Hua Yang bullish on earnings growth

Artist Impression of One South in Seri Kembangan. It is Hua Yang’s biggest project in the Klang Valley.

Property developer Hua Yang Bhd is looking forward to another year of impressive sales and earnings growth, says group chief financial officer May Chan.

The group, which is known for developing residential properties in the affordable segment, will also be celebrating the 10th anniversary of its listing on Bursa Malaysia this November.

It plans to launch projects with a combined gross development value (GDV) of RM815mil for its current financial year ending March 31, 2013 (FY2013).

Chan says this will more than double the RM400mil GDV of properties launched by Hua Yang in its previous financial year.

Chan says the group is looking to build on the momentum of financial year 2012's record breaking success.

The bulk of Hua Yang's sales in FY2013 will be from its Klang Valley developments, namely Phase 4 of One South in Seri Kembangan (GDV of RM200mil) as well as new leasehold service apartments in Shah Alam (GDV of RM175mil) and Desa Pandan (GDV of RM160mil).

The Desa Pandan development of two blocks of serviced apartments and two levels of retail units is on 1.55 acres in Kuala Lumpur, and is slated for a January 2013 launch.

“There will be around 400 units, sized from 540 to 1,000 sq ft. We have not firmed up prices yet. But interest is strong, with 2,000 registrations to date,” says Chan.

Meanwhile, the Shah Alam service apartments is due to be launched in October and is priced at more than RM300 per sq ft.

Another significant sales contributor in FY2013 will be new launches with a GDV of RM105mil in the group's Bandar Universiti Seri Iskandar township in Perak.

“We are also looking to acquire more land for future growth. It will be another busy year for us,” Chan tells StarBizWeek.

Presently, the group has an undeveloped land bank of 766 acres which has an estimated GDV of RM2.4bil across the Klang Valley, Johor, Perak and Negri Sembilan.

Chan says the group is looking to build on the momentum of FY2012's record-breaking success, where Hua Yang posted a 111% year-on-year increase in net profit to RM53mil while revenue rose 62% to RM306.4mil on the back of strong sales growth which was largely driven by its ongoing One South development.

One South

One South is Hua Yang's biggest project in the Klang Valley, with a GDV of RM920mil, consisting of retail units and offices, serviced apartments, soho (small office/home office) units and office towers on 16.7 acres in Seri Kembangan.

About 70% or RM365.6mil of Hua Yang's sales of RM520mil in the previous financial year (FY2012) came from One South.

As of end-June, phase one which consists of retail and office units is 90% sold.

Phase 2 and 3 which consist of 795 units of serviced apartments is 100% sold.

This year, the strong sales momentum for One South has continued with the April launch of phase 4 or Hua Yang's first ever soho development, namely Flexis@One South.

Two types of layouts are offered, consisting of single level units with built-ups of 475 and 628 sq ft, as well as duplex (split level) units ranging from 1,106 to 1,271 sq ft.

A typical soho unit will come with air conditioning, instant water heater, kitchen cabinets with sinks, gas hobs, audio intercom handset, Astro-ready cables and fibre optic points for high-speed Internet access.

Duplex upper floor units will have laminated timber flooring as well as a washing machine, fridge and a wardrobe.

“That way, residents need to purchase very little prior to moving in, as we have sorted out most of the fixtures,” says Chan.

Flexis@One South will have facilities on the 21st floor that ranges from a sky infinity lap pool, sky wading pool, sky pool bar, jacuzzi, floating sun deck, floating cabana, sauna, reflexology path, sky garden, barbecue deck, children's playground, rock climbing wall, meditation deck, yoga deck, Zen Garden, gazebo, study room, games room, boxing room, kitchenette, sky dining, sky lounge, sky bar to a sky fitness centre.

“Flexis@OneSouth will be the first in Seri Kembangan to have a 40m sky infinity lap pool, with a pool bar.”

Meanwhile, Chan says the first block of 266 units in Flexis@One South is fully booked, with prices starting from RM250,000 per unit.

The second block of 158 units in Flexis@One South was recently opened for bookings, and is selling at higher prices of around RM480 to RM500 per sq ft.

According to Chan, Flexis@One South is priced reasonably compared with other new high-rise developments in Seri Kembangan. Chan also points out that selling prices were in line with market demand and conditions.

“Phase 2 serviced apartments were sold at RM320 per sq ft in May last year. Subsequently, Phase 3 units were sold at RM370 per sq ft in July 2011.”

Chan says Hua Yang had bought the land for One South at RM55 per sq ft in December 2008.

“Recently, we looked at land around One South and prices have reached more than RM200 per sq ft.”

The final phase 5 and 6 of One South is likely to consist of a last block of serviced apartments and two blocks of office towers. “Initially, there plans for a hotel. But we are still exploring and looking at the best options for the final phases.”

One South is due to be completed by 2018.

Future growth

When asked whether Hua Yang is overly dependent on One South to drive sales growth, Chan says, “Not at all.”

She points out that One South has less than 25% of the combined GDV of RM815mil in new launches of projects for FY2013.

“This year, the Shah Alam and Desa Pandan developments will also drive our sales.”

As at March 31, 2012, Hua Yang's total unbilled sales from five ongoing developments stood at RM488mil.

The five ongoing developments are One South, Bandar Universiti Seri Iskandar township in Perak, Taman Pulai Indah in Johor, Senawang Link in Negri Sembilan, and Symphony Heights in Selayang, Selangor.

Developed since 2002, the 838-acre Bandar Universiti Seri Iskandar (BUSI) is Hua Yang's biggest township project.

“BUSI's GDV is estimated at RM1.2bil and it is slated to have about 6,000 residential and commercial units. So far, we have completed about 2,000 units. so, we still have eight to 10 more years to go for BUSI.”

Meanwhile, less than 20% of the 477-acre Taman Pulai Indah remains to be developed while the Senawang Link light industrial development has a GDV of RM45mil.

The Symphony Heights serviced apartments will be completed this year.

“All these, coupled with new phases and developments that will come on-stream in FY2013, gives the group a good earnings visibility for the next two years,” says Chan.

She is also confident about seeing continued positive response from buyers in the affordable market segment, such as first-time home owners, newly-weds, young adults and small families.

Chan says the group had been on an upward growth momentum since 2008, and is on track to achieve revenue of RM500mil by FY2014 and RM800mil by FY2018.

Concerning dividend payouts, Chan says the group usually pays out 25% of net profit as dividends.

For FY2012, the group has proposed a gross first and final dividend of 15 sen per share, which translates to a net dividend payout ratio of 30% of net earnings.

“This is the highest ever dividend payout.”

By The Star

The pros and cons of redeveloping used land

The Bukit Bintang Plaza located in the heart of Kuala Lumpur will be integrated with the My Rapid Transit project.

Some call it urban renewal, others prefer to call it regeneration. Yet there are those who prefer a less politically charged term like transformation. By whatever name it is called, each of these involve changes to land use.

The last several years, the Government announced several mega projects which involve some form of change in the use of land. There is the Sungei Besi Airport, which involves the conversion of an airport and its surrounding land into a mixed commercial project where hotels, service apartments and retail commercial space will be incorporated. In the case of the Sungai Buloh Rubber Research Institute, that involves the change of agricultural land to commercial use.

While both involve changes of considerable degree, the first is a redevelopement, while the second is development. The dropping of the “re” carries huge connotation. In the case of development, the landowner has the mandate to plan what he wants out of that piece of land. He can carve it out how he pleases, in whatever shapes and sizes. He can allocate different purposes for each of the parcels he has carved out and can plan the timeline for each of the parcel and why the development of one should precede another, a developer in Section 13 says.

He is the master planner. And his task begins on a clean slate where he wants to put the different buildings, and whether there will be a library for each of the community he plans to build on that piece of land.

In the case of redevelopment, that freedom to do as he pleases may not be available, especially where the acreage is small, and on both sides gleaming structures are already in place. His task is to give new uses to the land but within narrow bands. He may demolish the tired-looking commercial building and put in a new one. He does not have wide perimeters to seek changes to the land use, simply because that would be dictated by land laws, which differs state to state. The above is a simplistic explanation between development and redevelopment. There are many legal and social issues that have been omitted about land use.

In the Klang Valley, because of the high premium put on land, every little bit of empty land is used even when the structure is an eye sore. In other words, there is a lot of ad hoc development going on and some of these structures may seem totally out of place and out of sync with the environment.

As one drives along the highway, out of nowhere, a boxy monstrous structure emerges from what used to be a field. Because the approval has been given, the road infrastructure has to change in order to provide access to that building and traffic has to be detoured and directions to enter the building have to be put up to lead traffic there.

On one hand, it may benefit the authorities as an empty field generates no taxes, and they will have to pay staff to maintain the field. On the other hand, the community has lost another open space.

It is a balance between revenue and social cause. Currently, the regeneration or renewal that occurs in and around the Klang Valley are economic driven, says a town planner.

A developer who purchased a factory lot in Section 13, Petaling Jaya says when it was a factory, it was generating taxes of about RM40,000 a year to the local authorities. After he has put up the structure redevelopment has taken place the project is generating revenue of about RM900,000 for the local authorities.

The same applies to the many serviced apartments that are coming up in that area. Serviced apartments, although with a strong residential element, are built on commercial titles. It generates a lot more revenue for the authorities than something that is on residential title. While it is revenue generating for the authorities, it is money depleting for those who buy into such projects because taxes and utilities are 25%-30% higher. These are issues that local authorities should consider as they approve a project on commercial land status. The same explanation applies to density. The higher a building, the more offices and residences and the higher the revenue it generates for the town council.

Which takes us to the next question: Should renewal benefit the people or the developer and local authorities? It should not be a zero sum game.

Models for urban renewal

There are many models for urban renewal. In the case of Kampung Baru, it involves a parliamentary process. In Malaysia, and other parts of the world, land use is a political matter. It is also a state matter. Which may be the reason why there is no one-size-fits-all urban renewal policy.

While the renewal of Kampung Baru is one model, it is a political decision and involves many stakeholders, there are other simpler models of urban renewal. A town planner who declined to be named says the changes that are still in progress in Section 13 in Petaling Jaya is another model, and one which is vastly different from that of the Kampung Baru renewal process.

In this particular case, the landowners themselves took charge.

“The collaboration among landowners in Section 13 would be among the more cohesive although there are challenges. Some of them had invested heavily in machinery and were not ready to move until land prices move further up.

“Other landowners did not want to go into the challenges of becoming developers,” says a town planner who declined to be quoted. So they sell out to developers who are able to see the opportunities that such a proposition offers.

Parcel by parcel, the land continues to change hands. Says the principal of a real estate company: “There is huge demand with land prices fronting Jalan Semangat going for about RM400 per sq ft or thereabouts.”

Among the most popular form of developments seem to be high-rise serviced apartments targeted at the young professionals. Centrestage project by Cherish Springs Sdn Bhd will have 1,160 comprising 352 units of serviced suites and 775 office suites. There will also be 33 units of retail shops.

F&N too is planning a RM1.6bil mixed development in its ex-dairy premises in Section 13. Approval for a F&N tower, a hotel, offices, retail outlets and residential suites is pending.

The Pacific Star, with a gross development value of about RM900mil, will have about 260 serviced apartments and office tower and office suites.

The project will be undertaken by developer Island Circle Development (M) Sdn Bhd, who is also building the 21-storey Pacific 63 at PJ Central, near Jaya One. Another serviced apartment project in that location is Avenue D'Vogue, with 300 units, by the Inspiration group. More of such projects are expected in the future.

Inter-connectivity

With traffic flow being a concern, local town planner Ahmad Jefri Clyde, the director of Garis Architects, has suggested inter-connectivity within the buildings in Section 13 in order to reduce traffic on the roads in that area.

This loose cohesive structure came about because landowners were not agreeable to the proposal given by the authorities initially, which resulted in them coming together on a single platform to seek the help of a planner.

This was the “workable model” for Section 13, the town planner says. There are a myriad of models.

In the case of PJ Sentral, the regeneration work undertaken by Gapurna Sdn Bhd is slightly different. Gapurna owns the 12 acres located behind PJ Hilton and set up a company PJ Sentral Sdn Bhd to construct new structures after it has demolished existing ones. That is the plan.

Gapurna's director Imran Salim says the plan is to have another hotel in the area, which will be competition for PJ Hilton, which is owned by Tradewinds Corporation Bhd.

“Gapurna's objective is to develop a business district in that 12 acres to complement the surrounding areas like PJ 8 and other upcoming developments in that area,” says Imran, adding that there is a need for critical mass.

“There is a need for a business district within Petaling Jaya,” Imran says. The projects he is considering will have a gross development value of RM2.2bil.

Currently, what Petaling Jaya has are commercial areas located in each of the housing areas. Although PJ New Town used to be a centre of activities, the lack of work done there to renew the place has resulted in much of the renewal being carried out today outside the PJ New Town Centre. It is happening in Gapurna's PJ Sentral behind PJ Hilton and across the Federal Highway near the Tun Hussein Onn Hospital.

This trail of renewal continues on to Section 13, as a source from the Petaling Jaya City Council says. In a way, it is this lack of focus to plan a proper district which has resulted in ad hoc groupings of new buildings and office towers coming together with serviced apartments. A single thread links them all, they are all built on commercial land status, which generate much revenue for the council.

But spanking new buildings, hundreds of small apartments ranging from 500 sq ft onwards and retail may not amount to successful renewal of a township.

Road infrastructures, open space and parks with ponds and other water features, recreational areas which may take the form of sports fields, libraries and games courts are part of the renewal equation. Unfortunately, these important pieces of the puzzle are missing in the regeneration that is happening today.

Economics vs social benefits

Often, one may have heard about the proliferation of malls in Petaling Jaya and Kuala Lumpur and the weekends are used visiting one mall or another. That is because there is an abundance of malls around us. One one drives along Lebuhraya Damansara-Puchong, a monstrous brown building has emerged next to the highway. But are there new parks? This is a question only the populace can address and demand from their local representatives.

Renewal is not only happening in Petaling Jaya. It is also happening in Kuala Lumpur. Recently, Tradewinds Corp Bhd said it will demolish the Crown Plaza Mutiara Hotel and Kompleks Antarabangsa to make way for the RM6bil Tradewinds Centre project. The company said the project will take about seven years to complete and is expected to commence in early 2013. The project will be built on a 2.8ha at Jalan Sultan Ismail, Kuala Lumpur.

This is another model of renewal. In this particular case, two buildings will give way to several because the new structures will go upwards.

The integration of Bukit Bintang Plaza (BB Plaza) and possibly the Yayasan Selangor building adjacent to it with the My Rapid Transit station in the new structure is yet another model. In this particular case, it is value-adding to regeneration because a new service, in this case a public rail project, will be incorporated.

Which takes us to yet another question? Should renewal benefit the community and the rakyat? Certainly, otherwise, what's the objective of the renewal process if it were to benefit only the local authorities, or the developers or in this case, MRT Co?

Should it be purely economically driven? No, there has to be a balance. In the case of the BB Plaza, public transportation will be improved by leaps and bounds with the rail service. It provides connectivity and at the same time, enables access and connectivity to business and commerce. It will also help to reduce congestion.

While the inclusion of rail transport is a service, what good or value add do parks and green lung offer? As more people live in high-rise, and even if they do not, there is a need to link with the environment, with trees and parklands, to have a bit of space. In short, to get away from the maddening crowd.

If one were to consider some of the world's most expensive and desirable properties, be it an office or a sanctuary to return to after a hard day's work, chances are these properties are located next to or on a park or some green open space. Consider Hyde Park in London, Central Park in New York, Hyde Park in Sydney.

The Petronas Twin Towers, straddled by the KLCC Park, is a fine example of a successful redevelopment

Closer home, there is the KLCC Park and The Binjai on the Park. Incidentally, that too involves a change in land use. That location used to be a race course, today it houses some of Malaysia's most desirable real estate. There is money to be generated in open space, but this channel is slower and more sustainable and more beneficial to the populace than just plonking a mall next to the highway, or a high-rise residential development next to a set of traffic lights.

City Hall and Petaling Jaya City Council did not respond to questions or attempts to seek interviews with them.

By The Star

Successful redevelopment projects in Malaysia

MALAYSIA has successfully undertaken a number of redevelopment projects over the years and one of the most recognised and touted is the Kuala Lumpur City Centre (KLCC) development that sits on the former site of the Kuala Lumpur Race Course.

The gleaming Petronas Twin Towers which still holds the record as the world’s tallest twin towers has undoubtedly put the country on the world map.

The KL Sentral project, which sprung up from what used to be an old workshop and depot for KTM Bhd, is also hailed as another regeneration project that has spruced up the city’s landscape.

VPC Alliance (KL) Sdn Bhd managing director James Wong says the growing interest for redevelopment of old buildings is mainly confined to Kuala Lumpur’s city centre as the majority of the old buildings in the capital city are located there.

Wong says the landmark redevelopment projects that have been completed include that of the KLCC Twin Towers, the KL Sentral, the Integra Building @ The Intermark was built on the site of the former City Square, and Menara Binjai which used to be the Chua’s family bungalow.

Going forward, he says projects in the pipeline include that of the redevelopment of Kampung Baru into a mixed development by Kampung Baru Development Corp; the Jalan Cochrane government quarters into a shopping mall, serviced apartments and a hotel; Warisan Merdeka’s 100-storey office tower cum hotel; and the former Pudu Jail into Bukit Bintang City Centre comprising a transit centre, service apartments, office space, recreational area, hotel and commercial space.

There is also the redevelopment of the Sungei Besi military airport into the Bandar Malaysia mixed development; the ex-Unilever site in Bangsar into service apartments, shopping mall, hotels and office towers; a 15.9 acre site in Section 17, Petaling Jaya into a mixed development comprising commercial, retail and residential units; and Crowne Plaza Mutiara Hotel and Kompleks Antrabangsa in Kuala Lumpur into service apartments, hotels, and office towers.

DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh says economic obsolescence dictates that the old use or form is no longer viable and it makes lots of financial sense to redevelop the land.

“Redevelopment is part of the life cycle of urban rebirth, renewal and rejuvenation that creates new life out of the old that are no longer relevant,” he adds.

According to Koh, usually where a whole area is involved and there will be many political issues, a decisive and focused political will from the government will be required to make it successful.

He says the KLCC, KL Sentral, Bangsar South and Mid Valley are really very successful projects in rejuvenating the city and adding value to the surroundings.

“Pavilion KL is another recent example although there are mixed views on whether the old school building should be retained for adaptive reuse rather than knocking down the whole place,” Koh says.

Mah Sing Group Bhd group managing director and chief executive officer Tan Sri Leong Hoy Kum says the 100-storey Warisan Merdeka tower which is currently being planned is an example where historical value will be preserved whilst the economic value is extracted.

“PNB which initiated the project has clarified that Stadium Merdeka and Stadium Negara will be preserved, and the mega project will be developed on the remaining surrounding land and designed to complement and blend in with the heritage theme.”

Leong says Mah Sing is involved in two redevelopment projects – Icon City, Petaling Jaya on the 20-acre site of the old Matsushita factory, and Southgate on the site of the old Malaysian Tobacco Corp company building.

Leong’s picks of overseas regeneration projects include Canary Wharf in London, Cheonggyecheon River in Seoul, and the industrial town of Bilbao in Spain.

“In Bilbao, the opening of the Guggenheim Museum designed by American architect Frank Gehry is deemed to be one of the most important structures of the last 30 years, giving a new lease of life to Bilbao by spawning various service industries,” he says.

Meanwhile, Koh’s overseas picks of good redevelopment projects include Dockland in London, Xintiandi in Shanghai, Sudirman CBD in Jakarta and Grassmarket in Edinburgh.

By The Star

Mayland to turn Cheras Sentral into bustling spot

PROPERTY developer Malaysia Land Properties Sdn Bhd (Mayland), which is set to open a second shopping centre by year-end, expects return on investment (ROI) in as early as five-and-a-half years.

Typically, a mall in Malaysia could take up to 10 years to see ROI and at best, in seven years.

Mayland, which owns and operates the Sri Hartamas Shopping Centre, is currently working on Cheras Sentral, the shopping complex which was previously Phoenix Plaza and is now undergoing a RM110 million transformation.

The projected time to recoup investment in Cheras Sentral is commendable even though the investment is possibly only a fourth of what it would take to build an entirely new mall and the renovated mall will have less retail space.

The previous mall, Phoenix Plaza opened in 1994 but closed in 2005.

Mayland's retail general manager Michael Chee is confident that the company will be able to make the mall, which once failed, into an bustling spot.

The mall, with 500,000 sq ft of net lettable area (NLA), anticipates 85 per cent occupancy on the opening day, which will be before Christmas this year. Rent at the malls is expected to be between RM4.50 and RM5.00 per sq ft.

Chee projects that the tenants within the mall will be able to rake in between RM150 million and RM200 million in sales in the first year of operations.

In an interview with Business Times, Chee, who has 25 years of experience in the shopping complex scene, said the mall had previously failed due to the mismatch between the tenants and the surrounding demography.

By taking this into consideration, as well as the needs of the growing Gen Y population, Chee feels he now has the right formula for the new upcoming mall.

"Cheras Sentral is being positioned to cater to the Gen Y, who tend to visit the malls on an average of one to two times a week and make it a social activity," Chee said.

He said that very often, people are judged by where they shop as it points to the status of the individual.

Cheras Sentral will include coffee joints, leisure and entertainment elements as well as health and lifestyle. It will house a karaoke, eight screens cinema and Celebrity Fitness.

The catchment for the mall include 1.6 million people within a 15 minutes drive, with 65 per cent of the average monthly household income at RM10,000.

The anchor tenant at the mall is Jaya Grocer, that will occupy 24,000 sq ft and a 15,000-sq ft Chinese restaurant that can seat 1,000 people.

Mayland, a company controlled by Tan Sri David Chiu, bought property in 2009 and took on the task of refurbishing it and adding a hotel and car parks. The entire investment is for RM160 million.

The hotel, to be either a three or four-star category, will carry the group's hotel brand - Silka or Dorsett and will have about 300-odd rooms. The hotel is scheduled for opening at year-end or early next year.

Chee said things could only get better when the MRT line is ready in three years.

By Business Times

Mayland in talks to acquire 2 malls

KUALA LUMPUR: Malaysia Land Properties Sdn Bhd (Mayland) is in talks to acquire two malls in the northern part of Peninsula Malaysia, as the group looks to grow its shopping complex business.

"Our discussions are in the preliminary stage. Together, both malls have a net lettable area (NLA) of 1 million sq ft," Mayland's retail general manager Michael Chee said of the mall he is in talks with.

Chee told Business Times that while the group prefers to acquire existing malls, it is also open to looking at greenfield projects.

The property developer model is to own and operate the shopping complex rather than be just a shopping complex manager.

Mayland's first shopping centre is the seven year old Sri Hartamas Shopping Centre which has NLA of 200,000 sq ft in Kuala Lumpur. The second mall Cheras Sentral will open at the end of 2012 with 500,000 sq ft of NLA.

By Business Times (by Vasantha Ganesan)

PJ Section 13 gets a new facelift

SECTION 13 in Petaling Jaya is probably one of the most recent examples of urban renewal. The 260 acres bordered by Section 14, Section 12 and Section 17 started out as an industrial area in 1960s and 1970s. At that time, some parts of Section 17 were rubber plantations and the setting up of factories there seem to be a good idea. The population around Section 13 was scarce and there was an abundance of land.

Growth, progress and development of residential properties soon resulted in communities forming around the residential areas of Section 13.

Today, there are plans to turn it into a business park.

A town planner who declined to be quoted says current environment can no longer sustain the manufacturing sector in that area.

“There are labour issues, traffic involving large trucks all of which are having a negative impact on the surrounding lots,” he says.

He says it was not possible to have shophouses there, resembling those in Section 14. Neither was there a need for another town centre as there was the commercial areas of Section 14, Paramount and SEA Park and Section 14 and further away, SS2.

It was then decided to turn it into a service-oriented commercial and business area to complement surrounding areas. The more focused approach has also allowed the landowners, planners and the local authorities develop the place according to their respective aspirations based on certain guidelines.

Demolished

“There are different ways to go about urban renewal or regeneration. There is the Kampung Baru model where laws and statues have to go through a parlimentary process. Or it can be done on a more ad hoc basis, as what is happening in some parts of Kuala Lumpur and Petaling Jaya where old buildings are demolished to make way for new ones,” he says.

Over at Section 13, the template for change started decades ago when the Malaysian Feedmill factory was purchased by niche developer Jaya33 Sdn Bhd and converted into the current Jaya 33 which comprises several blocks and a retail entity.

The second phase is the ongoing development of Plaza 33. The successful conversion of that piece of factory land subsequently resulted in the construction of Jaya One, by Tetap Tiara Sdn Bhd, another family entity.

Says the town planner: “The collaboration among land owners in Section 13 would be among the more cohesive although there are challenges. Some of them have invested heavily in machinery and were not ready to move until land prices move further up.

“Other land owners did not want to go into the challenges of becoming developers,” he says.

The main driver behind the changes was purely economics. A factory may pay RM40,000 annually to the local council. If that same piece of land were used for serviced apartment, assessment collected may be about RM1,000 a year. If there are 100 units, there is RM100,000 going into the coffers of the local authorities.

Garis Architects director Ahmad Jefri Clyde says it is easier to transform an area when the landowners hold the title deeds to large tracts of land and are fairly united, compared with having to deal with hundreds or thousands of houseowners.

Clyde is the planner for Section 13.

Controlled activities

Fraser & Neave Holdings Bhd, for example, owns about 13 acres. The Aluminium Company of Malaysia sold its 10 acres in 2004 to Tetap Tiara Sdn Bhd for RM47mil for the development of Jaya One.

Says Clyde: “It is economics that is pushing for change. Factories are getting old. There is a greater demand for land for other uses. So there is the push and pull factors.”

Instead of manufacturing, the area will now be used for limited commercial use, where the land use will not be as intense and activities are more controlled, as in the setting up of a showroom and other service-oriented activities, says Clyde.

Several of the landowners are planning to build serviced apartments, which means there will be a huge residential element there. Two of the factories have been converted to churches. These two elements, says Clyde, will help to form the basis of a community.

Because there will be a lot more people on that 260 acres in time to come, it is important to provide connectivity among the buildings to reduce the number of cars on the road, Clyde says.

“People travelling from one part of Section 13 to another can walk, which takes the pressure off roads like Jalan Universiti, Jalan Kemajuan and Jalan Semangat,” he says.

The commercial and residential elements will result in a population of about 103,000 people living and working there as the plot ratio will be increased to 3.25 compared to 2.75 before.

Clyde says developers will have to adhere to green issues and the provision of landscaping to beautify the area.

By The Star

Out of necessity in the Klang Valley

The KL Sentral development on the right is progressing smoothly. (Bottom pic) The old KL Central Market.

The redevelopment and regeneration of huge swathes of Kuala Lumpur and other parts of the Klang Valley is taking on a fresh fervour with new residential and commercial projects set to juxtapose with the existing city skyline and landscape.

The upcoming regeneration projects that will change the skyline and landscape of the Klang Valley include that of the new Kuala Lumpur International Financial District (KLIFD) at the old government quarters at Jalan Tun Razak; Bandar Malaysia at the former Royal Malaysia Air Force site in Sungai Besi; Warisan Merdeka in Stadium Merdeka and Stadium Negara; and the redevelopment of Pudu Jail.

There are also the planned redevelopment of the Pekeliling Flats at Jalan Tun Razak and the former Wisma Angkasa Raya building in Jalan Ampang.

In the Klang Valley, the development of the 3,300 acres of the Rubber Research Institute land in Sungei Buloh has also hyped up much interest among industry players.

According to Mah Sing Group Bhd group managing director and chief executive officer Tan Sri Leong Hoy Kum, the scarcity of prime land in good locations as well as rising cost of good land and properties have made it more commercially viable to redevelop land.

“These kind of land generally serves an established demographic, and the projects will be able to attract a ready target market,” he says.

Leong says redevelopment is a good way to effectively utilise prime landbanks, unlock land value, and pursue new projects that cater to current market needs.

These projects will hopefully raise Kuala Lumpur's liveability index and catapult it to join the ranks of the other global cities.

“At the same time, it is also important to give due consideration to whether the proposed sites have buildings with historical importance or architectural significance. With input from all stakeholders and with careful planning, a win-win solution can be reached.”

Leong points out that the Kuala Lumpur Central Market is a good example of a redeveloped project as it holds historical importance and architectural significance due to its strong art deco design language, and its ability to be re-purposed to modern needs.

“Back in 1888, it used to be an open wet market and by the 1930's a permanent structure was put up. Towards the end of 1970s, the Malaysian Heritage Society decided to preserve the building under its heritage programme. It is now a tourist attraction and a one stop shopping centre for local products such as handicraft, art, kebaya, songket, batik and a wide variety of Malaysian cuisines,” Leong says.

Benefits of regeneration

Property consultancy CB Richard Ellis executive director Paul Khong says redevelopment projects will bring back vibrancy to the city and if done right, this renewal factor will continue to enhance property values.

“A good and new major redevelopment project like the KLCC can turn around the entire locality into a popular neighbourhood, change the focus of the super prime locations in the city, increase capital values and demand, and change the real estate value patterns of the entire neighbourhood,” Khong points out.

He notes that although the authorities are moving in the right direction with regard to redevelopment initiatives, “there must be a well-planned and holistic approach to this effort.”

“It is necessary to adopt a well planned approach in the redevelopment process and proper town planning must be done with the relevant authorities taking into account or anticipate the problems which are also associated with such redevelopment projects.

“I think we need a mechanism like Singapore's where a general consensus from about 80% of the unit owners are required to allow for a redevelopment of their own residential project. A strong legislation on this aspect will be welcomed,” Khong adds.

VPC Alliance (KL) Sdn Bhd managing director James Wong concurs with Khong.

Wong says while the redevelopment of major parcels of land in and around Kuala Lumpur is healthy as it is part of a regeneration process of the city, “the scale of all these developments is too much and will create an oversupply in the property market and affect property values.”

“Hence, all these redevelopment projects have to be phased to take into consideration the supply and demand in the property market. Otherwise, the planned projects will generate millions of square feet of residential towers, hotels, office blocks and shopping malls.

“Based on the moderate economic growth of about 5% for the next three years and with Malaysia recording a net negative outflow of investments to the tune of RM48.9bil from 2009 to 2011, there will be not enough effective demand to absorb the millions of square feet of these upcoming developments,” Wong cautions.

He says DBKL as the planning authority has a role to play to regulate the supply by providing planning approvals on a staggered basis instead of giving blanket approvals.

And the banks also have a role to play by insisting on market and financial feasibility studies to ensure the viability of a project prior to granting bank loan approval.

“The Greater Kuala Lumpur covers an area of 2,793.27 sq km and is administered by 10 municipalities surrounding Kuala Lumpur. Each local authority and municipality currently acts independently on planning approvals without referring to the planning approvals of the other neighbouring municipalities. Amongst the 10 municipalities, there should be a coordinating committee to oversee the planning application and planning approval of large development projects.

“The coordinating committee should carry out studies on the impact of these projects to the property market and the environment. This is to enable developers to have greater awareness of the incoming supply and they will be able to better plan and phase out their developments. Such a measure will help to minimise another crisis similar to the Asian financial crisis of 1998 where many commercial buildings and large projects in Kuala Lumpur failed and were abandoned,” Wong explains.

To avoid such a potential situation, Wong echoes Khong's calls for the local authorities to emulate the planning model of Singapore's Urban Redevelopment Authority (URA).

“Singapore's URA's planning is so systematic. They will ensure all properties are developed and used according to the master plan for each individual lot parcel. The URA will only release land parcel for sale for redevelopment purposes if there is effective demand in that particular location, and for each land parcel, there are clear cut planning guidelines of the number of storeys, type of uses, density, and the number of car parks a developer can built,” Wong says.

DTZ Nawawi Tie Leung executive director Brian Koh says given the escalating land cost and the need to better utilise scare land resources, there is a lot of potential to redevelop the older properties in the capital city.

“These projects will bring back life, commercial activities and value to blighted areas within the city centre, and create an anchor for the revitalisation of the entire area.

“The potential impact to the property's value and the overall property landscape will be significant over the long run. An anchor project will help to trigger off the forces, so it will help if we have a financially strong consortium to manage such projects, especially if it involves a big area that need acquiring and putting capital into,” Koh says.

Maintaining heritage

Koh also points out the need to take into account conservation issues for the older parts of the city where there are cultural or architectural heritages.

VPC Alliance's James Wong concurs with Koh on the need to preserve and restore heritage and historical buildings.

“Many old buildings in KL's city centre are of neo classical and the art deco design, and such buildings should be preserved and restored,” Wong says.

He says the Kuala Lumpur City Hall (DBKL) has a policy involving redevelopment of high rise buildings whereby a developer has to maintain the front facade and allow redevelopment of the balance of the building to a higher density. “This is so that the face' of the old buildings will still maintain its character.”

He stresses that the charm of a city is in the old buildings, “hence old buildings should be restored and the front facade of the original building be maintained.”

“The Government encourages the preservation of historical buildings including those of the Portuguese, Dutch and British periods by providing consultancy services on the proper way to carry out the conservation work. The public's attitude towards building conservation is also gradually changing since the successful adaptation and reuse of the Kuala Lumpur Central Market.”

Wong says the government has appointed organisations such as Malaysia Heritage Trust, DBKL's Conservation and Townscape Unit, and the Museum and Antiquity Department of the National Museum to implement, monitor and supervise conservation activities of old buildings.

By The Star

OSK Property sees higher earnings

You’re hired: (From left) OSK Property Holdings Bhd director Ong Ju Xing, executive director Tan Sri Ong Leong Huat, executive chairman Datuk Nik Mohamed Din, Embassy of the People’s Republic of China in Malaysia economic counsellor Xuan Guoxing, BUCG overseas department general manager Li Dao Song and BUCG (M) Sdn Bhd managing director Yang Hong Lin at the signing ceremony appointing BUCG as the main contractor for the Atria Damansara project.

KUALA LUMPUR: OSK Property Holdings Bhd (OSK Property) executive director Tan Sri Ong Leong Huat expects the company to have a significant increase in earnings for the financial years ending Dec 31, 2012 (FY12) until FY14 from unbilled sales worth RM800mil.

The RM800mil unbilled sales are contributed by eight concurrent projects. “These unbilled sales can be realised over the next two to three years,” he said, adding that the eight projects had a gross development value (GDV) of RM5bil.

In FY10, OSK Property recorded 134% year-on-year increase in net profit to RM11.87mil on the back of improved sales from its projects located in the Klang Valley, Seremban and Sungai Petani, Kedah. In the following year-end FY11, it saw a further rise of 107% to RM24.62mil compared with its results in FY10.

The increase was again attributed to continuous good take-up of its properties launched and also due to advanced stages of construction work progress in some of its projects.

In the first quarter ended March 31, 2012, the company's net profit increased 174% to RM12.05mil compared to the corresponding quarter last year, attributed to yet again higher sales achieved from its projects.

In addition, certain phases of the projects have reached advanced stages of construction, resulting in a higher percentage of profit recognition.

Ong said: “Now that the group is independent and fully focused on property development, the significant growth in the company is evident.”

Yesterday, the group signed an agreement to engage Beijing Urban Construction Group (BUCG) via BUCG (M) Sdn Bhd as the main contractor for the Atria Damansara project that was launched last November.

BUCG's portfolio includes 19 Olympic projects for the 2008 Olympic games held in Beijing. This included the national stadium, the national indoor stadium and the Olympic village.

“We are very excited to have engaged an international company with an impressive track record and financial standing for the redevelopment of Atria.

“We are confident that BUCG will demonstrate strong execution capabilities to complete the project in a timely manner with a high quality delivery,” Ong commented.

The project would see the redevelopment of Atria, which would see the demolishment of the existing four-storey building structure and two three-storey car park buildings.

The construction would be carried out in two phases, the first of which would be for a four-storey lifestyle shopping mall. The second phase would feature two 16-storey small office flexi office (SOFO) towers.

“The demolition has been done.

“Also the earthwork and foundation has been complete. We are now proceeding with construction of the building,” Ong said.

He added that the Atria project could be partially completed by end-2013, and be operational by early 2014. “The full completion of the project could be in end-2014,” he said.

The 5.48-acre freehold Atria project valued at RM1bil, has a gross floor area of 294,683 sq ft and a net lettable area of 208,400 sq ft. “We have close to 400 SOFO units, which was completely sold within three hours of launching. There are still hundreds on the waiting list,” Ong said. The gross development cost stands at RM270mil, which includes infrastructure costs.

OSK Property has a current landbank size of 1,700 acres. “The 1,700 acres is not inclusive of the eight current projects mentioned earlier. Of course, we are still looking to increase our landbank size,” Ong said.

In terms of the outlook for the Malaysian property market, Ong said there was no real property bubble. “There is still a need for houses, as seen in recent take-up rates of property launches,” he said.

By The Star