KL’s most desirable address

Artist impression of Banyan Tree Signatures Pavilion Kuala Lumpur

Two things came as a surprise to the marketing consultant behind what will be the world's first Banyan Tree Signatures in Kuala Lumpur how quickly it was sold out, and more astoundingly, that most of its customers were Malaysians.

“As you know, Malaysians are currently not a condo-buying group, especially when the price is high, and they usually prefer landed property,” remarks Tracey Lai, the marketing director of 1 Pavilion Property Consultancy Sdn Bhd, which handles sales and marketing for the RM1.4bil high-rise due to be completed in 2015.

Sandwiched between the Prince Hotel and Residence and Hakka Restaurant on Jalan Conlay opposite Pavilion KL, which some may remember as the site of the former Wisma MISC, Banyan Tree Signatures is well on its way to becoming the “most desirable address” in the capital, if its selling price and speed are any indication.

Lai: ‘About 70% of our buyers are local and 30% are foreigners.’

Lumayan Indah Sdn Bhd is developing Banyan Tree Signatures on a 1.46 acre plot at the junction of Jalan Conlay and Jalan Raja Chulan.

Set to tower over the Golden Triangle at a whopping 55 storeys, it will also be one of the tallest residential landmarks here.

Lai tells StarBizWeek in an interview that while its average selling price per sq ft was RM2,000, which is already at the top end for its location, the highest transacted price came close to RM3,000 per sq ft for the smaller units at the upper floors. In terms of the rental, Lai reveals that Banyan Tree Signatures is expected to be priced at RM10 per sq ft or higher, eclipsing even Pavilion Residences' RM8 per sq ft.

And for a development of its stature, Banyan Tree Signatures is sure to have courted some similarly high-profile, high net worth tenants. On this Lai is coy, holding firm to the confidentiality of her clients.

“There were prominent people who bought this but we can't divulge,” she says with a smile.

“About 70% of our buyers were local and 30% from Japan, Hong Kong, South Korea, Taiwan, UK, Middle East and Singapore, as well as a few from Indonesia. We did approach foreign buyers but the local take-up was so fast. Many were in fact referred to us.”

Lumayan Indah had, in fact, only signed the agreement with Singapore-listed Banyan Tree in October last year, after which some 80% of the private residences were snapped up within months.

Storied brands

The reason for this, Lai believes, is the confluence of the two brands backing the project Banyan Tree, known for its ultra-luxe spa resorts in various exotic locales, and Pavilion, owner of the award-winning shopping complex on Bukit Bintang.

Banyan Tree will manage the hotel and spa itself, giving the added allure of the service and amenities the brand is renowned for.

Imagine high ceilings, floor to ceiling windows, the tinkle of champagne glasses, and warm glow of crystal chandeliers against an evening panorama of KL.

Top that off with the ability to summon a limousine, yacht or even private jet through its concierge these are but some of the things in store for the owners.

The single-block development consists of 441 private residences, 51 serviced residences and 50 hotel suites, which are located at the two uppermost floors. Like the apartments, the hotel will also be the most expensive in town, Lai says.

The spa, a hallmark of Banyan Tree, will take pride of place on level 53 and the residences below. Plans are also in store for a rooftop deck with a gourmet sky bar and restaurant modelled after the Vertigo and Moon Bar of the Banyan Tree Bangkok.

Lai explains that the private residences were mostly sold to investors, with owner-occupiers making up some 30%.

“Our role does not end here (upon the sale) as we will be looking at property management for the owners, for example if they are overseas or busy and need someone to care for and rent out their units.”

Banyan Tree ventured into residences six years ago, but the one here will be the first under its “Signatures” concept, a model centred around the development of mixed use residences that will allow the firm to maximise returns vis-vis single-use projects.

How Banyan Tree got to where it is, is the stuff of real estate legend. In 1984, Ho Kwon Ping, former financial journalist and economics editor of the now-defunct Far Eastern Economic Review, along with his wife and brother, saw potential in a disused 600-acre tin mine in Phuket, Thailand.

Following years of site rehabilitation, they unveiled the maiden Banyan Tree resort in 1994, a precursor to the 30 hotels, 60 spas, 80 galleries and two golf courses they own today.

Couture living

The next item on Lai's agenda is the Pavilion Couture Suites, the last piece of the puzzle for Pavilion KL.

Situated on the corner between Chulan Square and the Westin hotel, the suites will be built exactly above the mall's retail floor, on which the street-fronting stores of Herms, Chopard, Versace and the rest currently stand.

“The interesting thing is we have been getting enquiries even though there isn't much information about it,” Lai says of the serviced residences, whose preview was on Thursday.

The suites, 175 of them, will feature sizes ranging from 686 sq ft to 2,206 sq ft, with some 70% of them smaller than 1,000 sq ft, Lai points out.

“We haven't determined the pricing yet, but it should be within RM2,500 to RM3,000 per sq ft,” she says, explaining that this was originally intended to form Pavilion's hotel component, but those plans were shelved in favour of the demand for private residences.

But with so many developments descending on the Bukit Bintang-KLCC stretch, most recently the proposal to build the Harrods Hotel right between Pavilion and Banyan Tree Signatures, is there cause for concern?

“A prime location is where everything comes together. You can't have your own brand standing alone without the support of other brands. A consumer wants choice,” Lai retorts.

“When you see many world-renowned brands converging in one place, it is a good sign, it means we have the potential to grow.”

Besides, she contends, the sheer force of big-ticket projects such as the RM26bil Tun Razak Exchange a few blocks away would only serve to enhance the appeal of the surrounding real estate.

Buying local

One thing Lai feels strongly about is how Malaysians sell themselves short when it comes to the local property market.

“If you compare us to other global cities, we are at the low end. I just returned from Singapore and you're talking about S$3,000, S$5,000 and S$7,000 per sq ft in the central business district (CBD),” she quips.

“Even in KLCC, we have been stagnant for a long time. We haven't moved from when we were hit by the financial crisis in 2008. My personal view is that the our CBD is very underpriced.

“We hit the RM2,000 per sq ft level years ago and nobody has dared to push beyond RM3,000. Our banks got a little worried as well about our prices.”

The problem, she adds, is that buyers tend to put their money elsewhere without thinking everything through.

“In my experience, a lot of our customers are Malaysian, yet they return here to purchase real estate.

“At the end of the day, we all want to come home. And you don't want to be stuck with a property that is 14 hours away and that will cost you a lot of money to manage.”

As someone who interacts regularly with investors, Lai has seen how foreign property purchases can backfire.

“A client of mine had her Melbourne apartment in the CBD revalued downwards by 10% at the point of completion. And when she decides to sell, it must be to an Australian.

“Malaysians can be so fearful that we're paying too much for our own properties so they go overseas and pay a lot of money for properties whose returns are 2% or 3% net.

“To be fair, a lot of people have made their money investing overseas. But the common belief that you can save on rental when your children study abroad by buying a foreign home is difficult unless you have currency gains and your returns are really good.

“You can do the same thing here for less risk.”

On her pick for the best locations to invest in, Lai says prime properties are ever reliable. “Good prime property will always have ready buyers, and they are the first to bounce back.”

By The Star

Reviving the phoenix

New-age: Artist impression of the Cheras Sentral. Chee (inset) says only the external walls of Plaza Phoenix are left.

Refurbishing an old building into something new and exciting is always a challenge. But at times, it isn't necessarily the biggest hurdle.

That is reserved for trying to revamp the image of the structure, especially if it has been stigmatised.

The formerly abandoned Plaza Phoenix shopping centre in Cheras is one such example, as it will probably be recognised as an ambitious (at its time of opening) but failed project that everybody today will probably remember for its bad points.

That's where Malaysia Land Properties Sdn Bhd (Mayland) comes in, which has taken upon itself to turn the unsuccessful Plaza Phoenix into a thriving, profit-generating, new-age shopping mall.

“A lot of people still remember it (Plaza Phoenix) as an old, rundown place that failed,” says Mayland retail general manager Michael Chee.

“At that time, the surrounding area in Cheras was not yet matured,” he tells StarBizWeek, adding that accessibility to the mall at the peak of its operations was also a major issue, as roads leading up to the shopping centre were always congested.

“We have a plan on how to market and progress the mall.”

Plaza Phoenix was opened in December 1994 but closed down in August 2005. In 2008, Mayland, helmed by Hong Kong-based hotelier and property developer Tan Sri David Chiu, acquired the mall.

“When we came in, the mall was abandoned and practically falling apart,” Chee recalls.

Since Mayland came into the picture, Plaza Phoenix, which is now known as Cheras Sentral, has been earmarked for a December launch. According to Chee, the mall already has a strong tenant mix to “pull in the crowds.”

“We already have an occupancy rate of about 75% to 80%,” Chee says, adding that the building has a built up area of about one million sq ft.

“For the retail portion, the gross lettable area is only about 500,000 sq ft. About 300,000 sq ft will be for walkways and car parks while the remaining 200,000 sq ft of space will be for the development of a hotel.”

Chee says Cheras Sentral will have around 1,250 car park bays.

Some 450 parking bays from Megan Phoenix, a building located behind Cheras Sentral that comprises office blocks and shop lots, will also be made available to mall-goers.

Among the mall's anchor tenants are TGV Cinemas (which has taken up about 2,000 sq ft), Jaya Grocer (27,000 sq ft), Celebrity Fitness (15,000 sq ft), Moon Palace Chinese Restaurant (20,000 sq ft) and Japan Home Centre (7,000-8,000 sq ft).

Chee says another 7,000 sq ft to 8,000 sq ft has been allocated for space dedicated to information technology products.

“We have Starbucks, Old Town White Coffee and Nandos, among others. We want to pull in the Gen-Y crowd, having lots of entertainment, leisure and food and beverage outlets in Cheras Sentral.”

Chee says Mayland is pumping in some RM125mil to revamp the mall, and with its tenant mix, expects to break even within the next five to six years.

“We may break even sooner than that,” he says, adding that the average rental rate at Cheras Sentral ranges between RM10 and RM15 per sq ft.

“The whole place has been redesigned. We've added a new tunnel to the car park, travelators and also glass elevators to give it a more modern look. It was a complete refurbishment. I think the only thing left (of Plaza Phoenix) are the external walls!”

To Mayland's (and Cheras Sentral's) benefit, the surrounding area has also been earmarked for development. Accessibility has been improved as the roads leading to the mall have been widened to reduce congestion.

Accessibility to the mall will also be enhanced with a proposed mass rapid transit (MRT) station sited across the road and linked via a pedestrian bridge.

“We're especially bullish about the location of Cheras Sentral because of the MRT station that's coming up,” says Chee, adding that MRT Co, the Government body overseeing the Klang Valley MRT, is also developing a multi-level carpark near the station.

“We will also be catering to a much more matured area today compared with when Plaza Phoenix was operating,” he says.

Chee notes that the prices of properties within Cheras had also escalated over the years, boosted by the developments (like the refurbishment of Plaza Phoenix) over the years.

“When we started refurbishing Plaza Phoenix years ago, people were auctioning their offices at Megan Phoenix and the starting price was RM200 per sq ft. Today, the properties are being auctioned off at between RM450 per sq ft and RM500 per sq ft.”

He says other developments had also “sprung up” over the years.

“Developers are also starting to come in and develop property within the area. Our project has improved the value of the offices there. We like to believe that we are the impetus for developers to relook into this place as a potential growth area,” says Chee.

He admits that the new commercial developments coming up within the area will create competition for Cheras Sentral.

“Today, there are malls springing up everywhere like grass after rain. Everyday, there are new brands and designs coming up. Within Cheras you already have Cheras Leisure Mall, Jusco, and Sunway Viva City is also coming up. We have some competition, but competition is always good. Gone are the days when you set up a mall and pray that people will come. Today, you need to be able to pull in the crowd. You need to have the right tenants in the right location for the right people. Otherwise, it becomes a mismatch. (But) we believe that Cheras Sentral has those elements.”

Cheras Sentral's success rate is also underpinned by the fact that Mayland is a unit of Hong Kong-listed Far East Consortium International Ltd.

By The Star

City within a city

Techno-city: Eu showing how i-City will look like on completion of the projects

I-BHD founder and executive chairman Tan Sri Lim Kim Hong has been in business for a great many years. Yet, he never fails to light up at the mention of his pride and joy the ambitious, steadily forming township of i-City.

With the exuberance of a young man, Lim, 62, is likely to take you by the hand and break into a short sprint as he points out upcoming attractions at his RM5bil, 72-acre development in Shah Alam, which was exactly what happened when StarBizWeek paid a visit there this week.

Seven years hence, I-Bhd's flagship project is set to harvest the first fruits of its labour.

I-City is currently best known for the rows upon rows of LED-lit trees that make a familiar backdrop to weekend family jaunts. The owners of the project believe this is the year it begins the journey to becoming a serious player in property development.

When finished, i-City will be many things to many people theme park, mall, hotel, residence, office and concert venue.

“We have over the past few years been working behind the scene to get all the approvals and infrastructure in place. We have that today, and moving forward we are going to reap the efforts of our investments,” group chief executive officer Datuk Eu Hong Chew asserts.

The story of i-City stretches as far back as 1993, when Lim bought a parcel of land in Section 7 of the then sleepy Shah Alam at RM4 per sq ft.

The freehold development is the brainchild of Lim, who has throughout his life been a trailblazer on many fronts despite adverse circumstances.

The youngest in a family of 10 children, he dropped out of school after standard six and worked in a furniture-making shop in his hometown of Muar, Johor, as an apprentice.

Lim later struck out on his own as a carpenter. At 21, he signed up as a mattress dealer with Dunlop and within a short time, he was the biggest dealer in the country. Soon after, Lim started Dreamland, Malaysia's first spring mattress brand, earning him the nickname “mattress king”.

Dreamland was subsequently listed in 1987 and Lim sold the business in 1993 for RM350mil. He invested the money in several regional ventures as well as in the land on which i-City sits.

I-City is the brainchild of Lim

I-Bhd, which is 61.2%-owned by Lim, used to be a white goods maker known as Sanyo Industries Malaysia Bhd before he acquired and renamed it in 1999.

His technology-based township, however, did not take off until 2005, hampered by the onset of the Asian financial crisis.

Today, Lim has the state on his side, so much so that it agreed to build three flyover interchanges that will link i-City to the Federal Highway, making it only the second development to have exclusive access to the bustling expressway after Mid Valley.

Not only that, the Shah Alam City Council has written to the Land Public Transport Commission requesting that one of the stations along the proposed Kelana Jaya-Klang line of the My Rapid Transit service i-City.

With only 20% of the construction in place, large tracts of bare land still dominate the landscape of i-City, although if everything goes on schedule, this will not be the case for much longer.

Day and night

I-Bhd will spend the next 10 years realising the masterplan designed by Jon A. Jerde, whose portfolio includes the ritzy Roppongi Hills neighbourhood in Japan and S P Setia Bhd's KL Eco City.

I-City is billed as an “international business hub by day and lifestyle haven by night”. Lim and his team are working to create an integrated mixed development the likes of which has no comparison in Shah Alam, and which many thought preposterous to do in a place better known for its sedate suburbia and factories than as a thriving nightspot.

A successful urban centre will always have a business as well as entertainment component.

“The perception then was that no one wanted to invest in Shah Alam,” recalls Eu, Lim's loyal aide of 20 years.

Because of this, i-City was a tough sell. Lim, for example, had to contend with an initially miniscule plot ratio of 1:3 and approved built up of five million sq ft, which would not allow the company to maximise its potential.

After much wrangling, Lim got the green light to raise i-City's plot ratio to 1:5, giving it a total gross floor area (GFA) of 13 million sq ft and RM5bil in gross development value (GDV).

I-City was the first and still the only private sector-led MSC status zone in the state.

It also signed a management and development agreement with the Selangor government to make i-City a “technopreneur campus”, which comes with a host of incentives such as a temporary occupation licence for some 30 acres of neighbouring land, 24-hour operation for approved outlets, lower bumiputra sales quota of 30%, and the expanded plot ratio.

“If you look at all the successful urban centres in the world, there is always a business as well as entertainment component. Look at Roppongi or Canary Wharf (in London). When you have both day and night activities, the place becomes vibrant,” Eu explains.

i-Appeal

The quarter ended June 30 marked the first time I-Bhd recognised revenue from the residential portion of i-City in its books. Its turnover in the second quarter improved 63% to RM10.94mil from RM6.71mil in the same period last year, and net profit to RM2.97mil versus a loss of RM129,000, boosted by a three-fold increase in its leisure segment and a one-off gain of RM1.8mil from the divestment of its i-Home trademark.

For the first half of the year, revenue climbed 73.5% to RM19.59mil from RM11.29mil, while net profit stood at RM3.79mil compared to RM294,000 of losses a year earlier.

In the notes accompanying its financial results, the firm said it recorded a profit of RM7.6mil from its leisure operations during the six months to June, which was triple the RM2.2mil achieved in the previous corresponding period due to stronger revenue from its upgraded SnoWalk, more visitors to the LED Lightscapes and new theme park attractions installed in the final quarter of 2011.

Nonetheless, Eu explains that the contribution from its leisure division, which has so far been I-Bhd's main earnings engine, should balance out as the company progressively receives cash from the sales of its residences.

“We have only accounted for less than 5% of our unbilled sales in the second quarter,” he points out.

I-Bhd in May launched 173 units of the West Wing of i-Residence, which has been fully sold. It unveiled last month a further 173 units of the East Wing in addition to 20 villas.

Also sold out were its 220 small office/versatile offices (Sovos), whose completion and handover is expected in two years.

In terms of pricing, Eu says i-Residence has set a new benchmark in the area at RM500 per sq ft.

Capital values in the vicinity, he adds, have appreciated in tandem. “When we were building in 2008, the semi-detached houses behind us were going for RM750,000 and RM300,000 for terrace homes. Now it has doubled to RM1.5mil and RM600,000.

“We have demonstrated that there is demand for high-rise living in Shah Alam, which has historically favoured landed property. When we wanted to do this, people were sceptical. But we have proven that if you have a nice product and environment, high rise is possible.”

Of i-City's total 13 million sq ft, 8 million has been carved out for residential-type dwellings, 2 million for the mall and three hotels, and the rest for offices.

I-Bhd plans to roll out RM500mil worth of projects with one million sq ft of GFA and hit RM500mil in sales per annum.

Eu calls i-City a “dual-track” project as the tourism and property development elements can operate independently of each other.

“Every developer wants a recurring income stream, that's how the theme parks came about,” he elaborates.

“Once everything is done, we will also receive recurring income from the investment properties, namely the mall, hotels and carparks.”

Quantum leap

By the middle of the next decade, after i-City has come to fruition, it is envisaged to have 30,000 knowledge workers, 25,000 residents and 40 million to 50 million visitors from five million now.

And while the small office/home offices (Sohos) and Sovos make up a significant chunk of its residences at 5.2 million sq ft, or 40% of the total built up, Eu does not think there will be a crunch in demand, citing the growing number of technopreneurs who eschew traditional offices.

In the near term, I-Bhd aims to launch 950 units of its RM300mil GDV Sohos in November alongside its Water World@i-City that will feature the country's only tornado ride.

Also in the works are a luxury 43-storey condominium sited on 1.1 acres in Kuala Lumpur's Golden Triangle in Jalan Kia Peng, which is slated to be revealed in the first quarter of next year, and Clarke Quay @i-City, the working title for what will be its riverfront complex inspired by the Singaporean tourist haunt of the same name.

“The authorities here are learning from Singapore and have decided to do away with the cemented banks of Sungai Rasau, which snakes past i-City. The plan is to widen and deepen the river to give it a natural look,” Eu explains.

The river will be the focal point for its leisure district comprising its one million sq ft regional mall, hotels, an amphitheatre and an F&B hub.

For the rest of the year, Eu is confident that the company can maintain its growth momentum.

He expects net profit to be double that of last year in the financial period ended Dec 31, 2012 (FY12) on the back of progressive recognition of unbilled sales from its apartments and better ticket sales from its rides and attractions with the looming year-end holidays.

In a May report, Kenanga Research estimates that I-Bhd could see solid earnings growth in FY12 and FY13 of over 100% to RM11.4mil and RM24.3mil respectively.

“For the past five years, the group has maintained its net cash position with a zero gearing balance sheet,” adds the research house, which has a target price of RM1.51 for the stock.

On dividends, Eu shares that there is potential for higher payouts in the future. It has been returning one sen to shareholders over the past two years for a yield of 1% to 3%.

“Last time we were thinking about how to settle the problems. Now we will settle shareholders,” Lim chips in.

For him, this is more than a business investment. “It is not only about returns. Without love, this will not be successful. Without love, we would have surrendered,” he says simply.

“The challenge for us now,” Eu sums it up, “is to continue to increase the GDV of i-City. We have 10 years left under the current plan. Our job is not to complete it, but to enhance it further so we will have many more years to go.”

By The Star

A place to have fun and live in

Snowman models in Snowalk at i-City.

I-BHD's City of Digital Lights, which opened its doors in 2009, has never failed to attract visitors. On average, it receives 90,000 visitors a week or about five million visitors per annum. Group executive chairman Tan Sri Lim Kim Hong recalls that the traffic jam at the entrance to i-City that stretched some 10km when it was first opened and parking was free.

Subsequently, I-Bhd charged RM3 per entry into the car park and the jam had eased to about 5km and now it costs RM10 per entry. He says the traffic buildup is now mainly during weekends, public and school holidays.

“I-City has become a landmark in Shah Alam. We're now a crowd puller,” Lim says. The soon-to-be developed mega shopping mall known as CityMall and Water World@i-City, which is opening its door in November, are set to attract more visitors.

I-Bhd will be announcing its joint venture with a shopping mall manager in two weeks which will help manage its CityMall. The mall will be built on 14 acres in i-City.

“We will make the announcement in two week's time. It will be an agreement with a mall operator,” group chief executive officer Datuk Eu Hong Chew tells StarBizWeek.

He says the “regional mall” with an estimated gross development value (GDV) of RM500mil, is scheduled to open in 2015 and investors are said to be conducting their due diligence exercise at the moment.

Last year, I-Bhd entered into a 30:70 joint venture with Everbright International China to co-develop 30 acres in i-City. The development will be done in two phases. Phase one involves 14 acres with a GDV of RM1.5bil and will comprise a giant shopping mall and 2 million sq ft of mixed residential, Multimedia Super Corridor (MSC) offices and educational institute.

The second phase has a GDV of RM2bil involving 16 acres.

“Everbright will be the contractor and builder of the mall. They will fund the construction and act as a financier cum contractor,” Eu says, adding that CityMall will have a lettable area of one million sq ft.

Eu says i-City will introduce some food and beverage outlets fronting Sungai Rasau as the Selangor government plans to upgrade the river. Once completed, there will be a 1km river frontage beside i-City.

Meanwhile, a six-acre Water World@i-City will premier to the public in November just ahead of the year-end school holidays. The water park will be a new boost to I-Bhd's leisure business, which is already a major cash generator for the company.

Lim says a tornado ride, the first of its kind in South-East Asia, will be a major attraction for the water park.

“Many do not realise we are not just a property developer but one of the few listed companies who have gone into the leisure business. We have invested RM30mil in leisure and theme park attractions so far.

“This year we are investing RM25mil in the Water World. Our plan is to invest RM100mil in the theme park in three to four years,” Eu says.

While I-Bhd's tourism element may not be huge, it is already getting a decent number of visitors to its theme park, various rides and attractions. Currently, Snowalk and the digital lights are the main attractions which draw people to i-City.

“Our track record so far is we have managed RM1 turnover for each RM1 of investment. We invested RM30mil this year in the theme park and expect RM30mil revenue. This is based on actual historical performance. We did not plan for it this way.

“For every RM1 of turnover we receive 30%-35% in terms of profit. We think we should be able to continue this. We reckon we should at least get RM100mil from our theme park yearly after it is completed,” Eu says.

I-Bhd embarked on the leisure business several years ago to provide the company with a recurring income stream once the development of i-City is completed in about 10 years.

Since the launch of City of Digital Lights, revenue from the leisure segment has grown from RM2.8mil in 2010 to RM17mil last year.

As at June 30, I-Bhd's efforts at enhancing its tourist attractions at i-City are paying off as profits have more than tripled year-on-year to RM7.61mil from RM2.24mil previously.

“When everything is complete, recurring income will come from the investment properties namely the mall, hotels and carparks. The theme park is separate as it is not under property development,” Eu says.

As it realises its need for repeat visitors, Eu says, I-Bhd will add new attractions every year to draw in the numbers. Last December, it brought in seven theme park rides and so far this year it has launched the 10,000 sq ft children's gym.

“At the moment we are still about 90% night in terms of visitor arrivals. We hope that by next year when the Water World is open it will be two thirds night visit and one third day visit,” he says.

Acknowledging that it has not done much marketing, Eu says it will be conducting more marketing once its Water World is open.

“A lot of the crowd comes by word of mouth. But once we finish the water park, there will be a critical mass for us to promote to. A lot of shopping malls would like to have an entertainment component. The difference for us is that by the time we open our mall, we already have a proven theme park,” Eu says.

Moving on, three hotels from luxury four star to boutique hotels are in the pipeline as long-term investment.

“At the moment there are three planned four-star, three-star and boutique hotels. The latter two we may manage ourselves although we haven't finalised this. However, for the high end one, we will probably get an international hotel operator,” Eu says.

By The Star

Making all housing more affordable

WHEN I watched Usain Bolt cross the 100m line in an Olympic record of 9.63 seconds during the recent concluded Olympic Games, I saw a young focused sprinter with only one objective in mind; to cross the finish line in the shortest possible time. He amazed the world with his stunning performance again.

This reminds me of our journey in making all Malaysian housing more affordable. It is a race that requires the same amount of focus from all relevant stakeholders including public sector which is the Government, and private sectors, i.e. the property developers, home buyers and NGOs. Furthermore, like in a race where the sprinters have a sight on the direction and goal, all stakeholders in the housing industry should be aligned to the same goal before starting the race.

To understand what exactly drives up property prices, we need to analyse the various factors that influence the price of a housing development in Malaysia. This may help us identify the root cause and provide us with the correct remedies to make Malaysian housing more affordable and sustainable.

Let's begin by looking at what are the major cost components of a property project. Twenty or 30 years ago, land acquisition was only about 5% to 10% of a project cost, but nowadays, it can take up to a sizable 20% to 30% of the whole development budget before any value-added works are carried out on the land itself.

Land prices are ever rising due to scarcity of urban land especially in the major cities. For example, a piece of land that used to cost RM10 per sq ft in Mont' Kiara during the late 80's now can cost up to RM300 per sq ft. With rising land cost “eating” up a significant portion of the development budget, house prices automatically increase as a result.

The next major cost is the holding cost and construction financing cost of the project. The longer it takes to complete a project, the higher the financing costs of the project which will then increase the price of a home.

I mentioned this before in my earlier articles that property projects are sometimes subjected to one, two or more years of gestation period to obtain all the necessary approvals from the relevant authorities before they can be launched. The lengthy approval period will definitely affect the holding costs, and slow down the supply of housing units. If this approval time is not shortened, the rising demand will only further push the prices up. This is the basic market influence of supply and demand.

Another factor that influences the cost of housing, as highlighted by developers surveyed during the recent Real Estate and Housing Developers' Association (Rehda) media briefing, is the unsold and unreleased Bumiputra units.

According to the latest half-yearly property industry survey by Rehda, the number one reason for unsold properties comes from unreleased bumiputra units and has been so for the past two years.

With the requirement to hold on to the unsold bumiputra units, the additional holding cost is inevitably spread out to all the other house buyers in the form of higher priced units. Unreleased bumiputra units may also create a false impression of supply shortage in the market, and these can cause the prices to increase again. While we recognise the need for a bumiputra housing policy, the various states should agree on a transparent, auto-release mechanism to release bumiputra units if unsold beyond 18 months of launch, to make houses more affordable for everyone.

Apart from land cost, holding, and construction financing costs, another cost component that adds to the price of properties is utilities costs. In the past, utility companies would be expected to build substations and water storage towers as well as lay electrical cables and water pipes. Today, all these are required to be completed by developers themselves.

In a roundtable discussion on housing affordability, Housing Buyers Association secretary-general, Chang Kim Loong highlighted that the privatisation of utility companies have turned them into profit-oriented companies. Taxpayers' monies are no longer utilised to provide the basic necessities that they have paid for. This ends up making houses cost more because home owners end up bearing the cost of the infrastructure for these utility services.

In the illustration mentioned at the start of this article, a sprinter must stay focused on the targeted goal of winning the race without mental and physical disadvantages before and during the sprint. Imagine if Bolt needed to run against a headwind and carried a few pounds on his back all along the race. Would he still able to break the Olympic record and become a legend?

In the race to make the price of all housing units more affordable, the issues of high land cost, lengthy approval period, additional utilities expenditure and unreleased bumiputra lots are the burdens that are holding houses back from becoming more affordable. Solve these dilemmas and we will begin to break records.

● FIABCI Asia-Pacific Regional Secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

By The Star

An alternative to build-then-sell

There’s a solution that will solve the problem of abandoned housing once and for all.

AT a time when the Government is looking closely at the property markets to see if a bubble is forming, and examining the question of building more affordable housing, it is only natural that the attention becomes focused on the property sector, especially with the budget just around the corner.

The situation calls for good sense to prevail in a rather fluid property market. A good rule of thumb is that when there is talk of a property bubble, whether arguing that there is one or against, there may well be one forming.

Under such circumstances, it is advisable to take a good hard look at practices in the property market to see if any may be inadvertently contributing to an artificial increase in demand not supported by genuine needs of those who want to occupy the space.

We can argue till the cows come home about many things, but if there is not enough demand to occupy the space, property prices will come down. If the supply outruns demand too much, property prices will eventually collapse. The converse is also true, of course.

Rational owners, developers, financiers and even buyers don’t want that and are prepared to accept measures which deflate the balloon without exploding it. The only people who want volatility rather than stability in house prices are speculators, for then they can trade.

So it is in the interest of everyone to rein in excessive speculation in the property market to ensure that supply about matches demand. And if Malaysians are to benefit from Malaysian property, there’s nothing wrong with restricting foreign purchases or even disallowing it – countries around the world do that and they are none the worse off.

A key factor that could affect supply is the build-then-sell (BTS) concept, which housing developers claim could result in contraction of supply by as much as 80% and result in soaring prices.

Whether that claim is true or not is a moot point but really, there is an alternative to BTS. You can still have BTS but implement a system whereby money does not go to the developer until the certificate of fitness (CF) is issued.

Such a system already operates in countries such as Australia and will effectively solve the problem of abandoned housing schemes once and for all. That we have not solved this problem after all these years is a shame when the solution is so, so simple. It speaks volumes for the strong influence of developers and the poor efficacy of government.

Here’s how it works. Developers, as it is now, can come up with their plans and sell based on their plans and specifications. Buyers, if they are convinced, will pay their deposits and pay according to a schedule of completion.

But here’s the difference. None of the money the buyer pays will go to the developer. Instead it will go into an interest-bearing trust account. The developer, based on his project viability and the money in the trust account, will get commercial funding to bridge the gap.

Professional architects will be required to be independent and to certify the stage of completion. Banks will then deposit the money into the trust account based on stage of completion. At the end of it all, when CFs are issued and everything is properly certified, the trust account releases the money to the developer.

The Government can facilitate the setting up of such a scheme. Bank Negara can administer it and put the trust money in interest bearing instruments such as government securities and treasury bills.

Banks can give concessional bridging financing to the developers because there is or will be an equal amount in the trust fund upon which the loan is secured. The trust fund could easily pay an interest rate of say 2% a year, which is still below that of fixed deposits, while it is not inconceivable that at current rates, developers can get concessional financing at 4%.

Yes, the financing costs will increase but not by very much. Let’s assume the house costs RM300,000. We assume that land costs are half and building costs the other half – it will vary but let’s use this for simplicity.

Typically developers will make a profit on land costs too, especially if they had obtained agricultural land and then converted it for residential use. So financing would be for construction purposes, or in this case RM150,000.

However, this amount will not be needed immediately but according to the stage of building. We assume it is drawn down uniformly over the period. Thus, if RM150,000 is used over two years, then the full interest on it will apply for about just one year.

If the developer can get financing at a concessional rate of say 4%, and he gets interest on the trust account at 2%, then his final cost will be 2% for one year on RM150,000 or RM3,000. That’s a small price (1% of the house price) to pay for total security and even that can be easily recovered by a tiny increase in the profit margin of the developer.

Not only that, if such a scheme is implemented, you don’t have to be a giant developer with deep pockets. So long as your scheme and your business practice are sound, you are quite likely to get bridging financing from the banks because of the security of the money in the trust account.

As I said, similar schemes are in place in Australia and it is a mystery why such a scheme has not been implemented here. It will very easily and immediately solve the problem of abandoned houses, which arise because developers have absconded with the money and left unfinished houses behind.

Thousands of buyers not only do not have houses to stay in but have to service a bank loan on top of that – a severe double whammy to their lives and the lives of their dependents. They are at their wits end to find a way of making a living.

It is time that all involved get a heart, put their hands together and put to rest this easily solvable problem of abandoned housing once and for all.

P. Gunasegaram has personal experience of an abandoned housing scheme. The shareholders of this liquidated developer are still doing fine.

By The Star

Matching house price hike with pay

BUDGET WISH LIST: Properties show double-digit growth while salary increases remain in single digits

EVERY Malaysian knows that Tunku Abdul Rahman Putra Al-Haj was instrumental in obtaining independence for (then) Malaya from British rule 55 years ago.

Right after chanting "Merdeka" together with the rakyat in the newly-built Stadium Merdeka on August 31 1957, Tunku, the country's first prime minister, went straight to work on the implementation of development programmes for the-then Federation of Malaya. Central to his programme was improvement of the rakyat's well-being and it was his aspiration to see the rakyat have a roof above their heads and food on their tables.

Fast-forward and five-and-a-half decades later, Malaysians today are better educated and enjoy higher standard of living. The poverty rate has also been significantly reduced, accompanied by sound economic growth.

Malaysia has grown by leaps and bounds, yet some issues affecting the rakyat remain to be solved. One of them is housing.

Currently, people in the middle-income segment, especially those in the Klang Valley, Penang and Johor Baru, are finding it more difficult to own houses as the prices are beyond their reach.

Some five years ago, mid-range houses catering for the middle-income people and first-time home buyers in urban areas ranged between RM250,000 and RM400,000. But today, the prices for these types of properties have doubled while some crossed the RM1 million mark!

High property prices translate into higher rentals, which means urban dwellers who can't afford to buy their own houses have to spend a lot to pay the rent. This is in addition to the current high cost of living such as car ownership as well as rising prices of food, products and services.

Thus, it is not surprising that affordable housing and concerns of skyrocketing house prices top the wish-list of Malaysians for the upcoming 2013 Budget. These were highlighted in the public feedback for the Budget, submitted on Prime Minister Datuk Seri Najib Razak's blog in July.

While the government continues to address home-ownership issue for the low-income people, housing needs for the other segments of populations are left to the market forces.

Ideally, market forces determine the right price based on supply and demand. However, speculative activities - where people buy properties from developers during a launch and flip or sell the properties upon completion - have distorted the house prices and pushed them upwards.

This artificial rise in demand is the concern of many parties as the high prices are not sustainable and it could lead to property bubble to burst, a situation where there is a sharp drop in house prices and the property value falls. This would affect the balance sheets of households, developers and banks, and eventually, the whole economy.

And we shudder to think how this would jeopardise the health of the banking sector which in turn will affect the economy as seen in the 1997/1998 Asian financial crisis. In fact, many developers went bust during the crisis, owing to the bubble burst at that time.

Being profit-driven, developers continue to build more houses based on speculative and investment demands. However, should the supply outstrip demand, there will be a property glut, which would also negatively affect the economy.

Lately in the news, developers say that houses in Malaysia are still affordable and they attribute the rise in property prices to high land prices and cost of building materials.

However, we must remember that the rise in the land and building material prices does not match the higher rise in house prices. It was reported that in 2010, property prices in Penang and Kuala Lumpur rose by up to 40 per cent in 2010. Last year, prices of terraced houses in Bangsar Baru, Kuala Lumpur, appreciated by 158 per cent from 1999.

Compare the double-digit growth in house prices in the urban areas in the past couple of years to the low single-digit rise in the average salaries in the country, then you have an idea how affordable houses in Malaysia are.

The rakyat and developers alike are eagerly waiting for the Budget 2013, which is to be tabled on September 28, to see how the government addresses these issues.

According to economists, the government can adopt fiscal measures such as tightening lending guidelines, further increase the real property gain tax and lower further the loans-to-value ratio for the purchase of second or more houses. The government can also work with developers to build affordable homes on government-owned lands.

As for the interest rate, there is small room to manoeuvre as the current rate is supportive of the domestic economic activities, given the uncertainty in the external economy.

As we will celebrate Hari Malaysia on September 16, let us hope that more Malaysians will have their own roof above their heads, and not just a rented ones.

By Business Times

Two major townships on UDA's drawing board

UDA HOLDINGS Bhd is in discussion to develop two major townships in two separate states, over the the next 10 years.

As the land is state land, it is currently in negotiations with the two state governments on the multi-billion ringgit joint-venture projects and is confident to be able to strike the deals by year-end.

However, he declined to reveal the two states which have been chosen for the development projects.

The company chairman Datuk Nur Jazlan Mohamed said the ideal development in each township is between 200 ha and 400 ha.

"What I could tell at this juncture is that the townships will be located outside the Klang Valley, as the land in Klang Valley, which is as high as RM100 million a hectare, is too expensive for us.

"We are positive about the development in the two townships after our success in developing Bandar Uda Utama in Johor Baru.

"We are in the final stages of concluding the discussions," he told reporters at his Hari Raya do in Johor Baru yesterday.

Currently, Uda Holdings has 18 ha of land in Sepang, Selangor, which has been earmarked for the development of 1Malaysia Housing Programme (PRIMA).

In Johor, its current landbank is 120ha, which is at Bandar Uda Utama. Nur Jazlan said the joint venture for the two townships was crucial for Uda Holdings to sustain its operations.

He said the company is also pursuing more development opportunities by acquiring more land or having joint ventures with land owners.

It is learnt that one of the possible joint-venture partners of Uda Holdings is Johor Corp in view of the latter's huge landbank in Johor.

Last year, Uda Holdings signed a memorandum of understanding with Johor Corp's subsidiary, Johor Land Bhd, to develop a commercial development in Bandar Baru Tampoi in Johor Baru.

The company has also signed another memorandum of understanding with another Johor Corp subsidiary- Damansara Assets Sdn Bhd - to build apartments in the same township.

By Business Times

UDA in talks to develop two townships

JOHOR BARU: UDA Holdings Bhd is talking to two state governments to jointly develop two new townships.

Chairman Datuk Nur Jazlan Mohamed said the multi-billion-ringgit projects would be developed on state-owned lands spanning between 202.34ha and 404.68ha. However, he declined to give more details.

“But I can assure you that we are in the final stage of concluding our discussions and will make the appropriate announcement when the time comes,'' he said.

Nur Jazlan, who is also Pulai MP, said this at a briefing at the Pulai Parliament Hari Raya Open House.

He said UDA would continue to look for new lands in Johor, especially within Iskandar Malaysia, as it only had 121.40ha left in Bandar Uda Utama that could last for a few years.

Nur Jazlan said UDA had two options when developing new property projects either buying land in the open market or develop it on a joint-venture basis with the landowners.

“Whichever option is comfortable for us, we'll go for it. Buying land needs money and it depends on our cashflow too,'' he added.

Nur Jazlan said getting land in strategic places was becoming more difficult while land prices, especially in the Klang Valley, were very expensive.

“Land in the prime area of the Klang Valley can cost up to RM40mil per acre and we don't have that much money,'' he added.

Nur Jazlan said UDA would develop affordably-priced houses under the 1Prima project for first-time house buyers on its 16.18ha land near Sepang, Selangor.

Separately, he said the company would like to participate in the RM1.8bil redevelopment of Johor Baru city centre.

Nur Jazlan said although UDA did not own land in Johor Baru city centre, it hoped to undertake the project with landowners.

“We have the expertise in property development and welcome those (landowners) interested to work with us,'' he said.

By The Star

Tips on hiring a home contractor

Home repairs can be expensive but when you lack the knowhow to do it yourself or just don't want to get your hands dirty, getting an expert is a must.

However, we've all heard the horror stories of someone hiring a real bonehead of a workman, or worse a con man contractor that runs off with every penny even before that first brick can be laid!

To help you avoid these situations, the following are some tips to consider when hiring a trusty handyman to work on your house.

Get a licensed contractor

Getting a licensed and insured contractor is considered a “safe bet” in ensuring the repairs you're seeking will be up to standard and professionally done,” says Jamal Aziz, who admits to having done “extensive renovation work” to his house.

“It's also a good gauge to determine if the contractor is properly qualified and knows how to perform the job.

“It's also a big help if the contractor is insured, to cover for any potential damage that might be caused to the house, or if a worker gets injured during the duration of the work,” he says.

Jamal does point out that a licensed and insured contractor can be more expensive.

“Because of their credentials, they can demand top-dollar (ringgit) for their services. That's why a lot of people prefer to get a contractor that might not be licensed (on paper), but is reputable for doing good work at reasonable prices.”

Get good referrals and recommendations

Most times, people tend to hire contractors that have been recommended by a friend or family member.

“The best credential on a contractor's CV is, of course, the good work he's done and the referrals from satisfied customers,” says Frankie Liew, who has been a contractor for over 20 years.

Jamal says it's also important to ask friends or family members how the service was during the repair period.

“Was it professionally done? Were there delays? Was the price reasonable? These are questions you should ask before determining if the contractor is worth hiring.

“However, every job is different. If you can get multiple referrals for one contractor, even better. I have experienced satisfactory work from a particular contractor, but the person I recommended him to did not think too highly of the job that was done.”

Jamal also says if budget is an issue, one could try getting referrals on a few contractors, if possible.

“Some contractors are all-rounders, while others might be good at specific jobs.”

Know what you want

Once you've decided on a suitable contractor, explain to him your terms and conditions.

“You need to be specific on what you want or how you want it done. A contractor might suggest the most expensive items or fittings but if it's not within your budget, you should explain it upfront,” says Tan Chee Meng, who recently renovated his house.

“Also, don't be afraid to ask your contractor any questions that needs clarifying, such as cost, duration of the repairs or if he's done similar jobs in the past. The answers he provides could provide a gauge on the type of contractor he is.”

Have it in black and white

Many people take it for granted that once a contractor has been hired, all the terms and conditions agreed upon would be fulfilled.

“Things can always go awry. Though it can be a hassle for a lot of people, it's sometimes best to have the agreement in writing,” says former legal assistant Sam Cheong.

He says drawing up a contract would help protect both the contractor's and customer's interests.

“The contract should have details such as the tentative duration of the repairs, problems that may arise and how to rectify them. It should also have a clause on what needs to be done if there is a delay that is neither party's fault.”

Get a good deal

The biggest issue that arises when hiring a contractor is cost. The customer wants the lowest possible price while the contractor will try to maximise his profits.

“It's always best to check with friends or people that have done similar jobs to estimate how much it would cost. Obviously, if your contractor is asking for too much or too little, something is wrong somewhere. Unfortunately, most people are happy when it's the latter,” says Cheong.

“If your renovation is unusually cheap, your contractor could be cutting corners,” he warns.

Time of payment can also be an issue. Do you pay your contractor before or after he's completed the work?

“Most contractors usually ask for some kind of a deposit before the work starts. The balance is paid after everything is done. You should not pay everything to him prior to the job,” says Jamal.

“This is because the contractor might end up taking his own sweet time to complete the job or, worst still, run off with your money! I usually pay half before and half after,” he says.

By The Star