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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

Euro buyer found

Bandar Raya to sell office tower for RM439mil

KUALA LUMPUR: Bandar Raya Development Bhd (BDRB) has found a European buyer for Office Tower 2 (OT2), which has been left uncompleted since 1997, for RM439.3mil.

“This (the sale of OT2) is the most significant part of the puzzle ... it will bring the Capital Square project to a closure,” BDRB chief executive officer Datuk Jagan Sabapathy told StarBiz yesterday.

In a statement to Bursa Malaysia, BDRB said its 70%-owned unit, Capital Square Sdn Bhd, signed a conditional sales and purchase agreement with Germany-based Union Investment Real Estate AG for the en bloc sale of the 41-storey office building.

The proposed sale would enable the company to unlock the value of OT2. The cash received could be utilised to finance the development of the other components of the Capital Square project.

The proposal was expected to contribute to BDRB's earnings for the financial years ending Dec 31, 2008 (FY08) to FY10.

Analysts said such en bloc sales would normally help ease a property developer's cashflow and it need not have to worry about cash being tight in unsold units when the project was completed.

Union Investment is an international investment management company specialising in open-ended real estate funds for private and institutional investors. It has assets under management amounted to 11.6 billion euros and has expanded into 12 new markets, including Japan, Singapore, Mexico and Hungary.

The OT2, which will be completed in 2011, is a Grade A office block at Jalan Munshi Abdullah in Kuala Lumpur.

With net lettable area of 600,000 sq ft, the sale consideration of RM439.3mil will be translated to about RM734 per sq ft.

Jagan said the deal signified a big improvement in the pricing of commercial property in the city centre.

“For a long time, the valuation (on commercial properties) was sitting between RM650 and RM700 per sq ft. We have gone past that,” he noted.

Analysts concurred the pricing was fair for the location, although it was not a hefty premium.

The latest en bloc deal prior to BDRB's transaction was done by Mah Sing Group Bhd, which managed to sell The Icon Jalan Tun Razak (East Wing) in November to Prompt Symphony Sdn Bhd for RM237mil or RM969 per sq ft.

Prompt Symphony is a special-purpose vehicle set up by Kuwait Finance House and Autron Corp Ltd.

Mah Sing, however, sold the The Icon's West Wing to Koperasi Permodalan Felda in July for RM174.4mil, or about RM714 per sq ft. Jagan took pride that this was one of the first deals that brought an European real estate management firm into the Malaysian property market.

“We have not seen much European funds. We have seen more foreign buyers from the Middle East,” he said.

To clinch a deal with the top real estate company, Jagan said BDRB had gone through an “exhaustive process.” The buyer had done stringent audit on BDRB, ranging from the design, the group's ability to deliver to its existing completed projects.

“It took three months for us to complete the due diligence process,” he said, adding that the success of the deal might help to pave the way for BDRB and Union Investment to explore more opportunities locally and in the region.

By The Star (by Kathy Fong and Yvonne Tan)

Magna Prima to continue its focus on niche developments

KUALA LUMPUR: Magna Prima Bhd will continue to focus on pocket-sized niche developments in good locations with a huge catchment for quick turnarounds. The Second Board-listed property developer has four ongoing and two yet-to-be-launched projects over 102 acres with a gross development value (GDV) of RM1.9 billion.

Its chief executive officer, Lim Ching Choy (pix) said, it is the primary objective and business model of the group to target projects in property hotspots with high densities and populations, particularly by purchasing land with development orders.

“We are very cautious with the property cycle and are going for [pocket-sized] projects as we do not have to incur heavy working capital or infrastructure costs.

Developing on approved land allows us to lock-in sales quickly and turn around quickly, probably within six months,” he told reporters after the group’s EGM yesterday.

He added that the group would also be focusing on residential and commercial highrise developments, targeted at the middle- to upper-income groups, as this is a growing market segment.

“All of our projects are located in the Klang Valley as we feel it is still strong in terms of economic growth, population, earning capacity, purchasing power and housing needs,” he said, adding that the area also promised good returns for investors.

Magna Prima received its shareholders’ approval to acquire 10.23 acres of freehold land for about RM57.9 million located next to Jalan Kuching at the intersection between Jalan Kuching, Jalan Ipoh and Jalan Kepong.

The land is for a mixed development comprising 20 units of 3-storey shops, two blocks of 200 signature offices, a 15- storey office block, and two blocks of 800 serviced-apartment units. It would also have a hypermarket occupying the lowerground and ground floors, five levels
dedicated to retail shops, departmental stores, a cineplex and a bowling centre as well as three levels of underground parking with approximately 5,000 bays.

The project with a GDV of RM735 million is expected to be launched in the first half of this year and scheduled for completion by 2012. “The company intends to sell the serviced apartments, shop offices and commercial units while retaining the retail mall for recurring rental income,”
Lim said.

Magna Prima’s other new mixed development located on a 4.78-acre tract in Section 13, Shah Alam, is targeted to kick off by the first quarter of this year and would comprise 378 apartment units and a 15-storey office building with amenities.

The project has a GDV of RM110 million. The group’s other ongoing projects include Magnaville in Selayang, The Avare near KLCC, Dataran Otomobil in Shah Alam, and Metro Prima, its maiden joint venture project with Kuala Lumpur City Hall, in Kepong. It has unbilled sales amounting to RM300 million, which would last the group for the next two years.

By theSun (by Yap Yew Jin)

The only way forward for developers is to open up

"Malaysian need to prepared to face global realities, even if it means we have to go through the paintful adjustment period" << Tan Sri Liew Kee Sin CEO SP Setia

QUESTION: What would be the main challenges for the property industry this year?

ANSWER: Today, Malaysian properties are of world-class calibre and can stand their own against international offerings.

This is attested by the many international awards garnered by local developments in recent times.

In fact, the Malaysian property market is one of the most dynamic and vibrant industries, which is constantly evolving in tandem with global trends.

Ambitious developers have even exported their expertise overseas and met with commercial success.

While local developers do not lack in the ideas departments, their biggest challenge is in terms of quality.

The industry is still plagued by the lack of quality and skilled manpower, and highly dependent on foreign labour.

Now that the market is liberalising and we are targeting foreign buyers who are accustomed to the demanding and exacting standards of developed nations, we need to improve in this aspect.

The entry of foreign developers also presents the challenge of increased competition.

Other general risks include the vagaries of being in a cyclical industry and political upheavals.

Q: How do you plan to overcome these challenges?

A: The oft-cited advantage of Malaysian properties is the fact that we are cheaper compared to regional peers.

But a closer analysis of this would reveal that this could be a function of the poor public transportation network in the country.

An ineffective public transportation system burdens living costs and would keep foreign buyers away.

The fact that other property markets such as Singapore and Hong Kong command higher premiums can be credited in part to the efficiency of the public transportation system anchored by the high-speed rail system.

The accelerated urbanisation in the city areas has caused serious traffic congestion.

Some major business and residential hubs should be built in sub-urban areas to control the pollution level and disperse the increasing traffic problem in the city.

Malaysia's relatively small population means that we need to attract a bigger pool of expatriates to continue to grow the size of the property market.

Hence, it is very important to facilitate entry of foreigners, especially knowledge-based workers.

This will create a strong expatriate community, which will in turn promote a vibrant rental market for residential properties.

Q: What are the trends that could shape the industry this year?

A: The sweeping changes to ease rules on foreign ownership of property and enhance the delivery system have benefited the sector tremendously.

These moves have created the "feel good" sentiment and attracted strong foreign interest in Malaysian real estate especially for high-end properties.

The FIC relaxation of foreign ownership followed by real property gains tax exemption were the most important contributing factors towards the upswing in foreign demand.

Not only that, foreigners are also eyeing the commercial market with many Middle East consortia, purchasing en-bloc office towers and retail centres, or taking equity interests in development companies or projects.

Industry sources show that in 2006, 45 per cent of the value of office transactions was by foreigners compared with 19.3 per cent the year before and 1.9 per cent in 2004.

Q: What are the prospects for the industry this year?

A: Underpinned by GDP (growth domestic product) forecast of six per cent for 2007 and coupled with good financing packages available from banks, the property sector will continue to thrive this year.

But we anticipate the most profound impact to come from the unlocking of RM9 billion worth of funds with the easing of withdrawals from the Employers Providence Fund (EPF) to finance loan repayments.

With higher disposable income, we are confident that more people will be upgrading to better and newer homes.

Moreover, we believe foreigners' appetite for local properties will continue unabated as they want to buy into an under-valued market with significant upside potential.

The success of Visit Malaysia Year 2007 has also enhanced the country's profile. Further, the housing industry will continue to receive support from the government's promotion of the "Malaysia: My Second Home Programme".

The tourist attraction and appeal of the country -- with a stable government and economy - has spawned a secondary holiday or retirement home market, bolstering the long-term prospects of the property market.

Q: How will your industry be affected by the expected rise in fuel and electricity this year?

A: While these efforts are greatly welcomed, the more pressing need to ensure long-term sustainability is to devise a new economic model that completely weans itself off the "subsidy mentality" and "protectionist policies".

Malaysia cannot afford to distance itself from the globalisation wave, or we will fall behind with the rise of new economic stars such as China, India and now Vietnam.

The only way to go forward is to open up, enhance competitiveness and fully integrate Malaysia into the world's free market.

Malaysians need to be prepared to face global realities, even if it means we have to go through the painful adjustment period.

By New Straits Times (by Azlan Abu Bakar)

Fairmont Singapore signals Asia expansion

SINGAPORE: Fairmont Hotels & Resorts, a global luxury hotel leader, has announced the opening of its first property in Asia — Fairmont Singapore, formerly Raffles The Plaza. The hotel’s two 26-storey towers have 769 rooms and suites, including those in the North Tower, which have recently been renovated.

Fairmont Singapore also has more than 70,000 sq ft of meeting space in the Raffles City Convention Centre on level four of the hotel. The company says Fairmont Singapore is the forerunner of major developments in the region, including in ChinaFairmont Beijing, Fairmont Peace Hotel, and a development on Macau’s Cotai Strip.


Malaysian Annual Real Estate Convention (MAREC)

Real estate agents hoping to establish themselves in the real estate market in ASEAN countries will find next year’s Malaysian Annual Real Estate Convention very useful.

This year, the Malaysian Annual Real Estate Convention 2007 focused on globalisation in the real estate industry. With real estate agents now aware of the bigger picture, the 2008 convention aims to capitalise on this awareness by looking at the small, more viable picture.

“We have already seen Malaysian investors going to neighbouring countries and starting property projects. Next year we want to concentrate on exploring the huge potential in ASEAN markets,” says organising chairman Siva Shanker.

With this target in mind, convention organiser, the Malaysian Institute of Estate Agents (MIEA), has adopted the theme ‘Regionalising the Malaysian Market – The Reality of Getting There’ for the 2008 convention, now termed as Malaysian Annual Real Estate Convention (MAREC).

The convention is scheduled from January 11 to 13 at the Sime Darby Convention Centre in Bukit Kiara, Kuala Lumpur.

“With MAREC, we hope to build a visually recognised brand for our annual convention whereby everyone knows it by its acronym,” explains Siva.

The goal of the convention is to equip estate agents, negotiators, developers and the general public with the necessary tools to network regionally, to enhance the real estate agency practice and also to understand the property market for the coming year.There are plenty of opportunities to tap into the real estate market in neighbouring countries such as Vietnam, Laos and Cambodia.

By bringing their own experiences, ideas and knowledge to the real estate market in these countries, Malaysian estate agents can use what they know to kick-start their own agencies in a new environment.

The convention also aims to show participants how they can market Malaysian property in other countries and encourage outside investment in the country.

Real estate practitioners, developers and architects in the real estate industry from eight countries will be speaking on how to carry out business in a particular country. Issues include how to set up office, what documents are needed, what to expect and market trends.

The topics include:

  • Property Market Outlook 2008
  • Formation of an ASEAN Alliance
  • Iskander Development Region – How Estate Agents can play a role
  • MIEA Board – Is it a Reality?
  • The Challenges of Meeting Home Buyers’ Needs
  • International Marketing
  • How to be a Top Real Estate Negotiator
  • Estate Agents as Property Managers?
  • Estate Agents Forum

This year, the convention will introduce a parallel platform for negotiators who wish to improve their work performance.

The topics are Selling Techniques, How to Become Top Producers and How To Make Real Estate A Successful Career.

“The convention seeks to help negotiators raise the bar with their work performance – close more deals, be more professional and knowledgeable to better service customers,” says Siva.

While the negotiator session is being held, there will be a forum discussion with the speakers for the other participants.

The Sime Darby Convention Centre is the official venue. Around 600 participants are expected for next year’s convention with over 120 participants registered to date.

There is an optional welcome dinner at the Sime Darby Convention Centre on January 11 when estate agents and real estate players from other ASEAN countries can interact and mingle.

The convention’s speakers and VIPs have also been invited for the dinner so participants are welcomed to ask questions and talk to relevant speakers.

Interested to register for the convention? Between now and January 10, early bird discounts are offered for both members and non-members.

*Optional Welcome Dinner – RM100

* Sign up now for the Malaysian Annual Real Estate Convention – MAREC 08 held from January 11 to 13.

For details, please contact MIEA.
Tel: 03-77277477
Fax: 03-77293693

By The Star

Joint venture to benefit estate agents

PETALING JAYA: OCBC Bank (Ma) Bhd has linked up with the Malaysian Institute of Estate Agents (MIEA) to roll out a year-long development programme that will catapult estate agents to new heights of professionalism.

Head of secured lending Thoo Mee Ling said the programme would involve initiatives that would directly benefit agents, and ultimately profit consumers, such as conventions, training programmes and luncheon talks.

Thoo Mee Ling

“As one of the top lenders among foreign banks operating in Malaysia, we recognise that our responsibility to borrowers goes beyond just making loans and financing schemes available to them.

“It also involves playing a part to raise the level of professionalism within the real estate industry in order to create a more conducive environment for property and home buyers to operate,” she said in an interview.

With a membership of about 700, MIEA is the national body representing real estate agents in Malaysia. Although it was set up principally to serve the interests of these agents, it also collaborates closely with other professionals such as valuers, bankers, architects and developers to foster a healthy real estate industry.

The bank's first effort for the year with MIEA would be the upcoming Malaysian Annual Real Estate Convention ’08 (MAREC ’08) scheduled on Jan 11 to 13 at the Sime Darby Convention Centre.

“We are excited about MAREC '08 because it draws together real estate agents, developers, financial institutions, marketing personnel and property investors – all in the spirit of learning from each other and building mutually beneficial relationships.

“In addition, the theme Regionalising the Malaysian market: The reality of getting there does well to set the tone for what is to come during the rest of the year,” Thoo added.

On the other programmes lined up for the year, she said these would ultimately benefit consumers such as home buyers and long-term property investors.

As part of the bank's collaboration with MIEA, Thoo said negotiators could look forward to two-day training programmes every month.

These sessions were aimed at equipping them with the necessary knowledge and practical skills to help them deal confidently and ably with the real questions consumers were asking today, she added.

“To ensure we do not simply skim the surface, we would be restricting participation to just 20 a session to ensure in-depth discussions.

“Apart from the training programmes, OCBC and MIEA will also be holding monthly luncheon talks featuring guest speakers to update estate agents and negotiators on topics that are pertinent to the industry,” Thoo said.

By The Star (by Daljit Dhesi)

Axis REIT pre-tax profit increases to RM68.6mil

KUALA LUMPUR: Axis Real Estate Investment Trust's (Axis REIT) pre-tax profit for the year ended Dec 31, 2007 increased to RM68.6mil from RM43.2mil the previous year.

Revenue increased to RM46.83mil from RM41mil previously.

In the fourth quarter, pre-tax profit rose to RM18.6mil from RM14.8mil in the previous corresponding quarter, while revenue rose to RM13.01mil from RM10.81mil previously.

In a statement, Axis REIT Managers Bhd (ARMB), the management company of Axis REIT, said the profit (income) in the fourth quarter was mainly from (unrealised) change in fair value of its investment properties of RM10.7mil.

“With the completion of three new properties in the fourth quarter, the total investment portfolio has grown to 14 properties compared with nine properties in 2006,” it said.

ARMB said Axis REIT has proposed an income distribution of RM15.5mil for the second half of 2007, which translated into a dividend per unit (DPU) of 7.53 sen. “Together with an interim distribution of RM12.56mil (6.1 sen per unit) in the first half of 2007, the total distribution for last year amounted to a DPU of 13.63 sen,” it said.

By Bernama

AmInvestment Bank wins best REIT award

KUALA LUMPUR: AmInvestment Bank Bhd has won the “Best Islamic REIT Deal in South-East Asia” award in the inaugural South-East Asia Deal Awards organised by Alpha Southeast Asia magazine.

The award highlighted the RM300mil sukuk Ijarah programme by Al'Aqar Capital Sdn Bhd for which AmInvesment was lead arranger and principal adviser.

The deal was not only the first sukuk in the world issued by an Islamic REIT (real estate investment trust), but also the first Islamic structure based on Ijarah, where the Ijarah assets are leased under the master lease and followed by existing commercial leases forming the subleases, a statement from AmInvestment said yesterday. The South-East Asia Deal Awards were given in recognition of the best and most innovative corporate-centric investment and commercial banking solutions in the region.

Only transactions lead managed by local banks in Indonesia, Malaysia, Philippines, Singapore and Thailand were considered for the awards.

By Bernama