.

This was not all. On the Scotts 28 condiminiums, similar offers and purchases were made. Lee Kuan Yew and son bought two more units and paid $2,791,500 and $2,776,400 respectively for them, each bagging a five percent discount.

All in all, Lee Kuan Yew received from HPL a total of $416,252 whilst Lee Junior got $643,185 in discounts. All the purchases amounted to more than $10 million and were carried out without mortgages and loans.

And yet, this was just the tip of the iceberg.

It was later found out that Lee Kuan Yew's entire family was in on the purchases. Daughter Lee Wei Ling, a medical doctor in a government hospital; sister Lee Kim Mon; and his two other brothers Freddy and Dennis; Kwa Kim Li, a niece of Lee; and Gloria Lee, Lee's sister in law, all bought the condos at hefty discounts. Wei Ling bought two apartments at Nassim Jade and was reported to have sold one off for a tidy profit. Again, all these transactions were carried out without the approval of the shareholders of HPL.

SHAREHOLDERS' ANGER

News was leaking out about the Lee family's purchases of the HPL condominiums and the shareholders were getting increasingly alarmed and disgruntled. When pressure was brought to bear on the management, HPL decided to belatedly seek the approval of its shareholders a full eleven months later.

The SES had no choice but to issue a statement censuring HPL for the breach of regulations. It noted that some of the discounts given to directors and their relatives in respect of the Nassim Jade units were higher than those given to non-related buyers and that the publicly listed companies have a duty to obtain the best price so as to maximise the return to its shareholders.

UNANSWERED QUESTIONS

In spite of this, there was no investigation nor inquiry, merely a censure for the company. Meanwhile, Lee Suan Yew quietly resigned as a director with HPL. To date, many questions remain unanswered:
1. Who made the decisions to sell the apartments at such discounts to the Lee family?
2. Who authorised Pamelia Lee to sell the units to her relatives?
3. How many more relatives or friends, apart from those readily identifiable, bought the units through such connections?
4. Why did Ong Beng Seng, owner of HPL, offer the units, and presumably the discounts, to the Lee family?
5. Why was there no enquiry into Lee Suan Yew's involvement in affair?

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