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Saturday, July 2, 2011

Taking a cue from CapitaLand

Johor Baru city skyline and the city which is located within Iskandar Malaysia economic growth corriodr will benefit from the influx of local and foreign investments.

EARLY last year, UEM Land Holdings Bhd CEO and MD Datuk Wan Abdullah Wan Ibrahim brought up the high aspirations he has for the company and Iskandar Malaysia. He told StarBizWeek that he aspires to make UEM Land Holdings Bhd a global property development outfit the likes of Singapore's CapitaLand.

UEM Land Holdings Bhd managing director/CEO Datuk Wan Abdullah Wan Ibrahim

“We hope to one day play a similar role in Khazanah be what CapitaLand is to Temasek. We recognise that we are a relatively small player compared to the highly diversified property player like CapitaLand,” Wan Ibrahim said when talking about the plans he has for southern Johor economic region.

The time for Wan Ibrahim to make that aspiration a reality has come.

Early this week, Khazanah Nasional Bhd issued a joint statement with Singapore's Temasek Holdings Pte Ltd to develop RM30bil worth of real-estate projects in Singapore and Iskandar Malaysia, which is located in the southern part of Johor. It will be the largest property joint venture between the investment arms of the two governments to date. The implications are many and far reaching.

Iskandar Malaysia is Khazanah's largest property investment, while UEM Land is its property flag bearer. UEM Land is the master developer of 9,713ha Nusajaya township. Singapore-based CapitaLand Ltd, on the other hand, is South-East Asia's largest property company in terms of market capitalisation, with sprawling assets and interest throughout the region. It is one of Temasek's portfolio company in the real estate sector. The other portfolio company in the same sector is Mapletree Investments Pte Ltd.

“Iskandar Malaysia, by itself, is essentially Johor Baru, three ports and a domestic airport. Iskandar Malaysia plus Singapore is a different equation altogether. We are then have the additional Jurong and Port of Singapore Authority and Changi International Airport, which connects to over 200 destinations worldwide, with 5,000 arrivals and departures a week by 80 international airlines. In terms of banking and services, it is second to none in the South-East Asia region,” Wan Ibrahim says.

All that connectivity and infrastructure will be there for the state of Johor to leverage on, with sovereign backing from both sides.

UEM Land will not only be working with CapitaLand, it will also be working with Mapletree Investments Pte Ltd, another portfolio company in real estate development.

Two new joint-venture companies, M+S Pte Ltd and Pulau Indah Ventures Sdn Bhd, for joint-development projects in Singapore and Iskandar Malaysia respectively, have been established.

In an e-mailed statement, Wan Abdullah says Sunrise MS Pte Ltd, UEM Land's indirect wholly-owned subsidiary has been appointed together with Mapletree Investments to oversee the development and marketing of four land parcels at Marina South, located at the heart of the financial and business cluster in Singapore's Marina Bay area with a total permissible gross floor area (GFA) of 341,000 sq m.

In addition, UEM Land and CapitaLand have been appointed to oversee the marketing and development of two land parcels in Ophir-Rochor, located between the Kampong Glam Historic District and the Beach Road Conservation Area with a total permissible GFA of 160,020 sq m.

The development at these two sites totalling 501,020 sq m, will include office, residential, hotel and retail components with a total estimated gross development value of approximately S$11bil (RM27bil), subject to design and development plans.

“We have the expertise to undertake these two projects and are thus excited to be involved in the development of these two key sites in Singapore. We view this as an excellent opportunity to familiarise ourselves with the Singapore market and regulatory framework, in line with our aspiration to expand to regional markets.

“Our appointment also allows us to establish a close working relationship with two leading real estate companies from Singapore and I view the appointments as win-win for both parties for not only are we able to learn from each other but it also provide a platform for future collaborative opportunities both in Nusajaya and elsewhere.” says Wan Ibrahim.

It is an opportunity that other Malaysian developers would give a leg and an arm for. The last several years, Malaysian developers have been making forays into the city state. These include YTL Land Bhd, sdb Properties Sdn Bhd, the Sunway group, SP Setia and GLC Sime Darby group. With land prices so steep by comparison, one has to have deep pockets and a deep confidence that there will be demand for their offerings. In the case of UEM Land, the prize literally landed on them.

RAM Holdings group chief economist Dr Yeah Kim Leng views the cooperation very positively.

He says from the economic perspective, the synergies when Khazanah and Temasek pool their resources and capital to jointly undertake investments in the two countries will enhance the potential of their investments considerably. The positive spillover arising from the collaboration will be that a lot of things will be fast tracked. There is also a greater chance for success given their sovereign backing from the respective governments.

“It will go beyond real estate to attract other business ventures to enter Iskandar. The positive effect for UEM Land and Iskandar is greater because some of Singapore's excess capacity can be relocated to the Malaysian side given our large land resources. UEM Land will be able to upscale themselves. This is one of the benefits of the JV,” says Yeah.

Despite the difference in size Iskandar Malaysia is three times the size of Singapore Yeah says there is much opportunities for UEM Land, Iskandar Malaysia. “The positive effects of this JV goes beyond property development, UEM Land. It will broaden and deepen Johor's economic base.

“Regionally, there is greater integration from the perspective of the Johor-Singapore region and well as the greater Asean region. With China and India having their huge population to generate demand, this is an opportunity and a catalyst for Malaysia and Singapore and Asean to generate demand. Malaysia will be benefit more because our absorption capacity should be greater and some of the excess capacity from Singapore can be relocated to the Malaysian side,” he says.

The positive effects of the tie-up has already spill over to the private sector. A day after the Khazanah-Temasek announcement, Eastern & Oriental Bhd (E&O) issued a statement it will be partnering both state investment arms to develop an 84ha mixed development dubbed as a wellness township in Nusajaya, Johor. E&O's unit Galaxy Prestige Sdn Bhd has set up a 50:50 joint-venture company, known as Nuri Merdu Sdn Bhd, with Pulau Indah Ventures Sdn Bhd, a 50:50 venture between Khazanah and Temasek.

E&O deputy managing director Eric Chan says in a e-mailed statement that the targeted GDV is estimated at approximately RM3bil and the actual figure will be dependant on the final masterplan. The infrastructure works have already started and targeted for completion by end of this year. Depending on market conditions, this project should last us between five and 8 years.

Says Chan: “The term wellness' is a broad concept that encompasess the well-being of the overall body, mind and spirit. Our consultants and architects are setting out to weave “wellness” elements into the masterplanned development with a view towards providing a quality lifestyle that enriches the well-being of residents.

Work on the master plan will be completed by the end of this year, the next stage is getting approval from the authorities, he says.

Prior to this, the lifestyle property developer signed a partnership agreeement with Japan's Mitsui group, Mitsui Fudosan Co Ltd, to jointly develop residential properties in Malaysia and the region.

Chan says their venture into Iskandar with Pulau Indah Ventures Sdn Bhd has no connection with the Mitsui Group but an analyst says the recent developments will be synergistic for the Penang-based developer.

“They can sell their Iskandar, Penang and Kuala Lumpur projects,” says RHB Research Institute senior property analyst Loong Kok Wen.

She says up to this point, E & O is the only Malaysian developer working with CapitaLand in Khazanah-Temasek venture.

By The Star

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