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Saturday, September 1, 2012

Kwasa Damansara to be a hive of activity for developers soon

PROPERTY developers and construction firms will be looking forward to the details of the pre-qualification process for the Rubber Research Institute (RRI) land in Sungai Buloh, following the finalisation of the sale of this real estate to the Employees Provident Fund's (EPF) subsidiary Kwasa Land Sdn Bhd.

Kwasa Land, the master developer, acquired 2,330 acres out of the approximately 3,000 acres of RRI land from the Malaysian Rubber Board for RM2.28bil or RM22.50 per sq ft, confirming speculation of recent months that the land will be acquired for more than RM2bil.

This land will be turned into the township of Kwasa Damansara, which will have a development period of up to 15 years and include a mix of residential and commercial properties, infrastructure and public amenities for an expected population of 150,000.

StarBizWeek understands that the terms and conditions of the pre-qualification process will be announced next week.

Who will be developing the township?

There was a lot of buzz when Prime Minister Datuk Seri Najib Tun Razak proposed during Budget 2009 about the development or redevelopment of strategic parcels of government-owned land in and around the Klang Valley, including in Kuala Lumpur, as part of several mega-projects aimed at boosting the economy.

The land, which falls under the jurisdiction of the Petaling Jaya and Shah Alam city councils, has a mixture of both freehold and leasehold parcels with the southern portion being the most valuable as it adjoins the upmarket Tropicana Golf & Country Resort.

Property valuers say that any premium to the tender price will depend on a number of factors including, as KGV-Lambert Smith Hampton (M) Sdn Bhd executive director (valuation) Anthony Chua points out, whether the land is parcelled out as converted or unconverted land.

“Parcels within the southern portion of the RRI land to fetch a higher value as they border the high-end developments of Tropicana and Ara Damansara,” Chua says.

The northern portion is closer to the Sungai Buloh New Village and is less developed.

VPC Alliance (KL) Sdn Bhd managing director James Wong says the portion of the RRI land which has a Petaling Jaya address will fetch a premium. Valuers also point out that the tender price must also take into account that Kwasa Land is responsible for the necessary approvals and the construction of the main infrastructure.

A valuer says developers will need to factor in the holding costs especially if they are tendering for larger parcels which take a longer time to develop.

Accordingly, developers that match Kwasa Land's criteria will be lining up to get a piece of the action, notwithstanding the current soft sentiment of the property market.

First in line will be Malaysian Resources Corp Bhd (MRCB), in which the EPF has a controlling 42.20% stake. A property-and-construction firm best known for its multi-billion ringgit Kuala Lumpur Sentral project, MRCB stands to benefit for years from not just property development but also civil infrastructure projects for the township.

MRCB's share price closed six sen higher at RM1.67 on Monday after hitting an intra-day high of RM1.70. Reports indicate that besides MRCB, others that may stand to benefit include those companies in which the EPF hold stakes but may not necessarily have property development as their main or only business.

This includes IJM Corp Bhd, in which the EPF has a 16.31% stake. According to a HwangDBS Vickers Research report, IJM Corp's subsidiary IJM Land Bhd, in which the EPF has a direct 5.46% stake, contributes 38% of earnings.

Conglomerate Sime Darby Bhd, in which the EPF has a 12.61% stake may tender for a parcel of land. The group's property division has experience in township development with projects strung along the Guthrie Corridor Expressway.

There is also SP Setia Bhd, in which the EPF has a 5.24% stake. While the developer has not indicated interest, it also has experience in township development with Setia Alam in Shah Alam and in Johor.

Dijaya Corp Bhd is another developer which may benefit. Being the developer of the Tropicana Golf & Country Resort may give the company an advantage as it is familiar with the market.

However, Kwasa Land has denied having talks with the company after StarBizWeek reported early last month that the company was in discussions to develop part of the southern portion of the land.

Affin Investment Bank Bhd analyst Isaac Chow says in a report dated Aug 28 that the cost to Kwasa Land for the acquisition of the land may translate into lower land cost for developers and enable them to launch properties at more affordable prices while maintaining a healthy profit margin.

By The Star

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