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Saturday, June 16, 2012

UEM Land to bank on Nusajaya

It is a bold statement to make, but Datuk Wan Abdullah Wan Ibrahim, managing director and chief executive officer of UEM Land Holdings Bhd, does not mince his words when he says the company has “delivered on its promises”.

“When we got listed in 2008, we told the media and analysts where we were going,” he tells StarBizWeek in an interview.

“When the time was right, we raised almost RM1bil through a rights issue. Even before we were listed we did the de-gearing exercise with Khazanah Nasional Bhd.

“And because of our need to diversify in terms of location, which we were taking too long to do organically, we acquired Sunrise.”

The hotly-debated RM1.39bil takeover of influential ex-banker Datuk Tong Kooi Ong’s listed vehicle, which was Mont Kiara’s master planner, immediately solved a few strategic objectives.

“Among others, we needed the right brand and skill set. In those days, UEM Land was a township developer. We can build high rises, but at what level of class, efficiency and market intelligence?” Wan Abdullah asks.

“Via the Sunrise team, we had that practically overnight. They had a strong balance sheet and a good track record in not only product delivery but also the financial aspects.”

“Now,” he adds, “we just need to ramp up earnings.”

“We have a huge five-year target. Corporate governance rules do not allow me to share this, but you will probably laugh and think it is a bad joke. It’s a very steep growth trajectory.

“Our 2012 headline key performance indicators will give you an indication,” he says, referring to its target to achieve 50% growth in revenue, 40% in net profit and return on equity of 10%.

“Those are big numbers in a property climate which is uncertain as we speak. While we have all these constraints, we are still pushing ahead with our agenda. I believe we have very good prospects, and the single biggest factor we are hanging our optimism on is Nusajaya.”

The 23,875-acre Nusajaya, of which UEM Land is master developer, is one of five flagship zones in Iskandar Malaysia, the country’s first economic growth corridor.

Wan Abdullah enthuses: “SP Setia has said it is focusing on Johor, and Mah Sing is also reinvesting in Johor. These people can’t be wrong in their reading of the market and the demand.

“Everyone is rushing into Iskandar, and it is not by accident. We have been working day in and day out for this.”

The key to this growth, he points out, is two-pronged. There will be new catalyst projects unveiled towards the fourth quarter for Nusajaya, the likes of which investors and analysts got a peek of at the CIMB Asean Conference earlier this week.

In a research note, CIMB analyst Terence Wong says the management previewed Gerbang Nusajaya, a 4,500-acre, RM18bil gross development value (GDV) township envisaged as the gateway to Iskandar Malaysia for those entering from Singapore.

Some of its proposed projects include an AutoCity test track and a trade centre.

“UEM Land’s original blank canvas of 24,000 acres in Nusajaya is finally reaching a tipping point. Recent strong sales (85% take-up for Imperia and close to 100% for Somerset Puteri Harbour) attest to the attraction of the township,” Wong remarks.

“The company is the best play on Iskandar Malaysia as it has close to 8,000 acres of undeveloped landbank in Nusajaya alone, which lies in the heart of Iskandar Malaysia.”

It has also made two major land purchases totalling RM579mil so far this year, a sign that it is not resting on its laurels despite already being the largest private landowner in Johor.

In April, it bought 122.28 acres near Puteri Harbour for RM93.2mil from Tanjung Bidara Ventures Sdn Bhd, a wholly-owned subsidiary of Khazanah, to be developed into a premier residential enclave featuring canal-front homes and high-end condominiums.

The land actually forms part of a larger 4,500 acres it had disposed to Khazanah in a de-gearing exercise in 2006.

“We needed a white knight (at the time). In 2007, nobody cared about us. Our gearing was 18 times, how could I move forward? So we sold land to Khazanah at 5% above market,” Wan Abdullah explains.

“Now that five years have passed, we are in a position to take it back at a fair price.”

Another crucial focus for UEM Land, he adds, will be to create employment.

“For example, look at SiLC (Southern Industrial and Logistics Cluster). For the past four years we were happily selling industrial land. But when people buy these lots, they take their time to build the factories. We cannot allow our future to be determined by their fancy.

“We have to drive this ourselves. Because of that, we are at advanced discussions with an international industrial player to build an industrial park.

“We hope to sign the collaboration soon and will build factories to be sold or leased, so that when people buy them, they will immediately kickstart operations.”

The way he sees it, there is much opportunity for this because “Singapore is pushing out its small and medium enterprises”.

“It is not efficient for them to be in Singapore due to high cost and other reasons. We have the opportunity to receive all these new investments. I can jolly well continue to sell industrial land and make money, but that doesn’t serve the township as a whole.

“As a developer, we don’t just build, we have to script it right.”

On the firm’s regional expansion, Wan Abdullah says this is still “in its infancy”.

“When we spoke about expanding regionally, the analysts and fund managers got a bit excited, but not positively. They said, ‘These guys just learnt to start walking and now they want to run, and when they run too fast they are going to fall down and hurt themselves’.

“Give us more credit, we would not be so silly to do that. These are the early days. We are not going to jump in and buy 1,000 acres in India or Vietnam.

“But we have to start taking baby steps or people will say three years from now that we didn’t consider the region.”

Closer to home, UEM Land is set to launch the second phase of its Arcoris mixed development in Mont Kiara comprising 366 small office home office (SoHo) units.

Its business suites launched last year have been 100% sold out, according to UEM Land development division project director Raymond Cheah.

Wan Abdullah is quick to point out that Arcoris is only the third development in Malaysia to be designed by Foster and Partners, whose résumé include London’s iconic Gherkin tower and Wembley Stadium.

The other two projects designed by the architecture firm here are Universiti Teknologi Petronas in Perak and Bandar Raya Developments Bhd’s The Troika in downtown Kuala Lumpur.

The six acre, freehold, 1.44 million gross floor area Arcoris is UEM Land’s first development to feature five components, namely the SoHo, business suites, hotel, serviced residences, and retail. The latter three have yet to make their debut.

Cheah calls Arcoris the “last piece of the puzzle” in Mont Kiara. The SoHo will occupy 25 storeys of the south block, with sizes ranging from 500 sq ft to 1,000 sq ft.

Based on past records, the 700 sq ft units tend to be the most saleable, Cheah shares. Prices are between RM900 and RM1,000 per sq ft.

Market research done by UEM Land indicates that price-wise, the SoHo is within reach of 62% of the population.

Arcoris is geomancy-compliant and is seeking a green rating to boost its appeal. The RM960mil-GDV project is scheduled for completion by the first quarter of 2016.

A private preview will be held later this month before the public launch, Cheah notes.

Another feature to look out for is the hotel as it would effectively be the first in Mont Kiara, the nearest hotels being Eastin and The Royale Bintang The Curve.

“There is pent up demand that people may not be aware of yet,” Cheah says, referring to its potential to attract business travellers heading to Matrade’s upcoming one million sq ft trade and exhibition centre in Jalan Duta.

By The Star

Is there a real reprieve in prices?

NOW that we are in the middle of 2012, it is probably a known and accepted fact that the property market is taking a long-awaited breather, after a steep and breathless uphill climb in 2010 and last year.

Prices and rental in a most parts of the Klang Valley have come down. In some hotspots that have seen the steepest price increase the last couple of years, rental and prices have come down marginally since the last quarter of 2011 and this trend has continued until today. It is likely this trend will continue well into the second half of this year.

It is not that there is no longer demand for these properties. There is demand, but the prices have been bidded up to such a degree that potential buyers are beginning to ask themselves if they are over-paying. Some may even ask if there are fundamentals to support such high prices. In short, they have decided to walk away.

Whether they are prepared to over-pay or whether there are fundamentals to support these high prices are two different things. This is because buying a house is – or can be – an emotional affair.

Some are willing to over-pay because they really like the property, or its location and the amenities that come with it. Or they may be concerned that if they do not buy now, prices may go up further.

So, despite the suspicion that they may be over-paying, they decide to go ahead with the purchase. This is particularly so if they are renting.

As for whether there are fundamentals to support prices that go up, up and up, well often, there isn’t. The same infrastructure is there, and the environment has remained status quo. But prices have moved up and buyers wonder – what’s the rationale? Buyers are beginning to question and that is good.

The secondary market – where buyers buy directly from property owners – may be a more realistic gauge of the sentiment prevailing in the property market.

There is less speculation in the secondary market. Those who shop for a house in the classifieds would already know the purpose of his purchase. He would more or less know how he is going to finance it because he has to pay for the property in full, upon signing the sales and purchase agreement. He would also have to go about seeking the services of a lawyer, if he does not have one already, and the mortgage loan would also have to be sorted out.

In other words, the outlay would be greater – emotionally, financially and physically – as there is much running around after a decision is made for a particular property.

It is only in the primary market, where buyers buy directly from the developers, that the speculative element is more evident. Amid the razzmatazz and the party spirit of the moment, a buyer just pays the 10% he is required to and sits back with the availability of today’s interest bearing schemes. He need not think too much about what he is going to do with it, or how he is going to finance the purchase until two to three years later. If he does not want to begin his loan repayment, he can sell it.

It is here, therefore, in the primary market, that the speculative element is more evident. Last year, developers had multiple launches. Their intention was to lock in sales while the going was good.

This year, the situation has changed somewhat. There is a lot more caution, both in the secondary and the primary market, as evidenced by less launches by developers, and slower sales in the secondary market. Unlike last year, a developer has to do a lot more marketing and promotion in order to lock in sales now.

Nevertheless, despite the slower sales, there seems to be no let up in the prices as they remain high, with developers justifying their prices with increasing cost of construction.

As we enter the second half of 2012, the worsening crisis in the eurozone will cast some uncertainty over the market, although indirectly. Already, exports for April have contracted, although marginally. This may filter down to the property market.

Those who buy with a clear focus and objective will continue to execute their decision. Those who are more uncertain why they are buying may take a wait-and-see approach, or if they really like a property and are certain of its potential, may just take out the cheque book.

Deputy news editor Thean Lee Cheng wonders how the Greek election tomorrow will turn out as it may open up a new chapter for the eurozone. We in Malaysia will not be immune to what’s happening in Europe.

By The Star

Chong Wei ventures into property business

KUALA LUMPUR: World number one badminton player Datuk Lee Chong Wei has made his maiden venture into the property business with a condominium project in Ampang with a gross development value of RM160 million.

Called A Residency D' Suria Condominium, the 18-storey project, located in Ampang Hilir here, will be launched by September. The project is expected to be completed by 2014.

Lee, via his set-up Chong Wei Binajaya Sdn Bhd, has teamed up with Perak-based property player SSF Corp to implement the project.

The condominium units are priced between RM500,000 and over RM1 million, depending on built-up area.

"We have already sold 40 per cent of the 252 units available due to its strategic location and are confident it will get a good response," SSF group executive director Major Datuk Wayne Chew told reporters yesterday.

Chew said Chong Wei Binajaya is a subsidiary of SSF but he declined to reveal details of the partnership.

Privately held SSF was established in 1995 and started as a contractor.

To date, it has built more than 1,000 homes, mainly in Perak, which include joint ventures with the state government. It plans to expand to the Klang Valley, Penang and Johor.

A Residency is the company's second project in Kuala Lumpur after Residency Duta Suria, which is also a condominium project and is situated next to A Residency.

By Business Times

Mulpha Land targets record sales this year

PETALING JAYA: Boutique developer Mulpha Land Bhd is targeting record sales of RM60 million to RM70 million in the current year, led by its Bangsar Enclave project in Kuala Lumpur.

Bangsar Enclave comprises seven units of three-storey bungalows in a gated and guarded community.

The project, with a green architecture concept and located at Jalan Medang Tanduk in Bangsar, will be completed in four months.

Mulpha Land executive director, Ghazie Yeoh Abdullah said each unit will be selling at RM12 million and above.

The company is positive on the take-up as it has a ready market.

He said Mulpha Land has a strong following from the Middle East buyers who are looking for homes here, to buy in bulk or individual units.

"The reach to the Middle East has been in our past organisation where we have constructed several projects in Saudi Arabia. We have a strong network there," Ghazie told Business Times yesterday after the company's shareholders meeting.

Mulpha Land is the property arm of Mulpha International Bhd, a diversified group.

The company's other ongoing projects are Bukit Punchor in Penang, Desa Aman in Kulim, Kedah, and Raintree Residence in Ampang.

The projects, including Bangsar Enclave, have a combined gross development value of about RM800 million, Ghazie said.

He said Raintree Residence, located opposite the Raintree Club at Jalan Wickham in the diplomatic enclave of Ampang Hilir and U-Thant, comprises 12 units and they will be retained for recurring income.

"Our current focus is to complete all current projects and realise our profitability. Long-term plans include focusing on projects in Kuala Lumpur, Selangor and in the northern states," he said.

For fiscal 2011, Mulpha Land posted a pre-tax profit of RM1.62 million on revenues of RM17.85 million.

In the first quarter of 2012, it recorded a pre-tax loss of RM601,000 on revenues of RM637,000.

The stock fell 2.5 sen yesterday, to close at 57.5 sen.

Mulpha Land deputy chief executive officer for property division Ronn Yong said he is positive on the outlook for the luxury segment of the property market.

"With the votality of the euro crises, a lot of people are hegding on properties. The rich are not affected and that is driving sales of our high-end properties," Yong said.

By Business Times

Tambun Indah to expand landbank

PETALING JAYA: Property developer Tambun Indah Land Bhd is seeking to increase its land bank size, particularly in the Klang Valley.

The company hoped to use the RM44.2mil, which was raised with the completion of its two-for-five rights issue on June 4, 2012, as well as expected positive cashflow from progressive billings of increase properties sold last year, to fund the land expansion, said managing director Teh Kiak Seng.

“Since our inception in 1994, we have developed a reputation as an innovative and premier property developer in Penang.

“Now, we are ready to expand and look at opportunities available to us elsewhere. We are now casting our net wider and hope to buy new land banks in the Klang Valley and other areas where we can develop projects on our own and, or work in collaboration with a joint-venture partner. With that, we can then take the Tambun Indah brand name to other states,” Teh said in a statement.

The group currently has an existing land bank of around 716.5 acres, mostly situated in Seberang Prai.

However, Teh added that he still believed in the robust strength of the Penang property market. Last year, the total number of residential units that were sold in Penang climbed 68.2% to 30,674 from 18,233 in 2010, while the total value of property transactions rose 59.8% to RM7.7bil.

The Penang Institute data show a 50% average rise in Penang property price since 2007, with condominiums on the island rising by 82%, and terraced and semi-detached or detached units on the mainland climbing by 25% and 30% respectively.

Teh added:“Furthermore, if the current trends continue, prices are expected to rise by a further 20% to 30% over the next few years. This level of market demand is good for the industry as a whole.

“We believe that Tambun Indah is poised to take opportunities from this (situation). Judging by the take-up trends experienced thus far by the group's launches in the first half of 2012, and the two projects that we intend to launch soon. I am optimistic on our performance this year.”

Meanwhile, Tambun Indah announced a first and final dividend of 3.8 sen per share for the financial year ended Dec 31, 2011. This translates to RM11.8mil and represents 50.3% of its net profit for the year.

By The Star

Cahaya Alam offers aesthetics, functionality and after-sales services

FOR many, buying a house is not about the purchase of blocks of concrete and a patch green, it is about owning a place to be with loved ones.

This is the principle, property developer, Encorp Bhd adopts when creating its township in Section U12, Shah Alam.

The township, Cahaya Alam, made mainly of residential projects is sited on 209 acres of leasehold land with a gross development value of RM800mil.

Since commencement of the project in 2004, Encorp has developed about half of the township.

Beyond just developing houses, Encorp has a community-focused approach to ensure quality living for its residents.

Besides its current landscaping ideas and common facilities like the 1km linear park that runs through the township, Encorp is looking to build a community hall.

“This community hall is going to be different because we want to manage it. We will organise other events that will be useful for families like educational activities, a tuition centre, music centre and other recreational activities,” executive chairman Datuk Seri Effendi Norwawi says.

“We’re exploring the possibilities to ensure the place is well-utilised and kept in tip-top condition. We want residents to feel that they are part of an Encorp community,” he says, adding that Encorp will work with a joint-management committee for this.

Effendi says a lot of thought has gone into the planning and designing of the houses.

“From the beginning, we think of everything that will give the house real value for the buyer. Buyers start with the aesthetic, as always the case. So we work hard on the aesthetic by detailing the layout and functionality of the house,” he tells StarBizWeek.

“We think of every user living there – the husband, wife, the children – and how can the house be as practical and as user-friendly as possible,” he adds.

Encorp emphasises on innovation in its product offering and one selling point they have is after-sales services.

Encorp will be providing renovation and furniture packages as well as home repair services.

“This is what we call the Encorp experience. Homebuyers always spend a few hundred of thousands on renovation. It’s wasteful,” he says.

“We have various packages, depending on what you can afford. For example, instead of a spending RM45,000, our package can be RM34,000 because we can do it cheaper and yet maintain the quality,” he explains.

Encorp also promises to respond to requests for home repairs within the hour.

“We don’t make profit from these services. We just want to earn within the reasonable margin based on market value,” he says of Encorp’s approach.

Furthermore, Encorp has also come up with easy entry financial schemes to help young buyers to purchase homes.

It is working with a panel of financial institutions for its schemes that allows buyers to pay 2% or 5% up-front with the sale and purchase agreement legal fees and stamp duty waived.

The schemes are interest-free during construction and buyers will only need to begin mortgage payment after the keys are handed over.

Last weekend, Encorp launched two phases of its medium to upper-market range properties known as Frangipani and Lotus.

Frangipani Phase 3 has 58 units with a price tag of RM684,000 to RM700,000. These are multi-facade superlink houses that come with different external designs to give the illusion that the two and a half storey houses are not linked.

The built-up area ranges from 2,169 sq ft to 2,749 sq ft.

Encorp’s first semi-detached houses, Lotus is now in its Phase 2 and has 36 units priced between RM1mil to RM1.2mil. Lotus has two and three-storey units with built-up area of between 2,980 sq ft and 4,610 sq ft.

Effendi says the Lotus project is Encorp’s “first attempt at semi-detached houses because the market can take it now.” He is referring to the change in buying power in the last two years as more have been able to afford homes in the upper-market range.

Both Frangipani and Lotus were first launched last year. Frangipani is now in its last phase but Lotus has another phase to be launched in the last quarter of this year.

Effendi says that Cahaya Alam has enjoyed about 80% word-of-mouth sales as customers encouraged their family and friends to be part of their neighbourhood. He also notes that there are some repeat buyers, with more new buyers coming from Klang and Cheras.

Cahaya Alam property has enjoyed more than 60% price appreciation the last two years. As an indication, its middle-market Camellia 2 houses which were selling for RM360,000 in 2010 are receiving offers of nearly RM600,000 now.

Despite the appreciation, Encorp continues to target families and home-occupiers instead of investors. While this category of homebuyers may not buy and sell properties the way investors would, Effendi said that families can always look to upgrade to the upper-market units.

Putting things into perspective, Encorp has perhaps set a smooth path to benefit its own customers over the course of its Cahaya Alam township development.

Its previous projects in Cahaya Alam, such as Rosselle, Jasmin, Camellia 1 and Camellia 2, were within the middle-market range.

The company is also embarking on a new masterplan to develop the remaining 90-odd acres. This would have a resort lifestyle design and concept.

Encorp is planning four more projects to build two and three-storey terraces and zero-lot bungalows. The four upcoming precincts will be gated and guarded, with water features and landscaping.

Encorp estimates to complete these upper-market projects by 2018.

Cahaya Alam only has one commercial development, Magnolia, which are shop-offices currently under construction on 7.7 acres.

The township, surrounded by the New Klang Valley Expressway, Federal Highway and NKVE-MERU Link, is a joint venture between Encorp and the Selangor State Development Corporation.

By The Star