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Wednesday, April 22, 2009

Property mart to see moderate growth in 2009

The property market looks set on the path of moderation in 2009 with prices and rentals correcting and construction activities easing slightly amid the current economic situation.

However, it is unlikely that prices and rentals will plunge in the coming years, said Valuation and Property Services Department, Ministry of Finance in its report released today.

The department said the residential sector is expected to gain from several measures under the Budget 2009.

For 2008, the property market recorded 340,240 transactions valued at RM88.34 billion, it said.
The transaction volume recorded 9.9 per cent increased from 309,455 transactions while value grew by 14.5 per cent from RM77.14 billion.

During the year, the primary market did not perform as well as the previous year as there were 48,830 new housing units offered for sale, of which only 21,725 units taken out.

In tandem with the dismal performance of the primary market, the number of residential overhang increased by 9.1 per cent to 26,029 against 23,866 units in 2007.

The report was launched by Deputy Finance Minister Datuk Wira Chor Chee Heung.

By Business Times

I&P turns bullish on sales

The property developer now expects to maintain revenue of RM750 million that it made last year, thanks to the good response to its Mad About Homes campaign

PROPERTY developer Island & Peninsular Bhd (I&P) has turned bullish on sales this year, thanks to the good response to a promotion campaign it launched in February.

It now expects to maintain revenue of RM750 million that it made for the year to December 31 2008. In March, I&P's chief told Business Times that the company was expecting revenue to fall by a third due to slower sales.

"Cautiously, we will try to maintain last year's revenue. We have a few strategies. We will be more innovative and may extend the campaign to boost sales," managing director Datuk Jamaludin Osman told Business Times in a recent interview in Kuala Lumpur.

I&P, a wholly-owned unit of state-owned fund manager Permodalan Nasional Bhd (PNB), has been getting good responses from the public since launching its Mad About Homes campaign.

In just two months, it sold 77 units of double-storey terraced houses and semi-detached homes, worth almost RM35 million. These are units within its Bandar Kinrara, Alam Impian and Alam Sari townships in Puchong, and Shah Alam and Bangi in Selangor.

I&P is also selling more bungalow lots this year.

It is releasing 15 lots for sale by way of tender, with reserve price starting from RM546 to RM572 per sq ft, at its 17.01ha Seri Beringin development in Bukit Damansara, Kuala Lumpur.

The company normally sells about five to seven lots a year.

Jamaludin is optimistic of selling all the 15 lots by the end of this year. Since 2005, the company has sold 54 bungalow lots in Seri Beringin.

I&P, which is focused on developments in the Klang Valley, is also reaching first-time buyers from outside the region.

It is collaborating with PNB to promote its products and developments. To do this, it is participating in Minggu Saham Amanah Malaysia (MSAM) 2009 in Johor Baru, Johor.

Jamaludin said I&P is taking the opportunity to participate in MSAM as it will be a good opportunity to showcase its properties.

"By participating in MSAM, people can identify PNB, not just as a unit trust conglomerate, but having companies who are reliable and giving dividends to the group. We hope to also get more exposure and recognition from Johor market and increase our database," he said.

I&P has been participating in MSAM since the first exposition in Kuala Lumpur in 2000.

By Business Times

SP Setia coy on plan to buy PNB real estate firms

PROPERTY developer SP Setia Bhd is keeping mum on its plan to acquire three real estate companies under Permodalan Nasional Bhd (PNB).

The three are Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd.

"It is too early to comment. This issue is very sensitive. Whatever we do, it must add value to our business," SP Setia president and chief executive officer Tan Sri Liew Kee Sin said on the sidelines of PNB's Malaysian Unit Trust Week 2009 in Johor Baru yesterday.

Liew was commenting on a foreign news report quoting RHB Research Institute Sdn Bhd as saying that SP Setia may acquire the three companies from PNB to increase sales and gain financial backing from the government.
RHB Research said the acquisition may increase SP Setia's value.

The property units have a combined annual sales of more than RM1.31 billion, similar to SP Setia's 2008 figures.

As of January 30, PNB owned a 6.5 per cent stake in SP Setia, according to Bloomberg's data.

By Bernama

Axis-REIT posts higher Q1 revenue of RM17.3m

AXIS Real Estate Investment Trust's (Axis-REIT) revenue for the first quarter ended March 31 2009 rose to RM17.3 million from RM14.5 million in the same quarter last year.

Net income rose to RM10.4 million from RM9 million previously, Axis REIT Managers Bhd, the manager of Axis-REIT, said in a statement in Kuala Lumpur yesterday.

Axis REIT Managers' chief executive officer Steward Labrooy said the company has maintained its earnings momentum despite the current global financial crisis.

"With the implementation of a quarterly distribution policy, we are now able to reward our unitholders on a more regular basis," he said.
The policy entails at least 95 per cent of the current year-to-date distributable income for the first to third quarters and at least 99 per cent of the current year-to-date distributable income for the fourth quarter.

Labrooy said the company would continue to focus on providing steady yield accretion through enhancement of the current portfolio, prudent capital management and examining investment opportunities as long as the gearing was capped below 40 per cent.

He said the company was optimistic Axis REIT would be able to maintain its current performance for the coming quarter and the rest of the financial year ending December 31 2009 boosted by the current satisfactory performance of the trust's existing investment portfolio.

By Bernama

I-Bhd plans Islamic resource centre

I-Bhd, developer of i-City in Shah Alam, plans to build an Islamic resource centre for the creation of an Islamic financial sector in I-City.

I-Bhd said the project is slated to start at the end of next year.

"The first completed phase of i-City has Al-Rajhi Banking Group, a premier Islamic financial group, acquiring 80 per cent of its 300,000 square feet Grade A cyber office suites," I-Bhd said, adding that other global companies had also expressed interest in i-City.

"In fact, i-City has already attracted tenants, such as UK’s Logica and Singapore Unified Communications, to name a few," I-Bhd said in a statement.

The i-City development is in line with I-Bhd’s vision to build a knowledge-based economy with i-City.

By Bernama

Monday, April 20, 2009

Mah Sing overseas expansion still on, but it will plan cautiously


An artist's impression of the Mah Sing Group's Soouthbay Penang project in Vatu Maung

Mah Sing Group Bhd hopes to launch its maiden offshore project next year.

President and group chief executive Datuk Seri Leong Hoy Kum said the company had not put its regional expansion plans on the backburner but was weighing all the risks and returns before venturing overseas.

“Although we are not in a hurry, we see opportunities overseas. We are exploring Vietnam and China, and hope to identify the right local partners and land for our project later this year,” he told StarBiz.

Mah Sing’s plans to venture abroad at end-2007 were put on hold when Vietnam’s economy encountered overheating problems.

Leong said having seen how fast the country succumbed to its currency and economic problems, Mah Sing learned that it paid to be patient in its overseas plans.

“Now that Vietnam’s economy and property market are stabilising, it is the right time to revisit our overseas ambition. The good thing is that land owners are more willing to negotiate now and we believe there is room for better terms for us,” Leong said.

He said Mah Sing would study projects that fitted well with its business model of fast turnaround time and incurred minimum capital outlay, preferably with deferred payment terms.

“The product types will depend on the results of the feasibility studies and could range from townships, landed or high-rise residences to commercial projects,” he added.

He said Mah Sing would be using its war chest of RM900mil for its overseas expansion and to buy more land in the Klang Valley and Johor.

Locally, it is holding talk with a few landowners for land acquisition of between 500 and 2,000 acres for greenfield township developments when the economy and property market recover.

“We expect to firm up two or three land deals before year-end,” Leong said.

Mah Sing has 16 ongoing projects in the country with estimated gross development value (GDV) of RM3.8bil over the next five to seven years.

For the financial year ending Dec 31, it plans to launch RM400mil worth of property products and expects to record sales of RM450mil. Some of the sales will be from its pre-constructed and on-going projects.

Leong said sales from Mah Sing’s pre-constructed projects and the completion of The Icon Jalan Tun Razak in June would provide it with the necessary cashflow to ride out the slow market now.

Meanwhile, income from the sale of The Icon office building for RM430mil two years ago will still be realised this year.

According to Leong, the market is still very challenging and the company has to put in extra efforts to ensure good take-up for its products.

For this year, it is looking at sales mainly from its Penang project, Southbay Penang, and other Klang Valley projects including Aman Perdana, Hijauan Residence, One Residence, Southgate and StarParc Point.

In Johor, sales will be from Sri Pulai Perdana 2 and Sierra Perdana.

By The Star (by Angie Ng)


Hatten plans Ginza-like district in Malacca

Hatten Group, a local property developer, plans to turn the Bandar Hilir area in Malacca into a commercial district the likes of Ginza, Tokyo's classiest commercial centre.

It is developing "Hatten Square", an upmarket commercial project located in the vicinity of Melaka Tengah and Melaka Raya. It features a four-star hotel with 260 rooms, 490 suites and 1,500 parking bays, and a mall with 200 retail units.

Construction has begun on the RM150 million project, with full completion scheduled for the third quarter of 2011. However, the 1,500 parking bays and the 200 retail units will be ready by December this year.


Hatten Group executive director Collin Tan said the successful completion of Phase 1 and 2 of Dataran Pahlawan, a new retail, entertainment and gourmet centre in Bandar Hilir, had resulted in the constitution of Hatten Group as a holding company for a group of companies with a unified vision to continue expanding in the area.

"To be located near Dataran Pahlawan Melaka Megamall and Mahkota Parade, the proposed shopping mall will carry exclusive luxury brands targeted at the upper- and middle-income group together with sidewalk cafes and alfresco dining.
"We hope that this new mall would turn this area into the 'Bukit Bintang' of Malacca," he said, referring to the famous shopping and entertainment strip in Kuala Lumpur.

Occupying 6.25ha , Hatten Square Suites & Shoppes will contain the hallmark of quality and innovation that buyers whom have long been associated with Hatten Group will recognise.

"Apart from the retail units, the 22-storey building will comprise 270 hotel rooms and 490 premier suites with common hotel facilities such as an extensively designed swimming pool, a spa, a gym, a ballroom and 1,500 parking bays built with the intention to cater to business travellers and families on vacation," he said.

Hatten Group plans to sell 40 per cent of the retail units at prices starting from RM180,000 per unit, and keep the rest as investment, implementing a similar development strategy practised in Dataran Pahlawan Megamall.

"Upon completion of the project, the value of the properties is expected to appreciate by 20 per cent per year," said Tan.

He added that Hatten Square will further complement the Bandar Hilir area by being the tallest building in Malacca, with good visibility of the historical city.

Other factors going for the proposed project are that the area has a ready population of 400,000 people and is easily accessible from Jalan Laksamana, Coastal Highway and Jalan Tun Razak (Lebuhraya AMJ).

"To ensure that all patrons to Malacca are able to enjoy and experience a comfortable and hassle-free shopping atmosphere, we are building a 17m wide air-conditioned two-tiered link bridge to connect the Square to Dataran Pahlawan Megamall and Mahkota Parade.

"This has been designed to add vibrancy and colour to the Bandar Hilir area, commonly known for its busloads of tourist arrival to the neighbouring historical sites and shopping malls," said Tan.

By Business Times (by Gomathy Ramasamy)


Four hotels hit a snag


Kate Lim showing the artist's impression of the approved Rice Miller Hotel. Legal action may be taken

PENANG needs at least 200 to 300 new hotel rooms a year even if its economic growth stays below 5% per annum as a result of the global recession, says the Malaysian Association of Hotels (MAH), Penang chapte, chairman Marco Battistotti.

Assuming the state’s economy annually expands by 5%, which was last year’s record, there is a need for 300 to 400 rooms.

“New hotel projects that have been approved should be allowed to carry on so long as they are in accordance with the law,” Battistoti added.

Despite the slowdown, airport arrivals in Penang for the first two months of the year were just slightly down at 464,634, against 527,203 in the first two months of 2008.

“The Penang hotels’ occupancy rate for the first three months of 2009 was about 60%, compared with about 64% in the same period a year ago,” Battistoti said, adding that the hotel rates were competitive compared with prices in Bali, Bangkok and Singapore.

“The daily room rates in these destinations have risen by about 20% and 25% since last year.

“Presently, the average room rate in Singapore is about S$180, while in Bangkok and Bali, they are US$75 and US$94 respectively,” he said.

Penang is attractive as a tourist destination not only because of its competitive room rate pricing.

“The strength lies in Penang’s balanced mixture of beach and city hotels. It has 35 hotels, of which 22 are in the city and 13 are beach resort hotels.

“Together they provide some 9,000 rooms,” he said.

Due to the global recession this year, the MAH expected about 7% drop in tourist arrivals for Penang, Battistoti added.

“The presence of low-cost carriers such as Firefly has helped increase tourist arrivals in Penang from other states in the country and the region.

“Some 20 years ago in Europe when low-cost carriers first appeared, travel within the European continent also doubled,” he said.

On the four approved hotel projects for inner George Town that hit a snag following the 18m height restriction guideline in the state heritage dossier, Battistoti said the MAH supported the projects .

The hotels are the Eastern & Oriental Hotel extension project known as Annexe at Lebuh Farquahar, the Boustead Group’s RM130mil Royale Bintang Hotel and the Asian Global Business (AGB) Group’s Rice Miller Hotel in Weld Quay, and the Low Yat Group’s proposed hotel project at Jalan Sultan Ahmad Shah.

The Eastern & Oriental Group obtained building plans approval from the Penang Island Municipal Council (MPPP) in 1996 for its 28-storey Annexe.

However, it was scaled down to 15 storeys in 2008 when the 18m height restriction was imposed.

The Boustead and the AGB Groups received MPPP endorsement for their projects in 2007 while the Low Yat Group’s proposed project received the go-ahead in late June 2008, less than two weeks before George Town was declared a World Heritage Site on July 7.

Because of the controversial height guideline, the developers of the four projects have now taken a different stand on their projects.

In a recent interview, AGB Group chairman Kate Lim said MPPP and the Unity, Culture, Arts and Heritage Ministry representatives had informed AGB verbally to scale down the proposed 51.7m Pier Hub project to 18m.

AGB has yet to receive the go-ahead from the local authorities to commence building.

“We are puzzled because the MPPP’s planning approval was given for a building 51.7m high.

“The financing was also obtained for a project with this height. How is it possible to change the financing model now?” she said.

Complying with the advice would cause the project to lose 70% of its gross commercial area, effectively rendering the whole project commercially unviable, Lim said.

“If we cannot proceed as planned, we will have to seek legal redress,” she said.

The Boustead Group declined comment.

A source familiar with the Boustead project said the group would carry on work as it had already received the go ahead to start construction from the MPPP.

“To stop work now would mean compensating the sub-contractors and that is a step that the Group don’t want to take,” the source said.

E&O communication and investor relations director Lyn Chai said the group had recently stopped work and would await clarification from the relevant authorities expected in June.

“When the Unesco height restrictions came to the forefront recently, we decided it would be in the best interests of George Town and consistent with E&O Hotel’s unique position as a heritage hotel, to review our plans and await formal notification,” she added.

When contacted, a Low Yat Group spokesman said the group, which had invested in Penang since the 1960s, would continue to co-operate and work with the relevant authorities to bring progress to the state and to uphold the Unesco world heritage site status.

“There are no immediate plans to make changes to the development order that has been approved,” he added.

The Low Yat Group hotel project comprises 399 rooms and a double-storey basement car park.

By The Star (by David Tan)

SP Setia silent on real estate acquisition plan

PROPERTY developer SP Setia Bhd is keeping mum on its plan to acquire three real estate companies under Permodalan Nasional Bhd (PNB).

The three companies are Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd.

"It is too early to comment. This issue is very sensitive. Whatever we do, it must add value to our business," SP Setia president and chief executive officer, Tan Sri Liew Kee Sin told Bernama on the sidelines of PNB's Malaysian Unit Trust Week (MSAM) 2009 in Johor Baru today.

Liew was commenting on a foreign news report quoting RHB Research Institute Sdn Bhd as saying that SP Setia may acquire the three real-estate companies from PNB to increase sales and gain financial backing from the government.
RHB Research said the acquisition may increase SP Setia's value.

The property units have a combined annual sales of more than RM1.31 billion, similar to SP Setia’s 2008 figures.

As of Jan 30, 2009, PNB owned a 6.5 per cent stake in SP Setia, according to Bloomberg’s data.

By Bernama

Rehda all for building projects to continue

GIVING his backing for the four hotel projects to proceed, Real Estate & Housing Developer Association, Penang Chapter (Rehda Penang) chairman Datuk Jerry Chan said the blanket 18m height guideline for Penang’s inner city was not imposed by Unesco, as popularly believed.

“It was inserted by the parties involved in the preparation of the dossier to be submitted to Unesco for the World Heritage Site status (WHS) listing application.

“Rehda’s main grievance is that stakeholders such as the various ethnic communities and their chambers of commerce, guilds, and associations were not consulted in the preparation of the state heritage dossier.

“After 2000, Rehda has not been consulted on the drafting of the guidelines for heritage zones,” he added.

The controversy over the height of the projects has prompted Rehda Penang to publish a recent advertisement expressing concern over the increased restrictions imposed in the state’s heritage and buffer zones.

The state planning committee had formulated guidelines in January allowing the development of high-rise buildings over 18m, subject to stringent conditions, said Chan.

“We understand that Malacca in its listing submission did not bind itself to any height restriction,” he said.

Chan noted there were existing buildings higher than 18m such as the Dewan Perniagaan Melayu building on Beach Street and the Bangunan Syed Putra on Downing Street, both located a stone’s throw from Boustead and AGB groups’ hotel projects.

“There shouldn’t be any assumption that Penang would lose its WHS status if the projects are carried out.

“Unesco has to clarify if it was aware of the MPPP approval for the four hotel projects with their respective specified heights.

“If Unesco was aware, then it has assented to the listing not withstanding these approvals,” he said.

Since the listing approval did not impose conditions that these projects had to be cancelled or scaled down, it could be inferred that they were not an issue nor a threat to the WHS status of Penang, he said.

“The authorities should explain who is responsible for the conflicting situation on the approvals and the 18m height restriction.

“Was the height restriction submitted intentionally or a genuine mistake?” he said.

Chan said if the state government believed in the economic benefits to be generated by the hotel projects, it should defend these projects.

Meanwhile, Penang Heritage Trust (PHT) president Dr Choong Sim Poey said the PHT was surprised that MPPP could have failed to apply Unesco heritage guidelines on the four hotel projects.

“The regular meetings of the state heritage conservation committee held since 2000 under the chairmanship of the previous Chief Minister were fully aware of the conservation guidelines of the heritage city.

“All the relevant state and MPPP officers, and Rehda and PHT representatives were part of this committee,” he said.

He added that losing the Unesco recognition would affect all businesses in the inner city.

Choong said: “A price has to be paid for this mistake; either in losing the Unesco status or compensating the developers.

“The state government and the people will have to decide which is the greater price to pay.”

By The Star

Saturday, April 18, 2009

Security still a concern in landed, gated and guarded projects


Pedestrian-friendly streets with pockets of green in Duta Nusantara, Sri Hartamas, developed by SP Setia.

Developers believe landed gated and guarded (G&G) projects are preferred for two main reasons: security and community living. However, they are quick to add that nothing is fool-proof.

All the developers spoken to have, at one time or another, promoted – or are promoting – G&G living. Developers interviewed, either by e-mail or visits, are E&O group (projects: Seventy Damansara, Idamansara, Seri Tanjung Pinang in Penang), Perdana ParkCity Sdn Bhd (Desa ParkCity), Glomac Bhd (Aman Suria), S P Setia Bhd (Setia Eco Park) and TA group (Idaman Villas and Damansara Idaman).

What the developers say:

E&O marketing & sales director K.C. Chong: G&G offers residents a more managed living environment, with features like security, privacy, landscaping and communal facilities. Residents can wander around easily, without worrying about speeding cars. Many of the better-managed residential estates organise social activities which help foster stronger communal links. This bond helps in enhancing the security aspects of the community.

The larger ones are usually masterplanned. Residents have prior knowledge of what’s in store in their neighbourhood, unlike non-master planned developments where you may see a set of commercial shophouses coming up after you have moved in. Well-designed and well-managed gated developments also tend to have strict rules on issues such as regulations and working hours for construction and renovation works, and building guidelines.

A prevalent feature is the very attractive landscaping incorporated in the streetscapes. Most of this landscaping are well maintained as the funds for doing this comes from the service charges which each homeowner pays into the communal funds.

SP Setia Bhd CEO and group MD Tan Sri Liew Kee Sin: Although G&G communities have started off as upscale developments, its popularity has resulted in many adaptations of the concept to cater to the needs of a broader segment of the market.

In masterplanning our Setia Alam project, we created small clusters of homes with only one single road entry/exit point. This is to facilitate the establishment later of a simple-security structure at relatively low cost such as a boom gate by the housebuyers themselves.

Some of our other projects are guarded but not gated. Essentially, there are different levels of security offered to meet the different needs of each segment of the market. At the highest level, the provision of perimeter fencing, CCTV and 24-hour security service will obviously involve quite a lot of expense. However, buyers can also choose less sophisticated options to suit their requirements.

Perdana ParkCity sales director Susan Tan: Communal facilities can be sustained with the force of law. The community concept is based on shared cost, which in turn, depends on the standard of services expected. With the provision of joint management corporation, provided for under the Strata Titles Act, property owners will decide on how much, and where, to spend.

However to reduce the maintenance cost, we feel that the local authorities should consider granting reduced assessments for such projects since maintenance of the internal roads, landscaping and facilities are borne by the residents and are no longer the responsibilities of the local authority.

Chong: Key security measures include a robust and well trained security force. Surveillance equipment must be in working condition at all times. Residents can help by taking simple precautions such as informing of expected visitors, reporting untoward incidents, conducting proper screening of employees and imposing a no-visitor rule for their helpers. The maintenance cost will commensurate with the range of amenities and services provided including the level of sophistication of the management and security systems. Potential owners/residents will need to assess their own requirements against the price that they are willing to pay.

Usually more experienced developers would set up, almost at the outset, residents associations on home owners associations, to involve the homeowners, which in turn decide on the level and quality of services they are comfortable with.

More often than not, these residents choose to increase the level of expenditure on essential facilities such as security and management of common facilities.

Tan: G&G projects are no different from condominium projects. Locking up the unit when they leave the house and activating the home security system should not be dismissed as unnecessary.

Chong: In many ways, gated communities are run very much the same way as condominiums. The difference lies in the attention given to the larger landscape of the residential estate, which could mean more grounds to cover for the security personnel and more landscaping.

Running costs may not necessarily be higher, because there are usually no lifts to maintain, no air-conditioned lobbies. The success of both types of developments depends essentially on the quality of management, set up initially by the developer, and is subsequently administered by the resident association.

A very important management tool is the Deed of Mutual Covenant, a document which the developer usually signs with the first purchaser, and subsequent house owners, which prescribes the way the development is managed.

It usually contains house rules, guidelines on house renovations, the administration of the community funds (collected from monthly service charges) election of office bearers, etc. The quality of the development does depend largely on the manner in which this management tool is utilised, for the ultimate benefit of the community.

Liew: It is a totally different product type and lifestyle living concept which appeals to a totally different group of buyers. On this note, it has to be said that buyers today are extremely well informed and increasingly sophisticated. Choices are made based on their individual needs, tastes and preferences as such it may be somewhat simplistic to merely differentiate between the two.

Glomac Bhd group executive vice-chairman Datuk Richard Fong: We are opening registration for 200 units of gated and guarded housing in Bangi. Our buyers are happy with Aman Suria. Since we handed the keys over to buyers, there have been no break-ins.

By The Star (by Thean Lee Cheng)

SP Setia to buy 3 PNB units?

SP Setia Bhd, the country's biggest property developer, may acquire three real-estate companies from a state asset manager, increasing sales and gaining financial backing from the government, says RHB Research Institute Sdn Bhd.

SP Setia will benefit if Permodalan Nasional Bhd (PNB) sells three property units it is already planning to merge to SP Setia, in which PNB already owns shares, said RHB Research, the brokerage unit of RHB Capital Bhd, the country's fourth biggest bank.

Adding Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd will enhance SP Setia's value and provide it with strong financial backing from the state for expansion, RHB Research said.

Malaysian developers' sales slumped last year as the country's exports fell, slowing economic growth, and the global financial crisis dried up credit.
PNB's three property units have combined annual sales exceeding RM1.31 billion, similar to SP Setia's 2008 figures.

SP Setia "could be pulled in to spearhead the merger in view of its strong brand name and market leader position in the local property industry", RHB Research said in a report yesterday. It maintained an "underperform" rating on the stock.

"A mega property company could also potentially benefit from merger synergies in terms of centralised procurement of construction materials and better negotiating power with contractors," it said.

Loans approved for residential property rose to RM3.74 billion in February, the first increase in seven months, central bank data show.

SP Setia chief executive officer Tan Sri Liew Kee Sin and company spokesman Diana Chin were not immediately available to comment when Bloomberg called the company.

PNB holds a 6.5 per cent stake in SP Setia as of January 30, according to data compiled by Bloomberg.

By Bloomberg

What makes a landed, gated and guarded project?

ON April 4, John left his semi-detached home in Kota Damansara, Petaling Jaya, at 6.30am. He returned at about 1pm to find that it has been broken into. He lost RM45,000 and was badly traumatised, not so much by the loss but by the invasion into his private domain.

John, 64, from Britain, says this is a gated and guarded (G&G) development and he pays about RM950 annually for the security service and maintenance.

As a result of that incident, he has extended the wall behind his house by another five feet, bringing it to nine feet. He has also installed an alarm system.

He suspects the thief or thieves must have climbed over the wall which separates his house from the public road.

“I’m thankful my wife and daughter were not at home when they broke in,” he says. He and his family have been staying there for about two years. The project has about 300 houses.

When contacted, the residents’ association president says the development was completed four years ago and the break-in involving John’s house is a “minor thing.”

In another project in Damansara Heights, one of the most upmarket residential suburbs in Kuala Lumpur, a relatively new development of about 18 months had three break-ins.

The weak point in this G&G development was also a wall which was relatively low compared with the other retaining walls that encompassed the project. The police were called in and a camera was subsequently installed on that wall.

“No one was hurt. It was the work of some petty thieves,” says a source from the company.

The break-ins in both the above two projects bring into focus several issues. The desire and need for security has resulted in various adaptation of the G&G concept.

In John’s case, both he and the resident association president think they have bought into a G&G development because there is a perimeter wall and guards.

Security presence and a perimeter wall do not constitute a project as a G&G. Conversely, there are some projects which are guarded but not gated.

Whatever the adaptations may be, local council approval is needed, even for the installation of a boom gate. It is sad and speaks a lot about the country’s security system if people feel safer behind bars.

Country Heights Kajang, for example, is guarded but not gated. Likewise, most parts of Bandar Utama. Seri Beringin in Bukit Damansara, Kuala Lumpur, has a perimeter wall and guards but it is not a G&G project.

Because of rising crime rate, Bangsar Baru residents are planning to turn the area into a gated and guarded community by permanently closing off roads and lanes which are accessible to motorists.

So what constitutes a G&G project? Other than the perimeter wall and the guards, the G&G project essentially takes care of its own landscaping and amenities like garbage collection and landscaping. The monthly charges go into all these, including the maintenance of a pool, tennis courts and clubhouse, if there are such facilities.

Innovative developers have also come up with single entrance/exit as a variant, without it being a G&G project.

So, how will a home buyer know if he has bought into a landed strata project, in layman’s terms, a G&G? The only way is to check with the local council or the developer. A word of caution: There are developers who claim their project is a G&G, when it is an adaptation. For many, an adaptation is good enough because security is their chief concern. Many are not bothered if there is a pool or a clubhouse.

Incidentally, a new law will be tabled soon to govern G&G developments. Previously, it was just a set of guidelines. The bill will be used on a national level and will help to regulate such properties.

The second issue pertains to security. What recourse do owners and residents have if there is a break-in? There is currently a case pending in court involving Sierramas, as a result of the breach in security. As most of the developers say: “Nothing is fool-proof. But we can have deterrents.”

The other issue is the community. While John and his family were traumatised by the break-in, the residents’ association president considers it a “minor thing”. Which calls into attention the importance of co-operation among residents. After all, isn’t that what being a community is about?

As Home Buyers Association secretary-general Chang Kim Loong puts it: “The success of a G&G project depends on the residents to be the eyes and ears for each other.”

While developers of such projects say G&G is the way to go, Chang says this is just a marketing strategy.

“G&G is not something to be encouraged. It segregates the haves and the have-nots. It is a concept, not a deception. There is no legal compulsion to buy; it is just a matter of who can afford the lifestyle that comes with a cost and it appeals to the medium and upper echelons,” he adds.

While certain quarters think this is just a marketing ploy to sell a lifestyle, it is undeniable that security and the increasing crime is making people feel more secure behind walls and bars.

The Associated Chinese Chambers of Commerce and Industry of Malaysia, in the second half of 2008, reported its findings in a survey that 89% of its respondents were concerned over public safety. It was also reported in the Ninth Malaysia Plan that public safety in Malaysia has deteriorated 21.5% between 1990 and 2004. The crime index rose 15.74% in 2006 from 171,604 cases in 2005 to 198,622 cases in 2006. Property crime made up 70% of the 2006 cases.

Landed G&G developments are not unique to Malaysia. There are such projects in the United States, Britain and Europe and Asia. G&G projects initially started out with condominiums, essentially known as strata-titled projects.

In Malaysia, concerns about security by home buyers, land issues and the opportunity to profit prompted the start of condominium living. All condominiums are strata developments, but the term strata is not limited to just condominiums today.

The desire to be on level ground has resulted in landed-strata development and this is where the landed G&G, and its variation, come in.

Seri Beringin, a project by Syarikat Perumahan Pegawai Kerajaan Sdn Bhd (SPPK), was never sold as such. Instead, it has sought the approval of the local authorities, in this case City Hall, to have a perimeter wall and even “donated” a guardhouse.

There are other projects in the country which come under this category. To enhance security, some of the residents have proactively grouped together to form a resident association to look into various security measures. Owners are allowed to put up their own barriers, like a higher wall as a form of deterrent – something John did to his Kota Damansara home.

For some landed G&G, particularly those in upmarket locations, high monthly rentals of RM10,000 and above has resulted in a large expatriate community. About 70% of Duta Nusantara (by SP Setia Bhd) in Seri Hartamas, Kuala Lumpur are tenanted. Duta Nusantara, comprising mainly semi-detached and bungalow units, are fetching monthly rentals of between RM14,000 and RM18,000, while Duta Tropika, mainly semi-detached and triple-storey terraced, has lower rentals.

Seri Beringin, not a G&G project, may be able to fetch rentals of between RM8,000 and RM10,000. This project is new and given time, may fetch higher rentals.

In Damansara Heights, Idamansara residences by E&O group are being rented for between RM15,000 and RM18,000, agents say.

Says an agent: “Because the rental is so good, there are many owners who prefer to let out the place instead of using it themselves, which accounts for the high-tenancy ratio. At the same time, there is demand, especially when the project has a good proportion of foreigners as foreigners tend to attract other foreigners. They also tend to put a premium on security.”

Whether G&G projects will fetch a premium depends pretty much on location and the set-up. Those located here and with good access, and are managed well, will have a better premium.

Whether it promotes community living depends on certain factors including the overall land size of the entire project, the availability of public areas like parks and pools where residents can meet and chat. Smaller projects with a short strip of road with houses facing each other may not be ideal.

After all, buyers who opt for this lifestyle also desire communal living, and this means a place to congregate other than by the roadside.

By The Star

Inflation – figures that go up and up


The prices of basic necessities such as food, clothes, housing and cars are dramatically higher now compared with those of 50 years ago. Of course, Malaysia today is a lot different than what it was in 1957. Back then, it had 6.28 million people. Today, the population is 27.7 million and our lifestyle has vastly improved.

With the strong economic growth since independence, comes the increase in the prices of goods and services.

Based on rough calculations, the prices of food, houses, cars and apparel have seen a compounded annual growth rate of between 3.7% and 9.02% over the past 50 years.

For instance, a Damansara Heights bungalow with 7,000 sq ft built-up area cost about RM40,000 in the 1960s. It has since appreciated to above RM3mil, given that the location is a prime area in Kuala Lumpur.

A popular vehicle in the 1960s, such as the 1.2 litre Datsun 1200, was priced at about RM7,000. Now, the 1.3 litre Perodua Myvi standard model costs RM43,000. It must be noted though that until the 1990s, cars had not come with fancy features such as high-tech fuel injection systems, power steering and windows, airbags and central locking.

In the 1960s, people paid 15 sen for a cup of coffee at a restaurant or coffee shop. Today, they have to fork out RM1.20 to RM1.50. That is a compounded annual growth rate of 4.71%.

Arrow, an American brand of men’s shirts was sold for about RM10 in the 1960s. The price was gradually increased to RM15 in the 1970s, RM20 in the 1980s and RM40 in the 90s. Now the shirt costs you about RM90 a piece.

Do Malaysians’ salary increases match the rising prices?

In the 1960s, civil servants earned about RM100 to RM150 a month. Today, their basic salary has reached about RM2,000. That reflects a compounded growth rate of 6.17% over 50 years.

However, with the continued rising prices, a father of two who earns a net monthly income of RM3,000 in Malaysia, especially in the Klang Valley, may struggle to stay afloat. After deducting for his EPF contribution, income tax, house and car repayments, and other expenses (meals, petrol, utility and phone bills, daily necessities), he will have little left for savings, if at all.

So, while the uptrend in prices is generally seen as a sign that the country is developing fast and that its people enjoy a higher living standard, can Malaysians cope with the high prices of the necessities, especially during a financial crisis?

According to a property agent contacted by StarBizWeek, the average salary is actually very far off the affordability mark for house prices, especially in the strategic locations in Klang Valley. “It is a big gap and it is rather difficult for people to catch up with the rising prices,” he says.

By The Star (by Rachael Kam)

Quite indispensable in business

The policymakers, economists and analysts are not the only ones who hunger for statistics. In the business community, figures are indispensable in just about every aspect. The property and automotive sectors are two obvious examples of businesses that rely significantly on the power of numbers.

According to property consultant Knight Frank Research, data and indices relating to property prices, resale values, rental rates and population are of interest to developers, real estate agents and consumers.

“These statistics can help the public in making informed decisions. For instance, in the purchase of property as a hedge against inflation, relocation or expansion of business, and the review of business strategies,” it says in an email reply to StarBizWeek.

“For developers, the data is used to understand market dynamics and in making projections of the market trend, as the property market is cyclical.”

Addressing supply and demand

The research outfit’s forecasts are based on, among other things, past years’ price trends, existing and new supply trends, the sales performance of new launches, and general occupancy of existing schemes. To gauge demand, it also talks to agents because they have first-hand knowledge of the market.

It adds: “Numbers on the income groups and population of an area will help developers to identify their market positioning, pricing and rentals of their products.”

Real estate agency S.K. Brothers Realty (M) Sdn Bhd concurs that statistics are essential indicators of property demand. General manager Chan Ai Cheng says property players are primarily interested in the level of demand and related factors such as the type, location and affordability.

This helps developers to come up with the right products at the right places and prices.

“With an awareness of house prices – including the trend and locality – developers and real estate agents will know whether the prices of the houses they are proposing to sell are realistic or otherwise,” she tells StarBizWeek.

She says statistics like the property index, stock market indices, supply of property, selling prices, sales performance and vacancy rates are some of the important numbers for the sector.

She adds that the data help the players address the supply and demand. Developers who understand the demand will likely enjoy good sales take-up rates. They will also be able to avoid an oversupply situation because they know which products are needed and which ones are coming on stream.

Chan says “on the ground” research is preferred because it provides current data needed for immediate decisions.

Indicator of consumer spending

“Numbers are important because they quantify the sentiments experienced by the population. In that sense, it can indicate the depth and extent of a problem. It also serves as a good guide and indicator,” she adds.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad says car sales numbers are a key indicator of consumer spending because they reflect well the sentiments towards the country’s economy.

“After housing, a car is the next single biggest item for many consumers. In good times, the demand for cars will increase and vice versa,” she explains.

She points out that the resale values and interest rates are two of the most important factors affecting the industry’s performance.

Generally, high resale values stimulate the demand for new vehicles because the owners pay less to upgrade or switch to new vehicles. In addition, they need less financing and this results in lower car instalments.

High interest rates mean consumers pay larger monthly instalments and this discourages them from buying new vehicles. “Without the numbers, we are unable to analyse, compare and evaluate the performance of economic activities as numbers enable the objective measurement of activities,” says Aishah.

However, she warns that the numbers do not always tell the true story of our social and economic status.

For example, most people in urban areas such as the Klang Valley find it hard to accept that the inflation rate is only 2% per annum, she notes.

She says the prices of goods have gone up, particularly during the first half of 2008, when the prices of petrol were raised by 40%. With RM100 today, you can buy less than what you could a year ago.

“This is how the layman relates to inflation. Perhaps the Government needs to introduce different price indices for the urban and rural areas,” she adds.

Benchmark value

“We need numbers not just for comparison purposes but also to benchmark ourselves against the industry,” says Datuk Syed Hafiz Syed Abu Bakar, managing director of of Perusahaan Otomobil Kedua Sdn Bhd (Perodua).

He says it also benchmarks its sales and service quality with the JD Powers & Associates customer satisfaction index (CSI) and sales satisfaction index (SSI) survey.

“Manufacturers like us keep track of the GDP, population growth, housing, per capita income, inflation, tax rates, employment, exports and manufacturing, forex, commodity prices, the stock market and other financial figures, to gauge the health of the country’s economy.”

He says numbers by themselves can also be misleading; how the statistics are derived should be clearly stated.

For example, Perodua ViVA, the company’s second best-selling model after the Perodua Myvi, was actually outselling the Myvi in states such as Kelantan, Terengganu, Sabah and Sarawak.

Nevertheless, Perodua believes in the saying, “What gets measured, gets done; and what gets done, gets rewarded.”

Syed Hafidz says that due to the strong demand for new Perodua cars, their resale values are holding well. A 10-year old Kancil is going for between RM6,000 and RM7,000 in the used-car market.

“As a car manufacturer, we live and breathe the sales, service and production numbers,” he adds.

By The Star (by Rachael Kam)

Dealing with past crisis makes comeback easier for our developers

IF there is a worthwhile lesson from the latest global financial debacle, it is that individuals, governments and business owners must always be prepared to accept uncertainties in life that will throw the best plan out of the window. They must be strong enough to adjust and make the best of things.

Although the crisis started out as a US sub-prime loan problem, the speed and magnitude with which it unfolded to decimate and wash out the wealth and achievements of so many countries, citizens and conglomerates, show that the world is growing smaller by the day and we are more inter-related than we care to admit.

What we are in today is a big global village, where all citizens, irrespective of their country of origin, are beholden to each other for better or for worse. To stem the rising greed and materialism that have contributed to much of the world’s ills today, the people, governments and businesses should strive to uphold their best virtues and responsibilities to ensure a better world.

The fallout from the crisis is certainly a rude awakening for all. Faced with so much uncertainties brought on by the crisis, individuals have to alter their plans, lifestyles and spending habits, including postponing buying decisions and settling for more affordable choices.

Likewise, governments should also be prepared to fine-tune and be flexible with their policies so that it is easier for the people and businesses to cope with the difficult times.

Although some may say that Malaysia has been spared the full brunt of the crisis compared with their more “developed” counterparts in the West, and things are not as bad as the last Asian financial crisis, business owners are not taking any chances and are preparing for the worst.

Their plans to expand market share and to improve their order books and sales have to be put on hold, at least until there are more certainties and confidence showing up in the economy and market.

What matters most – there is a strong and sustainable rebound in consumer confidence, which largely depends on the state of the US economy. Take the local property industry for instance. Developers were doing relatively well with strong take-up for their projects until the US financial crisis unfolded in the middle of last year, thus putting a stop to the party.

Kuala Lumpur was on the verge of seeing some “really expensive” residences, with price tags of up to RM30mil each, being unveiled when the crisis knocked off these plans from the drawing boards. Fans of these super-luxury residences will have some waiting to do before these products will be back in the market.

Many of the developers have to defer their project launches while some opted to tweak and redesign their products to offer more affordable products.

After almost three quarters of sluggish market and poor sales, it looks like things will not improve very much for the property fraternity until the other economic sectors, including the manufacturing and services sectors, start to show stronger signs of a rebound.

The crisis also highlights the fact that property development is a highly cyclical business and industry players should equip themselves with all the skills and know-how to survive any market conditions.

Besides having the right products in the right locations for sale, property development is also about good cashflow management. Developers need to be financially strong to ride out any cyclical “hiccups” as the deferment or slowdown of projects means substantial holding cost.

Luckily, our developers have learnt their lesson well from the last regional crisis and many have healthy gearing ratios after having pared down their borrowings.

Given the right market conditions, most of the developers will be able to spring back quite easily and start strutting their stuff again. A number of them are already making plans to launch greenfield township projects.

● Deputy news editor Angie Ng hopes the lessons will be well learnt and industry players will take the current lull in the market to learn new skills and add more value to the country’s living environment

By The Star (by Angie Ng)

Friday, April 17, 2009

Guocoland set to enter hotel scene with Thistle brand


The property arm of Hong Leong Group is building a five-star hotel in Damansara Heights, sprawling over 3.45ha, with 250 rooms at an investment cost of some RM800,000 per room.

GUOCOLAND (Malaysia) Bhd, the property arm of conglomerate Hong Leong Group, is ready to enter the Kuala Lumpur hotel scene by building a RM200 million five-star hotel in Damansara Heights.

To be ready in 2011 or 2012, the hotel will form part of the Damansara City integrated development comprising retail, luxury condominiums and office towers.

Managing director Paul Poh said that the hotel, located next to the Menara Millenium, is likely to carry the group's own hotel brand called Thistle.

Thistle is part of Guoman Hotel Management (UK) Ltd, a unit of GuocoLeisure Ltd. Both companies are part of the Hong Leong Group.
The proposed hotel, sprawling 3.45ha, will have 250 rooms, with an investment cost of some RM800,000 per room.

Poh was speaking to reporters to introduce the UK hotel brand's maiden foray outside of its homeland. There are 34 Thistle hotels in the UK.

Meanwhile, Guocoland is in the midst of renovating two of its existing hotels in the country for RM50 million to be rebranded as a five-star Thistle.

Sixty per cent of the budget will go towards upgrading the Hyatt Regency Johor Baru, and the balance on Guoman Port Dickson. Upon completion, both will be renamed as Thistle Johor Baru and Thistle Port Dickson Resort, respectively.

The two hotels will be closed for six months and will reopen in mid-2009.

Poh, who expects the return on investment from the two hotels to take between four and five years, said the hotels' contribution to the group's revenue will improve after the upgrade and rebranding.

Both hotels, with an estimated net book value of RM270 million, are expected to contribute about 37-40 per cent towards the group's revenue and net profit.

Previously, contributions from both hotels were close to 30 per cent.

For the year ended June 30 2008, Guocoland made RM41.24 million in net profit on revenue of RM120.13 million.

Thistle Johor Baru general manager Philip Skitch said that in the first year of operations, the hotel hopes to fill up 70 per cent of its 381 rooms, and garner an average room rate (ARR) of between RM200 and RM250 per night.

Thistle Port Dickson hotel general manager Dean Rossilli, meanwhile, hopes the 251-bedroom hotel will be able to more than double the occupancy to 65 per cent and is looking forward to achieving an ARR of between RM185 and RM225 per night in the first year.

By Business Times

GuocoLand keen to expand Thistle hotel chain

KUALA LUMPUR: GuocoLand (M) Bhd, the operator of UK-based Thistle hotels, aims to expand the hotel chain in Malaysia and Asia following a RM50mil refurbishment and rebranding exercise to be completed by the middle of this year for two of its Malaysian hotels, said managing director Paul Poh.

He said the company would be opening more Thistle brand hotels in Asia, either though acquisitions or building new ones.

“Yes, we are keen to expand the (Thistle) hotel business in Asia and Malaysia. Our intention is to be able to grow like we did in London,” he told reporters at the launch of the Thistle hotel brand in Asia yesteday.

Two Thistle hotels are slated to open in Shanghai and Beijing, China by the end of this year, Poh said.

In addition, GuocoLand is building another five-star hotel in its Damansara City project, an 8.5-acre integrated commercial development in Damansara Heights. The estimated RM200mil hotel, to be operated under the Thistle brand, is expected to complete by 2011 or 2012.

Thistle hotels are part of Guoman Hotel Management (UK) Ltd, owned by GuocoLand, a subsidiary of Hong Leong Group.

There are 34 Thistle Hotels in Britain, which are predominantly four-star rated, including 11 in central London.

The two five-star rated GuocoLand hotels undergoing the RM50mil refurbishment and rebranding exercise were the previously named Guoman PD and Hyatt Johor Bahru. They are now rebranded as Thistle Port Dickson Resort and Thistle Johor Bahru, the first time the Thistle brand was used outside of Britain.

Poh said the company did not renew its contract with Hyatt because “it made more sense to bring our brand (Thistle) to Malaysia, that is the only reason.”

The occupancy rate of Thistle Johor Bahru is expected to rise to 70% from 50% previously, while Thistle Port Dickson Resort is projected to see the occupancy rate double to 65% in their first year of operations under the Thistle brand, Poh said.

He added that he expected to see returns for the RM50mil investment in four to five years. With the new rebranded hotels, contribution from the hospitality segment is expected to rise to 37% of company revenue.

Peviously, GuocoLand’s hospitality segment contributed about 30% of revenue to GuocoLand, while the remaining came from property development.

Thistle Port Dickson Resort will have 251 bedrooms, a nine-hole golf course, nine function rooms and three kilometres of beach shoreline. The price of an average room ranges from RM180 to RM225 per night.

Thistle Johor Bahru will offer 381 bedrooms including 125 luxury rooms, and 19 apartment units. The indicative room rates is between RM230 and RM250 per night.

By The Star


SP Setia may acquire PNB property units

SP Setia Bhd, Malaysia’s biggest property developer, may acquire three real-estate companies from a state asset manager, increasing sales and gaining financial backing from the government, said RHB Research Institute Sdn Bhd.

SP Setia would benefit if Permodalan Nasional Bhd sells three property units it is already planning to merge to SP Setia, in which Permodalan already owns shares, said RHB Research, the brokerage unit of RHB Capital Bhd, Malaysia’s fourth-biggest bank.

Adding Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd would enhance SP Setia’s value and provide it with strong financial backing from the state for expansion, RHB said.

Malaysian developers’ sales slumped last year as the country’s exports fell, slowing economic growth, and the global financial crisis dried up credit.
Permodalan’s three property units have combined annual sales exceeding RM1.31 billion (US$358 million), similar to SP Setia’s 2008 figures, the Business Times reported on March 18.

SP Setia “could be pulled in to spearhead the merger in view of its strong brand name and market leader position in the local property industry,” RHB said in a report today and maintained an “underperform” rating on the stock.

“A mega property company could also potentially benefit from merger synergies, in terms of centralised procurement of construction materials and better negotiating power with contractors.”

Permodalan chief executive officer Hamad Kama Piah Che Othman plans to complete the merger of Island & Peninsular, Pelangi and Petaling Garden in July, a newspaper reported March 28, citing the CEO. Hamad Kama Piah wasn’t available to comment when Bloomberg contacted Permodalan today.

Loan Approvals

Loans approved for residential property rose to RM3.74 billion in February, the first increase in seven months, central bank data show.

SP Setia CEO Liew Kee Sin and company spokesman Diana Chin weren’t immediately available to comment when Bloomberg called the company.

SP Setia fell 0.6 per cent to RM3.28 at the 12:30 pm break on the Malaysian stock exchange, valuing the developer at RM3.33 billion. The benchmark Kuala Lumpur Stock Exchange Composite stock index advanced 0.4 per cent to 964.90.

Permodalan held a 6.5 per cent stake in SP Setia as of January 30, according to data compiled by Bloomberg.

By Bloomberg

Builders undertake RM98b foreign projects

A TOTAL of 102 Malaysian contractors have penetrated the construction market in 45 countries, undertaking various scope of work, Deputy Works Minister Datuk Yong Khoon Seng said today.

He said they have completed 432 projects worth RM29.3 billion while 125 projects, costing RM69 billion, are under construction.

"Their performance is to be proud of. It showed Malaysia's construction industry is capable of competing in the global market, providing services and work quality on par with foreign parties.

The construction market in foreign countries covers work to build infrastructures, buildings and airports, he said. "This is the result of the capabilities developed in the domestic market over the past one decade," he said when opening the Southern Region (Negeri Sembilan, Johor and Malacca) Construction Week 2009 hosted by the Construction Industry Development Board at the Malacca International Trade Centre.

CIDB chairman Tan Sri Jamilus Hussein was present.

By Bernama