MRCB determined to go 'green' on buildings

An artist's impression of the 348 Sentral project. It will be the company's first that complies with the LEEDS Gold Standard.

ALL future buildings by Malaysian Resources Corp Bhd (MRCB) are likely to be environmentally friendly, its chief, who is determined to go "green", said.

"Most of the buildings that we're building now are very technologically advanced, and now, the other big thing that we're pushing for is the adoption of the environment standards," group managing director Shahril Ridza Ridzuan said.

He said it was becoming increasingly clear that potential tenants, especially multinationals and big corporates, were becoming more concerned about environmental issues.

"As a developer, we have to respond to the marketplace. It makes a lot of sense for us to move on this path ... it's another selling point for our buildings," he told Business Times.

He said it was a natural step for MRCB, as it is also involved in business like cleaning up rivers and coasts in Malaysia. It is one of the biggest companies to do such clean-up jobs here.

Its 348 Sentral project at Kuala Lumpur Sentral, which comprises an office tower and serviced residence, will be its first that complies with the LEEDS Gold Standard, a green rating system in the US.

But now that Malaysia has its own green rating system for buildings, known as the Green Building Index (GBI), MRCB will also work at having its buildings, old and new, certified by the local standards.

Shahril noted that other developers, especially high-end ones, are also moving into this direction.

It makes sense, he said, adding however that for commercial reasons, this can't be applied to every single project.

"It has to be driven by the market as well," he remarked.

By Business Times (by Adeline Paul Raj)

MRCB looks to property boost

Malaysian Resources Corp Bhd (MRCB), a builder and one of the country's biggest providers of office space, says its property development business will likely account for half of the group's revenue next year owing to a recent pick-up in projects.

At present, the group derives the bulk of its revenue from construction activities.

"We have nearly five million sq ft of space under development right now in terms of offices, retail and serviced apartments," group managing director Shahril Ridza Ridzuan told Business Times in an interview.

By year-end, the group would have launched at least four big commercial developments at a cost of over RM3 billion at Kuala Lumpur Sentral, the country's biggest transport hub.

Shahril said the group expects to return to profitability this year and chalk up higher revenues as building material prices have fallen significantly, allowing it enjoy better profit margins.

About 35 per cent of its revenue this year will likely come from the property business, with the rest contributed by construction, he said.

"But next year, the property recognition will probably be equal to the construction recognition. So, we'll go back to the same balance that we used to see before," he said.

The group, which registered a net loss of RM57 million last year, will probably make a net profit of RM6 million this year, OSK Research said in a report last week.

Shahril said shareholders can expect dividends this year. The company generally tends to pay out at least 20-30 per cent of its net profit.

The projects at Kuala Lumpur Sentral, some of which were delayed from late last year, are expected to reflect in its books from 2010 to 2012.

"Last year was a year when we did a lot of provisioning. But this year, I think we've turned a corner, and so, from 2010 to 2012, we'll start to see a lot of growth again in terms of revenue and profits," he remarked.

It has already started construction work on 348 Sentral, a RM1 billion office tower and serviced residence; "Lot G", a more than RM1 billion development comprising a new mall, hotel and two office towers; and the new headquarters of banking group CIMB.

It will also begin work on a RM500 million low-density campus-style development once it has managed to secure enough potential investors and tenants.

MRCB, the master developer of Kuala Lumpur Sentral, is likely to see its order book expand to about RM5 billion by the year-end from about 4 billion now, Shahril said.

Meanwhile, the group is looking to develop something similar to Kuala Lumpur Sentral, but on a smaller scale, in Vietnam.

Discussions are under way with potential partners there. "We're looking at urban integrated development," Shahril said.

Half of at least 12 analysts who track MRCB have a "buy" recommendation on the stock, according to Bloomberg data. Their target prices range from as low as 60 sen to as high as RM1.70.

MRCB last closed at RM1.32.

By Business Times (by Adeline Paul Raj)

Tan & Tan: Niche marts will still attract buyers

Property developer Tan & Tan Development Bhd says demand for residential properties, particularly in niche markets, remains strong.

It plans to launch projects targeting demographics such as those with young families and the elderly.

"There is still ample money out there. If the product and price are right, people will still buy," its chief executive officer Tan Boon Lee told Business Times.

He cited the recent successful sale of all 49 units of residences at Laman Sierramas West, developed by Kumpulan Sierramas (M) Sdn Bhd.

The sales campaign was to have run from May 7 to yesterday, but all the units were taken up during the first weekend.

Tan & Tan, joint developer with KL-Kepong Property Holdings Sdn Bhd, managed to sell the property for RM37 million.

Priced at between RM560,000 and RM800,000 each, Tan said the completed project enabled people to view the units and make an immediate decision on purchase.

He said that it was looking next at developing another 40 gated, guarded community bungalows catering for those with younger families. The bungalows, to be developed with KL-Kepong, will have space of 3,000 sq ft to 3,500 sq ft.

"We are niche developers, but we are not looking at super-high-end projects. We are targeting specific groups," Tan said.

In the fourth quarter of the year, Tan & Tan plans to launch 50 to 60 condominium units catering for the elderly in Jalan Ampang Hilir, Kuala Lumpur.

"It will be elderly-friendly, with facilities like grab bars/railings, ramps, non-slip flooring in the bathrooms," Tan said, adding that it has looked into the little details.

Tan & Tan has had experience with hospital developments when it owned the Gleneagles Medical Centre in Kuala Lumpur.

No pricing has been set for the project as yet.

By Business Times (by Vasantha Ganesan)

Strong foreign demand for Australian properties

KUALA LUMPUR: Buying interest in Australian properties by Malaysian as well as other foreign investors has been on the rise the past six months and this trend is expected to continue for some time, say real estate agents and developers.

Jalin Realty International Pte Ltd, a real estate agent that specialises in properties abroad, expects a stronger demand for Australian properties this year.

Ian Chen

Chief executive officer Ian Chen said the company was seeing encouraging response for properties Down Under this year, especially from Malaysian investors.

“We are definitely getting a lot of enquiries,” he told StarBiz in an interview before the launch of the Artists apartments promotions here recently.

The Artists apartments, located in Fitzroy, Melbourne, have a gross development value of about A$100mil and is expected to be built by late 2010.

Only 30%, or 50, of the total 173 units are now available and priced from A$600,000 at about A$700 per sq ft. The average size of the two-bedroom apartment is about 860 sq ft.

Chen said because of the good response by Malaysian investors in its previous launch of the Milano Service apartments on Franklin Street, also in Melbourne, last year, the company decided to continue with the promotion of Australian properties here.

He said there were several reasons for the higher uptake in Australian properties.

“Clearly the weaker Aussie dollar against the ringgit is the main factor, which makes Australian residential properties very attractive, especially in this current economic environment when property prices are depressed due to the downturn,” he said.

Chen said there was potentially a 25% upside to the properties in Australia over time and generally properties there had a compounded growth rate of 8% to 10% per annum, depending on the states.

An Australian real estate agent from LJ Hooker said there was stronger buying interest in Australian properties this year.

“The bulk of the foreigners buying Australian properties is from Britain. There is also an increase in interest and purchase of properties from Asian investors, including Malaysians, compared with previous years,” he said, but declined to give numbers.

A spokesman from another Australian property agent said Victoria appeared to attract more foreigners than other states, possibly because of its incentives.

He said that besides federal funding to prop up the property market in Victoria, property buyers in the state would pay a lower stamp if they could choose to buy the land first and pay the full amount when the building was constructed.

On property investors, he said there were mainly four classes – those that buy to invest for capital gain, those that migrate, those that buy for their children to live in and affluent people attracted to a lifestyle of having homes in different countries.

Australian property developer PDG Corp sales manager Charles Vraca said the company was very bullish about properties in Australia, especially Melbourne, going forward.

“Purpose-built properties in choice locations in the inner city with a strong theme should sell well,” he said, adding that developers needed to understand the buying power and needs of the community first before starting construction.

PDG was the developer for the Milano Service and Artists apartments which were 70% sold before their construction.

Vraca said another reason locals and foreigners were attracted to Australian properties was the ease of getting loans to purchase residential homes.

“Generally they can get 70% to 80% financing for their property purchase,” he said.

A local property analyst, who declined to be named, said the Australian government was very supportive of the property market by coming out with a slew of incentives to stem the loss of confidence due to the global economic meltdown.

The Australian government made several interest rates cuts to lower the cost of mortgages for property, pumped in A$10.4bil to prop up the property sector and gave first-home buyers A$21,000 initially to buy their homes and has now extended the programme to June next year.

“There is also a good chance that the amount of assistance for first-home buyers could be significantly increased further,” the analst said.

Moreover, in another positive development, Australian Prime Minister Kevin Rudd recently announced a whopping A$42bil allocation (in stages) to extend the broadband network reach across the country, which will help support the property sector’s growth.

“All these positive moves done by private sector initiatives in tandem with government funding and support help tremendously to strengthen foreign investors’ confidence in the value of Australian properties,” said the analyst.

By The Star (by Danny Yap)

Developers still getting good sales from new projects

In every storm, there is a silver lining. Despite the current tough economic conditions, property developers are still able to launch new projects and fetch encouraging sales from ongoing projects, thanks to the low interest rates and attractive financing packages offered by property developers.

Based on banking data released in early May, approved loans for residential property surged 49% in March from the previous month.

According to developers, home buyers are not simply opting for cheaper homes due to the slowdown but are looking for good value buys as opposed to just a cheap sticker price.

That is reason enough for some developers to base their launches on their target markets instead of being compelled to switch to cheaper or affordable properties.

Most, if not all, major property firms are offering attractive financing packages to lure property buyers.

SP Setia Bhd launched its 5/95 home loan package in January. Under this programme, it registered sales of over RM500mil to date. It also targets to sell RM300mil worth of properties during the three-month extension of the 5/95 home loan package promotion from April 19 to July 19.

SP Setia president and chief executive officer Tan Sri Liew Kee Sin says the sales figures show that the market is still active.

“Property players in Malaysia are riding out the challenge well. Many have come up with attractive packages to entice buyers,” he tells StarBizWeek.

Another property player, Mah Sing Group Bhd, also launched an easy home ownership programme that has lifted sales to RM170mil in the first quarter for the financial year ending Dec 31 (FY09), compared with RM115mil previously.

In fact, its group managing director and chief executive Datuk Seri Leong Hoy Kum says sales chalked up in the first three months of FY09 already represent 38% of its RM453mil full-year sales target.

“Attractive financing packages and low interest rates are increasing the affordability for buyers. Buyers will also look at various other factors including location, practicality of design, value-added features and branding as well as track records of developers to make their purchase decisions,” he says.

Paramount Corp Bhd managing director Ong Keng Siew says its home ownership scheme, which was launched early this year has helped grow its sales in recent months. He believes that the scheme will continue to help generate sales in the next two years.

The company recently announced that it plans to launch a mixed township development – Bayan Hills in Sungai Petani next year with a gross development value (GDV) of RM1bil.

Paramount has also launched 38 units of two-storey semi-detached industry property in Kota Damansara with GDV of RM120mil, of which 22 units were sold to date.

Mah Sing plans to expand its landbank for commercial and residential projects which fits its business model of quick project turnaround.

It is looking to acquire one to two more pieces of land for integrated commercial developments next year.

Next month, Mah Sing will launch two developments, Starparc Point in Setapak, Kuala Lumpur, a five-acre commercial development with a GDV of RM125mil and the 54-acre residential precinct of Southbay Penang with a GDV of RM518mil.

The Southbay Penang residences comprise 284 super-link homes priced from RM795,000 and 76 bungalows priced from RM3.7mil. Currently, it has five ongoing commercial projects in Kuala Lumpur and Penang worth a total GDV of RM2.2bil. Meanwhile, SP Setia is set to launch a block of Setia Sky Residences with a GDV of about RM220mil and is waiting for one more approval from the authorities.

This is SP Setia’s first high-rise project in the Kuala Lumpur City Centre and it is located in Jalan Tun Razak on 5.96 acres with a total GDV of RM800mil, comprising four 39-storey tower blocks, with each block containing 211 condo units.

When the project was first unveiled, it was priced at an average of RM800 per sq ft. “Now, the price is at an average of RM680 per sq ft as raw material prices have stabilised. We have not reduced any of the unit sizes. Built-ups are still from 800 sq ft onwards,” he continues.

The company also has a few launches in the pipeline in Penang in the coming months. The group is confident of achieving its target of RM180mil in revenue from the sale of its properties in Penang for the financial year ending Oct 31 (FY09).

Liew says the group is on track to achieve total sales of RM1.1bil for FY09.

SP Setia’s products range from link houses for the mass market to luxury bungalows. Prices for its terraced homes in Setia Alam, Shah Alam start from RM300,000.

In Johor, its link homes are priced between RM200,000 and RM250,000. “All our townships are continuously launching in phases,” Liew says.

Paramount’s Ong says luxury developments may take a hit during a slowdown. But there’s no big impact to the mid-range to upper mid-range properties “because Malaysians still like to own properties”.

“Demand is still there, but all depends on the locations and reputation of the developer. People like to buy properties whether for their own use or for investment,” he says.

“Property is the best bet against inflation. Those smart property investors will always look for good properties to invest,” he says.

Mah Sing’s Leong says: “We feel that medium to high-end landed residential property segment will still do well due to the limited investment options for good properties in prime locations”.

According to the National Property Information Centre report for 2008, transaction volume grew by 10% for houses priced above RM500,000 and by 33% for houses priced above RM1mil.

Leong says this probably reflects the supply demand gap for properties in this price range, especially as semi-detached homes and bungalows account for less than 10% of the residential property supply. Mah Sing has met close to 40% of its full-year RM393mil launch target given the continuous strong demand.

“We plan our launches very carefully, and generally, our products enjoy at least 80% sales take up,” Leong continues.

He says “affordable” homes can be from RM200,000 to RM500,000, depending on location and the property.

By The Star (by Rachael Kam)

Building higher values

The economy’s weaker-than-expected performance in the first quarter of this year at -6.2% and further contractions expected in the second and third quarters, albeit at smaller percentages, is a big wake up call for the government and the people to put in greater efforts to rein in the declines.

The poor performance points to more difficult times ahead for many industry sectors including property, which will be in for a few more lacklustre quarters.

This shows that the magnitude of the problems plaguing the global economy is very severe and things certainly don’t look good for corporate earnings.

Much of the excesses and incompetencies that plunged many of the developed economies into one of their worst recessions since the Great Depression are still unresolved, and these will need much more effort and time to be addressed.

Far from what some pundits would like us to believe, a bottoming out of the world’s economy is still nowhere in sight, much less a recovery.

It is best to face the wrath of the global financial meltdown by getting to the bottom of the problem and repairing the weaknesses rather than see any positive sign as a “green shoot” that the government measures are working well.

Although Malaysia has been lucky so far and spared from a much more severe hit suffered by other countries, there is a need to strengthen its economic structure and move into higher value adding activities.

The Government’s initiatives to liberalise the economy are a good start and these should be followed by a more enabling environment to promote greater income earning opportunities and allow wages to catch up with those in other countries.

Even in the lower economic activities, such as waitressing in the food and beverage (F&B) sector, there are opportunities for higher value activities to be introduced.

It is necessary to employ more Malaysians instead of unskilled foreigners in a broad spectrum of economic sectors, including the F&B and factory production lines, as they are better educated and require less training.

Rather than keeping wages low by employing foreigners, it is necessary to allow wages to rise and catch up with those in other neighbouring countries. Malaysians are drawing much lower wages compared with their counterparts in Singapore and even Thailand.

Doing so will also prevent large amount of money from being repatriated to the other foreign countries that these workers come from and ensure higher domestic consumption for more sustainable economic growth.

Meanwhile, in the property sector, more liberalising measures are also needed for industry players to get back on their feet after being pulled down by the global economic crisis.

Currently the Government has made it mandatory for developers to build low-cost housing, which industry players lament are dragging them down further especially during the current tough market conditions.

It is worth looking at setting up a statutory body that will function as a public housing board to undertake an indepth master plan of all the low-cost or public housing needs in the country and build enough such units to meet demand.

The Government’s initiatives to allocate most of the RM1.4bil for Syarikat Perumahan Negara Sdn Bhd (SPNB), the housing unit of the Ministry of Finance, to deliver some 32,000 low-cost homes in Malaysia through various housing programmes under the two economic stimulus packages is a good start.

If the initiative is taken further and develop into a long-term national housing programme, it will ensure a more orderly development of low-cost housing for all needy Malaysians to own homes.

To further the housing cause, a good model to study is Singapore’s Housing Development Board, which is responsible for the planning and building of all public housing needs in the city state. Its ability to build high-quality public housing, complete with good community amenities at affordable prices, must be one of the best in the world.

·Deputy news editor Angie Ng believes that upgrading the country’s economic structure into a high value add and earnings economy will prepare it for a more competitive global environment after the crisis.

By The Star (by Angie Ng)

MRCB, Gapurna team up

Malaysian Resources Corp Bhd and Gapurna are expected to finish developing the RM1 billion '348 Sentral' project by the third quarter of 2012

Malaysian Resources Corp Bhd (MRCB) is developing a RM1 billion office and residential project at Kuala Lumpur Sentral, the city's largest transportation hub.

The project will be undertaken on a joint-venture basis with Gapurna Sdn Bhd, a local developer with 60 per cent share of the partnership.

Work on the project, known as 348 Sentral, started last month. It is expected to be ready by the third quarter of 2012.

"This is part of our RM3 billion expansion of Kuala Lumpur Sentral over the next few years," MRCB group managing director Shahril Ridza Ridzuan told reporters after the launch yesterday.

MRCB is the master developer of Kuala Lumpur Sentral.

348 Sentral will be financed using internal funds and borrowings.

"A couple of banks" are in the process of finalising a loan, Shahril said.

The project will feature a 33-storey office tower and a 21-storey serviced residence tower sitting on a five-storey podium and a four-storey basement.

The joint venture, GSB Sentral Sdn Bhd, will lease part of the office tower to oil firm Shell Malaysia to use as its regional office for 15 years.

Shell will be its anchor tenant, taking up about 340,000 sq ft.

"We decided to consolidate our offices in the Klang Valley and 348 Sentral was the best offer we had," its chairman Datuk Saw Choo Boon said.

The company currently has offices in 10 physical locations in the Klang Valley.

348 Sentral is said to be the country's first integrated commercial development going for the Leadership in Energy and Environmental Design (LEED) certification with gold standard, a US-based green building rating system.

It will be Gapurna's first big-scale project, its chairman Tan Sri Abdul Halim Ali said.

Shahril said he expected MRCB, which turned in sharply lower first quarter profit this year, to show better earnings in future quarters now that building material costs had fallen.

Its first quarter profit fell by almost 99 per cent to RM153,000.

On its upcoming transportation hub in Penang, he said the company was working on the final design and expected to get vacant possession of the site "shortly".

A temporary hub has been built and is operational.

The launch yesterday was officiated by Rural and Regional Development Minister Datuk Seri Mohd Shafie Apdal.

By Business Times (by Adeline Paul Raj)

HSL gets RM126mil housing project

KUALA LUMPUR: Hock Seng Lee Bhd (HSL) has received a RM125.7mil subcontract from Pembinaan Nomisual Sdn Bhd for the construction and completion of 1,000 houses in Bintulu, Sarawak.

In a filing with Bursa Malaysia yesterday, HSL said the scope of works included the construction of the affordable houses, related external works as well as the mechanical and electrical works.

The project is expected to be completed by April 2012.

“The contract is expected to contribute positively to the earnings and net assets of HSL for the financial years ending 2009 to 2012,” HSL said.

By The Star

Raffles Hotels aims to be KL rate leader

The prestigious Raffles Hotels & Resorts expects to be the most expensive hotel in Kuala Lumpur when it opens at Pavilion Kuala Lumpur in 2011.

Raffles is now the rate leader in seven out of the eight markets it is in. In Dubai, the rate leader is the Burj Al Arab in Dubai. In Singapore, Raffles last year closed at an average room rate (ARR) of S$1,000 (RM2,420) per night.

Fairmont Raffles Hotels International (FRHI) executive vice-president David Roberts expects the hotel to have an ARR that's a fifth higher than the leader at that time.

"We will position ourselves as a rate leader," Roberts said.

Currently, the rate leader in the capital is Mandarin Oriental at over RM600 per night.

Roberts was speaking to reporters following an agreement signing ceremony between Raffles Hotel Management and Harmoni Perkasa Sdn Bhd.

Harmoni Perkasa is a wholly-owned subsidiary of Urusharta Cermerlang Sdn Bhd. Pavilion Kuala Lumpur is 51 per cent owned by Urusharta and 49 per cent by the Qatar Investment Authority.

The signing ceremony confirmed a Business Times story in April that Raffles will open at Pavilion Kuala Lumpur in 2011.

Raffles Kuala Lumpur will have 200 rooms and suites measuring a minimum of 50 sq metres - 50 per cent larger than most five-star hotel rooms.

Raffles expects to be able to achieve a gross operating profit of between 35 per cent and 45 per cent in Malaysia. FRHI, meanwhile, has confirmed the opening of 15 more Raffles hotels between 2010 and 2012.

By Business Times (by Vasantha Ganesan)

Raffles KL to open doors in 2011

KUALA LUMPUR: The luxury hotel brand Raffles will have its first hotel in Malaysia - the Raffles Kuala Lumpur - which is expected to open its doors in 2011.

The Raffles Kuala Lumpur will be at Pavilion Kuala Lumpur, along Jalan Bukit Bintang. Featuring 200 rooms and suites, each with a minimum of 50 sq m (about 538 sq ft), it will offer the most spacious rooms in the city.

Raffles Hotels & Resorts' signed an agreement on May 28 with Harmoni Perkasa Sdn Bhd, a unit of Urusharta Cemerlang Sdn Bhd, which owns Pavilion Kuala Lumpur.

"The name Raffles is associated with exceptional standards of service, hospitality and cuisine. We look forward to working with Raffles Hotels and Resorts to bring a luxurious lifestyle experience to Kuala Lumpur," said Harmoni Perkasa chairman Tan Sri Zainol Mahmood.

Owned by Fairmont Raffles Hotel International, Raffles Hotels & Resorts is expected to expand from seven Raffles hotels now to 23 hotels worldwide by 2012.

Chris Cahill, COO of Fairmont Raffles Hotel International said the group had always wanted to extend the Raffles portfolio to Kuala Lumpur.

"Now we have an ideal strategic partner and an unrivalled location," he adds. The group also owns Fairmont and Swissotel brands of hotels and resorts.

Raffles Hotels & Resorts' public relations and communications manager Vivian Koh said Raffles Kuala Lumpur will offer six restaurants and bars including a specialty restaurant, an all-day dining restaurant, a lobby lounge, a lobby bar, a pool bar and a Cafe Stelle located at the Couture Pavilion precinct. The cafe which will be a showcase of Raffles' service prior to the opening of the hotel, opened its doors today.

The Raffles Amrita Spa, a signature component of Raffles hotels and resorts worldwide, will feature 10 treatment rooms and an extensive range of massage and wellness treatments.

By The EDGE Malaysia (by Racheal Lee)

Bertam Alliance to launch RM310m high-end projects

PROPERTY developer Bertam Alliance Bhd will launch three high-end projects worth a combined RM310 million in Selangor and Langkawi to ride out the economic downturn and remain profitable.

The company hopes to maintain its 2008 earnings via locked in sales and income from the projects, its executive chairman Ng Sing Hwa said.

For the year ended December 2008, Bertam made a net profit of RM5.5 million, up 28 per cent from 2007, on revenue of RM45.2 million.

Bertam, (formerly, UH Dove Holdings Bhd), is launching up to 30 bungalow lots in Langkawi worth over RM20 million in June, Ng said.

In July, it will launch Grand View, a gated and guarded community featuring 66 exclusive bungalows worth RM140 million (RM1.8 million to RM3 million each) in USJ1, Subang Jaya.

By September, Bertam will launch 72 bungalows in Kota Damansara, worth RM150 million, or RM1.8 million to RM2.2 million each.

Ng told Business Times after the company's shareholders meeting in Petaling Jaya yesterday that it is optimistic of selling the stocks within a year.

"Our properties are in established areas. So long as you don't overprice, there will be buyers. As a developer, I am quite happy with 25 per cent to 30 per cent profit margins," he said, adding that Bertam will emphasise on building houses in small numbers to remain cash flow positive.

It will also buy pockets of land from developers in choice locations instead of more than 40ha.

"Landbank kills if you are not careful and are over geared. If you buy land of more than 200ha, you will be cashflow negative, unless you have been able to develop it by more than 50 per cent. We won't toy with that risk," Ng said.

Ng added that Bertam will not lock-in a project that will last more than three years.

"Housing is an industry, not a real estate development. We buy land and keep on moving. We do not speculate or keep stocks. We have the right products to sell. We emphasis on design and do not overprice," Ng said.

By Business Times (by Sharen Kaur)

IGB puts 2 big projects on hold

Unfavourable market conditions have caused IGB Corp Bhd to delay two major projects with an estimated combined value of RM1.5 billion to RM2 billion.

This will likely affect its property development division in the current financial year ending December 31 2009.

Last year, revenue from property development fell by a third to RM169.97 million from RM252.48 million in 2007.

The two projects on hold are the final third phase of the Mid Valley City and the high-end Stonor condominium in Kuala Lumpur. They could take off from next year.



Nevertheless, group managing director Robert Tan Chung Meng expects the recent completion of its North Tower Offices and The Garden Residences to make up for any shortfall in that division.
The group's performance this year is likely to remain flat, he said.

IGB made RM172.87 million net profit on RM688.22 million revenue last year. It also made a gain from the sale of Gleneagles Kuala Lumpur of RM83.59 million.

On its hotel division, which contributed a quarter of revenue last year, Tan said that IGB will open The Cititel Kota Kinabalu this year.

The US$50 million (RM175 million) 550-room St Giles Makati in the Philippines, developed by associate company St Giles London, will be operational in the first quarter of next year.

IGB is also in discussions for possible hotel projects in Bangkok, Thailand; Sydney, Australia; and Hanoi and Ho Chi Minh City in Vietnam.

"We are talking to about 10 parties, some for joint-venture projects, some for management, and some to be wholly owned," Tan told reporters after IGB's annual general meeting in Kuala Lumpur yesterday.

He said the group's 910-room Renaissance Kuala Lumpur is still on the market and that it was also willing to sell the MiCasa All Suite Hotel in Kuala Lumpur that is undergoing a RM50 million renovation.

Tan said the asking price for the Renaissance is RM800 million and for the MiCasa, about RM200 million.

IGB's first quarter results, released yesterday, saw net profit decline 7.6 per cent to RM33.9 million from RM36.7 million in the previous corresponding period.

Better contributions from property investment and its hotel division helped revenue improve 2 per cent to RM165.6 million from RM162 million.

By Business Times (by Vasantha Ganesan)

IGB plans more hotels abroad

KUALA LUMPUR: IGB Corp Bhd is in talks with 10 parties on developing hotels in Vietnam, China, Thailand and Australia.

Group managing director Robert Tan said the development might be in the form of joint venture, asset management or to wholly-own the entity itself.

“The hotels will carry the brand of either St Giles or Cititel but no deals have been closed at the moment,” he told a press conference after the company AGM yesterday.

Tan said the talks were mostly focused on hotel development, while some deals might involve taking over and developing uncompleted buildings.

“We have started the construction of St Giles Hotel in the Philippines and it is expected to be completed by the first quarter of next year,” he said.

He said the hotel might be a 50:50 joint venture between IGB Corp and associate company St Giles London but the latter was currently financing the US$50mil project.

The hotel division now contributes about 30% to IGB Corp’s net profit.

Tan said the company had delayed a few projects, such as Stonor and Mid Valley Parcel 3, this year.

“They carry a total gross development value of RM1.5bil to RM2bil,” he said.

Stonor is a condominium in Kuala Lumpur while Parcel 3 is a commercial development.

On talks of selling its Renaissance Hotel in Kuala Lumpur, Tan said IGB was still pursuing the deal and the asking price was around RM800mil.

However, he said, it had not received any “serious” offer yet.

He said IGB was also considering disposing its MiCasa All-Suite Hotel, which was currently closed for refurbishment and scheduled to open in October.

“We are always open to offers. The value of the hotel will be about RM200mil after the refurbishment,” he added.

By The Star

MK Land back in the black

PROPERTY developer MK Land Holdings Bhd has posted a net profit of RM13.2 million for the nine months to March 2009, against a loss of RM18 million in the same period last year, attributed largely to higher property sales.

The improved performance has allowed MK Land to make an early payment of RM60 million as the final settlement of its outstanding bond, which is only due in September this year.

MK Land, in which Tan Sri Mustapha Kamal Abu Bakar holds a majority stake, slipped into the red in the 12 months to June 2007 and 2008 due to additional cost incurred because of errant contractors.

It was the period when Mustapha Kamal stepped down as executive chairman from April 2007.
Chief operating officer Fatimah Wahab said the profit for the period reviewed was driven by strong sales performance after Mustapha Kamal returned and turned the company around in June 2008.

Sales for the nine months jumped 180 per cent to RM185 million, in spite of the weaker property and economic market condition, Fatimah said.

Top company executives have also mapped out a turnaround plan that includes cutting operating overheads, increasing cash position and reducing debt on a timely basis.

"The early (bond) payment is a significant milestone for MK Land in its turnaround efforts. We have sent a message to our bankers, bondholders and other stakeholders that we are serious about our efforts to reposition MK Land," Fatimah said.

MK Land will also embark on a corporate restructuring to lower the overall costs of funds and enhance earnings of share, she told Business Times.

The group had debts of RM500 million as at December 31 2008 and aims to reduce this to RM400 million by June and RM300 million by early next year.

"We will revisit the capital structure, treasury function and funding situation and see how they could be best structured to carry us forward. We have strategies in place to lower the cost of funds through innovative financial packages. We are talking to bankers," Fatimah said.

She added that MK Land is looking at various ways to enhance its margins and banking on Armanee Terrace Condominium and Rafflesia, its two core products within its Damansara Perdana township in Selangor, to drive profits.

By Business Times (by Sharen Kaur)

US home sales up in April, inventories swell

WASHINGTON: Sales of previously owned US homes rose in April, a report showed yesterday, providing more evidence the housing market is stabilising and backing views the recession is nearing an end.

The National Association of Realtors said sales climbed 2.9 per cent to an annual rate of 4.68 million as the traditional spring home-buying season swung into gear. However, the stock of unsold homes swelled 8.8 per cent to 3.97 million, the highest since November.

Both the trade group and economists shrugged off the rise in home inventories as mainly the result of seasonal factors, with sellers taking advantage of spring to try and sell their properties.

“Most of the sales are taking place in lower price ranges and activity is beginning to pick-up in the mid-price ranges, but high-end home sales remain sluggish,” NAR chief economist Lawrence Yun told reporters.

The data appeared to have little impact on major US stock indexes, which were close to flat in early afternoon, but the Dow Jones Home Construction Index rose 2.3 per cent.

“This report seems to offer another piece of evidence that home sales are stabilising,” said Zach Pandl an economist at Nomura Global Economics in New York.

The data also offered a fresh hint that the 17-month US
economic downturn, triggered by the collapse of the housing market, was easing and could well end by the third quarter, as a National Association of Business Economists survey published yesterday predicted.

The pace of job losses slowed last month, claims for unemployment aid have come off their peaks and consumer confidence has risen from recent rock-bottom levels.

By Reuters

Low property purchases by MM2H participants

GEORGE TOWN: If each of the 11,738 participants of the Malaysia My Second Home (MM2H) programme between 2002 and 2008 were to invest in a residential property, the country would have recorded RM7.8bil worth of sales from them. But the actual sales amounted to RM407mil as only 510 of them bought houses during this period.

Tang Chee Meng ...Foreign real estate investors are more likely to invest in countries that they are familiar with

“If each of the MM2H applicants were to buy just one property, there would have been 1,676 properties sold a year, with an estimated gross sales value of RM7.84bil or RM1.12bil a year,” Henry Butcher Malaysia chief operating officer Tang Chee Meng told StarBiz.

Tang was speaking on the sideline at the recent Penang Real Estate Conference, organised by investPenang and the Socio-Economic & Environmental Research Institute, which was officiated by Penang Chief Minister Lim Guan Eng.

Henry Butcher Malaysia (Penang) was the technical advisor for the conference.

“According to the National Property Information Centre (Napic), foreign purchases comprised only 0.62% of the 756,000 housing units sold between 2003 and 2008.

“The most sought after properties by foreigners are those priced between RM250,000 and RM500,000,” Tang said.

The seven states surveyed by Napic are the Federal Territory, Selangor, Penang, Kedah, Johor, Sabah and Selangor. The top MM2H buyers were from China, Britain, Iran and Japan.

Tang said the global recession presented new challenges to Malaysia’s MM2H market.

“Distressed properties in the other countries like the United States, Britain and Singapore offer attractive opportunities to international investors as property prices and exchange rates in those countries have dropped. The challenge now is to convince international investors that Malaysian properties offer better value than sub-prime properties elsewhere and that property values will hold steady despite the uncertain economic environment,” he said.

Tang said there was also great potential in the tourism market.

“Foreign real estate investors are more likely to invest in countries that they are familiar with.

“In 2008, Malaysia saw a record 22 million tourist arrivals from Singapore, Thailand, Indonesia, Brunei, China, India, Japan and Britain.

“If we can convince just 0.01% of these tourists to invest in property in the country, it will translate into 2,200 properties sold.

“At an average of RM668,000 a property, it will bring in some RM1.5bil sales,” Tang said.

To enhance Malaysia’s competitive edge as a MM2H destination, Tang said the property industry should take part in Malaysia Property Inc’s (MPI) roadshows.

MPI is an initiative of the Federal government to promote and brand Malaysia as an international property investment destination.

The target markets include Singapore, South Korea, Britain, Japan, Hong Kong and Indonesia.

Tang said industry players should collaborate with organisations with high net worth database to promote Malaysian property.

“They could look into hosting events with publications such as MillionaireAsia and 100 Thousand Club magazine to tap high net worth individuals in key Asian countries,” he said.

By The Star (by David Tan)

E&O posts loss on lower property contribution

KUALA LUMPUR: Niche property developer Eastern & Oriental Bhd (E&O) has posted a RM44.6mil net loss for its fourth quarter ended March 31 compared with a net profit of RM9.27mil a year ago.

For the full year, the group saw a RM37.7mil net loss versus a RM128.9mil net profit in FY08, while revenue also fell to RM302.6mil against RM516.4mil previously.

A lower contribution from the property division, as well as provision for impairment loss on investments of RM10.24mil and loss of RM19.976mil on disposal of 50% stake and preference shares in associate Puncak Madu Sdn Bhd to Selangor Properties Bhd were the reasons for the lower full-year earnings, the group said in a statement. The property division accounted for more than 80% of total revenue in FY09.

While the company slipped into the red in FY09, it is looking at strengthening its balance sheet and reducing its gearing with a rights issue that is expected to raise RM200mil.

E&O executive director Eric Chan told StarBiz the severity and suddenness of the economic downturn in 2008 necessitated “pre-emptive balance sheet management strategies”.

E&O announced yesterday a renounceable rights issue of irredeemable convertible secured loan stocks (ICSLS) 2009/2019 on the basis of one new ICSLS for every two shares held. The nominal value 10-year ICSLS of 65 sen each come with a coupon of 8% per annum.

E&O has the option to call for conversion of the ICSLS into new E&O shares after two years of issuance and if its share price exceeds RM1.

E&O’s share price has been penalised since its merger with and delisting in July/August last year of E&O Property Development Bhd which left it with high gearing.

Chan said the rights issue was only part of a two-pronged approach to address the gearing concerns and funding needs.

In total, the group aims to raise RM500mil. In addition to the RM200mil from the ICSLS issue, E&O is raising another RM300mil from the disposal of non-strategic landbank.

“This programme started in January. To-date, we have raised just under RM100mil from our asset disposal including from the unwinding of the joint venture with Selangor Properties,” Chan said.

At present, E&O’s gearing is high at 0.8 times but the group’s loans are not due immediately having been extended to 2014.

According to Chan, with the RM200mil from the ICSLS scheme, E&O’s gearing falls to 0.46 times.

A further RM300mil from the disposal of non-strategic landbanks would bring gearing to a low 0.16 times.

Together with new property launches that would generate even more cashflow, gearing would be slashed to a negligible level in two to three years, said Chan.

By The Star (by Loong Tse Min)

US home prices fall 19.1% in Q1, biggest fall in 21 years

NEW YORK: U.S. home prices are at levels not seen since the end of 2002, but a closer look at data released Tuesday shows the worst may be over for some metropolitan areas.

The Standard & Poor's/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter compared to the first quarter last year, the largest drop in its 21-year history.

Home prices have fallen 32.2 percent since peaking in the second quarter of 2006.

In cities across the country home prices varied dramatically, depending on affordability, foreclosure activity and the local economy.

The bottom may be in sight in some markets, but nationally home values are expected to decline - though at a slower pace - for the rest of the year.

"We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices," according to Joshua Shapiro, chief U.S. economist for MFR Inc.

It's hard to believe it could get much worse for homeowners in the Detroit area. Homes there are worth what they sold for in 1995.

And while that's good news for homebuyers, the implosion of the auto industry and economic fallout means fewer buyers have the money to qualify for a mortgage.

"I feel like houses here are free," said Detroit area real estate agent Rose Marie Jouan with Re/Max Showcase Homes.

Her house that she sold in 2004 for $200,000 is on the sales block, bank-owned, for $86,000.

In Phoenix and Las Vegas, where prices have plunged by half since their peaks, home values have receded to levels not seen since the beginning of the real estate boom. Phoenix prices are at early 2001 levels and Las Vegas values hover at mid-2002 prices.

Home values in Charlotte, North Carolina, Portland, Oregon, and Seattle are steady at 2005 prices, the best showing of all 20 cities in the Case-Shiller report.

All three were some of the last to fall into the housing slump.

The Case-Shiller report offered other hopeful signs the worst may be over for some cities.

Denver prices posted an increase over February, while Dallas prices were flat. Separately, Case Shiller said its 20-city index of home prices fell by 18.7 percent from the year before, and the 10-city index lost 18.6 percent.

However, the rates of decline slowed in March, the second straight month they didn't set record price drops.

Still, there are no signs home prices nationally have hit bottom.

"We see no evidence that a recovery in home prices has begun," said David M. Blitzer, chairman of the S&P index committee.

All 20 cities showed monthly and annual price declines, with nine setting annual records.

Fifteen cities posted double-digit drops and Phoenix, Las Vegas and San Francisco recorded declines of more than 30 percent.

Minneapolis posted a 6.1 percent decline from February to March, the biggest monthly drop on record for any metros in the indexes.

Ron Peltier, chairman and chief executive of HomeServices of America, attributed the drop to a jump in distressed sales in March.

Economists will get a look at April housing data Wednesday when the National Association of Realtors releases sales data for previously owned homes, and on Thursday when the Commerce Department puts out numbers for sales of newly built homes.

Economists surveyed by Thomson Reuters expect existing home sales to rise 2 percent from March to April, while new home sales are forecast to rise by 1.1 percent.

By AP

Malaysians feel property prices too high

A majority of Malaysian property hunters feel that there is a surplus in Malaysia and that most selling prices are unrealistically high, according to a survey by iProperty.com Malaysia.

The majority of the respondents also planned to buy properties in the near future but were waiting for prices to fall further before doing so.

iProperty.com Malaysia (www.iproperty.com.my), Malaysia’s No. 1 property website, is part of the iProperty.com Group (www.iproperty.com).

The results of three separate polls,undertaken between February 11 and April 14 this year in three countries -– Malaysia, Singapore and Hong Kong – revealed similar sentiments.

By Bernama

YNH plans condo project atop Genting Highlands

PETALING JAYA: A rare piece of land on Genting Highlands has been snapped up by YNH Property Bhd which will build holiday condominiums amid the rarefied air there.

It is believed most of the land on the highlands is owned by the Genting group.

YNH itself was surprised that there was land available and offered by a company. It completed the land purchase at the end of last year but did not announce it as the sum involved is not substantial relative to its equity.

YNH paid RM16mil for 95 acres which an official described as being on the same level as the casino. “If it’s on the Awana or Gohtong Jaya level, we wouldn’t have bought it,” a company official told StarBiz yesterday.

The Awana hotel and resort and Gohtong Jaya township are some distance below the peak of Genting Highlands and therefore, less cooling. The land that YNH bought is near the top where the temperature is around 15 to 16 degrees Celsius, he said.

Although the land YNH bought is sizeable, only 30% to 40% is suitable for development as the slope on the rest is too steep. “We’ll use the rest of the land for a golf course and jungle trekking,” the official said.

As for the development portion of the land, the official said the company estimated the gross development value (GDV) at up to RM2bil over 15 to 20 years.

It is working on a GDV of about RM50mil an acre, which it considers achievable as high-end condominium projects in the suburbs of Kuala Lumpur can have a GDV of about RM100mil an acre.

The official said the land had been converted from agricultural use to that of mixed property development. The company is preparing layout and building plans for approval from the Pahang state authorities, and hopes to launch sales next year.

Beside the cool weather, a feature that led YNH to buy the land is that there is good road infrastructure that was built by the Genting group. The land YNH bought will also be accessible by the main Genting road.

On YNH’s other projects, the official said the retail area of Kiara 163 had been sold for a total of RM200mil. Sales for the apartment units of this project in the Mont’ Kiara area of Kuala Lumpur have not been launched yet.

Meanwhile, it has also sold the retail units in the first phase of Menara YNH, near Shangri-La Hotel in Kuala Lumpur. The units in the retail podium were sold for RM300mil and the company expects to start construction of that in three months’ time.

Analysts, however, were disappointed at a recent briefing when they were informed of a further delay in the sale of one of the twin towers of Menara YNH to Kuwait Finance House. The sale and purchase agreement for that might not be signed till next year, they were told.

By The Star (by C.S.Tan)