by Mark Baker
Editor-at-Large, The Age
Onn Mahmud was a wealthy tycoon with a bulging property portfolio when he jetted off without warning in 2007.
Number 10 Wylde Street, Potts Point, commands views to die for on a harbour not short of heart-stopping vistas. Perched high above Woolloomooloo Bay, it faces directly across the sweep of the botanical gardens to the Opera House and the Sydney Harbour Bridge.
For a while, a few years ago, it was the site for one of the most luxurious apartment developments in Australia. In 2008, the duplex penthouse in the five-storey project was sold off the plan for a record price of $20 million.
A year earlier – on the cusp of such riches – the Malaysian tycoon who had brought the project close to fruition abruptly sold the site as he quietly folded most of his substantial Sydney property portfolio and exited the Australian business scene.
After initially being offered privately for a firesale price $9.4 million, 10 Wylde Street was eventually sold for $15.5 million – less than its spectacular penthouse had been on track to fetch and way below the projected revenues of $50 million for the entire redevelopment of the old Oakford serviced apartment building. Virtually no one knew it at the time, but what appeared to have been a disastrous investment reversal in a booming market was, in fact, still a bonanza for a man with money to burn.
Onn Mahmud is the second wealthiest man in Malaysia, with a fortune estimated to be in excess of $2 billion. Malaysia’s richest man is his brother, Taib Mahmud, Chief Minister of the eastern state of Sarawak and reckoned to be worth more than $15 billion. Much of that wealth has come through the family’s control of logging deals that over the past 30 years have levelled most of the tropical rainforest on the island of Borneo. And a substantial slice of that wealth has found its way into investments in Australia.
Onn Mahmud bought 10 Wylde Street in the 1990s through his company, Ryan Park Limited, for $4.7 million. The windfall profit of $10.8 million netted from the 2007 resale had a sugar coating for the vendor – no tax was paid on the huge capital gain and nothing was returned to the project manager or architect, who were owed millions of dollars in fees and commissions by Onn.
Documents obtained by Fairfax Media show that Onn’s Sydney property empire was carefully constructed behind an Australian corporate facade. Real control lay in a network of offshore companies and trusts based in the Cayman Islands and managed by banking giant Merrill Lynch from offices on the Isle of Man – a structure that enabled Onn to avoid paying Australian tax on tens of millions in Australian profits. The NSW land transfer lodged after the sale in early 2007 of Wylde Street to another developer (which in turn folded its hand in the face of the later global financial crisis) confirmed that the ultimate owner of the property bought in the name of Ryan Park Limited was a trust registered in the Cayman Islands, operated out of the Isle of Man and controlled by Onn Mahmud. The beneficiaries of that trust were members of Onn’s family based in Singapore.
In a statutory declaration sworn on the Isle of Man on March 29, 2007, two Merrill Lynch officers, Nicholas Dearden and Yvonne Smallwood, confirmed that Ryan Park Limited was registered proprietor of Wylde Street but asserted that it was ”an unregistered foreign company” and that the company ”does not carry on business in Australia”.
Yet when Onn Mahmud had applied for an Australian business visa in 2002, his sponsor was Ryan Park Limited and he had declared that it and several associated companies had invested more than $50 million in commercial properties in Sydney. While Ryan Park had obtained an Australian Business Number in November 1999 as an ”Australian private company”, it was not registered for GST and had never been registered with the Australian Securities and Investments Commission.
Wylde Street had been the crown jewel in Onn Mahmud’s ambition to become one of Australia’s leading property developers. Over more than 15 years he was involved in a string of lucrative deals, including the refurbishment of an office tower at 287 Elizabeth Street in the city and the redevelopment of the Valentine on George hotel and restaurant.
”He wanted to be the next big thing in Sydney property and he had the money,” says Farok Abdul Majeed, an experienced project management consultant who was chief executive of Onn’s Sydney business operations for several years. Leading Sydney architect Greg Crone, managing director of Crone Partners, who was involved in about a dozen of Onn’s projects, including Wylde Street, says: ”He had ambitions to do a lot of big things and we were impressed.”
While still based primarily in Singapore and Malaysia, Onn moved his wife, Halimatun Ghani, and their son and daughter, into a lavish mansion in Carrara Road, Vaucluse, in Sydney’s eastern suburbs – ensuring the children had access to some of the best Australian schools.
But Onn’s ambitions were suddenly curtailed amid growing international controversy over his family’s business dealings and a breakdown in the relationship with his chief executive. In early 2007, Japanese and Malaysian media revealed that Tokyo tax authorities had confronted members of a shipping cartel over the payment of kickbacks to facilitate the export of rainforest timber from Sarawak – a trade estimated to be earning $2 billion a year for the state’s ruling family. It was reported that the investigation had revealed more than $10 million had been paid over several years to a company called Regent Star, based in Hong Kong.
According to the activist website Sarawak Report, Regent Star was run by Onn’s personal secretary from the same Hong Kong office as other companies controlled by the tycoon. The website said that at the time of the kickbacks Onn was in charge of another company, Archipelago, which was granted exclusive licensing authority over all timber exports from Sarawak by his brother, Chief Minister Taib Mahmud.
As this unwanted attention was being directed towards his international business dealings, a spotlight was also cast on Onn’s investments in Australia. In late 2006, Abdul Majeed launched legal proceedings in the NSW Supreme Court claiming he was owed more than $3.8 million for management work, legal services and expenses associated with the Wylde Street development, the renovation of the Onn family home in Vaucluse and various other projects. In December 2007 – eight months after the sale of the Wylde Street site – Justice Paul Brereton ordered Onn to pay Abdul Majeed $2.2 million plus legal costs.
The chief executive claimed Onn had not paid anything for his work over several years despite a profit-sharing agreement under which Abdul Majeed had undertaken to donate one-third of his stake to the Malay Association of NSW to develop business opportunities for young Malay Australians. Over that time Abdul Majeed says he had commuted between Sydney and Singapore on a weekly basis to brief and take instructions from Onn.
He also claimed Onn had reneged on a deal under which he was to be given two of the apartments, each valued at about $5 million, in return for his management of the Wylde Street project and in the event that the project was abandoned and the site sold, a 50 per cent share of the proceeds from that sale.
Abdul Majeed was not the only one left empty handed when Onn suddenly wound up his Sydney property ventures, left the country and stopped answering his phone. Crone Partners claims it is owed more than $500,000 for architectural and design services provided for Wylde Street and about 10 other projects.
”The bulk of our work was never paid for,” Greg Crone says. ”We were shocked when he sold up and then just disappeared off the face of the earth. When someone like this just disappears and leaves a shitload of debt it is just unbelievable.”
Particularly galling for Crone is the considerable work done by the firm for the lavish $3.5 million refurbishment of Onn’s Vaucluse house – a labour of favour if not love for a firm involved in some of the biggest construction projects in Sydney and Melbourne recently.
”We got thoroughly burnt, especially on the house and on Wylde Street. That really hurt,” he says. ”We were also denied the opportunity of considerable success fees on Wylde Street where we had achieved huge savings through innovative design within the existing structure.”
Abdul Majeed says Onn’s business operations in Australia were deliberately structured to evade Australian tax. He says Onn made profits totalling about $50 million and paid no tax on projects that he had managed. He believes as much profit again was made from other Sydney property investments by the tycoon.
While funds for the property deals were moved in and out of Australia with the assistance of the Singapore office of Merrill Lynch, advice on the operations was also provided by the venerable Singapore law firm Lee and Lee, founded by the country’s first prime minister, Lee Kuan Yew.
”On several occasions I met Onn’s legal advisor in Singapore, Aw-Yong Tian Soo, a senior partner at Lee and Lee, to discuss matters of Onn’s legal status and property development and transfer of funds overseas,” Abdul Majeed says.
The 2007 court order in his favour was discontinued after Abdul Majeed failed to appear at a subsequent court hearing in which lawyers for Onn challenged the order. He says that he had gone into hiding because of concerns about his safety and that of his family.
Abdul Majeed – whose failure to secure a settlement from Onn led to his being sued by the billionaire’s debtors – has now resumed legal moves to recover what he is owed. And he says that under the terms of his original agreement to share half the proceeds in the event that the Wylde Street site was sold before development, he is now owed an additional $5.4 million.
Crone, who spent several frustrating and fruitless years chasing his firm’s outstanding fees from Onn, is also preparing a renewed legal effort to recover the debt. While most of Onn’s Sydney property portfolio has been sold and Ryan Park Limited was struck off the Cayman Islands company register in September 2010, Valentine on George is still controlled by Onn’s wife, daughter Siti Hjar Hamidah Onn and other associates through Donmastry Pty Ltd.
The efforts of Abdul Majeed and Crone to obtain a settlement may well be assisted by political developments in Malaysia.
The scandals swirling around the Sarawak aristocracy are expected to come to a head after Malaysia’s national elections on May 5. Opposition Leader Anwar Ibrahim – who is seen as having a strong chance of unseating the ruling Barisan Nasional coalition – has promised a crackdown on endemic corruption. And the Sarawak leadership, key backers of the current national government, are expected to be a focus of any such crackdown.
Meanwhile expressions of interest are being invited for a new luxury apartment development at 10 Wylde Street, Potts Point – a perfect opportunity for buyers with deep pockets and a taste for local history.