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Thursday, June 3, 2010

Developers: Foreign labour cut could lead to delays and higher property prices

KUALA LUMPUR: Developers are concerned that the Government’s move to reduce the number of foreign workers in the country will result in project delays, leading to possible price increases in property.

Almost 100% of construction workers in the country are foreigners, according to International Real Estate Federation (FIABCI) Malaysia president Datuk Richard Fong.

Datuk Richard Fong ... ‘We will have the same problem again.’

“We have already seen the effect of tightening labour market five years ago when workers were sent home on an amnesty programme. We will have the same problem again,” he said at a press conference here after a talk by FIABCI World president (2010/2011) Enrico Campagnoli entitled Fiabci in front of Financial Crisis.

He said this resulted in delays in completion of projects which allowed buyers to claim penalties from developers for late delivery.

“When the workers finally returned, we had to retrain them because they were unskilled. So, it is a cycle which keeps repeating itself. The workers return but the issue that cropped up was quality, which in turn led to high rates of defects in the properties,” Fong, who is also Glomac Bhd group executive vice-chairman, said.

FIABCI World President Datuk Alan Tong said “with reference to reducing foreign workers, before the authorities come up with new rules, it would be prudent for more dialogue between the Government and the private sector to facilitate a better understanding of the sector, which today, depends almost 100% on foreign labour.”

“If the authorities want to reduce the number of foreign workers in the country, they must first think of the alternatives. Notwithstanding that, we laud the Government’s proposed plan to wean the country off subsidies,” added Tong, who is also Bukit Kiara Properties (BKP) group chairman.

Tong’s views are shared by See Hoy Chan Holdings group director Datuk Teo Chiang Kok, the developer for Bandar Utama township. Teo, who is also the first vice-chairman of the FIABCI Asia-Pacific Secretariat, said there must be safety nets for the lower income groups with the removal of subsidies.

“Do not look at subsidies as purely a setback suffered by consumers because flour and sugar prices are going to go up. The removal of subsidies also involves water, electricity and petrol which will impact the housing sector in no small way. We have to look at the bigger picture,” Teo said. Earlier, Campagnoli said the debt situation in the euro zone would affect the property sector in different ways because the countries have different economic strengths.

By The Star

Sunway REIT set for July 8 listing

Malaysia's largest real estate investment trust, Sunway REIT, will finally be listed on July 8 2010, some five-and-a-half years after the plan was first announced.

With properties valued at RM2.6 billion to be injected into it, Sunway REIT has secured four cornerstone investors who will together buy 14 per cent of the 2.78 billion units to be listed.

They include Singapore's investment firm GIC, the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB) and Great Eastern Life Assurance (Malaysia) Bhd.

Cornerstone investors usually participate in large initial public offerings (IPOs) and unlike institutional investors, they have a confirmed allocation.

Cornerstone investors are said to be more common in Hong Kong and Singapore. It is understood that cornerstone investors emerged during the Maxis Bhd IPO.
"Cornerstone investors have become a trend. I don't think Sunway REIT needs the cornerstone investors but it adds good gloss over the whole transaction," a banker said.

"Sunway REIT have these cornerstone investors to kick off the momentum that the big blue-chip investors are keen in this REIT and this also adds credibility to the REIT," he said.

The four cornerstone investors will buy a total of 376 million units. They will pay the lower of the institutional price and 98 sen.

In total, there will be some 1.65 billion units for public subscription, of which 134 million are for retail investors and 1.52 billion for institutional investors.

Based on the indicative retail price of 97 sen, the total market capitalisation of Sunway REIT upon listing is estimated at RM2.6 billion.

Properties that will form part of the REIT include the Sunway Pyramid Shopping Mall, SunCity Ipoh Hypermarket, Sunway Resort Hotel & Spa, Pyramid Tower Hotel and Sunway Hotel Seberang Jaya.

Its office properties will include Menara Sunway and Sunway Tower.

By Business Times

EPF, PNB among Sunway REIT cornerstone investors

KUALA LUMPUR: Malaysian property developer Sunway City Bhd has secured four cornerstone investors who will buy 14% of the roughly US$500mil (RM1.65bil) initial public offering of its real estate investment trust (REIT).

The cornerstone investors are the Employees Provident Fund, state investment company Permodalan Nasional Bhd, the Government of Singapore Investment Corp Pte Ltd and insurer Great Eastern Life Assurance (M) Bhd, the company said in its draft prospectus.

The cornerstone investors will take up 376 million units at a price which is the lower of the institutional price and 98 sen each. The Sunway REIT, with a fund size of 2.78 billion units, is set to become Malaysia’s largest REIT when it is listed in the third quarter of this year.

It will feature some 1.65 billion units for public subscription, of which 1.5 billion are for institutional and selected investors, the company said in May.

The issue price of the Sunway REIT will be determined after a book-building process which is expected to close on June 24, according to the prospectus.

RHB Investment Bank and Credit Suisse are the joint global coordinators. The banks, along with Maybank Investment Bank, HSBC, JP Morgan and CIMB, are joint bookrunners.

Sunway City said last month it would receive RM2.7bil in cash and about 1 billion units in the REIT for the eight properties it will inject into Sunway REIT.

The properties, which comprise of shopping malls, office towers and hotels, have a combined market value of about RM3.7bil. The listing is targetted for July 8.

By Reuters