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Saturday, September 27, 2008

PJ8 stands out impressively

Fronting the Federal Highway, PJ8 is highly visible. The project comprises a serviced suite block and three blocks of offices.

As one cruises along the Federal Highway towards PJ Hilton, an iconic structure rises high above the horizon. Known as PJ8, the project lies smack opposite the five-star hotel fronting the highway.

Cycle and Carriage office marketing Mercedes Benz used to occupy part of the site. PJ8 in Section 8 Petaling Jaya, undertaken by IJM Properties Sdn Bhd, comprises a 38-storey block of service suites, a 12-storey office suite block and two blocks of office tower with a gross development value of RM250mil.

The 4-acre IJM project is prominent by any standard and its completion is expected to give the main PJ a lift. It will help to rejuvenate what used to be a thriving PJ New Town but now perceived by many to be a little tired.

At 38 storeys, the service suite block may well be the tallest. It comes with three blocks of offices.

Its completion and eventual occupation will set new benchmarks, in more ways than one, sources say.

For a long while, much of the attention has been focused on Bandar Utama and Mutiara Damansara,

While there have been pockets of change and redevelopment in other parts of PJ, much of these have been drowned by the hype and activities in the new townships in PJ North simply because of the malls in that area.

The status quo is expected to remain. Nevertheless, PJ8 will add some sparkle amidst the current gloom in the sector.

Says Jones Lang Wootton executive director Malathi Thevendran: “Multinational corporations (IT, media, professionals, finance & banking, airlines), oil and gas companies, embassies and offices of foreign governments will prefer a Kuala Lumpur location.

“Those that are service-orientated €“ marketing, advertising, support services, data centres, backroom offices €“ will prefer PJ. Historically, the demand has been for smaller, cheaper office space which resulted in the development of shop offices.

“Today, we are seeing the move towards quality corporate office towers,” she says.

The PJ makeover started several years ago as new residential areas took shape and the spending power of its population grew.

Old factories were done away with and replaced by a new commercial landmark.

As families upgrade and move to better housing, the older established residential areas began to take on a rather exhausted facade. Time for change!

The old and the new

Be it food and beverage outlets, retail or services, the demand of the PJ population have grown by leaps and bounds as its middle class ballooned.

Other growth areas around PJ that Malathi likes include Mutiara Damansara, Bandar Utama and Damansara Perdana.

“There are an abundance of amenities there. It is close to the highway network and offers a big residential catchment. The upcoming LRT will boost its popularity.”

Mutiara Damansara, says Malathi, has an edge over Bandar Utama and Damansara Perdana, as it is one of the best and systematically planned commercial and residential enclave in Petaling Jaya.

The other areas she likes is Section 13, with its cauldron of commercial activities. But the local council will have to monitor accessibility and traffic in the years to come as more high rise commercial developments in the pipeline are completed.

Jerome Hong, managing director I (agency & corporate services) of PA International Property Consultants (KL) Sdn Bhd says the eventual occupation of PJ8 will increase the number of office workers and residents travelling in and out of its immediate area. Traffic congestion may be an issue.

Hong says although the developer has created several access roads into PJ8 from the flyover off Federal Highway and from Jalan Barat, the local council should address the traffic issue in this area as it is one of the main arterial roads leading to the main PJ centre.

“There will need to be better traffic management for the long term,” he says.

Hong says its location and access is second to none. It is close to all forms of public transport and other public amenities. It is also more visible, he says.

Between PJ8 and Malton Bhd’s VSQ, another commercial project across the Federal Highway near the Tun Hussein Eye Hospital, Hong prefers PJ8.

“VSQ is not so accessible in terms of road network or public amenities. The large multinational companies will also prefer floor plates in excess of 10,000 sq ft,” he says. While PJ8 is a mixed development comprising offices, retail outlets and serviced suites, VSQ offers only office facilities and a bit of food and beverage.

PJ8’s serviced suites are more than 80% sold, with the remaining units now selling at an average of RM500 per sq ft compared to RM350 psf in its early days, says S K Brothers Realty (M) Sdn Bhd general manager Chan Ai Cheng.

It has only one office suite left. IJM recently sold Tower C in PJ8 en bloc for about RM600 psf, setting a new benchmark. Its offices suites were tagged at RM430 psf when it was first launched.

Chan says most developments will take time to occupy. In this case, its visibility and accessibility will quicken the process. Jaya33 is in the region of RM3.50 psf to RM4 psf.

3 Two Square offices in the region of RM2.30 psf to RM3.50 psf.

“We can expect PJ8 to fetch rentals in the region of RM4.50 psf,” says Chan.

By The Star (by Thean Lee Cheng)

Reassessing Indonesia

Malaysia and Singapore have a unique relationship. We are like squabbling in-laws, but we know we cannot and will never divorce each other.

You live with the tension and exchange of barbs. The ties between Malaysia and Indonesia are quite different. The animosity at times can boil over. Grudges are harboured and allowed to fester. There is a genuine fear of, and sometimes loathing for, each other.

Most of that is at the political and policy levels. Many Malaysians and Indonesians love to visit each other’s country. Indonesia to Malaysians in general, is a bit of an underachiever. Naturally, Malaysia to Singaporeans, is also a bit of an underachiever.

It’s time to reassess Indonesia. In many ways, the country is moving in the right direction business-wise.

Recently, Qatar and Indonesia set up a US$1bil fund to invest in energy and infrastructure. Qatar is the world’s largest exporter of liquefied natural gas (LNG), while Indonesia is third. Both countries are also members of the Organisation of the Petroleum Exporting Countries (OPEC), though Indonesia has just opted out.

Qatar will contribute 85% of the funds for the new fund and Indonesia the remainder. Qatar’s state investment fund, the Qatar Investment Authority (QIA), has teamed up with Abu Dhabi state enterprise International Petroleum Investment Co in March to launch a US$2bil fund.

The QIA has also set up joint funds with Oman and Dubai.

Indonesia is pro-Western, much like Malaysia, and could be a model for a modern Muslim nation, provided nationalist Islam (not radical Islam) doesn’t become too powerful a force in Indonesian society.

Following the aftermath of the Sept 11 attacks, many were outspoken on the various failings of Muslim nations. Indonesia is a dominantly Muslim nation, with the largest Muslim population in the world, but it also has small but strong Hindu, Christian and Buddhist communities.

Malaysia has generally enjoyed a better perception in the eyes of international travellers and global investors.

Indonesia has had to contend with thorny events such as the Bali bombings and the East Timor massacre. If investors are to be influenced just by these events, they would be doing Indonesia and themselves a disservice.

There is still pockets of “nationalistic fervour” among the political voices in Indonesia.

Health Minister Siti Fadilah Supari commented in April that regional governments in Indonesia should be on their guard whenever they dealt with international investment proposals.

She said the following should be considered by provincial governors and regents in respect of foreign investment plans:

· Would the international investors take control of Indonesian resources?

· Would the foreigners be prepared to be on an equal footing with Indonesian partners, or would they adopt a lordly, colonialist stance?

· Would a particular foreign investment benefit Indonesians or harm them?

· To what extent would Indonesians gain from the investment? Foreign investors often lie about this matter.

For example, South Kalimantan’s coal needs were less than 1 million tons per year and there was an electricity shortage crisis. Yet, at the same time, 70 million tons of coal was taken out of the province and sold internationally.

Indonesia has been beset by an autocratic regime for a long time. We need to reassess the country now as the country is certainly moving away from the authoritarian system to a more democratic one.

It is still taking baby steps but press freedom and the media’s brutal honesty and bravery has paved the way for a more civil society. This is an important aspect of a decentralised power system, which accords more voice to a wider spectrum of leaders and the disenfranchised.

Meanwhile, according to an AT Kearney study of the top 25 most attractive investment destinations in the world, Indonesia ranks 21st. The rankings for 2007 are based on a survey of 1,000 CEOs around the world. In 2006, Indonesia did not make the top 25. Thanks to a well-respected Finance Minister in Sri Mulyani Indrawati, there has been significant economic liberalisation.

Quasi-monopolies have not been protected and are expected to compete with new foreign companies.

The boom in commodities over the last five years has helped the country infuse more strength into its underlying economy. Indonesia is at or near the top in palm oil, rubber, base metals, coffee and cocoa.

Sustainability of global investments

Corporate investors across all regions are concerned about the sustainability of the global economic order. Is Indonesia the flavour of the month only because of the commodities boom? I think not, as most experts can see a sea of change enveloping the country.

The commodities boom only hastens the benefits of such changes.

The country is confident enough to implement several years of mandated increases in minimum wages. While some industries may have shifted or closed operations because of these new rules, these measures have also forced investors and businesses to move up the value-add curve.

There has also been a decentralisation of budgetary systems, which has allowed local leaders to better manage resources and spending to their localities.

Over the last three years, Indonesia has managed to enjoy more stability politically, in its currency and in economic viability. This lessens the discount on businesses in valuation models, thus resulting in better confidence among foreign investors going forward.

Corruption is still a problem but one can easily see a more transparent era for Indonesia. More bigwigs have been hauled up and tainted politicians have lost their seats with greater frequency.

Major business entities

Since beginning of 2007, there has been more than US$20bil in mergers and acquisitions and capital raising, which drove the corporate sector to new levels.

The corporate sector is no longer dominated by seasoned players from the Suharto era. If you put the top business groups next to Malaysia, the latter pales in comparison.

The Salim group tops the ladder with US$7.3bil (RM24.8bil) in revenues annually and is in agriculture, distribution, property management, financial services and telecommunications in Indonesia, Hong Kong, China and Singapore.

Next is the Sinar Mas group with revenues of US$4.77bil (RM16.2bil), which was forced to sell Bank Internasional Indonesia (BII) following the 1997 financial crisis but has since rebuilt itself in banking with the acquisition of Bank Shinta.

The Sinar Mas group can be said to have been most affected by the 1997 financial implosion as their Asia Pulp & Paper had a staggering debt load of US$14bil. Following years of negotiations and restructuring, the company has thrived. It is also the biggest national player in palm oil, with land bank of more than 1 million hectares.

I could go on and on, but a summary of local companies with annual revenue of at least US$1bil each would be better for now (major assets/annual revenues):

Salim: consumer goods, agriculture/US$7.3bil

Sinar Mas: pulp and paper, agriculture/US$4.7bil

Djarum: cigarette, Bank Central Asia, Cipta Karya Bumi Indah/US$3.7bil

Gudang Garam: cigarette, plantations, paper packaging/US$3.5bil

Bakrie: coal, Bakrie Brothers/US$3.1bil

Lippo: regional property developer, healthcare, financial services/US$2.7bil

Raja Garuda Mas: pulp & paper, plantations, energy/US$2.4bil

coal, agro-industry, manufacturing/US$2.3bil

ABC: consumer goods, battery/US$2.1bil

Saratoga Capital: coal, Adaro, palm oil, infrastructure/US$1.9bil

Para: consumer goods, property, mining, financial services/US$1.6bil

Sampoerna: agro-industry, telecommunications, forestry and property/US$1.4bil

Ometraco: animal feed/US$1.2bil

Khazanah Nasional Bhd has a hefty profile in Indonesia. The businesses under Khazanah has an annual revenue of US$1.8bil. Its stakes include those in Bank Lippo, Bank Niaga, Excelmindo Pratama and infrastructure joint ventures (JVs).

Surprisingly, Temasek’s holdings in Indonesia has only a total annual revenue of US$1.5bil. It has stakes in Bank Danamon, BII, and various property and energy JVs.

Still, the key point here is the number of business entities that have substantial revenues. How many Malaysian businesses have combined revenue of more than RM3.4bil annually? Size matters, especially when they are headed in the right direction with the proper masterplan.

State-owned enterprises (SOEs)

The government has also planned to privatise a number of SOEs, which in itself is a grand plan to better manage resources, inject competition and promote efficiency in government. All in, 37 SOEs have been identified for privatisation and/or restructuring. There has been some delay in that certain factions of the government have been delaying the process.

Last year, 10 SOEs were scheduled for privatisation. However, only five are now ready to go to IPO this year: Krakatau Steel, Bank Tabungan Negara, and National Plantation Enterprises III, IV and VII. Needless to say, intense lobbying by the affected SOEs and maybe even “vested interests” must have been a large part of the delay.

Still, it’s hard to deny that the country is moving in the right direction.

By The Star (by S. Dali)

S Dali is a pseudonym. He is an ex analyst/fund manager and active blogger. ( who says he is too young, too old, too sarcastic, too dark, too funny, too charismatic, too poor, too Cantonese, too Malaysian, too frank, too ...