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Thursday, July 3, 2008

SP Setia beefs up commercial assets

LIEW: SP Setia has been achieving monthly sales of up to RM120 million from its mature townships

SP SETIA Bhd, Malaysia's most valuable property developer, plans to build its first retail mall for RM750 million as part of plans to have more commercial assets.

Almost all of the group's income now comes from residential property but it wants to change that strategy.

"We are planning to increase our commercial content from three per cent now to some 20 to 30 per cent in two to three years. We want to move into commercial as the properties will give us higher value," group managing director Tan Sri Liew Kee Sin told reporters at a briefing in Shah Alam yesterday.

The four-level mall will be built within Setia City, the commercial hub of its flagship township, Setia Alam, in Shah Alam, Selangor. It will have almost as much space as the popular Mid Valley Megamall, with a gross floor area of 1.23 million sq ft.

SP Setia's unit, Bandar Setia Alam Sdn Bhd (BSA), will build it with Lend Lease Asian Retail Investment Fund 2 Ltd (ARIF) via an equally owned joint venture firm, Greenhill Resources Sdn Bhd.

ARIF is a real estate fund advised by Lend Lease Investment Management Pte Ltd, which is part of Lend Lease Corp Ltd, an Australian property group.

The mall is the fund's first retail project in Malaysia.

The mall, which may include a hypermarket, is expected to be opened by the end of 2011 as construction starts in the next six months.

At the signing of the joint venture agreement in Kuala Lumpur yesterday, Liew said Greenhill will buy 12.2ha from BSA for RM119.57 million.

There is also a hospital and university campus project in the pipeline at the 63.2ha Setia City, he said.

"We expect profits from the retail mall to flow through after 2011," he added.

Liew did not rule out building more commercial properties with ARIF, adding that it would sell more land to the Australian fund if it wants.

Meanwhile, Liew said SP Setia is on track to meet its RM1.5 billion sales target this year as it has been achieving monthly sales of up to RM120 million from its mature townships.

It has 16 ongoing projects worth RM30 billion.

The firm made a net profit of RM260 million for the 12 months to October 31 last year. Its revenue was RM1.15 billion.

Liew said SP Setia will continue to launch new projects despite weak market sentiments globally. It is also on track to launch its RM2.5 billion EcoLakes project in Vietnam by October.

By New Straits Times (by Sharen Kaur)

SP Setia to build RM750m retail mall

KUALA LUMPUR: SP Setia Bhd will build a RM750mil retail mall in Setia City, a commercial hub at flagship township Setia Alam in Shah Alam.

The developer, via subsidiary Bandar Setia Alam Sdn Bhd, yesterday entered into a 50:50 joint venture with Lend Lease Asian Retail Investment Fund 2 Ltd (ARIF) to develop the mall. ARIF is part of Lend Lease Corp Ltd, a multinational property development group.

The joint-venture company, called Greenhill Resources Sdn Bhd, will acquire 30.5 acres of freehold land in Precinct 1 from Bandar Setia Alam for RM119.57mil.

The proposed mall has a gross floor area of about 1.23 million sq ft. Greenhill has also appointed US-based design architect The Jerde Partnership to create an iconic landmark.

SP Setia group managing director Tan Sri Liew Kee Sin said the project was expected to contribute to the group after its completion at end-2011.

Tan Sri Liew Kee Sin (left) explaining the retail mall concept to Selangor state executive councillor Teresa Kok.

“We expect to start building the mall within six months. We are currently waiting for approval from the Selangor government,” he said after the agreement signing yesterday.

To a question, Liew said the higher building material prices had already been factored in the gross development value of the mall.

“The mall will help us achieve our 20% target of building commercial products in the next two to three years from 2% currently,” Liew said, adding that the mall was expected to attract customers from the larger Klang Valley population as well as Setia Alam and Setia Eco Park townships.

He said there were about 350,000 households within 30-minute driving radius of the mall.

“We have also reserved land around the mall area should the Federal Government decide to extend the light rail transit system to that part of Selangor,” he said.

On its financial performance, Liew said the group was confident of achieving total sales of RM1.5bil for the current financial year ending Oct 31. He expected the group to post better fourth-quarter results following improved sales.

“We have been recording sales of RM100mil to RM120mil monthly,” Liew said, adding that the group registered RM50mil revenue over the weekend.

Commenting on SP Setia’s project in Vietnam, he said the group would continue with its launch plan despite the slowdown in the country’s economy. He said the launch would be held in October when its showhouses were ready.

“What is happening in Vietnam is similar to what we experienced in the 1997/98 financial crisis. Its interest rate is about 20% while ours now is about 6%.”

The project would benefit SP Setia in the long run, especially when Vietnam turned around, Liew said, adding that going forward, the group would be buying more land there.

By The Star

Bolton to invest RM200m more in Penang property

BOLTON Bhd will invest another RM200 million in property development in Penang, following a successful pioneering effort with Surin, a 28-storey freehold luxury condominium project.

Bolton’s executive chairman Datuk Azman Yahya said there were three to four proposals for residential projects being contemplated in the central Georgetown area of Penang.

“We will focus on residential projects, both high-rise and landed properties,” Azman told reporters after launching the RM130 million twin-tower Surin venture in Penang today.

Azman said the main reason for Bolton to invest in Penang was that property value has remained stable despite increases in fuel prices and the uncertain economic scenario in Malaysia.

“About 65 per cent of the 198 units in the first block of Surin were snapped up at the launch. Thirty per cent of the buyers were from Hong Kong and Singapore. This is an indication of how warmly, development projects such as Surin, are received in Penang

“I believe Penang will be a good hub for Bolton’s planned growth in the northern region and thus the commitment of another RM200 million in investment,” Azman added.

As a luxury condominium project, Surin is located amid the hills and the sea in Tanjong Bungah. The units in Surin range from 1,307sq ft to 2,827sq ft in size and are priced between RM364,988 and RM1.2 million each.

By Bernama

Builders face 20pc rise in costs

MALAYSIAN builders face a record 20 per cent increase in costs this year, which may prompt some of them to scrap projects, the nation’s largest surveyor said.

Average building costs rose 11 per cent in the first six months, with steel making up bulk of the increase, Loo Ming Chee, director of Davis Langdon & Seah (M) Sdn Bhd, said in an interview in Kuala Lumpur yesterday. Costs rose 12 per cent last year.

The increase is “unprecedented,” Loo said. “I’ve never seen anything like it in my 20 to 25 years of experience.”

Malaysian Prime Minister Datuk Seri Abdullah Ahmad Badawi in the past two months scrapped price controls on steel and cement and raised gasoline and power prices as record crude oil costs forced the government to cut subsidies. Tenders submitted this year show contractors expect steel prices to jump by as much as 50 per cent to RM4,800 (US$1,470) a ton from RM3,200, Loo said.

The government last month shelved at least US$1.1 billion in public works projects as soaring commodity prices forced it to spend more on food security.

UEM Group, the main contractor of a second bridge to the Malaysian island of Penang, said its costs may climb to more than RM5 billion (US$1.5 billion) from an estimated RM3.36 billion on higher raw material prices, Business Times reported today, citing the UEM managing director Ahmad Pardas Senin.

Slowing Growth

Malaysia’s central bank Governor Tan Sri Dr Zeti Akhtar Aziz said on June 29 soaring food and energy prices may hurt household spending and damp economic growth, slowing expansion in 2008 to below its March forecast.

The economy may grow between 4.5 per cent and 5 per cent this year, she said, citing “preliminary” estimates. The central bank in March forecast expansion of 5 per cent to 6 per cent.

The measures put many building contractors with no cost escalation clauses in their tender contracts in a bind, forcing them to pull out from projects, he said.

“Contractors are not taking the risk anymore” and would rather forfeit their 5 per cent performance bond in their contracts, said Loo. “Everyone has to face the reality” of higher costs.

Developers will also have little room to pass on the higher costs to consumers because rising food cost and inflationary pressures are eroding their incomes, Lee said.

Developers are “facing an economy with tightening disposable income and the possibility of an economic slump,” Davis Langdon said in its July quarterly newsletter. The “sector is now stuck in a proverbial no-man’s land.”

By Bloomberg

2nd Penang bridge's cost may breach RM5b

UEM Group Bhd, the main contractor of the second Penang bridge, says the total cost of the project is now RM4.59 billion, but it can even breach RM5 billion if prices of raw materials rise further.

"The costs of these items can only be determined as and when we procure them," managing director Datuk Ahmad Pardas Senin told reporters during a site visit at Batu Kawan on mainland Penang.

The bulk of the cost, or RM3.32 billion, is for the portion of the bridge over water, followed by RM997 million for the portion over land. Another RM285 million is for the design, concept and preliminary works that was agreed with the government.

However, UEM can pass on additional costs if the price of materials like steel, is higher.

"I believe that without the fluctuation clause (in an agreement signed between UEM and the government), no organisation will be willing to start any construction because you will definitely be running at a loss," said Ahmad Pardas.

"I would also like to clarify that the original costing for the whole project is RM3.6 billion and not RM2.7 billion as reported by some media previously.

"The RM2.7 billion was actually referred to the cost of building the 17km-bridge span over water. As the construction of a bridge would also include those built on land, another RM900 million should also be included in the original costing as it was allocated to build expressways, interchange and toll plazas," Ahmad Pardas added.

The 24km second Penang bridge (of which 17km will be on water) will link Penang Island and Seberang Prai.

UEM Construction Sdn Bhd, a subsidiary of UEM Builders Bhd, has named port builder and bridge construction firm China Harbour Engineering Co Ltd as its main contractor.

UEM Group now holds the concession for the first Penang bridge. Under that agreement, UEM could seek compensation if a second bridge was built.

However, Ahmad Pardas declined to say what UEM is planning to do, saying there are many ways to deal with the issue.

UEM Group also yesterday indicated its intention to tender for the concession rights of the second bridge.

"The company has the experience and knowledge as its is currently managing two important crossings which are the Penang Bridge and the Malaysia-Singapore Second Link.

"All these will definitely help justify why UEM Group should be the most suitable party ...," Ahmad Pardas said.

Meanwhile, UEM is set to buy 112ha of land in Batu Kawan and Batu Maung for the project. It is expected to pay a total of RM57 million in compensation to affected parties which include private land owners and Penang Development Corp.

By New Straits Times (by Marina Emmanuel)

Mapletree to set up US$500m Viet property fund

MAPLETREE Investments Pte plans to set up a US$500 million fund to invest in property projects in Vietnam, as it seeks to tap rising demand for homes, offices and shopping malls in the Southeast Asian nation.

Mapletree, owned by Singapore's Temasek Holdings Pte, will buy properties in so-called mixed-use developments in Vietnam, it said in its 2008 annual report.

``The timing of the fund will depend on market conditions,'' spokeswoman Shae Hung Yee said by telephone from Singapore yesterday. ``It will be at least US$500 million.''

Mapletree, which posted a net income of S$1.04 billion (US$763 million) in the year ending March 31, is focusing on China, India and Vietnam for growth as it expands funds under management. It added S$1.71 billion of assets on July 1 after completing its acquisition of JTC Corp's properties in Singapore.

The company will also buy more properties in China, Vietnam and Malaysia with a US$310 million industrial fund it started in 2006, Mapletree said in the report. About half of the funds are invested, and the company aims to use the rest before November 2009. It will set up a second fund after that, it said.

By Bloomberg