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Saturday, December 24, 2011

The Pudu Jail transformation

The decision to transform the Pudu Jail site into a prominent landmark in Kuala Lumpur has set tongues wagging among industry observers and experts within the local property scene.

The project, better known as the Bukit Bintang City Centre (BBCC), was initially set to be an integrated mixed development but is now slated to become a vibrant transport hub. Regardless of what it will become, the question at the end of the day remains the same do we really need it?

It should be noted that BBCC, should it be turned into a commercial centre, will have to compete with not just existing, thriving developments in the vicinity such as Berjaya Times Square, but also potential projects in the near future in and around the Kuala Lumpur Golden Triangle area.

It also has to cope with mammoth projects a little outside the city centre such as the KL Metropolis by Naza TTDI Sdn Bhd that will add millions of square feet of office, retail and residential space. In addition, there is competition from the ongoing KL Sentral project and the recent launch of the KL International Financial District.

Other projects in the pipeline include Menara 3 Petronas, Menara Binjai, Menara Worldwide and Permodalan Nasional Bhd's proposed 100-storey Menara Warisan Merdeka.

Commercial value

“With many developments coming up, this project (BBCC) will face some competition,” says Elvin Fernandez, managing director of property consultancy firm Khong & Jaafar Sdn Bhd.

Elvin: ‘It will take a lot of good planning and execution, (and) if a project is well placed and you add more space, it makes things better.’

He however adds that BBCC is strategically located and has the potential to be successful.

“It will take a lot of good planning and execution. Astute management plays a big part. Lots of research and correct decisions from day one this is the stuff of success. But it cannot be underestimated what needs to be done.”

Elvin does not think that BBCC will “steal the crowd” from the Berjaya Times Square area.

“I doubt it will steal the crowd from there. In fact, I think it will enhance Berjaya Times Square. If a project is well placed and you add more space, it makes things better.”

Elvin notes the Government's need to make Kuala Lumpur a liveable city which is one of the twelve Key Economic Areas (NKEA) identified under the Economic Transformation Programme (ETP).

“The ETP and emphasis on making KL a liveable city is a property-dependent policy. You need to look at all projects and not just one in isolation. Sufficient demand must be created to receive the supply.”

Soo: ‘There is a possibility that the 100-storey (Menara Warisan Merdaka) tower could take up all of the demand and vacuum clean the market!’

Depending on how the development is planned, CB Richard Ellis Malaysia managing director Allan Soo reckons that new supply of space at BBCC could be either a boon or a bane.

“The question is what kind of commercial space will be offered. Take the 100-storey (Menara Warisan Merdaka) building as an example. On one hand, having a 100-storey tower nearby justifies having more commercial space.

“However, there is also a possibility that the tower could take up all of the demand (for commercial space) and vacuum clean the market! So the success rate is 50-50.”

The development of the former Pudu Prison was first unveiled by Second Finance Minister Datuk Ahmad Husni Hanadzlah in May last year. Back then, the plan was to redevelop the land into a mixed development project that would comprise a 33-storey office tower, shopping complex, 43-storey hotel and 44-storey serviced apartment.

UDA Holdings Bhd is the project's master developer. The company was recently issued a directive by its shareholder, the Finance Ministry, to divide the 20-acre land into three plots to maximise the value of the land.

Two plots will given to bumiputra investors to develop, while UDA will develop the one parcel.

Transport hub

Earlier this month, UDA chairman Datuk Nur Jazlan Mohamed said the company's transport consultant had indicated that the site was instead suitable to be redeveloped into a transportation hub and so a big bus terminal is expected to be constructed on the site.

He says the transportation hub will be able to accommodate 200,000 to 300,000 commuters daily and complement the monorail and light rail transit facilities already at the Pudu Jail site.

Nur Jazlan says the transport hub will also help to ease vehicle congestion around Kuala Lumpur's golden triangle area, adding that the terminal will complement the my rapid transit (MRT) and ease commuter travel into the city centre in the future.

VPC Alliance (Malaysia) Sdn Bhd director James Wong points out that there are already a number of transport hubs in Kuala Lumpur.

“We already have KL Sentral and the Pudu Raya bus terminal. You may have to close one if you want to build another.”

One industry observer who requests anonymity says it will not be viable to set up a transportation hub in Pudu.

“Just look at the bus terminal there. It's always congested and the traffic jams in the area are crazy!”

Soo believes that the area can be made into a transportation hub if it is planned properly.

“With the current infrastructure, the current bus terminal is always congested. If we can take it out of that fringe and offer taxi as well as MRT services, it could work.”

Former prison site

Whatever is to become of BBCC, one will eventually have to address the elephant in the room. For over 100 years, the site housed some of the country's most notorious criminals and served as an execution ground for convicts a fact that might not sit well with potential investors and residents, especially the superstitious types.

“If BBCC is to house retail and office space, it might not be a problem,” says Wong.

“However, if the land is redeveloped to comprise residential property, it may affect demand.”

Elvin reckons the “stigma” associated with Pudu Jail will not be a big deal.

“To me, it's not an issue, although to some people, it might be. Ultimately, it's all about perception.”

Soo says it all depends on how BBCC is marketed.

“As long as your rebrand it properly, people will not be reminded of the former prison. Besides, people tend to forget after a while, especially with the newer generation coming into the market.”

Soo also says the project can be marketed to foreign investors and buyers, who are less likely to be concerned with the site's history.

By The Star

1MDB embarks on tender process for KLIFD project

PETALING JAYA: The tender process on major foundations works for the Kuala Lumpur International Financial District (KLIFD) has started, 1Malaysia Development Bhd (1MDB) said.

The Government-owned company had invited contractors to participate in a pre-qualification exercise in the construction and completion of earthwork and excavation works, retaining structure, piling works and related sub-structure works.

Deputy chief executive officer (operations) Datuk Azmar Talib said in a statement yesterday: “This is probably among the largest earthwork, covering the size of about 20 football fields (12ha) and excavating about 20m or about four storeys into the ground.”

Azmar said many activities had been taking place in view of the start of construction in the first quarter next year. Amid this, they are creating and enhancing value to the site.

Acting as the master developer for KLIFD, 1MDB is taking measures in environment management planning to minimise the impact of construction on the surrounding environment.

“As the master developer for KLIFD, we are always conscious of our responsibility to the community. We have sought the guidance and cooperation of Dewan Bandaraya Kuala Lumpur. We have taken proactive steps to submit the Environment Impact Assessment (EIA),” Azmar said.

The EIA is voluntary as the size of the KLIFD development is below 50ha, which is the minimum development size that will call for a mandatory EIA.

The notice of pre-qualification will close on Jan 6. Short listings and invitations to tender have been scheduled to complete by mid-Feb next year.

Azmar said 1MDB sought an inclusive participation by both big and small players. Companies can form joint ventures (JV) or consortium to participate in the pre-qualification.

The JVs can also be between local companies and international companies with locally incorporated operations. This will promote a blend of global and local expertise as well as technology transfer.

1MDB is also developing a Digital Master Plan for a digitally smart financial district, utilising technologies that are smart, intelligent and future proof.

The 30ha development in the Imbi area in between Jalan Tun Razak, Jalan Sultan Ismail and the Putrajaya elevated highway, seeks to create a catalytic pool of world-class players by combining leading financial institutions and top global companies.

By The Star

AEON, Parkson rightly command higher valuations

KUALA LUMPUR: AEON Co (M) Bhd and Parkson Retail Asia (PRA)'s solid price to earnings (PE) ratio shows that good consumer companies in the region rightly command higher valuations.

In its report, OSK Research Sdn Bhd has tagged AEON, which runs the Jusco retail stores, at a higher PE of 15 times to RM8.23.

PRA, which was recently listed on the Singapore Stock Exchange (SGX), currently trades at a 18 times forward PE, it added.

"Although the group posted two consecutive quarters of top and bottom-line year-on-year contractions, AEON still logged in positive revenue and net profit growth in Q3 after reopening its department store in 1 Utama. Since August, the company has been delivering positive profit growth since 1998," it said.

Hence, OSK Research has recommended the stock as a "buy", at a fair value of RM8.23.

It said AEON has new stores in the pipeline. The retailer plans to open two to three outlets next year alone.

"In the next two years, we expect AEON to open one outlet each in Kedah, Johor and Penang, for which the land was acquired in early 2011 (in Kedah and Johor) and in December in Penang," it said.

AEON also plans to penetrate Sabah and Sarawak, where it has no presence, next year. At the same time, the group will maintain its strategy as a residential area mall and will only penetrate small towns.

OSK Research likes AEON's unique business model as a department store-cum-shopping mall operator, which locates its outlets near residential areas and targets the mass market.

It said PRA's higher forward PE than AEON's reflects the former's regional presence and faster growth.

By Business Times

TA Enterprise Q3 profit falls to RM20m

KUALA LUMPUR: TA Enterprise Bhd’s pre-tax profit declined to RM20 million in the third quarter ended October 31 from RM36.5 million in the same quarter last year.

However, its revenue rose to RM173.1 million from RM153.3 million previously.

In a statement to Bursa Malaysia yesterday, TA Enterprise said it recorded lower contributions from both the stockbroking arm and TA Global Group in the current quarter.

It said contributions from its property division would continue to be positive, despite growing uncertainties in the global economic landscape.

By Business Times