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Monday, September 28, 2009

Office rentals in KL stabilising

PETALING JAYA: The soft office space rentals and occupancies in Kuala Lumpur are expected to stabilise in the next six months if the economic and business outlook continues to improve, say property consultants.

The city’s office market has not been spared from the effects of the global financial crisis, with easing demand pushing down rental and occupancy rates.

According to Knight Frank Research’s latest Real Estate Highlights report, absorption of office space is generally slow, except for buildings which are for owners’ occupation, including Lot C, KLCC (to be occupied by Petronas) and HSBC Annexe (part of the expansion of the existing HSBC headquarters).

Office occupancies started to decline in the first half of the year due to weaker demand as some companies withheld their expansion plans.

Overall, the average occupancy in Kuala Lumpur in the first half-year was 83% (second half of 2008: 85%), with prime offices in Kuala Lumpur city centre having done better with an average occupancy rate of 97% (second half of 2008: 97%).

Prime offices are still enjoying high occupancies due to the limited new supply of prime office space and the remaining terms of earlier tenancies locked in.

Occupancy for secondary office buildings in Kuala Lumpur city centre has shown an improvement as some companies remain interested in relocating to secondary offices as a cost-saving measure amid the economic slowdown.

The cumulative supply of purpose-built office space in Kuala Lumpur city centre was recorded at 41.3 million sq ft during the first half of this year while the cumulative supply in “decentralised”, or non-prime, areas of Kuala Lumpur stood at 13.5 million sq ft.

During the period, there were no significant investment sales for office property in Kuala Lumpur.

However, several sales were noted in decentralised Kuala Lumpur and Petaling Jaya, which included Wisma Chase Perdana in Damansara Heights, Wisma Dijaya in Damansara Utama and Wisma Glomac 3 in Kelana Jaya.

The report further said that several new office buildings currently under construction in Kuala Lumpur would add some 1.4 million sq ft in new office space in the city by year-end.

The increased supply will translate into more choices for tenants and a more competitive market for property owners.

“Office rentals in Kuala Lumpur will remain one of the lowest in Asia and this is an advantage in attracting foreign companies seeking space for their business expansion in the region,” the report said.

The new supply coming on-stream include GTower, The Icon Jalan Tun Razak and Menara PJD, all located along Jalan Tun Razak.

In decentralised Kuala Lumpur, the incoming supply in the second half include Quill Building 7, MIDA headquarters, and the head office of the Companies Commission of Malaysia.

DTZ Research head of South-East Asia, Chua Chor Hoon, said office property value in Kuala Lumpur had eased about 12% year-on-year but the drop was not as steep as in other regional markets.

“There are not many sellers, so there is no distressed sale. The average capital value is RM790 per sq ft,” he said in a recent report on the Kuala Lumpur office market.

Chua said most of the sales were transacted by local buyers while foreign investors were staying on the sidelines in search of higher yields.

YY Lau Property Solutions chief executive officer Y.Y. Lau said that on the whole, there was an oversupply of office space in the Klang Valley although certain popular locations were facing shortages.

She said most of the space was taken up by existing companies that were either consolidating or expanding their operations.

“To cut operation costs, some tenants have already moved to less expensive locations.

“Office space that may not be of Grade A standard is still registering good demand as long as it is well maintained and the rentals reasonable,” Lau said.

By The Star (by Angie Ng)

The Danna - a 'gift' from Tradewinds to Langkawi

Tradewinds Corp Bhd (TCB), a company controlled by businessman Tan Sri Syed Mokhtar Al-Bukhary, will open its RM170 million luxury accommodation in Langkawi called "The Danna" in July next year.

The Danna, to be positioned in the same league as the existing Tanjung Rhu Resort and The Datai, will be built, owned and operated by TCB, its chief executive officer Shahrul Farez said.

This property will be the group's third hotel on the legendary island after the three-star Mutiara Burau Bay Beach Resort and the five-star Meritus Pelangi Beach Resort & Spa, Langkawi.

Shahrul said TCB's decision to open the property in Langkawi was prompted by the high average room rates (ARRs) that the island garners.
Malaysia is said to have one of the lowest if not the lowest ARRs in the world. Langkawi, how-ever, boasts the highest room rates compared with any other places in Malaysia, even that of Kuala Lumpur.

The Danna is derived from the Sanskrit word, denoting "Gift".

Shahrul said the new hotel, located in Telaga Harbour Park and neighbouring Burau Bay, will have 130 rooms.

In 2007, TCB's 70 per cent owned Tradewinds Hotels & Resorts Sdn Bhd bought Benua Perdana Sdn Bhd, which owned the partially completed hotel.

This property sits on a 11,363 sq m site, which is on a 55-year lease from the Langkawi Development Authority (Lada).

The market value of the property as appraised by Rahim & CO in May 2007 was RM100 million, on a completed basis.

Shahrul declined to reveal the hotel's anticipated occupancy and ARR in the first year of operations.

However, luxury resort Tanjung Rhu Resort last year saw a gross operating profit (GOP) of 52 per cent and raked in RM1,500 per occupied room per night for two, including food and beverage.

GOP is gross revenue (from rooms, food and beverage, laundry or business centre) minus cost of operations (such as wages, electricity and ameni-ties).

Mutiara Burau Bay, meanwhile, enjoys an ARR of RM195 per night. The hotel is owned by Lada and managed by Mutiara-TCB Hotel Management Sdn Bhd, a member of the TCB group.

Meritus Pelangi is owned by TCB, but managed by Singapore Meritus International Hotels Pte Ltd. The property is TCB's best performing hotel in terms of ARR.

By Business Times (by Vasantha Ganesan)

Berjaya Hotels wants to hive off some foreign assets

Hospitality group Berjaya Hotels & Resorts plans to sell off its properties in Seychelles, Sri Lanka, Singapore and London to concentrate on its more profitable markets in Asia-Pacific.

Chief executive officer Joseph Won said the group wants to sell Berjaya Colombo Hotel and Berjaya Singapore Hotel, exiting entirely from Sri Lanka and Singapore, despite the two being in Asia-Pacific, to focus on bigger markets.

Won said if prices are right, it would also dispose of Berjaya Beau Vallon Resort and Berjaya Praslin Resort in Seychelles and Berjaya Eden Park Hotel in London.

He said the group is in discussions with a few parties for its properties in Seychelles and London and hopes to sell them within the next two quarters.

Locally, the group operates Berjaya Langkawi Resort, Berjaya Tioman Resort, Berjaya Redang Resort, Berjaya Georgetown Hotel, Colmar Tropicale and Berjaya Times Square Hotel in Kuala Lumpur.
The properties, including those overseas, are worth a combined RM900 million.

"We have made a strategic decision to be Asia-Pacific focused. We are transforming ourselves in such a way to become one of the biggest hotel groups in the region," Won said in an interview with Business Times.

He added that the plan for Asia-Pacific would be to open up to 20 new hotels and resorts in Japan, South Korea, Vietnam, Maldives and Malaysia over the next six to seven years.

The list would include Berjaya branded properties, which the group would own and operate on its own, and hotels operated by third parties.

Berjaya Hotels & Resorts will use proceeds from the sale of the foreign properties, and its own reserves and existing cash flow to finance the expansion.

In addition to opening more properties, the group will also be looking for management contracts in Asia-Pacific.

"We are getting offers from China and Vietnam to operate their wholly-owned resorts and hotels, under the Berjaya brand. This is something we would be doing on a big scale," Won said. - The largest database of products & suppliers from China

The group, in a 70:30 joint venture with a local Vietnamese firm, is currently constructing Berjaya Resorts Phu Quoc Island in Phu Quoc Island for US$45 million (US$1 = RM3.48).

Won said the new resort is targeted for opening in the second or third quarter of next year.

"This is our first property in Vietnam and I wish to do more. I am bullish on the market. We will be expanding there aggressively," Won said.

The group is also looking to open a city hotel in Ho Chi Minh City and a beach resort in Da Nang, within the next four to five years.

Meanwhile, Won said Berjaya Hotels & Resorts may be listed in the future to expedite its expansion and unlock the value of its properties.

"Listing is a possibility that everybody is talking about. My (immediate) aim is to take the group global after we have opened the new properties," he added.

By Business Times (by Sharen Kaur)

Berjaya Hotels expects to rake in RM310m revenue

The hospitality group has 11 properties in Malaysia, Seychelles, Sri Lanka, Singapore and the UK which recorded revenue of RM290 million for the financial year ended April 30 2009.

Hospitality group Berjaya Hotels & Resorts, a unit of Berjaya Land Bhd, expects to rake in RM310 million in revenue for current financial year, driven largely by its properties in Malaysia.

Its chief executive officer (CEO) Joseph Won said the earnings before interest, taxes, depreciation and amortisation (EBITDA) for all its properties in the current year will amount to 33-35 per cent.

The group has 11 Berjaya properties in Malaysia, Seychelles, Sri Lanka, Singapore and the UK, which recorded an average occupancy rate of 66 per cent and revenue of RM290 million for the financial year ended April 30 2009.

Won said the group's properties in Malaysia are recording better room sales with an average room rate (ARR) of RM320 million despite the global economic crisis.
The properties are Berjaya Langkawi Resort, Berjaya Tioman Resort, Berjaya Redang Resort, Berjaya Georgetown Hotel, Colmar Tropicale and Berjaya Times Square Hotel.

"We see more people travelling to our resorts in Redang, Langkawi and Tioman Island, and Berjaya Hills," he said.

In comparison, the ARR for the group's overseas properties is some US$120 million (RM418 million).

"Overall, we did very well in the financial year just-ended despite the global credit crunch. We are lucky to have come out of this crisis unscathed," Won said in an interview.

The group remains cautious even though the economy is recovering.

Won said Berjaya Hotels & Resorts will not take to raising the ARR for its Malaysian properties next year.

The last time the ARR was raised was in 2006, by 10-12 per cent.

Won was appointed CEO of Berjaya Hotels & Resorts in August last year.

By Business Times (by Sharen Kaur)

Traders Hotel to retain lead position among competitors

Three years since its opening, Traders Hotel Kuala Lumpur has emerged tops not only among four-star hotels in the city, but also among a handful of five-star properties.

And it is making sure it holds the top seat this year and the next, says its newly-appointed general manager Richard Cooke.

The hotel, owned by KLCC (Holdings) Sdn Bhd and operated by the Shangri-la Group, is only expecting a marginal decline in both average occupancy and average room rate (ARR) this year compared with 2008.

"We are number one in our competitive set. We expect to retain this position this year," he told Business Times in an interview.
"In the January to August 2009 compared to the corresponding period of 2008, we only experienced a slight decline (in occupancy and ARR)," Cooke said.

The 571-room hotel is positioned for business travellers, as such it was hit by the global economic slowdown. However, its leisure segment has improved and has helped to cushion the decline in the business market.

Business guests, which made up 85 per cent in 2007, now make up about 70-odd per cent. The remaining are leisure travellers.

The hotel enjoyed a bumper year in 2008 and Cooke expects that Traders will bounce back in the second half of 2010 and post similar results as in 2008.

Room rates next year are expected to inch up by 2 per cent to 4 per cent.

Based on a search on accommodation specialist's website, Traders' room rate for November 25 2009, (based on a search on September 10 2009) is RM449, which is far higher than the rates at some five-star properties.

Next year, Cooke has planned changes for the hotel to rejuvenate it so as to retain its lead among its competitors including improving on its service standards.

"We want to create functionality and memories for our guests," he said, adding that the hotel caters predominantly to the Malaysian market, followed by the Middle East, the UK and Singapore. Forty per cent of its guests are repeat guests.

This hotel has one of the leanest number of employee to room ratio of 0.8 and Cooke hopes to maintain it at this level and improve their efficiency at the same time.

By Business Times (by Vasantha Ganesan)

Berjaya Land 1Q net profit surges 76% to RM78.11m

KUALA LUMPUR: BERJAYA LAND BHD's first quarter net profit surged 76% to RM78.11 million for the period ended July 31, 2009 from RM44.36 million a year ago, boosted by the writeback of impairment in value of investments in associated companies and its Toto betting operations.

However, it cautioned that its hotels and resorts business may continue to be affected by the current global outbreak of Influenza A(H1N1) but it expected its gaming business under Berjaya Sports Toto to remain resilient.

BLand said on Sept 28 that revenue slipped slightly to RM952.63 million from RM963.91 million a year ago. Pre-tax profit was RM119.9 million compared with RM83.76 million. Earnings per share were 2.34 sen versus 0.05 sen.

"The lower revenue was mainly due to the lower revenue reported by the hotels and resorts division that was adversely affected by the outbreak of Influenza A(HINI) as well as the prevailing global economic crisis," it said.

As for the higher pre-tax profit, this was mainly due to the higher profit contribution from the gaming business arising from lower prize payout and significant net investment related income in spite of the lower profit contribution from the hotels and resorts division.

Toto betting operations accounted for RM824.9 million of the revenue of RM952.63 million.

The 1Q revenue, when compared with the fourth quarter ended April 30, 2009, showed the revenue declined to RM952.63 million from RM971.7 million but pre-tax profit rose to RM119.9 million from RM83.76 million.

"The decrease in revenue was mainly due to the lower revenue contribution from the gaming business when compared to the preceding quarter which was partly mitigated by the higher revenue reported by the hotels and resorts division.

"The higher pre-tax profit in this current quarter under review was mainly attributed to the investment related income as well as higher profit contribution from the hotels and resorts division compared to the preceding quarter where the group incurred impairment loss on its quoted investments, certain of its property, plant and equipment and investments in associated companies and jointly controlled entities," it said.

On the prospects, BLand said given the prevailing global economic conditions, the property market continues to remain soft and the hotels and resorts business may continue to experience setback from the current global outbreak of Influenza A(H1N1). However, it expected the gaming business under BToto to remain resilient.

"With this backdrop and barring unforeseen circumstances, the directors are of the view that the group's operating performance for the remaining quarters of the financial year ending 30 April 2010 will remain satisfactory," it said.

By The EDGE Malaysia

Glomac 1Q net profit at RM8.34m

KUALA LUMPUR: Glomac Bhd posted net profit of RM8.34 million for the first quarter ended July 31, 2009, up from the RM7.8 million a year ago.

The company said on Sept 28 that on a pre-tax level, it was up 57% at RM16.47 million versus RM10.5 million a year ago. Revenue slipped to RM58.98 million from RM79.54 million. Earnings per share were 2.99 sen versus 2.73 sen.

"The lower group revenue was mainly due to the completion of Suria Stonor, the group’s high-end residential condominium project. Profits were substantially higher due to stronger contributions from Glomac Tower. The stronger profits in the quarter also included the recognition of fair value gain of RM4.9 million from its investment properties," it said.

Glomac group executive chairman, Tan Sri F.D. Mansor said: “Overall, the group has had a good start to the current financial year" and the group's balance sheet would continue to improve upon the completion of the sale of two of its investment properties.

He said the sale of the two properties would enable it to undertake more exciting development projects and seek out new development landbank.

"Glomac’s financial performance in FY2010 will be supported by substantial unbilled sales of RM333 million as at end-July 2009, and new sales on recently launched projects.

"The group’s new flagship development, Glomac Damansara, comprising of shop offices, office towers, serviced apartments and retail suites, has a total estimated GDV (gross development value) of RM800 million," he said, adding the first phase, comprising of five and eight-storey shop offices with a total GDV of RM53 million, achieved a take-up rate of 70% over the initial six-month launch period.

By The EDGE Malaysia