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Wednesday, May 28, 2008

Sunrise to set KLCC land price record

PRIME SITE: Wisma Angkasa Raya is a stone’s throw from the Petronas Twin Towers.

SUNRISE Bhd has proposed to buy a piece of prime land in the heart of Kuala Lumpur, a deal that will set a new record for land prices in the Kuala Lumpur City Centre (KLCC) area.

The freehold 69,171 sq ft land houses the 29-year old Wisma Angkasa Raya, and is a stone's throw from the Petronas Twin Towers.

Sunrise plans to buy the land for about RM179 million, or RM2,588 per sq ft (psf), higher than what YTL Corp Bhd paid for 0.4ha in Jalan Stonor earlier this year.

"The price is undoubtedly a new record for Kuala Lumpur," Aseambankers analyst Ong Chee Ting wrote in a report yesterday, adding that it is a fair price.

The deal reflects the bullishness of Malaysian developers as the capital grapples with a shortage of office space.

The land "has potential to be redeveloped into an upmarket commercial development", Sunrise said in a statement to Bursa Malaysia on Monday.

The main risk to the project is that Kuala Lumpur may have too much office space by 2010.

Nevertheless, that risk is offset by the fact that the site is a good location, Ong noted in his report.

Under the deal, Sunrise is buying all of Tanah Tuah Development Sdn Bhd for RM27 million cash from Reliance Pillar Sdn Bhd and Lembaran Segimaju Sdn Bhd.

Tanah Tuah has an interest in the land as it signed a deal on January 14 this year to buy the property for RM152 million.

However, that deal is not completed yet. Sunrise did not identify the original landowner.

In addition, Sunrise will settle a RM30.4 million loan given to Tanah Tuah by Reliance Pillar and Lembaran Segimaju.

Ong calculates that if Sunrise's new property can be sold at RM1,300 psf, there is still a hefty 30 per cent margin to be made.

"This translates into potential gross development value and development profit of RM900 million and RM208 million respectively," he said.

Reliance Pillar and Lembaran Segimaju bought into Tanah Tuah this month for about RM40 million.

By New Straits Times (by Presenna Nambiar)

KrisAssets eyes foreign properties

KRISASSETS Holdings Bhd, the owner and operator of Mid Valley Megamall in Kuala Lumpur, may inject foreign retail and commercial assets into the company.

Depending on the location and value of the assets, KrisAssets may buy the properties on its own or with a partner.

"We are always looking for opportunities to acquire. We are in negotiations with foreign parties in China, India and Vietnam. They came to us and asked us to do a joint venture," group managing director Robert Tan Chung Meng said.

TAN: We are in negotiations with parties in China, India and Vietnam

"We are able to explore opportunities in the US because of the subprime issues. Otherwise, the US was not in our radar. We are looking at completed retail and commercial properties there," he said.

Speaking to reporters after the company's annual general meeting yesterday, Tan said the company was also in negotiations with parties from Europe and the UK.

Tan is also looking at property development opportunities in these countries for IGB Corp Bhd. IGB owns 74.9 per cent of KrisAssets.

Tan added that the recently opened high-end retail component The Gardens Mall, with a net book value of RM442.37 million, will be injected into KrisAssets when it achieves profitability. The Gardens in now owned by IGB.

"The Gardens is showing a 10 to 15 per cent improvement month-on-month. This is still not to our mark, but when we are in the high-end business it will take time to grow the business ... but it will come," Tan said.

Tan who described The Gardens' occupancy as "not bad" at 90 to 95 per cent, however, said that the mall needed higher visitation and higher spending. "There is a shortfall in our targets," he said.

A bigger budget has been set aside this year to help improve The Gardens' performance and results are expected within the next two to three years.

The existing components within Mid Valley City and the addition of five-star The Gardens Hotel and two office blocks with an anticipated 30,000 to 40,000 occupants will lend support towards the performance of the mall.

According to Tan, KrisAssets takes the form of a real estate investment trust. As such, it will look at injecting The Gardens within two to three years when it achieves earnings before interest, taxes, depreciation and amortisation.

On plans to inject commercial properties, Tan said: "There are a few possibilities. We may keep KrisAssets purely as retail or we could add offices as well."

Another company may be set up to spin off the commercial properties, which could happen in 2009 or 2010.

Meanwhile, based on the current status of the Malaysian economy, Tan expects the commodity market to have a positive impact on the performance of Mid Valley Megamall.

The RM1.75 billion mall receives between 30 million and 35 million visitors annually. The company hopes to outdo the internal target set for itself.

In the financial year ended December 31 2007, KrisAssets posted a net profit of RM122.74 million on the back of RM207.09 million in revenue.

By New Straits Times (by Vasantha Ganesan)

Sunrise to redevelop Wisma Angkasa Raya

PETALING JAYA: Sunrise Bhd is believed to be acquiring Wisma Angkasa Raya, located opposite the Petronas Twin Towers in Kuala Lumpur City Centre (KLCC), for redevelopment into an upmarket commercial project.

In a filing with Bursa Malaysia on Monday, the property developer said it had entered into an agreement with Reliance Pillar Sdn Bhd and Lembaran Segimaju Sdn Bhd to acquire Tanah Tuah Development Sdn Bhd for RM57.4mil.

Sunrise will pay RM27mil in cash and make a RM30.4mil shareholders' advance to Tanah Tuah. It has paid a deposit of RM5mil.

According to the announcement, Tanah Tuah has registrable interest in a piece of freehold land within the KLCC.

“Tanah Tuah represents a good investment as the property that is being acquired by Tanah Tuah has potential to be redeveloped into an upmarket commercial development, which will further strengthen the group's presence in a prime location,” Sunrise said in the statement.

Tanah Tuah had in January agreed to buy the 1.6-acre land from the original owner for RM152mil but the agreement has yet to be concluded.

Sunrise said it had taken the necessary legal measures to safeguard its interest in the event the company's agreement with the vendors was completed before the completion of the accord between Tanah Tuah and the original owner.

Wisma Angkasa Raya, which is around 29 years old, is Kuala Lumpur’s first high-rise office building. The unencumbered property is a 24-storey commercial building comprising a 20-storey office tower and a four-storey podium with two basement carparks.

It has a total net lettable area of 167,728 sq ft and an occupancy rate of 96.4%.

Aseambankers research analyst Ong Chee Ting said that assuming Tanah Tuah had taken a 100% debt funding for the purchase, Sunrise’s RM27mil cash payment to the vendors would have raised its acquisition cost to RM179mil, or RM2,588 per sq ft.

“Even at RM2,588 per sq ft, it is considered a fair price. Assuming that KL City Hall grants Sunrise a 10 times plot ratio for redevelopment, similar to the upcoming Menara YNH in Jalan Sultan Ismail, the price per plot ratio works out to RM259 per sq ft.

“Adding RM500 per sq ft per plot ratio for the construction of an upmarket development and factoring in an efficiency ratio of 80%, the total construction cost comes to about RM1,000 per sq ft per net saleable area,” Ong said.

Given that KL City Hall has raised the plot ratio for commercial development to nine to 10 times now compared with Wisma Angkasa Raya's three times, Ong said the redevelopment could yield a gross development value of at least RM900mil.

“If Sunrise’s new property can be sold above RM1,300 per sq ft, there's still a 30% margin to be made. This translates to a development profit of RM208mil,” he said.

Ong said the risk for the redevelopment plan was a possible oversupply of new office space in Kuala Lumpur by 2010, although this risk is “mitigated by the property’s prime location''.

By The Star (by Angie Ng)

Top HK developer ousts chairman

HONG KONG: Top Hong Kong developer Sun Hung Kai Properties ousted its chairman, Walter Kwok, yesterday in a family feud that has rocked one of the city’s best regarded blue-chip corporations.

Kwok’s departure after nearly two decades at the helm of the US$42 billion property company caps weeks of sensational media coverage, with Kwok accusing his brothers and fellow directors of having him diagnosed as bipolar, and reports of an extra-marital affair.

The saga offered a rare behind-the-scenes glimpse into the occasional power struggles among Hong Kong’s corporate glitterati. Sun Hung Kai was named in a Euromoney poll as Hong Kong’s best-managed firm in 2007.

Kwok, 57, who took leave of absence on Feb 18, has accused his brothers Thomas and Raymond of trying to have him dismissed illegally, but a Hong Kong court on Monday rejected his bid to block a vote by the board.

The brothers’ mother, 79-year-old Kwong Siu-hing, was named as chairwoman, Sun Hung Kai said yesterday. Walter would be a non-executive director, a symbolic role with no real power.

Walter Kwok said in a statement that he felt “much regret" at the decision, which he said was based on “superficial reasons, totally ignoring my hard work and contribution to the company during the past 18 years.”

Kwok however said he would “continue to closely monitor the operations of the company to safeguard the best interests of shareholders,” in his role as a non-executive director.

Sun Hung Kai shares climbed 0.9 per cent on yesterday, adding to Monday’s 1.8 per cent rise, as the power struggle looked to be heading for a resolution, but the stock is still down more than 10 per cent this month, wiping over US$4 billion off its market value.

Citigroup’s Tony Tsang slapped a sell recommendation on Sun Hung Kai in a May 18 report, citing “potential instability” of the firm’s management as a factor that might lead to delays of key property projects later in the year.

The Kwok brothers were ranked Hong Kong’s second wealthiest by Forbes magazine in January, with a combined fortune of US$24 billion, behind Asia’s richest self-made billionaire Li Ka-shing.


Over the past four decades, Sun Hung Kai has built some of the city’s most exclusive high-rises, including luxury hilltop apartment blocks and harbour-front skyscrapers.

Its International Commerce Centre, on the Kowloon peninsula, will become the world’s third tallest tower when completed, Raymond Kwok said last year.

Walter Kwok filed a suit against his brothers this month to stop them firing him, arguing that any attempt to remove him would constitute a breach of agreement.

The tycoon added that he believed his brothers had proposed his dismissal because of health concerns, linked to a diagnosis of bipolar disorder that he was contesting.

Local media, however, have reported that the rift may have resulted from Walter’s close friendship with a purported mistress who exerted an untoward influence on Kwok’s running of the firm — one of the city’s largest land owners and employers.

“In the past few days, some people have spread dishonest opinions to mislead shareholders over my mental state and of hindering the running of the company,” he said in a statement yesterday.

“These rumours have destroyed my own legitimate right to govern Sun Hung Kai.” On Friday, the high court rejected Walter’s application for an injunction, saying it was not a decision for the court, and on Monday again rejected an attempt by his lawyer to re-apply.

Kwok expressed “utter disappointment” with the decision.

Family disputes are rarely so acrimoniously aired in public in Hong Kong’s tight-knit corporate community.

Another exception is a marathon dispute over the multi-billion dollar estate of Nina Wang, formerly Asia’s richest woman and one of the city’s most colourful tycoons, which has not yet been resolved.

By Reuters