A GIANT logging company in Sarawak is alleged to be at the heart of the housing bubble that led to the sub-prime mortgage crisis and the world economic crash.
Sarawak Report identified the company as Samling, owned by tycoon Yaw Teck Seng who has been favoured with numerous timber licences by Chief Minister Abdul Taib Mahmud.
"We have established that Mountain House, a major new-town development in San Joaquin California, currently labelled as the ‘epicentre’ of the housing crash, was a Yaw family project," said the online publication.
Started in 2001, Mountain House was originally advertised as “The Town of Tomorrow” and "The American Dream Made Reality” with houses selling for over US$800,000 (RM2.6mil), mainly through sub-prime mortgages.
But, in the aftermath of the crash, the part-built project has been abandoned by the original developer and the town has been identified as the most “underwater” community in America, with over 89% of the properties now worth far less than the amount of money borrowed to buy them.
The prices of these houses are now half what they were in 2006, leaving buyers in a repossession nightmare.
Samling’s extraordinary involvement at the centre of the world’s greatest financial scandal was the culmination of years of massive investment in real estate across the United States, according to research by Sarawak Report. This investment came out of the profit from logging in Sarawak under permits granted by the Chief Minister and Resources Planning Minister Abdul Taib Mahmud.
Following last week’s condemnation of Samling Global by the Norwegian government as an "unethical" company, involved in "illegal logging" and "environmental devastation" in Sarawak, Sarawak Report revealed how a Yaw family subsidiary, CSY Investments, had passed US$2mil (RM6.4mil) mansions to the Taib family in Seattle, in what appeared to be an unrecorded property tranfer linked to a US$1 Quit Claim deal.
Sarawak Report went on to say that CSY Investments formed just part of a multi-million dollar web of Yaw-owned companies in the United States, primarily involved in property development. These companies were subsidiaries and affiliates of SunChase Holdings Inc, a California registered company incorporated in 1988 by Chee Siew Yaw, a son of the Samling boss.
With Yaw junior as its original president and chief executive, SunChase Holdings has been involved in a number of massive land-deals across the United States, including “the largest real estate partnership ever formed with the US government”, according to its own publicity.
The registered shareholder of SunChase Holdings was, until recently, Universe Limited, a Liberian company, which according to an investigation by the US Securities and Investment Commission (SEC), was "controlled by Hiew Teck Seng and the Yaw family, all citizens of Malaysia”. The companies and subsidiaries linked to SunChase Holdings are mainly operated out of Phoenix, Arizona.
SunChase Holdings has clearly been exceptional among US development corporations in possessing an extraordinary level of shareholder capital from the very beginning.
Straight after graduating from California State University, Sacramento, with a BSc in Real Estate, Land Use and Finance in 1986, the youthful Chee Siew immediately demonstrated his access to enormous sums for investment.
One of his first subsidiary ventures was Trimark Communities LLC, set up in July 1988, with himself as President. This became the company behind the disastrous Mountain House town project. Documents released by San Joaquin County state that between 1990 and 1992 Trimark bought over 70% of the 7.8 square mile site outright and began seeking approval for a half billion dollar development project comprising the largest housing scheme in California.
Approval was finally granted after two decades of lobbying and in the face of lawsuits filed by the State Department of Fish and Game over environmental concerns.
Meanwhile, SunChase had impressed the authorities with numerous other grand-scale projects in which it played the main investor. The company claims it specialises in building "large-scale, master-planned communities" and "managing distressed real estate assets"(repossessed property).
In particular SunChase emerged as the top bidder for Resolution Trust Corporation (RTC) land auctioned off by the US Federal Government in the aftermath of the Savings and Loans crisis of the late 80s.
The National Land Fund set up partnerships between the Government and private investors to take control of billions of dollars worth of ‘distressed real estate assets’ offloaded by troubled lending companies, usually at rock-bottom prices. Sunchase was the biggest private investor in the scheme, obtaining US$2bil (RM6.4bil) of assets, according to the company.
A Federal Audit Report issued in 1999 confirms, "In April 1993, the RTC selected SunChase Holdings, Inc, as the winning bidder for five of the six pools of assets offered in the National Land Fund I initiative”.
Indeed, Sunchase currently boasts: “The company is proud of its heritage as the managing general partner in the National Land Fund, the largest real estate partnership ever formed with the US government”.
Mountain House finally gained planning permission on the basis that it promised to create a sustainable, self-contained new town that would create sufficient jobs for its inhabitants.
The original county Master Plan promised affordable housing to meet the Bay Area housing crisis, together with retail and business outlets. But from the start sceptics pointed out that the project looked more like a ‘get-rich-quick scheme’ by the developer with little provision for real employment.
Indeed, the promotional material by Trimark Communities clearly targeted the aspirations of middle-class Californians looking for grander accommodation in an area of housing shortages.
The company marketed Mountain House, as the American Dream in the Town of Tomorrow, promising traditional-style, detached houses built around 14 separate ‘village’ settings, each with a school, leisure centre, open spaces and commercial heart for business enterprises.
Although the San Joaquin authorities had understood that houses would be priced around an affordable $200,000 (RM640,000), the demand for grander homes and the availability of dubious lending mechanisms and sub-prime loans meant that prices before the crash in 2007 were topping four times that amount.
Within weeks of the crash, all had changed.
Sixteen thousand houses were supposed be built, providing accommodation for 44,000 people, in the most ambitious development project in California for decades, but as the lending market collapsed, the Yaw family pulled out.
Trimark Communities was dissolved in California and Chee Siew returned to Asia, claiming that he had divested all his US interests in 2006. As a result, Mountain House has been left part-constructed and famous for being the repossession capital of the USA.
The main losers in the disaster have been the thousands of buyers who lost their their homes and the California Public Employees Retirement Scheme (CalPERS), which had invested heavily in the project on behalf of its future pensioners. CalPERS is believed to have lost US$926mil (RM2.9bil) of the value of its orignal US$1.2bil (RM3.8bil) investment in the project.
Those people who have remained in Mountain House have found themselves paying huge mortgages on low-value properties in a part-built town.
According to one victim: “Landscaped lawns face fields of weeds. Sheep graze on the future golf course. While two schools (out of a promised 14) have been built and a third is under way, there’s just one retail business, a convenience store. The closest supermarket is five miles away. A multimillion-dollar bridge - designed to link the southern and northern halves of town - has been fenced off. It’s our bridge to nowhere”.
Like the indigenous people of Sarawak, the people of Mountain House are now living with devastation wreaked on their lives by Samling.
According to one, "all they did was build as many houses as they could as quickly as possible to cash in on profit before the bubble burst”.
In 1991, a study by the World Bank concluded that only a fraction of the possible revenue that could have been raised from timber was flowing to Sarawak.
The problem was described as a major "leakage of public resources", which explains why the people of Sarawak have received few benefits from the loss of their valuable rainforest and remained among the poorest in Malaysia.
Full article in Sarawak Report