Property prices and demand up in Perak

On the fast lane: Terraced houses developed by YNH Property in Manjung. Manjung is the fastest growing district in Perak and property prices have risen by about 15% over the past two years.

GEORGE TOWN: The delivery of residential properties in Perak is expected to hit about 10,000 units this year compared with 4,582 units last year.

The delivery of housing units in Perak was 9,747 in 2007, 6,513 in 2008 and 8,496 in 2009, according to a recent Finance Ministry property market report.

Real Estate and Housing Developers' Association Perak chapter chairman Datuk Francis Lee told StarBiz that there was significant change in the attitude of consumers in Perak towards the purchase of properties since the beginning of the year.

The property prices in Ipoh have increased by about 15% over the past one year.

“The price of a double-storey terraced house has surpassed the RM200,000 mark, selling at around RM240,000 in the Kinta district area, which is within 8km radius from Ipoh town,” he said.

There are 10 districts in Perak. About 60% of the new property launches are located in the Kinta district.

The Larut, Matang, Selama and Manjung districts are the other areas where new properties are being targeted for development.

“The increase in property prices is largely caused by higher land cost, bureaucratic compliance fees, and construction cost.

“This has prompted more locals in Ipoh to buy properties today, as they fear that property prices may go up,” Lee said.

Despite the rising property prices, developers in Ipoh were not making additional margins from development, Lee added.

“At RM240,000, a double-storey terraced house in Ipoh is still affordable for a family with a combined monthly household income of about RM5,000.

“Buyers can withdraw from their EPF savings for partial payments and need only to pay above RM1,000 a month on a 20-year loan,” he said.

Lee added that double-storey terrace properties were still the most popular in Ipoh, followed by single-storey terrace houses which were selling at about RM150,000.

“Manjung is the fastest growing district in Perak. Property prices in Manjung have risen by about 15% over the past two years.

“In Manjung, the price of a double-storey terrace houses is about RM220,000, while single-storey properties are priced between RM150,000 and RM180,000, which are almost the same level as prices in Ipoh.

“There is rapid industrialisation in Manjung, which is spurred by the Lumut Port industrial park and the Lekir bulk terminal,” he said.

Lee added that the property market momentum should maintain unless there were further actions by the Government to prevent a property bubble and adverse changes in the economic climate.

Meanwhile, YNH Property Bhd corporate strategy head Daniel Chan said the group had so far launched mixed-development projects with an estimated gross development value (GDV) of RM525mil.

The projects include 300 units of shop-lots with GDV of RM210mil, 500 units of double-storey terrace houses with GDV of RM100mil, the RM135mil AEON shopping mall, and the RM80mil Pantai Hospital Manjung.

“The property outlook for Manjung should be stable, as our buyers are not speculators. Despite having gone through a few recessions, Manjung has generated a steady annual income of RM25mil to RM30mil to the group for the past 20 to 30 years,

“The Royal Malaysian Navy Lumut base and dockyard is a strong source of support for properties in Manjung. About 1,000 recruits join the navy every year,” he said.

The Manjung township project by YNH is also expected to benefit from companies such as Vale International (SA) Ltd, which is building a RM15bil iron ore pelletising plant in Manjung.

Scheduled for completion in either 2013 or 2014, the investment is expected to draw more workers to Manjung.

Kinta Properties Holdings Sdn Bhd chief executive officer Eric Chew said in the first half of 2011, sales had improved by 30% compared with the previous corresponding period.

Chew said the purchasing power of the younger generation had increased significantly in recent years.

“The residential property market in Perak is expected to remain to be stable. New properties will be priced slightly higher because of rising building material costs.

“The bulk of property purchasers are still locals. But in recent years, we are seeing more buyers from other states, as the value of property in Ipoh is appreciating,” he added.

The company has about RM55mil worth of properties to be launched in the second half of the year in Bandar Baru Sri Klebang, compared with the first half of 2011 which saw RM65mil worth of new launches.

They included new detached homes in a guarded community in ParkLane Residences, Bandar Baru Sri Klebang.

“There has been an increase in the demand for gated and guarded properties as purchasers are looking for homes with security as a key feature.

“We have also recently launched semi-detached and terrace houses in Bandar Baru Sri Klebang that are equipped with environmentally friendly features such as solar water heater, solar reflective paint, and rain water harvesting system,” Chew said.

By The Star

Buyers complain of prime units being taken up before launch

PETALING JAYA: As the property market gets “hotter”, there are complaints that prime units are being “pre-booked” before the launch dates.

Groups of house buyers have claimed that although they were early at property launches, almost all end and corner lots of homes have been taken up.

National House Buyers Association secretary-general Chang Kim Loong, who disclosed this, said prime lots in new housing projects were usually marked as sold because the units had been offered to selected groups of people before the launch.

They included staff of the developers and their subsidiary companies, shareholders as well as support staff such as lawyers, architects and bankers, he added.

“By right, developers can only launch their properties after all the necessary permits have been obtained, but they circumvent this by organising events such as registration and pre-launches.

“It is not illegal as it is merely the registration of potential buyers with no payments being made at all,” Chang said.

Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Seri Michael Yam acknowledged that developers, at times, gave the opportunity to their regular buyers to obtain prime lots.

“Unfortunately, in any given block a buyer has only a one in five chance of getting a prime unit such as the end lot,” he said.

Yam said developers who were responsible and adhered to good corporate practice would open up the sale of all units in their projects to the public.

“I don't think developers would be holding the prime lots for their own people and employees as this would require them to give rebates on the property price,” he said, adding that it would also not be financially viable for the developers as it would lessen their cash flow.

Yam said generally, sales should be based on a first-come-first-serve basis, with developers offering units to those who paid first.

He said if the allegations were true, it was not a nice way of marketing property.

“The most practical way of selling property would be to draw lots,” he suggested.

By The Star

Kimlun gets RM51m contract from Nusajaya Lifestyle

KUALA LUMPUR: Kimlun Corporation Bhd’s unit has accepted the letter of award for a RM51 million contract from Nusajaya Lifestyle Sdn Bhd to build a retail mall and ancillary buildings in Medini Iskandar, Johor Bahru.

It said on Monday, Sept 19 the scope of works comprises of building construction and ancillary works for the Mall which will be due to be completed by July 2012.

“The contract is expected to contribute positively to the earnings and net assets of Kimlun Group for the financial years ending 2011 to 2012,” it said.

By The EDGE Malaysia

A new horizon beckons for E&O

E&O’s Ariza Terraces development in its Sri Tanjung Pinang project.

Eastern & Oriental Bhd (E&O) is embarking on a new chapter with the entry of Sime Darby Bhd as the single largest shareholder of the company. What will happen next and how will the momentum that has led to the growth of E&O be following a big change in ownership? E&O deputy managing director Eric Chan Kok Leong replies to StarBizWeek's ANGIE NG on the growth direction for the company following Sime Darby's acquisition of a 30% stake in E&O.


Chan: ‘We intend to push the boundary further by making E&O a regional and international brand.’

With Sime Darby's recent purchase of a 30% stake in E&O, what will be the game plan for the company going forward?

E&O has successfully built a strong portfolio and visible premier niche brand in the property development, hospitality and lifestyle segment in Malaysia. Having established ourselves locally, we intend to push the boundary further by making E&O an aspirational brand that is recognised locally, regionally and eventually internationally.

In our various joint ventures and partnerships, E&O seeks to align itself with leaders and giants within respective industries, whether it is in terms of award-winning architects for our developments, in launching new products with CIMB-Mapletree, or the most recent marketing collaboration with Japan's largest zaibatsu, Mitsui Fudosan.

That ideology extends to the development of a wellness township in Medini Iskandar via a joint-venture (JV) with Pulau Indah Ventures Sdn Bhd. Pulau Indah Ventures is a 50:50 JV between Teluk Rubiah Ventures Sdn Bhd, a wholly-owned subsidiary of Khazanah Nasional Bhd, and Aneto Investments Pte Ltd, an indirect wholly-owned subsidiary of Temasek Holdings Pte Ltd.

Sime Darby's entry into E&O, is therefore consistent with this strategy, given that we now have as our new cornerstone shareholder, Malaysia's oldest and largest conglomerate. Sime Darby is recognised worldwide for their financial strength, considerable landbank and extensive network.

With such a prominent investor on board, the horizons for E&O expands at an accelerated pace which otherwise would not have taken place had the status quo remained.

What are some of the immediate and medium term plans Datuk Terry Tham has for himself and for the company?

Does he intend to stay beyond the third year, and what are his longer term plans as a property developer?

Datuk Terry Tham's position has only changed in that he has reduced his personal shareholding in the company. Datuk Terry has helmed the company from the outset and remains fully hands-on in E&O's operations as its managing director, continuing to set its vision as well as monitoring and guiding ongoing projects across the group's three core business divisions, which are property development, property investment and, hospitality and lifestyle.

Now with Sime Darby as E&O's new cornerstone investor, his long-held aspirations to grow E&O into an internationally recognised brand, has given him greater impetus and motivation.

E&O has built up a strong brand name as a niche developer in the Klang Valley and Penang. How can it progress further from here?

In early 2000, after a deliberate survey of the property market, it was decided to position E&O in the premium niche market segment, as opposed to township development where others had already established themselves. This strategy has augured well for E&O, evidenced by the healthy take-up rates of our properties and our ability to benchmark prices at each prevailing time of launch.

The E&O brand is now synonymous with premier developments, and we have been complimented that E&O adds the distinct style' ingredient into lifestyle'. Again, we came to secure this reputation by no accident it was a conscious strategy that we worked hard towards.

Today, the E&O Group is supported by an eight-pronged lifestyle portfolio, which includes our namesake heritage Eastern & Oriental Hotel (listed as one of the must-visit destinations in the New York Times bestseller 1,000 Places To Visit Before Your Die by Patricia Schultz), the newly refurbished Lone Pine Hotel (picked by travel portal TripAdvisor as one of “the top 10 boutique hotels in the world” in its category), the retail mall, marina operations, performing arts centre and convention centre at Straits Quay, serviced residences that bear the hallmark of E&O hospitality, merchandising as well as food and beverage via the Delicious Group.

These are pillars that truly differentiate E&O as a unique brand and substantiate our claim as a truly holistic premier lifestyle developer.

What are some of the synergistic benefits that the two companies can leverage on, and what should be their areas of focus - in terms of product types, market presence and business forte?

There are numerous possibilities for us to work together. For instance, we could enhance our market presence in locations where each party has no presence, tapping on marketing channels, service providers, market intelligence in products or even JVs to develop land in new locations. There is also the opportunity to deepen and broaden the technical capabilities of both parties in innovation and product design and to create new property products and sale opportunities.

We could also expand internationally, either together or through strategic alliances with other global property companies to increase their brand value and presence. We can also develop new growth engines from existing and new markets.

Beyond property development, we could also explore the possibility of leveraging on each other's hospitality capabilities. These are just some areas for possible collaboration.

We will have a better picture when the two parties eventually sit down to carve out specific projects for collaboration.

How will the Sime Darby-E&O deal impact or benefit the respective companies in terms of its staff strength and its project plans - will there be any changes in the pipeline?

Let me share with you E&O's Key Performance Indicators (KPIs) that map out our direction going forward:

• Achieve regional and international exposure of the E&O brand;


• Secure strategic alliances and collaboration with well renowned international institutions;


• Develop new growth engines;


• Deliver significant bottom line growth and sustainable profits; and


• Attract, retain and motivate talent across the group.

As you can see, our KPIs touch on the intangibles to the tangibles in value creation for E&O, from continued efforts in brand building to employee engagement, while never losing focus on the bottom line and balance sheet.

As for staff strength across the E&O Group, our numbers already surpass 1,000 and are increasing in response to new projects such as Medini Iskandar, the expansion of Delicious outlets (which will make its debut in Singapore Scotts Square this November), which go toward bringing new opportunities and careers to the employment market.

By The Star

Glut dampens market value and rental of condos

Since the high-end condominium market took a beating following the global financial crisis in 2008, their values have been left pretty much battered even today. Investors who got into the market around the peak must still be quite disheartened by the market's lethargy.

The big supply coming onstream has also been a dampener on property values and the rental market of these residences.

There are now many condominiums in need of tenants and the net rental yields are in the range of 3% to 5%, depending on the location.

But despite this, the speculative fervour in the upper-medium to high-end landed residential sector has not abated. There are signs that it is spilling onto the latest craze small sized, and more affordable, commercial cum residential accommodation known as SoHo's, and service apartments.

It is time to exercise caution on property matters to ensure the market's sustainability and avoid unnecessary losses.

The fact that even analysts are concerned and have downgraded the property sector pretty much indicates the party is coming to an end and it is time to be cautious.

UOB Kay Hian Research has downgraded its grading for the property sector to “market weight” from “overweight” citing that the property valuation cycle has peaked.

A global double-dip recession, coupled with the European debt problems, would certainly have spillover effects on the domestic economy, including the property sector. If the world economy is hit by a recession, the property market will not be spared either.

The recent market volatility and sell-off has affected investor confidence and the market is taking a breather now.

Although the market seems to be holding out quite well for now, there is no telling how it will react if sentiment is badly eroded by the gloomy external outlook.

As such, developers should also be cautious and build more affordable property units priced below RM350,000 that still has strong demand.

As shown by the havoc caused by the oversized property bubble and sub-prime loan crisis in the United States which literally brought down the world economy to its knees, we have witnessed how significant a role property has on the health of the economy and financial system of countries. The world would have been spared the agony of the global financial crisis and the continuing state of volatility and uncertainty had the United States been vigilant on its crumbling market fundamentals that inflicted such gargantuan damages felt till this day.

For the sake of a sustainable property market in the long term, it is important to have policy measures that will ensure the market is closely tied to market fundamentals, and to curb any artificial inflation in property value.

The more that is known of the fundamentals, the better and this calls for greater transparency.

To ensure financial and social stability, it pays for the Government, through its policy measures, to keep the property market closely tied to fundamentals.

The hot property market and sharp rise in property prices in residential markets in the Klang Valley and Penang continue to be of concern among property buyers and the authorities.

Bank Negara is said to be considering further tightening measures to cool the market and rein in speculative buying and further price hikes.

Some of the possible measures that are at the disposal to tighten the market include hikes in bank interest rates to fight inflation, and the further tweaking of the loan to value ratio (LVR) to dampen the excessive property demand.

The central bank is also said to be keeping a close watch on the mortgage loan market to see whether a capping of the LVR (at 70% of the property price) on second mortgages is necessary.

The critical sectors are the upper medium to high-end landed residential sector and non-owner occupied houses. Purchasers who have multiple properties and who already have a mortgage loan will be subject to the new loan limit if it is implemented.

To address speculative activity in the property market, there is also a likelihood that the Government may reinstate the real property gains tax (RPGT) to a higher quantum from the current 5% for all property sold within the first five years of purchase.

The Government has tweaked the RPGT on various occasions depending on market conditions.

From April 2007 until it was reintroduced in January last year, all gains from property transactions have been exempted from the tax.

Under Budget 2010, the RPGT was brought back in January, albeit at 5% for all property sold within the first five years of purchase.

If the Government decides to reintroduce the RPGT in its entirety, property speculators will get the brunt of the “axe” as gains from property sales within the first five years of purchase will be subjected to a tax of 5% to 30%.

The maximum 30% is for disposal within the first two years; 20% within the third year; 15% within the fourth year and 5% within the fifth year. Profits earned from disposal in the sixth year and beyond will not be taxed.

As for bank borrowings, directives may also be given to banks to lend based on net income and not on gross income as the practice now.

With the world's antenna tuned in to unfolding news on the US and eurozone's debt crises, such prudent measures will help to ensure the market's sustainability.

Deputy news editor Angie Ng believes going back to basic fundamentals and prudence is the way to go in times like this.

By The Star (by Angie Ng)

Real estate investing – attraction across the Causeway

SINGAPORE has always been a favourite destination for Malaysians whether we are looking to shop or going for a short holiday.

It is, after all, our closest neighbour and, especially for those of us living in Sabah or Sarawak, flying time to Singapore is even shorter than to Kuala Lumpur.

It therefore comes as no surprise that Singapore is also a favourite place for Malaysians looking to invest, especially when it comes to property.

Going by available data, Malaysians used to account for the largest portion of foreign investors in Singapore properties until early this year, when we were eased into second place by the Chinese.

Word from DTZ Research, a global real estate advisory services group, is that Malaysia, Indonesia, China and India together accounted for 75% of all property transactions in Singapore by foreigners and permanent residents in the first quarter of 2011.

Buyers from China made up 24% of all foreign buyers in the quarter, surpassing Malaysians who had held the top position since second quarter of 2008. In the first three months of 2011, Malaysians accounted for 21% of buyers, down from 24% in the previous quarter.

According to the Urban Redevelopment Authority (URA) of Singapore, the demand for private housing remained strong in 2011, with 4,200 new private residential units being sold in the first quarter of the year.

The URA, which is the island republic's land use planning and conservation authority, said in its website that a total of 43 sites had been made available under its Government Land Sales (GLS) Programme for the second half of 2011 in order to ensure an adequate supply of private residential, commercial and hotel sites to meet the demand.

It said that as developers continued to acquire land for residential development, 17 private residential sites had been injected into the GLS Programme Confirmed List for the second half of 2011 to meet this demand. These new sites should yield about 8,100 new residential units.

Going by the statistics, Malaysians will account for a substantial number of the potential buyers.

What are the factors that attract Malaysians to invest in property across the Causeway?

One of the main factors, I believe, is the close proximity of Singapore to Malaysia. For most investors, it is preferable to purchase a property that is close to home.

Given the choice, most of us would rather buy a house in a place where we can visit quickly and at short notice, rather than a place that is too far away. It is reassuring to know that you can always go and look at the property that you have invested in easily and quickly.

Singapore and Malaysia also share a long history and we even belonged as one nation not too long ago. As a result, cross border ties are strong. Many of us have relatives and families living across the Causeway, so for some it is only natural that they would also purchase property in the neighbouring country. Many Malaysians are therefore inclined to invest in property in Singapore because of these ties, just as many Singaporeans have invested in property in Malaysia for the same reason.

These personal and sentimental factors aside, Malaysians have a slew of other reasons to park their money in properties down south.

We see Singapore as the financial hub of not only South-East Asia, but potentially for the Asian region as well. The country now offers a wide range of financial services such as banking, insurance, investment banking and treasury services, and it serves not only its domestic economy but the Asia-Pacific region as a whole.

It is also one of the more well-established capital markets in Asia-Pacific and the Singapore Exchange (SGX) has become the preferred location to list for nearly 800 global companies. The decision by the owners of the Manchester United Football Club to seek a listing on SGX, as reported recently, is a case in point. Singapore has also become the largest real estate investment trust (REITs) market in Asia outside Japan.

These, coupled with a policy to attract foreign talent to the island nation, have helped to make the property market an attractive investment option.

Singapore has among the world's highest ratio of foreigners in its population. In fact expatriates and permanent residents together make up 42% of the island nation's population.

The large number of foreign residents has been a boost for the rental market. Property owners can be assured that their newly acquired apartment or home can be rented out within a month or so after they advertise its availability. Compare that to Malaysia where it could take up to six months to find a suitable tenant.

Yields from rental vary depending on the location of the property. In or near the central business district, where initial investments are already quite high, rental yields are in the region of 2% to 3%. On the other hand, yields from locations such as Geylang, can be as high as 6%.

More than rental yields, capital gains are what investors look for. Records show that properties purchased about five years ago are selling at double their original prices today. A 100% gain in just five years!

The keen interest in Singapore among property investors from South-East Asia and other parts of Asia is also driven by many initiatives taken by the Singapore government, among which are the opening of two casinos and the introduction of the Formula One night racing.

It is also being promoted as a medical hub and a centre for higher education, apart from being touted as a tourist destination and shopping haven.

The island nation will always be an attractive option for Malaysian investors even as the exchange rate is now approaching RM2.50 to a Singapore dollar. Given that an average apartment in Singapore now costs in the region of S$1 million, a Malaysian investor will have to fork out close to RM2.5mil for an apartment of less than 1,000 sq ft there. That amount of money could probably buy him a detached house of at least 4,000 sq ft plus an additional 2,500 sq ft of garden not far from Kuala Lumpur.

This fervour to invest in Singapore, despite the high prices, is certainly good news for developers who are looking to venture across the Causeway.

Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Please email md@sdb.com.my.

By The Star (by Teh Lip Kim)

Book early, rooms in Penang are going fast

Prospects for the year are looking rosy with 2011 expected to close at a 67 per cent occupancy and a record high hotel room rate of RM240.

Penang: Hotels in Penang are projecting a record year in 2011 as more rooms are filled and more money is made each night. And the outlook for 2012 is expected to be even better.

In the first seven months of this year, occupancy hit 65.7 per cent with an average room rate (ARR) of RM231. This compares to the first seven months of 2010 when average occupancy was at 59.3 per cent and an ARR at RM229.

"July 2011 posted the highest ever single month occupancy in the past five years, at 82 per cent," president for the Malaysian Association of Hotel (MAH) Penang Chapter Marco G. Battistotti said.

Accordingly, prospects for the year are looking rosy with 2011 expected to close at a 67 per cent occupancy and a record high room rate of RM240. This is despite additional room inventory this year.

As at end of last year, MAH member hotels had a total of 7,706 rooms, while up to July 2011, the rooms available touched 7,803.

These, Battistotti said, are the best numbers since the association started tabulating the statistics.

While occupancy is in fact similar to that achieved in 2006, ARR at that time was only at RM178.

MAH members in Penang represent 80 per cent of the available hotels in the state.

"This positive trend could continue in 2012," Battistotti told Business Times.

Battistotti, who said hotels on the mainland tend to have better rates as there are fewer players, divides Penang island into two sectors.

Hotels located within Gurney Drive to Bayan Lepas are considered city hotels and those located within the Tanjung Bunga and Burau Bay as beach hotels.

City hotels tend to generally have 65 per cent corporate crowd and 35 per cent leisure, while beach hotels tend to have the opposite composition.

The city hotel enjoying the highest ARR is E&O Hotel at around RM540, while the highest rate garnered by a beach hotel is Shangri-La Rasa Sayang Resort & Spa.

The better performance, especially by city hotels, is attributed to support from multinational corporations and manufacturing facilities located within the Free Industrial Zone. Some 70 companies here provided 100,000 room nights last year.

The Arab market has also improved this year. They provided 89,000 room nights in the first seven months compared with 81,000 last year.

Apart from a strong corporate market and a leisure market, Penang also gets a good number of arrivals for medical tourism.

George Town's status as a Unesco World Heritage City has spurred arrivals as it has helped increase Penang's popularity.

"For the European market, heritage is a strong selling point," Battistotti said.

Indonesians and Singaporeans remain Penang's largest foreign arrivals.

A good mix of leisure, backpackers, corporate and meeting, incentive, convention and exhibition is expected to augur well for the island over the next three to four years, Battistotti said.

By Business Times

Property downgrade

PETALING JAYA: UOB Kay Hian has downgraded the local property sector due to slower residential home sales, especially in the second half of the year, coupled with an anticipated tightening of property measures.

The research house, which downgraded the sector from “overweight” to “market weight”, said in its latest note that sales launches by property developer might had slightly dampened with average take-up rates of 50% to 65% compared with 80% to 90% a year ago.

It said there could be cooling measures on the sector, namely the re-introduction of a real property gains tax (RPGT), loan-to-value cap at 70% for second mortgage and mortgage approval criteria based on net salary.

Although these measures might not have been put in place, it added that the impact had already been felt as most of the property stocks had fallen about 10% to 25% since last month and were now trading sideways.

UOB Kay Hian noted that most companies were trading at a 10% to 20% discount to their respective revised net asset value (RNAV). Selectively, the research house said it liked property developers that could still benefit from the rollout of the Economic Transformation Programme (ETP) and positive news flow from Iskandar Malaysia.

It is maintaining its “buy” calls on MRCB (target price: RM3.02) and UEM Land (target price: RM2.68). The near-term catalysts for MRCB is the contract awards for phase 1 of River of Life and clinching parcels of RRI Land in Sg Buloh by year-end.

UEM Land, as the flagship developer of Khazanah, will continue to benefit from the land price appreciation through the materialisation of Iskandar Malaysia, which is currently very much on track, according to UOB Kay Hian.

It recently downgraded Mah Sing to “hold” with a target price of RM2.51 (10% discount to RNAV) and also maintained a “hold” on SP Setia with a target price of RM4 (10% discount to RNAV).

The research outfit is currently reviewing the target price and notes that there could be further downside if the market continues to fall, given its relative premium valuation compared with its peers.

Nevertheless, UOB Kay Hian said it expected mainstream property developers' valuations to hover at between mean and one standard deviation (SD) above mean.

This healthy valuation range reflects the positives of a low mortgage rate environment (of 4%-5%), the ability to secure coveted federal landbank, potential merger and acquisition activities within the sector (for example, IJM Land and MRCB), and in the intermediate term, the positive spill-over to land prices from mega projects like the MRT lines and River of Life.

Most of the property companies in UOB Kay Hian's coverage had also experienced positive changes in their business models, which justified higher above-historical valuations, it added.

Meanwhile, a property analyst at MIDF Research said it would maintain a “neutral” call on the sector this year unless there were policy changes that would impact demand for properties, like the reintroduction of the RPGT, loan-to-value cap of 70% for second homes and approval of mortgage loans based on net salaries.

He said the current low interest rate environment with the overnight policy rate maintained at 3% was still attractive and would spur demand for properties barring any unforeseen circumstances.

By The Star

Wang-Zheng unit to buy land for RM18.5m

WANG-ZHENG Bhd (WZB) says wholly-owned subsidiary New Top Win Corp Sdn Bhd has proposed to buy an industrial land for RM18.5 million from Klang Hock Polystyrene Industries Sdn Bhd.

The 2.7ha leasehold land is located in Pelabuhan Klang, Selangor.

WZB told Bursa Malaysia that the property will be held by New Top as an investment property to be leased out.

By Business Times

Citta vendor said mulling mall sale for RM340m

KUALA LUMPUR : Citta, the newly constructed suburban mall in Ara Damansara, has been put up for sale by the owners, sources say.

"The vendor is already in talks with interested parties," a source told Business Times.

The Citta Strip Mall - 70 per cent owned by German real estate fund SEB Asset Management and 30 per cent by property developer Puncakdana Group - is said to be looking at raking between RM700 per sq ft and RM800 per sq ft.

This open air shopping mall has some 424,467 sq ft of nett lettable space which means that the mall may fetch as high as RM340 million.

Previous reports said the mall was built at a cost of RM280 million.

CB Richard Ellis (CBRE) Malaysia's managing director, Allan Soo, when contacted to confirm the sale, declined to comment. CBRE has been involved in the leasing of the property and prior to CB Richard Ellis Group, Inc signing on Regroup as its affiliate, the latter was involved in the design and concept of the mall.

Regroup was also instrumental in bringing in SEB as an investor into the retail project.

It is understood that CBRE is now handling the sale of Citta. A deal may be concluded as early as by the end of 2011.

This sale, should it be completed by the year-end, would make it possibly the tenth transaction of a retail asset in Malaysia. In recent months, there have been purchases of the East Coast Mall, Gurney Plaza extension, Klang Parade, Ipoh Parade and Seremban Parade.

Citta, which opened for business in April 2011, is currently 40 per cent occupied.

The mall covers three floors, excluding the basement and rooftop over 800 car park bays.

Tenants in the mall include Harvey Norman, MBO cinema, Pappa Rich, Chili's, Julia Gabriel, RakuZen and Anjappar Restaurant.

By Business Times

Penang catches attention of Klang Valley developers

KUALA LUMPUR: Analysts think a trend may start where Klang Valley property developers look to buy a stake in real estate companies in Penang to take advantage of the state's booming sector.

CIMB Investment Bank Bhd research head Terence Wong said this is likely to happen over time.

"This could be continuing but not in a short time. It could happen once in a year," he said.

Investing in the property market in Penang is still a solid option.

"This is because property prices in Penang are firm and almost on par with what is being offered in the Klang Valley currently," he said.

On August 29, conglomerate Sime Darby Bhd said it was buying 30 per cent of Eastern & Oriental Bhd (E&O) for RM766 million to expand its portfolio in property development and hospitality, beyond Greater Kuala Lumpur.

Having a stake in E&O will immediately give Sime Darby access to present and future property projects in Penang.

Analysts have also said that it is cheaper to gain control of a listed company with landbank in Penang than buy large chunks of land in the island.

Three Klang-Valley based developers have already ventured into Penang and launched several properties.

IJM Land Bhd has launched it RM422 million The Light Collection I & II while SP Setia Bhd has introduced its RM60 million Brooks Residences, RM230 million Reflections condominium and semi-detached schemes for its Setia Pearl Island project.

Mah Sing has launched its the first phase of its Legenda@Southbay, for RM71 million.

By Business Times

IJM Land leads property stocks lower

IJM Land Bhd fell to a one-year low, leading Malaysian property developers lower after the industry was cut to “market weight” from “overweight at UOB- Kay Hian Holdings Ltd, which said the property valuation cycle has peaked.

IJM Land slid 2.1 percent to RM2.29 at midday, set for its lowest close since Sept. 13, 2010.

UOA Development Bhd lost 1.3 percent to RM1.49 and Mah Sing Group Bhd dropped 0.9 percent to RM2.20.

SP Setia dropped 3.1 percent to RM3.50.

By Bloomberg

Sime plans two property brands

An aerial view of Seri Tanjung Pinang phase one in Tanjung Tokong. As a stake owner, Sime Darby can take part in the development project.

CONGLOMERATE Sime Darby Bhd's 30% stake purchase in niche property developer Eastern & Oriental Bhd (E&O) will allow it to build two strong property brands with different strengths.

Instead of being confined to its own landbank and property product segment, the stake purchase and three-year collaboration agreement with E&O should allow Sime Darby to gain expertise in higher-end property products, says Sime president and group chief executive Datuk Mohd Bakke Salleh in an interview.

Although the conglomerate is one of the largest property developers in Malaysia, it has traditionally focused on township development and mass housing, but its recent entry as an E&O shareholder propels it into the higher-end market as E&O specialises in creating luxury lifestyle living spaces and high-rise developments.

“With the strategic stake in E&O, we take a view that E&O's business model and culture can be pushed onto our guys, specifically for the high-end market products. Overnight, we would be involved in the development (of E&O's projects) in the country and outside,” he says.

Bakke says while one can be an active property player, the challenge lies in moving into developing high-end products, where the margins are higher.

The deal puts a process in place for Sime Darby to strengthen its expertise and capabilities for niche products, as Bakke emphasises that as opposed to building expertise from ground-up, it has instead taken an opportunity to have a piece of a developer that has already carved out a niche.

Sime Darby Property will second some of its staff to be exposed to E&O's operations and the rigours of the market place. The company is also expanding its property strength by recruiting more property employees, with two to three senior management employees as well as a new property chief.

On Aug 28, Sime Darby announced its plan to buy a 30% stake in E&O for some RM766mil. It is seeking to buy 273 million shares and 60 million irredeemable convertible secured loan stocks, amounting to 30%, from three vendors E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh Holdings Ltd.

Before the deal was announced, market talk had been rife for a while that E&O's key shareholders were looking to divest their stakes, with the market speculating that property player SP Setia Bhd was looking to buy into the former. While SP Setia dismissed such talk, the E&O shareholders were still said to be in talks with other bidders.

“The discussion period for the deal was very short as we learnt about this opportunity and jumped at it. It was about two weeks before Hari Raya,” says Bakke.

Post Sime Darby's announcement, many questioned the rationale behind Sime Darby's high premium paid for the E&O shares, which amounted to 60% at an offer price of RM2.30 per share.

However, Bakke defends the high premium paid owing to the potential upside seen in landed assets in years to come. He adds that other stakeholders in the market place have paid similar premiums for strategic stakes, only to see investee share prices more than double years later.

“A lot is dependent on value creation within the company. We are comfortable with the price and we are going in as a long-term investor,” he says.

The initial asking price of RM2.50 per share by the vendors was reduced to a final offer price of RM2.30 per share. Sime Darby estimates that the deal is a 20% discount to E&O's realisable net asset value of RM3.2bil.



Bakke adds that the value of E&O is underpinned by its management led by managing director Tham and his next in command, deputy managing director Eric Chan.

While Tham has given his commitment that he will remain with E&O for the next three years, Bakke says there is a possibility he will remain beyond that time frame. But should he decide to leave, Chan is more than capable to take over.

E&O's largest project and its prized-jewel is the 980-acre Seri Tanjung Pinang seafront development in Penang.

The Sime Darby-E&O deal effectively gives Sime Darby the opportunity to take part in the Seri Tanjung Pinang 2 project, which involves reclaiming 740 acres in Tanjung Tokong to develop two islands for mixed development projects. The project has an estimated gross development value of RM12bil.

Both parties also entered into a collaboration agreement for them to share knowledge and expertise, leverage on each other's core competencies and exploit mutually identified economic opportunities for three years.

Bakke says that mixing with other developers allows one to pick up traits from the other and extract optimal results.

When asked if Sime Darby was pressured to buy the stake in E&O, Bakke dismisses these suggestion, saying this: “There was no pressure to do the deal. I believe management should behave and act professionally (when making such decisions).”

Meanwhile, news reports earlier this week raised questions as to whether Sime Darby will be required by the Securities Commission (SC) to launch a mandatory general offer (MGO) for the remaining shares in E&O. While the Takeover Code states that an MGO is only triggered by a 33% or more change in shareholding, there are other instances in which an MGO can be required by the regulator.

According to Para 6.2 of Practice Note 9 of the Takeover Code 2010, the SC has the right to consider all surrounding circumstances to deem if control has been passed to a new party, thereby mandating the new party to launch a general offer (GO).

Among the specific criteria laid out in Para 6.2 is “the consideration for the acquisition of the voting shares” in other words, the premium to market that was paid for those shares.

Other criteria that will be looked at include changes to the composition of the board and to the business of the target company.

While the SC told StarBiz that it was examining the circumstances surrounding the transaction for any Takoever Code implications, Bakke says that Sime Darby has not been engaged in any discussions with the regulator pertaining to a GO.

As for why Sime Darby did not opt for a GO for E&O shares from the get-go, he says Sime Darby wanted to enter as a stakeholder with the right stake size to have a feel of E&O's operations.

“At an appropriate time, we will do a GO (if we think it is appropriate). Since it (E&O) is a listed company, we could not do a due diligence or a feasibility study (for the stake purchase),” he adds.

By The Star

Sime open to GO for E&O

KUALA LUMPUR: Sime Darby Bhd is open to increasing its stake and making a general offer (GO) for Eastern & Oriental Bhd (E&O) shares at the right time, having recently purchased a 30% stake in the latter at RM2.30 per share, said its president and group chief executive Datuk Mohd Bakke Salleh.


Bakke: Sime is comfortable with its stake and purchase price for E&O shares.

Bakke told StarBizWeek that Sime Darby was comfortable with its stake and purchase price of E&O shares, adding that it was the logical step for Sime Darby to take up a 30% block first, given that E&O was a listed company and it would not be able to carry out a due diligence or feasibility study on E&O.

Thus, its entry into the company with a 30% stake and the signing of a three-year collaboration agreement allowed Sime Darby to get a feel of E&O's operations and evaluate the dynamics of the working relationship, he added.

“At an appropriate time, we will consider a GO. It could happen sooner or later but that will be a business call,” he said in an interview yesterday.

When asked if a GO was ever on the cards when the deal was being discussed between Sime Darby and the three vendors, Bakke said that was never a consideration.

“Otherwise, we would have bought the three vendors' total stake. Our intention was to have a stake of below 33% (which would then trigger a mandatory general offer),” he said.

Sime Darby announced on Aug 28 that it would buy 273 million shares and 60 million irredeemable convertible secured loan stocks, or a 30% stake, for a total of RM766mil.

The RM2.30 offer price represented a 60% premium to E&O's then market price.

The vendors of the block are E&O managing director and founding member Datuk Tham Ka Hon, Tan Sri Wan Azmi Wan Hamzah and Singapore-listed GK Goh Holdings Ltd. Post-acquisition, the trio will collectively own 11.5% of E&O.

Bakke stressed that Sime Darby was comfortable with its offer price of RM2.30, which was a 60% premium to market price, as Sime Darby was going in as a long-term investor.

Aside from this, many deals have been done at a premium to market price and shareholders have been rewarded down the line due to the value creation in the company, he added. He denied that there was any pressure on Sime Darby to do the deal.

“By taking a stake, we are looking at working with a company to create synergistic benefits and value in our investment. The issue of price is (essentially) between both parties,” he added.

Firm discussions over the deal were held two weeks before Hari Raya, after deal adviser CIMB Investment Bank Bhd informed interested parties that the three vendors were looking to pare down their stakes. The initial asking price was RM2.50 per share.

Bakke said the strategic stake in E&O would allow Sime Darby to expand its property play beyond the Klang Valley and move into high-end property products.

Meanwhile, Bernama reported that Sime Darby had completed the proposed acquisition of a 30% stake in E&O. In a filing with Bursa Malaysia, Sime Darby said the completion process was implemented yesterday with settlement due on Sept 14.

By The Star

Record mall deals in Malaysia

Kuala Lumpur: The country's fascination with shopping malls have turned these properties into highly sought-after assets.

So far this year, the number of deals involving malls or retail assets has reached a record and there is a possibility that more could be announced this year, industry experts say.

At least nine deals valued at over RM2 billion have been reported in the first nine months of the year, stretching from the northern state of Penang to Johor in the south and from the west of Klang Valley to the eastern state of Pahang.

Improved consumer spending and liberalisation of the market has helped spur interest in retail assets.

As the global economic recovery continues to be shaky, Malaysia has turned to domestic demand to boost its economy, chief economist at Bank Islam Azrul Azwar Ahmad Tajudin said.

"Malaysian consumers have proven to be rather resilient even during times of crisis. During the 2009 recession, the economy contracted by 1.7 per cent but private consumption was still in positive territory," he added.

In year 2000, private consumption or consumer spending accounted for 43.8 per cent of the gross domestic product (GDP) while in 2010 the number surged to 53.3 per cent of GDP.

Azrul reckons private consumption will grow further to 54 per cent in 2011 and 54.6 per cent in 2012.

Malaysia Retailers Association has projected retail sales to grow 6 per cent this year, probably faster than the broader economic expansion seen at 5-6 per cent.

CB Richard Ellis (CBRE) Malaysia's managing director Allan Soo expects a few more deals this year.

"REITs (real estate investment trusts) tend to look for both yield accretion and steady income streams. Retail assets here have a great accretion opportunity at the moment.

"Passing yields at acquisitions are mostly at 7 per cent but for trophy assets this may be pressured down to below 6 per cent. The pressure on yields results in higher valuations, so on a per sq ft basis, malls are now seeing better valuation than about five years ago," Soo said.

At the same time, higher valuations have triggered previously less willing owners to part with their assets.

Another major factor was Malaysia's decision to scrap a rule that required foreign investors to have a 30 per cent Bumiputera partner.

In addition, the Securities Commission's endorsement of REITs as an investment alternative have also helped.

In January this year, CapitaMalls Malaysia Trusts (CMMT) said it would be buying The Gurney Plaza extension in Penang for RM215 million and in June it announced that it would be buying East Coast Mall for RM310 million.

In May, ARA Asia Dragon Fund won the bid for three shopping complexes - Klang Parade in Selangor, Ipoh Parade in Perak and Seremban Parade in Negri Sembilan. It paid some RM450 million to TMW Asia Property Fund, which had bought the malls for RM340 million in 2005.

Meanwhile, Adzman Shah Mohd Ariffin, founder of Hektar Property Services Sdn Bhd agreed that for some owners, a sale is actually part of their exit strategy to cash out.

"At the same time, foreign purchasers have found that the land/ownership law is more straightforward and properties in Malaysia are still cheaper than in other countries although at lower returns at times," he said.

This week, we also received news that Bandar Raya Developments Bhd (BRDB)'s major shareholder Ambang Sehati Sdn Bhd, controlled by its chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, had offered to buy three retail assets belonging to BRDB.

The properties are The Bangsar Shopping Centre (BSC), CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor.

BRDB is believed to have received many offers for its trophy asset - BSC.

By Business Times

Whither retail space?

Night view of the beautiful and unique Sunway Giza.

PROPERTY developers might have a problem filling their up-and-coming malls with prospective tenants given the shaky global economy and cautious consumer sentiment currently.

This situation is compounded by the fact that Malaysia has an oversupply of retail space.



“Retail supply is growing despite the economic slowdown. Developers in all parts of Malaysia are still planning and building shopping centres,” says Henry Butcher Retail managing director Tan Hai Hsin.


Tan: ‘Retail supply is growing despite the economic slowdown.’

According to him, total retail space for Klang Valley in 2010 is at 49 million sq ft. For this year, it is expected to increase by 3.5 million sq feet, with an expected 50 to 60 new shopping centres expected to be built in Malaysia.

“In general, there is an oversupply of retail space throughout the country,” he says, adding that the greatest challenge for shopping centres today is not about themes or concepts, but rather, market saturation.

“There is too much retail space chasing the same customers. For the last four years, new shopping centres in Malaysia are finding difficulty to fill up upon opening.”

Tan says that many shopping centres are also finding it difficult to get the right anchor tenants.

“Yet at the same time, many developers are still planning for shopping centres throughout the country,” he says.

According to the National Property Information Centre's (Napic) property market report 2010, the retail market continued to record substantial amount of take-up at 268,027 sq m (2009: 269,504 sq m).

With the exception of Kedah (-11,545 sq m) and Pahang (-11,349 sq m), all other states registered positive take-up. Kedah and Pahang registered negative take-up as both had anchor tenant exit from one of their shopping complexes.

Malacca had the highest take-up space of 92,880 sq m. Selangor and Johor trailed with 48,916 sq m and 34,977 sq m respectively.

The national occupancy rate reduced marginally to 80.2% compared with 81.5% achieved in the previous year. This was partially due to the lower occupancy rate attained by the new completions at 38.0% (2009: 55.9%).

Eight states achieved occupancy rates above the national average including Kuala Lumpur and Selangor. As at year-end 2010, the country had nearly 2.09 million sq m of space available for occupation.

Construction activity continued to soften as depicted by lower construction starts at -2.3% against 2009. There were 28 buildings from 11 states commencing construction with a combined retail space of 420,255 sq m. New building plan approvals decreased by 57.6% from 2009.

However, 2010 witnessed more completions against 2009. The completions were recorded in 13 states including Putrajaya. A total of 501,106 sq m of new retail space came on-stream, bringing up the country's total existing space to 10.59 million sq m.

Among the major completions were Malacca's Aeon Jaya Jusco, Econsave Hypermarket and Tesco Extra which offered a combined space of 74,152 sq m. Sabah saw the entrance of Suria Sabah in Kota Kinabalu, Mega Long in Penampang and Keningau Mall with a combined 72,516 sq m of retail space.

In Penang are 1st Avenue and Straits Quay Mall with a combined space of 126,026 sq m.

The future supply was ample with 94 complexes (1.73 million sq m) incoming and 65 complexes (1.65 million sq m) in the pipeline.


Fernandez does not expect prices to shoot up any time soon.

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez says that despite the oversupply of retail space in Malaysia, average prime, ground floor rental rates of downtown shopping centres (namely Suria KLCC and Pavilion in Kuala Lumpur) and suburban shopping centres (Mid Valley in Kuala Lumpur, 1Utama and Sunway Pyramid in Selangor) have been holding steady.

He noted that even during the global economic crisis, rates remained fairly steady.

“Rent for average prime, ground floor space at downtown and suburban shopping centres are currently averaging RM50 to RM60 per sq ft and RM30 to RM35 per sq ft respectively.”

Fernandez says he does not expect prices to shoot up any time soon given the volatility of the global economy.

Stable consumer spending and good tourism levels have managed to help keep retail rates stable, he says.

Fernandez says that with the “summer” period over, the influx of tourists into Malaysia will decline in the coming months.



An analyst says the economic crises currently looming over the United States and Europe could affect tourist arrivals from that region.

“Their spending power will be curbed. For those who do have the money to travel, they may hold back on their long-distance travels,” he says.

Tan points out that the current world debt crisis is worrying and that it is affecting the Malaysian economy.

“Consumers' confident level is not high. Malaysian consumers are cautious in spending.”

Credit Suisse AG recently cut its real gross domestic product (GDP) 2011 growth forecast for Malaysia to 4.6% from 5.3%, in light of the West teetering on the brink of recession, especially with large parts of Asia remaining highly susceptible to growth developments in the United States and Europe.

Tan says consumer spending has also been curbed due to price inflation.

“Many things, from basic necessities to eating in restaurants, are more expensive than last year. But most of us are still earning the same salaries. We are paying more for the same things. Thus, we are buying fewer things than last year.

“Weak consumption will continue to slow down expansion plans of existing retailers and deter new retail entrepreneurs from entering the competitive market. This will, therefore, affect occupancy rate and rental growth of shopping centres.”

With the oversupply problem and cautious consumer sentiment, Tan says older malls would need to “refresh” themselves in order to compete better.

“They need to undertake refurbishments or even redevelopment. There are several examples. Ue3 turned into Viva Home with a higher occupancy rate. KL Plaza became the refreshing Farenheit 88. Other old shopping centres such as Atria and Jaya shopping centre are also now going for re-development.”

Tan says the local retail sector is still slated for positive growth this year.

“For the first quarter of 2011, the Malaysian retail industry recorded a moderate growth rate of 5.1% in sales compared with the same period in 2010. For the second quarter of this year, we are estimating retail industry to grow by 7%.

“For the whole year, we are projecting a growth rate of 6% or a sale value of RM81.6bil,” he says.

By The Star

Two big questions for BRDB

A file photo shows BDRB’s Bangsar Shopping Centre.

Two big questions are yet to be answered in Bandar Raya Development Bhd's (BRDB) recently announced related-party transaction. At what price the key assets will be sold to Ambang Sehati Sdn Bhd and what management plans to do with the cash proceeds from the proposed disposal.

A few days ago, it was announced that BRDB's major shareholder, Ambang Sehati, had proposed to acquire selected investment assets to “enable the group to monetise these assets and achieve a more efficient utilisation of its capital”.

Ambang Sehati is the private vehicle of BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who owns 18.8% of BRDB. The assets essentially include the Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall.

BRDB said the purchase consideration would be based on fair value that would be determined by independent valuers. BRDB has up to Sept 19 to revert with its decision. This acquisition will be paid fully by cash.

According to BRDB's 2010 annual report, the carrying value for Bangsar Shopping Centre and Menara BRDB is RM660mil while Cap-Square Retail Centre and Permas Jusco Mall are valued at RM214mil and RM68mil, respectively.

The jewel of the assets would be Bangsar Shopping Centre, which is located in the prime Bangsar area and has a net lettable area of 330,000 sq ft.

Bangsar Shopping Centre is currently almost fully occupied with average rental rates of about RM10 per sq ft. On the other hand, activity in CapSquare has much room for improvement and is relatively quiet after office hours.

“Only the food and beverage (F&B) area is doing okay. The mall isn't exactly bustling with activity. Selling it off may be a good idea,” says a property analyst.

He says that based on estimates, the four properties would fetch a value of about RM960mil, with Bangsar Shopping Centre accounting for 64% of that, valuing it at RM594mil (or RM1,800 per sq ft).

Currently, the group has a net gearing of about 0.4 times with total borrowings in the region of RM780mil. The bulk of the debt is tied to its CapSquare development.

The group could have excess cash of RM120mil to RM150mil, or 25 sen to 30 sen per share, after paying off its outstanding debt, says the analyst.

He does not think rewarding shareholders with bumper dividends are right at this point.

“Apart from reducing its gearing, we think the group would be better off deploying the cash for its property development, either for landbanking or to fund its future development.

“BRDB is not as aggressive as other developers in developing its properties and land bank. Without Bangsar Shopping Centre, earnings may not be as stable,” he adds.

An industry observer says BRDB may be doing the right thing by disposing of Bangsar Shopping Centre and the other retail outlets.

“Are the returns from these outlets actually attractive? Earnings-wise, it is only delivering some 20% to operating profits. This is low when compared to the amount of capital expenditure and debt the company is taking up.

“Also, when I walk into Bangsar Shopping Centre, it is the F&B segment which is doing well. If Bangsar Shopping Centre continues to charge rentals at a premium, how will the normal retail tenants be able to survive?” asks the observer.

In 2008, BRDB was reported to have invested RM250mil to upgrade Bangsar Shopping Centre. The renovation was completed in 2009.

Another property analyst says much depends on what BRDB does with the cashpile it receives from the sale of the properties.

“Bangsar Shopping Centre now provides stable earnings. Selling it off will only yield a one-time dividend. However, what happens after that? Management needs to use the cash proceeds wisely,” he says.

Meanwhile, an AmResearch analyst says that BRDB's latest project, Verdana North Kiara condominum, has been well received, with take-up rates averaging 70%-80% for the first phase.

There are two blocks with 250 units on offer at an average selling price of RM600 per sq ft. The price represents an 8% discount to the ongoing rate at its neighbouring Mont Kiara of about RM650 per sq ft. Verdana has a gross development value (GDV) of some RM600mil.

BRDB has another condo development in Bangsar with a GDV of some RM900mil which will likely be launched next year.

“Timing-wise, BRDB has been a little slow. It should have launched its products earlier this year when demand was extremely hot,” says the property analyst.

At present, BRDB has a joint venture with Multi-Purpose Holdings Bhd (MPHB). It is centred on developing 268ha in Mimaland (Gombak), Rawang and Penang with an estimated GDV of RM4.25bil after 2012.

Last November, BRDB signed supplemental agreements with UEM Land Bhd, the master developer of Nusajaya, to buy a 60% stake in a special-purpose vehicle used for the development of Residential North in Puteri Harbour.

The project, on a 111-acre freehold parcel, is expected to be completed in six phases over seven years. The expected GDV is RM2.3bil.

For its quarter ended June 30, BRDB's revenue stood at RM198.9mil, of which RM152.05mil came from property development while RM28.25mil was generated from property investment.

Operating profit derived from the two divisions was RM31.02mil and RM10.62mil, respectively.

For its financial year ended Dec 31, 2010, revenue dropped 31% to RM626.21mil as the group came to the completion on a number of different projects.

Net profit, however, improved 8.7% to RM125.6mil as its property and wood-based divisions were mitigated by higher rental income and fair value gains from investment properties.

By The Star

If it helps rein in soaring house prices, why not?

A proposal by Bank Negara Malaysia to change the way mortgages are calculated is excellent. It will greatly reduce the amount the public can borrow.

More than three years ago, my wife and I missed a chance to own our dream double-storey terrace house in Bangi. The price was about RM230,000 or RM217,000 after a 7 per cent rebate for Bumiputeras.

That house was under the first phase of a new township, whose units were snapped up within hours. A few months later, the second phase was launched, and the units under it, with slight upgrades from the previous phase, started from well over RM300,000 and were literally sold out too within hours.

I don't know exactly how the price for a more or less similar product had risen dramatically within a short span. My guts told me that it was due to a combination of the developer's reputation and quality and great demand for new houses in Bangi. Or perhaps, it's because of expectations (read speculation)?

Some observers said property rides on expectations. If people expect prices to go up in a foreseeable future, many may find out that properties will forever be out of their reach. Indeed, property prices in Malaysia have never eased during the past few years. As it stands today, the affordability ratio has gone through the roof.

A survey done by a publication on housing affordability saw property prices increasing from 5.9x income in 1989 to 10.9x in 2010. Left unchecked, it will soon climb to 15x your annual income.

It is also reported that the household debt-to-GDP (gross domestic product) ratio in the country has reached nearly 76 per cent, which is on the high side compared with our counterparts in Southeast Asia.

Hence, a proposal by Bank Negara Malaysia to change the way mortgages are calculated is excellent. It will greatly reduce the amount the public can borrow. The computation is supposed to be based on net income, and not gross income. That could reduce the amount that can be borrowed between 14 per cent and 37 per cent, according to a research house.

Certain parties can sigh and whine, but such proposal is a belated move to curb rising household debt. Yes, there could be an impact on the demand for affordable properties priced between RM100,000 and RM300,000. Yes, there could be slower take-up rate from the low- and middle-income segments that will result in the long run, slower delivery of affordable housing projects. And yes, ordinary wage earners could be affected more than the high-income segment.

But any good move to nip the household debt in the bud should be lauded. In other words, any good move to cool down soaring housing prices (and credit card loans) must be supported.

By Business Times

Utusan unit in property development JV

KUALA LUMPUR: Utusan Melayu (M) Bhd's wholly-owned subsidiary Juasa Holdings Sdn Bhd has entered into a joint-venture agreement with Insan Tiara Sdn Bhd to develop a RM6.8bil land in Kuala Lumpur into a mixed commercial industrial project.

Utusan said the completion of the project, consisting an eight-storey building with sub-basement and two floors of car park, shall be within four years from the delivery of vacant possession of the property with a further extension of two years.

By Bernama

Sime's planned E&O purchase gets analysts' thumbs up

KUALA LUMPUR: Sime Darby Bhd's planned purchase of a 30 per cent stake in Eastern & Oriental Bhd (E&O) last week will revive its flagging property business and also give it exposure to the Penang and Johor markets, analysts said.

For JP Morgan, the deal signals a more aggressive strategy from management to improve the property division.

"Sime's property division has generally been viewed as lacking push or not as aggressive as the purer developers.

"As it is, in the recently announced 2011 results, the property division was the underperformer with a 7 per cent year-on-year contraction in profits due to delays in obtaining approval for launches," it said in a research report.

Deutsche Bank AG said Sime is not present in the Penang property market currently and the deal would allow collaboration to enhance its property business in the long run.

Analyst Eltricia Foong said property development is estimated to account for 7 per cent of Sime Darby's 2012 operating profit.

"We reiterate our hold recommendation on Sime shares with a target price of RM9.30," the analyst said, adding that funding should not be a worry given its solid balance sheet and its recent RM690 million fabrication yard sale.

Sime Darby has proposed to buy the 30 per cent stake last week for RM766 million.

In Johor, E&O has a joint venture with Khazanah Nasional Bhd and Singapore's Temasek to develop a 84ha wellness township.

By Business Times