FIABCI'S MALAYSIA PROPERTY AWARD 2007
PROPERTY MAN OF THE YEAR:
Tan Sri Liew Kee Sin, group MD and CEO of S P Setia Bhd
BEST MASTER PLAN:
Sentul West & Sentul East, YTL Land & Development Bhd
BEST RESIDENTIAL DEVELOPMENT (HIGH RISE):
Stonor Park, Beneton Properties Sdn Bhd
BEST RESIDENTIAL DEVELOPMENT (LOW RISE):
Pinggiran Bayou Village, Leisure Farm Corporation Sdn Bhd
BEST RESORT DEVELOPMENT:
Genting Highlands Resort, Resorts World Bhd
BEST RETAIL DEVELOPMENT:
KB Mall, YS Tang Holdings Sdn Bhd
SPECIALISED PROJECT:
Sultan Abdul Aziz Royal Gallery, Laurent Lim Architect
SPECIALISED PROJECT:
Persada Johor Interntional Convention Centre
SPECIAL AWARD FOR NATIONAL CONTRIBUTION:
The Kuala Lumpur Performing Arts Centre, YTL Corp Bhd
Monday, November 5, 2007
Wealth creation: Equities or real estate?
The stock market or property? That was the question Phillip Capital Management's Ang Kok Heng asked during The Edge Investment Forum on Real Estate 2007.
"Shares and properties are both excellent assets for wealth creation. Many make their first million from them," says Ang. But which is better?
The difference between the two is that equity investment could be stock specific, while real estate investment could be location specific. And despite the fairly good returns from both investments, equities are more volatile whereas real estate investments are more stable.
Ang tells of several benefits of equity and property investments [see table]. He says equities are good for beginners as they can start with a small amount. Those looking at equities should take note of growth stocks as they provide excellent capital gain. Share prices of growth stocks appreciate over time due to expanding business, says Ang.
If one were to look at property investment, it is important to invest in properties in growth areas. "Well-located properties appreciate more as they have better amenities and accessibility. Furthermore, supply of land in good location is limited," says Ang. Increased economic activities will also enhance demand.
"Both stocks and property have good and bad points... to say that one has a higher risk than the other is not right as the nature of investment is different.
"If we define risk as volatility, then equity investment has higher risk. In the case of value at risk, property investment could be riskier if bank financing is taken into consideration."
Ang suggests that those who are younger may want to look at equities as properties require a larger amount of investment and are more suited to those who have accumulated some wealth. Start with equities before venturing into properties, he says.
At the end of the day, he says both equities and properties are good investments. The only way to make money is to equip yourself with adequate knowledge — you must know what and when to buy and which investment to shun. Knowledge allows us to manage our risk and avoid bad investment.
Ang himself was a late starter in property investment, having only started 10 years ago and now he feels that it is good to invest in both. "If you can, a 50/50 breakdown would be ideal. But this again boils down to the amount of knowledge a person has."
Ang: A 50/50 breakdown is ideal
A word of advice from Ang: "If you are a staunch believer of the stock market, do take a look at properties too. If you are a 'property man', you need to spice up your investment by adding equities into your portfolio."
By The EDGE MALAYSIA
Telling the Malaysian story
Property prices have been climbing, especially in the high-end housing sub-sector. Is there more upside to residential property investment? The answer is a resounding "yes" from panel speakers at The Edge Investment Forum on Real Estate 2007 held on Oct 27. About 500 turned up for the half-day forum. In fact, the party has just begun. To quote one of the three panellists: "The party planner had just started to plan." The panellists comprised Datuk Richard Fong, executive vice-chairman of Glomac Bhd and current Fiabci Malaysia (International Real Estate Federation) president; Lai Voon Hon, president and CEO of Ireka Development Management and Previndran Singhe, CEO of Zerin Properties. The session on whether Malaysian real estate was underpriced was moderated by Kumar Tharmalingam, regional president of Fiabci Asia-Pacific. The consensus from the three-member panellist was that the local property market has "at least another five good years to go" and that Malaysia's real estate is indeed underpriced. Several factors are responsible for this upbeat mood, the panel members share. Among them are the low interest rates, sustained growth in employment and wages, a young population and urbanisation, plus the government's efforts in promoting tourism. On top of these, Malaysia has also been on the radar screen of foreign institutional investors. It is one of Kuwait Finance House's "property picks" while Credit Suisse expects Malaysian properties to experience "property asset appreciation". The bottom line with Malaysia and the rest of Asia is that properties still offer good value. On whether Malaysian properties are underpriced, Fong tells the amused crowd: "I'm a property developer. Of course, I'll tell you we're underpriced." Fong, who opened the discussion, says it really depends on how one looked at Malaysia. "We may think prices are high but, if we compare ourselves to Singapore, we're dirt cheap." In Singapore, a high-end condominium on Orchard Road is tagged at S$4,000 (about RM9,206) psf. But in Malaysia, Fong says, you pay only 10% of that (Singapore price) for a luxury condo in the Kuala Lumpur City Centre (KLCC). Besides, the KLCC condos offer world-class standards and designs as many developers now use foreign architects for their projects. According to Fong, Malaysia is also one of the few countries in the world where commercial properties are cheaper than residential. He cites Glomac's new office development located at the junctions of Jalan P Ramlee and Jalan Pinang. Its Grade A building will be priced at RM1,200 psf, setting a new record for office buildings in KLCC. Ireka's Lai couldn't agree more. Capital values of Grade A office buildings in KL are less than 10% of that in Hong Kong. "Even Ho Chi Minh City is higher than us", says Lai. Ireka has a presence in Vietnam. It is not surprising then that foreign funds make up 23% of the total investment in KL's office space, says Zerin's Previndran. "The boom started sometime at end-2002 after the SARS (severe acute respiratory syndrome) outbreak ended. That's when Malaysia started seeing foreign investors coming in through institutional funds. They started looking at Grade A offices in the Klang Valley and are paying top dollar for them. It's the people behind these funds who are also investing personally in the residential market," says Previndran. Rock bottom prices "The foreigners are buying because we are so cheap. To me, there is no downside and prices can only go up. It's just a matter of time before we catch up with the region," says Fong. "With land costs going up, our prices are really value for money," echoes Lai. He sees foreign confidence growing in Malaysia's real estate, saying the local market should not hope for prices to go any cheaper. "We are at rock bottom already and contractors can't continue building if it's any cheaper." A bullish Fong says the market is only starting to move, with many foreigners like the Arabs and even Singaporeans beginning to invest in Malaysia. "They are looking at diversifying their wealth by investing in somewhere cheaper because prices are at a record high elsewhere in the region." Lai notes that there were many astute investors who preferred to put their money in different countries. Malaysia is proving attractive because of its potential for capital gain. The government's liberalisation of the economy — introducing several incentives to boost the property sector — has also augured well for the industry. "The government has shown that it is serious in wanting to promote Malaysian properties overseas. It has given a RM50 million grant and is seeking Fiabci's help to do so," says Fong. He feels that as long as the liberal policies continue with more foreign direct investments, the market will remain buoyant. All three panellists agree that the suspension of the Real Property Gains Tax has helped boost market sentiments, with more foreigners looking our way. Lai says such policies show that the government is outward looking. Talking numbers Based on Ireka's case studies, he says Ireka's projects in Mont'Kiara enjoy a return of equity of between 18% and 23% per annum (see table). "Which bank will give you that kind of interest?" Lai believes the currency exchange rate also had something to do with Malaysia being attractive. "From a foreigner's perspective, the ringgit is undervalued and there is huge potential for the ringgit to appreciate." Data by Zerin Properties showed that in July this year, 5,613 high-end condos were sold with 31% of the transactions involving foreigners. This works out to 1,700 units being retailed to foreigners. According to Previndran, the sales were concentrated mainly in the KLCC area. "It's a fact that KLCC is popular because these foreigners can relate to city living, coming from big cities themselves. The numbers show that there is definitely investor demand. "How much can one invest in Singapore? Besides KLCC, we have other places to offer foreigners. I think KL could be the next property play after Hong Kong and Singapore," says Previndran. On yields, Fong says Malaysian real estate still enjoys good returns. "The days of 8% to 9% yields are gone. A 5% yield is considered very reasonable today." The numbers show that there is still a lot of room for yield compression, adds Lai. What and where are the foreigners buying? Without a doubt, the Klang Valley continues to be the main attraction. The Mont'Kiara/Hartamas address was a favourite with the panellists, with Fong and Previndran also highlighting Bangsar/Damansara Heights. Fong also picked KLCC while Previndran feels Ampang Hilir showed much potential. Lai agrees that KLCC and its vicinity remain hot, as is the U-Thant/Embassy Row area. Outside the Klang Valley, both Lai and Previndran say places to watch will be those in Sabah. According to Previndran, one of Sabah's latest properties called Kudat Riviera had its launch in the UK only and is sold out. "There is a good MM2H (Malaysia My Second Home) following in Penang, coupled with a thriving hospitality industry. The first Hard Rock Hotel is going to be built there," says Previndran. On Johor, he says the Iskandar Development Region is attracting great interest and it is a "location in waiting". He feels that the airline price war between the low-cost carriers (LCC) is also contributing to the popularity of other destinations outside the Klang Valley. Property destination Fong reasons that a lot has to do with supply and demand, coupled with consumer power and the average Malaysian income. "I feel that Malaysia has not reached the sophistication of other cities like Singapore, Shanghai and Hong Kong. At the moment, we're like a 'jaguh kampung'. "We have to build our image and create awareness because many still don't know how easy it is for foreigners to own property in Malaysia," he says. Fong's sentiments are echoed by Lai who thinks that Malaysia needs to be promoted as an international property destination. Previndran says it all has to do with marketing and the government should also look into the efficiency of the civil service delivery system. The Malaysian story needs to be told. By The EDGE MALAYSIA
Fong says there is no doubt that KLCC remains a magnet for foreigners because they can identify with the area. From Glomac's experience with Suria Stonor, a high-end condominium coming up there, the market is attracting a lot of Arabs.
Previndran says the country's political stability is also a plus factor. "We are transparent in our dealings and the only reason Singapore is hotter than us is that our transactions take longer to process."
In Lai's opinion, several causes are driving the property market here. These include capital value, rental yield and capital gain. Besides, Malaysia's currency exchange, economy and demographics have also a role to play, he says.
All three agreed that high-end residences are the draw in the market for foreigners. Apart from the luxury condos in KLCC, resort and holiday homes are also getting popular, says Lai. He also sees potential in offices in prime areas and retail and shopping centres through the REIT (real estate investment trust) market.
Elsewhere, Lai feels Langkawi and the east coast of the peninsula are places to watch, while Previndran believes Penang and Johor will be popular.
While we are reeling in the foreigners because we are cheap, Kumar asks a pertinent question: "Why are we cheap? Is there 'something wrong' with our market?"
Mont'Kiara: The real estate success story
Kuala Lumpur's exclusive enclave of Mont'Kiara may be an obvious property hotbed, but is there too much happening too soon there? "No" is the response of two of the location's key players — Datuk Alan Tong of Bukit Kiara Properties and Datuk Michael Yam of Sunrise Bhd — and they explain why. Mont' Kiara today has gained the critical mass to continue to prosper. Add to that the limited supply of vacant land that puts a natural limit on future supply - Tong Sunrise's Yam says the escalating cost of building materials will likely further push up prices. "Within a period of 12 months from last January, steel bar prices have risen by more than 14% and ready-mix concrete prices by 13.8%. Construction costs have gone up over the years; in 1998 it was RM150 psf but now, it is an average of RM300 psf," said Yam who added that, last year, Malaysian property prices were similar to Bangkok but cheaper than Singapore. Rising values Tong recalls how the first Sunrise project, Mont'Kiara Pines, completed in 1993, was sold at an average of RM190 psf, with subsequent launches of Mont'Kiara Palma at RM210 psf and then Mont'Kiara Pelangi at RM230 psf. The latest Sunrise product, the RM800-million 11@Mont'Kiara is on the market tagged at RM727 psf onwards. Save for bumiputera units, the 6-star luxury condo with 342 units has been sold even before an official launch. Data compiled by Sunrise shows that its properties have enjoyed capital appreciation of up to 60% with yields from 8% to 12% (see chart). Yam notes that for capital appreciation to be sustainable, it must be driven by fundamentals like supply and demand, economic cycles, population growth, socio-demographics, government policies, interest rates and changing lifestyles. Yam says that from 1991 to 2007, Sunrise Bhd had completed some 3,200 condo units in the location, while other developers built another 2,700 units. "This works out to an average of 368 units per annum and when the additional 4,500 units developed by Sunrise and others come onstream in four years, the average supply of condos in Mont'Kiara would be 520 units per annum," he offers. He adds that the "guesstimate-per-annum-constant-demand" for upmarket residences is estimated at 5% of the 80,000-annual property needs in the Klang Valley. "Around 4,000 units of high-end homes are required. Thus, from this forecast of housing needs, demand for luxury products outweighs supply," he reasons. "A real estate broker came to see me and offered me a 10-acre tract in Segambut for RM6 psf. I was preoccupied with other projects at that time, and found the deal not very appealing. The next year, the same broker came by and this time I paid attention," Tong recalled. The first time Tong saw the land, it was simply an old rubber plantation full of undergrowth with no visible access. The nearest road was two km away. The terrain was hilly and impossible for the building of conventional housing such as terraced homes or semidees. At that time, he had just completed his first condominium, OUG Heights, on the periphery of Overseas Union Garden. The 10-acre OUG Heights in Kuala Lumpur sits on what used to be an old, hilly rubber estate, initially without any access. This project — comprising three blocks of 23-storey medium-cost condominiums with 394 units — was completed in 1988. The ingredients of Mont'Kiara's success were hatched in OUG Heights, a project Tong started building 13 years after he bought the land. "If OUG Heights could materialise after 13 years of the land purchase, I thought perhaps a miracle could happen in Segambut in 10 years. After all, the site had potential; it was only five km from the Golden Triangle," Tong says. But there were no economies of scale. As it panned out, within a year, Tong managed to acquire 12 parcels of land totalling 100 acres in the Segambut Rubber Estate, which he later renamed Mont'Kiara. "In the meantime it was discovered that KL City Hall was starting to build the access from Intan to Seri Hartamas from Jalan Kuching. We felt it was faster and easier to construct our own access road." The rest, as they say, is history. Traffic woes Meanwhile Yam says that new infrastructure, the Jalan Duta-Kiara flyover was opened last December and provides an alternative route to KL's city centre. "Preliminary traffic studies by consultants, based on projected population and traffic growth, indicates acceptable levels of outward and inward vehicular movement," Yam points out. Yam adds that as Mont'Kiara evolves into a more self-sufficient and self-contained enclave, there would be less outward traffic. From April to May this year, Sunrise conducted an owner's satisfaction survey in its Mont'Kiara projects of Pines, Palma, Pelangi, Sophia, Plaza Mont'Kiara, Astana, Bayu, Laman Suria, Aman and Damai. "The 605 respondents ranked the top reasons for deciding to live in our condos as: the convenient and strategic location, security efforts, good maintenance and conducive living environment," says Yam. 
The rising cost of building materials will likely further push up prices. Steel bar prices have risen by more than 14% and ready-mix concrete prices by 13.8% - Yam
Tong, the founder of Sunrise, before he exited the company in 1997, note that Mont'Kiara today has gained the critical mass to continue to prosper. Add to that the limited supply of vacant land that puts a natural limit on future supply. "Thus for those who own Mont'Kiara properties, the future looks quite good as it will only grow upwards," reasons Tong, dubbed "Condo King" by the local real estate fraternity and past World President of International Real Estate Federation (Fiabci).
Both Tong and Yam were speaking at The Edge Investment Forum on Real Estate 2007; on the topic The Real Estate Success Story — Mont'Kiara: A Developer's Perspective.
"Based on the original price, Palma has a gross yield of 14.53% — a 1,300 sq ft unit was sold at RM289,000. With current selling prices of RM518,000, gross yields are at 8.1%. As long as yields are more than the effective mortgage rate, there will be an upside. There is potential healthy capital appreciation upside of 50%," he states.
Tong: This was how Mont' Kiara looked like back in 1989
The Mont'Kiara story
Tong does not deny that there were some traffic concerns that needed to be addressed. "It is typical in any fast growing and expanding locality for there to be an amount of congestion. A new road between Jalan Kiara and Jalan Kiara 3 will greatly help to ease off traffic in the surrounding area," Tong offers.
By The EDGE MALAYSIA
Where are the property hot spots?
Is it too late to put money in the local property market? No, according to Ho Chin Soon Research Sdn Bhd director Ho Chin Soon. "You can buy properties as the market is stable. This I am confident about," he says. "The years 2005 and 2006 were good times to buy properties. However, it does not mean it is too late. There are those who say Malaysian property prices have been rising, but if you consider the inflation rate and other economic factors... the market is actually stable," shares Ho, one of the speakers at The Edge Investment Forum on Real Estate 2007. In his presentation entitled Property Hot Spots: IDR, NCER and Klang Valley, Ho says the good times would last another two to three years. "I do not mean that the recession is set to hit in 2010; it is just that if the cycle repeats itself, it may happen then. Knowing the right timing is important. The new real estate mantra is location, timing and branding. What is the use of the right location (hot spot), if the timing is wrong?" Hot spots The Klang Valley, or the Kuala Lumpur Conurbation, still has a lot of potential, says Ho. He adds that it is a young city with some five million to 5.5 million people and an impressive growth rate of 4.8% per annum. "The Klang Valley's locational centre of gravity is Petaling Jaya New Town Centre and the prime spots are the Golden Triangle and Mont'Kiara. If you are looking at buying landed houses, try and focus within the first tier of 15km from PJ New Town. You can settle for the second tier, but locations further than that are not advisable." Mega cities Ho ranks Penang as the No 2 growth area after the Klang Valley. "The question now is, can Johor overtake Penang in 10 to 15 years? The population growth in Penang is weak and IDR's strong. However, it is the reverse when it comes to the house price index: Penang is strong while IDR weak." (See chart.) He sees the IDR as a test bed for a radical shift in economic policies. It has the potential to experience strong growth if two major hurdles — civil service delivery and political objections — are dealt with. On the NCER, Ho laments the fragmentation of the land holdings. Breaking them up into parcels of 5 and 10 acres makes it very difficult to plan real estate projects. The NCER has a lot of untapped potential tourism spots and with Penang as its centre, it appears promising. When the second bridge and monorail come up, they will not only increase accessibility, but also spur real estate development. Branding Citing his mantra of location, timing and branding, Ho says those who don't know much about location and timing, can opt to buy from a "branded" developer. There is always a risk when it comes to property investment. For peace of mind, it is always safer to stick to known developers, he adds. Since 1989, Ho has carved a niche by supplying land-use maps containing information on land usage and ownership. His maps cover areas such as the Klang Valley, Penang, South Johor, Ipoh, Kuantan, Melaka and Seremban. Ho is a fellow of the Institution of Surveyors and a member of the Board of Valuers, Appraisers and Estate Agents Malaysia.
Ho: The Klang Valley will remain the No.1 growth region in the country for many more years to come
Ho says while there are certain spots that are "hotter" than others, all spots are interlinked with a trickle-down effect. "The Klang Valley will remain the No 1 growth region in the country for many more years to come. The growth in Klang Valley is in line with global urbanisation trends," he offers.
The rise of China alone has increased global competition and this, together with the emergence of India and Vietnam, makes the market tougher. "Look at what is happening in the world today. The strong urban shift has given rise to mega cities and the fight for mobile citizens has started. Our government sees the need to attract more foreign direct investment and new growth centres, such as Iskandar Development Region (IDR) and Northern Corridor Economic Region (NCER), are ways to attract investors."
If now is still a good time to buy, what will happen when projects are completed only in two or three years?
By The EDGE MALAYSIA
Liew pays tribute to mentor
Tan Sri Liew Kee Sin was slightly overcome by emotion when he publicly thanked his mentor for showing him the ropes in the property business. Accepting the award for Property Man of the Year at the International Real Estate Federation (Fiabci) Malaysia Property Award 2007 last week, the group managing director and CEO of S P Setia Bhd says he was very lucky to have known Wong Chee Kooi because without his guidance, he would have been nowhere.
Liew and his mentor, Wong (right)
"I was a young man then and wanted things to happen quickly. Wong told me to slow down," Liew says in his acceptance speech.
Attributing his award to Wong and his dedicated staff at S P Setia, Liew tells City & Country that he got to know Wong through a mutual friend. At that time, Wong was heading his own construction company called Syarikat Pembinaan Setia Sdn Bhd, which was involved in a couple of development projects.
"The company was not listed back then and we immediately hit it off as our different backgrounds meant we had a lot to share with each other," Liew recalls.
Wong harboured hopes of modernising his business and was also looking at going public, while Liew was a young banker with ideas about property development. He frequently visited Wong to exchange ideas and also shared with Wong his ambition to go into property development.
"While I advised Wong on corporate and financial matters, he in turn shared with me his knowledge and experience in the property development and construction industry.
"When I decided to start my own development company called Syarikat Kemajuan Jerai Sdn Bhd in 1989, Wong's wise words served as a guidance for me over the years," says Liew.
He found Wong to be a man of values, who often reminded him of the importance of loyalty, honesty and integrity. "I built the company based on these strong foundation and values.
"I must say the most valuable lesson in the business that I've learnt from Wong is upholding our integrity and keeping to our promises made to our purchasers," he says.
In 1993, Syarikat Pembinaan Setia was successfully listed on the then KLSE's Second Board. Three years later, it bought over Liew's company in a reverse takeover and Liew became the CEO of the new company called S P Setia Bhd. While Liew initiated the company's transfer to the Main Board, Wong decided to call it a day in 1998 to spend more time with his family.
"I am forever indebted to Wong for giving me a headstart in realising my ambition. Without being a listed vehicle, the company would not have been able to grow at such an exponential pace," says Liew. Today, Liew still keeps in close contact with Wong, not so much to seek business advice, but to exchange ideas on the latest development in the property industry and to catch up on life and family.
At the award ceremony which Wong attended, Liew says the past decade had been a challenging but rewarding journey for him at S P Setia since assuming the post of CEO in 1996. "My vision was simple — to be the best in all we do. I demanded the best service and product quality from my team and I am deeply gratified that our commitment in these areas has propelled us to the forefront of the industry."
The award-winning developer has been ranked No 1 in The Edge Malaysia Top Property Developers Awards in 2005, 2006 and 2007. Introduced in 2003 to benchmark Malaysian developers, winners are adjudged on both their quantitative and qualitative attributes.
Last year, S P Setia's Setia Eco Park won Fiabci's Malaysia Property Award for best Masterplan Development. The 800-acre project within the developer's township development of Bandar Setia Alam in Shah Alam went on to win the international Fiabci Prix d'Excellence Award. Interestingly, it was this international recognition that sparked the interest of Vietnam's top state-owned conglomerate Becamex IDC Corp to seek out S P Setia as a partner and this led to a joint venture in Ho Chi Minh City. Called EcoLakes at MyPhuoc, the RM2.1 billion project, located in Binh Duong province, 40km north of Ho Chi Minh City, marks S P Setia's first foray overseas.
The Malaysia Property Award is organised by Fiabci Malaysian Chapter. This is the 15th year of the awards. Nine awards were presented that night (see box). The event was graced by the Sultan of Selangor, Sultan Sharafuddin Idris Shah.
By The EDGE MALAYSIA (By Diana Chin)
Liew and his mentor, Wong (right)
"I was a young man then and wanted things to happen quickly. Wong told me to slow down," Liew says in his acceptance speech.
Attributing his award to Wong and his dedicated staff at S P Setia, Liew tells City & Country that he got to know Wong through a mutual friend. At that time, Wong was heading his own construction company called Syarikat Pembinaan Setia Sdn Bhd, which was involved in a couple of development projects.
"The company was not listed back then and we immediately hit it off as our different backgrounds meant we had a lot to share with each other," Liew recalls.
Wong harboured hopes of modernising his business and was also looking at going public, while Liew was a young banker with ideas about property development. He frequently visited Wong to exchange ideas and also shared with Wong his ambition to go into property development.
"While I advised Wong on corporate and financial matters, he in turn shared with me his knowledge and experience in the property development and construction industry.
"When I decided to start my own development company called Syarikat Kemajuan Jerai Sdn Bhd in 1989, Wong's wise words served as a guidance for me over the years," says Liew.
He found Wong to be a man of values, who often reminded him of the importance of loyalty, honesty and integrity. "I built the company based on these strong foundation and values.
"I must say the most valuable lesson in the business that I've learnt from Wong is upholding our integrity and keeping to our promises made to our purchasers," he says.
In 1993, Syarikat Pembinaan Setia was successfully listed on the then KLSE's Second Board. Three years later, it bought over Liew's company in a reverse takeover and Liew became the CEO of the new company called S P Setia Bhd. While Liew initiated the company's transfer to the Main Board, Wong decided to call it a day in 1998 to spend more time with his family.
"I am forever indebted to Wong for giving me a headstart in realising my ambition. Without being a listed vehicle, the company would not have been able to grow at such an exponential pace," says Liew. Today, Liew still keeps in close contact with Wong, not so much to seek business advice, but to exchange ideas on the latest development in the property industry and to catch up on life and family.
At the award ceremony which Wong attended, Liew says the past decade had been a challenging but rewarding journey for him at S P Setia since assuming the post of CEO in 1996. "My vision was simple — to be the best in all we do. I demanded the best service and product quality from my team and I am deeply gratified that our commitment in these areas has propelled us to the forefront of the industry."
The award-winning developer has been ranked No 1 in The Edge Malaysia Top Property Developers Awards in 2005, 2006 and 2007. Introduced in 2003 to benchmark Malaysian developers, winners are adjudged on both their quantitative and qualitative attributes.
Last year, S P Setia's Setia Eco Park won Fiabci's Malaysia Property Award for best Masterplan Development. The 800-acre project within the developer's township development of Bandar Setia Alam in Shah Alam went on to win the international Fiabci Prix d'Excellence Award. Interestingly, it was this international recognition that sparked the interest of Vietnam's top state-owned conglomerate Becamex IDC Corp to seek out S P Setia as a partner and this led to a joint venture in Ho Chi Minh City. Called EcoLakes at MyPhuoc, the RM2.1 billion project, located in Binh Duong province, 40km north of Ho Chi Minh City, marks S P Setia's first foray overseas.
The Malaysia Property Award is organised by Fiabci Malaysian Chapter. This is the 15th year of the awards. Nine awards were presented that night (see box). The event was graced by the Sultan of Selangor, Sultan Sharafuddin Idris Shah.
By The EDGE MALAYSIA (By Diana Chin)
Growing demand in high-end market
The push in the residential property market around the region, Malaysia included, is coming from the high-end sector. According to Allan Soo, managing director of Regroup Associates Sdn Bhd, benchmark prices are being set in the luxury segment across the region with increasing demand coming from foreigners.
In Hong Kong, the demand for high-end residential units was as strong as for the stock market. Huge institutional fund demand for equities has caused investment activities to increase, says Soo. Residential rents for Hong Kong are also the highest in the world. Data collated by Regroup showed monthly rental at The Peak, Repulse Bay and Central reaching HK$67,000 (about RM28,895). A record high was Grosvenor Place in Repulse Bay at HK$165,000. The persistent rise in rent is driven by expatriate demand. Meanwhile, Bangkok is benefiting from the tourist market and the retirement and second-home market created by Europeans. According to Soo, of the total residential stock in the Sathorn and Limpuni areas of Bangkok, which amount to over 11 million sq ft, 17.7% is foreign owned. Where does Malaysia stand? While KLCC remains a hot spot for many foreign investors, Soo says they are also looking elsewhere. "We have had specific enquiries from foreigners about areas like Sentul and some are also looking at Kuching," he says, adding that other parts of the Klang Valley that will remain hot include Kenny Hills, Bangsar and Damansara Heights. Regroup's research shows that the total existing supply of luxury condos and serviced residences in KL stands at 4,146 units, with the bulk of it located in the KLCC, followed by Bangsar and the Mont'Kiara/Sri Hartamas area. Future supply (under construction) that will be coming onstream in the next three years will amount to 10,205 units. The numbers may seem huge but Soo does not think there is an oversupply if compared with places like Shanghai, where transaction volume averaged 19,200 units per month or 230,400 units a year. Not about yields "It is the same for Malaysia. The boom in the residential market only started about five or six years ago, driven by rental and sale. But it is still a capital-led market rather than a yield market," he said. Currently, Malaysia offers very good yields of between 5% and 7%, which are relatively cheap, says Soo. While the focus remains in the Klang Valley, there is a growing segment of foreigners looking for holiday homes. "It has been a trend for many Europeans to buy in the tropics. First it was Bali, then Thailand and now it's Langkawi," said Soo. He sees Langkawi's popularity growing steadily as the demand for resort homes has now moved away from the once popular Bahamas and Cayman Islands to other destinations like Bali, Phuket and Langkawi. Last year, a villa at The Datai was reportedly sold for US$2.5 million (about RM 8.4 million). A few good years The residential market is not yield sensitive and individuals will not be concerned about 6% or 8% net. It will only become sensitive if yields go down to 3%. "It will augur well for developers to take note that the market will be driven by quality, in both style and price point of view. On top of that, asset management is important to keep prices up." Soo says it's time for upmarket bungalows to play catch-up, adding that among the places to watch would be Bukit Tunku and Bukit Pantai, where prices would double in the next three to five years and that land at RM200-plus psf will "soon be a thing of the past". Overall, Soo expects the property market to do better now that the Iskandar Development Region has been launched and there is strong foreign direct investment due to the exemption of the Real Property Gains Tax. "Personally, I wouldn't mind buying something in Langkawi or in KLCC."
Soo: It will augur well for developers to take note that the market will be driven by quality, in both style and price point of view
As Soo pointed out in his presentation at The Edge Investment Forum on Real Estate 2007, the market may have slowed down a little across the causeway due to credit tightening because of the subprime crisis but luxury homes were still being sold at record prices. Singapore's latest benchmarks in 3Q2007 were the sales of penthouses in The Marc at S$5,100 (about RM11,760) psf and the Orchard Residences at S$5,500. Last year, 22% of all purchases of high-end units were by foreigners, with top end ones having 65% foreign ownership.
Price trends in the country have grown fast in the last few years, jumping tremendously this year. In the Kuala Lumpur City Centre (KLCC) prices have breached the RM2,000 psf mark for high-end condominiums, with speculation that the Four Seasons will be offered at RM3,000 psf, says Soo.
Soo says investors in the luxury residential market seemed less concerned about yields when buying. In Singapore, a 5,000 sq ft penthouse on Orchard Turn was sold for S$28 million recently while Hong Kong has recorded the highest prices in the world. "A 5,100 sq ft house at Severn 8 on The Peak was sold at HK$210 million or HK$41,000 psf. Singapore's yields are around 2.55% while Hong Kong's is at 3.8%. Market talk is that some people buy not to rent. They just love buying.
"I think the market will still be good for the next two years or so. In downtown KL, the focus should be on higher-end residential and commercial developments, especially in the Jalan P Ramlee vicinity," says Soo.
By The EDGE MALAYSIA
Ascott to double Vietnam portfolio by 2010
In Ho Chi Minh City (HCMC) and Hanoi today, the biggest challenge is getting a hotel room, not to mention a serviced apartment. "There are many days when our properties are running at 100% [occupancy], and even I can't get a room," says Henry Lim, country general manager for Indochina at The Ascott International Vietnam, which is part of CapitaLand's serviced apartment arm The Ascott Group.
The 90-apartment Somerset West Lake in Hanoi is only 10 minutes from the business district of Hoan Kiem. Nearby are also shopping areas and international schools.
Today, Ascott is the largest serviced apartment operator outside of the US. There are currently 136 Ascott properties, with 19,200 apartments, in major gateway cities around the world. The target is to raise the number of properties to 180, with over 25,000 apartments, by 2010.
Ascott and its serviced apartment real estate investment trust (REIT), the Ascott Residence Trust or ART (listed in March last year), collectively own and manage four properties in Vietnam — two in Hanoi and another two in HCMC. There is a third property each in the pipeline in both cities, bringing the total number of properties to six and the number of apartments to 1,050. The target is to double the number of apartments to 2,000 by 2010, says Ascott's Lim.
For the Ascott group, Vietnam is one of the fastest growing markets (if not the fastest) in Southeast Asia in terms of RevPAR (revenue per available room or apartment), notes Lim. He cites the following reasons: "Demand is overwhelming, and CapitaLand has a strong foothold here. We are also the largest serviced apartment operator in Vietnam, and the focus is on these two key cities."
The company entered the market in 1994. Its flagship property in Vietnam was the Somerset Grand Hanoi, which opened in Hanoi in 1997, and in HCMC, it was the Somerset Chancellor Court, which opened a year earlier.
Apart from the Somerset Chancellor Court, which has 172 apartments, the other existing property in HCMC is the 165-unit Somerset Ho Chi Minh City. Both properties are owned by ART but managed by Ascott. A third, which will be opening in 1H2009, is the 232-unit Somerset Saigon City, which will also be managed by Ascott when it opens.
In Hanoi, apart from the flagship 185-unit Somerset Grand Hanoi (which incidentally is also owned by ART), there's the 90-unit Somerset West Lake Hanoi, which is owned and managed by Ascott. A third, the 206-unit Somerset Hoa Binh, will be opening in 2H2008 and will also be owned and managed by Ascott.
Ho Chi Minh City: Strong demand, limited supply
The two properties in HCMC are located in the heart of the CBD in District 1. The Somerset Chancellor Court completed a US$5 million (RM16.7 million) makeover in January. The 11-year-old property originally had 152 apartments. Many of the large three- to four-bedroom apartments were reconfigured into studios and one-bedroom apartments, hence adding 21 rooms to the total stock, bringing it to 172 units.
Today, 80% of the rooms are studio and one- or two-bedroom apartments, which are the most-sought after units among business travellers. The lobby was also upgraded to give it a corporate feel and the gym was expanded to add more equipment including a sauna and steam room. In the next phase of renovation, it plans to upgrade the swimming pool area and add a putting green for the enjoyment of residents who are golfers.
Although the bulk of its residents are long-term guests of at least six months, 23% are short-term stays of up to a month, says Richard Chua, area general manager for HCMC at Ascott International.
Next to Somerset Chancellor Court's serviced apartment, the company has a five-storey, 4,600 sq m tower office building. The building is fully tenanted, and is currently considered to be a Grade-B-plus building, says Chua. The lobby is currently being refurbished in keeping with the high-end brand of the property, he adds.
While the Somerset Chancellor Court is targeted at business travellers, the Somerset Ho Chi Minh City, less than a five-minute drive away, feels more homely and appeals to families. The 165 units are spread out in three 12-storey residential blocks. There's a playground and a huge resort-style swimming pool. There are currently 144 children among the residents in the property, says its resident manager and Singaporean Andy Ng.
The Somerset Ho Chi Minh City is a decade-old, but very well-maintained and does not need a major face lift. However, next year, there are plans to update the soft furnishings in the lobby and the apartments.
Ascott's Lim estimates that 85% of the residents in both properties in HCMC stay at least six months at a time. Today, both properties still command one of the highest rates in town, and are almost on par with five-star hotels in the city, which are asking for US$138 to US$140 a night, he says.
Limited supply, strong demand
There's overwhelming demand for serviced apartments, particularly in the CBD Districts of 1 and 3, says Marc Townsend, managing director of CB Richard Ellis (CBRE) Vietnam. There's very limited supply, especially of international-quality projects, with only seven Grade-A serviced apartments providing 400 units ranging from one- to four-bedroom units. According to Townsend, the average occupancy rate of serviced apartments is 97%, with the most sought-after being one- and two-bedroom units measuring 50 to 80 sq m.
Rents of serviced apartments are up by 12% to 20% from US$25 to US$33 psm per month in December last year to US$28 to US$30 psm per month in 2Q2007, estimates CBRE Vietnam. "Due to the limited demand and strong supply, rents will keep rising this year," says Townsend.
The supply demand dynamics probably explains why three of the existing four Ascot properties in Vietnam were injected into ART's initial portfolio of 12 properties in Asia. ART's 3Q2007 results released last week showed revenue in its Vietnam properties had jumped 50% or $2.8 million compared with 3Q2006. This increase was attributed to the inclusion of Somerset Chancellor Court in the portfolio and the higher average daily rates achieved while maintaining occupancy above 90%.
As for year-to-date performance, for the first nine months until end-September, Vietnam's revenue was up 76% to S$22.2 million (about RM51.2 million) compared to S$12.6 million the same period last year. And gross profit for the first nine months of this year was at S$13.6 million or 77% above the S$7.7 million achieved over the same period last year.
With both Hanoi and HCMC seeing strong growth and a continued flow of international funds and MNCs entering the country, there are plenty of opportunities for Ascott. In the pipeline are plans to introduce the other two Ascott brands in Vietnam, namely the top-end The Ascott and the mid-tier Citadines. "We are still exploring," says Lim. "Timing is important and finding suitable sites is a top priority."
By The EDGE MALAYSIA (By Cecilia Chow) - Cecilia Chow is City and Country editor at The Edge Singapore
Asking prices of luxury condos in Thailand continue to climb
Political jitters in Thailand after the coup in September may have dampened property growth, but the market has proven surprisingly resilient. Developers are hoping democratic elections scheduled for late December and clarification of the Foreign Business Act — which prohibits outright ownership of land to non-Thais and limits condo sales to foreigners — will stimulate investor demand and prices.
Rentals and capital values in some sectors, notably luxury condos in Bangkok, have continued to rise over the past 12 months.
Around the capital, most of the 5,400 units launched in the first half of the year are mid-priced projects. Although activity in the high-end condo sector has markedly slowed compared with last year, there is still steady, albeit cautious, demand from offshore investors, says Nigel Cornick, CEO of Raimon Land, who has lived in Bangkok for more than 16 years.
Rentals and capital values in some sectors, notably luxury condos in Bangkok, have continued to rise over the past 12 months
Anticipating an upturn
Raimon Land is one of the largest condo players in Bangkok and also has major apartment projects in Phuket and Pattaya. "Demand has been a little sluggish on the domestic side, but around 60% of our buyers are foreigners," says Cornick. "We anticipate an upturn in demand after the December elections."
Cornick believes astute buyers can lock in excellent future returns. "The jump in values could be significant once the political uncertainty fades," he adds. Foreigners account for 17% of buyers for completed Bangkok condo units, and at the luxury end, the top buyers are still from the UK, the US, Europe, emerging Europe and the Middle East. Cornick predicts a growing response from Asian buyers, especially those from Singapore and Hong Kong.
Singaporean investors snapped up 10 units in Raimon Land's top-end The River when the two million sq ft development along the Chao Praya River was pre-launched in April (official launch is in October 2008) at a weekend property investment exhibition in Singapore. Prices of the project range from 90,000 baht (RM 9,719) to 250,000 baht psm.
Increased interest from Singapore surprised Cornick. "Up until now, we have had very low response from Singapore and Hong Kong," he says. "But because their own markets have done so well, they could have cashed out of their investments at home and are holding spare funds. They have also seen Singapore developers go into Bangkok. It's a growing awareness that the Bangkok market will have some upside."
Raimon Land is not worried about Singapore developers such as CapitaLand, City Developments, Fraser & Neave, and Hotel Properties Ltd that have entered the Bangkok luxury apartment market over the last two to three years. "We don't see the Singapore developers as being more competition mainly because it's more a question of finding the right site and location," says Cornick. "We don't feel that in the next five years there are going to be that many opportunities to develop high-end freehold condos in the CBD."
He adds that there are few sites available, "and we've got two of them". Cornick is referring to the giant The River development, and 185 Rajadamri, the former Cambodian embassy where Raimon Land will develop a benchmark 600,000 sq ft ultra-luxurious condo comparable to the likes of SC Global Developments' The Marq on Paterson Hill in Singapore. Prices will start from 200,000 baht psm and look to push through the 300,000 baht psm barrier.
Growing affluence in Asia
"We already had considerable interest in the project prior to the official launch, in the first or second quarter of 2008," says Cornick, who says he's also looking at marketing the condo in Singapore next year. "There is growing affluence in Asia. More people have disposable income and the ability to buy more than one piece of real estate."
While desirable apartments around high-end CBD locations such as Sukhumvit, the riverside, Silom/Sathorn and Central Lumpini average 85,000 baht psm, high-end projects kick off at around 100,000 baht psm. Asking prices for some luxury condo developments are already at 200,000 baht psm — which a year ago would have sold for half that price.
In 1H2007, 54% of the total value of condominiums sold was from developments in this upper price bracket, which numbered 956 apartments. Stand-out performers were Siri @ Sukhumvit, which sold all 460 units at an average of 100,000 baht psm within a few weeks of its launch; Life @ Sathorn 10 (near BTS Skytrain), where the 285 units are almost fully sold; and The Address @ Chitlom (main CBD) where many units sold for more than 100,000 baht psm.
Raimon Land sees expanding opportunities outside Bangkok, and Cornick predicts 40% of its revenue will come from Phuket and Pattaya over the next few years. The developer has a project pipeline of 20 billion baht in Bangkok, 13 billion baht in Pattaya and around four billion baht in Phuket.
When it comes to resort locations, he sees more interest coming out of Hong Kong than Singapore. "Hong Kong expats are significantly more active than Singapore expats in the resort areas," observes Connick.
Most recent demand for resort condos has centred on Huahin, a three-hour drive from Bangkok. So far this year, Huahin accounts for 46% of total condo sales value among the key resort destinations of Phuket, Pattaya, Huahin and Samui. This success is largely due to strong Thai demand, pushing prices to an average of 85,000 baht psm.
Pattaya claimed 28% of total sales, with prices averaging 90,000 baht psm. Phuket condominiums accounted for 22% of value in 1H2007, with prices averaging 84,000 baht psm.
Raimon Land research shows around 2,200 resort apartments have been completed since 2003. Of these, 11 units remain unsold in Phuket while 71 units have not been taken up in Pattaya. There are no unsold new units at Huahin. Samui has not completed any condo developments so far.
Take-up rates in off-plan developments are also generally healthy (as at June 2007), notes Raimon Land. In Pattaya, 61% of units launched have been sold compared with 71% in Phuket, 86% in Huahin and 37% in Samui.
The Russians are coming
"Pattaya is stronger for us than Phuket because there is a strong industrial manufacturing base fuelling demand for rentals and real estate in Pattaya," says Cornick. "Pattaya has a very large demand from many foreign markets. Russians are now the second-largest group of visitors in Pattaya. They are increasingly spending money investing in real estate."
Cornick doesn't view Vietnam as a threat to foreign demand for Thailand's high-end residential condos and villas. "If you look at why people buy into Thailand, it's very specific. They buy for retirement or for a second home because they do business in Thailand. They are buying in Thailand because they want to be in Thailand," he says. "People buying into Vietnam are either foreigners setting up companies there or returning Vietnamese acquiring quite a lot of stock."
Cornick says Raimon Land is not looking to enter Vietnam yet: "It's too hard." It wants to focus on a market it knows best — Thailand.
By The EDGE MALASIA (By Mark Henderson) - Mark Henderson is a contributor to The Edge Singapore
Fall in London house prices
House price falls will become widespread in 2008 and 2009
House prices in the UK are expected to fall by 3% next year, according to a housing market analysis for 4Q2007 by Capital Economics Ltd, an independent economic consultancy specialising in the economics of the financial and property markets.
According to Capital Economics, a period of gently falling house prices is about to begin
"A stabilisation of house prices in 2008 is no longer our central scenario. Rather, because of the weaker economic outlook, poor affordability, tighter lending criteria and rising defaults we now expect house prices to fall by 3% next year. We also anticipate a further 3% fall in 2009. London house prices should hold up, but most regions will experience declines," says the consultancy.
Although house prices did not fall when affordability was also strained in 2004/2005 when the economy slowed, some key factors, however, have changed materially since then. For a start, says Capital Economics, it is now even less affordable for new buyers to enter the housing market.
"The Northern Rock debacle is also sure to have put a dent in the hitherto high level of confidence in the housing market. There are also fears that the risks of a US-style subprime crisis are being underestimated. What's more, we think that lingering inflation concerns will prevent any repo rate cuts until next year. And even if the repo rate is cut sooner and/or more extensively than we expect, the availability of mortgage credit will be reduced as UK lenders adopt a more cautious approach," it says. Thus, with finance more difficult to obtain, Capital Economics expects housing market activity levels to fall by more than 15% in 2008 and to remain subdued in 2009.
It adds that financial turmoil has weakened the outlook for London, but a stagnation of house prices in the capital seems most likely in the short term. "Housing affordability is worst in parts of northern England, the Midlands, Wales and the South West. These regions will also be hardest hit by softer household and public spending. Thus, by and large, we expect them to suffer the largest house price falls."
Typical buy-to-let returns are likely to be negative in 2008 and 2009 as net yields remain below mortgage rates and as capital gains — the key support for investment demand in the past few years — turn into losses. This will dampen new investment, but Capital Economics does not expect a collapse in the sector.
According to Capital Economics, a period of gently falling house prices is about to begin. "To be fair, aggressive interest rate cuts could be a mitigating factor. But given that houses are overvalued, however, and that there is scope for sentiment to reverse sharply, a bigger correction than our central view is certainly possible," it says.
Capital Economics is retained by financial, property and industrial and commercial companies to provide regular analysis and advice on the state of the economy and the prospects facing their own sectors. It also undertakes specific research projects commissioned by companies, government agencies and trade associations.
By The EDGE MALAYSIA
House prices in the UK are expected to fall by 3% next year, according to a housing market analysis for 4Q2007 by Capital Economics Ltd, an independent economic consultancy specialising in the economics of the financial and property markets.
According to Capital Economics, a period of gently falling house prices is about to begin"A stabilisation of house prices in 2008 is no longer our central scenario. Rather, because of the weaker economic outlook, poor affordability, tighter lending criteria and rising defaults we now expect house prices to fall by 3% next year. We also anticipate a further 3% fall in 2009. London house prices should hold up, but most regions will experience declines," says the consultancy.
Although house prices did not fall when affordability was also strained in 2004/2005 when the economy slowed, some key factors, however, have changed materially since then. For a start, says Capital Economics, it is now even less affordable for new buyers to enter the housing market.
"The Northern Rock debacle is also sure to have put a dent in the hitherto high level of confidence in the housing market. There are also fears that the risks of a US-style subprime crisis are being underestimated. What's more, we think that lingering inflation concerns will prevent any repo rate cuts until next year. And even if the repo rate is cut sooner and/or more extensively than we expect, the availability of mortgage credit will be reduced as UK lenders adopt a more cautious approach," it says. Thus, with finance more difficult to obtain, Capital Economics expects housing market activity levels to fall by more than 15% in 2008 and to remain subdued in 2009.
It adds that financial turmoil has weakened the outlook for London, but a stagnation of house prices in the capital seems most likely in the short term. "Housing affordability is worst in parts of northern England, the Midlands, Wales and the South West. These regions will also be hardest hit by softer household and public spending. Thus, by and large, we expect them to suffer the largest house price falls."
Typical buy-to-let returns are likely to be negative in 2008 and 2009 as net yields remain below mortgage rates and as capital gains — the key support for investment demand in the past few years — turn into losses. This will dampen new investment, but Capital Economics does not expect a collapse in the sector.
According to Capital Economics, a period of gently falling house prices is about to begin. "To be fair, aggressive interest rate cuts could be a mitigating factor. But given that houses are overvalued, however, and that there is scope for sentiment to reverse sharply, a bigger correction than our central view is certainly possible," it says.
Capital Economics is retained by financial, property and industrial and commercial companies to provide regular analysis and advice on the state of the economy and the prospects facing their own sectors. It also undertakes specific research projects commissioned by companies, government agencies and trade associations.
By The EDGE MALAYSIA
Gapuraprima launches retail REIT
Most investors have probably never heard of the Gapuraprima group, even though it is one of Indonesia's largest real estate companies. If it goes through with plans to list a real estate investment trust (REIT) in Singapore, however, the group as well as the Margono family that controls it might soon be as well-known here as the Riadys and their Lippo group.
Margono: We want to sustain the company for the next 50 years, and we want to run it professionally
Last week, the Gapuraprima group took its first tentative step into the media limelight in Singapore with Rudy Margono, the youngest child and only son of the group's patriarch Gunarso Susanto Margono, meeting the local press at the Mandarin Oriental Hotel over lunch. Speaking with an accent that betrays his years at Telok Kurau Secondary School, the 37-year old Margono introduced his family's corporate empire, which had just listed its subsidiary PT Perdana Gapuraprima Tbk on the Jakarta Stock Exchange. He then outlined plans to launch a REIT in Singapore early next year in partnership with Malaysia's Amanah Raya Bhd, a trustee company owned by the country's Ministry of Finance.
"Properties in Malaysia and Indonesia are much undervalued," says Margono. "And, we have upside potential for rentals." The REIT will initially hold seven shopping malls in Indonesia and Malaysia with a combined worth of about US$250 million (RM835 million). Five of these malls are being contributed by the Gapuraprima group, while Amanah Raya is injecting the other two. According to Margono the Indonesian malls are located in second-tier cities like Bandung and Solo. "Capital appreciation in these two countries can be 10% to 15% yearly," he says. "We think it is very attractive for investors, especially long-term investors." Amanah Raya is the backer of a Malaysian REIT called AmanahRaya REIT, which has an asset size of RM649 million.
There are currently 17 REITs listed on the Singapore Exchange, only one, First REIT, is controlled by an Indonesian group. With a portfolio of healthcare related properties, First REIT was listed in October last year, and currently has a market value of S$209.5 million (RM482 million). That's about 58% the initial size of Gapuraprima REIT's property portfolio. The backer of First REIT is the Lippo group, and its units currently offer a forecast yield of about 9%.
Lippo group is launching a second REIT in Singapore jointly with Temasek Holdings' wholly owned subsidiary Mapletree Investments. The new REIT called Lippo-Mapletree Indonesia Retail Trust will have an initial portfolio of seven retail malls and shopping spaces within other retail malls. Three of the malls are located in Jakarta, two in Greater Jakarta (including Jakarta, Bogor and Tangerang), and another two in Bandung, the fourth largest city in Indonesia. The asset size will be around S$1 billion.
Units in the Lippo-Mapletree retail REIT are expected to be priced in the range of 78 cents to 91 cents per unit, and based on the price range, the annualised yield is expected to be from 6.4% to 7.5%.
Will the second Indonesian retail REIT trade at a higher or lower yield than the Lippo-Mapletree REIT when it's listed? Much depends on the market's view of the Margono family's ability to expand its property portfolio and lift its distributions per unit over time, and whether they develop a reputation for treating minority investors fairly.
Margono's father started out by building houses for the Indonesian military for as little as US$400 each. Today, at age 67, the elder Margono sits astride a corporate empire with US$500 million in assets. Like many other Indonesian corporate groups, Gapuraprima nearly went up in flames during the financial crisis, which triggered former president Suharto's fall after 31 years in power. "We survived because we do all segments," says the younger Margono, who began working for his father from the age of 18, while attending night classes at Jakarta's university. Demand for its low- to mid-priced houses remained stable during those turbulent years, he adds. "There was a need for those houses."
The Gapuraprima group is now in much better shape, assures Margono. It began venturing into developing commercial properties in 2000, and benefited from Indonesia's strong economic recovery since then. The country's GDP is now more than 35% higher than it was before the financial crisis, says Margono. "Mortgage rates are the lowest in history — what used to be 24% is now 9%. Purchasing power of the Indonesian people has also been growing in the last five years."
So, what's next for the Gapuraprima group? "We want to sustain the company for the next 50 years, and we want to run it professionally," answers Margono. Indeed, the listing of PT Perdana Gapuraprima on Oct 9 was a key element in realising this ambition. With a market capitalisation of S$184.5 million, the listed unit is the third largest listed property company in the country.
Launching a REIT in Singapore will surface more of the corporate group's assets into public markets and expose their management to investors. The capital it raises will be used to expand the group's business interests around the region, in countries like Malaysia and China. "Our company has a vision to develop [properties] in the Asian countries," says Margono.
It is not yet clear that he will succeed, but it looks like investors in Singapore will be getting a better glimpse of the inner workings of a portion of his family empire.
By The EDGE MALAYSIA (By Nova Theresianto is a staff writer with The Edge Singapore)
Margono: We want to sustain the company for the next 50 years, and we want to run it professionally
Last week, the Gapuraprima group took its first tentative step into the media limelight in Singapore with Rudy Margono, the youngest child and only son of the group's patriarch Gunarso Susanto Margono, meeting the local press at the Mandarin Oriental Hotel over lunch. Speaking with an accent that betrays his years at Telok Kurau Secondary School, the 37-year old Margono introduced his family's corporate empire, which had just listed its subsidiary PT Perdana Gapuraprima Tbk on the Jakarta Stock Exchange. He then outlined plans to launch a REIT in Singapore early next year in partnership with Malaysia's Amanah Raya Bhd, a trustee company owned by the country's Ministry of Finance.
"Properties in Malaysia and Indonesia are much undervalued," says Margono. "And, we have upside potential for rentals." The REIT will initially hold seven shopping malls in Indonesia and Malaysia with a combined worth of about US$250 million (RM835 million). Five of these malls are being contributed by the Gapuraprima group, while Amanah Raya is injecting the other two. According to Margono the Indonesian malls are located in second-tier cities like Bandung and Solo. "Capital appreciation in these two countries can be 10% to 15% yearly," he says. "We think it is very attractive for investors, especially long-term investors." Amanah Raya is the backer of a Malaysian REIT called AmanahRaya REIT, which has an asset size of RM649 million.
There are currently 17 REITs listed on the Singapore Exchange, only one, First REIT, is controlled by an Indonesian group. With a portfolio of healthcare related properties, First REIT was listed in October last year, and currently has a market value of S$209.5 million (RM482 million). That's about 58% the initial size of Gapuraprima REIT's property portfolio. The backer of First REIT is the Lippo group, and its units currently offer a forecast yield of about 9%.
Lippo group is launching a second REIT in Singapore jointly with Temasek Holdings' wholly owned subsidiary Mapletree Investments. The new REIT called Lippo-Mapletree Indonesia Retail Trust will have an initial portfolio of seven retail malls and shopping spaces within other retail malls. Three of the malls are located in Jakarta, two in Greater Jakarta (including Jakarta, Bogor and Tangerang), and another two in Bandung, the fourth largest city in Indonesia. The asset size will be around S$1 billion.
Units in the Lippo-Mapletree retail REIT are expected to be priced in the range of 78 cents to 91 cents per unit, and based on the price range, the annualised yield is expected to be from 6.4% to 7.5%.
Will the second Indonesian retail REIT trade at a higher or lower yield than the Lippo-Mapletree REIT when it's listed? Much depends on the market's view of the Margono family's ability to expand its property portfolio and lift its distributions per unit over time, and whether they develop a reputation for treating minority investors fairly.
Margono's father started out by building houses for the Indonesian military for as little as US$400 each. Today, at age 67, the elder Margono sits astride a corporate empire with US$500 million in assets. Like many other Indonesian corporate groups, Gapuraprima nearly went up in flames during the financial crisis, which triggered former president Suharto's fall after 31 years in power. "We survived because we do all segments," says the younger Margono, who began working for his father from the age of 18, while attending night classes at Jakarta's university. Demand for its low- to mid-priced houses remained stable during those turbulent years, he adds. "There was a need for those houses."
The Gapuraprima group is now in much better shape, assures Margono. It began venturing into developing commercial properties in 2000, and benefited from Indonesia's strong economic recovery since then. The country's GDP is now more than 35% higher than it was before the financial crisis, says Margono. "Mortgage rates are the lowest in history — what used to be 24% is now 9%. Purchasing power of the Indonesian people has also been growing in the last five years."
So, what's next for the Gapuraprima group? "We want to sustain the company for the next 50 years, and we want to run it professionally," answers Margono. Indeed, the listing of PT Perdana Gapuraprima on Oct 9 was a key element in realising this ambition. With a market capitalisation of S$184.5 million, the listed unit is the third largest listed property company in the country.
Launching a REIT in Singapore will surface more of the corporate group's assets into public markets and expose their management to investors. The capital it raises will be used to expand the group's business interests around the region, in countries like Malaysia and China. "Our company has a vision to develop [properties] in the Asian countries," says Margono.
It is not yet clear that he will succeed, but it looks like investors in Singapore will be getting a better glimpse of the inner workings of a portion of his family empire.
By The EDGE MALAYSIA (By Nova Theresianto is a staff writer with The Edge Singapore)
Can Frasers Centrepoint Trust grow faster?
When officials at Frasers Centrepoint Trust (FCT) met with reporters and analysts recently to deliver the results of the real estate investment trust (REIT) for the financial year to September 2007, they were asked the usual question: When will FCT acquire The Centrepoint Shopping Centre? And, they gave their usual answer. "We've not worked out a timeline yet," FCT's CEO Christopher Tang told reporters.
Amid the redevelopment of the Orchard Road shopping belt, rentals have been rising strongly and property prices have soared over the last couple of years.
The Centrepoint Shopping Centre is one of the oldest malls on Orchard Road
One of the oldest shopping malls on Orchard Road, The Centrepoint Shopping Centre itself recently completed a S$56.4 million (RM129.5 million) enhancement programme that included the addition of a new eight-floor wing and a 17.5% expansion of its total floor space. But if you think that has made the owner, F&N, more willing to sell The Centrepoint Shopping Centre and F&N's REIT more eager to buy, think again.
According to Tang, FCT is uncertain about the impact that new retail properties on Orchard Road will have on rentals in the area.
"We're still monitoring developments in the Somerset micro-market," he says, referring to the neighbouring shopping centres across from The Centrepoint Shopping Centre.
Among the major developments coming up in the area are ION Orchard by CapitaLand and Sun Hung Kai Properties; and Far East Organization's Orchard Central development, both of which are scheduled for completion by the end of next year.
"[FCT] has adopted a wait-and-see approach for The Centrepoint Shopping Centre," says David Lum, analyst at Daiwa Institute. "But they might not have the luxury of waiting."
According to F&N's 2006 annual report, the Orchard Road site is worth some S$423.1 million, while the building is valued at S$86.9 million. Since then, the market valuation of the property has probably risen sharply, Lum says, raising doubts about whether buying it would be immediately accretive to FCT's distribution per unit (DPU).
From the perspective of F&N, on the other hand, getting the best possible price in a sale is the main priority. And, with many property market pundits calling for continued growth in the value of prime retail properties, holding back on selling The Centrepoint Shopping Centre makes sense.
"Capital values on Orchard [Road] will be re-rated," says Lui Seng Fatt, head of investments at Jones Lang LaSalle. "The wait will avoid the accusation of divesting it at a sub-optimised value."
Against that backdrop, some market watchers say it might be better for investors in FCT if the REIT simply stumped up for The Centrepoint Shopping Centre now, and then worked to improve its rental income over time.
FCT's current portfolio comprises the same three properties it owned when it listed in July last year: Causeway Point, Northpoint and Anchorpoint, with a total net lettable area (NLA) of 638,786 sq ft. The only acquisition it has made is a 27% stake in Malaysia's Hektar Real Estate Investment Trust (H-REIT) for RM104.5 million (S$45.4 million) in May this year. H-REIT owns two suburban retail malls, in Selangor and Melaka, with a total NLA of 944,501 sq ft.
The addition of The Centrepoint Shopping Centre would dramatically expand the value of FCT's portfolio, which currently stands at S$915 million.
Officials at FCT declined to say what the rental yields at The Centrepoint Shopping Centre are at the moment. However, given its prime Orchard Road location, there seems to be little reason FCT wouldn't be able to raise its rental yields over time, lifting the capital value of the property's 577,000 sq ft of gross floor area (GFA). Singapore Press Holdings' Paragon, located further down Orchard Road, has a GFA of 950,438 sq ft and was valued at S$1.82 billion in June, or over S$1,900 psf.
With a stagnant property portfolio since listing, distributable income growth at FCT has been slower than market leaders like CapitaMall Trust (CMT). For the quarter to September, distributable income at CMT was up 29% to S$53.2 million, almost twice the growth at FCT of 15.7% to S$10.3 million.
CMT owns 10 shopping malls, including Parco Bugis Junction and Plaza Singapura. It also holds a 40% stake in Raffles City and a 20% stake in CapitaRetail China Trust. About 150,000 to 200,000 sq ft of retail space will be added at Raffles City with the completion of an asset enhancement programme now underway. CMT aims to increase its asset size to S$8 billion by 2010 from S$4.8 billion as at March 31, 2007.
Even without acquiring The Centrepoint Shopping Centre, FCT plans to keep pace with the growth of the likes of CMT, targeting a doubling of its portfolio size within three years.
To do this, FCT plans to acquire three malls currently owned by its parent over the next 36 months. They are Northpoint 2 (83,000 sq ft), Yew Tee Point (80,000 sq ft) and Bedok Mall (80,000 sq ft). These will bring FCT's local portfolio to 881,786 sq ft of NLA.
FCT has signed a put and call option agreement with a price range of S$139.5 million to S$170.5 million for Northpoint 2, which is expected to be injected into the trust by 4Q2008. That is expected to provide FCT with a DPU uplift of 4% in FY2009, according to a Citigroup report last week.
Some analysts also point out that too much emphasis is often placed on a REIT's acquisitions. "It is not the main avenue of growth," says JPMorgan analyst Christopher Gee. "The investment universe is tight. There are not that many properties available for sale."
REITs can lift their DPUs through a variety of other ways too. For instance, FCT stands to benefit from rising rentals with up to 60% of the leases in its portfolio coming up for renewal over the next two years. The lease expiry profile bodes well for FCT as most of its properties are below market rentals, notes OCBC analyst Winston Liew.
Meanwhile, FCT's S$12 million refurbishment of Anchorpoint Shopping Centre is on track for completion by December.
According to Tang, the previous positioning of the mall was "wrong", with too many furniture outlets. The mall will now have more F&B outlets and a broader range of retail concepts. The new makeover is expected to yield a 36% increase in average rental to S$7.20 psf, says Tang. As at September, over 90% of Anchorpoint's NLA has been committed or is in advanced stages of discussion.
Anchorpoint's asset enhancement is the first in a series of three such initiatives. FCT will start on its second mall asset enhancement initiative at Northpoint in 1Q2008, which will cost about S$30 million. It will be integrated with Northpoint 2, creating a single shopping mall with a total NLA of about 232,000 sq ft. Similar enhancement plans are in the pipeline for Causeway Point.
Still, acquiring The Centrepoint Shopping Centre would go a long way in changing the market's view of FCT. And, many investors will be watching to see whether the REIT delivers on its plans to acquire the three malls it has earmarked, and expand its portfolio. Failing to do so could colour the market's view of other REITs that F&N plans to launch. According to F&N spokesman Hui Choon Kit, it plans to launch an office REIT and industrial property REIT within the next six months.
Since the beginning of the year, units in FCT have declined 2.61% to S$1.49 last week.
At current levels, they offer a forecast yield of 4.5%. That's higher than the forecast yield of 3.6% offered by CMT. But to analysts and investors who have tracked the REIT over the past year, the higher yield reflects its less aggressive growth. By comparison, units in CMT are up 29.2% since the beginning of the year.
By The EDGE MALAYSIA (By Audrina Gan is a staff writer with The Edge Singapore)
Amid the redevelopment of the Orchard Road shopping belt, rentals have been rising strongly and property prices have soared over the last couple of years.
The Centrepoint Shopping Centre is one of the oldest malls on Orchard Road
One of the oldest shopping malls on Orchard Road, The Centrepoint Shopping Centre itself recently completed a S$56.4 million (RM129.5 million) enhancement programme that included the addition of a new eight-floor wing and a 17.5% expansion of its total floor space. But if you think that has made the owner, F&N, more willing to sell The Centrepoint Shopping Centre and F&N's REIT more eager to buy, think again.
According to Tang, FCT is uncertain about the impact that new retail properties on Orchard Road will have on rentals in the area.
"We're still monitoring developments in the Somerset micro-market," he says, referring to the neighbouring shopping centres across from The Centrepoint Shopping Centre.
Among the major developments coming up in the area are ION Orchard by CapitaLand and Sun Hung Kai Properties; and Far East Organization's Orchard Central development, both of which are scheduled for completion by the end of next year.
"[FCT] has adopted a wait-and-see approach for The Centrepoint Shopping Centre," says David Lum, analyst at Daiwa Institute. "But they might not have the luxury of waiting."
According to F&N's 2006 annual report, the Orchard Road site is worth some S$423.1 million, while the building is valued at S$86.9 million. Since then, the market valuation of the property has probably risen sharply, Lum says, raising doubts about whether buying it would be immediately accretive to FCT's distribution per unit (DPU).
From the perspective of F&N, on the other hand, getting the best possible price in a sale is the main priority. And, with many property market pundits calling for continued growth in the value of prime retail properties, holding back on selling The Centrepoint Shopping Centre makes sense.
"Capital values on Orchard [Road] will be re-rated," says Lui Seng Fatt, head of investments at Jones Lang LaSalle. "The wait will avoid the accusation of divesting it at a sub-optimised value."
Against that backdrop, some market watchers say it might be better for investors in FCT if the REIT simply stumped up for The Centrepoint Shopping Centre now, and then worked to improve its rental income over time.
FCT's current portfolio comprises the same three properties it owned when it listed in July last year: Causeway Point, Northpoint and Anchorpoint, with a total net lettable area (NLA) of 638,786 sq ft. The only acquisition it has made is a 27% stake in Malaysia's Hektar Real Estate Investment Trust (H-REIT) for RM104.5 million (S$45.4 million) in May this year. H-REIT owns two suburban retail malls, in Selangor and Melaka, with a total NLA of 944,501 sq ft.
The addition of The Centrepoint Shopping Centre would dramatically expand the value of FCT's portfolio, which currently stands at S$915 million.
Officials at FCT declined to say what the rental yields at The Centrepoint Shopping Centre are at the moment. However, given its prime Orchard Road location, there seems to be little reason FCT wouldn't be able to raise its rental yields over time, lifting the capital value of the property's 577,000 sq ft of gross floor area (GFA). Singapore Press Holdings' Paragon, located further down Orchard Road, has a GFA of 950,438 sq ft and was valued at S$1.82 billion in June, or over S$1,900 psf.
With a stagnant property portfolio since listing, distributable income growth at FCT has been slower than market leaders like CapitaMall Trust (CMT). For the quarter to September, distributable income at CMT was up 29% to S$53.2 million, almost twice the growth at FCT of 15.7% to S$10.3 million.
CMT owns 10 shopping malls, including Parco Bugis Junction and Plaza Singapura. It also holds a 40% stake in Raffles City and a 20% stake in CapitaRetail China Trust. About 150,000 to 200,000 sq ft of retail space will be added at Raffles City with the completion of an asset enhancement programme now underway. CMT aims to increase its asset size to S$8 billion by 2010 from S$4.8 billion as at March 31, 2007.
Even without acquiring The Centrepoint Shopping Centre, FCT plans to keep pace with the growth of the likes of CMT, targeting a doubling of its portfolio size within three years.
To do this, FCT plans to acquire three malls currently owned by its parent over the next 36 months. They are Northpoint 2 (83,000 sq ft), Yew Tee Point (80,000 sq ft) and Bedok Mall (80,000 sq ft). These will bring FCT's local portfolio to 881,786 sq ft of NLA.
FCT has signed a put and call option agreement with a price range of S$139.5 million to S$170.5 million for Northpoint 2, which is expected to be injected into the trust by 4Q2008. That is expected to provide FCT with a DPU uplift of 4% in FY2009, according to a Citigroup report last week.
Some analysts also point out that too much emphasis is often placed on a REIT's acquisitions. "It is not the main avenue of growth," says JPMorgan analyst Christopher Gee. "The investment universe is tight. There are not that many properties available for sale."
REITs can lift their DPUs through a variety of other ways too. For instance, FCT stands to benefit from rising rentals with up to 60% of the leases in its portfolio coming up for renewal over the next two years. The lease expiry profile bodes well for FCT as most of its properties are below market rentals, notes OCBC analyst Winston Liew.
Meanwhile, FCT's S$12 million refurbishment of Anchorpoint Shopping Centre is on track for completion by December.
According to Tang, the previous positioning of the mall was "wrong", with too many furniture outlets. The mall will now have more F&B outlets and a broader range of retail concepts. The new makeover is expected to yield a 36% increase in average rental to S$7.20 psf, says Tang. As at September, over 90% of Anchorpoint's NLA has been committed or is in advanced stages of discussion.
Anchorpoint's asset enhancement is the first in a series of three such initiatives. FCT will start on its second mall asset enhancement initiative at Northpoint in 1Q2008, which will cost about S$30 million. It will be integrated with Northpoint 2, creating a single shopping mall with a total NLA of about 232,000 sq ft. Similar enhancement plans are in the pipeline for Causeway Point.
Still, acquiring The Centrepoint Shopping Centre would go a long way in changing the market's view of FCT. And, many investors will be watching to see whether the REIT delivers on its plans to acquire the three malls it has earmarked, and expand its portfolio. Failing to do so could colour the market's view of other REITs that F&N plans to launch. According to F&N spokesman Hui Choon Kit, it plans to launch an office REIT and industrial property REIT within the next six months.
Since the beginning of the year, units in FCT have declined 2.61% to S$1.49 last week.
At current levels, they offer a forecast yield of 4.5%. That's higher than the forecast yield of 3.6% offered by CMT. But to analysts and investors who have tracked the REIT over the past year, the higher yield reflects its less aggressive growth. By comparison, units in CMT are up 29.2% since the beginning of the year.
By The EDGE MALAYSIA (By Audrina Gan is a staff writer with The Edge Singapore)
Glasstech Asia 2007
GLASSTECH ASIA 2007
6th INTERNATIONAL GLASS PRODUCTS, GLASS MANUFACTURING, PROCESSING & MATERIALS EXHIBITION
Incorporating HollowGlass Asia 2007
Venue: IMPACT Arena Exhibition and Convention Centre Bangkok
Challenger Hall 1, Bangkok, Thailand
Date: 15 - 17 November 2007
Time: 10:30am - 7:00pm
Open to Trade & Professionals
IMPACT Arena Exhibition and Convention Centre Bangkok
Glasstech Asia will be held at Impact Challenger Hall 1 which boasts of the world’s largest column-free exhibition hall, measuring 459 by 131.2 meters with a 16 meter high ceiling and providing a floor space of 60,000 square-meters is larger than eight football fields. Sophisticated sound-proof walls can divide the hall into three column-free areas of 20,000 square-meters each. Key features include state-of-the-art exhibition facilities and deluxe supporting conveniences and services.
Glasstech Asia 2007 incorporating Hollowglass Asia 2007 will take place at IMPACT Arena Convention & Exhibition Centre from the 15-17 November 2007, bringing together under one roof, all trade personnels related to the glass industry in Asia.
Opening hours are from 1030 - 1900. However, in case there are any last minute changes to the opening hours, please kindly contact Glasstech Asia 2007 before you visit the fair. (http://www.glasstechasia.com)
Architects
Contractors
Property Developers
Glass Manufacturers
Distributors & Suppliers of Glass Machinert and Parts
Engineers
Glaziers
Interior Designers
Window & Facade Installers
Automobile Manufacturers
Automotive Component Distributors
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