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Saturday, August 2, 2008

Boustead Properties branding entire development

Now that Boustead Holdings Bhd has successfully completed its privatisation of Boustead Properties Bhd, it is going to focus on branding.

That seems like flogging a dead horse actually, this branding thing. After all, it was doing that since Ikea first bought its corporate lot about 10 years ago. And with each component that came on board, Boustead drove the branding vehicle – with Ikea, Ikano, Tesco, The Curve and Cineleisure.

Boustead Properties Bhd executive director Datuk Ghazali Mohd Ali.

Boustead Properties Bhd executive director Datuk Ghazali Mohd Ali says it is necessary. “Last time, we were branding all the individual components. Now we are branding the entire development as a single large entity, with all its infrastructures that make this an award-winning township, both for commercial and residential pruposes.

“It’s different, and we need to push this strategy further if we are to remain relevant,” he says.

An analyst likens Boustead’s strategy to Coca Cola’s. “It’s a global brand, but it continues to emphasise on branding. It’s a strategy to stay at the forefront. And it will reap from it.”

Ghazali says in order for Boustead to remain attractive to shareholders, and Mutiara Damansara to buyers, it has to do things differently.

“We have proven that we can and now we are leveraging what we have started,” he says.

By that he means the overall package, and what’s on the card now that it has taken Boustead Properties private.

“We will shed some non-core assets and do a bit of rationalising, and wait out the current challenging period.”

Ghazali says the conglomerate has partners like Johnson Suisse sanitary ware, a paint company in the form of Boustead Sissions Paint and UAC Bhd which is involved in building materials as a buffer.

Boustead Holdings reported sterling first quarter 2008 results, thanks to higher contribution from the plantation business, consolidation of subsidiary Boustead Naval Shipyard’s (BNS) earnings and lower effective tax rate. The trading division reported stronger earnings as well as its pretax profit increased by 7.5 times to RM22.8mil on the back of better sales volume and some inventory gain. Bulk of the earnings was contributed by BHPetrol.

The property division’s operating profit on the other hand declined 26% due to lack of sale of corporate lots.

“We still have nine corporate lots of about an acre each in Mutiara Damansara in Petaling Jaya but we are in no hurry to sell. We can wait for prices to move up. We have a successful mall which we can inject into a real estate investment trust (Reit).

This, says an analyst, is a tactical delay to capitalise on expected forward price appreciation. All in, net profit jumped 140% year on year and 21.2% quarter on quarter to RM152.3mil. The group declared an interim dividend of 5 sen gross as a reward to shareholders.

Fresh from its corporate exercise of going private, Boustead Properties is now preparing to launch its last residential development later this year in Mutiara Damansara Surian Residency, its second condominium project there. Its first is Surian Condominium.

The freehold development will have about 300 units of between 900 and 2200 sq ft. It will have two blocks of 23 and 25 storey each and some low-rise units. In terms of overall architecture, it will be fairly similar to Surian Condominium.

“The project will be more upmarket than Surian Condominium in terms of finishing and design, our first high-rise residential development there.”

He says Surian Residency will be selling for about RM400 per sq ft.

“We want to ride on the success of Surian Condominium, which is now changing hands between 30% and 40% above its launching price in the secondary market,” he says.

Boustead Properties is at the same time negotiating with potential tenants on the lease of Surian Tower, in the same township. The office block will be part of the overall development there.

With visitors to The Curve alone numbering 2 million a month – compared to 600,000 four years ago when it first opened – the numbers, he says, speaks for itself.

“We have tenants like Living Quarters and MetroJaya who are expanding. We also have tenants who have seen better sales when they moved over here than when they were in their old place. We also have competitors who are buying corporate lots here. This says something – that Boustead Properties is on the right track, notwithstanding the current economic situation,” says Ghazali.

Glomac Bhd recently bought two pieces of land totalling 10,800 sq ft for RM38.69mil. A third lot was sold to an insurance company. Boustead Properties has four core divisions – plantations, which contributes about 35% to sales, property development (40%), hotel and property investment.

Ghazali says that although its 26-storey Surian Tower is yet to be completed, one-third of it is already leased to a multinational company.

The lease for its remaining two-thirds of the building is being negotiated currently. He hopes the place will be occupied by September 2009.

With so many visitors to The Curve, Boustead is putting in 30% more to the car parks at Surian Tower than what is required by the local authorities.

Besides this office block with a net lettable space of 335,000 sq ft, Boustead Properties will also be building a new hotel and convention centre behind Cineleisure. Like its other 150-room hotel in the popular suburb, The Royale Bintang Damansara, the new hotel will have about 300 rooms.

“The Royale Bintang Damansara is nearly always full. So this idea to have another hotel with convention facilities is a good idea. With the price of petrol today and in the years to come, I would think people will be reluctant to drive into the city. Ideas and plans just evolve, we did not have this in mind earlier.”

To integrate the various components there, Boustead Properties hope to have a physical link from the proposed LRT station in the suburb to Surian Tower office block and the new hotel and convention centre.

Ikea, among its first buyers of commercial corporate lots, bought their site for RM99 per sq ft eight years ago. Corporate lots are now in the region of RM380 to RM400 per sq ft. Things have certainly moved.

By The Star (by Thean Lee Cheng)

Budget proposals to kickstart property

Having taken tough measures to counter the rising cost scenario, property developers have stepped forward to suggest a series of measures that can help kickstart the industry and put the players on firmer ground.

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has highlighted that among other things, the bumiputra quota release mechanism should be standardised, structured and transparent.

Rehda president Datuk Ng Seing Liong has proposed:

·An automatic release of the quota units to be in place after six months of a project's launch or when a project has reached 50% in its construction, whichever is earlier;

·Discounts for bumiputra buyers to be capped at 5% and only applicable for houses RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts;

·The low-cost housing ceiling price to be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs;

·A reduction or waiver of stamp duty rates for house purchase that average between 2% and 3% now. which will also help reduce the people's burden;

·Granting tax exemption for dividend income to unitholders to give a much-needed lift to the real estate investment trust (REIT) market.

Developers have been harping on some of these issues for a long time but attention from the Government is more urgent now.

The mantle of protectionism should be unshackled so as to create a more level playing field. Developers, already bracing for tougher days ahead, do not want to be further burdened by some of these practices.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25% to 30% higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures.

Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers.

Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

Malaysia has a relatively young population where almost a third of the 26 million people are aged 25 to 44, and the country still needs a fairly big number of houses each year.

There will still be demand for houses, especially good products at competitive prices in the right locations.

While demand for medium and lower priced properties has dropped, the high-end market is still holding out as buyers in this segment are less affected by the rising cost of living.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows.

By The Star (by Angie Ng)

Iskandar Malaysia spurs demand for costly homes

JOHOR BARU: Iskandar Malaysia has spurred growing market demand for high-end properties that was virtually non-existent in South Johor previously, said Berinda group sales manager Lim Sung Heng.

Buyers in Johor Baru are now ready to pay for houses priced from RM500,000, he said at the launch of the Park Link Villa II super-link semi-detached houses at Taman Impian Emas recently.

Priced from RM700,000, the 36 units have land size of 50ft by 100ft, an extra wide car porch that easily fits three cars and a spacious walk-in wardrobe in the master bedroom.

“We’ll be launching more high-end houses in Taman Impian Emas and this time around, the price tag will be from RM1mil,” Lim told StarBiz.

The Park Link Villa II precinct is equipped with WiFi, RFID technology, two-tiered gated and guarded security, a 27-hole golf course and a residents' club.

Berinda, a member of the Kuok group, launched Park Link Villa I late last year and received good response for the 40 units priced from RM600,000.

Lim said the latest phase was expected to generate similar response.He said the price of houses in Johor Baru was comparatively lower than in Kuala Lumpur, for instance, a 3,500 sq ft semi-detached house selling for RM700,000 in Johor Baru would cost over RM1mil in Kuala Lumpur.

He said house buyers in Johor Baru were becoming more discerning and demanding unlike previously due to the presence of developers from Kuala Lumpur.

By The Star - StarBiz - (by Zazali Musa)

Red tape hampers import of steel bars

It is almost three months since the government liberalised the steel bars and billet market, but some contractors say they are still being slapped with 15 per cent import duty by the Customs Department.

The Cabinet had on May 12 2008 announced immediate tax-free status on steel bars and billets, be it imported or exported.

"Our first shipment of steel bars, worth RM6 million, is stuck in Singapore because the Customs Department insists that the steel bar grade of British Standard 4449 does not match their computerised Malaysia Standard 146," Johor Master Builders Association president Loh Liam Hiang said.

The Johor Customs Department continues to impose a 15 per cent import duty on the shipment, he said, adding that the association's members are already at their wits' end because steel bars in the local market are too expensive.

"How many small- and medium-sized contractors can afford to pay RM4,000 per tonne for steel bars? We decided to import but now the shipment is stuck in Singapore. How are we going to meet project deadlines? For every one day delay, we've to pay penalties," he added.

Loh was participating in a nationwide dialogue involving some 600 contractors organised by the Masters Builders Association of Malaysia (MBAM) in Kuala Lumpur yesterday.

MBAM president Ng Kee Leen, who was also present, said while importation of steel bars is within the federal government's purview, sand supply is controlled by state governments via issuance of sand mining permits.

Ng said contractors in Selangor are facing sand shortage because the state government had stopped issuing sand extraction permits. This has affected concrete castings and held back some projects for contractors.

"We appeal to the Selangor state government to quickly re-issue permits to help normalise sand supply," he said.

By New Straits Times (by Ooi Tee Ching)