Bina Puri to develop Medini project in 2011

BINA Puri Holdings Bhd will develop its flagship commercial project worth RM500 million in Medini North in Iskandar Malaysia, Johor, from early next year.

The construction group yesterday inked a deal with Medini Land Sdn Bhd, a unit of Iskandar Investment Bhd (IIB), to jointly develop the 2.8ha project, known as Medini Square, via Medini Square Sdn Bhd.

Bina Puri holds 80 per cent of Medini Square, which will build retail, shop-offices and two 23-storey towers, each comprising small office/home office (SOHO) and office units.

Medini Square will have 1.05 million square feet of gross floor area, Bina Puri chairman Datuk Wong Foon Meng said after the signing ceremony in Kuala Lumpur yesterday.
"This is a strategic move for Bina Puri and we hope to be the catalytic developer and mover to attract other investors into Medini North," he said.

Bina Puri, which has RM2.5 billion worth of ongoing construction works, is eyeing several infrastructure projects, including in Iskandar Malaysia.

It has bid for projects worth RM4 billion here, in the Middle East, Pakistan, Brunei and Thailand and it expects a 10 per cent success rate.

Meanwhile, IIB president and chief executive officer Arlida Ariff said Medini Square will spur new developments in Medini North.

It will also complement the RM1.7 billion worth of ongoing projects in Medini North, namely Legoland Malaysia and 1Medini, a residential project by WCT Bhd and IIB, she said.

IIB is in talks with several local and foreign investors to build a three-star resort hotel, a four-star business hotel, a retail mall and a high-rise tower in Medini North worth RM1 billion.

By Business Times

Hot property market still grabbing attention

PROPERTY, especially the hot housing market, has become a favourite topic these days. Malaysians are generally quite savvy investors and their penchant for viable investment instruments have contributed to the current run-up in the housing market.

The availability of easy housing facilities, including the 5:95 and 10:90 packages, is also fuelling the strong buying interest.

According to the National Property Information Centre in its latest property market report, average house prices have risen 19% to RM273,000 in the first half of this year, from RM220,000 in the same period last year.

In Kuala Lumpur, prices rose about 35% to more than RM700,000 in the first half of the year, up from RM523,000 last year.

The strong jump in house prices in the past six months in some parts of the Klang Valley and Penang have raised concerns that unchecked speculative buying may cause overheating and result in a property bubble.

Bank Negara is keeping a close watch on the market and is engaging with banks on possible measures to curb excessive speculation on properties. It may consider imposing a 80% loan-to-value ratio (LVR) cap for mortgages to avert the risk of a potential property bubble.

The news have caused concern among industry and consumer groups over its dampening effect on affordability level and buying sentiment.

They worry that if the loan limit is brought down to 80%, many first-time house buyers, including those who have just joined the work force and the lower income group, may not be able to fork out the 20% downpayment for a house.

Their contention is that the proposed mortgage loan limit should not be imposed across the board and should give due consideration and flexibility to first-time buyers and those buying lower priced units priced below RM500,000.

Bank sources said Bank Negara’s aim of imposing the 80% mortgage loan cap was to reign in on speculative buying by certain quarters and the measure would be targeted at the high-end and non-owner occupied houses.

A blanket LVR cap will unlikely be imposed given the differing level of speculation in the various housing segments.

Given that houses of less than RM500,000 still constitute the bulk of transactions, accounting for 94% of the total number of units sold and 68% of sales value last year, the mass housing market may be spared. First-time house buyers may also be exempted from the proposed measure.

Should the proposed LVR cap materialise, houses priced from RM500,000 may be affected the most.

The mortgage loans market is now quite liberalised as the central bank does not impose any standard policy on mortgage loans but leaves it to the banks to manage.

Most banks have traditionally provided loans of up to 90% of the value of the property until about two years ago when market sentiment was impacted by the global financial crisis.

To stem the weak property sales, developers and their panel of bankers came out with different variants of housing loan packages that allow buyers to sign up for a house with just a 5% downpayment of the property value. Some even go as far as doing away with any downpayment and eligible buyers are granted the maximum 100% loan.

Although it has been almost two years since the introduction of these easy financing facilities to raise the affordability level for house buyers, these packages are still around in various forms today.

In fact, banks are still flushed with liquidity and are competing to get a bigger slice of the mortgage loan market. The stiff competition among banks has resulted in a mortgage price war with lending rates dropping to as low as base lending rate minus 2.3%.

But things have changed substantially in the past six months or so, and it should be time to review these housing packages.

If house buyers are made to pay higher downpayments for their purchases, the risk of their loans turning bad will be lower compared with if they have paid lower or zero downpayments.

We must not forget that the massive sub-prime housing debts in the United States that turned bad had triggered the global financial crisis two years ago and the world is still paying a heavy price for it today.

Although the LVR cap could dampen property market, demand for quality products in prime locations is expected to remain strong although buyers will be more selective.

Ultimately, if the proposed mortgage cap succeeds in cooling off the rapid rise in prices, especially for landed upper medium to high end residences, it should ensure a more sustainable and resilient property market.

By The Star

Proposal to cap housing loan won't dampen mart: Minister

The proposal to impose a 80 per cent loan-to-value ratio (LVR) for mortgages will not dampen the property market in the long run, said Minister of Housing and Local Government, Datuk Wira Chor Chee Heung.

Nevertheless, Chor said, there is a need for a certain structure to ensure it will not be a burden for the lower-income group to own a house.



"To enable the lower-income group to purchase house, perhaps there could be some kind structures where buyers who want to buy RM500,000 house and below, can still get 90 per cent loans while those who want to buy a house exceeding RM500,000, they can be given a 80 per cent loan," he told reporters after visiting Zephyr Point, an example of a build-then-sell project, in Kuala Lumpur yesterday.

"I leave it to Bank Negara Malaysia to decide the best course, but, in the long run, I don't think the 20:80 per cent will dampen the property market as such because, today, a large percentage of the purchases is made by genuine buyers. They need a home. That is why they are buying," he said.

Chor was responding to a question as to whether the proposal to impose an 80 per cent loan cap would dampen the property market. The move is expected to be implemented to avert risk of a property bubble.

Recently, Bank Negara was reported to be in discussions with banks on possible moves to curb speculation on property prices.

It was reported that the possible measures, which would likely include the 80 per cent LVR for mortgages, were being targeted at the high-end and non-owner-occupied purchases.

Chor also said that the ministry was seriously looking for partners to revive 47 abandoned housing projects as soon as possible.

By Bernama

KLCC plans new RM2b properties

Twin Towers architect Pelli will design two additional towers

PETALING JAYA: Cesar Pelli, the architect of the Petronas Twin Towers, will once again be casting his magic on the 100-acre Kuala Lumpur City Centre (KLCC) site in a new development that is estimated to cost about RM2bil.

Pelli is also involved in the design and architecture of retail and office block Lot C, to be completed next October. The 60-storey Lot C will be seamlessly integrated into the retail block of Suria KLCC, next to Mandarin Oriental Hotel.

In this other development on Lot 185 and Lot 167/K, the world-renowned architect will be designing two additional towers of between 50 and 70 storeys next to the Twin Towers. The two blocks, an office tower and a hotel, will sit on a four-storey podium retail block that will be integrated with the present four-storey retail mall, Suria KLCC.

Hashim Wahir, the group chief executive officer of the KLCC Group of Companies said the development, sited on three acres, would be built on two adjacent plots.


The Economic Planning Unit gave its go-ahead for the joint venture a few weeks ago, Hashim said. A detailed planning phase will be the next step and works are expected to begin by mid next year.

This latest development, Hashim said, would be undertaken by KLCC (Holdings) Sdn Bhd in a 50:50 joint venture with the Qatari Investment Authority via QD Asia Pacific Ltd, a subsidiary of Qatari Diar Real Estate Investment Co, the investment arm of Qatari Investment Authority.

“Lot C has one million sq ft of commercial space. It is being developed at a cost of RM1bil. This other development on two adjacent plots will have two million sq ft of commercial space. That will indicate how much this latest development will cost,” he said.

Currently, the 100-acre KLCC development, of which half has been gazetted as the KLCC Park, has about 10 million sq ft of space in the Twin Towers, Suria KLCC, Menara Exxon Mobil, the Mandarin Oriental, Traders Hotel, the KLCC Convention Centre and Menara Maxis. All of them belong to the KLCC group of companies.

The entire KLCC area is earmarked to have between 20 million and 22 million of commercial space.

“These latest developments comprising the hotel and office tower blocks will complement and enhance the skyline. It will enhance the view for Binjai On The Park, our only residential development,” Hashim said.

He said the latest development, together with Lot C, would help give a new shopping experience to the more than four million visitors who throng the Suria KLCC. A plaza connects Suria KLCC with this new retail podium block in Lot 185 and Lot 167.

“There is a demand from retailers for space,” Hashim said.

Within the next five to seven years, other developments will be coming up behind Traders Hotel and in other parcels of land on both sides of Binjai On The Park.

“As we complete these different components that make up the KLCC development, we believe the value of Binjai On the Park will move up because new amenities and conveniences are being added.

“Binjai is the first residential property on the park. We are working to provide delivery service from the supermarkets from Suria KLCC; our residents have access to all the services that Mandarin Oriental guests enjoy and we also have the Prince Court Medical Centre to provide medical services for residents,” he said.

More than 95% of Tower B of Binjai On the Park has been sold. What remains are the larger standard units in both towers and the 19,000-sq-ft triplex penthouse in Tower A.

“As our master plan unfolds, the value of our projects on these 100 acres will continue to be enhanced. One Hyde Park (a high-rise residential development) in London only has the park.

“We have the park and many other components that have proven to be synergistic both in terms of physical amenities and services, all in one single iconic development, with a commanding skyline,” Hashim said.

By The Star

Bini Puri in tie-up for Medini project

Bina Puri Holdings Bhd will team up with Medini Land Sdn Bhd, a unit of Iskandar Investment Bhd, to develop the Medini Square project, which has a gross development value of RM500 million, in Iskandar Malaysia.

In a joint statement today, the companies said the project, which would be undertaken via a joint venture company, Medini Square Sdn Bhd, would comprise retail, shop offices, small office/home office (SOHO) units and an office tower.

"The 1,048 million sq ft gross floor area development will complement the other attractions in Medini North, including LEGOLAND Malaysia," the statement said.

It said the first phase of the Medini Square would be completed by mid-2011 with approximately 50 shop offices developed, while phase two would see a combination of a SOHO concept and office tower.

The statement said the Medini Square Sdn Bhd would enjoy fiscal and non-fiscal incentives under the initial incentives and support package for early investment into Iskandar Malaysia.

"The incentives include corporate tax exemptions for 10 years," it said.

By Bernama

'Loan mortgages move won't dampen mart'

The proposal to impose a 80 per cent loan-to-value ratio (LVR) for mortgages will not dampen the property market in the long run, said Minister of Housing and Local Government, Datuk Wira Chor Chee Heung.

Nevertheless, Chor said, there was a need for a certain structure to ensure it would not be a burden for the lower-income group to own a house.

"To enable the lower-income group to purchase house, perhaps there could be some kind structures where buyers who want to buy RM500,000 house and below, can still get 90 per cent loans while those who want to buy a house exceeding RM500,000, they can be given a 80 per cent loan," he told reporters after visiting Zephyr Point, an example of build-then-sell project here today.

"I leave it to Bank Negara Malaysia (BNM) to decide the best course but in the long run, I don''t think the 20-80 per cent will dampen the property market as such because today a large percentage of the purchases are made by genuine buyers. They need a home, that is why they are buying," he said.

Chor was responded to a question whether the proposal to impose 80 per cent loan for home buyers would dampen the property market as the move was likely to be implemented to cushion the risk of property bubble. Recently, BNM was reported to be in discussion with banks on possible moves to curb speculation on property prices.

It was reported that the possible measures, which would likely to include the 80 per cent LVR for mortgages, are believed to be targeted at the high-end and non-owner-occupied house purchasers.

Meanwhile, Chor said, the ministry was seriously looking for partners to revive the current 47 abandoned housing projects as soon as possible.

He said the government has allocated about RM200 million to help developers revive these abandoned projects.

"It is not easy for developers to come in and help.
"(However), if there is virtually nothing to be made from reviving these abandoned project, the fund can be use as compensation for these developers," he said.

By Bernama

Unclear how loan-to-value ratio will impact loans growth

PETALING JAYA: The impact of any lower loan-to-value ratio (LVR) for mortgages on the banking system loans growth is still unclear, but analysts do expect loans growth to take a hit if the measure is pushed through.

Kenanga Research, in a report, said if measures to cool the property market were implemented, a move that is being studied by Bank Negara, there could be a negative impact on mortgage applications.

The research house said that the consumer segment was still “the sole driver for banking system loans growth” based on Bank Negara’s monthly statistical bulletin for July.

It said there were signs of a slowing down in loans growth, with growth in the business segment unsustainable compared to the strong performance earlier in the year.

“Going forward, we’re cautiously optimistic about the outlook of loans growth from the business segment with the easing of the business loan momentum,” it said.

It was reported last month that the central bank was exploring possible measures to curb excessive speculation on property prices by having a cap on the LVR to 80% from 90%.

TA Securities Holdings Bhd analyst Wong Li Hsia told StarBiz that the impact to loans growth would really depend on the manner of implementation.

“There will likely be an impact but we don’t know at this point how serious it will be as Bank Negara has yet to issue any guidelines on how it’ll be implemented,” she said.

According to other analysts, preemptive measures would only have a temporary effect on speculation as buoyant consumer sentiment and demand for good locations were expected to sustain property prices.

They said based on last October’s imposition of the 5% property gains tax, there could be a “short-term knee-jerk reaction” where demand cooled off for a while and property buyers became more discerning.

CIMB Investment Bank Bhd research head Terence Wong had suggested in an earlier report that should the measure be implemented, it should be on landed residential properties where prices have surged in certain locations instead of across the board.

However, HwangDBS Vickers Research analyst Yee Mei Hui said in a note yesterday that blanket measures were unlikely to be imposed given the differing level of speculation in the various segments of the property market.

“We believe first-time and mass residential buyers may be spared (similar to regional markets),” she said, adding that properties below RM500,000 constituted 94% of last year’s transaction volume and 68% of value.

By The Star

Wing Tai upbeat despite Singapore property move

Strong demand for high-end properties in Singapore means that property developers who build assets in that segment won't be affected by the island republic's measures to cool the property market.

Singapore had put a 70 per cent cap on loan-to-property-value for second mortgages, among other measures, to prevent the market from overheating.



Property developer Wing Tai Holdings Ltd deputy chairman Edmund Cheng said at the launch of its luxury project Belle Vue Residences in Singapore last week that the new curbs will not affect the group.

"The measures are few but for genuine buyers it is still okay. It may affect upgraders. Most of our projects are upper middle, high-end and super high-end, so the impact is not much," he said.

"Wing Tai will continue to launch new projects as there is pent-up demand for high-end properties, especially among international investors and home seekers," he added.

Foreign buyers generally make up about 29 per cent of Singapore's property market, Cheng said.

Meanwhile, Wing Tai may replicate Belle Vue Residences, its most valuable residential project worth S$350 million (RM812 million), in other Asia Pacific countries.

The project may be developed in Hong Kong, China or Malaysia, provided there is suitable land and Japan's renowned architect Toyo Ito agrees to design it.

Belle Vue was designed by Ito, whose free-flowing spaces and designs mirror the rhythms and patterns of organic growth. This is his first residential project outside of Japan.

Some 62 per cent of its 167 units have been sold, mostly to international property buyers, at between S$2,000 (RM4,640) per sq ft and S$2,300 (RM5,336) psf.

The project was launched in phases starting August 2008 and the remaining units will sell from S$2,300 psf to S$2,800 (RM6,496) psf.

Cheng said he was confident that the project will be fully taken up soon.

"Belle Vue is our best project but we are aiming for another best development," Cheng said.

Belle Vue, located on Orchard Road, is designed to parallel nature's simplicity.

By Business Times

Wing Tai to launch projects in Malaysia

WING Tai Holdings Ltd, a property developer, will launch several new projects in Malaysia as it is bullish on the market, its deputy chairman Edmund Cheng said.

Wing Tai will continue to develop high-end properties in the Klang Valley. It currently has 80ha of land in Kuala Lumpur and Penang.

"We are looking to increase our landbank in the Klang Valley, and work with suitable partners," he said.

Wing Tai, through its Malaysian-listed unit DNP Holdings Bhd, will launch Kondominium Nobleton Crest at Jalan U-Thant in Kuala Lumpur in 2011, pending market conditions.

The project comprises three blocks of low-rise residences.

It will also launch a prime development in Jalan Ampang, Kuala Lumpur, comprising two blocks of 49-storey and 43-storey serviced residences.

The project, on a freehold site spanning 0.6ha, is under construction.

"Work is progressing well. The launch will depend on market conditions. The market can expect several other exciting projects," Cheng said in a recent interview with Business Times in Singapore.

Wing Tai, through DNP, is currently developing Verticas Residensi, 423 units of freehold condominium in the Bukit Ceylon enclave.

Cheng said the project has received good response from the preview of its Tower A in July 2009.

Tower B was officially launched in January 2010 and the units have been quite well received, he said.

Verticas is under construction and it is expected to be completed in 2012.

Its other ongoing developments are in Penang. They are Sentral Greens in Relau, Phase 2 of BM Utama in Butterworth, and Phases 4 and 5 of Taman Seri Impian, comprising terraced and semi-detached houses.

Wing Tai started in Hong Kong as a garment manufacturer in the 1950s. It expanded its business in Malaysia in the 1960s and has developed over 70 projects to date.

By Business Times

RM500m potential assets for AHP

Real estate investment trust Amanah Harta Tanah PNB could add over RM500 million worth of assets in its portfolio within the next four years.

AHP now has a total of RM142.3 million worth of assets, including Plaza VADS and Bangunan AHP in Taman Tun Dr Ismail in Kuala Lumpur.

More assets are coming to AHP because PNB Commercial Sdn Bhd, the asset management subsidiary of Permodalan Nasional Bhd, has set its objective of turning around the commercial properties within PNB Commercial's stable, which will later be offered for injection into the REIT.

PNB Commercial owns and manages 11 properties as well as manages nine other assets for PNB. The total value of the assets is RM1 billion.

The 11 properties that PNB Commercial owns and manages are valued at around RM460 million and are scheduled to undergo a RM70 million makeover in 2010 and 2011.

PNB Commercial chief executive officer Datuk Mohamed Marzuk Basir said PNB Commercial has given itself five years to flip the properties so that they gives better yields.

"We have three-and-a-half years remaining to work on our assets, efficiently manage and refurbish them, and bring them to a healthy level," Mohamed Marzuk told Business Times in an interview.

Office buildings owned by the company include PNB Commercial House in Penang, as well as Wisma Nusantara and Menara Aik Hua in Kuala Lumpur.

Its retail assets are Pudu Plaza in Kuala Lumpur, a retail complex in Kajang, Selangor, and Perling Mall in Johor Baru.

Hospitality assets include three-star Hotel Sri Petaling in Bukit Jalil, Kuala Lumpur, and Lanjut Golf and Beach Resort in Kuala Rompin, Pahang.

Currently, the yield derived by these assets ranges between 2 per cent and 7.8 per cent and occupancy levels at its office buildings range from 50 per cent and 90 per cent.

Mohamed Marzuk expects that once occupancy level hits 80 per cent, PNB Commercial should be able to have a decent yield of 7.5 per cent to 9 per cent.

Similarly, any new acquisition made will be upgraded and then potentially sold to AHP.

The sale money will then be used as operating capital, for refurbishment and for acquisitions by PNB Commercial.

It is understood that the retail complex in Kajang, leased to Tesco hypermarket with an estimated RM60 million value, may be the first property that will be turned around and ready to be sold to AHP.

Mohamed Marzuk declined to comment on this but said PNB Commercial's task is to nurture the yields of all its properties and offer for injection into the REIT.

A decision on whether AHP buys any properties would depend on approval from shareholders as well as a gearing level of not over 50 per cent.

In the six months ended June 30 2010, AHP made RM7.53 million revenue and a net profit of RM4.04 million.

In the financial year ended December 31 2009, it made a gross rental income of RM13.97 million and a net rental income of RM8.89 million.

By Business Times

No to 80% mortgage cap on housing

PETALING JAYA: Several groups are up in arms over a proposal to cut housing loans by 10% from the current cap of 90%, saying that the move will only discourage Malaysians from buying houses.

National House Buyer’s Association (HBA) and Federation of Malaysian Consumers Associations (Fomca) cautioned that the proposed home loan reduction to 80% would only be a burden to potential house buyers.

HBA honorary secretary-general Chang Kim Loong said the proposal would go against the Government’s plans to encourage home ownership

“Young professionals who are just starting out will be deprived of buying a home for themselves. How are they going to get the 20% upfront payment?

“This campaign is to develop and maintain a firm rapport with one of our key stakeholders as they are the best people to promote the hotel,” said Barrow.

"That does not include the legal fees and stamp duties house buyers have to pay,” said Chang when contacted yesterday.

He said the move would only be good if it targeted high-end buyers, as an effort to deter speculation.

On Sept 2, StarBiz reported that Bank Negara was engaging with banks on possible measures to curb excessive speculation on property prices.

One of the measures discussed was whether the central bank will be capping the loan-to-value ratio (LVR) for mortgages at 80% in order to avert the risk of a potential property bubble.

Currently, most banks provide loans of up to 90% of the value of the property.

Fomca secretary-general Muhd Sha’ani Abdullah urged the Govern ment to ensure there was enough affordable housing available first before implementing such proposals.

“40% of the workforce earn up to RM1,500 a month. If this proposal were to be implemented across the board, how are they going to afford houses?” he asked.

Gerakan vice-president Datuk Mah Siew Keong said that if the proposal was applied across the board, the property market, construction industry, housing and real estate industry, and economic growth would slow down.

“Bank Negara must study the plan carefully, as the present limit of home loans of 90% has helped the housing and real estate industry,” said Mah, who is also the party’s economic development bureau chairman in a statement.

Housing and Local Government Minister Datuk Chor Chee Heung, however, said the measure would not dampen the housing market as in the long-term, it would actually be a healthy growth for the industry.

Banking sources said Bank Negara might consider discontinuing the 5:95 and 10:90 housing loan packages and impose higher downpayment for property purchasers.

This was due to a surge of between 10% and 30% in the price of landed properties in some parts of the Klang Valley and Penang.

By The Star

Berjaya Assets to handle Lido Boulevard

A model of Lido Boulevard, the multi-billion ringgit integrated waterfront development project along the Tebrau Straits, Johor.

JOHOR BARU: Berjaya Assets Bhd is now in the midst of taking over the development of Lido Boulevard, the multibillion ringgit integrated waterfront development project by Central Malaysia Properties Sdn Bhd (CMP).

The exercise is likely to be completed within the next six months, after which work on the project is expected to start almost immediately after being delayed for quite sometimes.

“It (the project) will be in a better hand with Berjaya Assets handling it in terms of project management and the most important thing is the strong financial backing from Berjaya Group,” a source told StarBizWeek.

The source added apart from the strong financial backing from the conglomerate, Lido Boulevard would benefit from Berjaya’s marketing experience to market the property to local and foreign buyers.

The flagship project by CMP, a company linked to business tycoon Tan Sri Vincent Tan Chee Yioun, is a joint-venture between CMP and Johor State Secretary Inc.

The latter is an investment holding company of the Johor state government, which is also the land owner.

Tan owns 60% equity in CMP while the remaining 40% is held by CMP managing director Datuk Chan Tien Ghee. Both Tan and Chan made headlines recently when they bought over the Welsh’s Cardiff City Football Club.

CMP had in March this year awarded a deal worth RM238.6mil to the Belgium-based dredging company Jan De Nul to carry out reclamation works on the site.

The works would take about 15 months to complete, once completed; about 38.11ha would be reclaimed land while 11.39ha would be on a piled concrete desk.

According to Wikipedia, major projects realised in part or whole by Jan De Nul include the expansion of Panama Canal, Australia’s Port Botany expansion, the Manifa Field Causeway and Island project in Saudi Arabia, the Palm Jebel Ali artificial island in Dubai and the adjacent Dubai Waterfront.

“Jan De Nul has set an office in the city (Johor Baru) but the reclamation works have not started as schedule due to the takeover exercise,” said the source.

About 6.8 million cu m of sand sourced from Teluk Ramunia on Johor’s southeast is needed for reclamation works. The sand will be transported by a dredger anchored at Stulang Laut near the Causeway, then pumped to the site via a 2km floating and sunken pipeline.

Located on 49.51ha, the project will be developed in phases stretching 2.4km along the Tebrau Straits from the now the defunct Lot One shopping complex to the Harbour Master’s office.

The project comprises four main components – luxury condominiums, waterfront office suites, a hotel and a shopping mall.

Lido Boulevard, with a gross development value of RM4bil, is expected to take shape by 2016 and it will completely rehabilitate Lido Beach and give Johor Baru a facelift.

By The Star

A new class of condos

Click to view larger image

Luxury units with spectacular views and top quality designs

Two things stand out among the Top 10 freehold condominiums around KLCC - the wide disparity in capital values of those who made it to the ranks (the top 2 are worth more than two to three times than the tenth ranked) while it drives home the point that branding and specific site, even if in the same vicinity, can make a huge difference.

In June, when it was reported that a tycoon listed on Forbes had purchased a penthouse on The Binjai On The Park for RM38mil, many were agog at the price these new luxury condominiums were fetching.

In fact, this particular transaction set the record for the highest single residential property ever transacted in Malaysia.

Even on a per square feet (psf) basis, The Binjai on the Park, developed by KLCC Holdings, has broken the record; one of its standard units on the auspicious 38th floor was sold for RM2,900 psf or RM10.6mil.

A strong indicator that living in KLCC has become more attractive, says Property consultancy Knight Frank managing director Eric Ooi, is that more tycoons are acquiring penthouses in condominiums in the vicinity.

6-star living

Over the past five years, the demand for condominiums in the KLCC area has been geared towards lifestyle condominiums.

The earlier condominiums emphasized on space, bigger and better facilities. Good examples are Selangor Dredging Bhd’s (SDB) Park Seven and E&O Bhd’s Dua Residency.

“We were the pioneers of lifestyle condominiums five years ago when the concept was still very new. Now the new opportunity could be in luxury-lifestyle products,” says E&O executive director Eric Chan.

In the last one year however, demand for luxury condominiums of a different kind have been on the rise. These units offer the most spectacular views, are designed by famous international architects and have top-quality designer finishes and fittings. Examples are The Binjai on the Park and Troika.

Generally, while prices for real estate are heading north, there seems to be a new pricing phenomenon taking place with certain condominiums around KLCC.

According to Bandar Raya Developments Bhd chief executive officer Datuk Jagan Sabapathy, one should not use the normal parameters of supply, demand, comparative valuation and yields to explain the pricing power of luxury real-estate products such as The Binjai On The Park and Troika.

“For these sort of luxury condominiums, there are only about 500 units. These units are catered more for the top five percent of society,” he explains.

Both The Binjai On The Park and Troika offer 24 hour concierge service, delivery services from the shopping malls and even the booking of flight and concert tickets among many others.


Hashim Wahir ... “There are many condos around KLCC. But there is only one KLCC condo, which is the Binjai on the Park

“We are working with Suria KLCC, Mandarin Oriental and Traders Hotel to continuously improve our residents’ experience of the KLCC lifestyle. For example, residents gets priority treatment from Petronas’s newly operational Prince Court Medical Centre, which is just 5 minutes away, for any healthcare services.” says KLCC Group of Companies Group chief executive officer Hashim Wahir, adding that it is in a class of its own.

WestMont S.A. Properties senior negotiator Chris Teng says that the price of a condominium in KL depends on address, location and quality of facilities.

“The closer you are to the KLCC development, the value goes higher. The reason why The Binjai on the Park commands a premium is because it has a permanently unblocked view of the Petronas Twin Towers.

“We know for sure there will be no developments in front of The Binjai on the Park. A lot of the other condominiums have potential developments that could block their view, so this affects their pricing levels,” he elaborates.

Zerin Properties chief executive officer Previndran Singhe points out that there is a residential enclave forming in the KLCC area.

“With the KLCC maturing over the years, the residential enclave seems to be establishing on Persiaran KLCC where The Binjai on the Park is located, across the KLCC Park and not too close to the commercial activities around the Petronas Twin Towers and Suria KLCC.

Rising owner-occupied units

“Apart from having the best address ‘Persiaran KLCC’, this side is greener, less congested, quieter and has more commanding views. A residential cluster is a lot more effective in attracting more families, both locals and expats, to shift to KLCC,” he says.

As it stands now, the take up rates for The Binjai on the Park and Troika are 70% of 171 units and 85% of 229 units launched so far.

KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says these days, condominiums are more owner occupied compared to the past.

As such, there is more emphasis on quality of finishings and unique features that set them apart from other condominium developments.

SDB managing director Teh Lip Kee says that Park 7’s success is due to its location and high emphasis on delivering services.

Park Seven has a occupancy rate of 95% and are mostly expatriates.

“These are people who walk to work, whether in Shell, Tan & Tan Developments, the Twin Towers or KLCC,” she says.

Jagan says that while Troika does not have the locational advantage of The Binjai on the Park, it still has a great view of the Twin Towers and the Royal Selangor Golf Club. It is also near the KLCC Park.

“We knew we had to do something special. We had a great location and branding, but how do we create superior value?

“So we looked for a superior architect that was iconic and leading, hence we got the number one architect in the world, Norman Foster,”

“The positioning of Troika is in its enduring value. The Binjai on the Park may have the primest site, but our building has the Wow factor,” says Jagan.

Previndran says that nowadays, there is a change in lifestyle with “many locals who used to stay in bungalows in Damansara Heights, now they choose to stay in luxury condominiums because they want the security.”

Chester Properties Sdn Bhd senior negotiator Nathali Tan adds that luxury condominiums are today considered high-class bungalows in the sky because of their size and exclusive features.

“These condominiums are spacious with built-ups of almost 4,000sf excluding space for pools, tennis courts, gyms and have private lift lobbies, very tight security, concierge services and are well maintained,” she adds.

Petronas, via KLCC Holdings Sdn Bhd is the developer of the entire KLCC Development, that is today’s Malaysia’s global landmark.

The KLCC masterplan includes the Kuala Lumpur Convention Centre, Suria KLCC, Mandarin Oriental, Traders Hotel, ExxonMobil, The Binjai On The Park and of course the Petronas Twin Towers.

The 88 storey Twin Towers designed by renowned world architect Cesar Pelli, has been the iconic skyline landmark of Malaysia since 1997.

Interestingly, The Binjai on the Park, developed by KLCC Holdings, is the only residential property within the KLCC development masterplan.

The design of The Binjai on The Park was to give residence of the condominium the most commanding views possible of the iconic Petronas Twin Tower.

That is why, the condominium was strategically placed diagonally across the towers on a corner lot of the KLCC Park.

“There are many condominiums around KLCC. But there is only one KLCC condominium, which is The Binjai on the Park,” says KLCC Group of Companies Group chief executive officer Hashim Wahir.

He says most international top class condominiums can only offer either city skyline views such as the apartments in The Peak, Hong Kong, or be part of an iconic development such as Burj Khalifa in Dubai or Roppongi Hills Residence in Tokyo or those overlooking sizeable parks such as Hyde Park in London or Central Park in Manhattan.

“From that perspective, The Binjai On The Park is the only one in the world that offers all these three. It has the most commanding views of the Petronas Twin Towers and is located right on the KLCC Park.

“We have a city within a city,” he says.

Hashim says there are more developments being developed under the KLCC masterplan over the next seven years.

“Cesar Pelli, the designer of the Twin Towers will be back in Malaysia to design two more towers which will forever change the skyline of KL.

“Malaysia is going to have two more iconic towers reshaping the KLCC skyline,” he says.

By The Star

A rising trend for condos

There used to be a time when landed properties, not multi-storied dwellings such as condos, were most sought after homes in Kuala Lumpur. While this may be true still to some extent, increasingly, high end condominiums are becoming the preferred choice for the affluent.

The first condominium in the country was Tan & Tan Development Bhd’s Desa Kudalari in 1980. Back then, one of Desa Kudalari’s main attractions was that its residents could view the horse race at the nearby Kuala Lumpur racecourse. The racecourse is, of course, today, the KLCC Park.

The dynamics changed with the arrival of the Twin Towers in 1997 and condominiums started to spring up. First, Stonor Park was developed in 2003, followed by Dua Residency in 2004 and then Park 7 in 2005. Notably, condominiums within close vicinity of KLCC began to fetch high prices.

Even so, it would be difficult for other projects to fetch similar prices as the units in The Binjai On The Park. Only the planned Four Seasons has the potential to set new benchmarks because it has a strong global brand and is known to have a very aggressive pricing strategy for its properties.

“New luxury condominiums around KLCC could be launched at RM1,800 to RM2,300psf. But (relatively) “lower-end” products around KLCC range from RM1,000 to RM1,500psf,” says HwangDBS Vickers property analyst Yee Mei Hui.

SDB managing director Teh Lip Kee says there is no property bubble in sight. Prices are going up simply because cost is going up.

“Furthermore, most of the demand are coming from the locals. Foreigners are not really buying yet. Also, not all developers are doing well. Only those with branding are doing well,” she says.


Datuk Jagan Sabapathy ... The emergence of luxury condominiums marks a shift from the traditional suburban living to condominium living in KL.

Bandar Raya Developments Bhd chief executive officer Datuk Jagan Sabapathy says that more importantly, the emergence of luxury condominiums marks a shift from the traditional suburban living to condominium living in KL.

“The condominiums in the city is not just for expat living. There is a huge and growing segment of young people living in the city who are well paid. There are also many well heeled parents who are buying homes for their kids. And they will pay for a luxury condominium,” says Jagan.

He adds that there is a shift among the young who want to live a ‘happening life’.

As such, in the coming years, he foresees the heart of the city being the heart of life.

“People now choose to live in the city because of the convenience and better quality of life. There is no need for them to drive through the nasty traffic daily. Between a RM1mil home in the suburbs compared to a RM2mil condominium in KL, more may choose to live in KL,” he says.

Apart from the convenience and lifestyle factors, Jagan says there is also the ‘empty nest factor’.

“These are people whose children have left, so they want security. They don’t want to be bothered with the maintenance of the garden, the pool and the general upkeep of their homes. They want an easier life where they can travel anytime they want. Condominium living actually makes this easier,” he elaborates.

“When the Government is successful in making downtown KL even more liveable, this trend of living in KLCC will get stronger in the years ahead,” says Jagan.

By The Star

Dealing with oversupply

Not surprisingly and generally speaking, most realtors concur that there is an oversupply of condominiums in the KLCC vicinity.

For this reason, property valuation firm, VPC Alliance (M) Sdn Bhd managing director James Wong says he is neutral to negative on the condominium situation in KLCC as he believes the situation could only get worst unless the government jump starts the economy with more foreign direct investments and mega projects.

Having said that, many say there is still room in the premise for niche products.

“There are many condominiums coming onstream together. Not all do badly. There is a difference between the developers that are able to sell, and those that are not able to,” he says.

With that, the new condominium launches that stand a higher chance of securing good take up rates are those that have strong distinguishing features.

KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says there have been no new launches of condominiums in the KLCC area in the last two years due to the global financial crisis and oversupply situation. In fact, in some instances, Chua says condominiums that were bought at RM2,000psf, and are now being sold at RM1,500psf.

“These units tend to be large with poor layout. The problem was that some of the developers over-marketed and over-priced their condominiums. So sometimes it’s wise to buy completed projects to actually see what you are really buying,” he says, adding that there is more activity in smaller-sized condominiums which are relatively more affordable.

To buy a good condominium, Wong says to first look at the strength and reputation of the builder to ensure that the developer is financially strong to complete the project even if there is a sudden economic downturn.

Secondly, ambience is important. Good developments have comfortable surroundings or good themes, and not a busy street with noisy ‘night clubs’ in front of it.

He added that investors also need to pay attention to the quality of finishings and the facilities offered.

Even so, CIMB Research head Terence Wong still sees opportunities in condos around KLCC. He explained that prices of condos at Mont Kiara have caught-up with prices of KLCC. But land near KLCC is significantly more expensive and scarce than in Mont Kiara.

According to DTZ Debenham Tie Leung (M) Sdn Bhd executive director Brian Koh, the issue of oversupply is more prevalent in the rental market. On this note, he says it may be easier to rent out smaller units of less than 2,000 sf as the oversupply involves those between the 2,500 and 3,500 sf range, which rental are generally higher than the housing budget allocations for expatriates.

Many lament that rental rates for condominiums around KLCC have been stuck at RM4 to RM6psf per month for the past the three to five years.

Chester Properties Sdn Bhd senior negotiator Nathali Tan says these rates are more applicable for condominiums around KLCC that were launched at RM700 to RM1,000psf levels five years back which are sizable but with basic designs and finishings.

On the other hand, Terri Har, marketing and sales manager of Layar Intan Sdn Bhd says that the recently-completed The Binjai on the Park has started to pull in tenants at RM7.50 to RM8.50psf per month, setting a new benchmark in the rental market.

By The Star

Sluggish rental market

Even as certain top-end condominium units have been sold at hefty prices, the general rental market in the KLCC vicinity has remained somewhat sluggish.

Furthermore, given the expected fall in the number of expatriates in the country, real estate consultancy Rahim & Co executive chairman Datuk Abdul Rahim Rahman says the rental market in KLCC may not improve in the next two years while prices could also fall as owners come under pressure from their financiers.

“This may lead to some of these owners off loading their properties at a discount,” he says.

However, quality projects in exceptional locations with good branding and developers with strong established records in high-end development will fare better, enjoying strong demand from investors, owner occupiers and tenants.

Even so, Rahim expects some moderate price appreciation of around 10% yearly, in spite of falling rental yields, as investors are now focused on capital gains.

“The days of high rental yields are over. This in itself is not necessarily a negative thing. It is a sign of a maturing market,” says Rahim.

The market in the first half of this year, he says, has been sluggish compared to the heady days of 2006/2007 when prices in the KLCC vicinity rose to hitherto unseen heights.

Rahim adds however that the market has bottomed out and is now in recovery mode, with asking prices ranging between RM850 to RM1,700 psf. But the rental market is still soft; the average rental is dropping by 13% from RM4.88 psf in December 2008 to RM4.23 psf in June 2010.

Having said that, Rahim says developers are more optimistic now compared to last year and have started reviewing their development proposals.

According to him, there are about 7,000 units currently in the KLCC core area bounded by Jalan Ampang, Jalan Pinang, Jalan Kia Peng and Jalan Tun Razak.

By The Star

OSK bets on Malaysian property boom

Malaysia's property sector is set to see its biggest residential boom in a decade, led mainly by medium- to high-end landed properties, says a research firm.

The sector may peak sometime in 2012/13 before going into a potential slump, OSK Research Sdn Bhd said.

OSK Research said a major mass housing boom will likely occur in the first half of this decade.

It added that the sector was already entering the early stage of a property "super cycle".

"Although the expected peak in 2012/13 may have dire consequences, the phenomenal boom that immediately precedes it gives investors an excellent opportunity to profit from the trend for at least the next 12 months.

"We, therefore, seize the opportunity to upgrade our property sector call to overweight from neutral," OSK Research said in its research note to investors yesterday.

Although location is key to identifying real estate opportunities, what is equally important but often overlooked is timing, it added.

It noted that the current 20-year boom in the medium- to high-end residential properties since the early 1990s might peak in 2012/13, after which mass affordable housing could dominate the real estate industry around 2015/16.

Stocks with focus in the medium- to high-end segment, such as Sunrise, YNH Property, IGB Corp and Bandar Raya Developments, are some of the best bets for the next 12 months.

"Mass housing developers, especially the 'fallen angels' such as LBS Bina and MK Land, may come to the fore as another major investment theme after that," OSK Research noted.

For "best of all worlds" exposure during this period, OSK Research recommends buying SP Setia.

It said the country's current boom in higher-end residential properties is probably in its longest "bull run" ever, spanning almost two decades since the early 1990s.

"This, unfortunately, has also given rise to the illusion of the infallibility of properties. We are now entering the final phase of this secular boom, which will be characterised by a period of fast-rising property prices in the medium- to high-end residential segment, particularly landed ones."

OSK Research observed that those born in the 1950s had become more risk-averse in their investments since 2003/04.

"As they approach retirement, they will divert a significant portion of their wealth into savings and traditionally perceived defensive asset classes such as real estate.

"However, their eventual absence may bring an end to the boom if there is no credible demand force to fill the void."

Emkay Group senior general manager Mazrita Mazlan said the wealthy do not mind paying a little bit extra as long as the properties are away from congested towns.

"As an example, MK Land (MK Land Holdings Bhd) will launch its Rafflesia high-end project, which has units starting at RM2 million apiece.

"Already the project has sold 100 units even before its launch," Mazrita claimed.

Mercury Securities head of research Edmund Tham said the boom will only benefit certain areas and selected developers.

"When it comes to the so-called boom, it depends on who you talk to. I believe there is a property overhang project in Mont'Kiara and some buyers are facing financing problems."

Independent property valuation surveyor Sharizal Supian said the trend right now is to go for boutique projects complete with gated communities and modern facilities and townships, such as UEM Land's Symphony Hill which saw units snapped up within days of its launch.

"The boom, however, only benefits the rich and does not benefit the general public," Sharizal said.

An Island & Peninsular Bhd executive said that only foreigners will benefit from Malaysia's property boom due to the cheaper ringgit.

By Business Times

Naza aborts pact to build Matrade Centre

The Naza group, one of the country's biggest privately-held conglomerates, has terminated an agreement with Kumpulan Jetson Bhd to help build the new Matrade Centre for RM628 million.

Jetson received a notice from TTDI KL Metropolis Sdn Bhd yesterday to terminate the shareholders agreement sealed by the two companies earlier.

It would be seeking legal advice, Jetson said in a statement to Bursa Malaysia yesterday.

Jetson and TKLM, owned by the Naza group, sealed a pact last year to carry out the planning, design and construction of the new Matrade Centre at Jalan Duta in Kuala Lumpur.

Early last month, Business Times had reported that the Naza brothers may exit Jetson, barely 12 months after they took control of the company.

By late August, however, Jetson told the stock exchange that it was not aware of any plan by key shareholders to sell their stakes in the company.

Nevertheless, the uncertainties have taken a toll on the stock, which fell by some 24 per cent over the past 30 trading days to close at RM1.19 yesterday.

On the surface, the termination of the agreement with Jetson lends more credence that the Naza brothers are moving towards an exit strategy.

SM Nasarudin SM Nasimuddin said he will reserve his comments at this point of time.

The Naza brothers, SM Nasarudin and younger sibling SM Faliq, bought 33.15 per cent of Jetson for RM12.3 million.

The brothers, heirs to the Naza empire, had since then twice sought to buy out the other Jetson shareholders, while maintaining its listing status.

Datuk Teh Kian An and his family members were the major sellers of the initial block of shares that allowed the Naza brothers passage into Jetson, their maiden foray in a public-listed company.

Teh was the former controlling stakeholder of Jetson and is the current group managing director.

Terminating Jetson from the Matrade project should not come as a big shock to the market as the writing was on the wall as early as last month. This was when Jetson ended an agreement with China State Construction Engineering (Hong Kong) Ltd to develop a 38-storey building in Kuala Lumpur for Naza TTDI Sdn Bhd.

Business Times understands that in recent weeks both parties had moved closer towards bridging their differences.

"A gentleman's agreement will be reached sooner rather than later," a source familiar with the matter said.

By Business Times

UDA focused on changing perception

UDA HOLDINGS Bhd’s profile will be raised quite a bit with the Government’s plans to develop several pieces of land around the Klang Valley.

The company has officially announced that it will be building an integrated mixed development on the former Pudu prison site.

The interest surrounding UDA is, to some extent, due to its original mandate given by the Government. Originally a government agency, UDA was formerly known as Urban Development Authority.


"We must have a mix (in ownership) to do justice to the land value. This is a project for the country"- DATUK NUR JAZLAN MOHAMED

It was set up in 1971 to promote planned urban development and to elevate bumiputra economic participation in urban areas.

The company was corporatised in 1996 with the Minister of Finance Inc as its holding company. It became known as UDA Holdings Sdn Bhd before it was floated on the stock exchange in November 1999.

As a listed entity, its role was rather challenging because it had to juggle between commercial and social responsibility. Up to March 2005, Malaysian Resources Corp Bhd was the second largest shareholder in UDA (24.93%) after Khazanah Nasional Bhd (50.01%). Other shareholders included the Employees Provident Fund, Pertubuhan Keselamatan Sosial (Perkeso) and minority shareholders.

UDA was eventually privatised by Khazanah Nasional Bhd in May 2007. With the Government’s plans to develop key sites around the Klang Valley, the role UDA will play as a government developer has come up again.

These include the development of Sungai Buloh, the Matrade in the Jalan Duta area, Kampung Baru, Stadium Negara, the former Air Force base in Sungai Besi and Dataran Perdana in Jalan Sultan Ismail, near Berjaya Times Square.

The Pudu prison site is not Malay reserve land. Even then, the bumi factor has cropped up. It is on this note that UDA chairman Datuk Nur Jazlan Mohamed drew some conclusions between property development and bumiputra ownership.

“We must have a mix (in ownership) to do justice to the land value. This is a project for the country. I don’t want to put a figure to it (ownership mix), but there must be a mix,” he tells StarBizWeek.

Nur Jazlan was quoted in a recent report that the company needs “to change the perception that properties developed by UDA are 100%, or even 80%, for bumiputras. It is better not to have a fixed quota for bumiputra properties but yet maintain the bumiputra agenda for it to be an effective business model.”


UDA is the master developer of the 22-acre former Pudu prison site.

Nur Jazlan, who is also Pulai member of Parliament, became chairman two months ago, after the government announced the development of the former prison site.

He was previously with IGB Bhd, Equatorial Hotels and his family’s development business. He also director in several public-listed companies.

Says Nur Jazlan: “We are clear about our objectives. We take care of bumi interest and we balance our commercial interest against our social responsibility.”

He says that is a principle that applies to all their projects. For example, a large portion of its Bandar Baru UDA development in Johor comprises bumiputras buyers. So UDA cannot be accused of not taking care of Malays there, he says.

He says the former Pudu prison site, located at the junction of Jalan Pudu and Jalan Hang Tuah, will be a social responsibility, and mixed ownership will add value to the land.He says if UDA is able to plan the different components of this mixed development well, they will be able to sell the residential units at a higher price.

Negative label

Nur Jazlan says when something comes with a bumiputra label, there tends to be a discount attached to it.

“It is a label people find negative. If you develop Kampung Baru, for example, and put a bumi label on it, there will be a sort of stigma. There will be a discount because only bumiputras can buy and own it. This puts a discount on the land and lowers its value, which in turn results in a cheaper development – and hopefully, not too bad a development.

“But that piece of land next to Kuala Lumpur’s Golden Triangle is expensive. One can utilise that land to achieve a greater rate of return. If there is a discount, the quality of whatever being built on it will be lower. In the long term, the potential for the value to increase is limited.”

Nur Jazlan agrees with the Government that the development of Kampung Baru must enhance the land’s commercial value and at the same time, take care of the bumi issue. “There must be a combination of buyers, with different purchasing power, a combination of different forces with diffeent objectives to give that project its commercial attraction.”

He also brought up examples of other Malay reserve land which have benefited as a result of the development in close-by non-Malay reserve areas. For example, the development at the Curve has raised land prices in Malay reserve Sungai Penchala.

Nur Jazlan also says that UDA is very clear about its focus.

“The mindset of distributing what you have without thinking of what anyone thinks does not work in the long run. We have to make money first before we can distribute.”

UDA’s first study of Kampung Baru was done during former Prime Minister Tun Mahathir Mohamad’s time. A subsequent study was done three years ago. Whether UDA will be involved in the redevelopment of Kampung Baru remains to be seen. With the Pudu redevelopment, the company would like to move away from the bumiputra label without forgoing bumiputra interest.

“The first and most important question we are asking ourself is: Do we want to rely on the spillover traffic (from other projects around us)? Spillover traffic means traffic from Sungai Wang to Berjaya Times Square, for example.

“Do we want to take the easy way out and just develop the place, or do we want to create a new destination? KLCC, for example, is a new destination. I am looking to create a new destination.”

Nur Jazlan says people have been moving out of Kuala Lumpur to areas like Cheras, Kota Damansara and Sungai Buloh, resulting in “a hollowing out of the city.”

“UDA would like to offer something that will make the city more lived-in rather than just a place to make a living. If we are to have a destination, we will need more residentials,” he says.

He says it is possible that between 30% and 40% of the RM5bil project will involve the development of residential projects. Retail and commercial development will take a portion and 1% of the land area will be allocated for open spaces.

The plans, to be finalised by year-end, will be defined by the various developments in the city.

The two main projects that will directly affect the development of the Pudu site is Permodalan Nasional Bhd’s proposed 100-storey tower at Stadium Merdeka, which is just across the former prison land, and the 34.4 ha development at Dataran Perdana, to be known as Kuala Lumpur International Financial District in Jalan Sultan Ismail, near Berjaya Times Square.

“If we can come up with a thematic development, we will be able to draw people to live there. For example, the KLCC area has a park and The Pavilion is a high-end shopping mall. So we have to have a theme for this site to make it a destination,” says Nur Jazlan.

By The Star

Should EPF house our money in real estate abroad?

It’s as predictable as clockwork.

Any move by the Employees Provident Fund (EPF), unless it’s glaringly positive, tends to set off warning sirens. Much of it has to do with the fact that the employed, 12.4 million of them, have no choice but to channel part of their hard-earned savings to the fund, hence the perceived-right to voice dissent or concern.

There’s also the “legacy stigma” that now and then rears its suspicious head, that the EPF, with its bursting wallet, may be acting in ways that are not in sync with the pillar on which it was set up almost two decades ago – to safeguard the people’s retirement monies.

So, when it was recently revealed that EPF plans to tuck some £1bil (or 1.2% of its total investable sum) primarily into commercial properties in UK, the vibes were multi-pitch.

Interestingly, the revelation was not voluntary. It was issued only after a press report by UK’s The Independent that EPF had awarded two global fund managers a mandate in relation to its plans to invest in UK’s real estate. No great strides there for EPF in terms of high disclosure standards.

Following a query by StarBiz, the EPF said it made the decision as it views the UK property market as “stable and highly liquid” and one of the world’s largest property markets backed by strong laws protecting landlords.

Still, concerns abound. Given the threat of a double dip recession in the UK, could this be a risky venture? And given the structural shift in economic power to the East, shouldn’t it be steering its money bag towards these markets? Armed with adequate foresight, perhaps it should consider investing in other growth industries instead?

In the first place, should the EPF house our retirement savings in real estate, local or abroad?

Because retirement plans are long-term investments by nature, it’s hard to get much more long term than real estate which generally displays better than average income characteristics. We could throw bonds into the same bucket of investment horizon but it has an expiry date and reaps relatively lower returns.

Truth is, pit against other pension funds world over, EPF’s move to invest abroad and more specifically in property is hardly a mould-breaking strategy. Only, it’s a mould that the fund has yet to get a big foot into – just yet, that is.

Major pension funds around the world are already in the act of diversifying their investments abroad while many are raising the sums invested in their overseas portfolios, be it in real estate, stocks or bonds. Some 7% of China’s national pension fund, which has about US$130bil in its pension pool, is locked up in overseas investments, which includes stocks, bonds and property. In fact, it is allowed to crank it up to 20%.

South Korea’s national pension service, with US$250bil, has been on a buying spree, investing in real estate from Australia to the UK to diversify from domestic fixed-income holdings. It expects to boost its overseas investments to at least 20% of its portfolio by 2015 from 11% now.

UK life and pension funds are estimated to have US$123bil, or some 7% of their total assets, invested in real estate. The pension funds in Finland and Switzerland are allowed to invest a greater percentage of their assets in real estate than in stocks.

As the country’s single largest institutional investor, with over RM400bil (and fast ballooning), the EPF is clearly at an investment crossroads – what else to buy and how to raise yields; how to tweak its traditional bond/stock/loans/property asset mix to improve returns.

It has done this to some extent. The fund has been steadily cutting back its investments in MGS over the years; from 41% back in 1995 and 35% in 2006, it now makes up 24% of its asset allocation.

To address this dilemma, non-domestic investments such as property as an alternative investment class is hard to snub, especially since property investments represent a meagre 0.4% of EPF’s total portfolio, way below the allowed ceiling of 5%.

Still, EPF needs to walk the thin rope of capital preservation and capital uplift.

Real estate pundits in UK opine that the recent “mini recovery” in UK’s property prices in the past year after a difficult two years, thanks to a weak pound and cheap credit, may be waning while they expect the underlying fundamentals of the wider economy to reassert themselves.

The prediction is for a choppy recovery in UK economy given the rising jobless data, fiscal tightening, higher taxes and credit squeeze, which in turn could stunt a recovery in UK’s property sector.

EPF plans to invest in commercial properties, which means it is targeting rental yields but the lack of clarity of a sustainable growth could keep businesses in the sidelines. In other words, they won’t be looking for more office space.

On the other hand, proponents of investing in UK’s real estate point out that the income return from such investments over the past 10 years has averaged 6.7% – no doubt, a sweet temptation for pension funds, like EPF, who are on the prowl.

There’s more sugar where that comes from – UK’s well-followed Property Forum has forecast an income return of 7% for the next five years to 2014 from this investment class as it deems property values are still 36% below their peak.

In short, there may still be bargains left for new investors like EPF. So, would you bet your retirement savings on that?

Business editor Anita Gabriel believes in the “Law of Attraction” where thoughts influence reality. She’s thinking of including spectacular future dividends from EPF on her “Vision Board”!

By The Star