If it helps rein in soaring house prices, why not?

A proposal by Bank Negara Malaysia to change the way mortgages are calculated is excellent. It will greatly reduce the amount the public can borrow.

More than three years ago, my wife and I missed a chance to own our dream double-storey terrace house in Bangi. The price was about RM230,000 or RM217,000 after a 7 per cent rebate for Bumiputeras.

That house was under the first phase of a new township, whose units were snapped up within hours. A few months later, the second phase was launched, and the units under it, with slight upgrades from the previous phase, started from well over RM300,000 and were literally sold out too within hours.

I don't know exactly how the price for a more or less similar product had risen dramatically within a short span. My guts told me that it was due to a combination of the developer's reputation and quality and great demand for new houses in Bangi. Or perhaps, it's because of expectations (read speculation)?

Some observers said property rides on expectations. If people expect prices to go up in a foreseeable future, many may find out that properties will forever be out of their reach. Indeed, property prices in Malaysia have never eased during the past few years. As it stands today, the affordability ratio has gone through the roof.

A survey done by a publication on housing affordability saw property prices increasing from 5.9x income in 1989 to 10.9x in 2010. Left unchecked, it will soon climb to 15x your annual income.

It is also reported that the household debt-to-GDP (gross domestic product) ratio in the country has reached nearly 76 per cent, which is on the high side compared with our counterparts in Southeast Asia.

Hence, a proposal by Bank Negara Malaysia to change the way mortgages are calculated is excellent. It will greatly reduce the amount the public can borrow. The computation is supposed to be based on net income, and not gross income. That could reduce the amount that can be borrowed between 14 per cent and 37 per cent, according to a research house.

Certain parties can sigh and whine, but such proposal is a belated move to curb rising household debt. Yes, there could be an impact on the demand for affordable properties priced between RM100,000 and RM300,000. Yes, there could be slower take-up rate from the low- and middle-income segments that will result in the long run, slower delivery of affordable housing projects. And yes, ordinary wage earners could be affected more than the high-income segment.

But any good move to nip the household debt in the bud should be lauded. In other words, any good move to cool down soaring housing prices (and credit card loans) must be supported.

By Business Times

Utusan unit in property development JV

KUALA LUMPUR: Utusan Melayu (M) Bhd's wholly-owned subsidiary Juasa Holdings Sdn Bhd has entered into a joint-venture agreement with Insan Tiara Sdn Bhd to develop a RM6.8bil land in Kuala Lumpur into a mixed commercial industrial project.

Utusan said the completion of the project, consisting an eight-storey building with sub-basement and two floors of car park, shall be within four years from the delivery of vacant possession of the property with a further extension of two years.

By Bernama

Sime's planned E&O purchase gets analysts' thumbs up

KUALA LUMPUR: Sime Darby Bhd's planned purchase of a 30 per cent stake in Eastern & Oriental Bhd (E&O) last week will revive its flagging property business and also give it exposure to the Penang and Johor markets, analysts said.

For JP Morgan, the deal signals a more aggressive strategy from management to improve the property division.

"Sime's property division has generally been viewed as lacking push or not as aggressive as the purer developers.

"As it is, in the recently announced 2011 results, the property division was the underperformer with a 7 per cent year-on-year contraction in profits due to delays in obtaining approval for launches," it said in a research report.

Deutsche Bank AG said Sime is not present in the Penang property market currently and the deal would allow collaboration to enhance its property business in the long run.

Analyst Eltricia Foong said property development is estimated to account for 7 per cent of Sime Darby's 2012 operating profit.

"We reiterate our hold recommendation on Sime shares with a target price of RM9.30," the analyst said, adding that funding should not be a worry given its solid balance sheet and its recent RM690 million fabrication yard sale.

Sime Darby has proposed to buy the 30 per cent stake last week for RM766 million.

In Johor, E&O has a joint venture with Khazanah Nasional Bhd and Singapore's Temasek to develop a 84ha wellness township.

By Business Times

Ireka to buy Kajang land

IREKA Corp Bhd, a property developer, plans to buy a parcel of freehold land in Kajang for RM22.43 million cash.

The land, measuring 83,339 sq metres, is located within the Bukit Angkat Industrial Zone and is intended for a gated and guarded mixed-use industrial development, said Ireka in its filing to Bursa Malaysia yesterday.

“The concept for this development is in the preliminary stage, no submissions have been made to the authorities yet.

The total development cost and expected profits will be determined after the development order has been obtained at a later stage,” it said.

By Business Times

Juasa, Insan Tiasa to develop RM6.8b land

Utusan Melayu (Malaysia) Bhd's wholly-owned subsidiary, Juasa Holdings Sdn Bhd, has entered into a joint venture agreement with Insan Tiara Sdn Bhd to develop a RM6.8 billion land in Kuala Lumpur into a mixed commercial industrial project.

Utusan said the completion of the project, consisting an eight-storey building with sub-basement and two floors of car park, shall be within four years from the delivery of vacant possession of the property with a further extension of two years.

"The proposed project will enable Utusan to enhance the value of its existing property and create a new source of income from property rental," it said in a filing to Bursa Malaysia today.

By Bernama

Risk profile change for Bandar Raya Developments

PETALING JAYA: The proposed sale of Bandar Raya Developments Bhd's (BRDB) investment properties to major shareholder Ambang Sehati Sdn Bhd will have a negative effect on BRDB's business risk profile over the longer term, according to RAM Ratings.

In a statement yesterday, it pointed out that should the proposed deal go through, BRDB would be divesting all of its investment properties, which have been providing a stable source of recurring rental income.

“The divestment will steer BRDB towards becoming a pure property developer. This, in our opinion, heightens the group's business risk,” said RAM Ratings.

By The Star

Shanghai banks tighten mortgage lending paper

BEIJING, Sept 9 (Reuters) Chinese banks in Shanghai have either stopped mortgage lending or are making it harder to get loans, the official China Securities Journal reported on Friday.

The central bank's recent move to widen the base of total deposits that banks must set aside for reserves further crimped banks' ability to lend, while record high home prices are also making them nervous, the newspaper said, citing unnamed banking sources.

Banks in Shanghai that the newspaper visited have taken various steps including halting mortgage lending, extending loan approval times because of tight quotas, excluding applicants whose homes are old or expensive or raising mortgage rates beyond regulatory requirements, the paper said.

China has rolled out a slew of measures since late 2009 to curb property speculation and rein in runaway housing inflation.

So far, they have yielded some results and there are growing signs that home prices are starting to fall in some cities where they have gained rapidly in the past few years.

The top banking regulator has constantly warned against lending to the real estate sector, but has also repeatedly reaffirmed that Chinese banks could withstand home price falls of up to 50 percent.

By The Star

London's hotspot property prices to double

LONDON, Sept 9 (Reuters) Property prices in some central London hotspots are set to more than double by 2016, driven up by a mix of factors including volatile financial markets and major new transport projects such as Crossrail, according to a report from estate agency Knight Frank.

Domestic and overseas buyers have flocked to the London residential market in recent years as they look for a safe place to park their money.

"It's really seen as safe haven for global money. We ran some figures showing how prime property is doing in terms of asset classes ... it beat the FTSE 100 tracker over the last 10 years by quite a long margin," said Grainne Gilmore, Knight Frank's head of UK residential research.

"It certainly gives gold a run for its money," she added.

Meanwhile the Crossrail development, Europe's largest infrastructure project, will link Heathrow west of London to the east of the city through huge new tunnels to be run under the city.

"Crossrail is a massive theme going through this ... it's going to change a lot of things. If you live in Barbican or Farringdon (adjacent to the City financial district) you're going to be able to get to directly to three airports within minutes," she said.

As a result prices in this area and the City are set to rise 118 percent by the end of 2015, second only to the Vauxhall area in south London, where prices are forecast to jump 140 percent thanks to the redevelopment of Battersea Power Station along with U.S. plans to build its new London embassy just down the road.

RIOT PROOF

The Knight Frank report added that there are 13 hotspots which will outperform even the 30 percent increase in prices expected in prime central London by the end of 2015.

But the gap between prime central London prices and the rest of the country is widening, as growth has already soared over 10 percent this year.

"There is a possibility we could see strong doubledigit growth by the end of this year ... the figures just keep getting stronger," said Gilmore.

House prices have fallen in all areas of England and Wales in the past 12 months, except London, with prices falling nearly 9 percent in the north east region, according to recent data from the Land Registry.

"We definitely wouldn't class what is happening at the moment as a bubble ... The fundamentals of the market in London are quite different to what they were in the rest of the UK (before the property crash)," Gilmore added, as buyers are cashrich and not reliant on cheap credit.

Even last month's riots have failed to put off buyers from all over the globe, which account for just under half of investors, said Knight Frank, attracted by the political and fiscal stability and high standard of education in the UK.

In a separate statement earlier this week, CB Richard Ellis said sales rates in London had improved for prime products and apartments with growth potential.

"The top end of the market is attracting such a wide range of buyers from all over the world that it is in effect insulating itself from any one economic cycle," said Jennet Siebrits, head of Residential Research at CBRE.

The highestselling develpment schemes so far in 2011 have had exhibitions in Asia as buyers in Hong Kong take advantage of a currency discount of about 20 percent.

Meanwhile major regeneration projects add nearly 5 percent to house prices in neighbouring areas, according to new research from CBRE, with the 2012 Olympic Games development lifting prices by 14 percent in the surrounding area.

By The Star

Kosmopolito to build another hotel in KL

KUALA LUMPUR: Kosmopolito Hotels International Ltd, a subsidiary of Far East Consortium International Ltd, plans to build another hotel in Kuala Lumpur next year.

At present, works are being done to get itself ready to launch its first hotel in Cheras under the brand name Silka before the end of first quarter next year. The hotel is expected to be part of a new mall, which is located at where Phoenix Plaza used to be.



"In the pipeline, are two projects in KL. Directly across the hotel, there's a Sri Jati Serviced Apartment. We plan to tear it down and rebuild and turn it into a budget hotel. We have received the local authority's approval. We should be starting our development and construction works sometime next year, ideally after Chinese New Year.

"We are still debating if it will be branded as Silka, or as a true-blue budget hotel," said Dorsett Regency Hotel area general manager Christina Toh.

It currently has five hotels in Malaysia. They include Grand Dorsett Subang, Dorsett Regency KL, Grand Dorsett Labuan, Silka Hotel Johor Baru and Maytower Hotel & Serviced Residences KL.

Toh was speaking to reporters after the company presented 12 of its managers with the Coaching and Mentoring Professionals (CCMP) Certification.

The company worked with The Institute of Training and Development to come up with programmes to help improve the leadership abilities of its managers.

"Not many out there are developing people. Today, people work for a company not purely based on how much they are paid, but also for career development and whether the company helps to improve their skills for career advancement," said Azizah Ismail, Kosmopolito Hotels area director of human capital.

With the CCMP programme, she hopes the company is able to maintain or improve its staff retention rate.

"Currently, our staff turnover rate is below the industry average which is about 10 per cent. For us, some of our hotels are doing about 1 per cent, but on average, we are doing about 5 per cent, which is significantly below the industry average," said Azizah.

By Business Times

SP Setia gets nod to build extra units on Penang Island projects

SP Setia will develop the Penang People's Park project on the grounds of the Penang International Sports Arena (Pisa). Pisa is an indoor sports arena close to the Penang International Airport.

GEORGE TOWN: The Penang government has set a precedent for housing developers in the state by allowing SP Setia Bhd to build extra units within any of its developments on the island over the next 30 years.

This comes under a build-operate-transfer (BOT) concession agreement that was signed on August 19 between the Municipal Island of Penang Island (MPPP) and Eco Meridian Sdn Bhd (EMSB), a wholly-owned subsidiary of SP Setia.

A summary of the concession, which was prepared by MPPP's legal unit and disclosed yesterday, said MPPP agrees to grant EMSB the right to additional density of any SP Setia developments within Penang Island and this would be over and above the maximum permissible density for the land.

This must not exceed 1,500 residential units spread out on the island during the concession period.

The concession period is for 30 years and EMSB is also entitled to apply for a renewal for two further terms of 15 years each.

Pisa was completed in 2000 and sits on more than 10 hectares, serving as the largest and most comprehensive multi-purpose indoor venue on Penang Island.

The arena, which is owned by the Penang Island Municipal Council and managed by Penevents Sdn Bhd, boasts an Olympic-sized swimming pool and a spacious air-conditioned area, which has been designed to host conventions, exhibitions and entertainment shows, along with major sporting events.

The new project, estimated to cost up to RM300 million, is made up of three components - which include an international convention and exhibition centre, along with refurbishment works to the existing indoor stadium and aquatic centre respectively.

The concession also compels EMSB to build 450 low medium-cost housing units.

"The State Authority shall provide a piece of land for the purpose of the same," the summary of the agreement said.

The deal also stated that MPPP has agreed to sell and transfer part of the 10 hectare plot to EMSB for the purpose of a hotel site with a leasehold title of 99 years.

The purchase price of the hotel site is RM13.7 million.

By Business Times

Bank Negara move can affect housing demand

GEORGE TOWN: Slower affordable property launches and less demand for such properties are some of the consequences of the proposed move by Bank Negara to assess housing loans on net income rather than on gross income.

Registered and chartered valuer C.A. Lim & Co proprietor Lim Chien Aun told StarBiz that there would be an impact on the demand for affordable properties priced between RM100,000 and RM300,000.

The proposed move to assess the eligibility for housing loans on a net income basis would lower affordability by 14% to 37%, said a recent RHB Research Institute report.

“We will definitely see slower take-up rate from the low and middle-income segments, resulting in the long run slower delivery of affordable housing projects.

“Ordinary wage earners will be affected more than the high-income segment.

“Unless the Government is willing to lower the price of affordable housing in the country, the proposed move, if implemented, may not support Government's objective of promoting affordable housing projects,” he said.

Chartered valuer and property consultant Azmi & Co (Penang) Sdn Bhd managing director Chandra Mohan Krishnan said there would be a slowdown in the delivery of houses, especially those priced from RM100,000 to RM300,000, as the eligibility of those in the low and middle income segment for housing loans would be affected, if the move was implemented.

“I don't encourage this move to be implemented now, as this would generate a chain of effects, although the intention is to curb speculation,” he said.

On the impact of the move on property prices, Henry Butcher Malaysia (Penang) director Dr Teoh Poh Huat said there would be additional downward pressure.

Real Estate & Housing Developers' Association (Penang) chairman Datuk Jerry Chan said, for example, the impact of the move would be more noticeable on the island than in Seberang Prai where the property market was less speculative.

“Developers who have lined up easy and high percentage financing for its projects will feel the brunt of the proposed move.

“New projects from such developers would assume a slower pace. Property buyers with high leverage for property purchase will also be affected.

“We can expect to see a slower takeup rate from this category,” he said.

Chan said the move, however, would not impact very much on property prices, due to high land cost and strong holding power of major developers in Penang.

They were commenting on Bank Negara's proposed move to curb rising property speculation, as household debt in the country, as measured by household debt to annual gross domestic product ratio, had surged to a record high level in 2009 and 2010, largely stimulated by low interest rates and easy financing scheme for property purchase.

The household debt to GDP ratio in the country has reached nearly 76%, which is on the high side compared with countries in South-East Asia.

Meanwhile, Penang-based Ideal Property Development Sdn Bhd plans to launch projects with about RM400mil in gross development value over the next 12 months, compared with RM600mil as originally planned.

By The Star

Sime-E&O deal — what about minority shareholders?

Sime Darby had on Aug 27 announced its intention to acquire 273 million Eastern & Oriental Bhd (E&O) shares and 60 million irredeemable convertible secured loan stocks (ICSLS) in E&O, which, on a fully diluted basis, amounts to a roughly 30% equity interest in this niche property developer.

Sime offered RM2.30 for each E&O share, or a total of RM766mil ringgit for the block, with the sale shares coming from just three main groups: Datuk Terry Tham Ka Hon, E&O's managing director, Singapore-listed GK Goh Holding Ltd and a group led by Tan Sri Wan Azmi Wan Hamzah, formerly of Land and General Bhd.

Sime has cited its reasons for the acquisition as being “aligned with its strategic direction to extend its presence in the property development and hospitality sectors, beyond the Greater KL region, specifically in Penang and Johor.”

Will there be a mandatory general offer (MGO) for the rest of E&O's shares, since the combined block passing to Sime does not cross the necessary quantitative 33% threshold for it to take place, is a question which is being asked in corporate circles.

According to the Mergers and Acquisition Code, in instances where a party buying stakes of between 20% and under 33%, there can be deemed to have been created a situation triggering an MGO.

These instances are laid out in Practice Note 9 of the Malaysian Code on Take-overs and Mergers 2010 and largely involve situations where there is some arrangement between the vendor of the block of shares and the new buyer on how they are going to vote on company decisions, the ability of the acquirer to exercise control of the retained voting shares and the consideration.

Our analysis is as follows.

With 30%, normally companies would be able to have effective control when there is fragmented shareholdings.

The vendors are selling only part of their shares and will have still 11.5% left among them.

The biggest owner, Tham, who owns 15.7%, will still end up with a 5.1% stake post-acquisition dilution.

A 60% premium is being paid, which is not something that can be scoffed at.

Where does this leave the minority shareholders? Is it fair to them?

We believe that in the circumstances, the Securities Commission should investigate whether the other conditions for an MGO have been fulfilled.

And what of Sime's minority shareholders?

Arguably, does Sime really need E&O all that much at that price?

Much has been made of the mega-merger that integrated the property arms of the former Golden Hope Plantations Bhd, Kumpulan Guthrie Bhd and Sime Darby Bhd, which has given the group a massive and undeveloped landbank of 37,000 acres, as well as 126,000 acres in Sime Darby Vision Valley.

With this massive amount of land on tap, Sime Darby Property's gross development value now stands at RM30bil.

This purchase is one of the biggest developments since its leadership change, and as a leading government-linked company (GLC) which seeks to practice good corporate governance, an arguably more beneficial deal to all parties could have been proposed.

The main sore point is the offer price which amounts to 19 times E&O's forecast earnings for 2012 and 1.85 times its price-to-book value, where by comparison, the property sector has an average of 12 times forecast earnings for 2012 and 0.8 times price to book value.

Yes, the premium could be partially justified since it is a controlling block, but with a mere 30% stake, the extent of earnings contribution accruing to Sime is merely at the equity-accounting level as an associate, or a mere 0.6% increase to Sime Darby's profits in 2012 and 2013.

So soon after reeling from its recent billion-ringgit losses in its energy division, it is hoped that the board had undertaken all due diligence in this deal.

By The Star

UOA Dev climbs on winning hotel job

UOA Development Bhd, a Malaysian property developer, rose the most in a week in Kuala Lumpur trading after winning a RM101.4 million-contract to build a hotel in Kuala Lumpur.

Its shares climbed 2 percent to RM1.53 at 9:03 a.m. local time, set for their biggest increase since Sept. 2.

By Bloomberg

Questions over Bandar Raya property offer

Should Bandar Raya Developments Bhd (BRDB) sell choice assets to its major shareholders?

Ambang Sehati Sdn Bhd, which holds 18.88 per cent of BRDB, has offered to buy selected properties from the group.

These are arguably the best of the lot within BRDB's stable of assets, with The Bangsar Shopping Centre and Menara BRDB top of the list. The rest are CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor.

The assets are worth close to RM1 billion with BSC and Menara BRDB making up 70 per cent of the total value, according to its 2010 annual report.

Does BRDB need the money? It probably does. As at June 30 this year it has total debt of some RM769 million. It paid about RM35 million in interest last year, which is more than a quarter of its net profit in the same period.

Analysts also agree that it needs cash for further property development. It only has some RM73 million in cash and short term deposits.

But should the board of BRDB restrict the buyer to just Ambang, owned by four investors led by BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz?

It shouldn't. If the objective is to raise as much money from an asset sale, it should invite other bidders. Indeed, rumour has it that a lot of parties have approached BRDB about buying just the BSC. Having other bidders would probably help BRDB to get more money which would also benefit its shareholders.

Industry executives also say that shopping malls are currently in demand by local and foreign investors. In May, Hong Kong's Cheung Kong Group bought three Malaysian malls for more than RM400 million.

Another important question is why would BRDB want to offload assets that provide steady income to the group. It is now a common theme for developers to have that recurring base to offset lean years.

BRDB's property business made a pre-tax profit of more than RM146 million in 2010, its biggest contributor. Its manufacturing and construction business made pre-tax profits of less than RM3 million last year.

This means that Ambang or any other interested party must fork out quite a sum to compensate BRDB for lost future earnings.

In less than two weeks, the board of BRDB will have to decide on Ambang's offer. Although the promise of quick cash is tempting, ultimately, minority shareholders will have to decide since the offer is a related party deal.

By Business Times

BRDB deal may be bad for minority shareholders, some analysts say

The Bangsar Shopping Centre

PETALING JAYA: Analysts are mixed on the related-party transaction announced by Bandar Raya Developments Bhd (BRDB), involving its major shareholder Ambang Sehati Sdn Bhd, which has proposed to acquire selected investment assets, including The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall.

While some analysts say that it is line with BRDB's intention to unlock value for the group, other analysts feel that this is bad for minority shareholders as the crown jewels of the company are being taken out, and this makes the group's earnings more lumpy in the future.

In an announcement made to Bursa on Monday, BRDB's board received the letter from Ambang Sehati, which holds 19% interest in the property developer, to acquire the assets to “enable the group to monetise these assets and achieve a more efficient utilisation of its capital”, saying that the company's shares had been trading at a significant discount to its net asset value.

Under the plan, it proposes to acquire CapSquare Retail Centre, which is currently held by BRDB's wholly-owned subsidiary Capital Square Sdn Bhd; Permas Jusco Mall, owned by BRDB's 99.74%-owned subsidiary Permas Jaya Sdn Bhd; and BRDB's entire 100% equity interest in BR Property Holdings Sdn Bhd, which owns The Bangsar Shopping Centre and Menara BRDB.

The company said its board (except for Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who is the chairman of the board, with deemed interests in the proposed acquisition by virtue of his substantial shareholding in Ambang Sehati) would deliberate on the proposed acquisition and decide on the next course of action with advice from the main adviser.

“We need to see how much they are selling the assets for. If they are selling it at fair value, then that's fine.

“To take it at book value, for instance, is not appropriate, because some of these properties were bought some time ago. It needs to be valued at market value,” said a property analyst from a local research house.

He added that monetising the assets was good for shareholders; however, “if it were monetised at below market price, then this was also not a good deal. Then wouldn't it be better off to sell these assets in the open market? I think there are potential buyers for The Bangsar Shopping Centre. This is quite a highly sought-after asset,” said the analyst.

He said while earnings from property investment were not as high as property development, it did provide stability for the company's earnings.

For the quarter ended June 30, 2011, of BRDB's revenue of RM198.9mil, RM152.05mil came from property development while RM28.25mil was generated from property investment. Operating profit derived was RM31.02mil and RM10.62mil respectively.

In the announcement, BRDB said that the purchase consideration would be based on the fair value that would be determined by independent valuers.

BRDB has up to Sept 19 to revert with its decision. This acquisition will be fully cash-funded.

Meanwhile, an analyst with OSK Research is optimistic.

He said that the potential disposal was in line with BRDB's intention to unlock the value of its assets.

“With the purchase consideration paid wholly in cash, we think it is very likely that BRDB would distribute a sizeable portion of the cash proceeds as a special dividend to its shareholders.

“As at the first half of 2011, BRDB had retained earnings exceeding RM1bil but held a cash balance of RM41mil only while a chunk of its assets were in the form of investment properties.

“We believe that by monetising its investment properties, BRDB would be able to distribute a portion of its retained earnings to shareholders as a special dividend.

“Subsequently, BRDB will end up with a leaner balance sheet, which could possibly boost its return on equity,” said the OSK analyst.

In BRDB's 2010 annual report, the three assets proposed to be sold collectively carry a book value of RM942.4mil.

By The Star

Depleting landbank may prompt BRDB to sell assets

Analysts say Bandar Raya wants to increase its property development activities to improve earnings, which have been below par lately.

Kuala Lumpur: Bandar Raya Developments Bhd (BRDB) may sell its prime assets to buy more land in the Klang Valley, Penang and Johor as its current landbank is depleting, analysts said.

It may agree on a price of RM1.2 billion, which is about 27 per cent more than their book value.

They said BRDB wants to increase its property development activities to improve earnings, which have been below par lately.

For the quarter ended June 30 2011, BRDB posted a net profit of RM17.1 million, down from RM84 million in the same period last year.

"The stock has been trading below its true value as its earnings have not been as good as expected. Only recently BRDB had been more active in terms of launches," said a senior analyst with MIDF Research.

BRDB, which has four ongoing projects, has less than 25 hectares of land in Bangsar, Dutamas, Seri Kembangan and Taman Duta, and some 124ha of land in Johor.

On Monday, BRDB's major shareholder Ambang Sehati Sdn Bhd, controlled by its chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, had offered to buy some of its assets.

These include The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor.

BRDB has, until September 19, to decide on the offer.

The company had appointed CIMB Investment Bank Bhd as its main adviser to evaluate the offer.

"It is obvious that the owner is taking the good assets. He may eventually flip it in a few years to make back his money. Retail assets are very valuable in Malaysia.

"Most of them are trophy properties ... not high value assets except for BSC which is a cash cow for the company," said another analyst.

According to BRDB's 2010 Annual Report, the value for BSC and Menara BRDB is RM660 million while Cap-Square Retail Centre and Permas Jusco Mall are valued at RM214 million and RM68 million, respectively.

OSK Investment Bank Bhd director and head of equity ca-pital markets, Gan Kim Khoon, thinks BRDB will sell the properties and prove to shareholders that they will stand to benefit from the disposal.

"BRDB will make quite a substantial capital gain from the disposal. Otherwise, it won't make sense to dispose of these income-generating assets.

"If BRDB is offered a good deal to sell the assets with substantial capital gain, that may outweigh the loss of future income stream. BRDB can generate income from property development projects," Gan told Business Times.

By Business Times

Property players concerned over new housing loan criteria proposal

KUALA LUMPUR: A proposal to change the way housing loans are approved has property consultants and analysts worried as they felt loans given based on net income as opposed to gross income would dampen demand for housing.

Some banks, however, don't have an issue with the proposed changes as one banker said changes to the debt serviceability ratio would be good for the housing market. He said the proposed changes were for the benefit of home buyers.

“It's up to the banks to manage it. Banks have their own ways to control and approve loans,” said Zerin Properties CEO Previndran Singhe.

Previndran was critical of the proposed change, saying such a drastic move would be self defeating and would mean more Malaysians could not afford homes.

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng said such a move would tantamount to a limit on the amount of money a person could borrow to buy a house.

Although lower demand may push prices down, he does not think developers may be able to reduce prices by much given the increase in building material prices over the years that has pushed the cost of building a home upwards.

“I will support any measure by the Government to cool down the property market so there is no bubble, but they have to be careful when taking measures and need to determine if there is really an asset bubble building up,” Tang said.

One analyst who covers the sector said such a measure, if it was to control speculation in the property sector, was not needed at the moment as house prices would soften in a period of weak demand brought about by an economic slowdown.

“Developers and banks would surely lobby against such a move,” she said, worried about the chain reaction a weaker property market would have on the overall economy.

RHB Research Institute on Monday analysed the proposed changes and concluded that a move to change the assessment of eligibility for housing loans to a net income basis would lower affordability by 14% to 37%.

It said the high-end market would be most affected, and should supply match demand then prices would have to correct by a similar or smaller percentage, or supply will have to be reduced to hold up prices.

“The mass market segment which is largely concentrated in the medium-priced range will see smaller impact, especially if first-time home buyers are excluded from this measure,” it said.

While some might see the measure as a move to bring down the price of homes, others think such a move by Bank Negara would in turn ease the growth in household indebtedness.

Bank Negara, which had been looking to introduce guidelines to stress-test individual borrowers this quarter, has sought the opinion of banks on the proposed move.

One of the factors that precipitated that move is the buildup of debt that has seen household debt to GDP ratio reach nearly 76%, which is on the high side compared with countries in South-East Asia.

“It is understandable for Bank Negara to take action given that the rising household debt, as measured by household debt to GDP ratio, has surged to a record high level in 2009 and 2010, largely stimulated by low interest rate and easy financing scheme for property purchase,” said RHB.

With residential loans rising 14.7% in July, residential loans accounted for 54.3% of total loans in the same month, up from 49.7% a year ago.

Although housing loans had been the biggest contributor to the increase in household debt, the buildup of personal loans had also been rapid and that had caught the attention of the regulator.


Lee says the intention of the proposed change is to get people to buy what they can afford.

CIMB Investment Bank Bhd economic research head Lee Heng Guie concurred that the proposal would affect demand for housing, but said the intention of the proposed change was to get people to buy what they can afford.

Lee said any decision to implement the new computation method had to be weighed against the current sluggish global economic situation.

And while household debt may be an issue, the ability of households to service their loans do not appear to be a problem as yet.

Lee said that in 2010, for every ringgit of income, households paid 47.8 sen to service their debt.

The debt service ratio of household debt was 49 sen in 2009, 39.5 sen in 2008 and 41.1 sen in 2007 and the factors that affect that ratio is household income and the interest rate outlook.

By The Star

Brisk property sales in Singapore

SINGAPORE: There were surprisingly brisk sales at property projects over the weekend, to give the month a rousing start after weeks of slow action.

No one in the market had expected sales to hit the levels of a year ago but the numbers in recent days have lifted sentiment.

The Luxurie in Sengkang has sold 180 units since sales started last week at an average price of S$980 per sq ft. Most of the project’s 622 units are two and three-bedders.

Its pricing is similar to that of neighbouring mass-market development H2O Residences by City Developments, but its proximity to Sengkang MRT and bus interchange made The Luxurie more attractive, said DMG and Partners Research. The Sengkang Public Library and Community Hub are also nearby, as are CHIJ St Joseph’s Convent and Rivervale Primary.

The Meyerise, a freehold development in Meyer Road, has racked up about 80 sales since it started last Friday. Singaporeans and permanent residents comprised about 90% of all buyers. The project has 239 units – a mix of two, three and four-bedroom as wel as penthouse units. The average price was S$1,950 per sq ft, with three-bedroom units the most popular among buyers.

The Meyerise is minutes away from Parkway Parade and Katong Shopping Centre, with Playground@Big Splash and East Coast Park also nearby.

There were 24 units shifted at EuHabitat in Jalan Eunos over the weekend, bringing the total number of sales to 472 out of the 548 apartments available.

Another 20 homes were sold at Boathouse Residences in Upper Serangoon over the same period.

This strong response was also mirrored in the executive condominium market, where applications for the Arc at Tampines were expected to surpass 1,180 by Monday’s 10pm deadline. With 574 units up for grabs, this translates into a healthy subscription rate of about 2.1 times.

Anecdotal observations suggest that several showflats, including those at the Arc at Tampines and The Luxurie, were packed with prospective buyers, although that may not translate into big sales numbers.

Associate professor Sing Tien Foo from the department of real estate at the National University of Singapore’s School of Design and Environment said he was surprised by the crowds. “I thought a lot of people are waiting to see how the global market situation will turn out,” he said.

“Some people could be going into the showflats to look for inspiration, others could be going out of curiosity to see what the market situation is like before making a decision.”

ECG Property, which marketed several properties over the weekend, said while crowds continued to visit showflats, they were not as big as those seen at the beginning of the year.

ECG chief executive Eric Cheng is optimistic that the next few months will be better: “September is not a good month. We’re just getting over the stock market shock and the ghost month has barely ended. The market is still looking very uncertain. Some people may have lost money in the stock market and they might not be looking to put money into property for now.”

But Steven Tan, OrangeTee’s director of residential, is confident that the demand for new homes will continue despite lingering economic worries.

“Now the main group of buyers are those who are purchasing for their own stay. Transactions from this group are driven by genuine demand and they are less affected by all these economic uncertainties,” he said.

Low interest rates will also go some way towards encouraging new home sales, say analysts.

The number of new home sales, including executive condominiums, hit 1,954 in July.

By Singapore ST

UK house prices lower in August

LONDON: British house prices fell 0.6% in August from July, when they had increased by 0.3%, a key survey by home loans provider Nationwide showed.

“UK house prices declined by 0.6% in August, although this does not change the picture of relative stability that has characterised the market over the past 12 months,” said Nationwide chief economist Robert Gardner.

The average value of a home in Britain stood at £165,914 in August, according to Nationwide. That was just 0.4% less than the same month last year.

“Sluggish demand for homes, combined with only a gradual rise in the supply of available properties, has helped to keep property prices stable since last summer,” added Gardner.

By AFP

Bandar Raya Developments asset proposal

Targeted: Bangsar Shopping Centre is among the selected investment assets targeted by Ambang Sehati Sdn Bhd.

PETALING JAYA: Property development company Bandar Raya Developments Bhd (BRDB) has announced a related-party transaction involving its major shareholder Ambang Sehati Sdn Bhd, which has proposed to acquire selected investment assets including The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall.

The BRDB board received the letter from Ambang Sehati, which holds 19% interest in the property developer, on Monday to acquire the assets to “enable the group to monetise these assets and achieve a more efficient utilisation of its capital”, drawing the board's attention to the company's shares which had been trading at a significant discount to its net asset value, said the company in an announcement to Bursa Malaysia.

Under the plan, it has proposed to acquire CapSquare Retail Centre, which is currently held by BRDB's wholly-owned subsidiary Capital Square Sdn Bhd; Permas Jusco Mall, owned by BRDB's 99.74%-owned subsidiary Permas Jaya Sdn Bhd; and BRDB's entire 100% equity interest in BR Property Holdings Sdn Bhd, which owns The Bangsar Shopping Centre and Menara BRDB.

BRDB has up to Sept 19 to revert with its decision on the proposed acquisition by Ambang Sehati that would be satisfied fully in cash.

The company proposed to acquire these assets collectively, and not individually or any part thereof, at a purchase consideration to be based on the fair value that would be determined by independent valuers to be appointed based on mutual agreement.

BRDB had appointed CIMB Investment Bank Bhd as its main adviser to evaluate the proposed acquisition from Ambang Sehati.

The company said its board (except for Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who is the chairman of the board, with deemed interests in the proposed acquisition by virtue of his substantial shareholding in Ambang Sehati) would deliberate on the proposed acquisition and decide on the next course of action with advice from the main adviser. Accordingly, further announcement would be made in due course.

BRDB is known for its development of Bukit Bandaraya in Bangsar, Kuala Lumpur. It also has developments in other areas in the Klang Valley, the Kuala Lumpur city centre in particular, and in Johor.

By The Star

Bandar Raya chairman offers to buy 3 properties from group

KUALA LUMPUR: Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, chairman of Bandar Raya Developments Bhd (BRDB), has proposed to buy three properties from the group for a yet to be determined cash amount.

Moiz, through Ambang Sehati Sdn Bhd, plans to buy The Bangsar Shopping Centre and Menara BRDB, CapSquare Retail Centre, and Permas Jusco Mall. The properties are valued at RM942.37 million based on BRDB's latest annual report.

Ambang, which holds 18.88 per cent of BRDB, will buy the assets based on fair value as determined by an independent valuer to be mutually agreed.

"Ambang Sehati believes that this would enable the group to monetise these assets and achieve a more efficient utilisation of its capital," BRDB said in its statement to Bursa Malaysia yesterday.

BRDB's board will have to decide by September 19. It has hired CIMB Investment Bank to evaluate the deal. Shares of BRDB fell 1 sen to RM2.32 yesterday.

By Business Times

Bandar Raya gains on assets sale plan

Bandar Raya Developments Bhd, a Malaysian property developer, rose the most in two weeks in Kuala Lumpur trading after a major shareholder proposed buying some of its malls and offices.

The stock gained 1.7 percent to RM2.36 at 9:15 a.m. local time, set for its largest increase since Aug. 19.

By Bloomberg

Glomac keeps overseas investment option open

KUALA LUMPUR: Glomac Bhd, a medium-sized property outfit, may invest overseas to diversify earnings if it gets projects with good returns.

Group managing director and chief executive officer Datuk FD Iskandar FD Mansor said the company was at one point looking at India and Vietnam but put on hold plans to focus on Malaysia.



"There are still a lot of things we can do here. We will keep our options open for overseas expansion," he said in an interview with Business Times recently.

Glomac's first foray overseas was Australia in 2006, when it bought 380, Lonsdale Street, in Melbourne for A$30.5 million (RM82.4 million). This was through its unit, Glomac Australia Pty Ltd and partner Victoria Investments & Properties Pty Ltd.

The Lonsdale property encompasses a commercial building and a seven-storey carpark complex, with 445 bays offering 8 per cent rental yields. The building is now worth more than A$45 million.

In 2008, Glomac ventured into Thailand and currently has a 600,000 sq ft warehouse near the Bangna-Trad highway in the Samutprakarn province in Bangkok.

The warehouse, which is 49 per cent owned by Glomac and 51 per cent by its partner, Warehouse Asia Alliance Company Ltd, a leading Thai company in warehousing and logistics services, was built for RM125 million. It is now worth around RM180 million.

Iskandar said although Glomac is not seriously looking at property projects overseas, it is mulling redeveloping Lonsdale Street to ride on demand for commercial properties in Melbourne.

"We are looking at potential redevelopment of the property as the market for commercial assets is very hot currently," Iskandar said.

Iskandar said long term plans include building its investment portfolio to include properties that provide a good yield.

But he ruled out the possibility of launching a real estate investment fund (REIT) for now.

"We were keen three years ago but to launch a REIT, you need assets worth RM500 million to RM600 million.

"We will look at investing in properties that give good recurring income. What is hot today are retail malls," he said.

Glomac had in its portfolio investment properties worth about RM200 million but sold most of them in recent years to focus on property development.

By Business Times

Dijaya in RM228mil land deal

PETALING JAYA: Dijaya Corp Bhd has entered into a conditional sale and purchase agreement with Taiyo Resort (KL) Bhd to acquire five parcels of freehold land in Mukim Semenyih, Ulu Langat, Selangor, measuring approximately 80.33ha for RM228mil cash.

In a filing with Bursa Malaysia yesterday, Dijaya said the agreement with Taiyo Resort was entered by its wholly owned subsidiary, Tropicana City Service Suites Sdn Bhd (TCSS).

The parcels of land are currently held under the operations of Kajang Hill Golf Club, it added.


Tan:‘The land deal provides an opportunity for the group to introduce more development in Kajang.’

Dijaya said the land would be transformed into a mixed development consisting of landed houses, condominiums, apartments and shop offices with an expected gross development value of about RM2bil.

“The development, known as Tropicana Kajang, will be another future revenue generator for the group and shall contribute positively to its financial performance,” it said in a separate statement.

Dijaya said the freehold land had an upside potential in terms of capital appreciation because of the increasing demand for residential and commercial properties in Kajang, as seen in other developments such as Nadayu 92, Tiara Residence, Ramal Villa, Twin Palm and Jade Hills, just to name a few.

“With increasing population and expanding residential properties in and around Kajang, the proposed development of commercial properties will cater to the rising demand for office and retail spaces.

“Furthermore, the proposed Kajang-Sungai Buloh MY Rapid Transit project will enhance the investment potential of Kajang, presenting a greater opportunity to property investors,” it said.

Group chief executive officer Tan Sri Danny Tan Chee Sing said the group was continuously acquiring sizeable land-banks with good development potential in strategic locations.

“The land deal provides an opportunity for the group to introduce more development in Kajang with quality and prestige synonymous with our Tropicana brand,” he said.

Dijaya said the purchase price was arrived at on a willing-buyer, willing-seller basis after several considerations including the reasonably low land cost of RM26.36 per sq ft which will enable TCSS to price its proposed development competitively and with reasonable margins.

On the financing for the purchase, Dijaya said it would be funded through internally funds and/or bank borrowings.

“The exact mix of internally generated funds and bank borrowings will be determined by the management of the company at a later stage, after taking into consideration Dijaya Corp and its subsidiaries' gearing level, interest costs and internal cash requirements for its business operations,” it said.

The group's net gearing is expected to rise to 0.22 times post-land acquisition assuming about RM114mil, representing approximately 50% of the purchase price, is financed via borrowings. As at Dec 31, 2010, Dijaya was in a net cash position.

By The Star

Dijaya to buy land in Kajang for RM228m

KUALA LUMPUR: Dijaya Corp Bhd, a property developer, has agreed to buy five parcels of freehold land in Kajang, measuring about 80.4ha (198.5 acres), for RM228 million.

The land will then be transformed into Tropicana Kajang, a mixed development project, comprising landed homes, condomimiums, apartments, and shop offices with an expected gross development value of RM2 billion.

"The group is continuously acquiring sizeable land banks with good development potential in strategic locations.

"Today's land deal provides an opportunity for the group to introduce more development in Kajang with the quality and prestige synonymous with our Tropicana brand," said chief executive officer Tan Sri Danny Tan Chee Sing in a statement.

According to the company's statement, these freehold land have an upside potential in terms of capital appreciation, partly because of the increasing demand for residential and commercial properties in Kajang.

The land are also located in a suburban area with close proximity to other popular areas such as Serdang, Mahkota Cheras and Bandar Sungai Long.

Kajang is served by numerous highways, such as the Kajang SILK Highway, that enable convenient access to neighbouring townships.

In addition, the existing terrain of Kajang Hill Golf Course provides a readily available landscaping that will enhance the attraction of Dijaya's proposed developments.

"With increasing population and expanding residential development in Kajang areas, the proposed development of commercial properties here will cater to a rising demand for office and retail spaces."

"Furthermore, the proposed Kajang-Sungai Buloh MRT project will enhance the investment potential of Kajang presenting a great opportunity to investors," said the company in its statement.

By Business Times

Bandar Raya goes mid-range with Verdana

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) expects its RM800 million Verdana project at north of Mont' Kiara to set a benchmark in lifestyle development in the mid-range residential segment in Kuala Lumpur.

Verdana is an extension of BRDB's brand of cosmopolitan lifestyle developments and is the company's first foray into the mid-range segment.

BRDB, which has been developing land in Bangsar for 45 years and luxury apartments such as One Menerung and The Troika, is expanding its wings to build products of a different price range.

"We are now looking to build properties within the affordable price range, yet offering the lifestyle that we have been providing in all our other developments," BRDB chief marketing officer KC Chong said in an interview with Business Times.

Verdana will be developed in two phases over 4.4ha. The first phase comprises two 25-storey towers and a six-storey block with 298 units.

It is priced at an average RM580 per sq ft with unit sizes ranging from 1,450 sq ft to 3,020 sq ft.

Chong said the development is unique as the first six floors of each building, including the six-storey block, offers garden villas.

He said the villas, with sizes ranging from 2,400 sq ft to RM3,020 sq ft are selling from RM1.5 million to RM1.9 million each and 30 per cent have been sold since end July.

"Verdana has attracted various category of buyers, namely owner-occupiers, expatriates living in Mont' Kiara and local investors as well as from Europe. They love the concept and design," Chong said.

Chong said 70 per cent of the project will include landscape garden, recreational facilities and water features. The bathrooms and kitchen will also be fully fitted with branded appliances to value add on the project, he said.

Phase one was launched in early August and 60 per cent of the 298 units have been snapped up.

Chong said phase two will feature two towers and a block for garden villas, offering more than 300 units. It is slated to launch by end-2012.

By Business Times

E&O deal hogs limelight

Coveted land: Phase one of Seri Tanjung Pinang in Tanjong Tokong. A second phase comprising two islands of 740 acres of land will be reclaimed around the area next year.

Sime has got the biggest chunk of E&O, but was the price worth it?

The pundits have it. For the last month or so, the rumour mill was working overtime around Eastern & Oriental Bhd (E&O), the luxury lifestyle property developer, that a merger or acquisition was in the works.

First came the persistent speculation that SP Setia Bhd would merge with E&O, which was soon quashed by SP Setia. Then last week - quite out of the blue - Sime Darby Bhd announced it was acquiring a 30% stake in E&O for a significant premium over the latter's share price.

In early August, E&O's shares galloped to a three-year high of RM1.75 on the back of the SP Setia merger rumours, then came down again in line with the global stock slump. Yet, amid the broader market sell-down a few weeks later, its stock again saw aggressive trading, this time from its own shareholders who appeared to be upping their stake.

The notable ones included GK Goh Holdings Ltd, a substantial shareholder of E&O, and Datuk Azizan Abd Rahman, a director of E&O. According to shareholder changes filed with Bursa Malaysia, GK Goh had bought 1.25 million shares in three days, raising its stake to 11.6%, while Azizan acquired 100,000 shares.

The upward trend in E&O's share price can be observed since Aug 24, from RM1.43 to Friday's close of RM1.60, an 11.9% increase.

The deal with Sime Darby, which E&O called a “milestone” development, raised more than a few eyebrows about why such a high price was paid. The share sale agreement is for Sime Darby to acquire 273 million shares in E&O and 60 million irredeemable convertible secured loan stocks, representing a 30% equity interest, for RM766mil cash.

The sale price works out to RM2.30 per E&O share, which is a 58.6% premium over the stock's pre-suspension price of RM1.45. Sime Darby came out in defence of its purchase, saying the RM2.30 was actually a 20% discount to E&O's estimated realisable net asset value of RM3.2bil or RM2.88 per share.

Upon completion of the deal, slated for Sept 9, 2011, Sime Darby will be the single largest shareholder of E&O.

E&O's largest project is the 980-acre Seri Tanjung Pinang seafront development, a coveted address in Penang.

To recap, the 30% block in E&O was acquired by Sime Darby from three substantial shareholders: E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh.

The trio's collective 41.7% shareholding in E&O will be diluted to 11.5% post-acquisition.

Tham, previously the largest shareholder with 15.7%, will end up with a 5.1% stake while Azmi and Goh will have 3.5% and 2.9% respectively.

A sore point with analysts is the high price paid for E&O. TA Research said the price was 19 times E&O's forecast earnings for 2012 and 1.85 times its price to book value based on consensus estimates. By comparison, the property sector has an average of 12 times forecast earnings for 2012 and 0.8 times price to book value.

Kenanga Research also noted that since Sime Darby was expected to equity account E&O's earnings on an associate level, that would only translate to a meagre 0.6% increase to Sime Darby's profits in 2012 and 2013.

It suggested that management might have been better off using the RM766mil to expand its plantation land or motor segment in China.

A local broker, however, had a more pragmatic view, saying that although Sime Darby was keen to venture into high-end development, it did not necessarily want to obtain everything at one go via a general offer, which would have been a much riskier proposition.

“Furthermore, E&O's shares in the open market are quite fragmented and not very liquid, making the task of acquiring 30% quite cumbersome and time-consuming.

“By getting the substantial shareholders to agree on a share sale proper, Sime Darby avoided facing a hostile takeover situation,” she said.

In terms of mutual benefits, Kenanga pointed out that phase two of the Seri Tanjung Pinang development might have factored strongly in the deal.

The project, estimated to have a reclamation cost of between RM3.2bil and RM3.5bil and a gross development value of RM9bil to RM10bil, could do with the financial muscle of a company like Sime Darby,

By The Star

Property loans to keep lead

PETALING JAYA: Analysts expect property loans to maintain their position as a key growth driver of credit expansion with some estimating them to grow between 10% and 12% this year due to the low interest rate environment and ample liquidity in the banking system.

While holding to this view, some feel the external environment, like the slowing US economy coupled with the sovereign debt crisis in the eurozone, could dampen demand for properties.

For the first seven months of this year, property loans remained the key growth driver, accounting for 40.6% of the banking system's overall credit expansion, followed by working capital loans at 23.6%. Residential property loans currently accounted for about 27% of the system's total loans.


We believe that the full year loan growth for residential property loans will be in the 10%-12% range.- RAM Ratings head of Financial Institution Ratings Promod Dass.

RAM Ratings head of financial institution ratings Promod Dass told StarBiz that the credit environment to date had continued to be accommodative for borrowers with ample liquidity in the banking system and a stable economic environment. Coupled with attractive promotional packages offered by some developers, he said residential property loans had already shown a healthy 7.1% growth in the seven months to July (or 12.1% annualised), which was more or less at a similar pace compared with the overall total banking system's year to date loan growth of 7.5%.

“We believe that the full year loan growth for residential property loans will be in the 10%-12% range although we are closely observing the sovereign problems still brewing in Europe as well as concerns on the US economy and the consequent impact on Malaysia's economic growth stamina, which could affect consumer sentiment in property purchases,” he reckoned.

Dass said that while there was a slowdown in loan applications for residential mortgages in the few months after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum had picked up again since March.

The move to curb the third and subsequent home financing was introduced by Bank Negara on Nov 2 last year to quell speculation on residential properties.

Alliance Bank Malaysia Bhd consumer banking head Ronnie Lim said he was bullish on property loans. He noted that in Malaysia, housing loans currently accounted for 50% (or RM255bil) of total household debt (RM510bil) and would continue to be one of the key growth drivers of retail credit expansion this year and in the near future.

“One of the main growth areas for properties is Klang Valley, which accounts for close to 60% to 65% of all property transactions. In addition, the population growth in Klang Valley is expected to reach 10 million by 2020 and the demand for residential property is expected to be fuelled by residents of Klang Valley whose average age is 34 years old.

“Coupled with the shortage of land in Klang Valley, demand will always out-strip supply. The economic growth and the low unemployment rate in the country is another catalyst for housing loan growth. The recent Economic Transformation Programme (ETP) announcement will further accelerate demand for residential properties as more affordable properties are being developed,'' he said.

Lim said prices of properties in Malaysia were still one of the lowest in the region when compared with countries like Thailand, Hong Kong and Singapore. The industry's total housing loan outstanding stood at RM255bil as of July 2011 compared with RM234bil in December 2010, he noted, adding that this represented a 14% annualised growth.

Given the positive environment and the above factors, Lim said the bank was confident the current growth rate could be maintained despite the recent global market unrest.

An MIDF Research banking analyst said property loans would hold up as a key growth driver of credit expansion this year as the persistent demand for property loans would be driven by low lending rates as well as the sustainable growth of the property market.

By The Star

Renewing KL – breathing new life into old

Properly-planned facilities should include public transport system.

The ongoing effort to redevelop the older parts of Kuala Lumpur is taking on a new vigour with a number of government-owned land and assets being identified for redevelopment. This urban renewal programme, to revitalise the older and dilapidated parts of the city giving them a new lease of life, should be a holistic one.

The rationale for adopting redevelopment projects instead of taking on new ones on virgin areas is due to the growing scarcity of land in and around the capital city. Sometimes old buildings and structures need to be torn down to make way for new developments, or they can get facelifts that may involve the external or internal structures, or both.

To ensure functionality and relevance of the new projects, urban renewal initiatives should have the big picture where the newly redeveloped parts of the city blend in with the existing landscape.

Before the individual projects take off, it is important to ensure the different components complement each other to further enhance and add value to the property landscape.

It is also important to ensure heritage buildings and places are conserved and spared from having to make way for redevelopment. They are the living heritage of the people and is testimony of how our forefathershave came together and contributed to the building of this nation many centuries ago. Knowing and understanding the country's history has a way of bringing the people closer together towards greater unity.

To ensure these various needs are looked into when drawing up redevelopment plans, the whole initiative should involve a holistic master plan instead of an ad-hoc one.

Maintaining the big picture will ensure properly thought out projects, infrastructure and facilities for not only the present population but also to cater for the needs of generations to come.

Planning developments holistically with proper master planning to look into the long term needs of the people, works well for both brown field (already developed) and green field (yet to develop) developments.

Infrastructure and facilities, including road linkages and public transport system will also be better thought out and designed when this approach is used.

Hopefully these initiatives will steer the city into the league of global city.

Aiming for the much touted global city status when drawing up redevelopment plans for the capital city will be a worthwhile pursuit as this goal will ensure the massive initiative stays on the right course.

It is not just about putting up towering skyscrapers and gleaming new structures which make up the hardware, but more importantly will be the intangible software that make up the overall environment and quality of life of the people. This initiative should look into the city's heart and soul, its identity and heritage that can be maintained by promoting certain themes and designs in the redevelopment plans.

While identifying the right feasible projects to be undertaken, equally important will be the intangibles like the quality of the projects that include their functionality; and how they can add value to the living environment.

This should be the right time to also champion the green cause by having environment friendly concepts and designs in these redevelopment plans to reduce the carbon footprint of our urban populace.

Security and safety issues should also be made a top priority and it will be opportune to incorporate more street safe and people friendly features and measures.

The tendency to over emphasise on the bottomline by churning out more units and focusing on sales numbers should be kept at bay.

The ultimate goal should be for redevelopment projects to be a part of a greater effort towards uplifting the quality of the city's environment while injecting life into decaying and ageing townships and slum areas in the federal capital.

Among the much awaited projects will be the development plans for the 3,300 acres of Rubber Research Institute land in Sungei Buloh and the Sungai Besi military airport.

The redevelopment of the ageing low-cost apartments and homes in some parts of the city by the Federal Territories and Urban Wellbeing Ministry and City Hall will also be interesting as it involves many old low-cost housing projects identified for an upgrade of living conditions for the urban poor.

If done properly, these projects have the potential to champion more holistic living environment, and become the new residential and commercial hubs of the Klang Valley.

Deputy news editor Angie Ng votes for quality holistic environment and user friendly projects over mere aesthetics and external facades.

By The Star (by Angie Ng)

Bandar Raya: Tie-up with MPHB opens new avenues

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) says its joint venture with Multi-Purpose Holdings Bhd (MPHB) will open new avenues for the company for land development.

BRDB is seeking opportunities to diversify its development portfolio to grow itself, said its chief marketing officer K.C. Chong.

In April, BRDB's wholly-owned units, Pinggir Mentari Sdn Bhd, Orion Vibrant Sdn Bhd and Magna Senandung Sdn Bhd, signed three separate joint venture agreements with subsidiaries of MPHB - Tibanis Sdn Bhd, Magnum.Com Sdn Bhd and Mimaland Bhd.

The joint venture is centred on developing 268ha in Mimaland, Gombak; Rawang and Penang. It will be the first venture for BRDB in these locations.

BRDB has long been accredited with the establishment of Bukit Bandaraya in Bangsar, Kuala Lumpur. It also has projects in the Kuala Lumpur city centre and Johor.

The company's vision moving forward is to provide the unique Bangsar lifestyle in Rawang, Mimaland and Penang.

Chong told Business Times that the joint venture is working towards launching the projects, with an estimated gross development value of more than RM4.25 billion, after 2012.

"The projects are still in the planning stages. Penang would be our most expensive development. We plan to build luxury houses and condominiums, worth more than RM1 million each," Chong said.

In Rawang, the joint venture is planning to build mixed residential properties and a commercial hub.

Chong said the development planned for Mimaland will be the most exciting as it would change the area's landscape.

Mimaland was once a famous recreation park. It opened in 1975 and ceased operations in 1993, following some unresolved plans for expansion.

The joint venture project will include eco-friendly hillside, courtyard and waterfront landed homes set among natural waterways, valleys and water bodies with mature forest views.

Chong said properties at its Rawang and Mimaland projects will start from RM500,000.

By Business Times

GuocoLand in joint development of Beijing land

Zhang exchanging documents wth Lee at the agreement signing

The Xinzhongjie land parcel opposite the Dongzhimen transportation hub in Beijing, which is touted as Asia’s biggest, might be one of the last pieces of land left in the prime area.

But the concentration of old and dilapidated houses and buildings with over 2,400 households and the high-end commercial designation by city planners for the future development of the area has been a stumbling block for developers eyeing the land.

Defying the odds, GuocoLand China, owned by Singapore-listed GuocoLand Ltd, the investment arm of Malaysian conglomerate Hong Leong Group, has taken a calculated risk to team up with Beijing Oriental Real Estate Investment Co Ltd for the primary development of the area.

GuocoLand China should make use of the good guanxi (connection) it has successfully built over the years with the local government, says its group managing director Violet Lee in an interview after the signing of a strategic cooperation agreement with Beijing Oriental Real Estate Investment in Beijing recently.

Both companies will be responsible for the planning and administration of the land to meet the standard preconditions for a land grant. Their job also includes the payment of compensation for the takeover of the land, resettlement of existing residents, land levelling and construction of public infrastructure.

The initial plan proposed by GuocoLand China is to connect both the Dongzhimen and Dongsishitiao subway stations at both ends of the 160,000 sq m with an underground shopping mall selling high-end fashion products and services.

GuocoLand China has already developed its iconic Guoson Centre project smack on top of the Dongzhimen transportation hub. The 600,000 sq m development includes Guoson Mall, a five-star British-styled Guoman Hotel, grade A office towers, high-end residences and a 40,000 sq m rooftop garden.

Miao Qian, a partner from Dongfang Hengxin law firm, says the Xinzhongjie area is not considered valuable land at all and the cost of resettling the thousands of households in the area would be very high.

“If it is a much sought-after piece of land, then it would have been developed early. It is very hard to develop, not to mention the property prices in the surrounding area are very high,” he says. The Xinzhongjie area is part of the overall East Second Ring Road High-End Industry Development Plan initiated by the district government under its 12th Five-Year Plan (2011-2015).

Beijing Oriental Real Estate chairman Zhang Yue says the actual number of households to be relocated and compensation cost for the affected residents are still unknown. Furthermore, there are possibilities of dragging the development for a long time and not having the desired return on investment.

“We cannot say for sure whether GuocoLand China will continue to be involved in the secondary land development. But, I believe GuocoLand China will have an edge over others when bidding for the granted land because they would already have a better understanding of the desired development from their involvement in the primary land development,” he says.

This is the first time GuocoLand China is involved in primary land development in the country. To date, GuocoLand China has invested US$3.5bil in China with a sizeable portfolio of completed and ongoing property development spanning 2.5 million sq m.

By The Star

Is Sime’s E&O buy strategic and fair?

Two questions need to be answered to assess Sime Darby's purchase of a 30% interest in property developer Eastern & Oriental (E&O). Is the purchase really strategic? Is the price fair? For both questions, the answers may well be no.

Let's look at the first question. It's paying RM766mil in cash for a fully diluted 30% stake (after conversion of irredeemable convertible secured loan stocks or ICSLS).

That makes it the single largest shareholder in the company but the existing management continues to be in place.

Introduced into the deal is a collaboration agreement between the two companies for sharing of knowledge and expertise, leveraging on each other's core competencies and exploitation of mutually identified economic opportunities for three years.

Here's what Sime Darby's president and CEO Datuk Mohd Bakke Salleh had to say about the deal: “The proposed acquisition will provide a springboard for us to expand our property business and the type of products we can offer. E&O is a distinctive brand in the industry and is synonymous with quality. We strongly believe that through collaboration and cross fertilisation of ideas and expertise, there are significant opportunities for synergies for both parties, thus creating value for our stakeholders.”

Perhaps. But is the chosen approach the best way to deal with this? Sime Darby has one of the largest land banks in the country. There is no lack of land to develop. Plus it has considerable property development expertise spanning 40 years having developed townships, bungalows, houses, condominiums, and commercial projects.

Is acquiring a 30% stake in what is at best a niche developer of high-end properties the way to acquire expertise? Or would it be better for Sime Darby to acquire the necessary expertise by developing its own capabilities in-house and hiring selectively appropriate people and consultants to fill in the gaps in its own management?

It would seem under the circumstances that Sime Darby has more experience and expertise than E&O and even if it lacked some of these in some areas it would have been perfectly capable to hire the necessary expertise instead of an expensive acquisition which gives it no control of the company even.

Sime Darby would have done something more strategic if it put in place and executed a plan to develop its own in-house capabilities so that it can better exploit its own considerable land reserves of thousands of hectares efficiently and without having to make expensive minority investments to get expertise.

Recall that early last year Sime Darby went into an equal joint venture to develop a RM1bil commercial project in its established Bukit Jelutong housing area in Shah Alam, Selangor with another property developer, Sunrise.

Again why did Sime Darby, a developer with a long and varied track record, need Sunrise, an established condominium developer with limited experience in commercial development, to put up a commercial centre? Has not Sime Darby more expertise than Sunrise in this area?

Sime Darby and Sunrise will have equal stakes in a joint venture to develop 20.95 acres in the 180-acre Bukit Jelutong township. The land comes from Sime Daby's huge land bank, probably the largest in the country.

The price of the three pieces of freehold commercial land land was RM114mil, or RM125 a sq ft. That is a rather good price for a buyer considering that the gross development area is 2.7 million sq ft and it is a RM1bil project.

In fact, one may be hard put to buy residential land in Bukit Jelutong at that price now!

Sime Darby really needs to get its strategy right here and now.

Next, is the price fair? The acquisition was made at RM2.30 per E&O share and per ICSLS. That's a premium of a huge 60% over E&O's closing price of RM1.45 Thursday before it was suspended on Friday pending the announcement.

In fact E&O's price was climbing steadily from around RM1.20 end-March for a 21% gain despite the broad property index dropping nearly 140 points to about 960 or a decline of 13%.

Sime Darby said that the acquisition was at a 20% discount to E&O's estimated realisable net asset value of RM3.2bil. However it is not clear how this was estimated and over what period of time these assets would be realised.

Basically it means that the three sellers of the E&O stake benefited enormously by getting a 60% premium over the market price for their stake. Their gains over the market price alone would have amounted to a massive RM283mil.

Perhaps Sime Darby, even if it thought that this was the best route for its property sector strategically, could have made a partial offer directly to all E&O shareholders for a 30% stake at a more palatable premium to market and then accepted all offers proportionately.

That would have meant that all minority shareholders of E&O would have had an opportunity to partake in Sime Darby's very generous offer instead of just the select three. The select three are Datuk Tham Ka Hon also known as Terry Tham managing director of E&O; Tan Sri Wan Azmi Wan Hamzah of Land and General fame; and GK Goh Holdings Ltd of Singapore which sold their stockbroking operations to CIMB group some years back.

Yes, Sime Darby is big and yes it has a lot of cash and yes it generates a lot of cash too. Which is why its strategic moves must commensurate with its overall size. Making a joint venture here and an acquisition there is not going to do much for its property division but will instead spread its resources thin.

Revamping it to reflect the size, scale and complexity of its property operations and to enable it to acquire a capacity to undertake all manner of property ventures with the help of appropriate consultants such as architects, designers and planners and keeping all the profits for itself will help it much more. That's what other property companies do.

Managing editor P Gunasegaram thinks that many bad corporate decisions are made in the name of this nebulous thing called strategy.

By The Star

Glomac: No chance of asset bubble in Malaysia

Glomac's group managing director says prices of properties in Malaysia have not "skyrocketed" as compared with Hong Kong, China and Singapore.

Kuala Lumpur: The chief of Glomac Bhd has quashed talks that the local housing market is overheating and will lead to an asset bubble.

Group managing director cum chief executive officer Datuk FD Iskandar FD Mansor Iskandar said prices of properties in Malaysia have not "skyrocketed" as compared with Hong Kong, China and Singapore. The countries have been recording sharp price jumps of 40 per cent to 60 per cent since 2009.

"We are in a highly-regulated industry so it won't be possible to have an asset bubble here," Iskandar said in an interview with Business Times.

He said in general, property prices in the local housing have been increasing by 5 per cent to 10 per cent per year, which he described as healthy.

"Property prices will continue to appreciate as land and raw materials become more expensive," said Iskandar, who is also deputy president of Real Estate and Housing Developers' Association Malaysia (Rehda).

He is confident that Glomac will record strong double-digit growth of 30 per cent in the next two years, led by sales from its current projects.

Glomac has 13 ongoing projects in Kuala Lumpur, Sungai Buloh, Rawang and Johor, with a balance gross development value of RM3.8 billion.

The company's unbilled sales remain high at RM550 million as at April 30 2011.

Iskandar said the RM950 million Glomac Damansara project in Petaling Jaya, Selangor, will contribute significantly to its net profit and revenue.

For fiscal year ended April 30 2011, Glomac chalked up 54.2 per cent gain in net profit to RM63 million, while revenue surged 90 per cent to RM601.5 million.

"The MRT (Mass Rapid Transit) project will instill confidence in buyers and many residential projects are expected to benefit from the implementation," Iskandar said.

By Business Times

Tabung Haji and PNB follow EPF's footsteps to invest in London properties

PETALING JAYA: Following the Employees Provident Fund's foray into overseas property markets, Lembaga Tabung Haji and Permodalan Nasional Bhd (PNB) are looking to do the same and have sent out feelers about this, industry players said.

Like the EPF, both funds are looking to buy into existing premium properties for their yield. And also the EPF, both had targeted London as their first choice, followed by Australian cities, the insiders said.

“A few proposals were given to Tabung Haji and PNB in the last six to eight weeks,” said one property consultant.

However, it still isn't clear how much both funds are aiming to spend on overseas properties.

Last year, PNB bought an upmarket office block in Brisbane, Australia, called Santos Place, reportedly for more than A$290mil (RM928mil).

The 37-storey building has 373,508 sq ft of lettable space with about two-thirds of that leased to Australian oil and gas giant, Santos.

Its previous owner was Nilson Properties. Santos Place was PNB's first acquisition in Australia.

To date, the EPF has been the most aggressive among the Malaysian-based funds, with most, if not all, its overseas investments in Britain.

The pension fund has so far confirmed the purchase of four British properties costing a total of 634mil (RM3.1bil). It issued a statement last year that it was putting aside 1bil (RM4.85bil) for its British property investments.

Most of Tabung Haji's overseas investments to date have been in Mecca and Madina in the Middle East. It also has property investments locally.

PNB manages a fund size totalling RM150bil while Tabung Haji manages funds totalling RM28bil. Sources said both funds were looking to invest in properties primarily in London, Sydney, Melbourne and Perth, although they were open to other locations.

Said a source: “They are keen to invest in well-tenanted properties in Australia and Britain ranging from 50mil to 100mil, or A$50mil to A$100mil, with annual yields of between 5% and 7%.”

This confirms what Tabung Haji group managing director and chief executive officer Datuk Ismee Ismail said in June. Ismee said the pilgrimage fund was planning to increase its investments up to a quarter, from 15% currently. He did not say which cities he was considering then.

Unlike the EPF, which was putting aside 1bil for overseas property investments, both PNB and Tabung Haji did not disclose any figures. The only criteria was that, their property investment must be syariah-compliant.

“Tabung Haji has so far been very firm about this. The properties they invest in must be syariah-compliant,” a source said.

It has been reported that due to the troubles facing Western economies, funds owning prime properties there could be looking to hive off some of those assets, not only in London, but across the Atlantic and in Australia.

According to Reuters, Australia's property investment market is expected to be among the most active for the rest of this year as offshore investors seek quality assets in a mature market with growth prospects, property services firm CB Richard Ellis said. Foreign investors accounted for more than 30% of property investments in the first half of this year, double the long-term average, CBRE said.

Sales activity could also pick up after some listed Australian property trusts including Stockland and GPT unveiled plans to sell their assets to fund share buy backs or seek other opportunities.

There are more than A$10bil of commercial property assets currently on the market, according to the Australian Financial Review.

With low unemployment and a relatively healthy economy, Australian commercial properties offer a total annualised return of 10% and industry experts see rises in rents, particularly in the office sector.

In Britain, while the rest of the country is suffering from a soft property market, the city is bucking the weak trend, with 30% more surveyors reporting prices on the rise than falling, with the capital also seeing the strongest level of new buyer enquiries. Nevertheless, latest July figures show that commercial real-estate values rose at the slowest pace since the market started recovering from a slump two years ago.

By The Star

Malton advances on Q4 profit jump

Malton Bhd, a Malaysian property developer, rose the most in more than two weeks in Kuala Lumpur trading after profit in the fourth quarter ended June 30 surged almost fivefold to RM26.8 million from RM5.54 million a year earlier.

The stock gained 4.4 per cent to 47.5 sen at 9:19 a.m. local time, set for the biggest gain since Aug. 11.

By Bloomberg