Spotlight on REITs

The impending high profile initial pubic offering (IPO) for Sunway Real Estate Investment Trust (REIT) on the Main Board of the Bursa Malaysia has certainly raised investor awareness on this particular class of investment securities.

Sunway REIT will make its debut on July 8. Hot on its heels, yet another REIT, the CapitaMalls Malaysia Trust is slated for listing on July 16.

Although REITs have been around for some time — Axis REIT was the first REIT to be listed in Malaysia back in August 2005 — investor interest has been largely subdued with relatively thin trading volumes observed for most of the 12 REITs currently listed on the local bourse.

However, we could see increased interest going forward. For starters, the listing of Sunway REIT has helped raise the profile for this entire asset class. It will be the largest REIT on Bursa Malaysia with assets valued at almost RM3.73 billion and a market capitalisation of roughly RM2.7 billion (assuming the indicative unit price of RM0.97). Elsewhere, CapitaMalls will list with assets totalling RM2.19 billion and a market capitalisation of about RM1.46 billion (assuming a price of RM1.08). By comparison, Starhill REIT, currently the largest listed, has assets of about RM1.64 billion and market capitalisation of little over RM1 billion.

We expect the larger size and better liquidity will broaden the appeal of REITs to a wider spectrum of investors, including foreigners. Case in point, one of the four cornerstone investors in Sunway REIT is the Government of Singapore Investment Corp.

Several of the other REITs have also announced plans to increase their assets base. For example, AL-AQAR KPJ REIT recently completed the acquisition of additional assets that lifted the total value of its investment properties above the RM1 billion mark. It has further proposed additional purchases, including two hospital buildings in Indonesia, worth some RM303 million. Axis REIT too has announced acquisitions that will boost assets under management to some RM1.1 billion by end-2010.

So, what is a REIT?
Although listed and traded on Bursa Malaysia, REITs are not equity. As the name suggests, a REIT is a form of trust that invests, primarily, in property assets. Funds, to acquire property assets, can be raised through the sale of units in the trust and/or borrowings.

REIT unit holders have a direct and proportionate ownership in the underlying properties. As such, buying into a REIT is akin to property investing, albeit on a smaller scale, but which requires minimal time and effort. The properties are professionally managed.

Part of a diversified portfolio
Indeed, investors may consider REITs as an alternative investment to properties — to form part of their diversified portfolio, which would typically also include bonds and equities.

The unit price of a REIT normally tracks closely the value of its underlying assets less borrowings (NAV or net asset value). Thus REITs, like property investing, are a hedge against future inflation.

Since REITs are listed and traded on the local bourse, they have the advantage of better liquidity as compared to owning properties. Plus, investors need only a small capital outlay in order to gain exposure to a diversified portfolio of real estate investment.

Attractive yields on high distribution rate
REITs are exempted from paying corporate tax provided they distribute in excess of 90% of their annual incomes, primarily rental, to unit holders. Hence, most are committed to a high distribution rate. For example, both Sunway REIT and CapitaMalls intend to distribute 100% of incomes in the first two years of operations and at least 90% thereafter.

The high distribution rate usually translates into yields that are more attractive than that from the average equity investment. Gross yields from REITs listed on the local bourse range from 7.2% to as high as 8.4%, based on 2009's distribution rates at prevailing prices.

Currently, incomes distributed to both individual and institutional investors in 2010-2011 are subject to a final 10% withholding tax. The government has yet to indicate the tax rate beyond this period. But industry watchers expect the rate will not stray too far from the global norm, especially if the government aims to attract foreign investors. Singapore, which has one of the largest REIT markets in the region, do not levy any taxes on income distribution to individual investors.

More defensive than equity investment
REITs are widely seen as a defensive investment alternative and are appealing to investors with a lesser appetite for risks.

To be sure, unit prices are still influenced by sentiment prevailing in the equity market. However, their volatility is generally lower since the rental incomes have been, by and large, steadier than revenue for many businesses in the economy.

Indeed, the majority of REITs have registered positive earnings growth over the past few years, albeit at a gradual pace. Rental rates have, on average, been trending higher as had property values. Of course, the longer-term rental prospects and market values for individual REITs will depend heavily on the quality of their underlying property assets.

Note: This report is brought to you by Asia Analytica Sdn Bhd, a licensed investment adviser. Please exercise your own judgment or seek professional advice for your specific investment needs. We are not responsible for your investment decisions. Our shareholders, directors and employees may have positions in any of the stocks mentioned.

By The EDGE Malaysia (Written by InsiderAsia)

MPHB diversifies into property development for additional income

PETALING JAYA: Multi-Purpose Holdings Bhd (MPHB) will be announcing its joint venture (JV) with a public-listed developer in the next several weeks to mark its entry into the property development sector.


MPHB MD Datuk Lau Kim Khoon pointing the way forward for the company: It is in property development. He says ‘We do not have the expertise but we have the land'. So a joint venture with someone who has the expertise is the answer to increase profit.

MPHB is known for its gaming business from which it generates about half of its profit via 51%-owned Magnum Corp, one of Peninsular Malaysia’s three legal number forecast operators,

Managing director Datuk Lau Kim Khoon @ Surin Upatkoon said the group was entering the property development sector in order to have an additional income stream and “to build a sustainable recurring income model.”

Besides gaming, its other businesses are insurance, stockbroking, property and hospitality.

The group is starting from ground zero in property development as other than its two residential projects which it launched early this year in Penang, it does not derive any revenue from property development.

The group has two office buildings, Menara Multi-Purpose and Plaza Flamingo, and two hotels under the Flamingo brand as investment properties. Menara Multi-Purpose is 98% occupied and Plaza Flamingo, 90%.

“In the past, MPHB has been factoring in the recurring income from these assets but the contribution was not substantial. The current contribution to the group’s revenue from property development comes mainly from two residential developments in Penang which are expected to contribute a total of RM37mil in profit before tax when completed in the next three years,” said Lau.

The Paya Terubong project is a six-acre joint venture comprising 116 units of town houses and 256 apartment units with a gross development value (GDV) of RM72mil. The Minden Heights project is another JV comprising 74 units of terrace houses under phase 1, launched early this year, and 95 units of terrace houses under phase 2, which will be launched at the end of this year. The GDV for this project is RM143mil.

The group is also converting Magnum Plaza into a three-star hotel to be part of its Flamingo chain. This is expected to open next year.

The jewel in the crown, Lau said, would be its RM3bil iconic integrated mixed development project at the junction of Jalan Sultan Ismail and Jalan Imbi near Park Royal Hotel, which is currently in the planning and designing stage.

It was reported last week that MPHB will launch a RM3bil project which will complement the Government’s proposed international financial district and Pasar Rakyat redevelopment in Imbi. The 2.4ha will have a retail podium, a 50-storey luxury condominium, a 35-storey four-star hotel and 30-storey office tower. The entire project will take several years.

“We believe our project in downtown KL is in line with the Government’s vision for KL. For this reason, we view the various ongoing projects by the Government and existing developers to be complimentary to our project, which would in turn strengthen other projects in the area.”

On the occupancy prospects of its KL integrated mixed development in view of the weak global economy and dwindling expatriate community, Lau said MPHB’s projects were not designed exclusively for expatriates but for the working class.

Only a small portion will be condominiums, as such occupancy and oversupply will not be an issue, he said.

“We do not have the expertise but we have the land. So we will work with the parties that have the expertise. It is not necessary to have our own property team to undertake these developments. The objective is to build a sustainable recurring income stream from our investment properties,” he said.

Lau said most of its land were bought and paid for years ago. Over the years, they have appreciated by three- or four-fold.

He said property development and investment is expected to contribute 10% to the group bottomline.

“Revenue from the property sector will contribute between 20% and 25% in about three to four years’ time,” he said.

“We are of the view that the local economy is stable and not directly affected by the fragile global economy. We are also taking a long-term view of the sector and the group will consider the overall economic climate and other factors when deciding on the timing of launches.”

He said the bulk of its landbank, which includes a 4,641-acre oil palm estate in Pengerang, Johor, which is near the third link to Singapore, are generally more suitable for the local market.

By The Star

Tradewinds sees higher rental for refurbished Menara Tun Razak

TRADEWINDS Corp Bhd, which is undertaking the RM450 million refurbishment of the 29-year-old Menara Tun Razak in Jalan Raja Laut, forsees office rental in the building to increase by 40 per cent by 2014.



Chairman Tan Sri Megat Najmuddin Megat Khas said office space in the building was currently rented out between RM3.50 and RM4.50 per sq ft and this would be increased to RM6 per sq ft.

He said the redevelopment activities would result in a temporary decline in the rental income from the group's property division.

"Barring any unforeseen circumstances, we expect to see rental income to decline by RM8 million annually, but we are optimistic that we can recover and improve our profitability when the Menara Tun Razak project is completed in four years' time," Megat Najmuddin told a press conference in Kuala Lumpur yesterday, after the company's annual general meeting.
Tradewinds will also construct a 40-storey office building, next to the Menara Tun Razak, later this year which will be crucial for the company's property development business.

"The development would enhance the area in terms of asethetics and value, increase our profile as a major high-end urban property developer, attract new and reputable clientele as well as create spill-over effects for surronding areas," Megat Najmuddin added.

He also said the company planned to set aside RM70 million to refurbish three other hotels under its wings, PJ Hilton, Hilton Kuching and Pelangi Langkawi.

By Bernama

Tradewinds to refurbish tower and build 40-storey block for RM450mil

PETALING JAYA: Tradewinds Corp Bhd will spend RM450mil to refurbish Menara Tun Razak (MTR) as well as build a brand new 40-storey office block on the existing land just beside MTR.

Tradewinds has just received the approval for the new office block and will start developing the 5-star office building this year. The building is expected to be completed by 2014.

“We are building a commercial building for tomorrow’s standards. The office block fulfils 95% of the checklist of some of the best buildings in Singapore,” said Tradewinds Corp director and advisor Poh Pai Kong.

Currently, MTR is generating net cashflow of RM8mil per annum.

Hence, from now until the refurbishment is completed in 2014, there will be a loss of some RM8mil in cashflow. However Poh said the refurbishment was likely to be completed before 2014.

He also emphasised that the refurbished building would fetch higher rental yield.

The existing rental for MTR is RM3.50 to RM4.50 per sq ft (psf). Once refurbished, MTR will be rented out at RM6 psf.

“The new office block will be rented out at RM6 psf for the first three years before we increase it in the coming years. If you look at Jalan Raja Laut, where MTR is located, it is increasingly becoming a bankers’ street. When you have a 5-star building, you are able to rent it to anyone,” said Poh, after the company AGM.

Tradewinds chairman Tan Sri Megat Najmuddin said property development was a catalyst of growth for Tradewinds, with commercial property as its focus.

Poh added that the refurbishment of MTR was a mere appetiser before the company served its main course.

“We are now looking at all sorts of projects. We are reviewing all our existing assets and developments. The property drive will be the catalyst moving forward for us,” he said.

Megat said that he was optimistic about the property outlook of the country despite many people criticising Malaysia.

Malaysia has a young population and there are only 4 million homes for a population of 28 million, according to Poh. “There is a shortage of homes now. There is a lot of potential for the property market.”

When asked whether Tradewinds would enter the residential property market, Poh said it was something they were looking at. One of the projects Tradewinds is planning for will include service apartments.

Meanwhile, Tradewinds will spend RM70mil over the next two years refurbishing three of its hotels, which are PJ Hilton, Kuching Hilton and Meritus Pelangi Beach Resort & Spa Hotel in Langkawi.

Right now, its gross operating profit for its hotels is around 40%.

By The Star

Sunway confident of record profit this year

Sunway Holdings Bhd expects a record net profit this year, driven by new business and healthier margins from all its five core divisions, managing director Yau Kok Seng said.



These include construction, property development, trading and manufacturing, quarry and building materials.

The construction division, which has RM3 billion worth of jobs in hand, is bidding for more infrastructure and building projects worth RM16 billion in Malaysia, Abu Dhabi, India and Singapore.

"We hope to get minimum RM1 billion worth of new contracts this year, maintaining our order book at RM3 billion," he told reporters yesterday after a shareholders' meeting in Bandar Sunway, Selangor.

Sunway, controlled by founder Tan Sri Jeffrey Cheah, has prequalified for projects like the light rail transit (LRT) line extension in the Klang Valley, the new low-cost carrier terminal in Sepang and the Kelau dam, part of the Pahang-Selangor raw water transfer project.

Yau said Sunway's property development unit, SunwayMas Sdn Bhd, will launch five projects, including one in Singapore, from July to December this year worth RM600 million.

It has six projects worth RM1.1 billion and 182ha of undeveloped land with potential to generate a gross development value of RM3.3 billion.

"With new construction jobs, property launches and unbilled sales of RM515 million, and increasing trading, manufacturing and quarry activities, we hope to exceed last year's earnings," Yau said.

Sunway reported a strong first quarter net profit of RM40 million, which is 2.5 times higher than in the same quarter last year.

"We have very clear strategy on how we want to build our businesses. The geographic diversification has helped us grow all the divisions.

"To expand further, we will continue to recruit the right talent and manage the foreign exchange rates," he said.

Sunway, which has RM170 million in its reserves, has no immediate plans to do a rights issue, he said.

Yau said Sunway will manage its cash flow, generated from all its operations, to expand.

"We hope to come up with a consistent dividend policy from next year. We are looking to distribute 20 per cent of our profits to shareholders," he said.

By Business Times

MRCB expands KL landbank with RM105m acquisition

KUALA LUMPUR: MALAYSIAN RESOURCES CORP Bhd is expanding its landbank near in landmark KL Sentral development by acquiring a company which owns a piece of land fronting Jalan Brickfields for RM105 million.

MRCB said on Wednesday, June 30 it had proposed to acquire 22.82 million shares or 60% stake in GSB Sentral Sdn Bhd with 17.91 million redeemable preference shares of 1 sen each in GSB for a total of RM105 million.

It is acquiring the stake from Gapurna Sdn Bhd, which is principally engaged in property development.

GSB Sentral owns 91,040 sq ft of land which has been approved for a mixed development of office and service apartments with total gross floor area of 1.468 million sd ft and an estimated gross development value of RM850 million.

The development on the lot started in March 2009 and is expected to be completed by the fourth quarter of 2012.

By The EDGE Malaysia

Glomac profit jumps 27.4pc to RM40.7m

GLOMAC Bhd’s net profit for fiscal year ended April 30 rose 27.4 per cent to RM40.7 million, driven by contributions from its Sg Buloh township and Glomac Tower commercial project in KL.

Revenue was down almost 8 per cent to RM317.8 million.

Going forward, Glomac expects significant growth, helped by unbilled sales of RM588 million, and pipeline projects worth RM1.8 billion, over the next 2 years.

By Business Times

Good response to IJM Land project

Property developer IJM Land Bhd has seen overwhelming response from Korean buyers for its RM500 million The Pearl Regency development on Penang island.

Apart from an en bloc sale of the entire commercial portion of the project comprising 83 commercial units worth RM90 million to a Korean party, IJM has also seen 40 per cent of 574 condominiums sold to Koreans.

The units, which were launched in Penang yesterday, were pre-sold to the Koreans in December last year in South Korea.

"The buyers of the condos are mainly Korean retirees and families who send their children to Penang to brush up on their English skills," IJM Land general manager Toh Chin Leong told a media briefing in Penang yesterday.

IJM Land established a sales presence in South Korea at the end of 2008.

The residential units are priced from RM478,314 up to RM1.3 million each, while the commercial area is priced at RM750 per sq ft.

The project, which sits on a 20ha site close to the Penang bridge and next to the Tesco hypermarket and e-Gate, which is a popular retail and food and beverage hub, is slated for completion by early 2013.

The project, sited on freehold land, has been marketed to potential overseas buyers in countries like South Korea, Indonesia, Singapore and Hong Kong with the help of local private hospitals in Penang, international schools, along with golf and country clubs.

By Business Times

CapitaMalls Asia eyes RM860m from listing

SINGAPORE'S CapitaMalls Asia Ltd could raise about RM860 million from the listing of its Malaysian assets in a real estate investment trust (REIT) on Bursa Malaysia.

Held under CapitaMalls Malaysia Trust (CMMT), the portfolio is made up of Gurney Plaza in Penang, Sungei Wang Plaza in Kuala Lumpur, and the Mines in Selangor.

CapitaMalls Malaysia REIT Management Sdn Bhd is the manager of CMMT. At the prospectus launch in Kuala Lumpur yesterday, chief executive officer Sharon Lim said CMMT is Malaysia's largest listed "pure-play" shopping mall REIT by market capitalisation and property value.

According to its prospectus, CMMT has the right of first refusal for retail properties located in Malaysia that CapitaMalls Asia intends to buy and this includes the Gurney Plaza extension.
CapitaMalls Asia has set aside RM3.5 billion to acquire more shopping malls and retail properties in Malaysia. Asked on CMMT portfolio expansion, Lim replied, "we're going through a couple of evaluations. We can't reveal until they are concluded".

CMMT is offering 1.35 billion units for sale under the initial public offering (IPO). A total of 786.522 million CMMT units are being offered to institutional investors in Malaysia and overseas and to retail investors in Malaysia only.

CMMT's parent CapitaMalls Asia will retain a stake of 41.74 per cent. However, if an over-allotment option of up to 15 per cent of the offering is exercised, CapitaMalls Asia's stake in CMMT will drop to 33 per cent.

The retail offering in Malaysia consists of 67.5 million units made available for application by the Malaysian public and eligible directors and employees at the retail price.

The final retail price will be below the retail offer price of RM1.08 per unit or the institutional price less a discount of 2.0 sen.

At an indicative price of RM1.08, the retail offer will provide a distribution yield of 6.9 per cent to the prospective investor based on its distribution per unit of 7.45 sen for 2011.

By Business Times

CapitaMalls REIT listing expected to raise RM864mil

PETALING JAYA: CapitaMalls Asia Ltd, one of Asia’s largest listed shopping mall developers, owners and managers by property value and geographic reach, has launched the prospectus and retail portion of what will be the largest shopping mall REIT (real estate investment trust) in Malaysia to date.


Lim Beng Chee ... ‘We see acquisition opportunities in Malaysia’s shopping mall sector.’

CapitaMalls Asia is part of Southeast Asia’s largest property developer Singapore’s CapitaLand Ltd.

The listing of CapitaMalls Malaysia Trust (CMMT) REIT on the Main Market of Bursa Malaysia on July 16 is expected to have a market capitalisation of RM1.4bil if an over-allotment option of up to 15% of the offering of 786 million units is exercised. If this portion is not exercised, it may raise RM864mil.

Its initial portfolio of three shopping malls – Gurney Plaza in Penang, Sungei Wang Plaza in Kuala Lumpur and The Mines in Selangor – has a total net lettable area of 1.88 million sq ft and has been valued at RM2.13 bil.

The CMMT IPO will have a total of 1.35 billion units in issue, of which 719 million units were offered to institutional investors at between RM1 and RM1.10 each in late June and 67.5 million units for individual investors at an indicative price of RM1.08 yesterday, with a forecast distribution yield of 6.9% for 2011. The final price will be determined on July 8.

CapitaMalls Asia CEO Lim Beng Chee told a press conference that occupancy and rental yields had increased for all three malls in its stable despite a weak economy in the last two years.

“We see acquisition opportunities in Malaysia’s shopping mall sector, with its fragmented ownership structure.

“CapitaMalls Asia will give CMMT a right of first refusal over any retail properties that we may acquire in future, including the extension that is being carried out at Penang’s Gurney Plaza. If acquired, Gurney Plaza extension will increase CMMT’s asset size by about 11%,” he said.

CIMB Investment Bank Bhd, JPMorgan Chase & Co and Maybank Investment Bank Bhd are jointly managing the IPO sale.

“As part of our long-term commitment, CapitaMalls Asia also plans to set up a Malaysia retail property fund to acquire and develop retail properties in Malaysia. CMMT will similarly have a right of first refusal over this pipeline of retail properties,” Lim said.

Individual investors will get a refund if the final price for institutional investors is lower than the retail price.

CMMT’s sponsor, CapitaMalls Asia Ltd, will retain a stake of 41.74% in CMMT.

If an over-allotment option of up to 117 million units is exercised, CapitaMalls Asia’s stake in CMMT will be 33%.

The IPO follows the RM1.5bil raised by Sunway Real Estate Investment Trust in its initial sale last week and underscores rising investor appetite for equities in Malaysia amid an economic rebound.

By The Star

AEON buys land for RM27.13m

AEON Co (M) Bhd is buying three pieces of leasehold land and two parcels of state land in Perak, measuring a total 6.9ha, for RM27.13 million.

It told Bursa Malaysia yesterday that it is buying the land to expand its retail business by opening new shopping centres and outlets.

By Business Times

Gula Perak plans to sell hotels to settle debts

PETALING JAYA: Gula Perak Bhd said has proposed to sell two hotels to Hong Kong-based Time Glory Investment Ltd for a combined value of RM193.9mil to pay off outstanding debts, the PN17 affected issuer told Bursa Malaysia yesterday.

Gula Perak had, on April 22, announced that the redeemable secured notes (RSN) totalling RM287.3mil had expired.

As the properties — Dynasty Hotel in Kuala Lumpur and Empress Hotel in Sepang – are charged to the chargee under the RSN, the proceeds arising from the proposed disposals will be utilised towards the repayment of the outstanding RSN.

By The Star

The big spillover benefits of Greater KL plan

PETALING JAYA: The redevelopment of a number of major goverment-owned assets to transform Kuala Lumpur and the other satellite towns in the Klang Valley, or the Greater Kuala Lumpur, into a leading global city has the potential to create significant spillover benefits to the country’s economy if it is planned holistically and is well executed, property industry players said.

Their concern is whether there will be an overall authority to oversee the redevelopment exercise so as to ensure the projects complement the current environment and are spaced out well to prevent an over supply situation.

Under the Greater Kuala Lumpur Strategic Development Project, an initiative under the 10th Malaysia Plan, the Government is to revitalise the city by re-developing strategic federal assets including the Sungei Besi military airport, Pudu Jail, Kuala Lumpur Financial District and the planned township development on the Rubber Research Institute (RRI) land in Sg Buloh.


Datuk Michael Yam says largescale redevelopment allows a wholesale repositioning of KL

Newly elected Real Estate and Housing Developers Association (Rehda) president Datuk Michael Yam said such large-scale redevelopment would enable a wholesale repositioning of Kuala Lumpur as a world-class city, “embracing all the contemporary features not currently available in existing developments, which grew out of organic demand and ad hoc non-contiguous ventures.”

“Developing large parcels of land enables better integration of services, infrastructure and other components, and is generally more long term and sustainable,” Yam, who took office on June 19, told StarBiz.

He said the development plans needed to be carefully thought out and planned, “not only to achieve profit targets, but for other more holistic benefits including social, environmental and sustainable objectives for the long term.”

“The supply should be of high quality and value, and needed to be developed in phases, in order not to upset the supply and demand equilibrium.”

Yam also said the need for a new, more effective and efficient structure of the approval and decision process to avoid costly delays and from falling short of targets. “Strong financial oversight, corporate governance and supervisory measures by a monitoring team should be established with active private sector participation.”

Meanwhile, the Government can use the highly profitable parcels as a source of additional income to cross-subsidise housing for the poor. This will provide a boost to the public sector’s effort in ensuring affordable housing for the low-income group.


Datuk Eddy Chen ... ‘Each asset or land area must come under a unified master plan.’

Rehda patron Datuk Eddy Chen said the projects should be developments of a high-value nature that have the potential to lure foreign direct investment in assets and properties that are of international standards.

“Each of the asset or land area must come under a unified master plan that has its own unique theme and designated role to play.

This is to avoid inter-city competition and overlaps. For example, while one city can be a financial district, another can be the centre of regional headquarters for multinational corporations, and others for MICE and corporate tourism activities.”

Chen, who was a former president of Rehda, said such cities needed to be well-planned with components for work and play, citing a good public transport system as the main mode of travel was also paramount.

Hall Chadwick Asia chairman Kumar Tharmalingam said the proposed redevelopment of the government assets “shows there is a complete shift in paradigm in how the Government is going about to unlock the value of its assets.”

“Having a government company to undertake the projects is a clever approach as it would give an assurance of implied sovereign guarantee that the Government will actively pursue the completion of the projects,” Kumar said.

He said many foreign funds including private equity and pension funds would be keen to invest their funds in those projects.

“By having open tenders for the development of these assets, the private sector will have the opportunity to participate,” he said, citing the Employees Provident Fund joint-venture development of the Sungei Buloh land that would be opened for bidding as an example.

Located on 1,320ha, the massive development is estimated to cost some RM10bil.

As for the 160ha Sungei Besi airport, Kumar said with the project’s strategic location and the sizeable land, it should become a new gateway to the city if planned cohesively. “To ensure that the place remains vibrant even after office hours, there should be facilities not just for work, but also to live and play there.

Mah Sing Group Bhd group managing director cum chief executive Tan Sri Leong Hoy Kum said high-value project initiatives to redevelop the government assets would provide more opportunities for the players.

“It is a good way to allow greater participation from industry players with the expertise to add value to the assets,” he said.

By The Star

Serviced apartments boom looms in Malaysia

With spacious rooms, the availability of round the clock hours services and a similarity to the modern home lifestyle, it is no surprise that serviced apartments will be one of the fastest growth markets in Malaysia.

Frasers Hospitality Pte Ltd Chief Executive Officer Choe Peng Sum said many players including hotel owners see the opportunities offered in this market. "More serviced apartments will be available soon enough, making the competition more intense."

"As one of the top three global companies for serviced apartments, we realise the potential opportunities arising from this market, with people and tourists opting for residences that offer a myriad of amenities and features to make them feel at home.

"I can also say that many hotels have started investing in their own serviced apartments as a diversified business marketing strategy," he told Bernama recently.
Explaining the group's latest undertaking, Fraser Place Kuala Lumpur (FPKL), Choe said that it is a luxury project in Jalan Perak and close to the Kuala Lumpur City Centre (KLCC).

As a Singapore-based company, the venture marks Frasers Hospitality Pte Ltd's first foray into Malaysia.

"The apartments are strategically nestled in the heart of the city, comprising 30 floors with 215 one or two bedroom suites, studios, stunning penthouses and an infinity sky pool.
The pool offers a view of the city's skyline.

"We are positioned in the very heart of the city centre with a host of food and entertainment outlets, offering unparalleled convenience to residents," he explained.

With a proven international track record in the hospitality industry, FPKL is expected to carry on the legacy here in Malaysia.

By Bernama

RM4b projects seen in Penang

GEORGE TOWN: The Penang Master Builders and Building Materials Dealers Association (PMBBMDA) expects the value of construction contracts in Penang this year to be slightly over RM4bil, which is the same as last year, but below the RM5bil forecast in 2009.

PMBBMDA president Vincent Ong said this was due to the global uncertainties and the pending gradual removal of subsidies, which would hike construction costs and lower demand.

“Nevertheless for the first quarter 2010, the value of 38 contracts from both the government and private sectors in Penang hit RM206mil, compared with about RM45mil achieved in the previous corresponding quarter, according to the Construction Industry Development Board (CIDB) report,” he told StarBiz.

“Of the 38 contracts, 10 were from the government sector. This compared with 11 contracts in the first quarter last year, of which three were government jobs.”

He said the association hoped to get more contracts from the state and federal governments for projects such as the expansion of the Penang International Airport, the second bridge and the Mengkuang Dam expansion.

“A lot of the government and private contracts that our members are handling now were approved before 2010.

“We hope this year there will be more fresh projects. If not, there may not be sufficient work to go around,” he said.

Last year, there were a total of 88 contracts, with an estimated value of RM638mil.

Meanwhile, PMBBMDA immediate past president Finn Choong said there would be over RM350mil worth of renovation jobs available for the association’s 117 members from now till March next year.

The renovation jobs are from projects such as the phase three of Setia Pearl Island and The Looc Residence, which recently obtained a certificate of fitness, Prestige Heights, the Moonlight Bay, Suria, Pavillion, Summer Place and Platino, which will be ready for renovation before year-end, and the Residence@Southbay, which will be ready in the first quarter 2011.

“The total sales value of these projects is about RM1.32bil.

“These properties will easily generate about RM350mil worth of renovation jobs, as it is normal for the owner of a unit to spend 25% to 30% of the property’s value on renovation,” Choong said.

Real Estate Housing Estate Developers’ Association Penang chairman Datuk Jerry Chan said the pending removal of subsidy sales would spur the sales of properties.

“This is natural as people want to grab properties with prices as they are today before an increase after the subsidies are removed,” he said.

By The Star

CapitaMalls Malaysia Trust largest "pure-play" shopping mall REIT

KUALA LUMPUR: CapitaMalls Malaysia Trust (CMMT) will be the largest "pure-play" shopping mall real estate investment trust (REIT) on the main market of Bursa Malaysia by market capitalisation upon its expected listing on July 16.

At the launching of its prospectus Monday, June 28, CMMT said its market capitalisation was expected to be about RM1.4 billion, adding that its portfolio has been valued at RM2.13 billion in the valuation conducted by its trustee, AmTrustee Bhd.

The Trust said its initial portfolio comprises three shopping malls namely Gurney Plaza in Penang, an interest in Sungei Wang Plaza in Kuala Lumpur and The Mines in Selangor. The portfolios have a net lettable area of about 1.88 million sq ft.

Under its initial public offering (IPO), CMMT is offering 786.522 million units to institutional investors in Malaysia and overseas and to the retail investors in Malaysia only.

The retail offering in Malaysia consist of 67.5 million units made available through application by the Malaysian public, eligible directors and employees at the retail price pursuant to the retail offering. The final price according to CMMT would be the lower of the retail offer price of RM1.08 per unit or the institutional price less a discount of 2 sen.

CMMT noted that the institutional price would be determined by way of book building. At an indicative price of RM1.08, the retail offer would provide a distributional yield of 6.9% to the prospective investor based on its distribution per unit (DBU) of 7.45 sen for the forecast year 2011.

The Employees Provident Fund Board (EPF) and Great Eastern Life Assurance (M) Bhd have signed up cornerstone investors for the IPO to subscribe 90 million units or 11.4% of the total 786.522 million units offered to investors. They have agreed to pay RM1.10 per unit or the institutional price, whichever is lower.

By The EDGE Malaysia

CapitaMalls to offer shares at RM1.08

CapitaMalls Malaysia Trust plans to offer shares for its Malaysian initial public offering at RM1.08 each to individual investors, according to a prospectus published on Malaysian newspapers today.

Individual investors will get a refund if the final IPO price for institutional investors is lower than the retail one, according to the sales document.

CapitaMalls will offer a total of 786.5 million shares, it said.

By Bloomberg

Encorp Strand to pull in the crowd

When Encorp Strand, in Kota Damansara, Petaling Jaya was completed in late 2007, there may have been some concern about who will be occupying these 265 units of shops and office space.


Datuk Seri Mohd Effendi Norwawi in his office, which overlooks the construction work on the mall and boulevard

Today, most of the ground floor units are tenanted. The story of Encorp Strand, with a gross development value of RM1.34bil by Encorp Bhd is pretty much linked to Dataran Sunway, another commercial development located adjacent to it across the road by the Sunway group.

Dataran Sunway, of about the same size as Encorp Strand, was the first to take off. Because it was the first to market, it was popular with investors and tenants. Investors, seeing the popularity and vibrancy it generated, bought into Encorp Strand when it was put on the market.

Says a real estate agent: “It is normal for any commercial development to take six months to a year to have tenants. Now the place is vibrant.”

With tenancy picking up and prices doubling in the secondary market, Encorp executive chairman Senator Datuk Seri Mohd Effendi Norwawi is encouraged with the work they have put in to create yet another hub.

The gross development profit (GDP) from the project is expected to be about RM300 mil. This comprises the GDP from the 265 units Shop Offices (less the 29 units retained by the company), the Garden Office and the serviced residence component.

The GDP excludes developments that will be retained by the group, namely the mall and its elevated car parks, the Boulevard, the 29 shop offices and the Garden Office car parks.

Besides Encorp Strand in Kota Damansara, the company also has projects in Penang, Shah Alam and Puteri Harbour in Iskandar Malaysia, Johor. Its three core businesses are property development (an on-going project with a gross development value of RM2.1bil), construction management (with an order book of 1.8bil) and government concession (housing project valued at RM2.2bil).

On the on-going changes at Encorp Strand, Effendi says his three-storey shop units were RM1.08mil in 2005. Today, some of them are priced at more than RM2.2mil in the secondary market while the four-storey units with lift are priced at RM3.2mil. It was previously RM1.8mil.

An agent who declined to be named said the capital value is growing faster than the rental.

Last week, they launched their second component, the Garden Office comprising 258 units of office suites on 2.6ha. It is currently 60% sold.

This project comprises 14 blocks of six and seven storeys with built-up ranges from 1,705sq ft and 2,510sq ft. It was sold at an average price of RM700 per sq ft.

The Garden Office is not designed as a single block, but a total of 14 blocks located in clusters around a stretch of landscaped area in the centre.

The second thing going for it is that it is low rise, comprising six to seven storey blocks. The third element is its use of open space with a rooftop garden for some of the blocks. On paper, the concept is aesthetically pleasing. Whether Effendi will be able to pull it off is another matter because rooftop gardens are not easy to maintain and there are several here.

The other interesting feature about Garden Office is that it will be connected to a larger and more comprehensive commercial development comprising its already completed shop and office suites via a walkway. The Garden Office is expected to be completed in 2013 with a gross development value of RM320mil.

Says Effendi: “Encorp Strand will be the most happening place when we are through with it.”

He could be right. Despite it being leasehold, Kota Damansara has become home to many. It is the 400,000 households within a 5km radius that Effendi hopes to draw to Encorp Strand. He is offering different components to attract the crowd. Besides the Garden Office, he is also planning to build a neighbourhood mall and on top of it will sit a 40-storey serviced apartment.

About 60% of the 280 units will be studio units of about 650 sq ft, 30% 2-bedroom units of about 1,000 sq ft.

He is targetting the young executives. To be launched next year, the studio units will be selling at about RM360,000.

“We have been getting quite a bit of enquiries for the serviced apartments,” he says.

Effendi has roped in the services of French architect Nicolas Ayoub to give the entire 18ha that make up Encorp Strand a bit of ooomph!

In some aspects, it will be a more pleasant place than its competitor across the road. For one, the roads are wider. For another, there is more open space.

Effendi promises his project will be of a superior product.

“Together with the office space, shop lots, Encorp Strand will be an integrated development comprising five components.

Work on the mall and boulevard started last year and is expected to be completed in 2012.

“We are creating a community in this 45 acres. The mall will have several anchor tenants - a cinema, a bowling alley, possibly a performing arts theater, a fitness centre and all the basic amenities that make up a township in this single location,” he says.

With The Curve a 10-minute drive away, and the newly opened Giza Mall in Dataran Sunway, and the Giant Hypermarket next to Encrop Strand and the Sun Suria Industrial Park, Effendi does not think there is any over supply of commercial and retail area.

“Encorp Strand will be very self-contained. It will be different from Dataran Sunway and the 40-storey block will be among the highest in this part of Petaling Jaya,” he said.

He has promised more than 3,000 car parks. With the way things are moving in Kota Damansara, whether that will sufficient is difficult to say. That place seems to attract people like bees to honey. What is missing is public transport which is currently in the pipeline.

By The Star

Mah Sing eyes 30pc sales abroad by 2015

Mah Sing Group Bhd, the country's fifth largest property developer by revenue, expects overseas projects to contribute 30 per cent of total sales by 2015, group managing director Tan Sri Leong Hoy Kum said.



Currently, there is no contribution from overseas.

Mah Sing has a cash pile of RM233 million and plans to capitalise on opportunities in China, Singapore, Australia, Indonesia and Vietnam.

It will launch its maiden project early next year in Jiangsu province, China, with an investment cost of US$620 million (RM2 billion).

Mah Sing has a 51 per cent stake in the project, which is expected to contribute to its sales from next year.
"We want to replicate what we have been doing here and further enhance our image and branding to be one of the premier lifestyle regional developers. We want to grow big and satisfy our shareholders," Leong told reporters yesterday after the company's shareholder meeting in Kuala Lumpur.

Mah Sing's strong institutional shareholders, who collectively own 56 per cent of the company, include Permodalan Nasional Bhd, the Employees Provident Fund and Koperasi Permodalan Felda Bhd.

Mah Sing has 21 projects worth RM6.3 billion in the Klang Valley, Penang and Johor.

The company has set a sales target of RM1 billion this year. In the first three months, it raked in sales of RM601 million.

Leong said that Mah Sing was confident of exceeding its 2010 target with contributions from its new projects and unbilled sales of RM1.1 billion.

Among the projects to be launched in the second half of the year are the Icon Residence @ Mont'Kiara, M Suites @ Jalan Ampang, One Legenda in Cheras, Garden Residence and Garden Plaza in Cyberjaya, and Austin Suites in Johor Baru.

Mah Sing is also scouting for niche, quick-turnaround landbank in Kuala Lumpur, Penang and Johor and an area of more than 80ha in Selangor, Leong said.

"When we buy land, we want to launch immediately and lock in sales to pare down debts. Property business is a financial game. You have to manage your cash flow.

"We are not highly geared now. With good concept, branding and track record, we are able to sell well all our products. We are confident our niche products will attract locals and foreigners," he said.

Leong added that Mah Sing was keen to develop the prized government land in Sg Besi and Sg Buloh and had expressed its interest to the government. It also wants to lend a hand in the proposed international financial hub in Kuala Lumpur.

By Business Times

Mah Sing has capacity to borrow more

KUALA LUMPUR: Mah Sing Group Bhd’s low gearing ratio of 0.05 times as at March 31 has provided the group with the capacity to gear up further, said group managing director and group chief executive Tan Sri Leong Hoy Kum.

At a briefing yesterday, he said that should the company gear up to 0.5 times, there would be about RM400mil available for landbank acquisition.

However, he added that the group was not in a hurry to raise its borrowings as it was in cash flow positive position.

Leong said the group had so far acquired three parcels of land with a gross development value (GDV) of RM712mil and was still on the lookout for more land.

“We are constantly scouting for more landbank. We’re looking at land aggressively everyday,” he said.

As at March 31, Mah Sing has cash and cash equivalents of RM166.9mil.

For the year ended Dec 31, 2009, the group had cash and cash equivalents of RM356.6mil.

Executive director for corporate and investment Steven Ng Poh Seng said the company spent some of its cash in the first quarter to purchase three parcels of land, resulting in the lower cash hoard.

However, he said Mah Sing’s cash and cash equivalents had improved to RM233mil in May.

Leong said should the group decide to raise its gearing up to a 0.5 times, it would be a non issue as it was still “very comfortable”.

Meanwhile, he said the group was confident of achieving its RM1bil sales target for this year as it had achieved sales of RM601mil in the first quarter.

For the three months ended March 31, Mah Sing posted a net profit of RM27.8mil on revenue of RM238.8mil, driven by its residential and commercial projects.

Leong said Mah Sing had a strong earnings sustainability from the combined RM6.3bil in remaining gross development value (GDV) and unbilled sales. Its unbilled sales stood at of RM1.1bil.

“Mah Sing is cautiously optimistic that 2010 will be a good year for the Malaysian property market and backed by a good employment market, strong liquidity and still-conducive interest rate levels,” he said.

The group is also interested to participate in government tenders for land in Sungai Besi and Sungai Buloh to be developed by the private sector.On overseas expansion, Leong said Mah Sing was looking to venture into Vietnam, Singapore, Indonesia and Australia.

Leong said the group had signed a letter of intent on a joint venture basis with 51% stake to develop a mixed development project in Wujin District, Changzhou, China.

He expects overseas projects to contribue 30% to group revenue in the next five years.

By The Star