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Saturday, November 27, 2010

Property buyers can benefit from M&As

Property buyers can hopefully look forward to wider choices, more innovative and quality property products to choose from if the spate of mergers and acquisitions (M&As) involving property companies translate into integration of skills, resources and innovation among industry players.

With more Malaysians turning to property investment these days, it will be welcomed by property buyers if these M&As promote the coming together and fusion of talents and capabilities among industry peers to bring to the market more well-planned and quality projects.

I believe one of the main factors for the sudden urge for developers to want to become part of a bigger entity is the fact that the Federal Government is opening up a number of its prized land bank around Kuala Lumpur and the Klang Valley for redevelopment.

Among the government-owned prime land in Kuala Lumpur and other parts of the Klang Valley are the 50 acres at Jalan Cochrane; 20-30 acres in Ampang Hilir (near KL city centre); and the 3,300 acres of Rubber Research Institute land in Sungai Buloh. Others comprise smaller parcels in Jalan Stonor, Brickfields, and Bukit Ledang (off Jalan Duta).

Notwithstanding the intense competition for the rights to develop these government-owned land, it is important to ensure optimum benefits for the people and country by upholding the utmost transparency through open tenders in the award of the land for development.

For both the public and industry players, the redevelopment of these land offers a huge opportunity to turn around and inject more vibrancy into the city's property landscape. Most importantly, all the attributes should be in place for Kuala Lumpur to be accepted into the list as one of the most livable metropolis in the world.

Kuala Lumpur and the Greater Klang Valley can certainly do with an efficient and well integrated public transportation system; a clean, green and safe environment; and a lively cultural and performing arts scene which are among the missing links in the city today.

The project planning should not be motivated just by profits, but should be demand-driven, and add value to the living, working and leisure environment.

It is imperative that a thorough and in-depth market study be conducted when drawing up the master plan for the redevelopment programme. In the planning and execution of these projects, input from the public, community groups and industry players should be sought and be given due consideration.

There is certainly a shortage of affordable landed housing (priced between RM200,000 and RM300,000) in the Klang Valley today and ensuring more such projects in the new development plans will be a timely gesture to ease the burden of the common folks.

If the implementation of the enlarged Kuala Lumpur master plan is done with best practices and attention to details, the people will be able to enjoy a more holistic and vibrant city. It will also be a boon to property values given the higher value perception bestowed on a Kuala Lumpur address.

With such massive development opportunities opening up, it is no wonder there is this sudden expansion frenzy among industry players.

Since UEM Land Holdings Bhd stated its intention to take over Sunrise Bhd earlier this month, two other mergers involving MRCB and IJM Land, and Sunway Holdings Bhd and Sunway City Bhd have been announced.

The first two mergers involve government-linked entities with private developers while the third involve two sister companies in the Sunway stable. It marks the creation of Malaysian property giants that have the heft and ambition to go regional, if not global.

The merger will boost their land bank, product offerings and expertise to enhance their market position.

With the growing competition, industry players see the need to strengthen their market capitalisation, land bank, geographical presence and expertise.

The marriages of these companies will allow the involved partners to leverage on each other's strengths and ensure better utilisation of resources. They will also create a bigger vehicle with a stronger balance sheet and market capitalisation to undertake bigger projects.

With their enlarged capacities and capabilities, there are better chances of winning bids for larger projects. Of course, all eyes are on the redevelopment of the massive Rubber Research Institute land in Sungai Buloh.

Besides flexing their muscles locally, developers are also seeing the need to venture offshore as the home market, while still robust, has a limit to its growth potential.

Globalisation is taking on a new vigour and there are opportunities for local developers to spread their wings to become international players.

Having a good brand and stronger financial backing and expertise are some of the prerequisites to carve a niche in the international market place.

While there are merits to being big, let's not forget that many conglomerates have failed after they grew too big and clumsy. Most of the time, these gigantic organisations lost track of their business forte and started to diversify into too many non-related activities. So it is important for them to keep level headed and not become arrogant and lose their footing in the process.

Despite the frenzy to go BIG, there is certainly room for the smaller and medium-sized developers which are appreciated for their quality projects, timely delivery and good after-sales service.

Deputy news editor Angie Ng believes industry players who uphold the basic tenet of appreciating and engaging with their customers will survive the good and bad times.

By The Star (by Angie Ng)

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