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Tuesday, September 6, 2011

Bandar Raya Developments asset proposal


Targeted: Bangsar Shopping Centre is among the selected investment assets targeted by Ambang Sehati Sdn Bhd.

PETALING JAYA: Property development company Bandar Raya Developments Bhd (BRDB) has announced a related-party transaction involving its major shareholder Ambang Sehati Sdn Bhd, which has proposed to acquire selected investment assets including The Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall.

The BRDB board received the letter from Ambang Sehati, which holds 19% interest in the property developer, on Monday to acquire the assets to “enable the group to monetise these assets and achieve a more efficient utilisation of its capital”, drawing the board's attention to the company's shares which had been trading at a significant discount to its net asset value, said the company in an announcement to Bursa Malaysia.

Under the plan, it has proposed to acquire CapSquare Retail Centre, which is currently held by BRDB's wholly-owned subsidiary Capital Square Sdn Bhd; Permas Jusco Mall, owned by BRDB's 99.74%-owned subsidiary Permas Jaya Sdn Bhd; and BRDB's entire 100% equity interest in BR Property Holdings Sdn Bhd, which owns The Bangsar Shopping Centre and Menara BRDB.

BRDB has up to Sept 19 to revert with its decision on the proposed acquisition by Ambang Sehati that would be satisfied fully in cash.

The company proposed to acquire these assets collectively, and not individually or any part thereof, at a purchase consideration to be based on the fair value that would be determined by independent valuers to be appointed based on mutual agreement.

BRDB had appointed CIMB Investment Bank Bhd as its main adviser to evaluate the proposed acquisition from Ambang Sehati.

The company said its board (except for Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who is the chairman of the board, with deemed interests in the proposed acquisition by virtue of his substantial shareholding in Ambang Sehati) would deliberate on the proposed acquisition and decide on the next course of action with advice from the main adviser. Accordingly, further announcement would be made in due course.

BRDB is known for its development of Bukit Bandaraya in Bangsar, Kuala Lumpur. It also has developments in other areas in the Klang Valley, the Kuala Lumpur city centre in particular, and in Johor.

By The Star

Bandar Raya chairman offers to buy 3 properties from group

KUALA LUMPUR: Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, chairman of Bandar Raya Developments Bhd (BRDB), has proposed to buy three properties from the group for a yet to be determined cash amount.

Moiz, through Ambang Sehati Sdn Bhd, plans to buy The Bangsar Shopping Centre and Menara BRDB, CapSquare Retail Centre, and Permas Jusco Mall. The properties are valued at RM942.37 million based on BRDB's latest annual report.

Ambang, which holds 18.88 per cent of BRDB, will buy the assets based on fair value as determined by an independent valuer to be mutually agreed.

"Ambang Sehati believes that this would enable the group to monetise these assets and achieve a more efficient utilisation of its capital," BRDB said in its statement to Bursa Malaysia yesterday.

BRDB's board will have to decide by September 19. It has hired CIMB Investment Bank to evaluate the deal. Shares of BRDB fell 1 sen to RM2.32 yesterday.

By Business Times

Bandar Raya gains on assets sale plan

Bandar Raya Developments Bhd, a Malaysian property developer, rose the most in two weeks in Kuala Lumpur trading after a major shareholder proposed buying some of its malls and offices.

The stock gained 1.7 percent to RM2.36 at 9:15 a.m. local time, set for its largest increase since Aug. 19.

By Bloomberg

Glomac keeps overseas investment option open

KUALA LUMPUR: Glomac Bhd, a medium-sized property outfit, may invest overseas to diversify earnings if it gets projects with good returns.

Group managing director and chief executive officer Datuk FD Iskandar FD Mansor said the company was at one point looking at India and Vietnam but put on hold plans to focus on Malaysia.



"There are still a lot of things we can do here. We will keep our options open for overseas expansion," he said in an interview with Business Times recently.

Glomac's first foray overseas was Australia in 2006, when it bought 380, Lonsdale Street, in Melbourne for A$30.5 million (RM82.4 million). This was through its unit, Glomac Australia Pty Ltd and partner Victoria Investments & Properties Pty Ltd.

The Lonsdale property encompasses a commercial building and a seven-storey carpark complex, with 445 bays offering 8 per cent rental yields. The building is now worth more than A$45 million.

In 2008, Glomac ventured into Thailand and currently has a 600,000 sq ft warehouse near the Bangna-Trad highway in the Samutprakarn province in Bangkok.

The warehouse, which is 49 per cent owned by Glomac and 51 per cent by its partner, Warehouse Asia Alliance Company Ltd, a leading Thai company in warehousing and logistics services, was built for RM125 million. It is now worth around RM180 million.

Iskandar said although Glomac is not seriously looking at property projects overseas, it is mulling redeveloping Lonsdale Street to ride on demand for commercial properties in Melbourne.

"We are looking at potential redevelopment of the property as the market for commercial assets is very hot currently," Iskandar said.

Iskandar said long term plans include building its investment portfolio to include properties that provide a good yield.

But he ruled out the possibility of launching a real estate investment fund (REIT) for now.

"We were keen three years ago but to launch a REIT, you need assets worth RM500 million to RM600 million.

"We will look at investing in properties that give good recurring income. What is hot today are retail malls," he said.

Glomac had in its portfolio investment properties worth about RM200 million but sold most of them in recent years to focus on property development.

By Business Times

Dijaya in RM228mil land deal

PETALING JAYA: Dijaya Corp Bhd has entered into a conditional sale and purchase agreement with Taiyo Resort (KL) Bhd to acquire five parcels of freehold land in Mukim Semenyih, Ulu Langat, Selangor, measuring approximately 80.33ha for RM228mil cash.

In a filing with Bursa Malaysia yesterday, Dijaya said the agreement with Taiyo Resort was entered by its wholly owned subsidiary, Tropicana City Service Suites Sdn Bhd (TCSS).

The parcels of land are currently held under the operations of Kajang Hill Golf Club, it added.


Tan:‘The land deal provides an opportunity for the group to introduce more development in Kajang.’

Dijaya said the land would be transformed into a mixed development consisting of landed houses, condominiums, apartments and shop offices with an expected gross development value of about RM2bil.

“The development, known as Tropicana Kajang, will be another future revenue generator for the group and shall contribute positively to its financial performance,” it said in a separate statement.

Dijaya said the freehold land had an upside potential in terms of capital appreciation because of the increasing demand for residential and commercial properties in Kajang, as seen in other developments such as Nadayu 92, Tiara Residence, Ramal Villa, Twin Palm and Jade Hills, just to name a few.

“With increasing population and expanding residential properties in and around Kajang, the proposed development of commercial properties will cater to the rising demand for office and retail spaces.

“Furthermore, the proposed Kajang-Sungai Buloh MY Rapid Transit project will enhance the investment potential of Kajang, presenting a greater opportunity to property investors,” it said.

Group chief executive officer Tan Sri Danny Tan Chee Sing said the group was continuously acquiring sizeable land-banks with good development potential in strategic locations.

“The land deal provides an opportunity for the group to introduce more development in Kajang with quality and prestige synonymous with our Tropicana brand,” he said.

Dijaya said the purchase price was arrived at on a willing-buyer, willing-seller basis after several considerations including the reasonably low land cost of RM26.36 per sq ft which will enable TCSS to price its proposed development competitively and with reasonable margins.

On the financing for the purchase, Dijaya said it would be funded through internally funds and/or bank borrowings.

“The exact mix of internally generated funds and bank borrowings will be determined by the management of the company at a later stage, after taking into consideration Dijaya Corp and its subsidiaries' gearing level, interest costs and internal cash requirements for its business operations,” it said.

The group's net gearing is expected to rise to 0.22 times post-land acquisition assuming about RM114mil, representing approximately 50% of the purchase price, is financed via borrowings. As at Dec 31, 2010, Dijaya was in a net cash position.

By The Star

Dijaya to buy land in Kajang for RM228m

KUALA LUMPUR: Dijaya Corp Bhd, a property developer, has agreed to buy five parcels of freehold land in Kajang, measuring about 80.4ha (198.5 acres), for RM228 million.

The land will then be transformed into Tropicana Kajang, a mixed development project, comprising landed homes, condomimiums, apartments, and shop offices with an expected gross development value of RM2 billion.

"The group is continuously acquiring sizeable land banks with good development potential in strategic locations.

"Today's land deal provides an opportunity for the group to introduce more development in Kajang with the quality and prestige synonymous with our Tropicana brand," said chief executive officer Tan Sri Danny Tan Chee Sing in a statement.

According to the company's statement, these freehold land have an upside potential in terms of capital appreciation, partly because of the increasing demand for residential and commercial properties in Kajang.

The land are also located in a suburban area with close proximity to other popular areas such as Serdang, Mahkota Cheras and Bandar Sungai Long.

Kajang is served by numerous highways, such as the Kajang SILK Highway, that enable convenient access to neighbouring townships.

In addition, the existing terrain of Kajang Hill Golf Course provides a readily available landscaping that will enhance the attraction of Dijaya's proposed developments.

"With increasing population and expanding residential development in Kajang areas, the proposed development of commercial properties here will cater to a rising demand for office and retail spaces."

"Furthermore, the proposed Kajang-Sungai Buloh MRT project will enhance the investment potential of Kajang presenting a great opportunity to investors," said the company in its statement.

By Business Times

Monday, September 5, 2011

Bandar Raya goes mid-range with Verdana


KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) expects its RM800 million Verdana project at north of Mont' Kiara to set a benchmark in lifestyle development in the mid-range residential segment in Kuala Lumpur.

Verdana is an extension of BRDB's brand of cosmopolitan lifestyle developments and is the company's first foray into the mid-range segment.

BRDB, which has been developing land in Bangsar for 45 years and luxury apartments such as One Menerung and The Troika, is expanding its wings to build products of a different price range.

"We are now looking to build properties within the affordable price range, yet offering the lifestyle that we have been providing in all our other developments," BRDB chief marketing officer KC Chong said in an interview with Business Times.

Verdana will be developed in two phases over 4.4ha. The first phase comprises two 25-storey towers and a six-storey block with 298 units.

It is priced at an average RM580 per sq ft with unit sizes ranging from 1,450 sq ft to 3,020 sq ft.

Chong said the development is unique as the first six floors of each building, including the six-storey block, offers garden villas.

He said the villas, with sizes ranging from 2,400 sq ft to RM3,020 sq ft are selling from RM1.5 million to RM1.9 million each and 30 per cent have been sold since end July.

"Verdana has attracted various category of buyers, namely owner-occupiers, expatriates living in Mont' Kiara and local investors as well as from Europe. They love the concept and design," Chong said.

Chong said 70 per cent of the project will include landscape garden, recreational facilities and water features. The bathrooms and kitchen will also be fully fitted with branded appliances to value add on the project, he said.

Phase one was launched in early August and 60 per cent of the 298 units have been snapped up.

Chong said phase two will feature two towers and a block for garden villas, offering more than 300 units. It is slated to launch by end-2012.

By Business Times

E&O deal hogs limelight


Coveted land: Phase one of Seri Tanjung Pinang in Tanjong Tokong. A second phase comprising two islands of 740 acres of land will be reclaimed around the area next year.

Sime has got the biggest chunk of E&O, but was the price worth it?

The pundits have it. For the last month or so, the rumour mill was working overtime around Eastern & Oriental Bhd (E&O), the luxury lifestyle property developer, that a merger or acquisition was in the works.

First came the persistent speculation that SP Setia Bhd would merge with E&O, which was soon quashed by SP Setia. Then last week - quite out of the blue - Sime Darby Bhd announced it was acquiring a 30% stake in E&O for a significant premium over the latter's share price.

In early August, E&O's shares galloped to a three-year high of RM1.75 on the back of the SP Setia merger rumours, then came down again in line with the global stock slump. Yet, amid the broader market sell-down a few weeks later, its stock again saw aggressive trading, this time from its own shareholders who appeared to be upping their stake.

The notable ones included GK Goh Holdings Ltd, a substantial shareholder of E&O, and Datuk Azizan Abd Rahman, a director of E&O. According to shareholder changes filed with Bursa Malaysia, GK Goh had bought 1.25 million shares in three days, raising its stake to 11.6%, while Azizan acquired 100,000 shares.

The upward trend in E&O's share price can be observed since Aug 24, from RM1.43 to Friday's close of RM1.60, an 11.9% increase.

The deal with Sime Darby, which E&O called a “milestone” development, raised more than a few eyebrows about why such a high price was paid. The share sale agreement is for Sime Darby to acquire 273 million shares in E&O and 60 million irredeemable convertible secured loan stocks, representing a 30% equity interest, for RM766mil cash.

The sale price works out to RM2.30 per E&O share, which is a 58.6% premium over the stock's pre-suspension price of RM1.45. Sime Darby came out in defence of its purchase, saying the RM2.30 was actually a 20% discount to E&O's estimated realisable net asset value of RM3.2bil or RM2.88 per share.

Upon completion of the deal, slated for Sept 9, 2011, Sime Darby will be the single largest shareholder of E&O.

E&O's largest project is the 980-acre Seri Tanjung Pinang seafront development, a coveted address in Penang.

To recap, the 30% block in E&O was acquired by Sime Darby from three substantial shareholders: E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh.

The trio's collective 41.7% shareholding in E&O will be diluted to 11.5% post-acquisition.

Tham, previously the largest shareholder with 15.7%, will end up with a 5.1% stake while Azmi and Goh will have 3.5% and 2.9% respectively.

A sore point with analysts is the high price paid for E&O. TA Research said the price was 19 times E&O's forecast earnings for 2012 and 1.85 times its price to book value based on consensus estimates. By comparison, the property sector has an average of 12 times forecast earnings for 2012 and 0.8 times price to book value.

Kenanga Research also noted that since Sime Darby was expected to equity account E&O's earnings on an associate level, that would only translate to a meagre 0.6% increase to Sime Darby's profits in 2012 and 2013.

It suggested that management might have been better off using the RM766mil to expand its plantation land or motor segment in China.

A local broker, however, had a more pragmatic view, saying that although Sime Darby was keen to venture into high-end development, it did not necessarily want to obtain everything at one go via a general offer, which would have been a much riskier proposition.

“Furthermore, E&O's shares in the open market are quite fragmented and not very liquid, making the task of acquiring 30% quite cumbersome and time-consuming.

“By getting the substantial shareholders to agree on a share sale proper, Sime Darby avoided facing a hostile takeover situation,” she said.

In terms of mutual benefits, Kenanga pointed out that phase two of the Seri Tanjung Pinang development might have factored strongly in the deal.

The project, estimated to have a reclamation cost of between RM3.2bil and RM3.5bil and a gross development value of RM9bil to RM10bil, could do with the financial muscle of a company like Sime Darby,

By The Star

Property loans to keep lead



PETALING JAYA: Analysts expect property loans to maintain their position as a key growth driver of credit expansion with some estimating them to grow between 10% and 12% this year due to the low interest rate environment and ample liquidity in the banking system.

While holding to this view, some feel the external environment, like the slowing US economy coupled with the sovereign debt crisis in the eurozone, could dampen demand for properties.

For the first seven months of this year, property loans remained the key growth driver, accounting for 40.6% of the banking system's overall credit expansion, followed by working capital loans at 23.6%. Residential property loans currently accounted for about 27% of the system's total loans.


We believe that the full year loan growth for residential property loans will be in the 10%-12% range.- RAM Ratings head of Financial Institution Ratings Promod Dass.

RAM Ratings head of financial institution ratings Promod Dass told StarBiz that the credit environment to date had continued to be accommodative for borrowers with ample liquidity in the banking system and a stable economic environment. Coupled with attractive promotional packages offered by some developers, he said residential property loans had already shown a healthy 7.1% growth in the seven months to July (or 12.1% annualised), which was more or less at a similar pace compared with the overall total banking system's year to date loan growth of 7.5%.

“We believe that the full year loan growth for residential property loans will be in the 10%-12% range although we are closely observing the sovereign problems still brewing in Europe as well as concerns on the US economy and the consequent impact on Malaysia's economic growth stamina, which could affect consumer sentiment in property purchases,” he reckoned.

Dass said that while there was a slowdown in loan applications for residential mortgages in the few months after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum had picked up again since March.

The move to curb the third and subsequent home financing was introduced by Bank Negara on Nov 2 last year to quell speculation on residential properties.

Alliance Bank Malaysia Bhd consumer banking head Ronnie Lim said he was bullish on property loans. He noted that in Malaysia, housing loans currently accounted for 50% (or RM255bil) of total household debt (RM510bil) and would continue to be one of the key growth drivers of retail credit expansion this year and in the near future.

“One of the main growth areas for properties is Klang Valley, which accounts for close to 60% to 65% of all property transactions. In addition, the population growth in Klang Valley is expected to reach 10 million by 2020 and the demand for residential property is expected to be fuelled by residents of Klang Valley whose average age is 34 years old.

“Coupled with the shortage of land in Klang Valley, demand will always out-strip supply. The economic growth and the low unemployment rate in the country is another catalyst for housing loan growth. The recent Economic Transformation Programme (ETP) announcement will further accelerate demand for residential properties as more affordable properties are being developed,'' he said.

Lim said prices of properties in Malaysia were still one of the lowest in the region when compared with countries like Thailand, Hong Kong and Singapore. The industry's total housing loan outstanding stood at RM255bil as of July 2011 compared with RM234bil in December 2010, he noted, adding that this represented a 14% annualised growth.

Given the positive environment and the above factors, Lim said the bank was confident the current growth rate could be maintained despite the recent global market unrest.

An MIDF Research banking analyst said property loans would hold up as a key growth driver of credit expansion this year as the persistent demand for property loans would be driven by low lending rates as well as the sustainable growth of the property market.

By The Star

Saturday, September 3, 2011

Renewing KL – breathing new life into old


Properly-planned facilities should include public transport system.

The ongoing effort to redevelop the older parts of Kuala Lumpur is taking on a new vigour with a number of government-owned land and assets being identified for redevelopment. This urban renewal programme, to revitalise the older and dilapidated parts of the city giving them a new lease of life, should be a holistic one.

The rationale for adopting redevelopment projects instead of taking on new ones on virgin areas is due to the growing scarcity of land in and around the capital city. Sometimes old buildings and structures need to be torn down to make way for new developments, or they can get facelifts that may involve the external or internal structures, or both.

To ensure functionality and relevance of the new projects, urban renewal initiatives should have the big picture where the newly redeveloped parts of the city blend in with the existing landscape.

Before the individual projects take off, it is important to ensure the different components complement each other to further enhance and add value to the property landscape.

It is also important to ensure heritage buildings and places are conserved and spared from having to make way for redevelopment. They are the living heritage of the people and is testimony of how our forefathershave came together and contributed to the building of this nation many centuries ago. Knowing and understanding the country's history has a way of bringing the people closer together towards greater unity.

To ensure these various needs are looked into when drawing up redevelopment plans, the whole initiative should involve a holistic master plan instead of an ad-hoc one.

Maintaining the big picture will ensure properly thought out projects, infrastructure and facilities for not only the present population but also to cater for the needs of generations to come.

Planning developments holistically with proper master planning to look into the long term needs of the people, works well for both brown field (already developed) and green field (yet to develop) developments.

Infrastructure and facilities, including road linkages and public transport system will also be better thought out and designed when this approach is used.

Hopefully these initiatives will steer the city into the league of global city.

Aiming for the much touted global city status when drawing up redevelopment plans for the capital city will be a worthwhile pursuit as this goal will ensure the massive initiative stays on the right course.

It is not just about putting up towering skyscrapers and gleaming new structures which make up the hardware, but more importantly will be the intangible software that make up the overall environment and quality of life of the people. This initiative should look into the city's heart and soul, its identity and heritage that can be maintained by promoting certain themes and designs in the redevelopment plans.

While identifying the right feasible projects to be undertaken, equally important will be the intangibles like the quality of the projects that include their functionality; and how they can add value to the living environment.

This should be the right time to also champion the green cause by having environment friendly concepts and designs in these redevelopment plans to reduce the carbon footprint of our urban populace.

Security and safety issues should also be made a top priority and it will be opportune to incorporate more street safe and people friendly features and measures.

The tendency to over emphasise on the bottomline by churning out more units and focusing on sales numbers should be kept at bay.

The ultimate goal should be for redevelopment projects to be a part of a greater effort towards uplifting the quality of the city's environment while injecting life into decaying and ageing townships and slum areas in the federal capital.

Among the much awaited projects will be the development plans for the 3,300 acres of Rubber Research Institute land in Sungei Buloh and the Sungai Besi military airport.

The redevelopment of the ageing low-cost apartments and homes in some parts of the city by the Federal Territories and Urban Wellbeing Ministry and City Hall will also be interesting as it involves many old low-cost housing projects identified for an upgrade of living conditions for the urban poor.

If done properly, these projects have the potential to champion more holistic living environment, and become the new residential and commercial hubs of the Klang Valley.

Deputy news editor Angie Ng votes for quality holistic environment and user friendly projects over mere aesthetics and external facades.

By The Star (by Angie Ng)

Bandar Raya: Tie-up with MPHB opens new avenues

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) says its joint venture with Multi-Purpose Holdings Bhd (MPHB) will open new avenues for the company for land development.

BRDB is seeking opportunities to diversify its development portfolio to grow itself, said its chief marketing officer K.C. Chong.

In April, BRDB's wholly-owned units, Pinggir Mentari Sdn Bhd, Orion Vibrant Sdn Bhd and Magna Senandung Sdn Bhd, signed three separate joint venture agreements with subsidiaries of MPHB - Tibanis Sdn Bhd, Magnum.Com Sdn Bhd and Mimaland Bhd.

The joint venture is centred on developing 268ha in Mimaland, Gombak; Rawang and Penang. It will be the first venture for BRDB in these locations.

BRDB has long been accredited with the establishment of Bukit Bandaraya in Bangsar, Kuala Lumpur. It also has projects in the Kuala Lumpur city centre and Johor.

The company's vision moving forward is to provide the unique Bangsar lifestyle in Rawang, Mimaland and Penang.

Chong told Business Times that the joint venture is working towards launching the projects, with an estimated gross development value of more than RM4.25 billion, after 2012.

"The projects are still in the planning stages. Penang would be our most expensive development. We plan to build luxury houses and condominiums, worth more than RM1 million each," Chong said.

In Rawang, the joint venture is planning to build mixed residential properties and a commercial hub.

Chong said the development planned for Mimaland will be the most exciting as it would change the area's landscape.

Mimaland was once a famous recreation park. It opened in 1975 and ceased operations in 1993, following some unresolved plans for expansion.

The joint venture project will include eco-friendly hillside, courtyard and waterfront landed homes set among natural waterways, valleys and water bodies with mature forest views.

Chong said properties at its Rawang and Mimaland projects will start from RM500,000.

By Business Times

GuocoLand in joint development of Beijing land


Zhang exchanging documents wth Lee at the agreement signing

The Xinzhongjie land parcel opposite the Dongzhimen transportation hub in Beijing, which is touted as Asia’s biggest, might be one of the last pieces of land left in the prime area.

But the concentration of old and dilapidated houses and buildings with over 2,400 households and the high-end commercial designation by city planners for the future development of the area has been a stumbling block for developers eyeing the land.

Defying the odds, GuocoLand China, owned by Singapore-listed GuocoLand Ltd, the investment arm of Malaysian conglomerate Hong Leong Group, has taken a calculated risk to team up with Beijing Oriental Real Estate Investment Co Ltd for the primary development of the area.

GuocoLand China should make use of the good guanxi (connection) it has successfully built over the years with the local government, says its group managing director Violet Lee in an interview after the signing of a strategic cooperation agreement with Beijing Oriental Real Estate Investment in Beijing recently.

Both companies will be responsible for the planning and administration of the land to meet the standard preconditions for a land grant. Their job also includes the payment of compensation for the takeover of the land, resettlement of existing residents, land levelling and construction of public infrastructure.

The initial plan proposed by GuocoLand China is to connect both the Dongzhimen and Dongsishitiao subway stations at both ends of the 160,000 sq m with an underground shopping mall selling high-end fashion products and services.

GuocoLand China has already developed its iconic Guoson Centre project smack on top of the Dongzhimen transportation hub. The 600,000 sq m development includes Guoson Mall, a five-star British-styled Guoman Hotel, grade A office towers, high-end residences and a 40,000 sq m rooftop garden.

Miao Qian, a partner from Dongfang Hengxin law firm, says the Xinzhongjie area is not considered valuable land at all and the cost of resettling the thousands of households in the area would be very high.

“If it is a much sought-after piece of land, then it would have been developed early. It is very hard to develop, not to mention the property prices in the surrounding area are very high,” he says. The Xinzhongjie area is part of the overall East Second Ring Road High-End Industry Development Plan initiated by the district government under its 12th Five-Year Plan (2011-2015).

Beijing Oriental Real Estate chairman Zhang Yue says the actual number of households to be relocated and compensation cost for the affected residents are still unknown. Furthermore, there are possibilities of dragging the development for a long time and not having the desired return on investment.

“We cannot say for sure whether GuocoLand China will continue to be involved in the secondary land development. But, I believe GuocoLand China will have an edge over others when bidding for the granted land because they would already have a better understanding of the desired development from their involvement in the primary land development,” he says.

This is the first time GuocoLand China is involved in primary land development in the country. To date, GuocoLand China has invested US$3.5bil in China with a sizeable portfolio of completed and ongoing property development spanning 2.5 million sq m.

By The Star

Is Sime’s E&O buy strategic and fair?

Two questions need to be answered to assess Sime Darby's purchase of a 30% interest in property developer Eastern & Oriental (E&O). Is the purchase really strategic? Is the price fair? For both questions, the answers may well be no.

Let's look at the first question. It's paying RM766mil in cash for a fully diluted 30% stake (after conversion of irredeemable convertible secured loan stocks or ICSLS).

That makes it the single largest shareholder in the company but the existing management continues to be in place.

Introduced into the deal is a collaboration agreement between the two companies for sharing of knowledge and expertise, leveraging on each other's core competencies and exploitation of mutually identified economic opportunities for three years.

Here's what Sime Darby's president and CEO Datuk Mohd Bakke Salleh had to say about the deal: “The proposed acquisition will provide a springboard for us to expand our property business and the type of products we can offer. E&O is a distinctive brand in the industry and is synonymous with quality. We strongly believe that through collaboration and cross fertilisation of ideas and expertise, there are significant opportunities for synergies for both parties, thus creating value for our stakeholders.”

Perhaps. But is the chosen approach the best way to deal with this? Sime Darby has one of the largest land banks in the country. There is no lack of land to develop. Plus it has considerable property development expertise spanning 40 years having developed townships, bungalows, houses, condominiums, and commercial projects.

Is acquiring a 30% stake in what is at best a niche developer of high-end properties the way to acquire expertise? Or would it be better for Sime Darby to acquire the necessary expertise by developing its own capabilities in-house and hiring selectively appropriate people and consultants to fill in the gaps in its own management?

It would seem under the circumstances that Sime Darby has more experience and expertise than E&O and even if it lacked some of these in some areas it would have been perfectly capable to hire the necessary expertise instead of an expensive acquisition which gives it no control of the company even.

Sime Darby would have done something more strategic if it put in place and executed a plan to develop its own in-house capabilities so that it can better exploit its own considerable land reserves of thousands of hectares efficiently and without having to make expensive minority investments to get expertise.

Recall that early last year Sime Darby went into an equal joint venture to develop a RM1bil commercial project in its established Bukit Jelutong housing area in Shah Alam, Selangor with another property developer, Sunrise.

Again why did Sime Darby, a developer with a long and varied track record, need Sunrise, an established condominium developer with limited experience in commercial development, to put up a commercial centre? Has not Sime Darby more expertise than Sunrise in this area?

Sime Darby and Sunrise will have equal stakes in a joint venture to develop 20.95 acres in the 180-acre Bukit Jelutong township. The land comes from Sime Daby's huge land bank, probably the largest in the country.

The price of the three pieces of freehold commercial land land was RM114mil, or RM125 a sq ft. That is a rather good price for a buyer considering that the gross development area is 2.7 million sq ft and it is a RM1bil project.

In fact, one may be hard put to buy residential land in Bukit Jelutong at that price now!

Sime Darby really needs to get its strategy right here and now.

Next, is the price fair? The acquisition was made at RM2.30 per E&O share and per ICSLS. That's a premium of a huge 60% over E&O's closing price of RM1.45 Thursday before it was suspended on Friday pending the announcement.

In fact E&O's price was climbing steadily from around RM1.20 end-March for a 21% gain despite the broad property index dropping nearly 140 points to about 960 or a decline of 13%.

Sime Darby said that the acquisition was at a 20% discount to E&O's estimated realisable net asset value of RM3.2bil. However it is not clear how this was estimated and over what period of time these assets would be realised.

Basically it means that the three sellers of the E&O stake benefited enormously by getting a 60% premium over the market price for their stake. Their gains over the market price alone would have amounted to a massive RM283mil.

Perhaps Sime Darby, even if it thought that this was the best route for its property sector strategically, could have made a partial offer directly to all E&O shareholders for a 30% stake at a more palatable premium to market and then accepted all offers proportionately.

That would have meant that all minority shareholders of E&O would have had an opportunity to partake in Sime Darby's very generous offer instead of just the select three. The select three are Datuk Tham Ka Hon also known as Terry Tham managing director of E&O; Tan Sri Wan Azmi Wan Hamzah of Land and General fame; and GK Goh Holdings Ltd of Singapore which sold their stockbroking operations to CIMB group some years back.

Yes, Sime Darby is big and yes it has a lot of cash and yes it generates a lot of cash too. Which is why its strategic moves must commensurate with its overall size. Making a joint venture here and an acquisition there is not going to do much for its property division but will instead spread its resources thin.

Revamping it to reflect the size, scale and complexity of its property operations and to enable it to acquire a capacity to undertake all manner of property ventures with the help of appropriate consultants such as architects, designers and planners and keeping all the profits for itself will help it much more. That's what other property companies do.

Managing editor P Gunasegaram thinks that many bad corporate decisions are made in the name of this nebulous thing called strategy.

By The Star

Friday, September 2, 2011

Glomac: No chance of asset bubble in Malaysia


Glomac's group managing director says prices of properties in Malaysia have not "skyrocketed" as compared with Hong Kong, China and Singapore.

Kuala Lumpur: The chief of Glomac Bhd has quashed talks that the local housing market is overheating and will lead to an asset bubble.

Group managing director cum chief executive officer Datuk FD Iskandar FD Mansor Iskandar said prices of properties in Malaysia have not "skyrocketed" as compared with Hong Kong, China and Singapore. The countries have been recording sharp price jumps of 40 per cent to 60 per cent since 2009.

"We are in a highly-regulated industry so it won't be possible to have an asset bubble here," Iskandar said in an interview with Business Times.

He said in general, property prices in the local housing have been increasing by 5 per cent to 10 per cent per year, which he described as healthy.

"Property prices will continue to appreciate as land and raw materials become more expensive," said Iskandar, who is also deputy president of Real Estate and Housing Developers' Association Malaysia (Rehda).

He is confident that Glomac will record strong double-digit growth of 30 per cent in the next two years, led by sales from its current projects.

Glomac has 13 ongoing projects in Kuala Lumpur, Sungai Buloh, Rawang and Johor, with a balance gross development value of RM3.8 billion.

The company's unbilled sales remain high at RM550 million as at April 30 2011.

Iskandar said the RM950 million Glomac Damansara project in Petaling Jaya, Selangor, will contribute significantly to its net profit and revenue.

For fiscal year ended April 30 2011, Glomac chalked up 54.2 per cent gain in net profit to RM63 million, while revenue surged 90 per cent to RM601.5 million.

"The MRT (Mass Rapid Transit) project will instill confidence in buyers and many residential projects are expected to benefit from the implementation," Iskandar said.

By Business Times

Tabung Haji and PNB follow EPF's footsteps to invest in London properties

PETALING JAYA: Following the Employees Provident Fund's foray into overseas property markets, Lembaga Tabung Haji and Permodalan Nasional Bhd (PNB) are looking to do the same and have sent out feelers about this, industry players said.

Like the EPF, both funds are looking to buy into existing premium properties for their yield. And also the EPF, both had targeted London as their first choice, followed by Australian cities, the insiders said.

“A few proposals were given to Tabung Haji and PNB in the last six to eight weeks,” said one property consultant.

However, it still isn't clear how much both funds are aiming to spend on overseas properties.

Last year, PNB bought an upmarket office block in Brisbane, Australia, called Santos Place, reportedly for more than A$290mil (RM928mil).

The 37-storey building has 373,508 sq ft of lettable space with about two-thirds of that leased to Australian oil and gas giant, Santos.

Its previous owner was Nilson Properties. Santos Place was PNB's first acquisition in Australia.

To date, the EPF has been the most aggressive among the Malaysian-based funds, with most, if not all, its overseas investments in Britain.

The pension fund has so far confirmed the purchase of four British properties costing a total of 634mil (RM3.1bil). It issued a statement last year that it was putting aside 1bil (RM4.85bil) for its British property investments.

Most of Tabung Haji's overseas investments to date have been in Mecca and Madina in the Middle East. It also has property investments locally.

PNB manages a fund size totalling RM150bil while Tabung Haji manages funds totalling RM28bil. Sources said both funds were looking to invest in properties primarily in London, Sydney, Melbourne and Perth, although they were open to other locations.

Said a source: “They are keen to invest in well-tenanted properties in Australia and Britain ranging from 50mil to 100mil, or A$50mil to A$100mil, with annual yields of between 5% and 7%.”

This confirms what Tabung Haji group managing director and chief executive officer Datuk Ismee Ismail said in June. Ismee said the pilgrimage fund was planning to increase its investments up to a quarter, from 15% currently. He did not say which cities he was considering then.

Unlike the EPF, which was putting aside 1bil for overseas property investments, both PNB and Tabung Haji did not disclose any figures. The only criteria was that, their property investment must be syariah-compliant.

“Tabung Haji has so far been very firm about this. The properties they invest in must be syariah-compliant,” a source said.

It has been reported that due to the troubles facing Western economies, funds owning prime properties there could be looking to hive off some of those assets, not only in London, but across the Atlantic and in Australia.

According to Reuters, Australia's property investment market is expected to be among the most active for the rest of this year as offshore investors seek quality assets in a mature market with growth prospects, property services firm CB Richard Ellis said. Foreign investors accounted for more than 30% of property investments in the first half of this year, double the long-term average, CBRE said.

Sales activity could also pick up after some listed Australian property trusts including Stockland and GPT unveiled plans to sell their assets to fund share buy backs or seek other opportunities.

There are more than A$10bil of commercial property assets currently on the market, according to the Australian Financial Review.

With low unemployment and a relatively healthy economy, Australian commercial properties offer a total annualised return of 10% and industry experts see rises in rents, particularly in the office sector.

In Britain, while the rest of the country is suffering from a soft property market, the city is bucking the weak trend, with 30% more surveyors reporting prices on the rise than falling, with the capital also seeing the strongest level of new buyer enquiries. Nevertheless, latest July figures show that commercial real-estate values rose at the slowest pace since the market started recovering from a slump two years ago.

By The Star

Monday, August 29, 2011

Malton advances on Q4 profit jump

Malton Bhd, a Malaysian property developer, rose the most in more than two weeks in Kuala Lumpur trading after profit in the fourth quarter ended June 30 surged almost fivefold to RM26.8 million from RM5.54 million a year earlier.

The stock gained 4.4 per cent to 47.5 sen at 9:19 a.m. local time, set for the biggest gain since Aug. 11.

By Bloomberg

Saturday, August 27, 2011

IGB plans St Giles in Australia


Prime land: The recently purchased Sydney property has a net lettable area of about 60,000 sq ft (5,436 sq m) with three retail floors and 10 upper levels of office space and a basement parking for 16 cars. IGB bought the building from a Charter Hall Group fund. Savills brokered the deal.

IGB Corp Bhd has submitted plans to the Australian authorities to convert a recently purchased office building into a three to four-star St Giles hotel.

Executive director Tan Boon Lee says the purchase of 34, Hunter Street in Sydney, Australia will be its eighth hotel under the St Giles brand. It was purchased at a price of A$36mil and will be given a A$20mil makeover.

“If we can get an average room rate of A$180 to A$200 for the 250-odd rooms, we would be able to get our money back in seven to eight years, which is normal period of investment,” he said. It is expected to be ready in two and-a-half years.

The real estate developer, with interest in hotels and malls has two St Giles hotels each in London, New York and Makati, the Philippines and is building a seventh in Penang.

IGB Corp Bhd, through its associate company St Giles Hotels, bought two hotels in New York City for US$78mil (RM2.55mil) from Starwood Hotels & Resorts Worldwide Inc in June last year to grow its St Giles brand.

The hotels, located in midtown Manhattan, were previously operated by Starwood under the W brand. Among the group's other brands are the MiCasa and Cititel chains.

“We would like our investments in hotels, offices and retail to contribute a third each to our property investment portfolio,” Tan says.

IGB achieved a net profit of RM174mil for financial year 2010, representing a 10% jump from its RM159 mil net profit in financial year 2009. This expansion in its bottom line was mainly due to improved results from property development and property investment as well as management divisions.

The property investment and management divisions contributed 59.2% to IGB's RM719.4mil revenue for the 2010 financial year.

Its hotel and property development segments contributed 28% and 10% respectively.

“Property development is the icing on the cake. When times are good, we will do more. When times are bad, we will acquire land. We have always liked KL,” Tan says.

IGB has its base in Ipoh. It was founded in the early 1960s by two brothers - the late Datuk Tan Kim Yeow and Datuk Tan Chin Nam. IGB's forerunner, Ipoh Garden Sdn Bhd was named after its maiden Ipoh project. It has since transformed itself from being a mere developer into a mega asset-based company involved in various facades of real estate development here and overseas.

On the purchase of 34 Hunter Street, Sydney, Tan said the group would like to develop “the kangaroo route from Britain to Australia.

“Once we have developed the hotel business along that route with Malaysia being the mid-way point, we can talk about (tourism) packages with the airlines. This will help us to promote our hotels from London to Australia,” he says.

IGB is no stranger to Australia. Among its most priced Australian asset at one time was the Queen Victoria Building (QVB) which IGB restored more than 20 years ago. That property later went to Singapore Government's Investment Corp (GIC) when it bought Ipoh Ltd of Australia. QVB was Ipoh Ltd's core asset.

The recently purchased Sydney property has a net lettable area of about 60,000 sq ft (5,436 sq m) with three retail floors and 10 upper levels of office space and a basement parking for 16 cars.

Tan says they will retain the facade of the building but will retro-fit the inside and have between 240 and 270 rooms with windows to every room as it is a stand-alone building located at the corner of Hunter Street and Pitt Street. It is three to four blocks away from the Sydney Opera House and is located mid-way between the Sydney Opera House and the Queen Victoria Building.

“Location wise, it is very strategic. In terms of timing, the local government there is trying to revive the city's night life. Over the last four years, there has been hardly any hotel so ours will be the only one,” says Tan.

He says there are several hotels in the vicinity. This includes the InterContinental Sydney, owned by Mulpha International Bhd, Grace Hotel owned by the Low Yat group, the Grand Hyatt at The Rocks, Radisson and Four Seasons.

“There is no three to four-star hotels in that area, all of them are five-star hotels. Our strategy is to provide a comfortable business class hotel, with a good bath, bed and free Internet facilities. Breakfast will be simple and our rates will be a third lower than those hotels around us.”

On the group's strategy in today's challenging times, Tan says there are plans to acquire other assets, in order to expand its hotel operations and business.

“Our first preference will be hotels. A lot of funds are selling so it is a good time to accumulate assets. If the site is big enough, then we would like to do a mixed development but for that to happen, it has to be about half or three-quarters the size of the Mid-Valley site (which is about 20 ha).

“Mid-Valley took us 15 years. It is not possible to find a piece of land this size in places like London or Sydney but it may be possible in China. Whatever we do, it must be near a local transportation hub,” Tan says.

By The Star

Demand for residential properties boosts UOA Q2 net profit

PETALING JAYA: UOA Development Bhd saw its net profit for the second quarter ended June 30 grew to RM60mil, which represented an increase of 44.6% from the RM42mil recorded in the preceding quarter.

The property development company had earlier told Bursa Malaysia that its revenue in the quarter had grown 18.9% quarter-on-quarter to RM173.33mil. Residential segment contributed most to the company's total revenue during the quarter in review at 59%, or approximately RM101mil, compared with the 25% contribution (or approximately RM36mil) in the first quarter.

“This is in line with UOA's increasing focus to meet the growing demand for residential properties in the Klang Valley,” the company said in a statement.

Going forward, UOA would continue to actively address the growing demand for commercial and residential properties with the development of its land bank that constituted a saleable area of over 1.4 million sq m, including its flagship project, Bangsar South, and other upcoming developments in key locations such as Taman Desa, Sri Petaling, Segambut and Glenmarie that would form a basis for its growth over the next five to seven years.

The company said it would capitalise on its strong balance sheet and continue scouting strategic development lands, while maintaining a focus on strategic locations within the Greater Kuala Lumpur.

By The Star

What development means to the LDP


TTDI-LDP interchange: It is baffling why the soon to-be-built MRT alignment does not feature in this part of urban development.

Several developments, of considerable scale, will be emerging fairly soon along the Lebuhraya Damansara-Puchong. Some of these developments will be completed in four years, while others will have a longer gestation period.

Four of these projects are being developed by Subang-based developer Empire group. The four pieces of land were purchased from MK Land, who developed Damansara Perdana.

What is visible as one drives along the LDP today is the on-going construction of Empire City on the side of Taman Tun Dr Ismail, Kuala Lumpur. This 23-acre development comprises several high-rise office blocks, serviced apartment blocks, a hotel and a retail area spanning a major portion of the 23 acres and a massive car-park beneath. It is sandwiched between the LDP and tracts of Malay reserved land. Empire City is scheduled to be completed by 2015 and will have about 10 access roads or viaducts leading to and away from.

In Damansara Perdana, on the other side of the LDP, the group has three more pieces of land. Empire Damansara, another mixed development comprising several office blocks, is located next to Metropolitan Square. This is on the outer fringes of Damansara Perdana which sits next to the thriving Kota Damansara township .

The LDP, in other words, besides being a highway, also serves as a sort of border and runs fairly close to the delineation between Kuala Lumpur and Petaling Jaya.

Empire Residence, a high-end gated and guarded development on 19.2ha of land inside Damansara Perdana itself, is being developed together with MK Land in a joint venture. This project will house 750 three-storey units instead of the 3,353 condominium units originally planned.

The Empire group's fourth project is located near the Penchala Toll near MK Land's Flora Damansara. According to an agent marketing one of its projects, the developer plans to fill up a natural lake located on this piece of land. A tertiary development or a resort-like development is being planned. Plans are still hazy.

While the Empire group has set its sights to develop on this side of town, two other developers are also planning their projects further along the LDP heading towards Sri Damansara.

Land & General Bhd (L&G) will be stepping up development of its high-rise condominium projects on 42 acres in the Sri Damansara township. This is expected to be launched towards the end of2011. It is currently known as Meranti and will be built over four phases. About 2,800 units of condominium are being planned.

In Sri Damansara, TA Global will also be offering Damansara Avenue, a 48-acre project comprising several apartment and office blocks, and commercial developments. It is estimated that this will take 10 years tocomplete. There are about four to five blocks of serviced apartments and an equal number of high-rise office blocks.

All these projects will add to the population located along this stretch of the LDP. The majority of the roads accessing these projects, or leading away from these projects, will feed into the LDP. Some will be via the Sg Buloh road. It does seem a scarry propostion for the LDP! One can't help but wonder how the LDP is going to cope with the sure growth in traffic along this short stretch divided by the Penchala toll. As it is, the LDP is terribly congested during peak hours and these develpments are bound to make things worse.

What will it be like in the next couple of years when these projects are ready to host their tenants and owners?

It is also baffling why the soon to-be-built My Rapid Transit (MRT) alignment does not feature in this part of urban development which lies between the PJ-KL border when so many projects have been approved and ear-marked for development.

This takes us to the issue of town and urban planning. We cannot do away with development, modernisationand the pressing need for housing. All these are part and parcel of growth and progress.

But, what the local authorities can do is to consider the pressure such massive projects will add to the road and transport system. Without an integrated public-transportation system, these projects may dilute the livability of the area they are piling their foundations in.

Local authorities and transport planners cannot abdicate their roles as guardians and overseers of this community along that LDP stretch. When planning approvals arrive on their tables, they have to consider these new projects based on what is already existing there. The local authorities have to take into consideration the many condominium developments that are already there, in this case the Damansara Perdana location. They have to consider the limited access into Sri Damansara today and the effects of how two massive projects totalling 90 acres will affect that access.

Assistant news editor Thean Lee Cheng wonders what travelling on the LDP will be like a few years from now.

By The Star

Ibraco to launch next phase of Tabuan Tranquility

PROPERTY developer Ibraco Bhd, which came out of Practice Note 17 (PN17) status three months ago, is capitalising on the high take-up rate of the first two phases of its Tabuan Tranquility project here to launch the next phase of residential development.

Group managing director Chew Chiaw Han said Tabuan Tranquility phase two, which would has more than 255 units of houses, would open for sale before end of this year.

The units are made up of 163 terraced houses, 68 semi-detached homes and 24 detached houses with a gross development value (GDV) of more than RM150mil.

Townhouses will also be built under Phase two but its number has yet to be determined.

“Infrastructure work for phase two development is now underway,” he told StarBizWeek yesterday.

Tabuan Tranquility, a massive commercial, industrial and residential development on 66ha along Kuching-Samarahan Expressway, was unveiled last year under Ibraco's regularisation scheme to take the company out of PN17.

It is the single biggest mixed development ever undertaken by Ibraco, which has built more than 10,000 units of properties in the city over the years.

Tabuan Tranquility, to be developed in five phases up to 2015, will have a total 640 units of double-storey terraced houses, 108 units of semi-detached houses, 60 units of three-storey townhouses, 76 units of four-storey shophouses, 72 units of semi-detached industrial buildings, one office block and a petrol service station.

The entire project has a GDV of RM517mil.

Ibraco was classified a PN17 company after its revenue for the financial year ended Dec 31, 2009 fell below 5% of its paid-up capital. It was uplifted from PN17 in late May 2011.

Chew said all the 76 units of shophouses under phase one, priced between RM1mil and RM1.79mil each, had been sold.

“For phase five residential scheme, 90% of the units have been sold,” he added.

Phase five comprising 204 terraced houses and 38 semi-detached houses is due for completion in November-2012.

Chew said Ibraco would launch a new residential project in Stutong here next month. The project will have 67 units of terraced houses and four units of semi-detached houses with a GDV of 15mil.

On Ibraco's plan to venture into mixed property development projects in Bintulu or Miri, he said the company was still working on the proposal.

The company has earlier identified the land and might carry out the proposed development in joint-venture with the landowner concerned.

To diversify, Chew said Ibraco was studying proposals to go into construction business, both infrastructure and civil building works, for the private and public sectors.

For the quarter ended June 30, 2011, Ibraco posted a pre-tax profit of RM3.75mil on a turnover of RM28.5mil as compared with loss of RM798,000 on revenue of RM676,000 in the same period last year.

In an explanatory note, Ibraco said the group's revenue increased to RM28.5mil against RM19.4mil in the quarter ended March 31, 2011 when revenue came from both sales of inventories and Tabuan Tranquility project.

Chew said for the financial year ending Dec 31, 2011,the group was confident of achieving its projected nett profit of RM12mil.

By The Star