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Thursday, September 30, 2010

E&O aims to grow F&B, property units in region

EASTERN & Oriental Bhd (E&O) wants to expand regionally to grow its property development and food and beverage (F&B) units, its chief said.

The developer's businesses are currently in Kuala Lumpur and Penang, where it is involved in property development and investment, and operating hotels and restaurants.

Under the F&B division, E&O operates the Delicious Chain of restaurants in Malaysia and it wants to expand this to Singapore, Thailand and Indonesia, said its executive director, Eric Chan.

"F&B contributed some RM3 million to E&O's net profit last year and we aim to increase this going forward," Chan said yesterday, after the company's shareholders meeting in Kuala Lumpur.
E&O operates six Delicious outlets and one Chinese restaurant.

The company has RM500 million in its coffers to spearhead the F&B expansion. However, the bulk of the cash will be used to generate fresh cash flow by launching new projects and buying more land, Chan said.

On the property development front, Chan said E&O aims to launch flagship projects in Singapore and Jakarta, Indonesia, but there are no concrete plans yet.

"Our priority is to launch projects locally. We have more than RM4 billion worth of high-end housing projects to launch in Penang and Kuala Lumpur. We will launch as long as the market can take it.

"If there are no negative policies being implemented, then we expect the markets in Penang and Kuala Lumpur to be positive," he said.

Among the projects that E&O plans to launch are seafront terraces, villas and semi-detached homes in Penang, and condominiums at Jalan Yap Kwan Seng and Jalan Kia Peng as well as in Bukit Tunku in Kuala Lumpur.

Chan said E&O aims to achieve record sales of RM1 billion. No time frame was, however, given.

For its financial year ended March 31 2010, E&O posted RM70.5 million in net profit on revenue of RM352.4 million.

By Business Times

MPPP revises plot ratio for high-rise properties

GEORGE TOWN: The Penang Municipal Council (MPPP) has revised the plot ratio guidelines for high-rise properties on the island to allow developers to construct a total of 122,000 sq ft per acre compared with 42,000 sq ft per acre previously.

Real Estate Housing Developers’ Association (Rehda, Penang) chairman Datuk Jerry Chan told StarBiz that developers could now develop up to 87 units, with a total built-up area of 122,000 sq ft per acre.

Datuk Jerry Chan ... More flexibility for developers

“The condition that comes with the new plot ratio guidelines is that 5% of the units is to be sold at not more than RM200,000.

“Another 10% is to be sold below RM300,000, and another 5% at a price not exceeding RM500,000,” he said.

The new plot ratio guidelines are applicable in areas where it is allowed to develop 30 units per acre and above, according to the local control plan, and in areas designated as commercial/tourism areas under the MPPP’s structural planning and development control plan.

The new plot ratio guidelines are not applicable for prime residential areas such as Jalan Tunku Abdul Rahman (popularly known as Ayer Rajah Road), Jesselton area, existing established housing zones and general housing areas, George Town Heritage Site (which includes the buffer zone), certain areas in Tanjung Bungah and Tanjung Tokong.

These terms and conditions were communicated to Rehda Penang and other professional bodies in a letter dated July 28, 2010.

Chan said the MPPP also implemented in July the Green Building Index (GBI) guideline to encourage the development of green development projects.

“According to the GBI, if the project qualifies for the platinum and gold standard of the GBI, the developer can still pay the old development charges of RM5 per sq ft and RM7 psf respectively for residential and commercial properties.

“If the project fails to qualify for either the platinum and gold standard, the developer will have to pay triple the amount,” he said.

Chan said the 122,000 sq ft built-up area per acre was still lower than the guidelines for super-condominium projects which could exceed 180,000 sq ft built-up area per acre.

“The new plot ratio guidelines will see the development of more affordable high-rise properties priced from RM200,000 to suit different ages and budgets,” he said.

Previously, the plot ratio guideline for high-rise on the island was 60 units per acre or 42,000 sq ft per acre.

“This means a developer could either build 60 units of 700 sq ft apartments or 30 units of 1,400 sq ft apartments. Each unit must also have three bedrooms.

“The old plot ratio guideline, which had been enforced for over 30 years, was inflexible and did not give the developer the room to construct units of mixed sizes and lay-outs and price them according to the needs of different income groups,” he said.

By The Star

3 local firms in talks to invest in India's Sri City

Three Malaysian companies are expected to establish an investment presence in one of India's top special economic zones (SEZs) by the end of the year.

Integrated SEZ developer Sri City (Pte) Ltd vice-president C. Saravanan on Tuesday said the companies, which are engaged in industrial engineering, are likely to plough in an estimated US$25 million (RM77 million) into India's first integrated business city known as Sri City, located 55km away from Chennai in South India.

"The Malaysian companies are among several foreign firms we are in advanced negotiations with and we hope to sign a deal with them by the end of the year," Saravanan told reporters in Penang.

He, however, did not disclose the name of the Malaysian companies, except to say that the firms were mulling setting up a presence in South India for manufacturing and distribution purposes.

Saravanan and Sri City Pte's deputy general manager for marketing M. Ganesh were in Penang as part of a six-day official visit to Malaysia to meet top investors who are keen on investing in India.

They are also due to meet government and investment promotion officials in Perak and Kuala Lumpur this week.

Apart from meeting potential investors, Saravanan said the company is also looking for joint-venture opportunities with local consultants and companies.

"There is an estimated US$30 million to US$40 million (RM93 million to RM124 million) worth of joint-venture projects for Malaysian companies in Sri City for the development of social infrastructure like residential enclaves, education zones, leisure and entertainment zones."

He singled out the development of golf courses within Sri City as a project which could potentially attract Malaysian companies.

"As developers of this economic zone, our equity would be to provide land for these proposed projects," Saravanan added, saying that his company has ear-marked US$250 million (RM770 million) in setting up Sri City and a total of US$150 million (RM462 million) has been spent, to date, on infrastructure support.

Sri City, which was set up in 2008 and covers more than 2,400ha of land, was master-planned and designed by Singapore-based Jurong Consultants Pte Ltd.

The zone has attracted 35 multinational companies with total investments of US$150 million. Eleven of these investors have already begun operating in Sri City.

"We are hoping to lure another 15 more companies to the SEZ by the frist quarter of 2011," he added.

Located on the border of Andhra Pradesh and Tamil Nadu, Sri City offers smooth connectivity to three sea-ports, two international airports, a national highway and railway services.

"We have earmarked some 300ha of land for open spaces and our plans are to develop Sri City as a green city, as we aspire to be the world's first carbon-neutral city," Saravanan said.

By Business Times

BMAM voices dissatisfaction with valuers' proposal

Investors will lose interest in buying condominiums and apartments in Malaysia if the proposed amendments to the Valuers, Appraisers and Estate Agents Acts 1981 take place.

The Building Management Association of Malaysia (BMAM) is up in arms against the Board of Valuers, Appraisers and Estate Agents who had proposed to amend the Act.

The proposal was tabled in Parliament for first reading at its last session in July.

"If this (the amendments) takes place, the management fees (of high-rise residential units) will increase by 100 per cent, and many people including foreign investors will lose interest in buying condominiums and apartments," said (BMAM) president Datuk Teo Chiang Kok in a press conference to voice its dissatisfaction with the proposed amendments yesterday.

Teo said the amendments would encompass all facets of property ownership and monopolise the functions of property management including building and leasing management, general maintenance and facilities management.

There are almost two million strata title residential holders in the country and based on a minimun fee of RM50 per unit per month, valuers stand to make RM1.2 billion annually, he said.

"It's indeed a very lucrative business and that is why monopoly is not good ... We urge the government to do something about it as this is their (valuers) second attempt to see the amendment through after their first attempt five years ago failed," he said.

Teo also said that the property management industry should not be monopolised by several hundred valuers, but should instead be allowed to operate in an open market.

"We have a pool of good talent who can readily do the job but if the proposed amended Act comes in force, there is definitely going to be a brain drain in this sector ... even those taking diploma courses for this type of work will not be able to find jobs," he said.

Teo said shopping complexes and malls would also not be spared as their shareholders will not be allowed to pick the people they want to manage their buildings.

BMAM has asked for an appointment to meet the Minister of Finance to sort out the issue, he added.

By Business Times

China steps up control of property market

China on Wednesday announced it had taken further steps to cool its red-hot property market, ordering banks not to provide loans for third home purchases and above.

The new measures are aimed at preventing house prices from rising too fast, the State Council, or cabinet, said in a statement, amid fears of a speculative bubble that analysts say could derail the world's second largest economy.

The cabinet said down payments on all home purchases would now have to be at least 30 percent, and limited the number of homes that people can buy in cities where prices are too high, have risen too quickly or where supply is tight.

The new measures urged banks to strengthen their oversight of consumer loans, banning them from being used to buy homes.

The cabinet also called for a trial reform of the property tax now being carried out in some cities to be sped up and gradually expanded to the whole of China.

This is widely expected to entail an expansion of the tax on commercial real estate to cover residential houses.

The measures are the latest in a series issued this year -- such as tightening restrictions on advance sales of new developments -- to try and prevent the property market from overheating.

Official data has suggested that these efforts have started to pay off, with growth in China's property prices slowing for the fourth straight month in August.


Syed Mohamed set for IIB top job

Datuk Syed Mohamed Ibrahim, the property head at DRB-HICOM Bhd, is slated to join Iskandar Investment Bhd (IIB) as its chief executive officer (CEO), replacing Arlida Ariff who currently holds the post.

Arlida's contract expires at the end of this year and it is believed that her term will not be extended, sources said.

"The offer has been made and he (Syed Mohamed) may even start this year," one of the sources said.

IIB confirmed that Arlida's contract finishes at the end of the year, but declined to comment further.

Syed Mohamed and Khazanah Nasional Bhd, the parent of IIB, also declined comment.
Syed Mohamed has been the group director of DRB-HICOM's property and infrastructure division since early this year.

He returned to Malaysia after a stint as chief operating officer of Seera City Real Estate Development Co, a firm leading the RM24 billion, 15-year project known as the "Knowledge Economic City" in Madinah, Saudi Arabia.

The city is one of six new cities being built by Saudi Arabia and is intended to be an education and technology hub.

Before that, Syed Mohamed was the CEO of Tabung Haji's property arm, TH Properties Sdn Bhd, the developer of Bandar Enstek, a RM9.2 billion township in Negri Sembilan.

He will succeed Arlida, an engineer by profession, who was appointed IIB executive director on July 2 2007. She became the president and CEO on January 1 2008.

Under her watch, IIB has brought in significant projects like the Legoland theme park, factory outlets, and some world-renowned universities.

The RM750 million theme park, which is among the main attractions at Medini North in Iskandar Malay sia, will be the fifth Legoland in the world and is scheduled to open in 2012.

Since the set-up of IIB in November 2006, the company has also awarded over RM3 billion worth of construction jobs in Iskandar Malaysia.

In Medini North, there are RM1.7 billion worth of ongoing projects, including Legoland Malaysia and 1Medini, a residential project by WCT Bhd and IIB.

Arlida said recently that she was in talks with several local and foreign investors to build a three-star resort hotel, a four-star business hotel, a retail mall and a high-rise tower in Medini North worth RM1 billion.

IIB is also trying to get two other universities to set up engineering and multi-programme schools in EduCity, the 120ha education enclave in Nusajaya. One is with Singapore's Raffles Education Group.

In June, IIB signed a deal with the Management Development Institute of Singapore (MDIS) to set up an MDIS campus in EduCity.

The MDIS campus is the third in EduCity, the other two institutions being the UK's Newcastle University of Medicine and the Netherland's Maritime Institute of Technology.

By Business Times

Wednesday, September 29, 2010

Australia commercial property deals on the rise

Australian commercial property transactions are climbing as the nation’s economic growth draws investors seeking income and capital growth, CB Richard Ellis Group Inc said.

About A$2.6 billion (US$2.5 billion) of properties changed hands in the third quarter, 75 per cent more than a year earlier, the world’s largest commercial real-estate broker said in an e- mailed statement today. Office properties accounted for about 70 per cent of the transactions, when on average they make up 50 per cent, it said.

“This type of stock is ready to sell, with a large number of new office buildings featuring long leases and attractive depreciation benefits available for incoming investors,” Kevin Stanley, executive director for global research and consulting at CBRE, said in the statement. Investors are drawn by the “bright prospects for income and capital growth in the office sector” driven by recent employment growth, he said.

Australian job growth exceeded forecasts in August, with employers adding 30,900 workers, sending the unemployment rate down to 5.1 percent, the lowest since January 2009.

While the gain in property transactions hasn’t pushed rents up yet, the increase in vacancy rates in major markets has slowed, Stanley said.

Industrial property deals accounted for 23 per cent of third-quarter sales, and retail for 7 per cent, CBRE said. Overseas investors purchased 42 per cent of the properties up for sale in the quarter and 36 per cent in the year to date, according to CBRE. On average they account for about 15 per cent.

By Bloomberg

Tuesday, September 28, 2010

JB to get own ‘KLCC’

Datuk Abdul Ghani Othman and Mukhtar Hussain signing the plaque at the branch opening

JOHOR BARU: Johor wants to develop the former sites of the Lumba Kuda and Bukit Chagar low-cost flats in Johor Baru into an area similar to Kuala Lumpur City Centre.

Mentri Besar Datuk Abdul Ghani Othman said the components of the project would include buildings that resembled the iconic Petronas Twin Towers, hotels, condominiums, serviced apartments and retail complexes.

“On clear days, the towers would have a commanding 360 degrees views of the city centre and our neighbour Singapore,” he said yesterday.

Ghani was speaking to journalists at the opening of the HSBC Amanah Malaysia Bhd’s first Islamic bank branch in Johor at Taman Nusa Bestari and also its seventh branch.

He said the Lumba Kuda and Bukit Chagar sites would also be the last stop for the mass rapid transit (MRT) services from Woodlands, Singapore to Tanjung Puteri in Johor Baru. A rapid transit system (RTS), which would be centralised at Kempas KTM station, will connect commuters to other parts of Johor Baru and Pasir Gudang.

Ghani said Johor was opened to all options on the type of RTS to use; whether to have a bridge across the Straits of Johor or an underground sea tunnel linking Johor and Singapore.

“The distance might be short: only about 1.6km but if the sea tunnel project is viable and can help reduce congestion above land, why not,” he said.

Ghani said the Iskandar Regional Development Authority and State Economic Planning Unit would have until the end of the year to complete their studies on the city centre transformation plan and submit their findings to the Federal Government.

Under the 10th Malaysia Plan, some RM1.8bil will be spent to turn Johor Baru into a vibrant city in line with its status as one of the five flagship development zones in Iskandar Malaysia.

By The Star

Iskandar Malaysia moving in the right direction

Selling fast: Tham (right) and sales and marketing manager Patrick Chin with the model of the SuriaMas Block C Apartment Tower.

JOHOR BARU: Iskandar Malaysia and Singapore are two major contributing factors that will drive growth of the property market in south Johor.

IJM Land Bhd general manager (southern region) Tham Huen Cheong said the country’s first economic growth corridor was moving in the right direction since its inception in Nov 4, 2006.

Located in the southern most part of Johor, spanning 2,217 sq km and under its Comprehensive Development Plan (2006-2025), Iskandar will be transformed into an international metropolis.

The figure released by the Iskandar Regional Development Authority showed Iskandar received RM62.32bil cumulative investment up to June, surpassing the 2010 target of RM47bil.

“Developers are benefiting from the investment flow with demand for properties on the upward trend,’’ he said at the launch of SuriaMas Block C Apartment Tower.

The project located in Larkin is a privatisation project between IJM’s subsidiary Suria Bistari Development Sdn Bhd and the Johor government.

The 13-storey block with the gross development value of RM35mil is made up of 152 units with built-up area from 82.03 sq metre to 104.98 sq metre, and selling prices between RM220, 000 and RM330, 000 each.

He said the opening of the two Integrated Resorts (IR) in Singapore also saw good demand for apartments units especially those located just few kilometres away from Bangunan Sultan Iskandar, Customs, Immigration and Quarantine Complex in Bukit Chagar.

Tham said it was a known fact that Johor and Singapore were economically inter-dependent and positive economic growth on both sides of the Causeway would create a spill over.

“Apartment units are popular with Malaysians working in Singapore as most of the apartments blocks are located within the gated and guarded precinct,’’ said Tham.

He said many chose to stay in apartments nearby the CIQ due to the shorter travelling time commuting to work to the republic.

The safety factor was another consideration as security guards patrolled the area regularly.

Tham said apartments in the Larkin area fetched good rental due to its close proximity to Johor Baru city centre and was surrounded by amenities such as schools, banks, shopping complexes, private hospitals and public transport terminal.

He said a three-room unfurnished apartment unit in the area could easily fetch RM850 monthly rental, while for the fully-furnished three-room unit could derive rental between RM1,200 and RM1,800.

Tham said it was still considered cheap compared with a room in any Housing Development Board public flats in Singapore, which could be leased out to tenant from S$500 monthly.

By The Star

1MDB gearing up for expansion plans in real estate industry

PETALING JAYA: The Government’s strategic investment unit, 1Malaysia Development Bhd (1MDB) seems to be gearing up for involvement in the real estate industry judging by its large recruitment plan recently.

1MDB placed a two-page recruitment advertisement in The Star on Sept 25, mostly for senior positions within various units in the real estate team of the company.

The vacancies were for positions in the project management unit, design and planning unit, supply chain management unit, project implementation unit, branding and marketing unit, quality assurance unit and corporate functions.

Sources familiar with the company said the new line-up would be for the redevelopment of the Sungai Besi Airport area and a new international financial district in Kuala Lumpur.

“1MDB is gathering resources right now to kick-start its expansion plan in the real estate industry,” the sources told StarBiz yesterday. The company, when contacted, declined to comment.

As reported in June, the Sungai Besi airport would be developed into a green mixed-use development that will feature a commercial hub.

To be known as “City of Malaysia”, the project will be jointly developed by Middle Eastern investors including the Qatar Investment Authority and 1MDB.

In its advertisement, 1MDB said: “At 1MDB, we strive to be a strategic enabler for new ideas and new sources of growth to further strengthen Malaysia’s competitiveness. Through innovation, creativity and high performance, we unlock strategic values to drive long term sustainable economic development. Join our real estate team to be part of this mission.”

According to its website, 1MDB has a unique difference in its pursuit of economic growth.

It creates business opportunities and forges global partnerships to bring home foreign direct investment for new high-impact growth.

It forms equal-capital joint ventures in investments with high multipliers, especially energy, real estate, tourism and agribusiness.

This business model has proven successful with an early indication of US$3bil investments from the Middle East.

By The Star

SunCity project in Penang

SUNWAY City Bhd’s wholly-owned unit, Sunway City (Penang) Sdn Bhd, had on August 4 agreed to buy 32.74ha of land for residential development in Barat Daya district, Penang, from Sungei Ara Holdings Sdn Bhd for RM38.76 million.

SunCity said the area will have an estimated gross development value of RM800 million when fully developed.

“The proposed development for the new land bank consists of semi-detached houses and bungalows which will strengthen SunCity’s presence in Penang,” it told Bursa Malaysia yesterday.

By Business Times

Plenitude to buy Penang land

PLENITUDE Bhd’s wholly owned unit, Plenitude Estates Sdn Bhd, has agreed to buy 21.3ha of freehold land in Balik Pulau, Penang, from United Formula Sdn Bhd and Affluent Base Sdn Bhd for RM40.1 million.

The land is earmarked for mixed development that includes double-storey and super-link houses as well as 2-3 storey shops with an estimated gross development value of RM230 million.

The development should start in the first half of 2012 and last five years.

By Business Times

PKNS plans to set up Astronaut City in Bernam Jaya

KUALA LUMPUR: The Selangor Economic Development Corp (PKNS) plans to set up an "Astronaut City" in Bernam Jaya, Northern Selangor, says its Chief Executive Officer Omar Othman. "However, it is still in the preliminary stage. We are just talking about it. There is nothing concrete yet," he told Bernama here today.

Ohman said PKNS was organising an "Astronaut Congress" to be held at the Shah Alam Convention Centre on October 8. "We are trying to schedule a visit by the astronauts to our Selangor Science Park, which is also the Solar City to exchange ideas," he said after a visit by national astronaut Datuk Dr Sheikh Muszaphar Shukor to PKNS's exhibition booth at the Global Finance Conference here today.

Themed, "Dawn of the New Decade: Alternative Investments in Asia", the two-day conference, organised by the International Herald Tribune and the London Speakers Bureau, ended today.

PKNS, the investment arm of the Selangor state government, is the only exhibitor displaying multi-billion ringgit high-profile properties to attract potential international investors.

Malaysia's first Solar City, located in Selangor Science Park 2, is an integrated urban mixed redevelopment with high-tech industrial, commercial residential and recreational components.

Meanwhile, Sheikh Muszaphar said "we are impressed with the world class infrastructure that PKNS has put in place in the Solar city". "We are bringing 100 astronauts from all over the world to visit Solar City namely from the United States, Iran, India. "Probably, we can promote space science as the Solar City has a lot of opportunities and potential," he added.

By Bernama

Monday, September 27, 2010

UEM Land counts on Nusajaya

From left: UEM Land strategic marketing GM Zamry Ibrahim, strategic marketing and communications director Zulkifli Tahmali and Mohamad Razif Abdul Wahab looking at the model of the company’s Nusa Bayu mixed property development project.

NUSAJAYA: UEM Land Holdings Bhd is banking on the on-track development of Nusajaya as the main selling point for its latest mixed property development project.

Senior marketing and sales manager Mohamad Razif Abdul Wahab said that Nusa Bayu, to be launched early next month, would be the company’s fourth ongoing project in Iskandar Malaysia.

The other three projects are East Ledang, Nusa Idaman and Puteri Harbour while Horizon Hills is a joint venture between UEM Land and Gamuda Bhd.

“Nusajaya is progressing well and moving on the right track as planned, attracting investments from both local and foreign investors,’’ Razif told StarBiz.

UEM Land is the master developer of the 9,308ha Nusajaya, the key driver of Iskandar Malaysia, the country’s first economic growth corridor launched on Nov 4, 2006.

Nusajaya comprises eight catalyst developments — Kota Iskandar (Johor’s new administrative centre), Southern Industrial and Logistic Clusters, Puteri Harbour Waterfront Development, EduCity, Medical City, International Destination Resort and Nusajaya Residences.

Razif said that Nusa Bayu, sited on 105.21ha along the Pontian Link, would have 5,000 residential and commercial properties and a gross development value of RM700mil.

He said the initial launch was set for 130 double-storey link houses, with a built-up area of 1,400 sq ft each and costing under RM300,000.

He said the company would target young families, first-time homebuyers and Malaysians working in Tuas and Jurong in Singapore, as the project was easily accessible from the Second Link crossing.

“We conducted a market study and found that there was a huge gap for new houses priced between RM200,000 and RM300,000 in Nusajaya,’’ Razif said.

Razif said feedback also showed that many buyers, including foreigners, were attracted to properties in Nusajaya.

Work on infrastructure and several development projects in Nusajaya are on schedule and are expected to be completed in the next two to five years.

They include the RM1.4bil Coastal Highway linking Johor Baru city centre to Nusajaya, Asia’s first Legoland Theme Park, Indoor Theme Park @ Puteri Harbour, Marlborough College, Newcastle University Medical Faculty and Pinewood Studios.

By The Star

SunwayMas ventures into Sri Lanka

SunwayMas Sdn Bhd (SunwayMas), the wholly-owned property development arm of Sunway Holdings Berhad (Sunway Holdings), signed a Joint Venture Agreement (JVA) with Dasa Group on September 24 to jointly develop a parcel of prime land in Sri Lanka’s capital city of Colombo. With the signing of this JVA, SunwayMas becomes the first Malaysian property developer to undertake a development project of such scale and nature in Colombo, Sri Lanka.

Under this JVA, SunwayMas and Dasa Group will jointly undertake the development of a 34-storey building comprising about 70 commercial units and 180 residential units on prime freehold land in the premium mixed-use zone of Bambalapitiya in District Colombo 4. The proposed development has a gross development value of USD80 million (equivalent to approximately RM 250 million). The project will sit on a 1.14 acre land that is located 5km away from the central business district of Colombo.

The JV comes on the heels of the Memorandum of Understanding signed between SunwayMas and Dasa Group in June 2010. Under the JVA, the proposed structure is for SunwayMas to hold 65% of the shares and the Dasa Group 35%.

The JVA was signed by Sunway Holdings managing director Yau Kok Seng and Dasa Group of Companies chairman and founder S. D. Gunadasa. Yau said, "Today is a historic occasion as this is the first-of-its-kind venture by a Malaysian property developer into Sri Lanka. This is the beginning of an era of mutual economic co-operation and benefit between our two nations. Today, we have contributed towards a new paradigm - that of the opening up of the Sri Lankan economy to foreign investment and expertise, thus allows us to contribute to Sri Lanka’s nation building.”

Yau added, “Sunway Holdings has built a strong reputation in Malaysia for quality property offerings and pioneer development concepts. After today, Sri Lanka would be the third foreign country, apart from Singapore and China, where Sunway Holdings will have its property development foot print in.”

This brings Sunway Holdings’ land bank to a total of more than 430 acres with potential Gross Development Value of approximately RM2.6 billion, which will be developed over the next 3 years. The Group currently has RM450 million in unbilled property sales and is expected to launch about RM500 million worth of property projects in Malaysia and Singapore in the next few months.

S. D. Gunadasa, Chairman & Founder, Dasa Group of Companies, said at the ceremony, "This JV marks an important milestone for the Dasa Group’s first venture in mixed development in Sri Lanka. We look forward to more collaborations with Sunway Holdings for our future expansions.”

“While the Sri Lankan property market gears itself for robust growth in the next 5 years, international collaborations with premier property players such as the Sunway Holdings will contribute immensely to raise the standards in the industry as well as to create new benchmarks”, he concluded.

By The Star

Mines 2 aims to rake in RM15m rental from new shopping mall

MINES 2 Sdn Bhd, the owner of Mines 2, is aiming to rake in rentals of RM15 million a year from its new shopping mall that will start operations on October 15.

Its chairman Tan Sri Lee Kim Yew said with the "street mall" concept, Mines 2 offers unique shopping atmosphere with colourful light-emitting diode (LED) lights.

"We are the first shopping mall in the country to use 100 per cent LED in our operations," he said.

The RM150 million 11-storey commercial building has 400 shops and kiosks.

The company aims to secure 90 per cent tenancy rate by June next year.

Lee was speaking to reporters after the signing ceremony between Mines 2 Sdn Bhd and Frontken Corp Bhd, a service provider of surface metamor-phosis engineering to set up the Frontken LED lighting technology in the mall, recently.

Also present was Frontken's executive chairman and managing director Willie Wong.

"We aim to attract 10 to 12 per cent more visitors from the Mines Shopping Fair to shop here (Mines 2)," Lee said, noting that the Mines Shopping Fair has one million visitors a month.

Frontken's new LED lighting technology adapts to the green environmental initiatives, reduces energy cost and offers brighter and higher efficiency.

Lee said LED lights save energy, promote sustainability, reduce environmental impact and improve the quality of the light.

"We have made an investment of RM5 million to use LED technology here and hope to recoup the investment in less than five years," he said.

Lee said with Frontken's LED technology, Mines2 is expected to reduce utility expenses by up to 40 per cent from the lighting and air-conditioning loads.

He added that in the future, Mines 2 will continue to cooperate with Frontken to build a car park equipped with LED lights with 2,000 capacity.

By Business Times

Sunway Holdings still rated a ‘buy’

ECM Libra Investment Research is maintaining a "buy" call on Sunway Holdings Bhd in anticipation of strong earnings growth and more landbank acquisitions in the pipeline.

In a research note here today, ECM Libra said, it has raised Sunway's estimates for financial year 2011 and 2012 by 0.7 per cent to 7.5 per cent respectively, as the company remains the top "buy" for the construction sector.

"This is premised on a strong earnings growth of 67.6 per cent in financial year 2010 and undemanding forward price to earnings (P/E) valuation of 7.8 times, more landbank acquisitions in the pipeline as well as strength in securing overseas construction contracts," it said.

ECM Libra's target price, which based on 10 times price to earning on mid financial year earnings per share (EPS), remains unchanged at RM2.61 as the impact on financial year earnings is negligible.

Last Friday, Sunway Holdings entered into a joint venture (JV) agreement with Dasa Tourist Complex Pvt Ltd to undertake a mixed development project in Colombo, Sri Lanka.

The project is on a piece of 0.46 hectares (1.14 acres) freehold land with an expected gross development value (GDV) of RM250 million.

The development is for a 34-storey building comprising 180 residential and 70 commercial development units.

Sharing the same view, OSK Research is also maintaining a "buy" call on Sunway Holdings with a target price of RM2.52.

By Bernama

Saturday, September 25, 2010

Sunway to launch RM1.1bil project in Singapore

KUALA LUMPUR: Sunway Holdings Bhd will launch its third property project with a gross development value (GDV) of RM1.1bil in Singapore next week, said managing director Yau Kok Seng.

"The Sri Lanka project has the potential to generate total salea b le area of at least 380,000 sq ft" YAU KOK SENG

Yau said the 1.92ha project, called Vacanza @ East, would be located at Jalan Senang, District 14, a freehold land strategically sited near Pan Island Expressway.

“We expect good response for the project,” he said after signing a joint-venture (JV) agreement with the Dasa Group of Sri Lanka here yesterday.

He said profit margin in Singapore was usually 12%.

The project will comprise eight blocks of 12-storey buildings, which will have 500 units.

Sunway will also launch another project with a GDV of S$370mil in the second half of 2011 in Singapore. It will comprise 17 blocks of five-storey residential development.

The JV agreement signed yesterday was between Sunway unit SunwayMas Sdn Bhd and Dasa Group for a RM250mil mixed development project in Bambalapitiya, Colombo.

A JV company will be formed in Sri Lanka, with SunwayMas having a 65% stake and remainder taken up by Dasa Group.

SunwayMas would fund its investment in the JV company through bank borrowings and internal funds.

Yau said it hoped to launch the Sri Lanka project, which is expected to generate 20% profit margin, by the second quarter of 2011.

He said the development entailed a 34-storey building comprising 70 commercial and 180 residential units on prime freehold land and mixed-use zone.

It will be completed in 2014 and enjoy five years tax holiday then onwards.

“The project, sitting on a 0.461ha, is located a mere 5km from the Central Business District of Colombo. It has the potential to generate total saleable area of at least 380,000 sq ft,” he said.

Yau said residential properties in the Sri Lanka project would be priced from US$200 per sq ft while commercial units from US$350 per sq ft.

With the latest foray, Sunway’s land bank amounts to 174ha, with a potential gross development value of RM2.6bil over the next three years.

By Bernama

Sunway plans RM250m Sri Lanka project

Sunway Holdings Bhd will launch its RM250 million flagship commercial and residential project in Colombo, Sri Lanka, by the second quarter of next year.

It will be the company's sixth overseas project. Sunway has four ongoing projects in Singapore and one in China.

Sunway managing director Yau Kok Seng said it expects to get the approvals for the development, comprising a 34-storey tower with 70 commercial units and 180 high-end residences, in four months.

Construction will start immediately and the project is targeted to be completed by mid-2014, he told reporters after the signing of a joint-venture agreement with Sri Lanka's Dasa Group in Bandar Sunway, Selangor, yesterday.

Sunway is developing the project through wholly-owned unit, SunwayMas Sdn Bhd, in a 65:35 joint venture with Dasa Group, which is involved in real estate, tourism and fabrics.

SunwayMas will undertake the development on 0.5ha of freehold land owned by Dasa Group.

Yau said that Sunway was targeting more than 20 per cent net profit for the project.

On the home front, Sunway's profit margin ranges from 15 to 30 per cent, while that from its projects in Singapore is 12 per cent on average.

Yau said the residences in its Colombo project will be sold at more than US$200 (RM620) per sq ft, while the commercial units will be priced from US$350 (RM1,085) per sq ft.

"We are targeting locals and foreigners. We hope to sell up to 80 per cent of the project within the first year of its launch," he said.

Yau added that Sunway will look at further collaboration with Dasa Group as well as other developers in Sri Lanka as it embarks on being a long-term player.

The Sri Lankan government is giving incentives, such as a five-year tax holiday, use of duty-free imported and locally sourced building materials, and repatriation of funds invested, to woo foreign developers.

Yau said the project will also act as a springboard for Sunway's other businesses, including civil engineering and construction, building materials, trading and manufacturing, and quarrying.

"There are a lot of projects to build ports, bridges, roads and highways, and airport expansion in Sri Lanka. We are testing the market now through this project and will slowly tap other areas," he said.

By Business Times

Making Greater KL the nation’s heartbeat

Datuk Seri Idris Jala is not an urban planner – he is the master urban planner. As he presented his ideas on moving the country into high-income territory, he has fixed his focus on the city.

His rationale: Greater Kuala Lumpur (KL) will be the largest contributor at the gross national income level, both today and in 2020. A decade from today, Greater KL will contribute more than seven times over the next target urban centre of Johor Baru and 2.5 times over the largest industry sector, namely oil, gas and energy.

His aspiration – to improve the city’s livability. His tool – urbanisation. His rationale – the city will provide the engine of growth for the entire country. That means, the next 10 years will be crucial. A decade is a short time, actually, to do all that he has laid down.

Jala’s emphasis on livability is based on improving the public transport system, stability, healthcare, edcuation, infrastructure, culture and environment. The Economist had earlier ranked KL 79 out of 130 cities in terms of livability.

Property analyst and map maker Ho Chin Soon says: “Cities generally generate a huge portion of a country’s wealth. Paris produces 30% of France’s wealth, Tokyo 20% to 25% of Japan’s, and the Klang Valley 30%. How it is to be done is another question.”

Jala’s plan is for Greater KL to have a population of 10 million, compared with the current 6.4 million.

He has written about the growth of Petaling Jaya, Subang Jaya and others parts of KL.

Ho says there are two sensitive areas at stake here. There will be more as the journey for transformation goes along. The first involves public transport.

“Although we have some form of public transport before and the money to make it a reality, we did not proceed to ensure the survival of our car industry. That is why our public transport ridership is a mere 10% compared with Hong Kong’s 90%, and Singapore’s 80% to 85%.”

Ho says the Mass Rail Transit (MRT) system is more than just connectivity. Studies done have shown that if there is an MRT under an apartment block or mall, their rental improves by a quarter or a fifth, at least.

An integrated transport system with the MRT as its main spine will help to raise property prices and connects the pockets of new development that the Government has announced in the last few months with the existing established areas, Ho adds. These includes the redevelopment of the 380-acre Kampung Baru, the 80-acre Islamic financial hub at the Dataran Perdana in the Imbi area, the mixed development on 460 acres at the Sg Besi old airport, the Matrade piece of land in Jalan Duta, and the redevelopment of the 22-acre former Pudu Prison site among others.

The objective is to more than double the commercial content of KL.

“This will take some time for the market to absorb,” he cautions.

The other sensitive area is the redevelopment of Kampung Baru and other Malay reserve land. In order to do that, Ho says there must be changes to the laws governing Malay land rights.

“There must be a repeal of all Malay Reservation Land Enactments. All federal and state land must be sold via public auction so that the various states and the Federal Government can realise the true value of its land,” he said. Currently, the land belongs to the state.

Livability and aesthetics

The cleaning up of the river, the greening and beautification of KL and the call for new developments to have 30% of open space are part of the attempts to improve the city’s livability.

The revitalisation of the Klang River through its beautification and redevelopment of its banks also involves the cleaning up of the river to reduce polution. A joint development council will be fundamental in driving the development of the river. Other elements include the renewal of old areas within Greater KL.

Already, an UDA Holdings Bhd source says the government agency has put in a few proposals for the redevelopment of some old shop houses in some areas and to work with local authorities in their renewal programmes.

“From now onwards, developments will not viewed from an agency perspective, but from the country’s perspective and how it adds to the Greater KL plan and the city’s livability,” it says. The private sector has also proposed to work with UDA on some projects, all of which will help to enlarge UDA’s land bank, it added.

“Our projects will be market driven,” the source says, adding that UDA will be playing a big role in this transformation, both in terms of property development and public transport.

“We will be returning to our original objective of building cities.”

The agency has put in a request to be considered as one of the operators for Bandar Tasik Selatan transport hub. It currently manages and operates Puduraya Terminal, which is currently undergoing a RM52mil renovation.

In the area of property development, its most immediate project is the redevelopment of the 22-acre former Pudu Prison site. Located between Permodalan Nasional Bhd’s 100-storey project near Merdeka Stadium and Dataran Perdana’s Islamic financial centre in Jalan Sultan Ismail behind Berjaya Times Square, the former Pudu Prison site will form the axis, or centre of development, in that vicinity.

Another UDA project is the office and service apartment project on four acres next to Sheraton Imperial Hotel in Jalan Sultan Ismail. This area, where most of the hotels are located, and Jalan Bukit Bintang, where the malls are situated, will be given emphasis because they will generate tourist dollars.

There will be a need for more interaction between UDA and the local authorities, says the source.

To give cohesion to KL’s transformation, Greater KL will comprise 10 local authorities consisting of City Hall and the town councils of Kajang, Selayang, Ampang Jaya, Subang Jaya, Shah Alam, Klang, Petaling Jaya, Putrajaya and Sepang. Today, these operate within their designated zones.

By The Star

Holistic view needed for Greater KL plan

Developers and valuers hope the Government’s Greater Kuala Lumpur (GKL) plan will not only be a catalyst to spawn a thriving capital city, but also have all the right attributes to become one of the most livable metropolis by 2020.

The GKL plan is one of the 12 National Key Economic Areas identified under the Economic Transformation Programme, which is a road map to turn Malaysia into a high income economy with a per capita gross national income of US$15,000 by 2020.

The 279,327ha GKL will cover districts under 10 municipalities namely Kuala Lumpur, Putrajaya, Selayang, Ampang Jaya, Petaling Jaya, Subang Jaya, Shah Alam, Klang, Kajang and Sepang.

Real Estate and Housing Developers Association president Datuk Michael Yam says it is imperative that the Government take a more holistic view to the overall future planning of Kuala Lumpur and its surrounding areas, with the objective of benchmarking GKL against other world class cities.

“The catalysts required to turn GKL into a reality include better physical planning of Kuala Lumpur and its surroundings; transportation and traffic dispersal; social and cultural planning; crime prevention and respect for the rule of law; high standards of education and health facilities; environmental care; improvement of infrastructure and services; efficient government delivery system; and a conducive business and market friendly environment,” he tells StarBizWeek.

Yam says transportation connectivity, green lungs (where appropriate) and a whole hosts of user friendly amenities must be built into the development masterplan.

“Life cycle costing and economical and environmental sustainability should be factored into the planning of communities. Incentives should be given to developments that achieve the quadruple bottom line objectives covering profit, society, environment and sustainability,” he says.

Yam points out that a major challenge for the GKL plan is that the footprint covers an extensive area including neighbouring Selangor.

This inclusion is necessary and critical to the success of the extensive transportation network, supply of utilities, cleaning of rivers, waste management and connectivity.

“One of the keys to the efficient and effective delivery of the GKL plan, especially when the components of the area are controlled by governments from different parties, is the need for a governing body or organisation that can be mandated to make all decisions pertaining to the realisation of the plan.

“This body would be empowered by the governments to make decisions without fear or favour, and members of this body should be people with a macro view and the requisite expertise and experience to set policies and drive the project. It should have the courage to engage competent professionals to help plan, conduct market studies, analyse the financial viability and encourage best practice in executing the tasks,” he says.

He says: “Design and layout of infrastructure should be inclusive and forward looking, being friendly to mothers and the elderly as we progress towards an aging population in 20 years time. Such universally friendly features and amenities should be incorporated into best practice principles.”

Yam foresees that more residential properties, including higher quality residences, will be needed for the growing population and inflow of new talents. New commercial and retail properties will also be needed to meet the higher demand.

To avoid market mismatch, he says it is important to implement development initiatives in market-driven phases based on real demand.

P.K. Poh, a retired property veteran from Dijaya Corp Bhd and currently an advisor to a public-listed group, says urbanisation and high income alone do not make a city great if it is not livable.

“The GKL plan should have all the amenities expected of a great city, such as an efficient transportation system, reliable broadband connectivity, a clean, green and safe environment, comprehensive civic facilities (libraries and museums), a lively cultural and performing arts scene and a high level of service culture from those in the service industry. World-travellers will find these features very evident in the top 20 world-class cities around the world,” Poh adds.

He believes that for GKL to achieve the rank of a world-class city, the most important factor will be to create an efficient and reliable transportation system with seamless interconnectivity between different transportation modes to all corners of the city.

“I also think that the needs of pedestrians and cyclists in the city have been sidelined, in that there are not enough sidewalks (that are wide and level enough) and the total absence of dedicated bicycle tracks in the city.

“According to a recent article that I read, the top three world-class cities in the world – Munich, Copenhagen and Zurich – all have great connectivity, cultural and civic amenities and green spaces. This makes for a happier, healthier living for its residents, which is so important in today’s pressure-cooker environment.”

Poh says while the planning is already in place, “the time of reckoning is during the implementation stage.”

“It’s a long journey from now till 2020. Like all ambitious programmes, it will need to be reviewed from time to time, say, every three to five years, and tweaked. To do this, there needs to be a methodology set up to measure the progress in a clear, transparent and easily-understood manner,” he says.

According to CB Richard Ellis Sdn Bhd executive director Paul Khong, as planning details of the land have not been formalised, it is still premature to gauge how the final GKL plan will affect the value of the land.

“It is only in the planning stages and the plans are not formalised yet. At the end of the day, it is subject to the final planning approval for the respective projects. It is also important to ensure new projects are planned properly to ensure there will not be an over supply situation,” Khong says.

Mah Sing Group Bhd group managing director cum chief executive Tan Sri Leong Hoy Kum says the comprehensive transportation proposal is particularly exciting as this will boost demand for properties.

“The plan includes the mass rapid transit and high-speed rail link between Kuala Lumpur and Singapore with a possible extension to Penang. This will be a major boost for the property sector if they materialise,” he says.

By The Star

Construction, property sectors will benefit

Despite the fact that the proposed Economic Transformation Programme (ETP) is not a pronouncement of the Government dishing out contracts it would pay for, analysts have highlighted the construction and property sectors as key beneficiaries.

Recall that the ETP requires the private sector to come up with most of the funding for the projects. However, it is still unclear if the Government will provide any kind of guarantee to the companies that are awarded the contracts.

In any event, the stocks that have benefited the most from the ETP seems to be Gamuda Bhd and MMC Corp Bhd, the two companies that had earlier submitted an ambitious plan to build a Mass Rapid Transit (MRT) project in the capital city.

That’s because, as HwangDBS Vickers report puts it, the MRT “has received a high level of commitment, increasing the project’s approval.” The research house adds that the RM36bil MRT project can double the order book of Gamuda and triple that of MMC’s. It also says the construction sector as a whole will benefit from the MRT project, given its sheer size.

Meanwhile, CIMB Research points out: “The MRT project is massive and represents the single largest contract in Malaysian history, beating the previous largest project, the RM12.5bil northern double-tracking, which is also being built by Gamuda-MMC.”

CIMB notes that Gamuda has the expertise in tunnelling and that the tunnelling portion of the MRT project is worth RM13bil to RM14bil.

The research house also says that should the MRT project take off, “there will be plenty of work to go around and other major players such as Malaysian Resources Corp Bhd (MRCB), IJM Land Bhd and WCT Bhd should also be able to ride on it.”

OSK Research points out that of the 12 national key economic activities, the one on Greater KL had attracted the most interest as it had a scale model of KL and all the new proposed property developments, as well as more tangible projects such as the KL MRT and the river of life project, “with high-level financial figures available.” OSK adds that these projects are the most likely to kick off first.

The property sector has also been highlighted as another big winner.

This is on the basis that if the MRT project is carried out, it may lift the value of properties in central KL by improving underground connectivity and enhancing the shopping experience, analysts say.

Furthermore, the Greater KL plans for 10 million people living in the city by 2020 from 6 million currently. Of the additional residents, it is estimated that around 500,000 are expected to be expatriates or Malaysians returning from abroad.

“All in, it is estimated that a million homes will have to be constructed to meet the requirements of an enlarged population base,” notes CIMB.

HwangDBS Vickers points out that the Greater KL initiative should benefit owners of large land bank in KL that include Bolton Bhd, SP Setia Bhd and DNP Holdings Bhd.

The plan also includes the redevelopment of the RMAF base at Sungai Besi, Dataran Perdana, the Matrade development at Hartamas, the old Pudu Jail site and the redevelopment of Kampung Baru.

CIMB also singles out the High-Speed Rail project from KL to Singapore and Penang, which has been identified in the ETP as one of the projects that has partial or near commitment from a named investor.

The research house also highlights that the ETP mentioned Johor Baru as being listed as a geographic location that is a driver of economic activity.

“If the High-Speed Rail project materialises, it could boost property prices in Kuala Lumpur significantly, as values are far behind Singapore’s and travelling time between the two cities could be reduced to 2.4 hours. The rail project will also benefit property prices in Iskandar Malaysia as the proposed train will stop in Johor Baru before proceeding to Singapore.

“What is surprising from the map of the proposed project is that phase two extends to Penang island, which is good news for the Penang property market too,” CIMB says in a report.

It adds that while many developers have land in Johor, the biggest beneficiary will be UEM Land, due to its vast and strategic landbank in Iskandar.

“Arguably, UEM Land’s 10,000-acre land bank in Nusajaya is at the heart of Iskandar and the proposed MRT from Singapore will also pass through its project.”

CIMB says other developers with a sizeable land bank in Johor include SP Setia, Mah Sing Bhd, UM Land Bhd, KSL Holdings Bhd, Bandar Raya Developments Bhd, Mulpha International Bhd, IJM Land, Tebrau Teguh Bhd, Plenitude Bhd and Daiman Development Bhd.

As for developers with exposure to high-end project in KL that may garner interest from Singaporean buyers, they include Eastern & Oriental Bhd, Sunrise Bhd, UM Land, Bandar Raya, Mah Sing and Glomac Bhd, CIMB says.

Genting Bhd and Genting Malaysia Bhd can also gain if Singaporeans choose to take the high-speed train ride here to a casino that they needn’t pay fees to enter, unlike the two integrated resorts in Singapore, analysts say.

Building materials companies such as Ann Joo Resources Bhd and Malaysia Steel Works Bhd, and Southern Steel Bhd as well as the big cement players such as YTL Cement Bhd, Tasek Corp Bhd and Lafarge Malayan Cement Bhd may also gain.

A head of research at a broking house adds that other beneficiaries may include education stocks for private schools such as Help International Corp Bhd, PIE Industrial Bhd for the focus on the electronics and electrical sector, MyEG Services Bhd for the broadband and electronic government push and ETI Tech Corp Bhd for the focus on renewable energy.

By The Star

Loan-to-value cut will deter speculative buying

PETALING JAYA: The potential reduction in the loan-to-value ratio for the third and subsequent house purchases to as low as 70% will bite into property speculation activities as well as banks’ loans growth and earnings to a certain extent, analysts said.

A property analyst said a loan-to-value ratio of 70% would wipe out some speculative buying in the property market.

“It will be significant, especially for the high-end and high-rise residential property segment, as this segment typically attracts more speculators.

“Banks which traditionally have exposure to such loans will be affected if this ruling takes place,” she told StarBizWeek.

To recap, there is speculation that the loan-to-value ratio for the third and subsequent house purchases could be further reduced to as low as 70% from the assumed rate of 80%.

This followed Prime Minister Datuk Seri Najib Tun Razak’s comments on Tuesday that Bank Negara might impose a limit on financing to 80% from 90% for subsequent purchases after the second property while first-time buyers can borrow up to 90%.

The move is aimed at curbing speculative property transactions in a bid to contain escalating property prices.

An analyst with a local stockbroking firm foresees slower loans growth for residential mortgages if the loan-to-value ratio of 70% is implemented.

“This could result in more competition among banks, with some resorting to giving more discounts on base lending rates thus affecting net interest income and earnings.

“Assuming a 1% drop in residential mortgage growth, banks may suffer a less than 1% drop in net profit,” she said.

Nevertheless, she said the impact might not be very significant as the number of property speculators buying third and subsequent houses in the market was small compared with genuine buyers.

“Most banks actually have mortgages to genuine buyers in their books rather than to speculators,” she added.

The analyst said hypothetically, banks with the biggest exposure to the residential property sector would be the most affected by a lower loan-to-value ratio.

According to statistics, Alliance Financial Group Bhd has the highest exposure to the residential mortgage segment, representing 39.4% of its loan book. This is followed by Hong Leong Bank Bhd with 38.7% and Public Bank Bhd 27.9%.

The analyst, however, stressed that the quantum of effect would depend on how much of the residential loans was given out to speculators as opposed to genuine house buyers.

“Then again, most banks tend to be pretty prudent and may already have a stringent credit policy in place when it comes to lending to borrowers who are not buying residential property for their own stay.

“If this is the case, then the loan-to-ratio of 70% would not have an impact on them,” she said.

By The Star

Low interest rate, easy credit give rise to speculation

Earlier this year, a relative of mine managed to sell his Bukit Sentosa house after four years. Its closest town is Rawang.

He decided to relocate back to Petaling Jaya. But property prices have gone up so much that he now has to rent. In his late 40s, he hopes he does not have to go on renting.

But even if he were to get a suitable place, there may be problems with financing because of his age.

This relative belongs to a group of people who will be retiring soon but who do not yet have a roof over their heads. He is what developers and bank officers would call “a genuine house buyer.”

With property prices going up since the second half of last year, what are his chances of having his own home? Dicey.

Therein lies the problem in today’s property market. On one hand, there is the low interest rate. On the other is easy credit. Yet both are not helping him.

On the flip side, it is encouraging many to speculate. These two factors – low interest rates and easy financing – are supported by various schemes that are being promoted by developers.

Among the most popular is the 5/95 scheme, or variations of it, which started early last year. A buyer merely pays 5% of the price of the house and does not have to pay anything until he takes the keys. All interest payments are “absorbed” by the developer (Psst! The interest is priced into the value of the house).

Some schemes do not require mortgage payments until the sixth year of purchase. One developer requires a downpayment of only RM5,000 and no more because it also offers a 10% rebate, which buyers can “use” on signing the sale and purchase agreement.

No payment is required until completion of the property and this RM5,000 is used to pay for utility deposits and maintenance deposit. Whatever is left is “refunded” to the buyer. Such schemes encourage speculation.

While Singapore has banned them, developers here are still rushing to launch their projects using this form of financing. Early this week, there were talks of increasing down payments to 20% or even 30%.

While this will not weed out speculation completely, it will serve as a deterrent. Such a move will also help the banking sector indirectly.

Out of every loan approved by banks today, one-in-three to one-in-two is a property-related loan. This compares with one-in-five prior to the 1997/98 Asian financial crisis.

With such a huge exposure to the property sector, in the event prices become unsustainable, the banking system will be adversely affected.

At the beginning of the 21st century, US banks gave loans to home buyers who would normally not have been given credit.

These borrowers were allowed to buy houses by paying slightly more than normal rates, often with floating interest rates that rise and fall with the general market. The relaxing of credit standards led to ever-increasing house prices.

Many bought homes they could not afford, but assumed that the rising property market would help to cover their loan commitments, which would allow them to refinance later on, once the value of the house climbs up.

When the bubble burst, house prices fell and so did the banks. This became what is currently known as the US subprime mortgage crisis.

With today’s easy credit and these 5/95 and 10/90 schemes, something similar seems to be happening here in Malaysia.

There is also the absence of housing between the RM250,000 and RM300,000 price range. Even a studio apartment of about 650 sq ft can cost about half a million ringgit.

Developers justify their penchant for building high-end launches with the rising cost of building materials and the desire for lifestyle living. Not every one is seeking after that dream home. Certainly not that relative of mine.

Assistant news editor Thean Lee Cheng thinks it’s time to nip speculation in the bud.

By The Star

Karambunai denies plan to build resort casino

PETALING JAYA: The surge of Karambunai Corp Bhd (KCB) shares since speculation arose it might get a casino license as part of a proposed integrated resort (IR) at its existing resort in Sabah has created excitement in the market but the company yesterday poured cold water on any such move.

“KCB has not up to date submitted any official proposal to the Malaysian government, nor has it penned any written documents with any other third parties in respect of any plan to build a casino in Karambunai,’’ the company told Bursa Malaysia in a statement.

KCB said since it was a key player of tourism in Sabah, its general manger of the Nexus Karambunai Hotel was invited to be a member of Pemandu’s NKEA tourism lab.

“During the lab sessions, KCB’s representative has been discussing and disclosing drawings in Karambunai with members of the private and public sectors as to the manner in which Karambunai as a member of the private sector may assist in this direction,” it explained.

“Pemandu is free to use any drawings conducted in the lab sessions, but chooses drawings from Karambunai which has copyrights source & status. To KCB, these chosen drawings are merely meant as a plan. The recent public information simply mentions the existence of a IR in Kota Kinabalu Sabah and has not disclosed and named specifically KCB as a party.”

The market has been amazed by the 227% rise in the value of the loss-making company’s share price from 5.5 sen on Tuesday to its close at 18 sen yesterday given the probability of a fresh casino licence being issued in Malaysia.

According to a research house head, the idea of having a second casino in Malaysia would face a lot of opposition as it is politically unacceptable.

Analysts point to the fierce opposition to the proposal of sports betting in the country and the repeated political comments that Genting Malaysia Bhd would remain the sole recipient of a casino licence in Malaysia.

The casino idea was first raised when an online news portal reported that the panel discussing on the entry point presentation (EPP) made reference to successful casino-anchored IRs namely Singapore’s Marina Bay Sands and Resort World in Manila without mentioning the need for another casino here.

In the public EPP presentation, the proposed development of Karambunai’s resort in Sabah would feature a water theme park, a mangrove centre, iconic architecture and waterfront living.

KCB posted a net loss RM14.4mil in its first quarter ended June 30 compared with a net loss of RM14.6mil a year ago. Revenue for the period under review increased slightly to RM24mil from RM22.3mil in corresponding period last year.

By The Star

Friday, September 24, 2010

70% loan for third and subsequent houses?

PETALING JAYA: There is speculation that the loan-to-value ratio for the third and subsequent house purchases could be further reduced to as low as 70% from the assumed rate of 80%.

According to sources, talk of a loan-to-value ratio of 70% has surfaced but nothing has been decided yet and discussions are still ongoing.

To recap, Prime Minister Datuk Seri Najib Tun Razak had said on Tuesday that Bank Negara might impose a limit on financing for subsequent purchases after the second property while first-time buyers can borrow up to 90%.

It is reported that there were plans to lower the loan-to-value ratio for the third and subsequent house purchases to 80% from 90%.

The move is aimed at curbing speculative property transactions in a bid to contain escalating property prices.

"The (property) market will have to adjust itself and find a new level", SK BROTHERS REALTY SDN BHD GM CHAN AI CHENG

SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng said a reduction in the margin of financing to 70% would affect property sales for investments initially.

“There will be an impact on the property market. The more aggressive and gung-ho property investors may think twice about investing in properties if they have to cough up more money.

“For example, a buyer who will have to pay RM50,000 deposit for a half a million ringgit property will now have to come up with RM150,000,” she said.

That said, Chan admits that most investors would have surplus cash and not overgear themselves by taking a maximum loan when buying a property.

“As with any new ruling, the market will have to adjust itself and find a new level,” she said.

She suggested that the central bank should look at a lower loan-to-value ratio for properties that were more prone to speculation and not impose the rule across the board.

An analyst with Affin Investment Bank said the loan-to-value ratio curb may not be imposed on the entire property industry, hence it should not affect the demand and sales of properties except perhaps in selective locations/projects with a higher rental market.

“However, the guidelines do not appear specific at the moment.

“There are also ways a purchaser can play around them.

“We may not see a sharp pullback in terms of property sales and banks’ mortgage growth to be impacted badly,” she said.

The analyst said more stringent measures, such as regulating the discount on base lending rates (which is currently at 1.8% to 2.2% in the market), barring interest-only payments or the absorption of interest cost by developers during the construction period would have a more drastic impact on property sales and loans.

Other measures include increasing stamp duties or real property gains tax rather than imposing a cap on the loan-to-value ratio or even lowering the cap to 70%.

According to AmResearch’s sensitivity analysis, bank earnings are not so sensitive to changes in loan growth.

“We estimate that every 1 percentage point downgrade to our loan growth assumptions will lead to less than 1% downgrade in net earnings,” it said in a note yesterday. Thus, potential moves to reduce the loan-to-value of property related loans would not lead to any major downgrades to net earnings, AmResearch said.

A bank official who declined to be named said most of the bank’s mortgage borrowers were buying residential property for their own stay and the proportion of borrowers who were buying such property for speculative purposes were small.

“Hence I don’t see the loan-to-value curb significantly hurting our business. We also check the credit profile of our borrowers before deciding on the loan amount so if a customer’s credit rating is not so good we will reduce the loan amount accordingly,” he said.

According to Bank Negara statistics, outstanding loans growth for the banking sector grew 11.9% to RM841.74bil in July year-on-year.

Mortgages make up the largest portion with some 26.8% of the total loans outstanding as at end July.

The National House Buyers Association honourary secretary general Chang Kim Loong said a lower loan-to-value ratio for the third and subsequent house purchases was welcomed.

He said property speculators have caused property prices to escalate throughout the years.

“I would like to suggest that the loan-to-value ratio should be even lower, at say maybe 50%, so that those without upfront cash will not speculate on properties and deprive the genuine buyers from buying a decent house,” he said.

By The Star

Sunway unit in JV to develop Sri Lanka project for RM250mil

PETALING JAYA: Sunway Holdings Bhd, via its unit SunwayMas Sdn Bhd, is tying up with Sri Lanka-based Dasa Tourist Complex Pte Ltd to undertake a mixed development project there with an estimated gross development value of RM250mil.

Sunway told Bursa today that the project in Colombo will involve the construction of residential and commercial units.

The joint venture will see SunwayMas and Dasa Tourist having a 65% and 35% stake respectively.

Sunway said the mixed development will comprise of at least 318,000 sq ft of net saleable areas of residential units and 60,000 sq ft of net saleable areas of commercial units in Colombo city.

“Sunway is constantly on the lookout for new investments. The Group has been in India for more than 10 years and the opening of the Sri Lanka economy to foreign investment and expertise allows expansion of Sunway’s geographical footprint to Sri Lanka which has a higher foreign currency rating as compared to India.

“The proposed JV is not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of Sunway for the current financial year ending Dec 31, 2010 but is expected to contribute positively to the future earnings of Sunway Group,” it said.

By The Star

Sunway plans RM250m Sri Lanka project

The RM250 million flagship commercial and residential project in Colombo will be the company's sixth overseas project

Sunway Holdings Bhd will launch its RM250 million flagship commercial and residential project in Colombo, Sri Lanka, by the second quarter of next year.

It will be the company's sixth overseas project. Sunway has four ongoing projects in Singapore and one in China.

Sunway managing director Yau Kok Seng said it expects to get the approvals for the development, comprising a 34-storey tower with 70 commercial units and 180 high-end residences, in four months.

Construction will start immediately and the project is targeted to be completed by mid-2014, he told reporters after the signing of a joint-venture agreement with Sri Lanka's Dasa Group in Bandar Sunway, Selangor, yesterday.
Sunway is developing the project through wholly-owned unit, SunwayMas Sdn Bhd, in a 65:35 joint venture with Dasa Group, which is involved in real estate, tourism and fabrics.

SunwayMas will undertake the development on 0.5ha of freehold land owned by Dasa Group.

Yau said that Sunway was targeting more than 20 per cent net profit for the project.

On the home front, Sunway's profit margin ranges from 15 to 30 per cent, while that from its projects in Singapore is 12 per cent on average.

Yau said the residences in its Colombo project will be sold at more than US$200 (RM620) per sq ft, while the commercial units will be priced from US$350 (RM1,085) per sq ft.

"We are targeting locals and foreigners. We hope to sell up to 80 per cent of the project within the first year of its launch," he said.

Yau added that Sunway will look at further collaboration with Dasa Group as well as other developers in Sri Lanka as it embarks on being a long-term player.

The Sri Lankan government is giving incentives, such as a five-year tax holiday, use of duty-free imported and locally sourced building materials, and repatriation of funds invested, to woo foreign developers.

Yau said the project will also act as a springboard for Sunway's other businesses, including civil engineering and construction, building materials, trading and manufacturing, and quarrying.

"There are a lot of projects to build ports, bridges, roads and highways, and airport expansion in Sri Lanka. We are testing the market now through this project and will slowly tap other areas," he said.

By Business Times

SP Setia Q3 earnings up on ongoing projects

PETALING JAYA: SP Setia Bhd net profit increased 104% to RM87.3mil for the third quarter ended July 31 from RM42.7mil achieved in the same period last year.

The net profit includes gain from the disposal of its investment property, Tesco Hypermarket in Setia Alam.

SP Setia said told Bursa Malaysia its revenue rose 13.5% to RM414.9mil in the third quarter, compared with RM365.6mil in the same period last year.

For the first nine months, it posted a net profit of RM176.7mil from a revenue of RM1.2bil, representing an increase of 54% and 17% respectively over the previous year.

“The group’s profit and revenue were mainly derived from property development activities in the Klang Valley, Johor Bahru and Penang,” it said, adding that construction and wood-based manufacturing activities also contributed to earnings.

SP Setia registered sales of RM1.95bil as at August 31, therefore essentially achieving its full financial year sales target of RM2bil with two months to spare before the period ends on Oct 31.

“The 10-month sales value has exceeded by 18% the group’s highest ever sales value over one financial year of RM1.65bil recorded in FY09,” it said.

President and CEO Tan Sri Liew Kee Sin said the group’s proactive moves last year to capture market share in the luxury high-rise and integrated commercial sector, while further consolidating its lead in landed residential segment, had borne much fruit.

“Despite the financial turbulence at the time, we continue to invest substantially to improve both infrastructure and amenities in all our developments,” Liew said.

By The Star

SPB Q3 net profit plunges 77%

KUALA LUMPUR: Selangor Properties Bhd’s (SPB) net profit plunged 77% to RM7.5mil for the third quarter ended July 31 against RM33.3mil a year ago when it posted higher unrealised foreign exchange gain and better profit from property development.

The main contributors to net profit for the quarter under review were property development, investment properties and education, it said.

Revenue was almost 40% down to RM42.5mil from RM70.6mil while earnings per share tumbled to 2.19 sen against 9.69 sen previously.

By The Star

Thursday, September 23, 2010

Mixed reaction to possible increase in property downpayment

PETALING JAYA: The possible move to raise downpayment from 10% to 20% for the third and subsequent house purchases drew mixed reaction from housing professionals and a research house.

Datuk Michael Yam ... ‘The property market is still lukewarm.’

Real Estate and Housing Developers’ Association (Rehda) president Datuk Michael Yam said the capping of loans to 80% for the third and subsequent purchase would probably not discourage the wealthy from speculating because they could afford the 20% deposit.

“Investors would pull back on purchases after the third unit because of the higher deposit requirement. The impact of this is probably 10%-20% of the upmarket segment. Overall, the effect of the cap is minimal as the presence of speculators is small,” he said.

Prime Minister Datuk Seri Najib Tun Razak said on Tuesday that Bank Negara might impose a limit on financing for subsequent purchases after the second property while first time buyers can borrow up to 90%.

The property market has come under speculative pressure the past 12 months with double-digit rise in prices in some locations. Despite concerns that a bubble may be forming, Yam said “the property market is still lukewarm.” The number of launches by developers has also increased compared with last year, with developers offering 10/90 schemes or variants of it.

Yam, who is also managing director of property consultancy Impetus Partnership, said investors may purchase that third property, but nothing additional due to the deposit. “Those who buy for the next generation would buy it sooner if they see a capital upside as well.” Yam said the 20/80 move would have little impact on the secondary market.

“There are usually lower margins for secondary housing,” he said. He said the move needed to be further studied and evaluated in order not to dampen the activities of serious investors.

“At the moment, the property market is still lukewarm due to lower rental yields and capital appreciation compared to neighbouring countries. Placing such a restriction may take Malaysian property off the radar of foreign investors. As it is, the Government has already re-implemented real property gains tax (RPGT) and raised interest rates. Further restrictions may not bode well for Malaysian property.”

He said loan capping and other measures introduced in Singapore had not really slowed the property transactions in Singapore. This proved that it was ultimately market forces that decided what was best, he added.

Managing director of The Metro Kajang Group, Datuk Eddy Chen, said the move would have little effect on landed units. “It is fine to have a pool of properties for rental income. I don’t think there are many people who are buying to flip (to resell when the project is completed). There is always the 5% RPGT as a deterrent,” he said.

He said the 20/80 move would not affect landed units. The company launched 260 double-storey terrace and semi-detached houses last week in Semenyih, Selangor.

Mah Sing’s group managing director cum group chief executive Tan Sri Leong Hoy Kum said the proposal should not affect market sentiment.

“Property has long been viewed as a preferred vehicle to hedge against long-term inflationary pressure,” Leong said.

“The banks have in place stringent processes as well as check and balance in their loan approval process. These should be good enough to ensure the quality of loans in the market and market forces should be allowed to prevail.”

A source from a housing developer has a different view.He said that nine out of 10 buyers opt for the 10/90 scheme whether they were buying to stay or investing.

“If there is a 20% downpayment requirement for non-first time buyers, at least 30% of sales will be affected,” he said.

Should this move be implemented, he said Malaysia would be joining the ranks of Hong Kong and Singapore to curb property speculation.

Hong Kong requires buyers to have a downpayment of between 50% to 60%.

Singapore requires 70% to 80%.

Property consultancy Rahim & Co said government intervention was only warranted if there was overwhelming evidence of excessive speculative activity.

“Otherwise these actions may backfire and hinder recovery in one of the most important economic components. Interest rates have already been increased – it may be too early to slap more deterrents to investment at this fragile stage of the economy’s recovery,” a Rahim & Co statement said.

“It should be best left to the banks to decide on their own desired level of exposure, although it might be prudent for Bank Negara to direct the banks to cut back on their margin of lending to parties that are clearly speculators, no matter how good their credit.”

The statement said 10/90 was a happy medium.

Research house HwangDBS said the 20/80 move was “less onerous than expected as there was initial concern that the loan-to-value ratio at 80% cap may be imposed across the board.”

“Impact to the property sector should be insignificant as we believe there are not many buyers with more than two houses. Banks have been generally stringent on mortgage applicants with multiple properties and high monthly commitment, the report said.

“We are positive on the Malaysian property sector and expect demand to continue to be supported by positive macro factors like young population, urbanisation, shrinking household size, rising income, inflation hedging and infrastructure improvements,” HwangDBS said.

By The Star

More funds invest in offshore properties

PETALING JAYA: More Malaysian institutional funds, including Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF), are looking to raise their exposure in offshore property investments such as in Australia and the UK.

Last month PNB acquired its first property in Australia with the purchase of Santos Place in Brisbane for A$287mil (RM838.19mil). The 36-storey Premium A grade office tower with 34,338 sq m is said to be the largest six-star environmentally rated building in Australia.

Christopher Boyd ... ‘They are entering markets that offer higher income assets.’

Following on the heels of PNB’s foreign venture, the EPF had at the end of August announced that it would be investing £1bil (RM4.88bil) in European property markets, focusing on the UK.

The fund had said that the investments would be for the long term with expected annual yields of 6% to 7%.

Industry observers said another potential candidate for offshore property investment was Kumpulan Wang Persaraan (KWAP).

According to the fund in its recently upgraded portal, the objective of its property investment initiatives is to invest in strategic properties for steady income with growth potential on rents and capital values in order to achieve commendable returns that contribute well to KWAP’s overall goals.

“Prospective investments in property can be domestic or foreign based with a preference for locations in central business district and urban areas. Acquisition of the strategic assets can be via direct acquisition or partnership.

“The risk exposure of property investments should not exceed 30% of KWAP’s Strategic Asset Allocation. Moreover, the property portfolio itself shall be well diversified based on locations, types, sectors and sizes,” KWAP said in the website.

PNB’s acquisition of Santos Place is said to be the largest commercial property transaction in Queensland since the global financial crisis. It was brokered by CB Richard Ellis and Jones Lang La Salle.

According to CB Richard Ellis Malaysia executive chairman Christopher Boyd, who was one of the agents for the PNB deal, Malaysian funds are venturing offshore to diversify their risks and to go to markets where returns and capital values are higher.

“They are entering markets that offer higher income assets as they have a commitment to pay out dividend yields of 5% to 7% per annum,” he told StarBiz.

Santos Place is fully tenanted and more than 40% of the office space is leased to Australian oil and gas exploration and production group, Santos Ltd. Petronas is also one of the tenants.

“The vendor, Nielson Properties, has given a guarantee of an annual yield of just under 8% for the building. The yield is quite attractive considering that Malaysian properties are offering yields of only 6% to 6.5% a year,” Boyd said.

He added that the performance of office buildings in general “is a proxy for the country’s economy and how it fares is as good as the tenants that occupy them.”

“This is a good time for the funds to snap up good quality property for long-term investment. Investing in offshore property market is a cyclical play and it is important to get the timing right when the market is on the verge of an upturn,” Boyd added.

Most of the traditional buyers of investment property in Australia are institutional funds such as mutual and pension funds and REITs, but they are quite cash strapped now and are not active in the market.

He said the domestic buyers were expected to only start getting back to the market within the next 12 months and the valuation of the property assets was still quite attractive.

“Given that there is still room for capital appreciation for good quality investment property Down Under, it is a good time to leverage on the market. The quality of the tenants there is also highly rated and they usually sign up for long-term tenures of 10 to 15 years. The rental rates will be reviewed every three to five years,” he added.

Besides office buildings, investors Down Under are also keen on good retail centres as well as industrial and logistics buildings.

CB Richard Ellis executive director Paul Khong said there were also strong interests from Malaysian developers in Australian development projects especially in Sydney and Melbourne.

“They are looking at redevelopment of commercial and residential sites and also joint venture opportunities. Some have already set up shop there.”

Khong said Malaysians generally ranked very high on the investment list for Australia and UK properties as a majority of individual investors would have one of their children studying there or would be going abroad to pursue their studies soon.

“This is a natural push for our local investments to head this way. The investors will be looking at yields of 6% to 8.5% (initial yield) depending on property type, size of investment, location and country. Many projects have seen good or even double-digit capital appreciation over the last five years,” Khong added.

By The Star