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Tuesday, January 8, 2008

Bandar Raya keen to do more projects

Bandar Raya Developments Bhd CEO Datuk Jagan Sabapathy shares with StarBiz his views on the company’s latest deal, the prospects of the commercial property sector in Asia and what he thinks will make the Iskandar Development Region project successful.

Below are excerpts from the interview.

STRABIZ: What does the sale of Office Tower 2 in CapSquare mean for Bandar Raya?

Jagan: Typically, they (Union Investment Real Estate AG) do not buy an uncompleted building. But here they are, their first time in Malaysia and buying an uncompleted building for the first time .

So, from our point of view, Malaysia has passed a very vigorous test and I think Union Investment is keen to do more here. I expect them to continue looking for new deals in Malaysia.

It (the deal) is very good for Bandar Raya because it means that it we were able to complete a very significant deal with a significant player. Hopefully we can do more things with them in future.

What are your views on the commercial rates in Malaysia?

There has been a huge improvement. We (CapSquare) are at the fringe of the Golden Triangle. I think for a long time, valuations here were sitting on RM650-RM700 per sq ft. We have gone past that (with this sale). Clearly, there is upside in this market.

Bandar Raya Developments chairman Datuk Mohamed Moiz (centre) exchanging documents with Union Investment Singapore MD and Head of Asia Pacific Markets Steffen Wolf. Looking on is Datuk Jagan Sabapathy (left).

You reckon the prospects are good for commercial space in the Klang Valley?

I think so. If you really study the market, you will be able to see that the commercial sector has been lagging. But like everything else, as our gross domestic product expands, new jobs are being created in sectors such as the financial services and oil and gas.

So, within the Klang Valley, you are going to see the need for more quality commercial space.

I think that this in itself will give a shot in the arm for demand, valuations and pricing.

What more is in store for Bandar Raya this year?

What’s happening this year is that we still have two more office tower blocks in CapSquare. Those are about 160,000 sq ft each and I would like to think that we would now commence marketing those two blocks.

The Bangsar Shopping Centre is being expanded – we are adding 100,000 sq ft retail and 200,000 sq ft office space. This will continue to allow us to expand our portfolio.

The expectation is that by 2010, we would end up keeping for ourselves close to one mil sq ft of grade “A” commercial space.

Any plans for new land acquisition?

We are looking for new parcels of land within the Klang Valley - quality, commercial space comprising office and retail, for both investment and sale.

Obviously we will be looking for land where we are comfortable. I’d like to think that we will be looking at stretching our base - I think there are a lot of opportunities in Petaling Jaya, - that whole commercial belt from PJ, Subang to the airport, and Klang ... there are a lot of commercial activities there. That belt also has a huge population.

We may even look at Johor Baru - we’ve got our Permas Jaya project, which started off with almost 1,400 acres and we still have almost 400 acres left.

We are obviously keeping a very close watch on what’s going on in the Iskandar Development Region (IDR).

What’s your observation on the IDR? There are so many conflicting views on it.

Obviously, for the IDR to work well, it needs to engage the very “lucrative” population in Singapore.

I think there are great opportunities there. It’s a question of how ultimately IDR engages Singapore: it comes to that because clearly the market is Singapore.

It's not going to happen without the Singaporeans participating, so we have to be able to talk to them.

The cost of doing business in Singapore is becoming prohibitively high as with the standard of living.

Singapore needs to take the heat off from its market and Malaysia needs her people to move (the IDR project). Everybody wins.

I’m cautiously optimistic on the IDR.

Given the persistent subprime issue in the US, what is your take on property demand in Asia, and Malaysia specifically?

Forget about our “heroes” in the US. Typically, there is still a lot of money flowing into Asia.

I think in the narrow sense, obviously subprime affects confidence in the US and selectively some Japanese banks, and there is some impact ... but there is still a lot of the world that is growing very quickly.

And actually, if you take out the subprime issue out of the US real estate and finance sectors, a lot of American companies are doing very well, given their exposure to Asia.

Look at the oil producing countries - there is a huge amount of liquidity that is spilling out from there; the amount of petrol dollars flowing into Asia is huge.

Then you have China and India – traditionally recipients of investments – but now you see them putting cash back into Asia.

So, I think that in spite of the issues in the West, liquidity within Asia is still very strong.

So long as that is happening and interest rates appear to be trending down, you still have the right conditions to continue to sustain Asian economies. And when that happens, the conditions in Malaysia are right (to benefit).

By The Star - StarBiz

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