Mah Sing's first Sabah venture to use concepts from the group's Icon City
Property developer Mah Sing Group Bhd's managing director and chief executive Tan Sri Leong Hoy Kum is excited about the group's first property venture in Sabah.
“With our prime and very visible location in Kota Kinabalu's central business district (CBD), coupled with our planned offerings which meet market demand, we are very excited about the prospects of this new market,” he told StarBizWeek.
On March 26, Mah Sing had told Bursa Malaysia its wholly-owned subsidiary Capitol Avenue Development Sdn Bhd had entered into an agreement with Paduan Hebat Sdn Bhd for the proposed joint development of 4.26 acres of prime leasehold commercial land in the Sembulan District of Kota Kinabalu.
The land is located along the coastal highway in the CBD.
Paduan Hebat agrees with Capitol Avenue to jointly develop the land for RM39mil or about RM210 per sq ft.
Capitol Avenue was also granted an exclusive option to jointly develop with Paduan Hebat 4.408 acres at RM216 per sq ft or about RM41.5mil.
The option is exercisable by Capitol Avenue within six months.
According to Mah Sing's statement, the land is located opposite the five-star Sutera Harbour Resort and KK Times Square, and has direct road frontage to the Coastal Highway, one of Kota Kinabalu's main thoroughfares.
Other landmarks nearby include the Sabah Umno building, Ming Garden Hotel and Asia City.
The land will be the southern entry point to the CBD from the Kota Kinabalu International Airport, which is only 3.9km away.
The estimated gross development value is RM360mil for the 4.26 acres and RM470mil for the 4.408-acre option land.
Tentatively called Sutera Avenue, the proposed joint development will comprise multi-storey shop offices fronting the Coastal Highway with street mall retail lots and serviced apartments.
The joint development is expected to commence by the first half of 2013, and the 4.26 acres and 4.408-acre option land are expected to be developed over five years.
Mah Sing says the shop-offices with generous lot sizes will incorporate a new and unique concept (inspired by Mah Sing's 30 Jewels and Gourmet Street shops in its flagship Icon City project in Petaling Jaya) that will appeal to business owners, investors and future tenants.
The retail units will be designed for food and beverage outlets, and a street mall retail concept, in synergy with the shop-offices.
According to Mah Sing, demand for the development will result from the vibrancy of Sabah's economy which has benefited from the wealth of natural resources including oil palm, timber and oil and gas.
It also notes that there is a high population base, as Kota Kinabalu together with the surrounding towns of Penampang, Tuaran and Kota Belud has a population of about 800,000.
There is also a strong tourist trade, and Leong notes. “Kota Kinabalu is a premier tourist destination and is projecting about 2.75 million tourist arrivals in 2012, after attracting more than 2.63 million tourists in 2011. Close to 850,000 international tourists visited Sabah in 2011, with more than 300,000 from South Korea, Hong Kong, Japan, Taiwan, China, Macau and Singapore. More than half of Sabah's international tourists are repeat visitors, with close to 80% of them paying for accommodation during their travel. With their intimate knowledge of the region and frequency of their visits, we believe these tourists are also our potential investors.”
According to a report by consultancy CH Williams Talhar & Wong Sdn Bhd (WTW), major condominium developments launched in Kota Kinabalu's CBD have seen new benchmark prices.
Projects launched last year included 441 units of The Loft @ The Mall, priced from RM650 to RM820 per sq ft, and 333 units of Jesselton Residences, priced from RM630 to RM930 per sq ft.
“Also, 2011 saw the completion of condominums Alam Damai, Peak Vista and Hartamas Heights. Alam Damai, which was previously launched at RM230 to RM300 per sq ft, has reached RM400 per sq ft and above in the secondary market,” says the WTW report.
In addition to increasing land costs and scarcer choice development lands, the hype on condominiums is also spurred by the favourable economic climate backed by earnings from good palm oil prices over the last few years.
The report also notes that the existing supply of purpose-built office space in Kota Kinabalu currently enjoys high occupancy rates of 91% due to the lack of new supply and the conversion of some office buildings to hotels in the last one to two years.
Rents and values are rather stable although there are some upward movements in rents and values for prime and newer office buildings within the CBD.
“Overall, yields are estimated to be around 5%.”
“We are opened to landbanking or joint venture opportunities that fit our business model and have been scouting for land in Sabah, especially in Kota Kinabalu for some time. As an established property developer with 38 projects in Greater Kuala Lumpur, Penang, Johor Baru and now, Sabah, we have a wealth of know-how and a broad base of good consultants, both local and international, who can help to add value to the project,” says Leong.
“We want to leverage on our experience and bring in good architecture, new lifestyle concepts and design that make property management easier, thus creating value for the property.”
Leong also points out that Mah Sing Group's land consideration in the Sabah venture was quite reasonable.
“Land in nearby KK Times Square is being transacted at RM288 per sq ft. Certain suburbs have land transacted at RM150 to RM160 per sq ft on average, while current asking prices (for land in the suburbs examples like Likas and Tuaran) are touching RM200 per sq ft.”
He also points out that the land consideration is less than 10% of the gross development value of Sutera Avenue, which is estimated at a combined RM830mil.
“There is no other available land along the Coastal Highway/CBD which is so prime. All the other lands are already developed or being developed. Mah Sing will get to develop nett land as the surrounding areas are built up, and infrastructure is ready.”
(With gross land, land area has to be allocated for roads, infrastructure, open space, setbacks and land to be surrendered back to government [if required]). This means about 30% land area can be saved when the nett land is developed. In other words, the developer has 30% more saleable land area).
Leong also says the Sabah venture fits well into the company's quick turnaround strategy.
“We can launch the project quickly as the location is matured and infrastructure is ready. Mah Sing intends to start registration of interest by the third quarter of 2012.”
By The Star
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