GO reprieve for Sime Darby

The deal-makers at Sime Darby Bhd are probably heaving a collective sigh of relief. On Tuesday, the Securities Commission (SC) lifted the veil on its much-awaited decision as to whether Sime Darby would have to make a mandatory general offer (MGO) for luxury property developer Eastern & Oriental Bhd (E&O).

Ultimately, the regulator ruled that Sime Darby and E&O managing director Datuk Terry Tham Ka Hon were not parties acting in concert, and as such a MGO would not arise. The decision threw cold water on the month-and-a-half-long saga that gripped Corporate Malaysia and kept the investing public on tenterhooks.


Tham is one of three parties selling a stake to Sime Darby.

But this development marks the end to only one part of the SC's review still pending is the inspection of all stock transactions at E&O following its chairman Datuk Azizan Abd Rahman's purchase of 450,000 shares in the open market over five transactions from April to August this year.

His last purchase of 100,000 shares was on Aug 12, just two weeks before Sime Darby announced it was buying 30% of E&O. This period also coincided with a drastic increase in the trading volume of E&O shares, according to Bloomberg data.

Besides Azizan, another party that aggressively bought shares was E&O shareholder GK Goh Holdings Ltd. It purchased 1.25 million shares over three days, raising its stake to 11.6%.

Azizan is SC chairman Tan Sri Zarinah Anwar's husband. In accordance with the SC's internal governance processes, this disqualified her from the review due to conflict of interest. The SC said the review was led by two of its most senior independent commissioners, Datuk Francis Tan and Datuk Gumuri Hussain.

Sunday swoop

While some quarters have wondered aloud as to why the SC took as long as it did to reach a decision, an SC spokesperson reportedly said there was no specific time-frame for such reviews because there were various factors to be considered, including how soon the SC is able to access information related to the circumstances.

If nothing else, this outcome puts an end to the uncertainties surrounding the fate of Sime Darby's acquisition, made during a volatile period that saw the share prices of both companies seesaw in different directions.

For instance, Sime Darby shares hit a 13-month low of RM7.70 on Sept 19 on investors' fears that it might have to launch a MGO as well as the general market sell-down by foreign holders. Shortly after the deal came to light, E&O shares soared to RM1.76 on Sept 6, its highest in four years.

However, the entire affair over E&O began even before Sime Darby stepped into the picture.

In July, E&O was at the centre of rumours that SP Setia Bhd was keen to buy it, sending the former's stock up to RM1.70. SP Setia now a takeover target itself brushed off the gossip, but market talk persisted that E&O shareholders were looking to divest their stakes.

Then, on Aug 28, a Sunday, Sime Darby told Bursa Malaysia of its plan to acquire 273 million shares and 60 million irredeemable convertible secured loan stocks, or a 30% interest, in E&O for some RM766mil. The stake was to be bought from three vendors Tham, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh.

The deal took many by surprise, coming on the cusp of the Hari Raya and Merdeka Day holidays, a time when most would have either returned to their kampung or were on their way.

Sime Darby's offer price was RM2.30 per E&O share, a staggering 60% premium to its then market price. But Sime Darby defended the deal, saying it was a 20% discount to E&O's estimated realisable net asset value of RM3.2bil, or RM2.88 per share. With the stake sale done, Sime Darby is now E&O's single largest shareholder.


Bakke says the acquisition would enable Sime Darby to gain expertise in highend property offerings.

Predictably, the prevailing question on most people's mind was this: Why such a high premium? And why only 30%, which neither cedes it full control nor notable profits? Sime Darby went into damage control mode after that, with its president and group chief executive Datuk Mohd Bakke Salleh doing the rounds with the press.

He told StarBiz in an interview that the acquisition would enable it to gain expertise in high-end property offerings, the speciality of E&O. It is understood that Sime Darby, whose domain is in township development and mass housing, wanted a foothold into the top-end of the market, which commands higher margins.

Sime explanation

For E&O, pundits argued that the key selling point was its 980-acre Seri Tanjung Pinang seafront development in Penang, estimated to have a gross development value of RM10bil. E&O holds the concession to reclaim 740 acres for the second phase of the project in Tanjung Tokong to create two islands for mixed development.

Seeing that E&O needs between RM3.2bil and RM3.5bil to kickstart the reclamation, it could do with the financial shot in the arm of a conglomerate like Sime Darby.

But Sime Darby's stand has always been clear: it did not buy into E&O with the intent of a merger, but rather to enter as a stakeholder with the right size to get a feel of its operations. Bakke had told StarBiz that plans were already afoot to second some of Sime Darby Property's staff to E&O for exposure.

“We will make a general offer if we think it is appropriate. Since it (E&O) is a listed company, we could not do a due diligence or a feasibility study (for the stake purchase),” Bakke said.

This was not enough to placate minority shareholders, many of whom felt left out of the hefty 60% premium. Following intense pressure, the SC initiated a review to determine whether Sime Darby's actions had indeed necessitated a MGO.

Although the threshold for control is 33%, Para 6.2 of Practice Note 9 of the Takeover Code 2010 states that the SC has the right to consider all surrounding circumstances to deem if control has been passed to a new party, thereby mandating the new party to launch a MGO.

Among the criteria in Para 6.2 is “the consideration for the acquisition of the voting shares”, or the premium to market paid for the shares. Besides the issue of price, Sime Darby together with the three vendors from whom it purchased the stake would still collectively own about 41% of E&O post-transaction, arousing questions if they were persons acting in concert, an accusation they have vehemently denied.

While all this was happening, another party quietly accumulated E&O shares in the open market. Controlled by renowned banker Tan Sri Azman Hashim, ECM Libra Financial Group Bhd upped its stake to 6.3% from 5.1% in April, then raised that to 6.5% on the day of E&O's AGM on Sept 30. It has since become E&O's second largest shareholder.

At the AGM, ECM nominated two people to E&O's board Mahadzir Azizan and Leong Kam Weng, both lawyers by training but this was shot down by shareholders present at the meeting. To this day, no one quite knows what ECM has in mind for its investment in E&O since it has kept mum on its plans.

Many theories

After the SC's announcement this week, StarBiz tried to contact ECM for its response but was told its management preferred not to comment.

Many theories have surfaced about ECM's game plan, with one suggesting that it planned to force Sime Darby's hand in making a MGO. Speculation at the time had it that ECM possessed the support of friendly shareholders within E&O, which would have given it the leverage to swing the vote in its favour during the AGM.

The AGM itself was a heated affair. Combined, both the AGM and EGM dragged on for six hours, delaying the afternoon press conference. Minority shareholders took the opportunity to grill Tham on why he did not insist on an MGO by Sime Darby.

At the press conference later, E&O deputy managing director Eric Chan revealed that 75% had voted against the election of Mahadzir and Leong, but he also steered the conversation towards E&O's upcoming projects, such as its joint venture with Khazanah Nasional Bhd and Temasek Holdings Pte Ltd to develop a township in Iskandar Malaysia.

Now, as this particular chapter is laid to rest, one wonders what ramifications it might have for Corporate Malaysia. Does it, perhaps, set a precedent for similar deals in the future? All said and done, a key takeaway could simply be the classic saying: Let the buyer beware.

By The Star

Unlocking land value

When the Kuala Lumpur International Financial District (KLIFD) was announced, I was quite pleased at its location at the other end of Bukit Bintang as that part of the city was long the purview of dilapidated civil service residences which degenerated to car wash premises and some unsavoury practices on premises built nearly 100 years ago. All that is a memory now as the land is finally cleared and a new master plan began to emerge.

Kuala Lumpur is sorely in need of a financial district such as Connaught Place in Hong Kong or Raffles Place in Singapore or even Canary Wharf in London, a location that every international financial institution would have to be in to be counted as a world leader.

The KLCC location could have been ideal but Petronas is not property centric and preferred to surround itself with the oil and gas services industry. There are still a number of vacant sites after 15 years.

Malaysia has now a worldwide reputation as a sukuk platform and a halal platform both valuable commodities if you want to do business in the Middle East and be in the running for a syariah compliant financial service. Or if you want to sell your food products to the Middle East.

With the tsunami of change in North Africa and the continued instability in that region for some time, more and more banks and funds will want to relocate to safer locations and it's Malaysia and not Singapore or Hong Kong that will be the first port of call if we have the right product and the right location.

But after that announcement and the setting up of a great office and hiring people in 2009, there was a long period of silence. In the current gossip-laden environment there was not a peep from the company in explaining anything.

Then suddenly after a long lull the KLIFD project is in the news again, with a slew of appointments being made recently for the RM26 billion development.

To be fair, from the beginning its master developer 1MDB has made it clear it would let action speak louder than words. But in doing so it had had to resolve issues raised by several parties, transparency being one of the major ones.

Now though, more pieces are being put together and the picture is beginning to get a little clearer.

For a project of that scale, it is understandable that many will want to have a piece of the action and concerns of fairness when it comes to awarding contracts are bound to arise. From the outside looking in, some may say that not much effort has been done to allay these concerns and curiosity.

But it could also be said that 1MDB maintained its own pace in conducting the selection process. The company certainly remains either unaware or impervious, which is necessary for a project like this.

Given the 20-year timeline of the project, wouldn't any developer want to ensure all its vendors have the necessary resources and ability to deliver?

Early August, it had announced Akitek Jururancang Malaysia Sdn Bhd and US-based Machado Silvetti & Associates as its master planners, chosen for a "highly functioning, interesting, innovative, and aesthetically pleasing urban district that will establish KLIFD as a financial centre of choice".

A few weeks ago, it followed with 11 more appointments consisting international and local outfits in various fields of expertise, from infrastructure engineer to traffic experts to sustainability consultant.

This is quite a pleasant change, and redeemed 1MDB from some of its detractors' criticism of being unable to make decisions.

1MDB reiterated that its selection process adopted best global practices, including at pre-qualification and request for proposals (RFP) stages.

1MDB also said it had engaged all potential vendors in numerous discussions to ensure all parties are able to work together to realise its vision for KLIFD.

The need for keeping information close to the heart of the matter is, of course, understandable for fearing it will jeopardise negotiations and project's progress. However, 1MDB should still be aware of the public's curiosity and allow certain details to be available on a regular basis.

For one, this action will keep speculations to a minimum and at the same time it enables the public to make up their mind better on whether KLIFD is indeed a beneficial project or otherwise.

KLIFD is currently in its master planning phase, with a detailed plan set to be delivered early next year. Construction is scheduled to start in June next year.

According to news reports, the first phase of the development is expected to be operational by 2016, when the first line of Malaysia's mass rapid transit system is set to be up and running.

When fully complete, KLIFD aims to bring together leading financial institutions and top companies from all over the world into one place. With Malaysia's edge in Islamic finance as well as the country's location in Asia, it should well attract major players, complementing other financial centres in the region.

If the project is indeed going to be one of the main drivers of the economy, the public would want to know what kind of animal it would be, or how the project could boost the surrounding areas with incentives to complement KLIFD.

1MDB perhaps is ready to shift gears. It should continue with its initiative to be more forthcoming, and assume the spotlight it has always been put under. Besides KLIFD, 1MDB is also the master developer for Bandar Malaysia, the urban redevelopment project where the old Sungai Besi airport is located.

It has said that the selection of consultants for Bandar Malaysia, as the project is named, will undergo the same rigorous selection process with a mix of international and local companies. That should be a good thing.

The writer is the chief executive officer of Malaysia Property Incorporated

By Business Times

SunREIT Capital receives approval for RM3bil notes programme

KUALA LUMPUR: Sunway REIT Management Sdn Bhd said that its unit SunREIT Capital Bhd had received the Securities Commission’s approval to establish a RM3bil medium-term notes (MTN) programme.

SunREIT Capital is a special-purpose vehicle formed specifically for the issuance of the MTNs under the programme whose shares are held by OSK Trustees Bhd on behalf of Sunway Real Estate Investment Trust (SunREIT).

SunREIT Capital is the wholly owned subsidiary of SUNREIT, which in turn is managed by Sunway REIT Management.

HSBC Bank Malaysia Bhd, Maybank Investment Bank Bhd and RHB Investment Bank Bhd are the joint principal advisers and joint lead arrangers for the programme.

The first issue of the programme shall entail RM1.56bil MTNs in nominal value comprising of a few classes.

The programme has an expected tenure of up to 18 years and a legal tenure of up to 20 years.

The proceeds of the MTNs shall be utilised for the purpose of advancing to SunREIT where the REIT Trustee shall utilise such proceeds for financing (including repayment of cash used by SunREIT to part finance) the investment activities of SunREIT or refinancing of its existing and future borrowings for investment activities.

The proceeds will also be used for working capital requirements of SunREIT and to defray expenses incurred in relation to the MTN programme as well as to refinance maturing MTNs on their respective maturity dates.

By The Star

KLIFD to take off early 2012

KUALA LUMPUR: The US$8 billion (RM25.07 billion) Kuala Lumpur International Financial District (KLIFD), to be jointly developed by 1Malaysia Development Bhd (1MDB) and Abu Dhabi's Mubadala Development Corp, will get off the ground early next year.

"The master plan is close to completion. We are working closely with City Hall to get the details ironed out," said its chief executive officer Shahrol Azral Ibrahim Halmi.

The project, which is aimed at strengthening the country's position in the financial services sector, will be developed in phases on a 30.35ha piece of land in the Imbi area fronting Jalan Tun Razak.

"We want the development to be on an orderly basis and ensure that there are marketing benefits," he said.

Over the next six months, 1MDB will intensify talks with prospective investors and developers, he said, without revealing details.

The first phase will comprise a tower and several buildings, he added.

The projects in KLIFD are aimed at attracting cutting-edge technology along with promoting sustainable development via green technology, he said.

Such niche development requires huge investment and as a government-owned organisation, 1MDB has the strength and flexibility to execute it, he said.

He praised the incentives given to IMDB in the 2012 Budget, saying they came at the right time when work on the financial district was being intensified.

"We appreciate the government's commitment to KLIFD. It will ensure that we have the right sort of tenants, such as international banks and financial institutions," he said.

The incentives include a 100 per cent income tax exemption for a period of 10 years and stamp duty exemption on loan and service agreements for KLIFD-status companies.

Others include Industrial Building Allowance and Accelerated Capital Allowance for KLIFD Marquee Status Companies, and 70 per cent income tax exemption for a period of five years for property developers in KLIFD.

He said the level of commitment within KLIFD, the government and its officials is exemplary as "everybody has the same sense of urgency (given the importance and impact of the project)".

Such incentives would also attract developers to the development of KLIFD, despite the huge investments needed, he said.

Shahrol Azral, who graduated from Stanford University in the US and has experienced the Silicon Valley lifestyle, said KLIFD would also have a similar concept, being not just about offices but a place where one can "hang out" and network.

"KLIFD is all about building the nucleus for talent and innovation, which is also in line with the government's aim under the Economic Transformation Programme," he said.

1MDB takes a lot of effort to send the message across to the general public of the totally new concept of KLIFD, he said.

"We have a lot of programmes that involve the people and the younger generation, such as Dana Belia," he said.

Dana Belia, funded by Yayasan 1MDB, provides young people a platform to express their hopes, ideas and creativity through projects that promote unity.

Shahrol Azral, who is also an expert in value creation in multiple sectors, said he wants to maintain the "authenticity" of Malaysian culture - Malay, Chinese and Indian - in KLIFD. "We have the diversity and that will be part and parcel of KLIFD. It won't just be some building blocks," he said.

By Bernama

Chor sees no property asset bubble

PETALING JAYA: Malaysia does not foresee a property asset bubble in the near future unlike China, Hong Kong and Singapore, which have such concerns.


Chor: ‘Increase in RPGT among measures to curb speculation.’

Housing and Local Government Minister Datuk Chor Chee Heung said that many local developers were still rushing to submit their applications for various projects.

“No, I don't think so because we have not reached that stage. If you think this (slower property sales) is the sign, then why are developers jumping in to continue to build?” he said after the opening of the 19th International Real Estate Federation Asia-Pacific Real Estate Congress 2011.

On another note, Chor said the increase in the real property gains tax (RPGT) was among the measures taken by the Government to curb speculation.

The Budget 2012 proposed that the RPGT on properties held and disposed of within two years be raised to 10% from 5%.

Chor said although the additional 5% was not too much of a deterrence, it would not give much room for speculators to buy property and flip it shortly, adding that the additional tax would not affect genuine home buyers.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, in his speech at the congress, said the real estate and business services sector was projected to expand by 6.8% and 5.7% respectively in 2011 and 2012.

“As we move forward, we cannot abandon the underprivileged and the poor. In this respect, we have put in place numerous measures to ensure that there is adequate supply of affordable homes. In March this year, the Government launched the My First Home Scheme.

“Under Budget 2012, the ceiling selling price of these homes has been raised to RM400,000 from RM220,000. The new ceiling would allow a greater number of aspiring homeowners to take advantage of the 100% financing scheme by participating financial institutions,” Husni said.

He also said unique public-private partnerships would be forming, where the Government would provide the land on which private property developers could build homes for the less fortunate group.

By The Star

UOA plans more projects

PETALING JAYA: With property stocks trending lower over the past several weeks and its shares halved from the initial public offer price of RM2.60 in June, UOA Development Bhd is manoeuvring around the current soft patch with a proposed purchase of 9.8 acres.

In a filing with Bursa Malaysia, the company said it had proposed to buy the freehold Kepong land for RM72.9mil cash.

The stock closed three sen higher at RM1.28 yesterday.

Chief operating officer David Khor told StarBiz that a residential development was being planned for that land and work would commence next year.

“It will be one of several projects about five or six being planned for next year,” he said. No gross development value is available.

UOA is a subsidiary of United Overseas Australia Ltd, which is listed in both Australia and Singapore.

UOA is known for its flagship project comprising 60 acres in what is currently known as Bangsar South, located between Petaling Jaya and Kuala Lumpur.

“We are unable to comment on the share price. However, we are extremely pleased to share that UOA has recorded a gross profit of RM161mil in the first half of 2011.

“This marks an impressive first half-yearly results compared with RM183mil recorded for the full year of 2010,” Khor said.

He said UOA would continue to focus on its core development activities while delivering a sustainable and strong financial performance to shareholders.

“UOA's expertise is in office development although we are also able to do high-rise residential and landed properties,” Khor said.

Close to 90% of its office space of 2.26 million sq ft, divided between 14 blocks and eight subsequent blocks in Bangsar South, have either been rented out or sold, he said.

Khor said residential component contributed about 60% of UOA's revenue in the second quarter.

He said contribution from the residential component was expected to continue to increase. This is based on the company's upcoming developments and potential land acquisitions that would form a solid basis for its growth over the next five to seven years.

CIMB Research said UOA had about 100 acres of undeveloped land with a gross development value (GDV) of RM11bil. Bangsar South has a GDV of RM8bil and will take several years to complete.

The company has completed two high-rise condominium blocks in Bangsar South comprising a total 470 units besides 14 blocks comprising 760,000 sq ft of office space and another subsequent four blocks of 600,000 sq ft.

Khor said besides Bangsar South, UOA had seven other ongoing projects in the Klang Valley that would generate RM2.43bil in GDV. The company will launch another six next year with a GDV of RM1.35bil.

“After 2012, there will be other developments comprising residential and commercial, with GDV totalling RM6.9bil,” he said.

By The Star

SP Setia's major shareholders seeing eye to eye

KUALA LUMPUR: The major shareholders of SP Setia Bhd have appeared to patch up their differences, after a joint statement by both the property developer and Pemodalan Nasional Bhd (PNB), say analysts.

This has also meant that SP Setia chief executive officer (CEO) Tan Sri Liew Kee Sin is now less likely to seek a higher takeover bid.

"Market talk was that PNB and Liew did not see eye to eye on some issues, particularly on PNB's intention to have more say in the company. The statement yesterday certainly squashed market rumours and addressed the concerns of investors, employees and business partners.

"With the statement, it is also less likely that Liew will be seeking for higher bidders, as this may not look professional," said a research head from a local brokerage.

Early this week, PNB in a statement, said it wants Liew to remain at the helm of SP Setia and the existing management team to continue to manage the company. It added that "it is committed, once markets stabilise, to maintain an appropriate shareholding spread with the capacity to attract not just local but also foreign institutional funds and retail participation".

Liew, in the statement, added that he was "heartened" by the reassurance from PNB president Tan Sri Hamad Kama Piah.

To recap, about two weeks ago, PNB announced a conditional takeover offer for SP Setia, which involves PNB buying SP Setia shares it does not own for RM3.90 a piece and warrants it does not own for 91 sen each.

The takeover bid, which appears to be hostile, was immediately rejected by Liew on the same day, saying that the offer undervalues the company. He asked PNB to reconsider higher offer and said it will seek offers from rival bidders.

The takeover is conditional upon when PNB receives more than 50 per cent of shareholders accepting the offer.

Since PNB's announcement, the group has increased its shareholding from about 33.2 per cent to about 38 per cent in SP Setia, mainly via the open market.

However, interestingly, it appears that PNB's acquisition from the open market has slowed lately.

This week, SP Setia's average daily trading volume is about one million shares a day. In contrast, between September 29 and October 7, its average trading volume was 15 million shares a day.

"It is now likely that investors will just sit out for the time being while waiting for the independent advice circular to be out," said an analyst.

By Business Times

New condo? No, it’s an office block

SINGAPORE: With their swimming pools, gyms and immaculate rooftop gardens, they could almost be mistaken for executive condominiums.

In fact, they are office buildings in industrial estates – part of a new breed of developments designed to provide a stylish workplace for young entrepreneurs keen to get the creative juices flowing.

Gone are the days when their firms had to settle for space in staid grey blocks alongside small factories. Instead, developers say they are concentrating on aesthetics and recreational facilities, which help them to attract tenants such as start-ups run by bosses who want somewhere “cool” to do business.

Take Bizhub 28 @ Chai Chee. Due to be completed in 2013, it will have a pool, barbecue pits and a gym. Seah Yam Seng, the property agent in charge of selling the office space, said it was attracting mainly foreign firms and new tech businesses.

“It’s the lifestyle,” he said. “Some local companies may be happy with just an office space to work in but, nowadays, tenants do demand a little more.”

Oxley BizHub is another trendy development, this time aimed at light industry companies or those that produce small consumer goods. The developer of the Ubi Road 1 project, which is due to be completed in 2013, said it was not interested in slapping together a simple design.

Oxley Rising chief executive Ching Chiat Kwong said: “We believe that injecting a bit of ‘lifestyle’ into our projects encourages people to be more productive at work. It helps to have a lot of greenery and a nice area to work in.”

He added that the concept was likely to catch on fast with developers who realised their customers expected modern features.

Oxley paid S$158.1mil, or S$169 per sq ft (psf), for the Oxley BizHub 60-year leasehold plot in August last year. Since its launch, the property has sold its 728 units at an average S$677 psf. Prices there are said to be higher than those at other 60-year leasehold properties in the area, which go up to slightly over S$400 psf.

While the building’s design sets it apart from others in the neighbourhood, property agent Benson Koh said prices at the project depended just as much on the economy.

“Whether or not the price can be justified will depend on market demand,” he said. “The recent cooling measures on residential property have driven a lot of investors to buy units in industrial projects, so demand is very high right now.”

The move to add more frills to office buildings is also catching on in downtown developments. Asia Square, in the Central Business District, will have a 32,300-sq-ft gym and a fully sheltered landscaped plaza where tenants can relax, socialise or hold corporate events.

Existing office buildings equipped with facilities like these include Capital Tower and One George Street, both of which have pools managed by Fitness First. Capital Tower even has an indoor golf club on its ground floor. CapitaLand, which developed both buildings, said it wanted to provide its tenants with a balanced environment for work and play.

When IT consultancy Acian Technologies decided to set up its new office at the futuristic Fusionopolis in Buona Vista in 2007, the building’s design, gym and roof garden were a major draw. “It’s great for the employees to visit the garden, and it helps us when we are recruiting staff,” said chief executive Julien Arnaud, 33. “I’m a member of the gym, and I usually drop by in the morning or after work.”

Wesley Oxenham, director of design at technological firm Peekspy, said he planned to move his office somewhere “cooler”. Right now, his company is based in an older industrial building.

“I visited the Google offices in Singapore a few years ago, and I was quite inspired by the way they did the place up,” said the 28-year-old. “It’d be nice if the office building and the interior were well designed. It could help us think in a more innovative way.”

By Straits Times Singapore

Sunway in JB and Singapore projects

PETALING JAYA: Construction and integrated property developer and manager Sunway Bhd has been awarded a contract worth RM308.9mil from Iskandar Malaysia Studios Sdn Bhd for the construction of an integrated media studios facility in Johor Baru.

In a statement to Bursa Malaysia, Sunway said that its wholly-owned subsidiary Sunway Construction Sdn Bhd had received the letter of award for the project.

Called Pinewood Iskandar Malaysia Studios, work on the project would take 19 months for completion by May 10, 2013.

Among other things, the project would comprise a TV block, with two TV studios and two scene docks; a film block with five studios; an annex block with a viewing theatre and audience-holding area; a production block, with offices, dressing room and wardrobe studio; and ancillary building and space, with a guard house, carpark and a 10-acre backlot for filming.

The project is expected to contribute positively to the earnings of Sunway group from financial year ending Dec 31, 2012 onwards.

In a separate announcement, Sunway said that Sunway Developments Pte Ltd, together with Hoi Hup Realty Pte Ltd and Oriental Worldwide Investments Inc, had been awarded the tender for a piece of land in Jalan Loyang Besar/Pasir Ris Rise, Singapore for a 99-year lease term at S$140.96mil (RM345mil).

Sunway Developments, a wholly-owned subsidiary of Sunway Construction, would set up a joint-venture company with Singapore-based Hoi Hup and Oriental World based on a 30:60:10 equity ratio to undertake the development of the land.

The proposed development is expected to complete within 60 months, commencing Oct 10.

By The Star

Sunway to develop land in Singapore

SUNWAY Bhd won a RM345 million tender from the Urban Redevelopment Authority of Singapore to develop a piece of land in Jalan Loyang Besar, Singapore.

Sunway’s partners in the venture are Hoi Hup Realty Pte Ltd and Oriental Worldwide Investments Inc.

By Business Times

E&O mandatory general offer unnecessary

PETALING JAYA: In a move market observers said was not unexpected, the Securities Commission (SC) has concluded that Sime Darby Bhd does not need to make a mandatory general offer (GO) for shares in Eastern & Oriental Bhd (E&O).

In separate announcements to Bursa Malaysia, Sime Darby and E&O said the SC had found that Sime Darby and Datuk Terry Tham Ka Hon were not parties acting in concert and as such a mandatory offer obligation would not arise.

The SC also told Sime Darby that its finding was without prejudice to a review of the decision should new facts arise and it was the regulator's right to take appropriate action provided under the securities laws as a consequence of such review.

Trading in Sime Darby and E&O shares was suspended yesterday till 2.30pm pending the announcement on the SC's decision.



The news comes after more than a month of speculation over the implications of Sime Darby's acquisition of a 30% stake in niche property developer E&O for RM2.30 per share, a 60% premium to its then market price.

In a statement, the SC said: “In the course of the review (of the circumstances of the acquisition), parties involved in the transaction were interviewed and relevant documents procured. The review included an assessment of possible concert party relationships between and among the parties involved. Precedents in Malaysia and practices and rulings in other jurisdictions on similar issues were also examined.

“Having analysed all the evidence gathered, it is the SC's finding that the acquisition of the 30% equity interest in E&O by Sime Darby had not given rise to a mandatory offer obligation under the Malaysian Code on Take-Overs and Mergers 2010.”

Besides Sime Darby and the three vendors from whom it had bought the 30% interest, the other name in the spotlight was E&O chairman Datuk Azizan Abd Rahman, who had purchased 450,000 shares on the open market in five separate transactions from April to August this year, with the last purchase of 100,000 shares done on Aug 12 about two weeks before Sime Darby announced its acquisition.

Azizan is also SC chairman Tan Sri Zarinah Anwar's husband. She recused herself from the review as a result.

Although the SC has said a GO was not necessary, the review of all stock transactions by all parties of E&O shares is still ongoing.



Sime Darby's purchase, coming just under the 33% threshold that would have required it to launch a GO, had sparked much debate in the market and consternation among minority shareholders of E&O.

After both companies resumed trading, Sime Darby shares hit a high of RM8.68 before settling at RM8.50, 1.19% above its closing price on Monday. E&O shares, meanwhile, traded mostly below their previous close and ended 1.45% lower at RM1.36.

Analysts said the SC's decision came as no major surprise. Speaking to StarBiz, a Sime Darby analyst said the outcome was more or less expected by industry watchers. He said the news would not significantly impact Sime Darby and did not warrant a change in his valuations.

Hong Leong Investment Bank Research said in a report that it was positive on the development as it would mean Sime Darby does not have to acquire the remaining 70% of E&O at a GO price that was much higher than E&O's market price.

Another analyst pointed out that the bigger concern for Sime Darby was crude palm oil (CPO) prices as the conglomerate derived some 58% of its operating profit from its plantation business. Sime Darby is the world's largest listed palm-oil producer by acreage.

CPO prices have come under pressure after the Malaysian Palm Oil Board released figures on Monday that showed supply was getting ahead of demand, as palm oil stockpiles jumped 12.17% in September from August against an 8.8% drop in exports.

As for E&O, analysts anticipate its share price could face some selling pressure because the prospect of a GO has diminished.

An analyst reckoned that E&O shares might touch RM1.20 on the disappointment of investors who bought into it expecting a GO.

By The Star

SP Setia's Liew gets 'sweet' offer

Kuala Lumpur: Permodalan Nasional Bhd (PNB) wants Tan Sri Liew Kee Sin to remain at the helm of SP Setia Bhd, following its proposed takeover of the company.

Analysts said if Liew remains as chief executive officer, there is a strong possibility the various funds with sizeable stakes in SP Setia may not accept the takeover offer and instead choose to remain as shareholders in the company.

As at December 23 last year, the various funds, excluding the Employees' Provident Fund, owned close to 19 per cent of SP Setia while as of last Friday, the EPF holds a 14.95 per cent stake.

The funds are not expecting better offers from rival bidders, considering the size of the takeover, which is said to be the biggest in more than two decades.

PNB is offering shareholders RM3.90 a share, as well as 91 sen for every warrant they hold, after it raised its stake in SP Setia to 33.2 per cent last month, exceeding the 33 per cent threshold.

In their first joint statement to Bursa Malaysia, PNB said it appreciated the strong branding of SP Setia, thanks to its entrepreneur-led management team.

"Liew will continue to lead SP Setia as its CEO... the existing management team will also continue to manage the company," said PNB in the statement.

The asset manager also said "it is committed, once markets stabilise, to maintain an appropriate shareholding spread with the capacity to attract not just local but also foreign institutional funds and retail participation".

Liew, in the same statement, said he was "heartened" by the reassurance from PNB president Tan Sri Hamad Kama Piah at their meeting last Friday.

The tycoon, who joined the SP Setia board in 1996, owns 11.26 per cent of the company and is widely recognised as the main driving force behind its transformation into one of the country's biggest property developers.

TA Securities property analyst, Tan Kam Meng, said following PNB's assurance that it would not be involved in the day-to-day operations of SP Setia, it is now unlikely that Liew will accept the (RM3.90 a share) offer.

"This should lend support to the share price as PNB is expected to continue buying SP Setia shares from the open market at any price below RM3.90 per share."

PNB said its involvement in its investee companies is mainly through board representation, while the day-to-day operations are left to professional managers.

Mercury Securities head of reseach, Edmund Tham, said the statement seems to indicate that Liew may not be seeking alternative bidders.

He said since there is no update from AmInvestment Bank as the independent adviser, investors may opt to take up the offer or hold on to the shares.

"The immediate concern for the public investors would be the liquidity of the shares, meeting the public spread requirement (at least 25 per cent) and the listing status."

Liew, meanwhile, reiterated SP Setia board's advice to non-interested shareholders to wait for both PNB's offer document as well as the independent advice circular before deciding on their next move.

When contacted, an SP Setia official said the company needs to see the whole process through before it can comment further.

By Business Times

Hamad: PNB not taking active role in SP Setia

PETALING JAYA: The nation's largest asset manager, Permodalan Nasional Bhd (PNB), has taken the step of reassuring stakeholders of property developer SP Setia Bhd that it does not intend to seek an active role in the management of the latter despite a bid to increase its stake.

PNB president and group chief executive Tan Sri Hamad Kama Piah Che Othman, who issued a joint press release with SP Setia president and chief executive officer Tan Sri Liew Kee Sin, said the asset manager's role was to look for good companies to invest in and not to manage those companies.

Hamad had met Liew last Friday following concerns over the fate and future direction of the company after PNB made an offer of RM3.90 per share and 91 sen per warrant with the aim of increasing its stake to more than 50%.

“Tan Sri Liew will continue to lead SP Setia as its CEO. The existing management team will also continue to manage the company with the same high professional standards and spirit of excellence which has caused SP Setia to be voted number one developer in Malaysia time and again,” he said.


Hamad: ‘Liew will continue to lead SP Setia as its CEO.’

Hamad added that PNB's involvement in its investee companies was mainly through board representation, while the day-to-day operations were left to professional managers.

PNB was seeking to increase its stake in the company because there was a disconnect between the fundamental value and share price caused by the global market turmoil, he said.

“As a long-time shareholder of SP Setia, and more recently a substantial shareholder owning more than 30% of the company, PNB fully appreciates the strong branding and deep-embedded value which has been created in the company through its entrepreneur-led management team,” he said.

He said the asset manager was also committed to maintaining an appropriate shareholding spread with the capacity to attract not just local but also foreign institutional funds and retail participation once the market stabilised.

Liew, on the other hand, was heartened by PNB's reassurance that it would continue to work with the existing management.

He expressed confidence that SP Setia would continue to have a bright future with solid growth prospects and thus create greater value for all stakeholders with the strong backing of PNB as a supportive long-term institutional shareholder committed to working synergistically with SP Setia's management.

However, Liew reiterated the board's advice to non-interested shareholders to wait for both PNB's offer document and the independent advice circular before deciding on their next move.

“This is to enable all shareholders to make a more informed decision regarding their investment in SP Setia,” he said. AmInvestment Bank Bhd was appointed the independent adviser for the offer.

According to Bloomberg data, PNB together with Skim Amanah Saham Bumiputera has a total stake of 31.73% in the company.

By The Star

Mah Sing, China firm in deal on 3 towers at Mont' Kiara project

KUALA LUMPUR: Mah Sing Group Bhd, Malaysia's fifth largest property developer by revenue, has partnered a Chinese firm to build three towers at its RM408 million Icon Residence Mont' Kiara project in Mont' Kiara, Kuala Lumpur.

The firm, a diversified group from China, will build the towers in exchange for 96 units from Mah Sing.

The units are worth a combined of RM220.8 million, or an average RM1,200 per square foot, said Mah Sing group managing director-cum-group chief executive Tan Sri Leong Hoy Kum.

Icon Residence Mont' Kiara comprises three towers with a total of 260 units. Each unit is worth an average of RM2.3 million.

With the Chinese firm taking up 96 units, this would mean Mah Sing has sold 60 per cent of the project since the project launch in June this year.

Leong said this is the first arrangement between Mah Sing and the Chinese firm and also the first of its kind for the group.

He said this arrangement will free up the construction cost for Mah Sing, allowing the group to use its cash flow for other opportunities.

Leong added that it will also set a precedent for similar arrangements in the future for Mah Sing's other projects.

"This is a win-win arrangement for both parties as we believe there is plenty of upside to the project once it is completed, and Mah Sing effectively does not have to come up with further cashflow to complete the project," Leong said.

Dubbed an architectural masterpiece, Icon Residence Mont' Kiara is a one of its kind serviced residence and the first in the region to adopt a distinctive Mediterranean theme.

It will be Green Building Index and Green Mark compliant with some features, such as variable refrigerant flow air-conditioning system with energy saving benefits and automated waste collection and rain water harvesting system.

Leong said the project has attracted strong interest from Hong Kong, China, Singapore, Indonesia, Taiwan, Korea and Malaysia.

Meanwhile, Leong said Mah Sing will not revise its sales target of RM2 billion for 2011. The company has achieved RM1.7 billion as at September 2011.

By Business Times

VI Properties woos Malaysians to Canadian real estate

KUALA LUMPUR: Vision International Properties (VI Properties), a real estate investment group, aims to sell up to RM80 million worth of its properties in Canada within a year of opening its office in Malaysia.

A spokesman said the firm is confident of achieving the target in view of overwhelming demand for its properties in Canada from buyers and investors in the Asia Pacific region.

"The minimum investment starts from RM500,000 and after four months in Malaysia, we have sold every single unit of our first project, called the Royal Oaks Manor. We only have two units left for our second project, known as Foxbend Manor in Lethbridge.

"Looking at these developments, we are confident that the target can be achieved," the spokesman told Business Times.

VI Properties offers ready-built properties with positive and immediate cash-flow, whereby investors will receive individual title to their property immediately upon purchase.

"We only market residential properties with proven good track record in tenancy rate and high rental yields. Our properties are already rented, ensuring that investors receive returns from day one. We provide a hassle-free full-service property management programme, hence investors get paid every month.

"Investors can obtain a loan of up to 80 per cent of the purchase price at interest rates from as low as 2.35 per cent through the company's cooperation with HSBC Premier and TD Bank in Canada," the spokesman said.

The spokesman added that VI Properties concentrates on residential properties in Alberta, Canada where the "Silent Oil Boom" is located.

On why an office in Malaysia, the spokesman said the company sees the potential of having Kuala Lumpur as its hub for business expansion in Asia Pacific.

"Due to the economic slowdown in the US, Europe and the Middle East, VI Properties sees the opportunity to establish and expand the company's business in the Far East or Asia Pacific." the spokesman said.

To date, the firm has concluded 12 real estate investment projects across Canada.

By Business Times

Bina Puri unit secures RM20mil housing project

KUALA LUMPUR: Bina Puri Holdings Bhd's wholly-owned subsidiary Bina Puri Construction Sdn Bhd has secured a RM20.4mil project from Jabatan Perumahan Negara.

The 14-month job, to commence this month, would involve the construction of Taman Topaz housing project in Dengkil, Selangor, said group managing director Tan Sri Tee Hock Seng.

He said with the new project, the group's orderbook now stood at RM2.73bil.

“This year, we have secured new projects worth over RM1bil, which is consistent with our performance over the last few years,” he added.

By Bernama

Bina Puri climbs on housing contract

Bina Puri Holdings Bhd rose to its highest in almost a month after saying it won a RM20.4 million building contract from Jabatan Perumahan Negara.

The stock climbed 2.9 percent to RM1.08 at 9:02 a.m. Kuala Lumpur time, set for its highest close since Sept. 15.

By Bloomberg

Mah Sing secures RM221mil bulk sales in Icon Residence Mont Kiara

KUALA LUMPUR: Mah Sing Group Bhd has secured a RM220.8mil bulk sale of 96 units of serviced residences in Icon Residence Mont Kiara, at an average pricing of RM1,200 per square foot.

The units were taken up by an established Chinese corporation that would undertake the construction of buildings and external works of the entire project in return for the 96 selected units, Mah Sing said in a statement today.

Mah Sing will be the sole marketing agent for the 96 units. “This is indeed an innovative arrangement as it frees up the construction cost for Mah Sing and allows us to use our cash flow for other opportunities. “It also sets a precedent for similar arrangements in the future for other Mah Sing projects,” said Mah Sing Group Managing Director/Chief Executive Tan Sri Leong Hoy Kum without naming the Chinese corporation.

Icon Residence Mont Kiara, dubbed the first in the region to adopt a distinctive Mediterranean theme, comprises 260 units in 3 iconic towers.

This bulk sale brings the take up of the project to more than 60%.

Mah Sing said the project had attracted strong interest from Hong Kong, China, Singapore, Indonesia, Taiwan, Korea as well as Sabah and Sarawak.

“Mah Sing intends to start a series of roadshows to these countries to reach out to its registrants and facilitate their purchase,” it said.

By Bernama

Developers drawn to ‘less prime’ locations

With the supply of land-bank getting scarce in the Klang Valley, it's not surprising to see developers expanding their presence in “not-so-prime” locations.

This was evidenced as recently as last week, when SP Setia announced it was acquiring a RM381.2mil plot of land in Rinching, located mid-way between Semenyih and Bangi old town, to be followed soon after by Mah Sing Group Bhd's purchase in Rawang for RM92mil.

“Granted, it is often developers with prime land-bank in Kuala Lumpur and Penang that stand to benefit more from rising property prices,” says an industry observer.

“But property conglomerates such as SP Setia and Mah Sing are well-known brand names with a proven track record. They can probably attract buyers and chalk up sales even if they bought land in Timbuktu,” he adds in jest.

A huge boost to the land acquired by SP Setia and Mah Sing is that they are both well connected. Malaysia Equity Research in a report pointed out that the former's Rinching land is located within 15 minutes from the proposed Bandar Kajang MRT station. “(It is) near the terminal station for the approved MRT Blue Line (Sungai Buloh-Kajang) and 25km south of KLCC (which is 40 minutes via existing highways).”

The report also says SP Setia is planning to replicate the success of its twin flagship Setia Alam and Setia Eco-Park development, including investing in infrastructure to improve connectivity.

An analyst at a local bank-backed brokerage says investing in infrastructure is “part of the package” when developing land that is considered “less prime”.

Similarly, analysts are also positive about the connectivity for Mah Sing's Rawang land. The developer has proposed to develop a mixed township, M Residence@Rawang, that includes beginner homes on 90.3ha.

“M Residence@Rawang is directly accessible from the North-South Highway, being only 10km from the exit point at the Rawang toll via Jalan Batu Arang. The Kuala Lumpur-Kuala Selangor Expressway (formerly known as Latar Highway) was opened in June,” says UOB KayHian in its research report.

“The Rawang KTM Station is also a short drive away, within 12km from the land, according to the management,” it adds.

According to Mah Sing, the M Residence@Rawang township has an estimated gross development value of about RM948mil and preliminary plans include two-storey link homes, townhouses, semi-detached homes, three-storey shops and various facilities and amenities.

“M Residence@Rawang is expected be developed over three to four years and the group is also actively scouting for more well-located mega township land that fit the group's business model of quick turnaround and allow for value enhancement,” the company says.

The first launch is slated for the first half of next year for the mass market, in line with the Government's call for private developers to build more affordable housing.

The move to provide affordable homes has been praised by analysts and industry observers and considered a good way to attract buyers in less prime land within the Klang Valley.

“With absorbitant property prices today, especially in the Klang Valley, it is becoming increasingly difficult for first-time home buyers to even place a downpayment for a house,” says one industry observer.

On the proposed Mah Sing development, UOB KayHian says: “The price tag for a two-storey link house (built-up of about 2,000 sq ft) is indicatively priced from RM390,000 onwards, or RM195 per sq ft. Ground checks indicate that selling prices for a two-storey link house in nearby developments such as The Emerald and Bandar Country Homes range from RM150 per sq ft to RM250 per sq ft.

“We believe the township concept should be able to attract buyers given the decent selling prices.”

Macquarie Research in its recent report says Mah Sing's project could see good demand with the significant rise in property prices in Kuala Lumpur and Klang Valley in the past year.

“As a comparison, Kuala Lumpur Kepong Bhd (KLK) launched its link houses in June this year in Bandar Seri Coalfields with prices ranging from RM328,000 to RM368,000. We understand from KLK that the sales for the launch were very strong with over 90% sales achieved, primarily due to upgrader demand.

“Mah Sing's new land is further up north of KLK's project, but has good connectivity with the KL-Kuala Selangor Expressway and is 20km from Rawang city centre.”

By The Star

Bina Puri awarded RM20.4m housing job

Bina Puri Holdings Bhd's wholly-owned subsidiary, Bina Puri Construction Sdn Bhd, has secured a RM20.4 million project from Jabatan Perumahan Negara.

The 14-month project, to commence this month, will involve the
construction of a housing project in Dengkil known as Taman Topaz.

In a statement today, Group Managing Director Tan Sri Datuk Tee Hock Seng said with the new project, the firm's outstanding orderbook, now stood at RM2.73 billion.

"This year, we have secured new projects worth over RM1 billion, which is consistent with our performance over the last few years," he added.

Tee also said the company was optimistic the construction sector would benefit from the new allocation recently announced in the 2012 Budget coupled with the spillover effects from the Economic Transformation Programme.

By Bernama

Bina Puri secures RM20mil project

Kuala Lumpur: Bina Puri Holdings Bhd has announced that its wholly-owned subsidiary, Bina Puri Construction Sdn Bhd, has been awarded a project from the Jabatan Perumahan Negara worth RM20.4mil.

The project is to undertake the construction works of a housing project in Dengkil known as Taman Topaz. Construction will commence in Oct 2011 and is expected to be completed in 14 months.

Group Managing Director Tan Sri Datuk Tee Hock Seng, JP said, “Inclusive of this project, our outstanding orderbook now stands at RM2.73bil. This year, we have secured new projects worth over RM1bil, which is consistent with our performance over the last few years.”

“Moving forward, we are confident our clients will be assured of our ability to deliver quality and timely projects. Additionally, we are optimistic that the construction sector will benefit from the new allocations recently announced under the Budget 2012 coupled with the spillover effects from the Economic Transformation Programme,” Tee added.

By Bernama

PNB not taking active role in SP Setia

KUALA LUMPUR: Permodalan Nasional Bhd (PNB) has given its assurance that Tan Sri Liew Kee Sin will continue to lead SP Setia Bhd as the company's CEO.

In a joint statement to Bursa Malaysia, PNB said its role in its investee companies is mainly through board representation while the day-to-day operations are left to professional managers.

"PNB is an investment fund and its role is to look out for good companies to invest in and not to manage these companies," it said.

The statement said PNB president and group CEO Tan Sri Hamad Kama Piah Che Othman had met Liew on Friday to “personally reassure him of PNB's best intentions for SP Setia."

“PNB is also committed, once markets stabilize, to maintain an appropriate shareholding spread with the capacity to attract not just local but also foreign institutional funds and retail participation,” it added.

In September, PNB had launched a takeover offer for SP Setia for RM3.90 cash per share and 91 sen per warrant after its shareholding surpassed the 33% threshold.

Since then, PNB has steadily acquired shares through the open market, with the most recent acquisition indicated in a Bursa Malaysia filing this morning that showed the state investment firm added 9.14 million shares at an average of RM3.89 apiece and 1.06 million warrants at 89.5 sen apiece.

SP Setia shares were traded at RM3.89 at 3pm.

By The Star

PNB says to keep SP Setia management

Permodalan Nasional Bhd, Malaysia’s biggest state-asset manager, plans to retain SP Setia Bhd’s current management team with Liew Kee Sin as chief executive officer following its proposed buyout, according to a joint stock exchange filing in Kuala Lumpur today.

PNB is also committed, once markets stabilize, to maintain an “appropriate” shareholding spread to attract local and foreign investors, the statement said.

Liew reiterated the board’s advice to wait for PNB’s offer document and a circular from independent advisor AmInvestment Bank Bhd before deciding on the general offer, it said.

The joint statement followed a meeting last week between Liew and PNB President Hamad Kama Piah Che Othman, it said.

By Bloomberg

Pavilion said to raise RM800m in IPO

Pavilion REIT, part-owned by the Qatar Investment Authority, plans to sell units on Malaysia’s stock exchange as early as next month through a property trust, said two people with knowledge of the matter.

The company, which owns the Pavilion shopping, residential and office project in Kuala Lumpur, aims to raise about RM800 million (US$255 million), said the people, who declined to be identified as the information is private. The size of the initial public offering may rise to as much as RM1 billion depending on demand, one of the people said.

At RM800 million, the Pavilion IPO would be Malaysia’s third-biggest share sale this year, after offerings by Bumi Armada Bhd and MSM Malaysia Bhd. Companies canceled or postponed US$8.9 billion of IPOs around the world in the third quarter as stocks plunged, putting the market on track to set a record for pulled deals.

Fitness First Ltd, which had sought to list in Singapore by the end of this year, is among those delaying IPO plans, people with knowledge of the matter said this month.

Pavilion is owned by Malton Bhd. Chairman Desmond Lim Siew Choon and his wife, together with Qatar Investment Authority. Its flagship development comprises a 1.4 million square-foot retail mall with 450 outlets, plus one office building and two residential towers in Kuala Lumpur’s city center, according to Malton’s website.

CIMB Group Holdings Bhd, Malayan Banking Bhd and Credit Suisse Group AG are managing the offering, the people said. Desmond Lim and his wife were at meetings and couldn’t immediately comment, according to their secretaries. A spokeswoman for Pavilion, who asked not to be identified, had no immediate comment.

By Bloomberg

Real property gains tax: Gradual impact

The existing rate is not effective in curbing speculation and could jeopardise the ability of the low- and middle-income groups to buy houses, says Najib

Kuala Lumpur: The impact from the real property gains tax (RPGT) hike, a move to curb speculation in the property market, will be gradual.

RPGT is a tax on properties sold less than five years after they are bought. Only the profit from the sale of a property is subject to RPGT.

It has been doubled to 10 per cent for the first two years and will remain at the previous level of 5 per cent in the third, fourth and fifth year. There will be no tax on gains after the fifth year.

RPGT exemption on a residential property is given to both husband and wife on one residential property each, once in a lifetime.

Yesterday, Prime Minister Datuk Seri Najib Razak in his 2012 Budget speech said that the existing rate of 5 per cent is not effective in curbing speculative activities and could jeopardise the ability of the low- and middle-income groups to buy houses.

These changes, he said, are low enough not to affect genuine property owners and will curb speculative activities.

Chairman of the Property Management, Valuation and Estate Agency Division of the Royal Institution of Surveyors Malaysia Adzman Shah Mohd Ariffin said that the move will deter future sales of property within two years of purchase. With prices stabilising and should they sell fast, they will not be able to make a killing.

"But, for those who bought a property three years ago, the price appreciation would have been much higher than the 10 per cent RPGT imposed," Adzman said, adding that this category of buyers will continue to make a profit.

According to him, properties can appreciate by 20 per cent or more once completed.

Real Estate and Housing Developers' Association Malaysia president Datuk Seri Michael Yam welcomed the move.

"The fact that there is no drastic change to the ruling on RPGT encourages long-term ownership of property which also helps the owner with capital appreciation and wealth creation as they will hold on to the property longer," said Yam.

He added that the first two years are effectively a 100 per cent increase, thus it will help discourage short-term speculation.

"It is a gentle/soft landing which will avoid a dip in the supply and demand of property," Yam told Business Times.

"The increase in this instance is not unreasonable, given that there are no speculative activities in the entire country but only confined to pockets of urban areas like Kuala Lumpur and Penang. These pockets of activities are insignificant compared with the total supply and demand for housing in Malaysia," he added.

However, real estate agent Rahim & Co's managing director Robert Ang said the 10 per cent increase is not an effective measure to try and curb speculation activities.

"If you want to curb speculation, why not something higher?" he said.

By Business Times

Opportunities in secondary market

OPPORTUNITY may present itself for house buyers looking for properties in the secondary market especially in prime areas, with the property market going through a soft patch, dampening sentiments of speculators.

“We have not detected any downward trend in prices yet, in fact prices are still on an upward trend. However, sentiment may have been dampened by the anticipation of measures that the Government may take to curb speculative buying on properties,” property valuer, KGV-Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua tells StarBizWeek.

He notes that the property sector has already seen a downturn in 2008, triggered by the United States subprime mortgage crisis following the 10-year cyclical nature of the global economy.



He, however, says house prices in Malaysia were not impacted extensively at that time.

“I would be more inclined to say that prices appreciation in the near future would be moderate. However, I think there will be a technical correction by next year. If you read the signs now, there might be a correction coming soon,” he said.

“Its about time for a correction. Hopefully we will not experience a drastic correction this time as sales data of new properties built by prominent developers are still enjoying brisk sales. The demand for houses and the savings of people are still there,” he says.

Chua says property prices in the secondary market is still stable especially in established areas and mature townships like Petaling Jaya, while properties outside the vicinity of Klang Valley have not seen any significant uptrend in price, excluding prominent locations like Bukit Tinggi and Penang.

Speculation is rife that the authorities may end the stiff competition seen among banks by maintaining a certain margin for banks, putting a stop to interest-rate slashing by banks to attract more customers for their banking loans.

A local research-house analyst says that although this may be beneficial for banks, ultimately it would squeeze the pockets of consumers in the interest of banks.

He adds that Bank Negara was also keeping a close eye on mortgage loans to see whether a cap on the loan to value ratio (LVR) for second mortgages is necessary.



“Any raise in the LVR would further dampen demand for properties, and right now its exceptionally hard to predict what the authorities are going to do next to further regulate the property market, as these speculated actions are all double-edged swords that the authorities need to carefully play around with,” he says.

Meanwhile, Henry Butcher Malaysia Sdn Bhd chief operating officer Tang Chee Meng expects property prices to hold firm for the next six months but that all depends on how external factors like the eurozone crisis and the faltering US economy will fare in the near term.

“The market has softened a bit with demand weakening since April, and it would be an additional concern for the property market if loans are given based on an individual's net income compared with the currently used gross income standard,” he says.

“People are just concerned and everyone is adopting the wait and see stance before acting. Buyers are more cautious and selective to make sure that the properties they buy are priced reasonably,” he says.

According to data provided by the National Property Information Centre, the country recorded more than 134,000 transactions in the residential property sector during the first half of 2011, an increase from 108,000 transactions recorded in the previous corresponding quarter.

More than 929,000 property transactions worth RM253.19bil were recorded in the market from 2009 till now, including 214,000 transactions worth RM64.75bil for the first half of the year.

Recently, research houses have also started to downgrade the property market, with the most recent being RHB Research which says that the positive catalysts for the sector is scarce.

It expects the property market to continue underperforming the broad market with the weakening ringgit and lower expected returns from properties, coupled with a less bullish sales target next year as the research house sees further downside risk to gross domestic product growth.

“On the physical market, although foreign buyer content in the Malaysian property sector is small, the weakening ringgit does suggest that the expected return from property investment is getting lower from the foreign perspective. This will diminish the relative attractiveness of Malaysian properties to foreigners,” it says.

It says more bargaining opportunities can be found in other countries such as Hong Kong and Singapore as property prices have start to retrace.

By The Star

Dijaya unit buys land near KLCC for RM65m

KUALA LUMPUR: Dijaya Corp Bhd's subsidiary Ace Rhythm Sdn Bhd has purchased three parcels of freehold land in the city for RM65.25 million.

The land, located along Jalan Sultan Ismail, will be developed into mixed project consisting of serviced apartments and commercial lots, to generate an estimated gross development value of about RM650 million .

In a statement yesterday, Dijaya group chief executive officer Tan Sri Danny Tan said the projects are expected to contribute positively to the group's future revenue stream and financial performance.

The lands have good development potential because they are in a strategic location in the central district of Kuala Lumpur City Centre, an area where residential and commercial properties are highly sought after, Tan said.

The lands, he added, also have the ability to demand premium pricing for both residential and commercial properties, as evidenced by other developments within the vicinity such as Pavilion Residence, Four Season Place, the Binjai and Regent Residence.

Tan pointed out that this acquisition, following its proposed development of W Kuala Lumpur Hotel & Residences, provides an opportunity for Dijaya to expand and strengthen the group's existing business property development portfolio within Kuala Lumpur.

"This is an opportunity for the Group to introduce the 'Tropicana' brand name to an urban market in the city centre area. This proposed development is expected to attract much attention from both the locals as well as foreigners in the country," he said.

By Business Times

Dijaya buys KL land for RM65mil

PETALING JAYA: Dijaya Corp Bhd has acquired a one-acre freehold land along Jalan Sultan Ismail, Kuala Lumpur, for RM65.25mil.

In a filing with Bursa Malaysia, Dijaya said the land was acquired by its 99.99%-owned subsidiary Ace Rhythm Sdn Bhd and would be turned into a mixed development, consisting of serviced apartments and commercial lots.

“With this acquisition, Ace Rhythm is expected to generate an estimated gross development value of RM650mil from its projects, thus contributing positively to the group's future revenue stream and financial performance,” it said.

By The Star

Enjoy more with less for the sake of sustainable development

Imagine stepping into the shoes of a city planner. If given the opportunity, how would you accommodate 150,000 families on an island of 10,000 acres which is fully covered with primary rainforest?

Perhaps the first thing that comes to your mind is a proper plan to house the 150,000 families and at the same time, build enough infrastructure and facilities to make the island a lovely place to live in.

Let's dwell further and imagine two extreme options available.

The first option is to accommodate all 150,000 families in terrace houses at a tight 15 units per acre. This basically means the entire rainforest in the island needs to be chopped down to give way to 150,000 homes.

As the houses are spread all across the island, there will be a need to build extensive network of roads to connect them. Obviously, this would use up more land, creating traffic jams and leading to an inefficient public transportation system.

The second option is to accommodate all the families in a higher density development or vertical development by developing an average of 100 units per acre. With this option, 1,500 acres of the island will be covered with 150,000 high rise homes, leaving 8,500 acres of primary rainforest untouched.

With such a huge land reserve, you can turn some of the land into recreational parks and public amenities where dwellers can enjoy and lead healthier lifestyles. In addition, commercial centres built within residential vicinities would be able to enjoy greater business opportunities and economies of scale brought in by the high density development. Even if you took an additional 500 acres from this, it would still leave you with 8,000 acres of rainforest.

The two scenarios above do resemble a real life situation. So, as a city planner, what would be your choice and how would you plan your city?

As the population continues to rise and land for development becomes scarce, growing a city vertically as opposed to horizontally makes more sense since more housing units and facilities can be built using less land. The efficiency of vertical developments allows more land to be preserved for future usage, which will become precious resources for the future generations.

In a vertical development, it is common to have facilities which are not viable in a horizontal development. These include swimming pools, sport centres and landscaped and recreational areas. These facilities create an ideal living environment for residents to enjoy a more balanced lifestyle as their homes are not just confined to the size of their units, but extend to all facilities in the common areas.

People who stay in high rise developments can also utilise a combination of vertical (lifts) and horizontal (MRT, buses and taxis) facilities and transportation to move from one place to another. There will be fewer roads and cars as more people take public transportation, which are more cost effective, efficient and environmentally friendly due to increased densities.

From an architectural point of view, vertical development does not only improve the quality of life, but also contributes to the attractiveness of a city as high rise buildings do create interesting landscapes.

Hong Kong, which is known as the “Pearl of the Orient”, is one of the best examples of a city formed by skyscrapers. The beautiful composition of Hong Kong happens naturally as the city grows. Singapore also has a very successful lineup of skyscrapers, efficient mass transit system and green resources in the heart of the island.

Last year, at the WCSC 2010 (World Class Sustainable Cities) Conference organised by REHDA KL, MIP & PAM, the city of Curitiba, Brazil was featured. This has to be one of the benchmarks for sustainable cities.

What is amazing is that the transformation has only taken place in the last 40 years. Today, skyscrapers line the city on either side of dedicated bus only highways, pushing up public transport ridership to a phenomenal 80% to 90%! In the meantime, residents enjoy around 50 square metre of greenery and parkland, more than double the global average and more than three times the KL average.

I have encountered many foreign visitors who tell me that KL is a beautiful city. This is because our capital city is located in a valley where the land is not flat, and there are many tall buildings with different heights forming an appealing city skyline. Besides, suburbs such as Bangsar and Mont'Kiara which house plenty of high-rise developments have also became attractive residential areas for the local and international community due to the interesting skyline.

If a city solely focused on horizontal developments, it would end up with a dull and flat skyline. All you can see are rooftops if you were to look down from high altitude.

Many years ago, a prominent national architect voiced out that low density developments contribute to “future slums”. He believed that houses could not last forever perhaps 50 years and they would be demolished to make way for tall buildings.

If we focussed on landed property development, the pace of development may not be as fast as the nation aspires it to be as there are too many individual owners to coordinate with in terms a new development plan.

Now, imagine you are one of the 150,000 families mentioned. Which would you prefer? Occupy a terrace house in cramped streets, facing limitations in terms of daily activities and future growth of your country, or opt for a high rise building with efficient traffic-free public transportation and ample parks in order to enjoy a more efficient and balanced lifestyle?

The choice is yours now.

Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president in 2005-2006 and was recently named Property Man of The Year 2010 by FIABCI Malaysia.

By The Star (by Datuk Alan Tong)

10% tax on REIT dividends extended 5 years

The Government has extended the concessionary tax rate of 10% on dividends of non-corporate institutional and individual investors in real estate investment trusts (REITS).

The incentive, which expires on Dec 31, will be extended for five years, starting from Jan 1 next year to Dec 31, 2016.

“We are very happy with the extension as there was a lack of clarity on what would happen after the expiry,'' said Malaysian REIT Managers Association (MRMA) and Axis-REIT Managers Bhd CEO Stewart LaBrooy.

“Earlier, there were concerns as no announcements were made while the date of expiry was drawing close. Now that it has been extended, we can go back to business as usual.”

Mah Sing Group Bhd managing director Tan Sri Leong Hoy Kum said this would promote domestic participation and attract foreign investors.

Labrooy added that the REIT industry had developed very well over the last few years. The upcoming REIT to watch out is that of Pavilion Kuala Lumpur which should add further liquidity to the market.

Pavilion Kuala Lumpur is slated to be Malaysia's largest initial public offering for a REIT. It is likely to be valued at a yield of 7%. Details are still sketchy at this point, but sources said its assets could be worth between RM4bil and RM5bil.

Meanwhile, individual and institutional investors in Singapore and Hong Kong do not pay withholding tax on their REIT investments.

Both local and foreign retail as well as institutional investors in Malaysia now have to pay a 10% withholding tax, which had already been reduced from the 25% tax rate previously.

The withholding tax rate in Malaysia has not been adjusted since 2008.

By The Star

RPGT increased to 10%

Under Budget 2012, it was proposed that a real property gains tax (RPGT) of 10% be applied to properties held and disposed of within two years.

Meanwhile a rate of 5% will be maintained for properties sold within the third, fourth and fifth years after purchase.

The current RPGT, imposed after Budget 2010, is 5% for all properties sold within the first five years of purchase.

However, consultants and analysts said the 5% increase in the RPGT, for units sold within the first two years after purchase, would have little impact on speculative activities in the property market and escalating house prices.

Property consultant CB Richard Ellis (M) Sdn Bhd executive director Paul Khong said speculative activities in the property market would only be slightly curbed by the RPGT increase.

“This latest RPGT increase is a small negative point to investors but not detrimental. Investors will be more cautious in doing their profit calculations.”

Khong hoped that there would be no more negative changes in the RPGT quantum within the next few years, and pointed out that many investors would be rushing to liquidate their positions prior to Jan 1, 2012 in order to enjoy the current 5% RPGT this year.

HwangDBS Investment Management Bhd head of equities Gan Eng Peng also agreed that the latest RPGT increase was not an effective measure to curb speculative activities.

“To curb speculation, the RPGT should be higher than 10%,” Gan said.

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng also did not think that the latest RPGT increase would have a major impact on property sales.

“The Government is sending a message that it is serious in preventing an asset bubble and wants the property market to be more orderly. If the market is hot, an RPGT increase to 10%, for the first two years after purchase, will not really curb speculation,” said Tang.

A property analyst said the quantum of the RPGT increase was quite gentle.

“It is obvious that the Government does not want to dampen the property market. The marginal increase in RPGT is considered to be friendly and accomodative towards growth in the property sector,” he said.

Another research analyst concurred, and said the latest RPGT increase would help to slightly “cool off” demand in the property market.

“It would make investors think twice before “flipping” their properties within a short period after buying them,” she said.

“Our outlook for the property market next year is that of flat demand year-on-year. Rather than this gentle RPGT increase, investors should look at the central bank's policy on liquidity and ease of getting housing loans.”

KPMG Tax Services Sdn Bhd executive director Tai Lai Kok opined that the Government's move was fair.

“Any upside in tax revenue from the RPGT increase would be marginal. So, rather than to increase tax revenue, the Government's move is very focused towards curbing speculation in the property market,” said Tai.

Meanwhile, House Buyers Association (HBA) vice-president Brig-Gen (R) Datuk Goh Seng Toh said the latest RPGT increase was negligible.

“We think there will hardly be any effect in curbing escalating house prices. Certain developers do not allow buyers to sell within the first two years, when the house is still under construction. Also, many buyers only sell after the first two years, when their properties are completed.”

Goh added that the Government should not have a “one size fits all” RPGT rate. “The RPGT should be applied differently based on the type and price of the property.”

Meanwhile, Budget 2012 also proposed to increase the maximum price ceiling for houses under the My First Home (MFH) scheme to RM400,000.

Also, this improved scheme will be available to house buyers through the joint loans of both husband and wife beginning January 2012. Under the present MFH scheme, houses are priced within the RM100,000 to RM220,000 range.

The scheme is opened to private sector employees aged between 18-years old and 35 years old; drawing a monthly salary of not more than RM3,000. Property consultants said the Government's objectives under Budget 2012 were clearly to curb excessive property speculation and boost house ownership for lower-income groups.

Goh said while the improved MFH scheme would made it easier for those who qualify to obtain loans for properties priced at RM400,000 and below, it might also add pressure on the disposable household income of lower-income groups.

“Our household debt-to-income ratio is already high. Also, this might make it easier for property developers to increase the prices of their units from a lower price range to RM400,000 and buyers might actually end up paying more.”

Another property analyst pointed out that developers in the Klang Valley would still find it tough to cater to the RM400,000 and below price segment due to land and construction costs. “Nowadays, there are not many property launches at this (level of) pricing in the Klang Valley,” the analyst noted.

However, Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum welcomed the improved MFH scheme and said that property prices in reasonably well-located townships are currently in this price range.

“For example, we intend to offer beginner homes priced from RM390,000 onwards in our latest township M Residence@Rawang in the first half of 2012. For this price, buyers can get a 22ft x 70ft home with a 2,000 sq ft built-up in a location that is less than 30 minutes from Kuala Lumpur,” said Leong.

By The Star

Measures proposed to prop up housing sector

The Government has announced a slew of measures related to the property sector. While the real property gains tax (RPGT) was uppermost on the minds of both developers, consultants and property buyers, Prime Minister Datuk Seri Najib Tun Razak also proposed other measures to keep the momentum going for the sector.

Under the My First Home Scheme (MFHS) announced earlier this year, Najib proposed that the cap of houses for young working adults of aged 18 to 35 be raised from RM220,000 to RM400,000.

Najib, who is also the Finance Minister, also promoted the 1Malaysia People's Housing (PR1MA) scheme. While the MFHS is for those with a monthly salary of RM3,000 and below, the PR1MA scheme also comes under the broad category of affordable social housing.

“PR1MA will be the sole agency to develop and maintain affordable and quality houses, specifically for the middle-income group. It will be the developer for projects on land owned by the Government,” he said.

Several plots of government-owned land around Sungai Besi and Sungai Buloh will be used for this purpose. The Government will also identify areas in the vicinity of MRT, LRT and other public transport system to be developed by PR1MA for housing projects.

“PR1MA also welcomes the cooperation with the private sector to develop similar projects. In this respect, several private developers responded to the Government's call to provide affordable and quality housing. PR1MA will play a main role in ensuring that the distribution of the housing units be transparent and fair through an open balloting system,” he said.

Although much has been said about the build-and-sell concept, Najib brought this up once again in the budget.

To protect buyers from delay and abandoned project, the Government will encourage the construction of more houses using the build-then-sell concept.

Real Estate and Housing Developers Association Malaysia president Datuk Seri Michael Yam and Rehda national council member and branch chairman for Federal Territory N.K. Tong said the measures announced in the budget proposals encouraged homeownership among the poor and young working adults but discouraged speculation.

Yam said the slew of measures to promote ownership and to spearhead investment was heartening and showed that the Government was serious in keeping the healthy property market on an even keel.

“The measures announced is in line with the Economic Transformation Programme (ETP). Under the ETP, the Government wants to raise the population of the Greater KL/Klang Valley from the current 6 million to 10 million. In order to do that, there is a need for housing,” Tong said.

“It will be difficult for private land owners to provide land for social housing in the city, or close to the city. It is good that the Government is providing land for this cause and, at the same time, having them located near the proposed new public rail transport.

“In this respect I would said that the budget is two-prong when it comes to home ownership helping people to have a roof over their heads, and to save for their future.”

Yam said the slew of measures to promote ownership and to spearhead investment was heartening and showed that the Government was serious in keeping the healthy property market on an even keel.

By The Star

Seoul’s residential market

I visited South Korea recently in connection with a valuer (called appraiser there) meeting and although this was not my first visit, I was nonetheless impressed with the generally high level of efficiency in the country. Hassel free, from the well organised public transport, to the high service levels in the hotel and retail sectors.

The smooth and efficient bullet train ride from Seoul to Gyeongju, covering about 400 kilometres in two and a half hours was also impressive.

Not so efficient, in my opinion however, is the housing market in Seoul. Possibly a bubble that will burst, if it does not deflate quietly (which is unlikely), or one that risks growing bigger and then bursting or deflating. Astute policy nudging and/or more in-depth, knowledge-based decision making by market participants are key to a smooth “landing”.

Greater Seoul has 20 million inhabitants and that is 40% of the population of the country, a rather high percentage for a capital city. The Korean Peninsula is mountainous.

The per capita GDP of the country is about RM60,000 (based on a conversion of 1:3) as compared with Malaysia's, which is about RM21,000. The average monthly household income in Seoul is RM12,000. In Greater Kuala Lumpur it is about RM6,000.

The average house price in Seoul is about RM1.4mil and this means that on average the house price is close to 10 times household income, and this is viewed with some consternation by Koreans. About 10 years ago the average house price was 6 times household income, also slightly elevated as measured based on a global long term benchmark for developed countries at three times.

Kuala Lumpur typically has house prices at a long term relationship of around 4 to 4.5 times annual household income, but in many hot spots, in the past few years, there has been a run up to more than 10 to 15 times when viewed from an average household. And it may surprise many, that despite frequent comparisons with high-end condominiums in Singapore, HDB flats in Singapore, that house the majority of households in Singapore, the relationship is only about three times.

Japan which neighbours Korea had a property bubble in the late 1980's and prices soared to close to 20 times annual household income, only to come down crashing, and 20 years later, most of the medium sized cities in Japan have a corrected and stable relationship of about five to six times but with the Tokyo suburbs closer to 10 times.

Net yields, the second driving fundamental in the housing market, in Seoul are nothing much to speak about, being about 2% per annum. In Kuala Lumpur yields have slipped below the 3% benchmark for the ubiquitous double story terrace house. This figure of 3%, in the hierarchy of property yields, is generally acceptable when capital appreciation possibilities are a possibility but when such possibilities dim then a higher return should be the order of the day.

My Valuer friends in Seoul opine that much has to do with “Chonsei” system in Korea that has led to the high house prices in Seoul, apart from a long, inordinate support for the construction industry that has now resulted in construction being a high 20% of GDP, and the other usual culprits of easy money and exceptionally low interest rates.

This system of owning houses for owner occupation and investment is predicated on rising house prices. Landlords, for example, rent out houses by getting the tenant to set aside in a finance company or bank a lump sum for rent over two years and take the interest as rent.

Interest, which in the past, and due to artificial constructs was high, has come down as the economy irons out these constructs as it modernises further. The landlords in the past were happy with this because their focus was on capital appreciation, which was sustained and high.

But of late, especially since the middle of the last decade, house prices have stopped rising. The market is now normalising and rents that drive values are taking hold and tying values to more normal returns. The process will continue further as the Koreans move inexorably towards a market where house prices are tied to household incomes and driven by rental returns.

The housing market in any modern economy is an important pillar. It is a store of household wealth and when it stalls or falls it has an impact, sometimes an outsized impact, on the economy.

In the United States, house prices went up (and was allowed to go up by design or mistaken notions) against governing fundamentals and are now on a downward trajectory to the detriment of the economy at large and the global economy. A recent article in the Wall Street Journal shows the pre-bubble average house price increase from 1988 to 2000 to be 3.6% per annum and it shot up to 10.4% per annum between 2000 and 2007, outstripping average household income increase.

The US Bureau recently revealed that median household income in the United States in 2010 fell to US$49,445, the lowest in more than a decade. In Malaysia, our country-wide compounded annual average house-price increase in the period 2000 to 2009 was about 5%, running neck to neck with household-income increases.

Regulators are obliged to cast a watchful eye on the housing market and know the driving fundamentals, and where and when needed, nudge the market through astute policy intervention.

Post 2008 Global Financial Crisis, most countries in the region, including ours, have taken policy measures targeted at the housing market as against mainly broad brush monetary policy measures of the past, to stamp out excessive speculation and keep the market tied or running not too far from underlying fundamentals. This no doubt requires constant monitoring of the market, and in particular, before and after any policy implementation.

On a broader perspective, the market should be allowed to function as a free market and any intervention kept to a minimum and only to iron out free market imperfections.

Elvin Fernandez believes in the free market and timely nudging by policy makers and key market participants to iron out any, and only where needed, imperfections in the system.

By The Star (by Elvin Fernandez)