Bolton launching projects worth RM3b

Market-listed property developer, Bolton Bhd, will be launching projects with a gross development value (GDV) of RM3 billion over the next 12 months.

Executive Director Chan Wing Kwong said for the current financial year ending March 31, 2012, the group has three projects to be launched with a total GDV of RM1 billion.

"We have also received preliminary approval for our proposed revision to the development plan of the 1.74 hectare Jalan Mayang land in the KLCC area, which we plan to launch next year," he told reporters after the group Annual General Meeting here, today.

He said the project will be a mixed commercial development with an estimated GDV of RM1.8 billion.

Chan said the group is still considering more land acquisitions while looking for potential joint venture development opportunities.

"We have to continue to push the envelope in terms of creativity and innovation with regard to product range, marketing strategy, business development and customer service," he added.

For the financial year ended March 31, 2010, the group posted a lower pre-tax profit of RM20.3 million as compared to RM50.7 million previously, while revenue was down to RM243.8 million from RM257.5 million.

The decline in pre-tax profit was due to one-off charges, namely, the mark-to-market losses on quoted securities of RM6.5 million and higher marketing expenses of RM17.6 million incurred due to the record sales performance achieved during the year.

Bolton's Executive Chairman Datuk Azman Yahya considers the lower earnings to be an anomaly, as when the group begins to deliver on its projects, it will be reaping the benefit of higher profits.

"Our comprehensive income for the year was RM31.8 million. Of equal importance is that we amassed RM64 million cash from our operation, which put us in a firm position to sustain our growth plan," he said.

The group recorded RM586 million in sales, the highest in its 47-year history, representing a 125 per cent increase over the RM260 million achieved in the last financial year, with unbilled sales of RM484.6 million as at March 31, 2011.

By Bernama

Bandar Raya's asset sale may face shareholder hurdle

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) may have a tough time convincing minority shareholders to approve a major asset sale as the offer was below book value and it is not using the bulk of the proceeds to replenish land.

On Monday, BRDB agreed to accept a RM914 million offer from major shareholder Ambang Sehati Sdn Bhd to buy four properties from the group. The assets have a book value of RM942 million.

"For BRDB to monetise their assets, it is fine to sell if the price is right or at attractive levels. But we think it might be tough for BRDB to get its minority shareholders to approve the deal," an analyst with OSK Investment Bank told Business Times.

Ambang Sehati is buying CapSquare Retail Centre, Permas Jusco Mall and all of BR Property Holdings Sdn Bhd, which owns Bangsar Shopping Centre (BSC) and Menara BRDB.

Ambang Sehati, which owns 18.8 per cent of BRDB, is controlled by Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, who is chairman of the property firm.

It proposes to pay a preliminary cash payment of RM430 million and assume RM484 million in liabilities related to BSC and Menara BRDB.

Following the proposed disposal, BRDB plans to distribute RM390 million from the assets sale to shareholders via a net cash dividend of 80 sen apiece, and use RM302 million to pare down debt.

AmResearch thinks the money could have been put to better use.

"While the proposed dividends are attractive for minority shareholders, we believe the cash proceeds are better off deployed for landbanking purposes or to fund its future developments, especially when its property development unit has been lacklustre due to delay in launches," it said in a report.

OSK has downgraded BRDB from "buy" to "trading buy" and increased the target price from RM3.06 to RM3.14 effective yesterday, taking into account the special dividend.

AmResearch, meanwhile, is reaffirming its "hold" rating on BRDB with fair value unchanged at RM2.45 a share.

Shares of BRDB fell 14 sen to close at RM2.24 yesterday.

By Business Times

China boost for affordable homes

BEIJING: Chinese Premier Wen Jiabao pledges to allocate more government funds to build cheap homes for low-income households and urges banks to lend more for the construction of state-subsidised housing.

China has built 8.68 million units of homes for rental or sale to poor families as of the end of August this year, putting it on track to fulfil its full-year goal of 10 million homes.

“We have made good achievements in affordable housing construction in recent years,” Wen told a cabinet meeting on Monday.

By Reuters

US housing starts slow in August

US housing starts fell in August for a second straight month, another sign of the weakness of the American economy, the US Department of Commerce said Tuesday.

Builders started new homes at an annual pace of 571,000 units, down from 601,000 in July and 615,000 in May. It was also slightly lower than the pace for the first half of the year.

However, in a promising sign -- though from a less reliable indicator of the economy's health -- building permits issued in August jumped to an annual rate of 620,000, up from 601,000 in July and 606,000 in June, the department said.

The construction industry, one of the key pillars of the economy, has remained in a deep slump since the 2008-2009 recession, with ultra-low interest rates failing to give a boost to the sector.

By AFP

Bandar Raya accepts offer

Upon completion of the RM914 million deal, BRDB is also proposing to pay RM390.12 million or 80 sen a share as cash dividend to shareholders

Kuala Lumpur: Bandar Raya Developments Bhd (BRDB)'s board of directors have accepted an offer from Ambang Sehati Sdn Bhd to acquire some of its assets and liabilities in a deal valued at RM914 million.

Upon completion of the deal, BRDB is also proposing to pay RM390.12 million or 80 sen a share as cash dividend to shareholders, upon receiving the cash from Ambang Sehati.

Early this month, the BRDB board hired CIMB Investment Bank to evaluate the deal.

Ambang Sehati is 26 per cent-controlled by BRDB's chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz. Moiz also has an 18.8 per cent stake in BRDB.

"This was an unsolicited offer. We did receive offers from other parties before but there was nothing serious on the table. After weighing the offer from Ambang Sehati against what is happening in the market, we found it a very interesting deal," said BRDB's chief executive officer Datuk Jagan Sabapathy.

Speaking to newsmen after the close of the stock market yesterday, Jagan said the board's decision took into account the advice and opinion of its main adviser CIMB and independent adviser Public Investment Bank Bhd.

By Business Times

BRDB to sell commercial assets for RM914mil, pay special dividend

KUALA LUMPUR: Bandar Raya Developments Bhd (BRDB) has accepted Ambang Sehati Sdn Bhd's offer for the proposed acquisition of BR Property Holdings Sdn Bhd, which owns Bangsar Shopping Centre, Menara BRDB, CapSquare Retail Centre and Permas Jusco Mall for a total indicative value of RM914mil, subject to shareholders' approval.

With the proposed disposal, the board proposes to pay a special dividend of 80 sen net per share or RM390mil.

As Ambang Sehati will acquire all the assets and liabilities of BR Property, this deal will see BRDB netting RM430mil in cash and the repayment of RM430mil in borrowings and dividends from BR Property to BRDB.

Thus, BRDB will receive a total cash amount of RM860mil. Of this, BRDB plans to reduce its borrowings by RM320mil, pay out RM390mil for the special dividend and use the remaining RM168mil for working capital.

BRDB's borrowings will drop from 0.71 times to 0.38 times, or from approximately RM1bil to RM248mil.

The combined indicative value of RM914mil is marked to market as of Sept 1, 2011, and is also based on an initial yield of 6% for retail assets and 6.5% for the offices. The total capital expenditure is approximately RM572.7mil.

“I must emphasise that this was totally an unsolicited deal. It is worthwhile, reasonable and makes sense,” said BRDB chief executive officer Datuk Jagan Sabapathy.

“When someone offers us a deal at a yield of about 6%, that is a ballpark figure, and we have to look at it.

“A lower yield means a higher selling price, which is good for us. At this price and this yield, it is fair. We get to sell our assets at 6% yield, while most people do it at 7%.”

He added that the board had not conducted an open tender exercise to dispose of the assets as this might negatively impact the smooth operations of the retail centres.

Additionally, there is the risk that the offer may be withdrawn by Ambang Sehati upon expiry of the accceptance date, keeping in mind current economic uncertainties.

“There has been mischief chatter' about us receiving offers for the proposed assets. However no one has come to give us a serious offer for our assets in the last two weeks.

“Now, we have Ambang Sehati coming to buy our four assets collectively, and they are taking the bright stars and the not-so-bright stars lock, stock and barrel,” said Jagan.

“With this proposal, we get to reduce our debt, and now we have working capital. If people are really saying that the economy is slowing down, then isn't it better for me to reduce my gearing level?” said Jagan, adding that that the office market and the retail rental market were softening.

At present, the investment properties division contributes some 5% to total revenue of BRDB's property segment. Jagan said BRDB was not looking to buy another investment property, and would be more focused on land-bank.

“If you notice, it has been the pure property players such as SP Setia, Mah Sing and IJM Land, that have done very well.

“The mixed-bag players like us have seen our share price languishing pretty much at the RM2 level,” he said.

BRDB's independent non-executive director, T Vijeyaratnam, said even without the steady contribution from its investment properties, this did not mean that BRDB's earnings in the coming years would be further reduced.

“In the next two years, BRDB will start recognising earnings from our projects, Verdana in North Kiara, BluWater in The Mines, Medang Serai in Bangsar and The Straits View Residences in Johor,” said Vijeyaratnam.

Ambang Sehati is controlled by BRDB chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz. 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 profits derived from the two divisions were 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 of 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

Bandar Raya gains on malls sale plan

Bandar Raya Developments Bhd rose to its highest level in almost two weeks after saying it will sell its office and malls for RM430 million and give part of the proceeds to shareholders via a cash dividend.

The stock gained 2.5 percent to RM2.44 at 9:04 a.m. local time in Kuala Lumpur trading, set for its highest close since Sept. 8.

By Bloomberg

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