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Saturday, November 29, 2008

How resilient is Malaysia’s property sector?

In recent weeks, a series of telling full-page advertisements have appeared in the local papers on the sale of luxurious condominiums. The location: Mont’ Kiara and KLCC. Is somebody unloading?

The question begging to be asked is this: How resilient is Malaysia’s property sector in the current financial meltdown?

There seems to be two broad versions right now. The first is that the current crisis will not affect the property sector as much as it did in the 1997/98 financial crisis.

The rationale given by property consultants is that in the late 1990s crisis, interest rates went up from less than 10% to 15%. Now interest rates are around 7% and getting lower for residential properties.

The second rationale is that banks were withholding credit in the late 1990s. The third rationale is that property buffs (which include buyers, sellers and observers) have learned from that crisis and are not so highly leveraged.

We shall call this first group the “bulls”, following the stock market jargon for investors who have dared to invest and who saw the silver lining behind a dark cloud.

Then there are the “bears” with a more cautious stand. Their rationale: The world is going through what could be the worst financial crisis since WWII and there is no such thing as decoupling from the US market because every country is affected. The question is to what degree will we be affected, and how developers and property buffs will weather the crisis.

As Glomac Bhd group managing director F.D. Iskandar Mohamed Mansor puts it: “To those who say Malaysia will be insulated, let me say that when our trading partners – the US, Europe, Japan, India and China – are affected, we will be affected. We have to face that,” he says.

Iskandar is also Real Estate and Housing Developers’ Association Selangor branch chairman.

But there are those who are positive. According to a report by research house ECM Libra, which recently hosted a property talk for about 100 fund managers, the current property downcycle will not be as bad as the 1997/98 Asian financial crisis.

“The indications are that the market is fairly resilient. With the exception of luxury condominiums, correction of capital values and rental of properties should be moderate,” the report says.

Rehda president Datuk Ng Seing Liong is positive. “We know there is a slowdown, not a crash. On average, it will only be a 5% drop in property prices, maybe in some locations and segments, 10%. We are well insulated and there is nothing to fear. We will not be like Singapore, where there will definitely be a crash.

“Of course, there will be a slowdown as buyers take a wait-and-see attitude. But everything is under control and we have asked for a 50-basis-point reduction in interest rates. We have a 25 basis points cut, so in the next few months, we hope there will be another,” says Ng.

Some property consultants and a valuer say they are not seeing any fire-sale and that their customers are still holding on to their prices from six months ago.

PA International Property Consultants (KL) Sdn Bhd managing director I (agency and corporate services) Jerome Hong says: “I don’t think it will be as bad as before but we will only know by the first half of next year.”

Hong says his concerns are with high-rise condominiums the prices of which have come down by about 10%.

“We have multiple-unit buyers who are now letting go. But those in good locations and with good views may be fine. We will see more in January and February next year,” he says.

And now, views from the “bears”: Savills Rahim & Co managing drector Robert Ang says the property sector is not as resilient as many would like to think.

“Six months ago, I told a group it will weaken, that our cycle is almost coming to an end, that it will taper off by 2009 or early 2010. It came earlier as a result of what is happening in the outside world.”

Ang says the last few months have attracted a lot of foreign interest and many of these foreigners, together with Malaysians, have been affected.

Ang, who at one time was an all-out promoter of the KLCC area, believes that KLCC is over-built and that the other troubled area is Mont’ Kiara.

“The condo market has been weak for the last couple of years. The office market will have a lot of supply. The landed houses will be much more resilient,” he says.

Another property consultant, who declined to be named, says he sees two troubled spots – the KLCC and Mont’ Kiara.

“KLCC is in a better position than Mont’ Kiara. Depending on the project, its developer and the view from the top, prices may drop 15% to 20% next year. In Mont’ Kiara, it may be 20% to 25%.

“At the same time, there are units going for RM2,500 per sq ft or more. The winners will be those who bought into that area at RM500 to RM600 per sq ft. For example, Dua in Jalan Tun Razak.

“Dua went up to about RM1,000 per sq ft, so with a 20% drop, even at RM700 per sq ft, these buyers are still okay. It is those who went into that area at RM900 or RM1,000 who will face difficulty,” he says.

Says a source from a foreign bank, who monitors the property scene: “I would hold cash. Realistically, Malaysia has not yet felt the whole effect of the global meltdown. The next six months will provide more clarity.”

By The Star (by Thean Lee Cheng)

MK Land reveals turnaround plan

DEVELOPER MK Land Holdings Bhd yesterday revealed its turnaround plan, which included the appointment of two chief operating officers and the sale of non-core assets.

Chief executive officer Tan Sri Mustapha Kamal Abu Bakar said the plan, called the Renaissance, will be done in three phases over three years.

MUSTAPHA KAMAL: MK LAND will look into exporting its expertise

MK Land made losses in 2007 and 2008, prompting Mustapha Kamal to assume the top post in June after relinquishing the position more than a year ago.

The company posted a RM4.9 million net profit in its first quarter to September 30 2008. Revenue more than doubled to RM77 million.

"We are bullish of achieving a good performance in the current financial year with a target sales worth more than RM350 million," Mustapha Kamal said.
The turnaround plan will turn the group into a more structured and focused entity managed by skilled and experienced professional team.

"The new management line-up comprises both new and old faces that we believe could steer MK Land into greater heights," he told reporters at a briefing in Petaling Jaya, Selangor, yesterday.

Under Phase 1, it will reorganise the company's structure into two operating regions, namely central and northern region whilst setting up a strategy and planning think tank at the head office.

There are COOs for both regions.

It also plans to sell non-core assets, vacant land and reduce stockpile of completed units.

MK Land will develop premium products in Phase 2. It will expand abroad in the third phase.

"We will also be looking at exporting our core expertise to less developed countries looking for quality housing in the lower to medium category," Mustapha Kamal said.

By Business Times (by Azlan Abu Bakar)

An orchard in the backyard

HIJAUAN Heights Sdn Bhd is transforming 1,000 acres of land in Pedas, Negri Sembilan into a lifestyle property development that includes bungalows with orchards, outdoor activities and a clubhouse as well as round the clock security.

It is for this reason that its director, Nor Azmi Talib believes the unique lifestyle project called “Hijauan Heights” will be a hit.

Nor Azmi: The location is a plus point

The development of Hijauan Heights started about three years ago on a plot of land that belonged to Telekom Malaysia Bhd (TM).

Through a subsidiary, TM Facilities, the company did a joint-land development agreement with a landscape company, IDH-IndahHijau (M) Sdn Bhd.

TM provided the development land while Hijauan Heights, a subsidiary of IndahHijau was responsible for the development, sales and marketing of the project.

Hijauan Heights plans to complete the first phase of the development by May next year.

According to Nor Azmi, the gross development value of the first phase is about RM79mil.

“TM will develop the structure for telecommunication that would include 3G connectivity. We have already divided the project into four phases scheduled for full completion by 2013. The 1,000 acres have already been subdivided to a minimum of one acre each to be offered to buyers,” says Nor Azmi, adding that in total about 591 lots have already been divided while the rest would be used for other developments such as building roads, a clubhouse and water tank.

“Here at Hijauan Heights, we offer you not just the orchard and clubhouse but also outdoor activities such as paragliding, fishing, boating and camping site to name a few. Plus, all the bungalows that we built are fully-furnished,” he says.

The location, Nor Azmi says, is another plus point as it is only 20 minutes to Seremban and an hour’s drive from Kuala Lumpur.

He is confident that despite the softening property market, the project with its unique features will be able to attract buyers.

“Our concept is very different from other developers. We are not doing mass development where thousands of houses are built. We are offering buyers a lifestyle concept whereby you can live in a green surrounding, do outdoor activities and also enjoy all the fruits from the orchard.

“Plus, you don’t have to worry about safety as it’s gated,” he says.

Nor Azmi says Hijauan Heights offers six types of four bedroom bungalows with an average built-up of 2,000 sq ft. It also provides three years of free maintenance for the orchard.

“In total, there would be about 129 units of four bedroom bungalows in this first phase plus the clubhouse. Since the soft launch on Aug 2, about 51 units had been sold,” says Nor Azmi.

He adds that the company is very selective about the choice of trees to be planted so that the buyers could taste all the fruits without waiting for the fruit season to come.

“About 40 fruit trees such as guava, rambutans, mango and longan have already been planted on each acre. For that, you don’t need to wait until the fruit season to savour the fruits as it will be a continuing fruiting season,” he says.

General manager Ungku Amir Ungku Sulaiman says the achievement of the company to subdivide the whole land into one acre individual title lots was something to be proud of.

“It’s not easy to subdivide this massive land into individual lots. It took us about two to three years just to do that,” he says.

He adds that this was an opportunity for future investments for buyers as the one acre land could be divided into more plots if they decide to split the land for their children.

The 1,000-acre freehold land at Hijauan Heights offers a minimum of one acre with six types of fully furnished bungalows to choose from with 40 type of trees planted. The prices start from RM750,000 to RM900,000 depending on the size of the land acquired.

By The Star (by Edy Sarif)

Menara Citibank back on sale

Menara Citibank is back up for sale now that IOI Corp Bhd has called off its purchase for RM586.73 million, said agent Regroup Associates Sdn Bhd.

"Interested parties with a strong financial background can make an offer as the seller is still willing to consider a good offer," Regroup Associates executive director Paul Khong told Business Times yesterday.

However, Khong said it would not be possible to complete the sale of the building by the end of this year as deals of such nature take a few months to complete.

"The timeframe depends on how quickly the parties come to an agreement on the terms of the deal and sign the SPA (sale and purchase agreement), which will then be subject to the FIC approval," he said, adding that this could take up to six months.
While Khong was unable to comment on which parties have expressed interests, he said there were many enquiries on the building as it was still an attractive income-yielding asset.

"Menara Citibank is a Grade A office building with good tenants, who will not look to move out in a slowing economy," he said, adding that the exclusive agent for the deal was CB Richard Ellis Singapore.

IOI backed out of the deal on Thursday, forfeiting its RM73.36 million deposit paid to Inverfin Sdn Bhd, citing concerns over the economy.

Inverfin is 50 per cent owned by Menara Citi Holding Co Sdn Bhd, a unit of US bank Citigroup. Singapore's CapitaLand Ltd holds another 30 per cent, while Amsteel Corp Bhd owns the rest.

In August, Business Times reported that IOI Corp Bhd, a private equity fund and a Korean fund were short-listed as bidders for the building.

Menara Citibank has a net lettable area of 733,626 sq ft and a 99 per cent occupancy rate.

The net book value of the building as of December 31 last year was RM458 million and the gross rental revenue was RM43.3 million (excluding the revenue from the car-park of RM3.3 million).

By Business Times (by Jeeva Arulampalam)

Putera Capital bidding for RM9b local jobs

Despite its status as a financially-troubled group, Putera Capital Bhd has bid for construction jobs worth about RM9 billion in Malaysia.

The group, which had its first restructuring proposal rejected by the authorities, is awaiting response to its second revamp plan.

"If all goes well, than we can embark on these projects with our strategic partners," chief executive officer Wan Azman Wan Salleh said after the group's annual general meeting in Kuala Lumpur yesterday.

However, he declined to comment further on the revamp plan.
The group has not made money in seven years and it faces the threat of having its shares taken off the stock exchange.

For the financial period ended May 31 2008, the group posted a loss of RM9.2 million on revenue of RM1.5 million.

Putera Capital has closed its loss-making textile division and it wants to focus on the construction and infrastructure business.

It holds a 20 per cent stake in the West Coast Expressway, a multi-billion-ringgit project that has yet to take off.

On its partnership with Melewar Industrial Group Bhd to build a proposed RM2.2 billion monorail system in George Town Penang, Wan Azman said the group remains hopeful of the project.

They are still waiting for a response from the state government, he added.

By Business Times (by Zurinna Raja Adam)

Friday, November 28, 2008

PJD to unveil two projects next year

KUALA LUMPUR: PJ Development Holdings Bhd (PJD) expects to launch two property projects in the Klang Valley next year, said managing director Wong Ah Chiew.

“We expect to launch the first project in the next six to seven months,” he said after the company AGM yesterday.

The projects scheduled for launch is Duta Kingsbury @ Dutamas in Sri Hartamas and a yet-to-be-named mixed residential project in Cheras.

The Duta Kingsbury residential project would have a gross development value (GDV) of RM600mil and the Cheras project, a GDV in excess of RM1bil, said Wong.

PJD currently has 10 ongoing projects and some 600ha of undeveloped landbank all over Malaysia.

On another note, Wong said PJD was cautiously optimistic on the outlook of the local property market.

“We do see a slowdown but we do not think it would become as bad as the US property market,” he said.

Wong said PJD would be revising the design of one or two of its ongoing projects to cope with the softening property market.

“We want to maintain the quality of these projects while making it more affordable at the same time,” he said.

Wong also said the rise in raw material prices since the fuel price hike earlier this year posed big challenges on its construction division.

However, the recent drop in fuel and steel prices would help reduce any impact on the sector going forward, he said.

PJD owns and manages the chain of Swiss-Garden International hotels, resorts and inns in Malaysia.

Swiss Garden International Sdn Bhd vice president of operations Raymond Yeoh said while the occupancy rate for its hotels was healthy, he expected the local tourism sector to slow down next year.

“The last two to three months have put a question mark on the local tourism industry. Forward bookings from January have been a little slow. With the current economic downturn, tourists are more cautious about their travel plans,” he said.

By The Star

Sunrise profit at RM43mil

KUALA LUMPUR: Sunrise Bhd announced yesterday a pre-tax profit of RM42.79mil for its first quarter ended Sept 30, down from RM85.59mil in the previous corresponding period.

Pre-tax profit for the quarter was lower as the previous period had included total gains of RM52.1mil arising from the sale of commercial units and carpark lots in Plaza MontKiara to Quill Capita Trust, as well as a piece of land, Sunrise said in a statement.

Excluding these one-off gains, the group’s underlying pre-tax profit for the quarter would have chalked up a 28% year-on-year growth, it said.

Its revenue, however, increased to RM198.21mil from RM130.62mil previously.

Main contributors to the group’s financial performance for the quarter were its ongoing commercial and residential developments, namely Solaris Dutamas, Mont’Kiara Meridin, 10 Mont’Kiara and 11 Mont’Kiara.

The group chalked up property sales of RM216mil during the quarter.

By Bernama

Thursday, November 27, 2008

Gadang in running to win RM500m Abu Dhabi jobs

GADANG Holdings Bhd, a construction and property firm, may win two contracts worth RM500 million to build residential towers in Abu Dhabi in the United Arab Emirates by the middle of next year.

It will soon sign a pact with a local party, believed to be from the royal family of Abu Dhabi, to form a joint-venture company.

Gadang's partner will hold a majority stake in the venture, which will source for local funds in Abu Dhabi for the project, managing director and chief executive officer Tan Sri Kok Onn said.

KOK: There is big demand for properties in Abu Dhabi

Besides residential, it will also build office and commercial blocks, Kok said after the company's shareholders meeting in Kuala Lumpur yesterday.
"There is great demand for housing and commercial. There are areas in Abu Dhabi where foreigners can own properties, so there are a lot of investors coming here to buy," he said.

The two contracts are part of the over RM2 billion jobs Gadang is bidding for in Abu Dhabi.

In addition, Gadang is gearing to launch condominiums, semi-detached homes and bungalows worth over RM100 million in Tanjung Bungah, Penang, by the middle of next next year.

It is also waiting for the final results of a tender it submitted two years ago to build a RM200 million sewerage treatment plant in Malacca, Kok said.

"We have a lot in the pipeline. Earnings-wise, we hope to do better next year, driven by current projects and also because construction material prices have dropped. This will improve the situation for us," Kok said.

For the year to May 2007, the company posted a net profit of RM7.5 million on the back of RM172 million revenue.

Gadang expects to benefit from projects under the Ninth Malaysia Plan that the government will call for next year.

By Business Times (by Sharen Kaur)

Wednesday, November 26, 2008

Gadang bidding for RM6b jobs

GADANG Holdings Bhd, a construction and property group, is bidding for some RM6 billion worth of infrastructure and construction contracts in the country and the Middle East, to ride out the global economic downturn.

It is bidding for an estimated RM4 billion worth of government jobs and private finance initiative (PFI) projects in Malaysia, and over RM2 billion worth of projects in Abu Dhabi in the United Arab Emirates.

Managing director and chief executive officer Tan Sri Kok Onn said Gadang expects to sign a pact with a partner in Abu Dhabi soon to work jointly on the projects there.

Abu Dhabi will be a new growth area for Gadang, which has been scouting for jobs there in the last two years.
Apart from Malaysia and the Middle East, the main board-listed firm is also exploring for infrastructure work to build water treatment and power plants in Vietnam and Indonesia.

It wants to be proactive in building its construction, property and utilities divisions despite concerns over the global financial market.

"We will grow the businesses cautiously. While there are lucrative projects in the pipeline in Malaysia and overseas, we will study the jobs first before making submissions," he told Business Times in an interview.

Kok said Gadang will remain resilient against the current market challenges and will continue to put in place various measures to reduce the impact of rising prices of construction materials on the operating margins.

The group hopes to do better financially this year, supported by its two ongoing contracts worth RM716 million to build the Kemuning-Shah Alam highway and the Cheras Rehabilitation Hospital.

Kok said its four water-supply concessions in Indonesia will also add to the group's revenue.

It also expects higher earnings from its property division, which has been enjoying brisk sales.

"Demand for cheaper housing has been on the uptrend. Buyers are looking for affordable homes in these trying times. We will continue to build them so long as there is continued demand," Kok said.

Gadang's construction orderbook stands at some RM550 million, with unbilled property sales worth RM50 million.

For the financial year ended May 31 2008, Gadang saw a 42.4 per cent drop in net profit to RM7.95 million, from RM13.80 million a year ago.

Revenue was RM172.50 million, down 23.7 per cent from RM225.96 million.

By Business Times (by Sharen Kaur)

Magna Prima cuts target

MAGNA Prima Bhd, whose luxury homes fetched record prices last year, slashed by almost half projected revenue from its biggest development as the global recession cuts demand for retail property.

Magna Prima will remove a mall and hotel from its Magna City project in northern Kuala Lumpur and focus on apartments, shops and offices, chief executive officer Lim Ching Choy said.

Lim cut his sales forecast from the development to RM600 million from RM1.1 billion.

"We have to reposition our direction," Lim, 47, said in an interview on Monday in Petaling Jaya. The "downscaling" will help Magna Prima "manage sales according to market conditions".
A worldwide recession has triggered real-estate slumps from the Netherlands to New Zealand, and IJM Corp and Berjaya Land Bhd are among Malaysian developers reported to have shelved projects.

The Southeast Asian nation's government expects the slowest growth in eight years in 2009, and Lim said it may be 18 months before the economy rebounds.

Lim said the profitability of the Magna City project, scheduled to be introduced in the first quarter of 2009, won't be affected by the cutback. He's seeking a profit margin of between 25 percent and 30 percent from the development.

The recession might also offer takeover opportunities because valuations have fallen, he said. The company plans to double its cash reserves to RM100 million in the next 11/2 years for property acquisitions that can be injected into a real-estate investment trust, Lim said.

By Bloomberg

Magna City project to be downsized

PETALING JAYA: Magna Prima Bhd has downsized its Magna City project in Kuala Lumpur to RM600mil from RM1.1bil in gross development value (GDV) due to slowing growth, according to chief executive officer Lim Ching Choy.

“In view of the slowing economy, we reposition our development to suit the market demands,” Lim told StarBiz. “We (downsized) the development because we anticipated that the retail mall business would be tough going forward.”

Lim said the decision would also “lighten up” the company’s cash position, adding that the project’s profit margin could be maintained at 25% to 30% of sales value.

“Magna Prima is able to retain a healthy profit margin because we may not keep any of the assets in the amended RM600mil (project),” he said, revealing that the company had planned to retain 45% to 55% of the original project.

As of end of October, the group had RM230mil in unbilled sales.

The Magna City will have over 1.6mil square feet of net floor area while the construction is targeted to commence in the middle of 2009.

It sits on 10.23 acres of freehold land comprising 67 units of lifestyle shop offices, two levels of retail lots, two levels of corporate offices and 800 units of service apartments.

By The Star (by Law Kai Chow)

Tuesday, November 25, 2008

Funds look to investing in China property

HONG KONG: Property investors are pencilling “second half, 2009” in their diaries as the likely time to start pouring money into China again as they search for bargains in its ailing real estate market.

But they are wary of slowing economic growth, overbuilding in some areas, difficult partnerships with developers and red tape.

Private equity fund manager Gaw Capital Partners is looking to raise up to US$1.5bil for Chinese property, while ING Real Estate is marketing a US$750mil fund it wants to launch in the first quarter of next year.

“I think it’s a good time to start looking,” said Goodwin Gaw, cofounder of Gaw Capital, which manages US$4.7bil of assets in 14 Chinese projects. “2009 and early 2010 could be a sweet spot.”

Many among the 540 investor groups at the MIPIM Asia property conference in Hong Kong last week pinpointed China as the market that would recover quickest from the global economic crisis because of growing domestic demand for housing and office space. And they are keen to raise funds to prepare.

Behind the enthusiasm is a hope that capital starved property firms will offer plum investment deals to foreign investors looking for internal rates of return of 25%-30%.

China has announced four trillion yuan (US$586bil) in fiscal stimulus measures, with 800 billion yuan going to low income housing and one trillion yuan on infrastructure spending.

While economists admit they do not know how much is new spending, they believe more steps are in the offing - probably tax and interest rate cuts and perhaps more spending in earthquake-hit Chengdu.

By Reuters

Investors scour Asian property marts for bargains

HONG KONG: Asia's battered property markets are starting to attract strong interest from investors, with Japan, Australia, China, Hong Kong and Singapore among their top picks in the region.

Property fund manager LaSalle Investment Management, which raised a US$3 billion (US$1 = RM3.63) fund in August, expects Hong Kong and Singapore to recover first from the financial turmoil, its regional director David Edwards said.

"We are seeing a decline in values throughout the region.

There are properties that are being sold at much lower prices than the market's perception of their values," Edwards said.
ING Real Estate plans to double its investments in Asia to US$1 billion, with most of its investors in Europe wanting to diversity into the region, said the firm's Asia Pacific managing director Nicholas Wong.

ING invested mostly in China and Japan, he said, and was now marketing a US$750 million fund to build Chinese housing.

Several Asian markets were already 30-40 per cent off their peaks, Wong said. And a Reuters poll last week found that analysts believe Hong Kong and Singapore prices are set to fall by at least a fifth in the next year.

"Most of our clients are from the UK and Europe and traditionally, they invest only at home," Wong said. "Now, they want global exposure and most of them want to go to Asia for diversification."

With Hong Kong, Japan and Singapore in recession, Asian developers are battling falling demand and tighter credit, even after efforts by central banks to encourage lending by slashing key rates.

"The risk of bankruptcies are still higher throughout Asia and most financial institutions are not out of the woods yet," said Kelvin Lau, economist at Standard Chartered Bank in Hong Kong. "That's why overall lending conditions have not yet returned to normal."

In Japan, more than 400 small and medium-sized developers have gone out of business this year as the residential market slowed and as credit dried up.

But the tough environment is not stopping property investors from prowling the region for bargains.

"The present environment is incredibly difficult. As a business, we are taking a cautious approach. But we are still looking," said LaSalle's Edwards.

LaSalle had so far invested US$10 billion in Asia and nearly half of the amount was in Japan, Edwards said. The company was also keen in Australia and China, he added.

Other investors were optimistic that some property segments would recover soon.

China's ailing housing market, for instance, may stabilise in about six months and recover in two years, before most other Asian countries, said Cheng Soon Lau, managing director at Invesco Real Estate Asia.

Invesco is planning to invest directly in China, Japan, Hong Kong and Singapore, buying office blocks and building housing.

Managers of securities funds are becoming less worried that investors will withdraw money, according to Chris Reilly, director of property for Asia at Henderson Global Investors. "Right now, there is really not much redemption," he said."

By Reuters

Property downturn not as bad as in 1997

The current down cycle in the property market is not as bad as the 1997 Asian financial crisis, said ECM Libra Capital Sdn Bhd.

"We are more inclined to see a moderate property downturn similar to the dot-com bust days in 2001. Although oversupply is evident in varying degrees in various sub-segments of the property market, indications are that the market is fairly resilient," it said in a report yesterday.

"With the exception of luxury condominiums, correction of capital values and rental of properties should be moderate," it added.

ECM Libra recently hosted a property talk and invited property consultants from Regroup Associates as speakers to shed some light on whether the Malaysian property market is resilient enough to ride out the economic downturn.
"We came away from the talk with reinforced belief that the current property downcycle is not as bad as the Asian financial crisis," it said.

ECM Libra also said a "crash" test was carried out, revealing that the risk of declining sales is moderate and not likely to crash, especially residential properties.

"Further risk of margin erosion is also minimal as building material prices have stabilised, and developers are in a better financial position now as leverage is half that of the 1998 Asian financial crisis.

"Besides that, property stocks are already trading at "mini" distressed valuation last seen in 2001," it said, upgrading its call on the property sector from underweight to neutral.

"Although there may be more negative news in the near term, we believe most of the bad news have already been priced in. We believe that the fundamentals of the economy and property market are stronger now and the current downturn should be more moderate," it said.

Prices of property stocks have fallen by 50 per cent to 70 per cent year-to-date. However, ECM Libra warned that the change in its stance is more of turning less bearish than turning bullish, as property stocks will still operate under challenging environment over the next six to 12 months.

Sunway City is its top pick for the sector due to its more resilient earnings from property investment as well as its undemanding valuation.

By Business Times

Sales forecast for Magna City slashed

MAGNA Prima Bhd, whose luxury homes fetched record prices in Malaysia last year, slashed by almost half projected revenue from its biggest development as the global recession cuts demand for retail property.

Magna Prima will remove a mall and hotel from its Magna City project in northern Kuala Lumpur and focus on apartments, shops and offices, chief executive officer Lim Ching Choy said. He cut his sales forecast from the development to RM600 million (US$165 million) from RM1.1 billion.

“We have to reposition our direction,” Lim, 47, said in an interview yesterday in Petaling Jaya, outside Kuala Lumpur. The “downscaling” will help Magna Prima “manage sales according to market conditions.”

A worldwide recession has triggered real-estate slumps from the Netherlands to New Zealand, and IJM Corp and Berjaya Land Bhd are among Malaysian developers reported to have shelved projects. The Southeast Asian nation’s government expects the slowest growth in eight years in 2009, and Lim said it may be 18 months before the economy rebounds.
“The whole market is bearish on property stocks,” said Ang Kok Heng, who oversees US$156 million as chief investment officer at Phillip Capital Management in Kuala Lumpur. “They have a few choices, either you delay the launches, hold or scale them down to suit the conditions.”

Yesterday, Malaysia’s central bank cut interest rates for the first time since 2003 and lowered the amount lenders need to set aside as reserves to help shield the Southeast Asian economy from the global recession.

Shares of Magna Prima, based in the Kuala Lumpur suburb of Damansara, have fallen 59 per cent this year, outpacing a 41 per cent slide in the benchmark Kuala Lumpur Composite Index.

Still Profitable

Lim said the profitability of the Magna City project, scheduled to be introduced in the first quarter of 2009, won’t be affected by the cutback. He’s seeking a profit margin of between 25 per cent and 30 per cent from the development.

The recession might also offer takeover opportunities because valuations have fallen, he said. The company plans to double its cash reserves to RM100 million in the next 1 1/2 years for property acquisitions that can be injected into a real-estate investment trust, Lim said.

A slump is the “best time to make more money,” he said. “Land cost is reasonable if you have money.”

With the Magna City project scaled back, Lim plans to focus on building higher-priced homes. Demand for low-priced homes has been “drastically affected” by the slowdown, he said.

Bank loans approved for Malaysian home purchases in September fell to a seventh-month low, according to the central bank.

Economic growth in 2009 is expected to slow to 3.5 per cent from about 5 per cent this year.

Magna Prima will roll out two high-end residential projects worth as much as RM300 million each next year, and is in talks to acquire 2.5 acres (1 hectare) in Kuala Lumpur near the Petronas Twin Towers to construct an office building, he said.

Last year, Magna Prima sold the last unit in a luxury residential block in the center of Kuala Lumpur for a record RM2,100 per square foot. Space now goes for an average RM1,300 per square foot and above, according to Mervin Chow Yan Hoong, an analyst at OSK Research Sdn Bhd.

Magna Prima last week said third-quarter profit tumbled 85 per cent to RM1.1 million.

By Bloomberg

Contruction boom is over for Dubai

DUBAI:The United Arab Emirates (UAE) began to bail out and consolidate Dubai's rattled banking sector and curb a building frenzy yesterday as the former boomtown started cutting state spending in the face of the global crisis.

In a major policy shift, the federal government will inject capital into Emirates Development Bank, a newly created rescue vehicle preparing to absorb merging Islamic lenders Amlak and Tamweel.

And in what marks the end of an era for Dubai, Mohamed Alabbar, a member of the emirate's ruling council, said the emirate would now pare its construction ambitions back in anticipation of waning demand after spending the past five years building as much property as fast as possible.

He assured investors the Gulf's regional financial hub of Dubai was able to meet its sovereign obligations.

By Reuters

Elegant designs

Lago, from Mobalpa's Tendance Collection, imparts a classic yet modern feel to any kitchen.

Cabinets set a kitchen's style and tone. Therefore, it is crucial to explore all your options before making the final decision.

Renowned French brand Mobalpa was founded in 1949, at Thônes, France, by Societe Fournier. The company is now 100 years old and has made a name for itself in three areas, namely kitchens, bathrooms and fitted wardrobes.

Working with wood is a tradition among the mountain dwellers of the region, which is dotted with alpine chalets built entirely of wood that, for centuries, have withstood the ravages of weather at its worst.

Mobalpa certainly benefits from this environment and from its time-honoured traditions. When it began, the company consisted of a modest workshop in which a handful of craftsmen produced solid rustic fittings for its local clientele.

In 1947, Mobalpa produced its first fitted kitchens, and has been producing fitted kitchens for over 40 years and customised bathroom cabinets since 1993. Development of the state-of-the-art techniques is devoted specifically to this activity.

Today, Mobalpa is the among leading makers of kitchen cabinets in France. There are over 40,000 homeowners in France whose homes get fitted with Mobalpa kitchens every year.

Mobalpa kitchens are available in three collections. These are the 100 % Design Collection which focuses on elegant, creative and contemporary designs, the Tendance Collection, which concentrates on classical, timeless designs and the Heritage Collection featuring country designs accented by the nobility of wood.

Check out the classic, modern feel of Lago. The beige kitchen has a unique combination of moulded lacquered doors. A wedged oak island unit doubles up as a food preparation counter or dining counter.

It is crafted for ample storage space. A mineral worktop complements its façade. Lago is a design from the Tendance Collection.

Managed by Advantage Resources Sdn Bhd (ARSB), the sole distributor of Mobalpa products in Malaysia, Mobalpa kitchen cabinets are showcased in its latest outlet in Damansara Utama.

By The Star

Monday, November 24, 2008

Keen interest prompts latest YNH launch

An artist's impression of the Kiara 103 project

YNH Property Bhd is targeting to officially launch its RM1bil Kiara 163 suites, a mixed development project in Mont’ Kiara, Kuala Lumpur, next month.

The project comprises a 23-storey office tower (175,000 sq ft), two 42-storey serviced apartment blocks (595,000 sq ft), retail podium (142,000 sq ft), and an auditorium (175,000 sq ft).

“We are launching the project due to keen interest from prospective local and foreign purchasers and also due to its prime location.

“There are always investors who look at property investment as a good hedge against inflation.

“We have secured about RM260mil in sales for the office and retail space to-date,” said group corporate services head Daniel Chan.

Chan said that to add value to Kiara 163, the retail podium and serviced apartments had eye-catching architectural designs and recreational facilities.

The two 42-storey serviced apartment blocks had a unique curved block design that was accentuated by the extensive use of glass windows, he said.

“The apartments will be equipped with facilities such as a swimming pool, jacuzzi, a gym, squash court with garden setting, and an entertainment pavilion,” Chan added.

The four-level retail podium is positioned as a neighbourhood retail centre catering to affluent expatriates and the local population.

“Food and beverage outlets, a supermarket, specialty stores which deals in fashion, eyewear and watches as well as service providers, including laundry outlets and medical and dental clinics, are on our list of retailers.

“The unique feature of the retail podium is the sunken outdoor courtyard where the food and beverage outlets will be located,” Chan said.

The office tower block, which would provide an alternative to corporate headquarters that did not require a city centre address, was also designed to accommodate small home-office units, Chan added. “This would help us tap into diverse markets,” he said.

The group’s other mixed-development projects, Duta Kiara 1, Duta Kiara 2, Duta Kiara 3, Duta Kiara 5, Duta Kiara 6 and Project 3KL, located in Mont’ Kiara, Hartamas and Kuala Lumpur city centre, would be launched over the next two years, Chan said.

These projects have a total gross development value (GDV) of about RM2bil.

“Our projects in KL and Mont’ Kiara, such as the Fraser Place KL and Ceriaan Kiara, have been well received with Fraser Place KL achieving sales of about 99% and Ceriaan Kiara 87% to-date,” said Chan.

Fraser Place KL is scheduled for completion soon, while Ceriaan Kiara will be ready by end-2009.

In Manjung the group’s “bread and butter” township development will continue to contribute to earnings for the next 20 to 30 years due to the demand from employees of the Lumut Naval Base as well as workers at the oil and gas fabrication and biodiesel plants there.

On the status of Menara YNH, the group had accepted Kuwait Finance House’s offer to buy 50% of the iconic “Grade A” office tower in January, Chan said.

“This property, located in the central business district, is designed by a world-renowned architect firm, Fosters and Partners.

“We are not in a rush to sell the second block as we want to get the best value for our shareholders.

“Based on our earnings before interest, tax, depreciation and amortisation of 50%, we are able to achieve a yield of above 7.20% if the rental is conservatively priced at RM3.80 per sq ft,” he said.

Chan said the company’s dividend policy was at least 30% of profits but the group had paid a higher rate in the past few years.

By The Star (by David Tan)

Freebies galore as developers push sales

Developers need to be innovative to create demand for their projects

TIMES must be getting quite bad, judging from the recent spate of generous freebies and incentives thrown in by developers to push property sales.

While in the past such incentives were offered by big and small players, this time around it appears that the “big boys” are going all out to sell their products while the smaller ones are mostly lying low.

For example, Soon Tiek Development Sdn Bhd is offering a whopping 21% guaranteed rental return to buyers of its retail outlets at Leisuretainment @ Endah Promenade.

Sime Darby Property Bhd has also been aggressively marketing its products with a host of incentives, including a “Guaranteed Buy-Back” programme to allay any fears among buyers during the current “uncertain and challenging times”.

Buyers of its houses, including those in Bandar Bukit Raja, Planters’ Haven, Bukit Jelutong, Denai Alam, USJ Heights and Nilai Impian, also stand to win big cash prizes: RM100,000 (first prize), RM60,000 (second prize). RM40,000 (third prize) and RM20,000 (fourth prize).

The SPK Group is also wooing buyers of its Cahaya SPK two-storey superlink homes, priced from RM468,000, with its “Year-End Bonanza” which consists of a grand prize of a Toyota Camry, first prize of a seven-day, six-night Australia Gold Coast holiday for two and for the other winners, vacations to South Korea and Hong Kong.

The IOI Group, which has many developments in the Klang Valley, recently offered several incentives that included a 45-day interest-free period for EPF withdrawal applicants and a 90-day interest-free period for government loan applicants. Buyers of its latest two-storey terrace houses and The Grand 2, comprising three-storey shop offices in Bandar Puteri Klang, also get a chance to win RM10,000.

A few months ago, purchasers of Phase 2 Jelutong Heights’ 2½-storey semi-detached houses priced from RM1.12mil were offered a RM50,000 “early bird” discount at a special preview. Buyers need only pay 10% upon signing the sale and purchase agreement with “no cumbersome progressive interest” until vacant possession.

These incentives, usually thrown in with free lunches, tea parties and sometimes elaborate dinners with classical music for upmarket products where only a handful of privileged guests are invited, are becoming the norm.

Most developers will not openly admit that their sales have slowed but the “off-the-record” consensus is that 2009 will be very challenging.

But will these freebies and incentives have any impact on sales? Those with steady-paying job and sound finances may find the incentives attractive enough to help them decide to buy.

However, generally, people are still wary and uncertain of the economy and are adopting a “wait-and-see” attitude, something that developers do not want.

Developers have not only delayed launches but some of them are forced to downsize or make major changes to their projects.

Some are looking for greener pastures abroad and have re-branded while others are trying to create new demand with unique products.

Berjaya Land Bhd and AP Land Bhd have new projects in Cheju Island, South Korea, and Hokkaido, Japan, respectively. It can be expected that more developers will be venturing abroad as local demand is set to shrink.

Instead of competing with each other, developers must pool their resources to collectively woo more foreign investors to Malaysia under the Malaysia Property Inc, tasked with promoting the country as an international property investment destination.

The International Real Estate Federation Malaysia is facilitating this collaborative effort between the Government, Real Estate and Housing Developers Association, Malaysian Institute of Estate Agents and the private sector.

Britain, the Middle East and Japan have been identified as the main target markets to launch Malaysia’s branding and promotional initiatives, with the Malaysia My Second Home (MM2H) programme being given priority.

Foreigners should find our products, especially the high-end ones, comparable with some of the best in the world. What we need is to let the world know more of what we have to offer. The pricing of our properties and the cost of living are still favourable.

The Government can do more, not just by injecting funds but, more importantly, addressing issues such as rising crime rates to ensure that Malaysia is seen as a safe place for MM2H, and offering tax incentives to spur people to buy their first home.

By The Star (by S.C.Cheah)

Karambunai says Sabah mart still hot

Property developer and resorts operator Karambunai Corp Bhd (KCB) will launch three new projects next year worth RM1.1 billion collectively in Kota Kinabalu, Sabah.

The Sabah firm is unfazed by the global financial crisis, expecting the property market in the state to remain buoyant, chief executive officer Datuk Robin Loh Hoon Loi said.

"We are fortunate the property market is still hot and active in the state, which is busy with palm oil, petroleum and tourism activities. Because of this, there is demand for new products," Loh said.

Loh told Business Times in an interview recently that foreigners are still looking for exotic products under the Malaysia My Second Home programme and for investment purposes.

KCB has over 766ha of prime land in Kota Kinabalu with two active big developments - Nexus Karambunai in the Karambunai peninsula and Bandar Sierra township - where the new launches are scheduled to take place.

In the Karambunai peninsula, KCB will launch Amabilis, a RM400 million upscale project in Nexus Residence Karambunai, featuring 100 luxury villas; and a 26.5ha Korean Village Resort, comprising villas and condominiums with recreational facilities worth over RM400 million.

Amabilis is expected to be launched in the first quarter of 2009, in conjunction with the opening of Dillenia, a new hotel under the Nexus resort brand, encompassing 80 units of semi-detached villas and 163 units of low-rise condominiums, some of which have been sold to investors under a leaseback option.

KCB has leased back some 90 per cent of the units to complement its existing five-star, 500-room Nexus Resort Karambunai, operating since 1997.

The launch of the Korean Village Resort, which is a 30:70 joint venture between KCB and Landlovers Korea Co Ltd, is still being finalised.

In Bandar Sierra, it will launch by mid-2009 200 units of terrace and semi-detached houses and cluster homes; 416 units of walk-up apartments; and 80 units of three- and four-storey shoplots worth RM180 million, utilising 16ha.

Loh is confident that sales will be vibrant, boosted by the location and demand.

While Nexus Karambunai is world renowned, Bandar Sierra, which is about 15 minutes' drive from the city centre, has become a landmark project for Kota Kinabalu with natural demand as government offices are relocating close by, he said.

By Business Times (by Sharen Kaur)

Silver lining for developers

Developers with a good line-up of pre-constructed projects for launch and high unbilled sales can look forward to commendable year-on-year financial results in the upcoming reporting season.

While most industry players have experienced an erosion in profit margin as a result of higher construction costs that started a year ago, companies that have projects in advanced stages of construction and recorded good take-up for their products will hold out well, performance-wise.

According to analysts’ estimates, Mah Sing Group Bhd is expected to turn in a higher net profit of RM98.7mil for its current financial year ending Dec 31 (FY08), from RM81.1mil in FY07, while revenue is set to rise to RM680.5mil from RM573.4mil.

In the first half of 2008, Mah Sing recorded sales of about RM263mil.

Mah Sing is one of the favourite picks for its sound balance sheet, strong branding and project execution capabilities.

Based on the company’s quick turnaround model, projects are usually launched six to nine months after land acquisition, although there could be some delay in the coming months following the softer market sentiment.

The company’s cash surplus of RM143mil as at Sept 30 will stand it in good stead to look for opportunistic acquisitions to expand its market presence.

In a research note, CIMB Research said Mah Sing was eyeing more land in Malaysia and hoped to wrap up several acquisitions over the next few months.

It is also scouting around for landbank in Vietnam, as the asking price for land should now be more realistic in view of the difficult market conditions there.

“Mah Sing is well-positioned to embark on more land acquisitions with its cash in hand, which should increase to RM213mil by mid-2009.

“It also has the capacity to borrow up to RM250mil should it choose to increase its net debt-to-equity ratio to a comfortable 0.5 time from 0.1 time in September,” the research house said.

Another developer with an identical financial year, United Malayan Land Bhd (UM Land), can expect some improvement for its third-quarter results following two quarters of losses.

The company recorded a loss of RM1.5mil for the first quarter ended March 31 and a further RM4mil loss in the following quarter.

However, on a year-on-year basis, UM Land’s results for FY08 are expected to be significantly short of last year’s.

In FY07, UM Land turned in a profit after-tax and minority interest of RM46mil on revenue of close to RM400mil.

The good response to its Suasana Sentral Loft condominiums in KL Sentral worth a gross development value (GDV) of more than RM300mil contributed to bottom line in FY06 and FY07.

Going forward, its latest project Suasana Bangsar, which was launched in July, will contribute to sales and earnings.

The project, with GDV of RM190mil, will take two to three years to complete.

Other projects in the pipeline will be a joint venture with MMC Corp Bhd to develop serviced residences in Persiaran Raja Chulan next year and a joint venture with Bolton Bhd to build high-end condominiums in Jalan Mayang, Kuala Lumpur, by 2010.

Meanwhile, companies which derive their income from investment property are in a better position to weather the current challenging market conditions as their rental income has been locked in.

Being the largest owner of superprime commercial properties in Kuala Lumpur City Centre (KLCC), the performance of KLCC Property Holdings Bhd is not expected to be much impacted by the market slowdown.

Hwang-DBS Vickers Research said the company had the most defensive earnings in the sector through locked-in rental income from blue-chip tenants on long-term leases.

It said KLCC Property’s earnings should continue to grow at a stable three-year cumulative average growth rate of 9%.

By The Star (by Angie Ng)

Ireka to build on i-Zen brand in Vietnam

IREKA Corp Bhd plans to aggressively grow the i-Zen brand for its overseas property development, especially in Vietnam, says executive director Lai Voon Hon.

“The Vietnamese market offers vast opportunities for the i-Zen brand, as the country has a young and educated population, strong foreign direct investment and a proactive government that promotes changes and liberalisation,” he told StarBiz.

He added that that the group was targeting the upper middle income segment in Vietnam.

i-Zen is an embodiment of quality products, contemporary lifestyle, high security, continued relationship with buyers, after-sales services and property management services.

Ireka’s property development in Vietnam is via its associate Aseana Properties Ltd. Currently, Aseana has seven projects in Malaysia and three in Vietnam.

Aseana’s joint ventures in Vietnam have an estimated gross development value of US$1.9bil. Its upcoming projects include Queen’s Place and Hi-Tech Healthcare Park, both in Ho Chi Minh City.

Queen’s Place sits on two acres and is a US$200mil joint-venture project in which Aseana owns 65%. It comprises residential units, offices and a retail mall.

Hi-Tech Healthcare Park is a US$420mil mixed commercial and residential development on 93 acres. It is 51%-owned by Aseana.

Lai said Mont’ Kiara had provided Ireka with the “branding showcase” and expertise to promote i-Zen outside Malaysia.

“The i-Zen brand has helped Ireka differentiate itself from others. This will not only benefit us during property launches but also allow buyers to command a premium resale value.

By The Star (by Law Kai Chow)

UAE intervenes in merger of mortgage lenders

DUBAI: Two of the United Arab Emirates' (UAE) largest mortgage lenders, already on track to merge, will be brought under a government-owned bank, the UAE finance ministry said yesterday, in the first sign of federal government intervention in Dubai's troubled property sector.

Trading in both Amlak and Tamweel, which have been struggling amid the global credit crunch, was suspended after the finance ministry said it will supervise their merger under the government's Real Estate Bank to ensure a fair valuation and protect shareholders.

"For Amlak and Tamweel it was always clear that some level of government support was necessary," said Raj Madha, a banking analyst at EFG-Hermes. "There were three problems that Amlak and Tamweel were facing: funding, liquidity and solvency.

"A merger between the two would have made no difference to those problems but an integration with Real Estate Bank effectively addresses all three of those issues," he said.

The combined market value of the firms is 2.5 billion dirhams, or US$681 million (US$1 = RM3.63) roughly one-third of their worth since October 4 when the two Dubai-based firms first announced merger plans.

Little-known Real Estate Bank, which comes under the finance ministry, is a government-owned entity aimed at supporting the real estate sector and provide housing for UAE nationals, according to its website.

Earlier this month, Tamweel said it was in talks with the central bank and the finance ministry about their "short-term requirements facility", and long-term funding options once its merger with Amlak had gone through.

A finance ministry official said yesterday that more details would be announced in coming weeks while an Amlak official declined to comment. Tamweel was not immediately available.

The companies will be combined as the UAE Real Estate Bank to create the largest real estate finance institution in the country, the state news agency WAM said.

Lenders and developers in the UAE have been battered by the credit crisis as market financing evaporated, property values plunged and buyers fled a market where land values have ballooned during a five-year boom.

Speculation has grown, as the financial crisis squeezes credit and hits stocks and real estate markets, that the federal government may step in to help shore up confidence in Dubai. Becoming a licensed bank would enable the two mortgage lenders to take deposits and access emergency federal funds.

By Reuters

Sunday, November 23, 2008

Changing the face of Petaling Jaya

A New generation of office buildings have mushroomed in several parts of Petaling Jaya over the past few years in tandem with growing demand for better office space outside the city centre.

However, as the economy faces tough challenges in view of the current global financial crisis, the local property market has also experienced a general slowdown. The consensus among property developers is that times would be “bad” next year, although few would admit it openly.

Some developers who joined the office market craze in Petaling Jaya in the past few years may be lucky as they have managed to complete their projects and sold or tenanted out most of their office and retail spaces.

At Jaya One, residents have more choices in terms of dining and shopping.

These are the new generation strata office developments where some of them have retail components. They are mainly found along the Federal Highway (mostly purpose-built integrated offices like PJ City, PJ8) and in Section 13, 14 and 19 like Jaya 33, Jaya One, The Quill 9 and 3 Two Square.

Affluent townships like Bandar Utama and Taman Tun Dr Ismail (TTDI) are also seeing several new office projects (Menara Surian next to Ikano Power Centre and three in Bandar Utama City Centre viz Plaza IBM, KPMG Tower and 1, First Avenue. With Bandar Utama being awarded the MSC Cybercentre status in October, it would enhance the value of properties there).

Ken Group is also planning to build an office block in TTDI.

Coming up in the Kampung Kayu Area is 10 Boulevard and nearby, just after the Damansara toll plaza is the new Merchant Square.

There are many more being planned or under construction.

Those that have just been launched or just completed may face an uncertain future. This may be partly due to a softening market that is expected to get worse next year.

Although oil prices have dipped recently, there are still fears that it might jump next year, causing another round of fears and uncertainty. The global financial “tsunami” may hit our shores hard next year.

Meanwhile, a rough poll shows that generally the office market in Petaling Jaya, especially for the new developments, are holding up fairly well.

Businesses today want to be seen as progressive and not holed up in some old shop houses. They do not mind paying a premium to own or rent offices that are well located and have lots of amenities.

Chan: PJ people can now work in PJ and this has helped to reduce traffic jams.

S K Brothers Realty Sdn Bhd general manager Chan Ai Cheng points out that employees are also choosy in not only who they are working for, but also where they work, as in location.

“An interesting thing while marketing 3 Two Square is that we noticed that businesses were moving out of the older shop offices and shop houses to new developments as their former image had made it difficult for them to hire staff, much less retain them. Young graduates today are looking at working in fine offices, and places with a nice address plus extra perks. It reflects the changing times,” she says, adding that many companies who had their roots in Petaling Jaya were also reluctant to relocate elsewhere.

SK Brothers, she says, is one such company that had bought office space in 3 Two Square which is very near its former office in Paramount Garden that it had been operating since 1979.

“When we bought our office space in 3 Two Square, prices were around RM260 psf to RM280 psf but it has since gone up. We transacted a unit at 3 Two Square early this year for RM315 psf. Recently, we transacted another office space just above our unit at RM380 psf. Office rental rates there are in the region of RM2.30 to RM2.70 psf,” says the daughter of SK Brothers founder Charlie Chan.

Chan says she has a friend who bought a unit at 3 Two Square a few months before completion and managed to almost immediately rent out her unit to a pharmaceutical company; for a year now, she has been enjoying rental returns of close to 10% per annum.

Chan says her company’s decision to buy a unit in 3 Two Square was based on factors such as accessibility, matured neighbourhood, track record of the developer, ample car park bays and unique features including its wide frontage lots with a minimum of 28ft for high advertising exposures.

She said Quill 9 at Jalan Semangat which is due for completion soon has BMW as its ground floor tenant. Developed by the Quill Group, it has big floor plates of 20,000 sq ft to 50,000 sq ft with rentals from RM4.30 psf.

“All these new developments are a welcoming change for residents of Petaling Jaya. I have lived in PJ all my life and in the early days there was only Jaya Supermarket and the Right Angle in Section 14,” she adds.

“Today with Jaya One, Jaya 33 and others, residents have more choices in terms of dining and shopping, As more companies relocate their offices here, it has also enabled PJ residents to find jobs nearer their homes. PJ people can now work in PJ and this has helped to reduce traffic jams and improve people’s life,” she adds.

Instead of developing traditional type shop houses, developers have differentiated themselves with new products and concepts.

For example, Jaya 33 has a hyper office concept, VSQ (pronounced as V Square) has corporate offices with serviced apartments, 3 Two Square is marketed as hybrid shop offices while Jaya One in Section 13 (along Jalan Universiti) has a mix of stand alone office block, and restaurants designed in courtyard styles.

The new projects along the Federal Highway include the newly completed PJ8, PJ City and fairly new Menara LYL.

A 6-storey office block with two basement car parks is under construction two lots from Menara LYL. These, along with Menara Axis, Crystal Plaza and the row of motor showrooms (Mercedes-Benz, Chevrolet, Mazda, Ssyangyong, VW, Naza World, Subaru and Ford on the opposite of the highway) are transforming this part of Petaling Jaya into a vibrant office cum retail hub.

By The Star (Stories by S.C.Cheah)

I-BHD Building a legacy

I-BHD executive chairman Datuk Lim Kim Hong thinks he is building an intelligent city. He is doing that and more. He is building a legacy.

Lim likens i-City to Hong Kong’s Cyberport.

Lim likens i-City to Hong Kong’s Cyberport and to Dubai’s Internet City and Media, but on a very much smaller scale. His two boys, Boon Siong, 35, and Ricky, 31, are deputy CEO and chief innovation officer respectively, are helping him.

Lim, 58, has reached a stage in his life where financial returns are no longer the main driving force. He wants to make a contribution to society. The other force driving him is his interest in technology and innovation.

Lim is not the regular entrepreneur. In the 1970s, his corporate vehicle Sumurwang introduced Dreamland brand of mattresses. Dreamland Holdings Bhd subsquently diversified into the stainless steel industry in the early 1990s and was renamed Kanzen Bhd.

Sumurwang later divested Kanzen, took an interest in Sanyo Industries Malaysia Bhd, renamed it I-Bhd and brought out a plethora of “i” brand of digital products. In 2006, I-Bhd went into the property development sector. On the unrelated nature of his past ventures, Lim says the formula remains the same.

“The word today is ‘innovation’ and because we have gone into property development, I want innovation to play a bigger role in what we put up,” he says.

When he steered the company into property development several years ago, the plan was to ultimately have two revenue streams - property development and technology - independent of each other.

Says its director Eu Hong Chew: “In about five years, property development may contribute between 60% and 70% to the group and technology the rest. One of the ways would be to offer our IT services to other developers. This will provide us with an independent IT revenue stream. The idea is to take their IT services out of i-City into other projects.

Eu says as the economy becomes more challenging, companies will look towards technology, especially IT, to help control and manage their business. “Despite the current global slowdown, our broad business direction remains relatively unchanged,” says Eu.

Like KLCC, Sentral, Mid Valley City, Bandar Utama city centre, Lim is delighted that i-City has already been given MSC Cybercentre status. Phase one, comprising about 300,000 sq ft of office space, is officially open for leasing.

Phase two with 200,000 sq ft of office space in three and five-storey units will be ready in the third quarter of next year. This will be another en bloc sale. They are in talks with investors from the Middle East, Japan, S Korea and Singapore.

“When the customer moves in, all the network, telephone infrastructure will be ready,” he says.

The entire 72 acres will take be ready in 2015 and comprises a mall with cinema facilities, several office towers and a lake of about 40 acres and park, a hotel and a small number of residential development.

Work on the mall is expected to begin in the first quarter of next year and will take three years go complete.

Eu says when i-City was planned three to four years ago, they asked themselves: What does knowledge-based office workers want? Broadband, events hall, concierge, parks and supporting amenities like food and beverage, malls and retail and a well-managed entity came into mind.

With their joint-venture partners - Sydney-based ServCorp and US-based networking equipment supplier Cisco Systems Inc among two of them - Eu and his team began to package the space accordingly.

“We are not doing a regular office commercial project, we are targeting a category of clients who like the nice perks and facilities that come with space, greenery and conveniences,” he says.

A central data centre will house the computers instead of individual companies having their own server rooms. This will be ready in the first quarter of next year. ServCorp will manage the place and Cisco, its broadband element.

There have been a lot of behind-the-scene negotiations to get the local authorities approvals for entertainment, tourism and technology elements. Incidentally, there are no cinemas, pubs or other forms of entertainment in Shah Alam due to state restrictions so i-City will certainly transform the township.

Notwithstanding the global crunch, the office environment is moving towards a greater need for conveniences, which is why ServCop and Cisco have been brought in, says Eu. When the project was first launched three years ago, the gross development value was RM1.5bil. It is estimated to exceed RM2bil today.

I-Bhd will keep between 30% and 40% of the development for recurring income and sell the rest to institutional investors. The mall, all the car parks and office towers will be kept for recurring income.

“In order to comply with MSC requirements, we have to manage the place and as such, we might as well deal with as few authorities as possible, hence, the en bloc sale. That was how it all evolved two to three years ago.

“I-City will be on a very much smaller scale compared to the international intelligent cities in Dubai and Hong Kong. As for the MSC Cybercentres in Bandar Utama, Sentral and Mid Valley, these are developments which are about 10 years old. It was only subsequently that they were given MSC status. Unlike them, we are building I-City from ground zero,” says Eu.

By The Star

Rates still attractive

Real estate agent Daniel Goh of CBD Properties is a busy man these days.

Despite all the gloom and doom about the global financial crisis and general softening market, he still sees the Petaling Jaya (PJ) office market rental rates and values holding well.

Goh is confident that more businesses will relocate to Petaling Jaya as it is more affordable than Kuala Lumpur.

“Companies are moving from the city centre to PJ, Shah Alam and Klang where the rentals are lower and also nearer to their employees’ homes,” he says, adding that during a downturn, larger companies might downsize their operations and go for smaller but modern offices; PJ has many new ones to offer.

“I just closed a deal to rent out a 6,000 sq ft office space in Jaya One in Section 13 for about RM2.50 psf inclusive of maintenance fees,” he says, adding that he had also recently done a deal to rent out a 6,400 sq ft office space in Brem Tower in Kelana Jaya for RM3 psf.

Goh has also found several tenants for Menara LYL at Jalan 51A/223 which is ideal for companies looking for bigger spaces from as low as 7,500 sq ft to an entire floor of 30,000 sq ft.

Despite the asking rent of RM4.50 psf, which is higher than the RM2.50 psf to RM3 psf in other areas, this new, modern building is almost fully occupied with tenants like Jaya Palace, McCannWorldgroup, Red Oven, Jobhunt and Standard Chartered Bank.

Office workers from Menara LYL and its adjacent Menara Axis, Crystal Plaza and some older buildings can walk to an LRT station in front of their offices.

In the 1970s, there were only a few buildings at the intersection between Jalan Utara/Jalan Barat and the Federal Highway. They include the former Jaya Puri Hotel (now called PJ Hilton) and the Asia Jaya shopping mall. Later came the Armada Hotel.

Today, this area is a hive of activities. Coming up is Malton’s VSQ office cum serviced apartment project next to the Tun Hussein Onn Hospital.

Right at the highway intersection is the newly completed RM250mil PJ8, an iconic landmark. Located on the former 3.8-acre leasehold, Cycle & Carriage showroom site opposite PJ Hilton, this L-shaped development comprises three office blocks (12, 13, 17 stories) and a 38-storey tower (tallest in PJ) with 310 serviced suites. It has 1,100 parking bays.

Developed by land owner Mega First Corp Bhd and IJM Corp Bhd, the development is set to be the latest “happening” place with a 23,000 sq ft plaza, elevated six metres above ground.

IJM Land Bhd managing director Datuk Soam Heng Choon says all three stratified office blocks had been sold (one sold en bloc) while more than 85% of the serviced apartments had also been sold, leaving only the bigger units. Mega First had also occupied substantial office space there.

He says the early batch of office suites had already appreciated in value and were now worth RM560 psf.

Contrary to talks that it might be difficult to rent out the office suites at RM4 psf to RM4.50 psf, Soam says owners had rented out many of their units, and there had been many enquiries for 20,000 sq ft to 30,000 sq ft space.

Soam says office rentals in the city were more expensive. For example, KL Sentral offices were being rented out for between RM7 psf to RM8 psf.

Kim Realty Sdn Bhd chief executive officer Vincent Ng says the new strata titled offices with security features and retail components were attracting certain companies especially small foreign firms who were image conscious.

Ng: Strata titled offices attracting small foreign firms who are image conscious.

On the office market in the Damansara area, Ng says rentals and values in Damansara Jaya were generally lower than those in SS2 and Damansara Utama commercial areas.

He says rentals for the first floor office space in Damansara Jaya was about RM1,500 to RM1,800 a month while the ground floor rentals were as low as RM3,000 to RM5,000.

The ground floor rental of SS2 ground floor shops could be as high as RM10,000 a month and the price of a shop house there were in the region of RM3.5mil to RM3.6mil.

By The Star

Downturn in Asia property marts to accelerate in 2009

HONG KONG: Asia's property markets are about to be hit by the global economic downturn with apartment prices and office rents in Hong Kong and Singapore set to skid more than 20 per cent by the end of 2009, a Reuters poll on showed yesterday.

Tokyo residential prices are forecast to fall 10 per cent by the end of next year while Grade A office rents and capital values are seen slipping by up to five per cent, according to the poll of financial institutions and property consultants.

Hong Kong residential property prices, already down 15 per cent from a peak earlier this year, are set to drop 20 per cent.

"They are heading back to levels seen during the SARs outbreak in 2003," said Leland Sun, founder of Hong Kong-based Pan Asian Mortgage Co Ltd.
"Although mortgage rates are low, at around three per cent, banks are reluctant to give 70 per cent mortgages because of declining economic conditions."

In Singapore, home prices fell 2.4 per cent in the third quarter of 2008 - marking the end of a four-year housing boom - and will drop another 21 per cent by the end of 2009.

The downturn in Asian property lags the end of the property boom in the US and Europe but will be felt more keenly next year. In comparison, Reuters polls forecast a 6.4 per cent drop in US house prices in 2009.

Hong Kong, Singapore and Japan are all now officially in recession. In Japan, more than 400 small and medium-sized developers and real estate firms have gone out of business in the past year as the residential market has turned down and as tighter credit has made it harder to finance property deals.

Office supply in Tokyo is relatively tight but rents at new buildings have started falling for the first time in six years.

Hong Kong, Asia's biggest international financial centre, will probably be most exposed to retrenchment in the financial sector. HSBC said this week it would lay off 500 staff in the city although redundancies by banks in Asia will be less than in New York or London.

As finance companies are locked into long leases, falling demand will filter through slowly, meaning further downside for office rents and prices in 2010 and possibly 2011, analysts said.

Capital values of Grade A office space in Hong Kong are poised to slump 30 per cent between while office rents are expected to tumble 26 per cent, according to the poll.

Office rents in Singapore have quadrupled in the past five years as companies expanded amid limited supply. As supply now looks to overshoot just as companies are cutting back, Grade A rents are set to drop 21 per cent by the end of 2009 and prime office capital values will slide 25 per cent.

By Reuters

Friday, November 21, 2008

TA Enterprise aims to list property arm in Q1

PETALING JAYA: TA Enterprise Bhd expects to list its property arm TA Global Bhd on the main board in the first quarter of next year following the Securities Commission’s approval recently.

Managing director and chief executive officer Datin Alicia Tiah said the group was arranging with the underwriters on the portion of shares to be allocated to bumiputras.

“Initial public offerings (IPOs) in recent times were not fully subscribed.

“I think we would need to see how we are going to allocate the bumiputra portion following the Government’s relaxation of the rules,” she said.

The Government recently announced that it was relaxing the minimum 30% bumiputra equity requirement for public-listed firms. TA Enterprise had earlier targeted to list TA Global by next month.

TA Global’s listing exercise involves a proposed rights issue of 860 million new shares and a public issue of 350 million new shares at 50 sen per share.

TA Enterprise had earlier proposed to sell 875 million TA Global shares to bumiputra investors. It also proposed a capital distribution to shareholders via a share capital reduction from RM1 per share to 50 sen.

The proceeds from the proposals would total RM437.5mil. TA Enterprise is expected to recognise a capital gain of RM924.9mil.

Although the group is cash-rich, Tiah said, it would still want to raise more funds through an IPO because it needed more cash to buy assets at this time as the prices of properties were easing.

As of July 31, the group’s net cash and cash equivalents totalled RM451mil.

“We would still need more cash if we were to buy assets overseas.

“For investments in Australia, the weakening Australian dollar vis-a-vis the ringgit would enable TA Global to buy more properties there,” she said.

It currently owns Radisson Plaza Hotel in Sydney that had an average occupancy rate of 82% in July and a market value of A$120mil.

“Everything is at a discount now and I would say there’s about 25% discount from currency gains due to the strengthening of the ringgit (against the Australian dollar),” she said.

Furthermore, Tiah said, it was a good time to buy properties now because many prime properties held by hedge funds are available following a massive redemption by hedge funds.

“That is why this IPO is very important to us. If we are successful in raising the money, this would create an opportunity for the group to buy good assets with highly discounted prices,” she said.

Meanwhile, deputy chief executive officer Tiah Joo Kim told StarBiz that TA Global would launch an international brand for the newly acquired RM107mil Coast Whistler hotel by the first half of next year.

He said the group would develop hotels that carried its own brand, complete with different concepts and themes.

“We want to study the market segments and create different themes and concepts to suit the different market segments,” he said, adding that the acquisition of Coast Whistler would be completed by next month.

Joo Kim said TA Global would also develop a mixed development project worth some RM1.27bil on 3.3 acres at the corner of Jalan Imbi and Jalan Bukit Bintang, Kuala Lumpur.

By The Star (by Shannen Wong)

Thursday, November 20, 2008

YTL Corp hunts for acquisitions

KUALA LUMPUR: YTL Corp Bhd says it has a “war chest” of RM12bil and is hunting for acquisitions as asset values decline.

“We have an army of people combing through deals,” managing director Tan Sri Francis Yeoh said in an interview with Bloomberg Television yesterday. “Valuations are going down by the day. I’ve been waiting for this moment for a long time.”

The global recession has sent every major benchmark stock index worldwide tumbling at least 30% this year after the collapse of banks and insurers from the US to Japan. YTL could borrow six or seven times more than its cash for larger deals, Yeoh said, suggesting valuations might be near their bottom.

“It’s the best time to buy assets which are at distressed levels,” said Jason Chong, who helps oversee US$1.6bil of securities, including YTL shares, as chief investment officer at UOB-OSK Asset Management.

“In times like this, cash-rich companies like YTL can afford to cherry-pick.” he said.

While the company would maintain a “steady dividend flow,” YTL investors shouldn’t be surprised if dividend growth eased to allow the company to make acquisitions, Yeoh said.

YTL, the owner of resorts across Malaysia and the Ritz-Carlton and JW Marriott hotels in Kuala Lumpur, was assessing businesses in the property, power-generation and water industries, Yeoh said. He wouldn’t name specific targets.

It is particularly looking for deals in Singapore, where rents are falling, and in Britain and Australia, where the domestic currencies have weakened. The ringgit is up 17% against the pound sterling and 32% versus the Australian dollar in the past six months.

“If you buy a pound asset today, you can’t go that wrong,’’ Yeoh said. “Every time there is a currency implosion, you are at an advantage. A lot of deals are beginning to be quite salivating.’’

In south Australia, where YTL owns 33.5% of ElectraNet Pty, a power generator with a 200-year licence, YTL was looking at power and transport infrastructure assets to buy, Yeoh said, adding that sellers needing cash had approached YTL.

YTL in October agreed to pay S$285mil for control of Macquarie Prime Real Estate Investment Trust, owner of stakes in two Singapore shopping malls. YTL last year bought an apartment building in Singapore for a then-record S$435mil.

YTL favoured assets that already generated cash and were regulated, such as Britain’s Wessex Water, rather than those needing investment, he said.

By Bloomberg

Wednesday, November 19, 2008

TH Properties to provide healthcare at Bandar Enstek

KUALA LUMPUR: Lembaga Tabung Haji’s property arm TH Properties Sdn Bhd and Primanora Sdn Bhd, will provide healthcare services in its flagship project at Bandar Enstek in Negri Sembilan for the aged and elderly.

“Besides healthcare services, the first phase of the development, Resort Living@enstek, will also offer various social, cultural and educational activities for residents,” TH Properties’ chief executive Zaharuddin Saidon told reporters after signing a memorandum of understanding here yesterday.

He added that the development would be on a 12ha land in Bandar Enstek, with a gross development value (GDV) of RM30 million. Construction will start in June 2009 and is scheduled for completion within two years. Bandar Enstek is a RM9.2 billion township which will spread over 2,000ha when fully completed in 2025.

“There will be about 60 units of bungalows in the area, which cost RM500,000 to RM1 million per unit. We are targeting the elderly of 60 years old and above,” Zaharuddin said, adding that it was also looking to provide similar services to the elderly in Ipoh and Penang.

Besides the Resort Living@enstek, the property developer is also eyeing suitable locations in Bandar Enstek and Kuala Lumpur to develop its second healthcare project — Women & Children’s Hospital — with a GDV of RM150 million.

“The demand for the hospital will be in Kuala Lumpur and a decision will be made in the next couple of months,” he said.

By The EDGE Malaysia

TH Properties to build township for the elderly

TH Properties Sdn Bhd has teamed up with PrimaNora Sdn Bhd to develop a RM30 million resort-style township in Bandar Enstek for the aged and elderly.

TH Properties chief executive officer, Zaharuddin Saidon, said the 12-hectare development was expected to commerce in June next year and would be completed two years later.

“The township, called Resort Living@enstek, is targeted at those 60 years and above.

“It will comprise 60 bungalows priced between RM500,000 and RM1 million each,” he said after signing the memorandum of understanding (MOU) with PrimaNora in Kuala Lumpur yesterday.
Zaharuddin said under the MOU both companies would also collaborate to develop a women and children’s hospital, medical wellness centre, specialist healthcare facilities and comprehensive health Hajj programme, focusing on providing comprehensive and holistic healthcare.

“We are currently studying the strategic location for the hospital (for women and children). It might be within the Bandar Enstek or somewhere else in Kuala Lumpur,” he said.

He said the companies also planned to develop the same type of township in Penang and Ipoh.

“We have identified a few locations. We will duplicate Resort Living@enstek and build the township, maybe in Penang and Ipoh,” he said.

Asked if this was the right time to introduce new development due to the current global crisis, he said: “The health industry is recession-proof. People still get old. They have to prepare themselves.”

Zaharuddin said the company was fortunate not to rely on one product.

“For other developers who rely on one product, especially the high-end, investors might hesitate because of the current financial crisis. So they will be affected.

“But for us we have different products. So if the high-end have problems, we will go for other products such as middle- and lower-end.

“People still need houses. So we will identify the products the market wants,” he said.

By Bernama

Urusharta draws foreign buyers

KUALA LUMPUR: Urusharta Cemerlang Sdn Bhd believes properties in the country are still attractive especially among foreigners, says chairman Tan Sri Zainol Mahmood.

“With strategic location and high quality of materials used, there should be no reason why foreigners don’t want to buy properties in Malaysia,” he said yesterday after the topping-up ceremony for Pavilion Residences.

He added that foreigners from about 18 countries made up half of the buyers for the 368-unit high-end condominium project, which was sold out last month.

The units were priced from RM1.8mil to RM8mil.

Despite the current global economic slowdown, the international community seemed aware of the future of Malaysia and were still confident on investing in the country, said Zainol.

Comprising two towers, the project is located at Pavilion Kuala Lumpur in the Golden Triangle.

Zainol said although the property sector was facing a slowdown, developers shouldn’t just stand still but must think positively on how to generate business activities in the country.

He believed the company’s decision to complete the development of Pavilion Residences would help the industry and the country by creating jobs.

“If we stop the development, it would mean no jobs for people. Doing so would just help create a recession,” he said.

Pavilion Residences is scheduled for completion early next year with gross development value of RM610mil.

By The Star

YTL Corp hunting for acquisitions

YTL Corp, Malaysia’s biggest builder, said it’s got a “war chest” of about RM12 billion (US$3 billion) and is looking for acquisitions as asset values worldwide fall.

“We have an army of people combing through deals,” managing director Tan Sri Francis Yeoh said in an interview with Bloomberg Television today. “There are very interesting assets globally that are ready.”

“It’s the best time to buy assets which are at distressed levels,” said Jason Chong, who helps oversee US$1.6 billion of securities, including YTL shares, as chief investment officer at UOB-OSK Asset Management in Kuala Lumpur. “In times like this, cash-rich companies like YTL can afford to cherry-pick.”

YTL, based in Kuala Lumpur, has expanded its cement, power and water businesses by buying businesses in China, Indonesia, Australia and the UK, where the Malaysian company owns Wessex Water.
Yeoh said today YTL could borrow six or seven times more than the company’s available cash for larger takeover.

YTL is assessing businesses in the property, power-generation and water industries, Yeoh said. Still, the company will maintain a “steady dividend flow,” he said.

Profit at YTL in the year ended June 2008 rose 9.8 per cent to RM769.8 million from a year earlier, helped by higher earnings at the utility and cement divisions.

By Bloomberg