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Friday, November 30, 2007

Foreign buyers boost office property

Rising interest in the commercial market has many experts wondering what the next benchmark price for prime office space will be

The recent record-setting RM1,120 psf offer for Glomac Al Batha Sdn Bhd’s Glomac Tower in the KLCC vicinity has set the local property market abuzz, with many in the real estate fraternity caught in a guessing game on the next benchmark price for prime office space.

Glomac Tower

The Icon Jalan Tun Razak

Then, close on the heels of that offer came Mah Sing Group Bhd’s enbloc sales of two Grade A office developments -- the East Wing of The Icon Jalan Tun Razak and The Icon Mont’Kiara to Prompt Symphony Sdn Bhd. The sales, announced three days ago, have valued the East Wing of The Icon at RM237 million and The Icon Mont'Kiara at RM285.4 million.

It is worth noting that Kuwait Finance House Bhd (KFH) featured in the Glomac and Mah Sing
transactions. KFH teamed up with real estate investor Prestige Scale Sdn Bhd to pay RM577 million for Glomac Tower. As for the deals with Mah Sing, KFH formed Prompt Symphony,
a special purpose vehicle with Autron Corp Ltd.

On a per sq foot basis, the East Wing of The Icon Jalan Tun Razak has been priced at a discount to Glomac Tower, but this is to be expected given the different locations of the projects. There is no doubt that the KLCC address commands a significant premium.

It should be noted that Mah Sing’s sale of its two commercial developments to Prompt Symphony does not include parking bays. For the East Wing of The Icon Jalan Tun Razak, Mah Sing has signed a put and call agreement to sell 301 parking bays at RM18.15 million to Prompt Symphony. For The Icon Mont'Kiara, the developer has also inked a similarly worded agreement with Prompt Symphony, valuing the 637 parking bays at RM19.9 million.

The recent enbloc office space deals serve to highlight the increasing interest from foreigners, particularly from the Middle East, in real estate. On the pricing, several consultants contacted said, at RM899 psf, the East Wing of The Icon Jalan Tun Razak is a “good” deal. The 17-storey tower has a nett lettable area (NLA) of 263,435 sq ft.

In comparison, Mah Sing had in July this year, sold the West Wing of The Icon Jalan Tun Razak to Koperasi Permodalan Felda for RM174.4 million or RM715 psf, or, as pointed out by Knight Frank Malaysia executive director Sarkunan Subramaniam, the East Wing sale marks a 20% increase in values.

“Rentals for the office space when completed in two to three years time would have to be able have to fetch a minimum of RM6 psf with the nett yield at 6% for the property to be worth
the purchase,” Sarkunan told Propertyplus.

Can The Icon Jalan Tun Razak command such rentals upon completion? "I believe it is possible. Rents in KL’s Golden Triangle are moving upwards. Current average rentals are at RM6 psf and yields for prime offices are at 6.25%,” Sarkunan said.

He reasoned that Prompt Symphony foresees a compression of yields, which are a reflection of rentals over capital value. Lower yields, Sarkunan continued, are not necessarily a bad sign, but possibly due to good capital appreciation.

The Icon Mont’Kiara
The market has valued Mah Sing’s 27 levels of offices and a retail podium with a combined NLA of 380,510 sq ft at a cool RM285.4 million or RM750 psf. Zerin Properties chief executive officer
Previn Singhe (pix) sees this as a possible benchmark price for the area.

The Icon Mont'Kiara

Zerin Properties chief executive officer - Previn Singhe (pix)

“The closest transaction to this would be One Mont’Kiara’s, which was launched in 2006 for RM550 to RM650 psf. The new prices show the area’s maturity and that Mont’Kiara has become a preferred location for investors,” Previn said, adding that, if values were based on quality alone, Mont’Kiara properties could fetch higher prices than certain KLCC projects.

One Mont'Kiara
Other commercial offerings in the area would be Sunrise Bhd's Solaris@ Dutamas. This mixed-use commercial development first launched its office suites in October 2005, at RM370 psf and the latest launch in April this year was RM460 psf.

YY Property Solutions chief executive officer YY Lau also called the price “attractive”. It shows that Mont’Kiara has graduated from just being a residential enclave to a truly sought after commercial centre, she added.

DTZ Debenham Tie Leung executive director Brian Koh (pix) said that enbloc purchases of commercial buildings usually include the parking bays, hence the West Wing of The Icon Jalan Tun Razak and The Icon Mont'Kiara prices would be higher if they were sold with car parks.

DTZ Debenham Tie Leung executive director Brian Koh (pix)

“If the car parks were included, The Icon Jalan Tun Razak would be priced at RM969 psf, which is pricey for that location. And the fact that the earlier block had been sold, it would mean that the property is stratafied," Koh said.

Koh adds that the high prices paid by foreign investors shows that they either have a bullish view of the market or that they are willing to accept low yields because they are in it for the long haul.

Office Market
Consultants concur that the recent commercial purchases reflect the confidence in the local property market. Previn said foreign investors have shown that they believe the Malaysian real estate industry to be on the upside. “They see that the upside has just begun and that is why they are buying.”

Lau adds that factoring in the rising construction costs, property prices are unlikely to go down. “There will be a lot more supply of office space coming in from not only KL, but less central areas such as Damansara Heights and Petaling Jaya. Although the immediate market for offices in the Klang Valley remains healthy, there could be a possibility of oversupply in the next three to five years if all the proposed projects are approved,” Lau noted.

However, Previn felt that the demand for offices, especially in the KL city centre would be strong as the tightening of rents show that there isn’t enough office space to go around.

By theSun (by Allison Lee)

From secondary jungle to thriving township

What was once considered secondary jungle 10 years ago is now a thriving selfintegrated township with a good mix of residential and commercial properties.

Property developer Glomac Bhd saw the potential of the 500-acre piece of land in the heart of Sungai Buloh and transformed it into the now 1,100-acre Bandar Saujana Utama, which is celebrating its 10th anniversary this Sunday.

Its group managing director Datuk FD Iskandar (pix) said the developer took a risk to come up with a township in the area, which was considered relatively far from Kuala Lumpur and nearby townships such as Shah Alam and Petaling Jaya.

“At that time, we had to go for cheaper land as we could not compete with the bigger boys who could afford expensive land nearer to the KL city centre,” he told PropertyPlus. The calculated risk seems to have paid off as the township now enjoys take-up rates of up to 90% for its properties. About RM750 million-worth of properties here have been sold so far.

The Bandar Saujana Utama project began in 1997, via a joint venture, and over the years accumulated more land thus expanding the township to its size of more than 1,000 acres today.

“We started off by selling 1- and 2-storey terraced houses priced at RM90,000 and RM108,000 respectively, but sales were difficult to come by due to the recession in 1998,” he said. A decade later, prices for these units have doubled to about RM200,000 each.

Fortunately for the development, the government announced the first Home Ownership Campaign (HOC) a few months after the houses were launched, and purchasers of affordable homes (priced below RM250,000) were given incentives such as stamp duty waivers and developers absorbing the S&P fees. “We anticipated sales to be slow and targeted only two
phases a year, instead we managed to clear three phases during the HOC period,” FD Iskandar revealed.

Bandar Saujana Utama is accessible via the Guthrie Corridor Highway, North Klang Valley Expressway (NKVE), an upgraded trunk road to the MRR2, and the proposed New North Klang Valley Expressway (NNKVE). It has a total gross development value (GDV) of RM1.3 billion, with 5,500 properties already handed over.

Township amenities
To create added value and benefits for the residents of Bandar Saujana Utama, the developer has provided numerous amenities and facilities in the township. These include a residential clubhouse with facilities such as a swimming pool, gymnasium and tennis courts, the Elmina Equestrian Centre, which offers horse riding classes, and schools such as SK Saujana Utama and SMK Saujana Utama. The upcoming Universiti Teknologi Mara is located five minutes drive away.

Central Mart, the latest addition to the township’s commercial hub known as SU Central, is expected to bring added business and vibrancy to the self-integrated township. It is a RM12 million joint venture project between the developer and Trendcell Sdn Bhd.

“Ever since it opened in June, Central Mart has definitely exceeded expectations and would no doubt be a major centre for business and social activities to almost 30,000 residents in Bandar Saujana Utama and the surrounding areas,” FD Iskandar said.

The township's Central Mart is expected to bring more businesses to the area

He added that being the first modern supermarket in the vicinity, the mart would complement the other conveniences already available in the commercial centre, including SU Mall, Saujana Square and Saujana Square 2.

The 50,000 sq ft modern building comprises a wet and dry market, offering a wide variety of fresh vegetable, fruits and seafood at reasonable prices. The mart also houses a food court and an Ace Hardware store. It was officiated by Agriculture and Agro-based Industry Minister Tan Sri Muhyiddin Yassin on Tuesday.

Bandar Saujana started off as a small project but has since grown to a township with a huge market catchment of more than 20,000. This would in turn attract and give confidence to supermarket chains and operators like Central Mart to set up their business here,” he said.

He added that, as the township progresses, the developer would be able to upgrade its products.

“Besides terraced houses, Bandar Saujana Utama also offers super links at RM320,000, semidees from RM380,000 and bungalows from RM500,000 onwards,” he said.

On Sungai Buloh, he stated the area has great potential for future development due to improved accessibility. It is about a 35 to 45-minute drive to KL. “With improvements to public transportation and roads, I foresee traveling time to be reduced to only 30 minutes in the future,” he said adding that travelling time from Subang Jaya to Kelana Jaya also takes about the same time.

“Although our properties are priced slightly higher than others in the vicinity, buyers do not mind paying a 10% premium because we are a reputable developer and offer enhanced value to the properties they purchase,” he offered.

Anniversary carnival
In conjunction with the township's 10th anniversary, Glomac is organising the “Karnival Saujana Utama 2007”, at the township’s show village this Sunday. Among the activities planned include, face painting, lucky draws and a live performance from local comedian Saiful Apek. The developer is hoping to raise funds through the sale of coupons, with proceeds going to schools in the township and other charity organisations.

During the event, the group will be launching its latest phase of 2-storey terraced houses, consisting 120 units in phase 5B and 115 units in phase 3. Prices range from RM177,900 to RM205,8000.

Besides Bandar Saujana Utama, the developer has two other ongoing township developments, the 450-acre Sri Saujana in Johor and the 350-acre Saujana Rawang, located in the Northern Growth Corridor, 10 minutes from the Rawang interchange. The projects have GDVs of RM600 million and RM550 million respectively.

The group has 14 projects throughout Malaysia with a total GDV of RM3.3 billion. It also has warehouses in Australia and Thailand, and is undergoing due diligence for a university township development in India.

By theSun (by Yap Yew Jin)

Malaysia's very own property dot com

When Asim Qureshi came to Malaysia for a holiday with his wife in 2003, little did he know that they would be moving to Malaysia and setting up a business here a few years later.

The Oxford graduate and British-born Qureshi, who is now marketing manager and co-head of said, “My decision to move to Malaysia was not only business. When I came to Malaysia on a holiday with my wife, we decided casually that we would want to live here some day.

Qureshi: The opportunity was staring me in the face

We were interested to buy a few properties but struggled to find what we wanted. "I realised that the Internet is an ideal medium to both buy and sell property - - it's instant, easy-to-list, and buyers and tenants can create narrow searches rather than waste time looking at long lists of properties. It will soon become the most popular method to find property in Malaysia — this view is supported by analysing trends in most developed countries. I felt Malaysia didn’t have the type of quality property website that I had seen in the UK, so the opportunity was staring me in the face.”

Qureshi resigned as vice-president of investment banking giant Credit Suisse in London to set up AIQ Global — a property management and development company, with his French wife. “Everyone at that time thought I was insane. But I’d say it has, so far, proven to be amongst the
best decisions in my life”, he added. They have since managed to purchase a few properties in Malaysia.

Kashif Chowdhree, an old friend of Qureshi, loved the idea of the website and assembled the team within days. Chowdhree, chief technology officer and cohead of my, is a highly experienced web developer whose previous work experience includes designing web
infrastructures for some of Wall Street's top companies including JP Morgan.

Chowdhree: Loved the idea of the website

Chowdhree said, “Our development team is working flat out at improving the website and the results will be obvious as each month goes by. Our website is already revolutionary in many ways — in terms of website design, the site’s components change their size according to the size of the screen, the way photos are displayed (you are taken through a slide show if you click on any of the property photos) and the way the search engine at the top scrolls away if it is not
needed. It’s the small touches throughout the site that make it a revolution in design. In terms of functionality, the site has everything from blogs to forums, articles to news and it’s free – it’s the combination for a property website that is revolutionary”.

He added that they wrote the property-related articles in the site including guides on selling, buying, renting and renovating property. Qureshi was unwilling to disclose what they would like to achieve in the future but added that they’re a very young and aggressive team.

“I believe Malaysia is going through a major upward property correction — a property boom. I think the strong increase in values we've seen in ultra-prime areas such as KLCC and Damansara Heights will spread to other parts of KL, and then spread throughout the country. Typically, in any property boom, the prime areas in the major cities go up first, the rest of
the country follows. The stock market is near an all time high, foreign investment is soaring, GDP growth remains robust — all the signs are there. These price increases will probably bring in further foreign investment, as well as create further interest from the domestic market, which will further increase prices and it becomes a cycle. All of this would of course be fantastic for — the more interest in Malaysian real estate the better”, said Qureshi, commenting on the current property market situation in Malaysia.

“Our primary targets are real estate agents, property developers and real estate buyers. We’re also soon to open up to a whole new target base soon, but if I told you about that, I’d have to kill you!”

By theSun (by Rosalynn Poh)

Penang's very own Canary Wharf

PENANG: The Light, visible from the mainland and the Penang Bridge, is set to brighten Penang’s eastern coastline as a new major landmark.

Launched last Friday by Penang Chief Minister Tan Sri Dr Koh Tsu Koon, The Light is an ambitious RM4 billion project undertaken by IJM Corp Bhd’s subsidiary Jelutong Development Sdn Bhd.

When completed in 2012, The Light will significantly alter the island's coastline view off Gelugor, said IJM CEO and managing director Datuk Krishnan Tan.

To be built on three phases over 152 acres of reclaimed land, The Light will feature 1,186 units of high-end waterfront condominiums, office towers, four hotels, a family mall, an IT mall, a fashion mall, dining and entertainment facilities, and a sea front park.

The residential units will spread over 42 acres while the commercial and retail units over 103 acres, with the remaining seven acres for the sea front park.

The Light is a spectacular project and a crown in IJM’s portfolio that will bring pride to the people of Penang. It will be one of the island’s biggest waterfront developments, on par with international waterfront developments such as Canary Wharf in London, Melbourne’s Docklands
and Queens Quay of Toronto,” said Tan.

He said, among the unique features of The Light are a floating stage for arts and cultural performances, a floating restaurant and a marina for water taxis.

“As part of our commitment to the environment, we have set aside two kilometres of the coastline for greenery and will integrate plants into our project design."

According to Krishnan, the prices for the residential and commercial units have yet to be fixed but it could be in the range of RM350 to RM650 psf.

IJM was given the right to reclaim and develop 338 acres in the area by the state government in exchange for constructing the Jelutong Expressway. The Light is part of the 338 acres. Land reclamation and construction works are expected to start next year.

By theSun (by Tim Leonard)

Felda makes RM110m foray into Saudi Arabia

The Federal Land Development Authority (Felda) is allocating RM110 million for its first overseas investment in Saudi Arabia, focusing on real estate developments, hotels and restaurants in the kingdom, particularly in the holy city of Mecca.

Its chairman Tan Sri Mohd Yusof Noor said 20 per cent of the allocation has been spent on opening a restaurant, while 75 per cent is for the running of a hotel in Mecca.

"We will start operating our first restaurant by next month and a 54-room hotel by January next year," he told reporters after receiving an investment licence from Saudi Arabia General Investment Authority's (Sagia) country director for Asean, Meshari S. Al-Khaled, in Kuala Lumpur yesterday.

Sagia's investment licence, which is hard for foreign companies to get, is needed for foreign companies to invest in and own real estate in Saudi Arabia.

"The investment licence would allow us to start our restaurant and expand our services in Saudi Arabia in future. We are also looking to invest in similar sectors in other parts of Saudi Arabia," he added.

While many Malaysian companies have obtained investment licences from Sagia in the past, Felda is the first that allows 100 per cent foreign-ownership. The licence was awarded to Felda subsidiary Felda Global Ventures Middle East Sdn Bhd.

With the licence, Felda Global Ventures Middle East will form its new Saudi Arabian subsidiary, which will be known as FGV Arabia Ltd, to be jointly owned by Felda Global Ventures Middle East (90 per cent) and Felda D'Saji Sdn Bhd (10 per cent).

Mohd Yusof said FGV Arabia will engage in real estate developments, own or provide management services for hotels, hotel complexes and restaurants.

"We consider Saudi Arabia as a prime, promising and strategic location for executing Felda's investment strategies in the Middle East," he said.

Meanwhile, Al-Khaled said Malaysia is currently the fourth largest investor in Saudi Arabia, after the US, Europe and Japan.

Established on July 1 1956, Felda was set up to help the government carry out rural land development schemes and to uplift the economic status and living standards of the rural community.

To date, Felda has developed about 480 new areas, totalling 853,313 hectares which have become plantation and settlement areas.

By New Straits Times (by Kamarul Yunus)

Al-Rajhi to help woo Mideast investors to east coast

The first foreign Islamic bank in Kelantan wants to be the catalyst in pulling in more Middle Eastern investments to help spur the East Coast Economic Region (ECER).

At the launching of its 19th branch in the country at Wisma Aminah Zain in Kota Baru, Kelantan, on Wednesday, Al-Rajhi Bank Malaysia (ARBM) officials were confident that its Syariah-compliant products, services and facilities would facilitate the flow of capital from the Middle East.

At the launching of the bank by Tengku Mahkota of Kelantan Tengku Muhammad Faris Petra, ARBM chief executive officer Ahmed Rehman said the bank's products adhere to the strictest of Syariah principles as practised in Saudi Arabia.

"This provides confidence to clients when dealing with Al-Rajhi Bank," he said.

"Our arrival in Kelantan follows the launching of the ECER. Al-Rajhi hopes to play a prominent role in attracting investors from the Middle East, as well as strengthening Malaysia as a regional Islamic hub," he said.

Ahmed said the bank has 14 other branches in the Klang Valley, and one each in Johor Baru, Malacca, Penang and Kuching. ARBM plans to have a network of 50 branches by 2010.

By New Straits Times (by Syed Umar Ariff)

TH Prop CEO to join Saudi firm

THE head of Tabung Haji's property arm, Syed Mohamed Ibrahim, is leaving TH Properties Sdn Bhd (THP) to work on a RM24 billion city project in Madinah, Saudi Arabia.

Syed Mohamed, the chief executive officer of THP, tendered his resignation earlier this week, a source told Business Times.

"He felt that it was an opportunity that could not be passed. It is a rare opportunity," the source said.

Syed Mohamed is set to become the chief operating officer of Seera City Real Estate Development Co, a firm leading the 15-year project, known as the "Knowledge Economic City".

The city is one of six new cities that will be built by Saudi Arabia, the world's biggest oil exporter.

It will be an education and technology hub near Islam's second holiest shrine in Madinah.

Syed Mohamed's departure highlights the attraction of Malaysian expertise to foreign markets.

Malaysia's MMC Corp Bhd and Saudi's Binladin Group are developing another city, called the Jizan Economic City, a US$30 billion (RM101 billion) 30-year project.

Saudi Arabia is tapping its massive oil wealth to build infrastructure and create jobs.

Seera is owned by investors like food company Savola Group and property developer Taibah. The Knowledge Economic City will cover an area of 4.8 million sq m housing information technology companies and research institutions.

It is unclear who will replace Syed Ibrahim, although Tabung Haji is likely to consider internal and external candidates to lead THP.

THP is currently developing Bandar Enstek, a RM9.2 billion township in Negri Sembilan.

The township has attracted investments in excess of RM500 million from both the government and private sectors that have established institutions of higher learning and research there.

It is expected to be completed by 2025.

By New Straits Times (by Shahriman Johari)