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Tuesday, December 16, 2008

Foreigners still keen on Malaysian properties

PETALING JAYA: Landmark office transactions concluded in the past 12 months show that foreigners are still keen in the local property market.

Of the nine transactions that were concluded this year, four involved foreign buyers or foreign-related funds. According to data compiled by Rahim & Co Research, the outlook for office property market looked good with more transactions expected going forward.

“Foreign investors like Malaysia for its stability as they feel it is not as volatile compared with markets in Vietnam, Hong Kong and Singapore. The stable economic outlook and good infrastructure are also plus factors for the real estate sector,” the research house said.

This year, several en bloc transactions had taken place, including the sale of Menara Standard Chartered to ING for RM300mil or at RM934 per sq ft, and Pearl@KLCC to Flora Bliss for RM550mil.

There are other several foreign funds that are looking to purchase real estates on an en bloc basis.

“Prime Grade A office buildings in the Golden Triangle and around the KLCC (Kuala Lumpur City Centre) vicinities are almost 100% occupied now. It is for this reason that we expect the few new office buildings in the Golden Triangle to do well in terms of occupancy,” it noted.

Interested buyers for the two office buildings that are up for sale in Kuala Lumpur - Horizon Commercial Centre in Bangsar South and Menara UOA Bangsar Tower A along Jalan Bangsar - comprise mainly foreigners.

The asking price is between RM900 and RM1,000 per sq ft, a significant increase from RM700 to RM900 per sq ft last year. About 3 million sq ft of new office space will be ready next year while the average annual take-up is only about 1.5 million sq ft. The balance space is mostly for owner occupation by big corporations and government departments.

Meanwhile, rental rates - which have been rising over the first half of this year - have started stabilising. Excluding the Petronas Twin Towers, Grade A office space in Kuala Lumpur’s Golden Triangle and around the KLCC are commanding monthly rents of RM7 to RM9 per sq ft.

Reflecting the prevailing pensive mood, Savills Rahim & Co said some companies entering Malaysia for the first time were not commiting to long tenancy or lease of office space but had chosen to occupy service offices instead.

They want the flexibility to watch the market’s performance next year before signing on the tenancy papers. Zerin Properties chief executive officer Previndran Singe said the office market would still see strong demand as the economy was still growing, although at a slower rate.

On the growing number of aborted property deals, Rahim & Co Research said: “The global financial crisis is affecting most institutional funds in various ways, thus they are taking a step back to monitor the situation.”

Banks are also starting to tighten credits and the credit crunch will make it increasingly difficult for investors and buyers to borrow to fund property deals.

Last month, IOI Corp Bhd forfeited a deposit of RM73.4mil when it withdrew from its proposed purchase of Menara Citibank in Jalan Ampang, Kuala Lumpur. The 50-storey Grade A office building has a net lettable area of 733,626 sq ft and a 99% occupancy rate.

Elsewhere, the gloomy global economic outlook has also resulted in aborted deals. In Singapore, the deal by City Developments Ltd’s 53%-owned London-listed Millennium & Copthorne (M&C) to sell The Seoul Hilton to Kangho AMC Co has fallen through. Kangho had agreed to purchase the hotel for S$596mil in June and had paid a non-refundable deposit of 10% plus another 1 billion won for two payment extensions.

These amounts will be forfeited and M&C will book S$60.6mil as extraordinary gain in the current financial year and continue to manage the Seoul Hilton.

With Malaysia’s gross domestic product growth having slowed down to 4.7% in the third quarter this year from 6.3% in the second quarter and 7.1% in the first quarter, Rahim & Co Research is anticipating a further slowdown in the final quarter.

“The global economic crisis is taking its time to impact Malaysia but in 2009 the effect on the country will be more pronounced.We expect some companies, especially in the financial sector, to reduce their headcount or at least stop recruitment.

“This may lead to the consolidation of separate departments or offices into one premise and new office buildings outside of the city centre may prove more popular,” the research house said.

By The Star (by Angie Ng)

SDB to continue slope stabilisation work

PETALING JAYA: Property developer Selangor Dredging Bhd (SDB), which is embroiled in a tussle with residents living below the hill where the 5.68-acre freehold Damansara 21 project is located, will continue with slope stabilisation work pending new guidelines on hillslope developments.

Last Friday, Federal Territories Minister Datuk Seri Zulhasnan Rafique announced the temporary halt on structural works at the project while a 34-storey serviced apartment project in downtown Kuala Lumpur’s Bukit Ceylon has also been halted pending a decision by the Government.

Asked whether the company would file for compensation from the Government should the project be scrapped, SDB communications and corporate affairs manager Lina Othman said in an email reply: “There was no notification that the project is to be halted indefinitely.”

She said the company would continue with the stabilisation work as required by the relevant authorities and await the new guidelines on hillslope developments.

Lina said the slope stabilisation work and development cost had come up to “approximately RM15mil”. Past reports had put the cost of stabilising the hillslope at more than RM30mil.

The land parcel was bought for RM52mil, or at RM200 per sq ft, from Malaysian Assurance Alliance Bhd in August 2005 and came complete with a development order and building plans in place.

“We’ve planned that slope stabilisation and earthworks are to be completed before launch, so the sum spent on slope stabilisation has been taken into account. Building construction costs have not been incurred,” Lina said.

She said to ensure that the land could be built on, the company would improve the factor of safety to a minimum 1.4. “We’re currently in the midst of making the land safer. In terms of factor of safety, even prior to commencing work on the site, there were localised landslips as the factor of safety for certain parts of the land was less than one,” Lina said.

She said the project was targeted for an end-2009 launch but might be deferred depending on the economic situation at the time. The project, which has a gross development value of RM250mil, comprises 21 five-storey bungalows priced from RM10mil to RM15mil, and was scheduled for launch in the second half of next year, according to several reports.

A source familiar with the matter said that based on the logic of what the company had spent to stabilise the soil of the hillslope and what it still had to spend, “the least the Government can do is to compensate the company for what it has spent on stabilising the land should the project be scrapped.”

“It’ll be a case precedent what the company can claim from City Hall,” he told StarBiz yesterday. “Short of that, it will be deceiving since the company bought the land with the understanding that it can be developed.”

When the site was purchased, he said, the company was prepared to carry out the work to stabilise the land for development. “I don’t think the Government has any grounds to stop the project, there’s no reason as long as the company is doing it right.”

By The Star (by Fintan Ng)

TA to purchase A$160 million hotel

KUALA LUMPUR: TA Enterprise Bhd (TAE), in a bid to boost its interests in the hospitality industry overseas, entered into an agreement to purchase a A$160 million hotel in Melbourne, Australia.

In an announcement to Bursa Malaysia yesterday, TA Enterprise said The Westin Melbourne is a five-star hotel located in the central business district and will cost the universal broker RM389.12 million (at the current exchange rate of RM2.432 to A$1).

It added that it would be purchasing the property from RPHT Pty Ltd and the business from RPHT Operations Pty Ltd through its newly established wholly owned subsidiaries TA Covernant Ltd and Ascents Hotel Pty Ltd.

The value of the property was set at A$137.41 million according to valuer Jones Lang LaSalle, while the business brought in A$13.36 million for the 12-month period ended July 31, 2008.

RPHT is held by three shareholders namely Westin Asia Pacific Management Pte Ltd, HLTTA Pty Ltd and United Super Pty Ltd, while RPHT Operations which owns the business is held by five institutional funds.

According to the filing, TA Covenant would be the property owner while Ascents Hotel would own the business. A trust, Ascents Trust, has also been registered with the Australian government in conjunction with this transaction.

The Westin Melbourne has shown consistent earnings growth since 2004, as well as in its occupancy rates, according to the announcement. The original cost of investment in the hotel was A$108 million and development commenced in 1997.

TAE has already committed A$16 million in deposits towards the purchase. It added that although shareholder approval was not required for the purchase, the transaction was still contingent on regulatory approval from Bank Negara Malaysia, as well as other interests.

TAE said it planned to fund the acquisition through “internally generated funds and borrowings”. The filing further shows that TAE would be taking out A$60 million (RM145.92 million) based on an exchange of RM2.432 per A$1) loan to fund the purchase.

The external loan would effectively increase its borrowings to RM283 million from RM137.1 million. TAE’s gearing ratio also rises from 0.06 to 0.13 times.

TAE is no stranger to the hospitality business in Australia as it currently owns the Radisson Hotel in Sydney, Australia. TAE expects the purchase to be completed by early 2010.

By The EDGE Malaysia (by Fong Min Hun)

TA Enterprise buys Westin Melbourne for RM390m

PETALING JAYA: TA Enterprise Bhd is acquiring the property and business known as The Westin Melbourne in Australia for RM389.12mil from RPHT Pty Ltd and RPHT Operations Pty Ltd.

TA Enterprise told Bursa Malaysia yesterday the acquisition of the freehold five-star hotel, which is part of the 16-storey Regent Place Development, only included the 262 rooms and hotel amenities located on nine floors of the development.

It said the net book value of the hotel was A$137.41mil as at June 30, 2008.

The company added that for the 12 months ended July 31, 2008, the hotel occupancy had increased to 82.8% while the average room rate had risen to A$311.22.

By The Star

REHDA urges govt to reconsider blanket ban

The Real Estate and Housing Developers’ Association Malaysia (REHDA) yesterday urged the authorities to reconsider the proposal to impose immediate blanket ban of development projects following the recent Bukit Antarabangsa landslide tragedy.

REHDA president Datuk Ng Seing Liong said the tragedy was unfortunate but a blanket ban would not be the best solution to the problem.

According to REHDA, it is necessary for an urgent plan of action to be taken that addresses not only the immediate crisis, but also the longer term issues of sustainable development that includes the protection of hill slopes and the environment.

Ng said the authorities and the nation should be adopting sound measures to provide a more sustainable solution to hill slope management and development.
“One weakness related to hillside development is the lack of master planning and transparency in the land development and building process,” he said in a statement.

REHDA said it is particularly important that information on hill slope developments be made available to developers and landowners so that developments in such areas are not carried out without sufficient input on future upstream and downstream projects that may take place in the same area.

Such developments should not be approved and carried out on a discrete basis, Ng said.

“REHDA also proposed that a long-term solution is for a dedicated federal agency or commission to be set up that will have authority over hill slope development for the whole country,” he said.

Ng said such a body should be allocated with sufficient resources to undertake research on hillside development and slope safety, establish a register or inventory of all major hillslide lands with profiles on their topography, geological properties and stability.

“This agency should also be empowered to issue and enforce guildelines and standards, approve hillside development and monitor slopes, akin to the functions of the Hong Kong Geotechnical Engineering Office,” he said.

Ng said more stringent rules for maintenance of slopes and drains, and safe treatment and handling of abandoned projects should also be drawn up and imposed.

According to him, blanket banning and freezing of all hill slope development is not a sustainable long-term answer.

“A blanket ban affects many landowners and developers with a value writedown that will affect their balance sheet. This will mean a provision for contingent loss which will have a serious consequences for industry players,” he said.

A recent survey conducted by REHDA Selangor branch estimated that about 4,500 acres of hillside land valued at around RM1.4 billion are involved.

By Bernama