IJM Land’s Seri Riana Residence Phase 2 opens sales to hot response

After having previewed to pre-registered buyers last weekend, IJM Land’s Seri Riana Residence Phase 2 condominium launched officially last weekend.

According to the developer, more than half of the units for sale were already booked during the preview.

Phase 2 consists of two high-rise blocks (Blocks F and G) with a total of 284 apartments. With contemporary designs, the units offer built-up areas ranging from 1,259 sq ft to 1,830 sq ft and are priced at approximately RM600 per sq ft. Each unit is made up of either three- or 3+1 bedrooms with two to four bathrooms.

Seri Riana Residence comprises the later phases of the Riana Green East.KL development in Wangsa Maju.

Phase 2 of Seri Riana Residence comes after Phase 1 was launched in the middle of last year. According to the developer, 95% of Phase 1 has been sold, achieving sales of RM330mil.

Seri Riana Residence is a condominium developed by Elegan Pesona Sdn Bhd, which is a joint venture between IJM Properties Sdn Bhd and MSL Properties Sdn Bhd. IJM Properties is also the developer of Riana Green condo in Tropicana, Petaling Jaya.

“Every home has been designed with a great blend of luxury and a touch of nature. It offers privacy with a breathtaking view of the Kuala Lumpur skyline or Melawati Ridge,” says IJM Land chief executive officer and managing director Datuk Soam Heng Choon.
Seri Riana Residence benefits from being located next to Aeon Big (formerly known as Carrefour) Wangsa Maju and Wangsa Walk shopping mall, as well as only 15 minutes’ drive to Mont’Kiara using the Duta-Ulu Kelang Expressway (DUKE), or to Jalan Sultan Ismail using Jalan Jelatek.

Seri Riana Residence is also located not far from the Sri Rampai LRT station, which is six stops from the KLCC station. The developers have said that they will build a covered walkway and link bridge to the LRT station.

The development comes complete with  facilities designed for the whole family which includes 2.8 acres of themed landscaped parks, a sports centre, children’s play zone, green lawn, 40m lap pool, sauna and more.

Seri Riana Residence  is targeted for completion by the first quarter of 2017.

STAR, October 21, 2013

New LRT extension to connect Kelana Jaya to Klang through Shah Alam?

PETALING JAYA: The feasibility study of the third light rail transit (LRT 3) line connecting Kelana Jaya to Klang through Shah Alam is expected to be completed by the end of next month and the project is expected to cost between RM8bil and RM9bil, said a source close to the matter.

“This will translate into about RM230mil per km on average to cater to the most populated and industrialised cities in Selangor.

“Looking at the environment now, where the Government is pushing towards the development of public rail infrastructure networks, it should receive the green light soon.

“After the feasibility study by Syarikat Prasarana Negara Bhd is completed, it will then go to the relevant authority for approval.

“And this will be good news for the people in Shah Alam and Klang as well as contractors involved in the ongoing RM7bil LRT extension of the Ampang and Kelana Jaya line to bid for more jobs,” the source told StarBiz.

Some of the main stations, according to the source, would be Glenmarie, Stadium Shah Alam, i-City, UiTM, Bandar Baru Klang, South Port and Bandar Sultan Sulaiman.

“There are several route options being proposed and this LRT 3 is going to be connected to the Kelana Jaya line and the mass rapid transit line.

“The LRT 3 is going to be 30km to 34km in length with projected ridership of 22,000 passengers per hour per direction,” he said.

As of 2010, Shah Alam has a total population of 216,000 while Klang has 909,500 people.

Currently, the Greater Kuala Lumpur region is witnessing the ongoing construction of the RM23bil Sungai Buloh-Kajang MRT project undertaken by MRT Corp and its project delivery partner, a joint venture between Gamuda Bhd and MMC Corp Bhd.

The line with 31 stations serves a corridor with an estimated population of 1.2 million people.

Meanwhile, Prasarana’s LRT extensions of the Kelana Jaya and Ampang line with additional 13 stations for each line will be fully completed by June 2015.

The extension of the Kelana Jaya and Ampang line will see the construction of 17km of elevated tracks extending from Kelana Jaya station to Putra Heights and another 17.7km track from Sri Petaling station to Putra Heights.

The Kelana Jaya line extension will increase passenger capacity up to 98,000 during peak hours, while the extended Ampang line can cater to 79,800 passengers.

Upon completion, the two lines will connect at the Putra Heights station, forming a complete rail system in the Klang Valley.

STAR, October 21, 2013

RM6bil Mid Valley Southkey taking shape in JB

JOHOR BARU: Shopoholics in the Southern region will be thrilled as a new mall similar to Mid Valley Megamall in Kuala Lumpur will be set up here.

The RM6bil project named Mid Valley Southkey Megamall will be about 30% smaller than the megamall in Kuala Lumpur but will feature a similar design.

IGB Corp Bhd group managing director Robert C.M. Tan said that the project was a joint venture between IGB and Johor based Selia Pantai Sdn Bhd who had a 30% stake in the project.

“The first phase of the mall has officially started today and we expect the building to be completed by end of 2016.

“While the new mall may be slightly smaller than the original Mid Valley Megamall, it will have many enhanced features,” he said adding that a lot of improvements had been incorporated based on mistakes made in the construction of the first mall.

Tan said that Mid Valley Southkey Megamall would be built within the Southkey township area and would be built on 36 acres.

“Once completed, the mall will be largest shopping mall in Johor,” he said adding that the integrated development will include eight 30-storey tower blocks, four office blocks and one serviced apartment with 180 units.

The megamall itself will have six levels with about 12,000 parking bays for visitors.

“We target to receive an average of 2 million visitors in a month but we are still studying the local demographics to see what kind of outlets will be roped into the project.

“The mall will however include a cineplex, bowling alley and other similar leisure facilities that are available at the Mid Valley Megamall,” he said adding that three hotels including Cititel Johor Baru, Boulevard Hotel and The Gardens hotel would be included in the project as well.

“The Gardens hotel will be built in the second phase of the project as we plan to build another version of The Gardens Mall in Johor as well,” he said.

Meanwhile, Selia Pantai founder and group chief executive officer Datuk Mohamed Zaini Amran said that a lot of improvements would be done to the infrastructure leading to the mall.

“The road from Bakar Batu to Jalan Tebrau will be widened to six lanes and we will also be building direct ramps from the Eastern Dispersal Link (EDL) leading into the megamall and exiting as well.”

 

The Star, October 21, 2013

Investors on hold pending budget

PROPERTY agents polled in the Klang Valley say Budget 2014 is expected to weigh considerably against investors. The more experienced investors are reading the signs around them and are taking a wait-and-see attitude while the braver ones are going ahead with their investment plans.
“Many may only make a decision post-budget,” says Peter, a senior negotiator who declined to be named.
Investors are concerned about the re-imposition of the real property gains tax (RPGT) in its full force. Of late, different media have delved into that possibility.
“Because property prices are so high today, there is the likelihood that this group of buyers will be targeted, as opposed to those buying for their own stay,” says an agent.
The situation in the property market today is different from before, Peter says, as investors have several issues to content with.
“Property investments are not as simple as before. The RPGT will be a deterrent, while the possible imposition of the goods and services tax (GST) may raise prices, which may induce those who do not yet own a property to just buy a unit,” says Peter.
The re-imposition of the RPGT and the entry of GST are not the only concern among the more experienced investors.
They are also concerned about the flat or falling rental market.
Peter says there was a time when investors bought into a project with a larger downpayment than currently on a progressive payment method and used the rental income to cover the full or partial monthly mortgage commitment. Today, that may not be possible because of the low downpayment, says Peter. The present developers interest bearing scheme has changed that.
“A one-room apartment in some locations may be more than RM600,000 today. At that price, he will only get a gross yield of 4% if he were to rent it out at RM2,000 a month and he has to pay for the various monthly charges.
“The days of using your rental income to cover your mortgage loan is over,” Peter says.
His comments are similar to another agent specialising in the Sri Hartamas/Mont’Kiara location in Kuala Lumpur.
She says rental has been trending down for several years.
“Most landlords are more accommodating and acceptable about reducing rental,” says Jenny.
She says the monthly rental for a 640 sq ft one bedroom unit used to be RM2,200-RM2,300 in 2011. This has gradually been reduced to RM2,000 today, a drop of 10% to 15%.
“There are more than 400 units in Plaza Damas 3 today. Some of the units were under a guaranteed scheme. Buyers who opted for this scheme had their units with a built-up of 500 sq ft rented out for RM3,000 a month. This amount includes car park, utilities and house keeping. If you remove these items, the rental is about RM2,500 to RM2,600 a month. With the end of these scheme, more units will be entering the market, putting new pressure on rental going forward,” she says.
The drop in rental is prevalent in most locations in the Klang Valley with the rental of larger units in Mont’Kiara facing a greater reduction.
“It is likely that rental may drop further,” she says, adding that returns have been trending downwards from 7% to 8% to 4%-5% today. It is likely to go down to 3% for condominium units.
“You cannot expect your rental to cover your monthly instalments,” she says, adding that much of this situation has to do with urbanisation. “We see this situation in Beijing, Shanghai and Singapore – part and parcel of the urbanisation process.”
The downtrend facing rental of condominium units is due to the supply entering the market.
Says Vincent Ng of Kim Realty: “Tenants stay in a place a year or two and move from the older ones to the newer block. This is prevalent in any location where there are multiple blocks coming up in a single location. The owner may refurbish his unit but the public areas are beyond his control.”
Ng says that while the one and two-bedroom units – with rentals between RM1,000 and RM2,000 – continue to be in demand even in the older blocks, it is the larger and older units that may face a problem in rental.
“There are so many new condominiums coming up and many of them have excellent facilities compared to the older ones,” says Ng.
However, Ng cautions that each location and project is different and has its own selling points. University Tower, located at the busy crossroads facing the University Malaya Medical Centre for example, enjoys good demand, despite not having the facilities or the ambience of the more modern contemporary units found in Mont’Kiara and Hartamas.
“Rental for University Tower is going up instead of going down,” says Ng. It is the only apartment block in that site. Oversupply will push down rental but that is not the case with University Tower because there is no other residential block within walking distance of the hospital.
An agent who declined to be named says North Point in Mid Valley used to be rented out at RM7,500-RM8,000 three years ago. “The last year, the landlord, a China national, instructed me to rent it out at RM6,000. There were no takers. He has just given new instructions to rent it out at RM4,000 a month. Ironically, people are willing to pay RM1.5mil for it, which is double the launching price,” says the agent.
Like the most fundamental of economic theory, when it comes to condominium rental, the theory of demand and supply applies, as with any goods and services.

Leave RPGT alone, Govt urged

GEORGE TOWN: The Federal Government should leave real property gains tax (RPGT) alone in the 2014 Budget.
New Bob Group director Dr Lee Ville said that if the RPGT is increased, then it will dampen the property market, which has already started to cool.
Lee is also president of ERA Malaysia, which is the world’s leading real estate brand.
It is expected that the Federal Government will raise the RPGT rate to 30% from 15% for properties sold within two years, and 15% from 10% for properties sold within three to four years.
For properties sold in the fifth and sixth year, the RPGT is expected to remain unchanged at the current 10% and zero RPGT respectively.
“The anticipated RPGT will not deter foreigners from buying, as they are allowed to dispose their properties only after the third year,” he said.
GEORGE TOWN: The Federal Government should leave real property gains tax (RPGT) alone in the 2014 Budget.
New Bob Group director Dr Lee Ville said that if the RPGT is increased, then it will dampen the property market, which has already started to cool.
Lee is also president of ERA Malaysia, which is the world’s leading real estate brand.
It is expected that the Federal Government will raise the RPGT rate to 30% from 15% for properties sold within two years, and 15% from 10% for properties sold within three to four years.
For properties sold in the fifth and sixth year, the RPGT is expected to remain unchanged at the current 10% and zero RPGT respectively.
“The anticipated RPGT will not deter foreigners from buying, as they are allowed to dispose their properties only after the third year,” he said.
GEORGE TOWN: The Federal Government should leave real property gains tax (RPGT) alone in the 2014 Budget.
New Bob Group director Dr Lee Ville said that if the RPGT is increased, then it will dampen the property market, which has already started to cool.
Lee is also president of ERA Malaysia, which is the world’s leading real estate brand.
It is expected that the Federal Government will raise the RPGT rate to 30% from 15% for properties sold within two years, and 15% from 10% for properties sold within three to four years.
For properties sold in the fifth and sixth year, the RPGT is expected to remain unchanged at the current 10% and zero RPGT respectively.
“The anticipated RPGT will not deter foreigners from buying, as they are allowed to dispose their properties only after the third year,” he said.

STAR, October 19, 2013

KPJ buying building in KL

PETALING JAYA: KPJ Healthcare Bhd has entered into a conditional agreement with Danaharta Hartanah Sdn Bhd (DHSB) to acquire Menara 238 (the former Menara Marinara) in Jalan Tun Razak, Kuala Lumpur for RM206mil.

KPJ said in a Bursa Malaysia filing that the acquisition should be completed by the early third quarter of 2014.

The company said the purchase would be financed via a combination of internal funds of RM41mil and through external borrowings.

STAR October 18, 2013

Why peo­ple can’t sell their homes?

The en­vi­ron­ment for sell­ing a home is not with­out its chal­lenges, es­pe­cially in a tough prop­erty mar­ket.
But for a few un­for­tu­nate in­di­vid­u­als, try­ing to sell off their prop­erty (even in good times) can be next to im­pos­si­ble, no mat­ter what they do!
The fol­low­ing are rea­sons why some po­ten­tial sell­ers have prob­lems dis­pos­ing off their homes.

Bad lo­ca­tion
We all know this one – when its comes to suc­cess­fully sell­ing your prop­erty, it’s all about lo­ca­tion, lo­ca­tion, lo­ca­tion. What amounts to good or bad lo­ca­tion is ac­tu­ally quite ob­jec­tive. But se­ri­ously, how bad is “bad?”
Ac­cord­ing to Malaysian In­sti­tute of Es­tate Agents (MIEA) pres­i­dent Siva Shanker, there are some lo­ca­tions that no­body wants to live in.
“This could be at a T-junc­tion, next to an ox­i­da­tion pond or even a power sub­sta­tion,” he tells StarBizweek.
Siva adds that many buy­ers are also re­luc­tant to pur­chase homes lo­cated near over­head power lines.
“We have a set stan­dard based on guide­lines by the World Health Or­gan­i­sa­tion on how far these lines need to be away from the homes. But re­gard­less, buy­ers still pre­fer not to live in ar­eas where there are power lines near by.”
Carey Real Es­tate Sdn Bhd man­ag­ing di­rec­tor Nixon Paul says most Malaysians can be quite su­per­sti­tious about where they choose to live.
“Peo­ple are re­ally into the feng shui el­e­ment. Houses with the num­bers four on them, are typ­i­cally dif­fi­cult to sell.
“And this is even among nonChi­nese buy­ers, who fear that they might not be able to sell the prop­erty in the fu­ture.
“A house sit­u­ated next to a sew­er­age fa­cil­ity or a ceme­tery can be a prob­lem when to sell,” he says.

Ter­ri­ble con­di­tion
You’re not go­ing to be able to at­tract buy­ers if your home looks like it could col­lapse at any time.
“A di­lap­i­dated place over­grown with grass and where the walls are full of cracks or leaky roof is un­likely to at­tract any buyer,” says one in­dus­try ob­server.
Siva how­ever feels that a run­down prop­erty could ac­tu­ally be a bless­ing in dis­guise.
“I feel that it’s bet­ter to buy a dump for a cheaper price, and then spend some money to re­fur­bish it into its for­mer glory, or some­thing even bet­ter.”

Siva says many Malaysian buy­ers can­not “vi­su­alise” the po­ten­tial of a di­lap­i­dated home.
“The av­er­age buyer can’t see what a house that is in ut­ter dis­re­pair can be turned into, be­cause all they see is a home that is in ter­ri­ble con­di­tion.
“On the other hand, when he vis­its a de­vel­oper’s show unit, he is so cap­ti­vated by what he sees be­cause it (the show unit) looks so amaz­ing. In his mind, he thinks he’s pur­chas­ing that prop­erty but what he’s ac­tu­ally buy­ing is an empty shell.”
Siva says spend­ing a bit of money to spruce up a place can be ben­e­fi­cial. “Why not spend RM20,000 to spruce up a place worth RM500,000 so that you can sell it for RM550,000?”
He says the sit­u­a­tion is sim­i­lar even for ten­an­cies.
“Most land­lords are also un­will­ing to ren­o­vate a place to make it look more at­trac­tive. In­stead, they would rather wait for a con­firmed ten­ant and then only ren­o­vate.
“This may not even hap­pen (se­cur­ing a ten­ant).
“This is where home-stag­ing comes in,” says Siva.
The con­cept of home-stag­ing, which is aimed at im­prov­ing the prop­erty’s ap­pear­ance in the eyes of po­ten­tial buy­ers (with the ul­ti­mate goal of a quick sale and for a bet­ter price tag), is pop­u­lar es­pe­cially among coun­tries in the West.
Stag­ing usu­ally in­volves some­thing aes­thetic, im­prov­ing the de­sign, or­gan­i­sa­tion and over­all ap­pear­ance of a prop­erty.
In some in­stances, the po­ten­tial suc­cess of sell­ing your home can be de­pen­dant on the con­di­tion of your neigh­bour’s prop­erty.
“If your neigh­bour’s house is run-down or di­lap­i­dated, your house can also be­come af­fected,” says Nixon.

Un­rea­son­able prices
Another in­stant where prop­erty can be hard to sell is when the seller sets the price of the prop­erty ridicu­lously high.
“This is a typ­i­cal case of over­pric­ing, where the owner is just greedy and the ask­ing price is too high.
“And be­cause of this, the prop­erty re­mains in the mar­ket for­ever,” says Siva.
He adds that in re­cent times, strin­gent loan ap­provals have also made it tough for pur­chasers to get a loan.
“You might find a buyer, but then he might have a prob­lem get­ting a loan.”
Un­der Bank Ne­gara’s re­spon­si­ble lend­ing guide­lines, which were im­ple­mented on Jan 1 last year, loans are now ap­proved based on net in­come com­pared with gross in­come pre­vi­ously.

STAR, October 20, 2013

Supply and demand is most significant cause of rising property prices

Real Estate and Housing Developer’s Association (Rehda) national treasurer Datuk N K Tong recently said that the escalating prices of properties, was significantly caused by the supply and demand factor.

 

“As land prices continue to rise, there is also the issue of not producing houses fast enough to cater to the increasing demand.

 

“We need to accelerate the number of units being built and this can be done when all parties work closely,” said Tong, adding that a property market report by the National Property Information Centre (Napic) showed the existing stock nationwide in the first quarter of 2013 was 4.6mil residential units (excluding kampung and estate houses).

 

The report also said the average housing completion yearly was 100,000 units relative to the average annual household formation, which was 140,000.

 

Tong also noted that the delay in issuing approvals was also a reason why property prices had increased tremendously over the years.

 

“When there is a delay in issuing planning approvals, development costs, which include utility costs, tend to increase, resulting in more costs passed down to house buyers,” he said.

 

He added that Rehda had been continously engaging with the Government and utility companies like Tenaga Nasional Bhd, Telekom Malaysia and Indah Water Konsortium Sdn Bhd, among others, to find ways to resolve the matter.

 

“Unfortunately, despite all these issues, the public still has the misconception that the developers are to be blamed for escalating property prices,” said Tong, adding that the best way to tackle the issue was to hasten approval time, decrease red tape and utility costs, as well as building more affordable houses to cater to the population.

 

While everyone has a role to play, Tong suggested that the Government should also look at ways of relocating some of the subsidies and allocate the sum for more affordable homes to be built instead.

On Aug 29, Selangor Development Corporation (PKNS) general manager Othman Omar had also said that delays in issuing planning approval can lead to an increase in development costs of about 20% to 30%, which, in turn, increases the development cost from RM5 per sq ft to RM30 per sq ft. The cost would then be passed down to the house buyer.

 

Othman also mentioned that outdated and inconsistent requirements from local councils also contributed to the contrasting cost of houses in different jurisdictions.

 

Meanwhile, Tong said the second Malaysia Property Expo (Mapex) of the year would be held from Oct 25 to 27 and it was expected to generate RM300mil in sales.

 

He said REHDA was confident that the property event would be more successful than the first Mapex in April, which recorded RM200mil in sales.

 

He said about 92 property developers would be participating in the event, which would also include several free public talks on a variety of subjects.

 

Star, October 17, 2013

 

Raising RPGT will push up house prices

PETALING JAYA: Raising the real property gains tax (RPGT) and stamp duty could risk pushing house prices higher, according to HwangDBS Vickers Research.

 

This is because sellers would try to pass on incremental costs to buyers and delay disposal, leading to even tighter supply.

 

“We understand the Government needs to be seen to be actively reining in property speculation, but we do not advocate raising real RPGT, which had a relatively short-lived impact in the past and could push house prices higher as sellers may pass on the incremental costs to buyers.

 

“It could also spur sellers to postpone disposal and developers to hold back launches in view of weaker sentiment, leading to even tighter supply in the market,” said the research house in a report yesterday.

 

Currently, RPGT is charged at 15% for disposal within two years and 10% for disposal within three to five years (compared with 5% to 30% prior to Budget 2010).

 

HwangDBS Vickers also noted that while raising stamp duty may have a bigger impact, sellers would also try to pass on the incremental costs to buyers.

 

“Any hike would not only affect new projects but also those under construction, especially strata-titled and projects under the master title which have yet to be transferred.”

 

Aside from the once-in-a-lifetime exemption from RPGT for individuals, the research house suggested for specifically first and second home-buyers to be spared from any tightening measures, to be in line with the Government’s aim to promote home ownership.

 

“Reducing the loan-to-value cap for a second property would affect genuine upgraders, who may find it challenging to pay a higher down-payment while waiting to sell their existing properties.

 

“This could reduce supply in both the secondary and primary markets, as developers may also delay launches due to poorer take-up.”

 

HwangDBS Vickers added that the Government should encourage the development of more international-class condominiums, such as those in KLCC and Bukit Bintang, to attract more foreigners.

 

“While other countries in the region are restricting foreigners from buying properties, Malaysia should conversely open up, as foreigners currently made up less than 5% of transaction volume (albeit rising marginally based on the Malaysia My Second Home applications).

 

“Property can be a new engine of growth for Malaysia in view of Iskandar Malaysia’s potential to leverage on Singapore and Greater Kuala Lumpur’s significance within the Economic Transformation Programme (which is targeting to attract 100 multi-national companies to set up operational headquarters in KL).”

 

HwangDBS Vickers also said that the potential introduction of the goods and services tax by 2015 could lead to lower personal and corporate tax rates.

 

“This should improve Malaysia’s competitiveness in attracting foreign direct investments and talent, along with stemming Malaysia’s brain drain and rising investments overseas by local corporates.”

 

Star, October 2013

 

Best Western to manage hotel and serviced apartments in i-City

SHAH ALAM: I-Bhd has partnered with Best Western International, the world’s biggest hotel chain, to develop the first hotel in the 29ha i-City project, scheduled to open in September 2014.

The three-star hotel, Best Western@i-City, has a gross development value of RM50mil, and represents the first of two hotels planned for the international park.

 

At the signing ceremony between the two parties, I-Bhd deputy chairman Datuk Eu Hong Chew said the hotel would probably have one of the shortest gestation periods due to the attractions based in the park.

 

Meanwhile, Best Western will also manage its first Best Western Service Suite in the country by providing hospitality and building management services for a period of 5+5 years.

 

“It is a standard arrangement with all our hotel owners. After that period, it is an automatic renewal unless there is an issue,” said Best Western vice president of international operations for Asia and the Middle East Glenn de Souza.

 

He added that the hotel would be an addition to its international portfolio and would be promoted overseas. “i-City is pretty self-contained, it’s like a one-stop shop. We would work with the tourism organisation to promote i-City.

 

It would attract a lot of foreigners because it provides everything for families and businesses,” he said.

 

Best Western Service Suite@i-City will comprise 826 units of serviced residences.

 

It will be the first hotel-branded residential development in Shah Alam and is expected to be completed in 2016. Eu added that the project would be launched by the end of this year. I-Bhd expects the hotel to enhance the number of visitors to the theme park attractions, as visitors now have the option of staying within i-City.

 

 

“The rooms would be comfortable and trendy. Rather than compete with the other facilities within i-City, we would complement and support them,” de Souza said.

 

The hotel is part of the third building block in the development of i-City as a tourism destination, said Eu. “The three tourism components are i-City’s theme park attractions, a 1.5-million-square-feet super regional shopping mall and hotels,” he said.

 

To-date, the company has invested RM70mil in various rides and attractions.

 

Eu added that I-Bhd planned to invest an additional RM30mil in the theme park in the next few years.

I-Bhd is working with Thailand’s Central Retail group to develop the RM580mil CentralPlaza@i-City, which has been slated for completion in 2016.

 

Best Western has more than 4,100 hotels in more than 100 countries worldwide. In Malaysia, it currently operates in KL Sentral, Kota Kinabalu, Sandakan, Pulau Pangkor and Port Dickson. It plans to have 15 hotels in the country by end-2015.

 

Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim, who officiated the signing ceremony, said there were still opportunities for international-class hotels within the capital city. “I hope this project would be an eye opener for other international hotel operators,” he said.

Star, 17 Oct 2013

Property projects with GDV of RM2.5bil proposed for Section 13 PJ

Land values have risen more than 100% from 2010

Three property projects with an estimated gross development value (GDV) totalling more than RM2.5bil are being proposed for Section 13, a neighbourhood that is better known as a light industrial zone until recently.

Sources told StarBiz that two projects had received conditional approvals from the local authority while another was under consideration.

They said the projects that had received conditional approval pending their land-conversion applications from industrial to commercial titles were projects by Fraser & Neave Holdings Bhd (F&N) and a Sime Darby Bhd-IOI Corp Bhd joint venture.

The conversion process may take from six months to a year. Should these two projects be approved, they would bring the total number of on-going and approved projects to more than 10 in the 105ha leasehold neighbourhood.

According to a source, F&N’s two parcels of land totalling 5.14ha on the former Premier Milk and F&N Dairies plants on the corner of Jalan Universiti and Jalan Kemajuan, “could bring about one of the most significant and notable changes in land use in that area because of its location, combined land area and its varying components.”

The RM1.5bil F&N project, a joint venture with Singapore-based FCL Centrepoint Pte Ltd, would comprise 900 service apartments in three 32-storey blocks, 425 small office home office units, a 16-storey 250-room hotel, two office blocks of 19 and 23 storeys and a four-storey shopping mall podium.

The Sime Darby-IOI joint venture, located on a 2.2ha parcel along Jalan Kemajuan, would comprise a nine-storey podium with shop-offices at the bottom and two blocks of service apartments on top of the podium totalling 758 units with a GDV of RM557mil.

The third project, with an estimated GDV of RM600mil, would be developed by property-and-education firm Paramount Corp Bhd. This project would be located on a 2.1ha where KDU College is located along Jalan Universiti.

This project would comprise a four-storey podium together with a 29-storey office block and three blocks of serviced apartments of 10, 14 and 31 storeys on top of the podium totalling 454 service apartments and 64 small office home office units.

Real estate valuers have noted that land values in Section 13 have risen from about RM200 per sq ft in 2010 to more than RM400 per sq ft today.

A valuer said because of the potential for land-conversion in the neighbourhood (spurred by a 10-year special area plan mooted by the Petaling Jaya City Council), it would not be possible to compare land values there with another industrial zone.

He said the last transaction in Section 13 was for the DKSH land beside KDU College, which was sold for RM480 per sq ft to PJ Development Holdings Bhd.

A property consultant said the portion of Section 13 facing Jalan Universiti commanded a higher value although this might be debatable since there might be plans to have access to the Sprint Highway via Jalan Harapan-Jalan Semangat. Currently, access to the Sprint is via Section 17 and SS2.

The star, October 16, 2013

Too much retail space? Klang Valley has 59 million sq ft but some small towns have only a single mall.

THERE are a few issues facing shopping mall space in the Klang Valley today. The first is the amount of space, the second is retail spending which has a direct effect on rental and yield.

The Klang Valley, which includes Selangor and Putrajaya, has a total of 59 million sq ft of mall space, according to statistics from the National Property Information Centre (Napic).

That is equivalent to 51 Suria KLCC malls, which has 1.14 million sq ft of net lettable area. Napic includes arcades and older buildings in the outskirts as shopping mall space.

If one were to consider non-government statistics, property consultancy CBRE says Greater Kuala Lumpur has a total retail space of 48 million sq ft, equivalent to 41 Suria KLCCs malls. This excludes arcades and retail space in older buildings in the Klang Valley outskirts. Greater KL has a population of 7.2 million, according to Economists Intelligence Unit.

Neighbouring Singapore in December 2012 has 56 million sq ft of retail space, of which 25 million sq ft (or 44%) are shopping floor space in the city state of 5.3 million people, according to CapitaMall Trust website. A local property consultant considers 25 million sq ft as rather low as Singapore thrives on shopping and tourism.

The question is… will retail spending continue to expand? As it is, retail rentals have not shot up but have only been maintained.

Retail sales in Malaysia are expected to grow at a faster rate this year – up 6.4% to RM94.4bil from a growth rate of 5.5% to RM88bil in 2012, driven by domestic demand, says RGM Retail Group (M) Sdn Bhd retail consultant and managing director Tan Hai Hsin. Tan is Henry Butcher Retail managing director.

He says the oversupply and overbuilding situation is only apparent in the city, but not in the smaller towns.

“This does not mean there is no room for growth,” he says in an email. He says the retail scene industry in Malaysia will remain healthy for the rest of this year, supported by sustainable domestic demand.

Although Klang Valley’s oversupply of mall space has been apparent 10 years ago, the drive to build is relentless.

Jordan Lee & Jaafar executive director Yap Kian Ann says developers like to go into mall developments because profits from malls tend to be higher than condominiums and offices generally. Average mall rental is RM12 per sq ft compared with RM7.50-RM8 for office space.

In August, Sunway REIT Management Sdn Bhd chief executive officer Datuk Jeffrey Ng hit the nail on the head when he said “there is no shortage of condominiums, office, retail and hotel space.”

The story of KL malls is not just oversupply but the disparity between the successful malls and the struggling ones.

The two main downtown malls are Suria KLCC and Pavilion KL. Both thrive on fashion. Then there is the big suburban malls like Mid Valley and Gardens, 1-Utama and Sunway Pyramid.

Then there are the smaller neighbourhood malls like Bangsar Village and Bangsar Shopping Centre. Each of them serves a certain niche market. Then there are newer malls like the SS2 Mall and Paradigm Mall.

Popular malls like Pavilion KL, Suria KLCC and 1-Utama enjoy nearly full occupancy while struggling ones suffer from poor visibility and anaemic traffic.

Mall focus

While the abundance of mall space and retail spending are important issues, the focus on mall space came about because there seems to be some interesting developments in this sub-segment of the property market.

In August, a Singapore-based fund, ARA Asset Management Ltd, linked to Hong Kong tycoon Li Ka-Shing said it would be divesting five neighbourhood malls in Malaysia.

These being Aeon Bandaraya in Malacca, Klang Parade, Ipoh Parade, 1MK in Mont’Kiara and Citta Mall in Ara Damansara. Granted, two of them are not in the Klang Valley, the sale of malls in today’s challenging and uncertain economic and financial environment only underscores the opacity of what lies ahead.

ARA Asset Management is one of the largest mall managers in Asia. One of its fund managers, ARA Managers (Asia Dragon) Pte Ltd’s director of portfolio investmentThomas Kong says it is divesting because the fund under which the malls are parked are winding down.

The five malls has a total built-up area exceeding 2.7 million sq ft. Kong says they would like to retain management rights for all five, which are part of a series of assets in Singapore, Hong Kong, China and Malaysia.

Malaysia has under a fifth of the whole fund’s portfolio.

Another mall for sale is Tropicana City Mall in Petaling Jaya. Tropicana Corp Bhd, its owner, offered the four-storey mall to CapitaMalls Malaysia REIT Management Sdn Bhd, which manages the Capitamalls Malaysia Trust (CMMT). The due diligence has just been completed, a source says.

Also on the grapevine are the possible sale of two other malls, Encorp Strand Mall in Kota Damansara and the Empire Shopping Gallery in Subang Jaya. There is a net lettable area of 750,000 sq ft between them. Attempts to get in touch with Encorp’s top management failed.

Mammoth Empire Holding Sdn Bhd (MEH) executive director Datuk Danny Cheah says he has no intention of selling Empire Shopping Gallery for the next one year.

“If you talk about the future, we (will) never know,” he says. “Instead, we are building more malls. Empire City in Damansara Perdana will have a mall of about 2 million sq ft. We also have Remix Mall of about 1.5 million sq ft. We are gearing towards a REIT (real estate investment trust) and you need to be sizeable for that.

For a REIT to be successful, there must also be attractive yields. Mall rentals are not shooting up, they are being maintained currently, property professionals say.

Despite that, developers continue to have a penchant for malls. The Sime Darbygroup will be building its first mall in Melawati in a joint venture with CapitaMalls Asia Ltd. It will have a net lettable area (NLA) of about 620,000 sq ft.

Malton Bhd is said to be planning to replicate its success with Pavilion KL by building a mall in Pusat Bandar Damansara on a smaller scale and another larger one in Bukit Jalil.

Guocoland (M) Bhd, the developer of Damansara City in Pusat Bandar Damansara, is also building a mall there. That means within the triangular 46 acres known as Pusat Bandar Damansara, there will be two malls and possibly two hotels.

Another developer is planning to build a mall in Bukit Jalil, so they will be giving Malton a run for its money. Who opens first is important. This will be located between Overseas Union Garden and the Kesas Highway.

These are just some of the known projects in the pipeline.

Rent-free period
But even as developers plan for these future projects, some shopping centres are giving long rent-free period to their retailers, says Henry Butcher Retail managing director Tan Hai Hsin. Despite this, they still fail to attract sufficient retailers.

Tan says there is a clear disparity between successful malls and struggling ones. Tan says shopping centres that have been suffering from low shopping traffic will continue to face challenges in attracting crowds moving forward while the more successful ones will thrive with retailers waiting in line.

Jordan Lee & Jaafar executive director Yap Kian Ann says there are four criteria that help a mall to succeed. Those with 1 million sq ft of net lettable area seem to do better, although there is a place for neighbourhood malls as seen in Bangsar Village 1 and II and Bangsar Shopping Centre.

A second criteria is developer must retain control and must not sell the units individually. The mall owner will be able to control the tenant mix and management. The third criteria is location, says Yap.

He says the mall outlook will be challenging in the next two to three years when new malls are completed.

“We have not felt the full effect of it yet. But we will in another two to three years,” he says.

How did Kuala Lumpur come to a stage where is an abundant supply of office space, condominiums and retail space but affordable housing? The short answer is profitability. The long answer will take up more than these two pages.

If it is any indication, CBRE in a second quarter 2013 report said prime retail rents in the city centre was at RM155 per sq ft at the KLCC. Traffic flow is an important criteria.

“This is not average rental but the rental of the unit itself,” says a source. In the suburbs like Bangsar and Petaling Jaya, average prime retail rent is RM48 per sq ft.

The report says further increases are expected.

Routine selling?
The buying and selling of malls may well be routine by funds and developers. Or it could be an indication of something else brewing. Owners cash out, or monetise, due to expected weak yields going forward, or as in the case of the ARA Dragon Fund (ARA), a winding down of a fund.

Monetising is clearly the case with the Quill group who is building Quill City Mall in Jalan Sultan Ismail, Kuala Lumpur. The Employees Provident Fund is buying for RM1.2bil under certain conditions.

The number of For Sale signs is food for thought.

Ironically, despite the oversupply, more malls are built. Will there be takers for Malaysian malls?

Henry Butcher Retail MD Tan Hai Hsin says there will be local and foreign interested parties.

“Size of the mall, the current yield and potential for higher increment are the main considerations,” Tan says.

Which explains why millions are spent on enhancement and refurbishment. Klang Parade is being refurbished at a cost of RM120mil. Post refurbishment, rental will go up double-digit in percentage terms to provide a net yield of 8%. ARA owns it.

1MK in Mont’Kiaram, another ARA asset, is being enhanced at a cost of RM20mil. 1MK will be relaunched in April/May 2014 with an expected yield of 6%.

Citta Mall in Ara Damansara, which the fund purchased at about RM200mil or RM600 per sq ft is currently 58% leased versus 30% last November.

“We will sell our refurbishment plan to the next fund,” says Kong. The fund acquired the five malls for more than RM1.2bil.

The last and fifth mall it will be divesting is Aeon Bandaraya in Malacca, which it bought for less than RM400mil in 2010, giving it a yield of 7%.

Other mall owners are also investing in enhancements, the Sunway group being one of them. Going forward, Kong says selling the five malls collectively as a single portfolio will be of more value than individually as “it is difficult to assemble a portfolio of this size.”

There are other exit routes, but for the time being, divestment will be the most likely, says Kong.

“If you have great malls, there will be no lack of suitors,” he says.

The Star, 5/10/2013

Leading malls expected to enjoy rental growth

SUNWAY REIT Management Sdn Bhd CEO Datuk Jeffrey Ng Tiong Lip says the company will remain focused on retail with at least 60% retail exposure as measured by asset size, revenue or net property income (NPI) over the long term. The company manages Sunway REIT.

Ng says they are mindful of the market cycle and impending oversupply of retail space.

“We have noted many sellers of assets entering the market,” he says in an email.

It bought the Yaohan Mall, later renamed Sunway Putra Mall, through a public auction in 2011. It has two shopping malls in the pipeline, namely Sunway Giza and Sunway VeloCity Shopping Mall but this depends on their financial performances and pricing by the vendor.

He shares his views on the retail and REIT industry:

What is your outlook for the retail and REIT industry? Is there any pressure on mall rentals today?

The market capitalisation of Malaysian REITs (M-REITs) has surged from RM25bil at the beginning of this year to RM36.3bil (as at Sept 30, 2013) following the listing ofKLCCP Stapled Group. We expect to see further growth with the emergence of more players in the next few years.

The trading performance of M-REITs went through a mild correction in July-August 2013 due to overall softer market sentiment and a spike in bond yields. Large-cap M-REITs were trading at highly compressed levels of below 5% prior to the correction.

By end-September 2013, distribution yields of large-cap M-REITs have moved closer to 5.5%-6%. While there has not been a drastic change in fundamentals of the large-cap M-REITs, the decompression of distribution yield is a healthy sign and offer value to investors.

In view of the higher yields, it will be difficult to make yield accretive acquisition especially in prime areas. Operation costs are expected to marginally increase over time due to higher fuel costs, potential electricity tariff increase and minimum wage. M-REITs will need to look into strategies to mitigate rising operation costs.

In the retail sector, leading malls are still enjoying strong occupancy of 95% and above. Retail space is expected to increase in the next one to two years. Although consumption is expected to remain buoyant, (there is a) possibility of slower growth in retail spending in view of the recent rise in fuel prices resulting in higher cost of living.

Leading malls should be able to continue to enjoy rental growth… average performing malls may be pressured to maintain their occupancy rates and rental rates.

What is the impact of a rise in interest rates?
Overnight policy rate is expected to remain steady for the rest of 2013… (but) long-term interest rate could trend up. It is a matter of time before short-term rates move in tandem with long-term rates.

With this in mind, Sunway REIT Management Sdn Bhd (the Manager) has converted a large portion of its debt into fixed rate. The fixed rate portion has increased from 20% in FY2012 to 81% in FY2013. The average debt maturity for the fixed portion debt is 3.6 years. By locking in the rates, this portion of the debt is not susceptible to interest rate movement and will not be affected by higher interest cost.

Please give a brief on Sunway Putra Mall.
The refurbishment period is over 22 months. The mall will resume business by first quarter of 2015 after a refurbishment cost of about RM300mil. Post-refurbishment, it will have a net lettable area (NLA) of just below 600,000 sq ft (compared with 500,000 sq ft before).

Who are the competitors of Sunway Putra Mall?
There are numerous shopping malls in Kuala Lumpur. New malls will enjoy the novelty factor in the short term. Being able to sustain the footfall over the longer term horizon (is important). Sunway Putra Mall has a captive market with the Umno headquarters,Putra World Trade Centre in the vicinity and a residential catchment within a 2.5 km radius.

What sort of rental do you expect for Sunway Putra Mall?

The rental rates will be in line with the market positioning of the mall (mid-to upper-mid customer segment) and comparable market rental rates. We expect a stabilised yield for the entire Sunway Putra Place, inclusive of Sunway Putra Mall, to be between 7% and 8%.

Will Sunway REIT be able to maintain its distribution per unit (DPU) in the next two years?
The manager endeavours to maintain or minimise the impact on DPU for the next two years despite the loss of income from Sunway Putra Mall. This is possible if the existing assets continue to perform. It is already a bonus to be able to maintain the DPU for FY2014.

Strategies to minimise impact on DPU for FY2014:
·A major rental reversion commenced last month at Sunway Pyramid Shopping Mall. About 54% (900,000 sq ft) was due for renewal.
·About RM38.4mil were invested to enhance assets. This was completed in the previous financial year and a 15% return on investment is expected. These include the retrofitting of chillers at Sunway Pyramid Shopping Mall, refurbishment of Sunway Hotel Seberang Jaya and a 14,193 sq ft expansion at Menara Sunway.
·Sunway Pyramid Shopping Mall’s NLA will expand by a further 20,362 sq ft and 23,432 sq ft of existing space will be reconfigured. This is expected to be completed by year-end and costing RM40.1mil.

How did we come to this stage where there is an abundance of office, retail and hotel space?
This is due to the overbuilding of investment properties. Landowners wanted to create value by building a portfolio of investment properties for investment purpose. The overbuilding phenomenon eventually led to (the current) oversupply situation. In today’s scenario, there will be a demand for new buildings due to migration of tenants from the older properties.

The Star, 5/10/2013

Greater KL residential market expected to consolidate

THE Greater Kuala Lumpur residential property market is poised for some consolidation after recording breathtaking growth in terms of price hikes and transaction volume over the last three years, property consultants observe.

CBRE’s latest Greater Kuala Lumpur MarketView says a period of stabilisation is in order, with the period of significant growth in capital values seen since 2009 being replaced by an era of more gradual increases.

“The rapid growth in Kuala Lumpur and its suburbs has resulted in a scarcity in development land that drove up capital values for many areas in Selangor.

“About 75.7% of all residential units in Greater KL are located in Selangor, with the remaining 24% and 0.3% in Kuala Lumpur and Putrajaya respectively. Putrajaya, the country’s administrative capital, accounted for just over 4,740 units which are primarily for housing of civil servants,” the report adds.

New residential developments are being located further and further away from the city centre, with an increasing level of development seen in the southern portion of Greater KL, forming a growth corridor linking the city with Putrajaya/Cyberjaya and down to KLIA.

The CBRE report points out that previously overlooked areas, including Semenyih, are poised to see a marked increase in development activities in the near future.

As of quarter two (2Q) 2013, 196,092 units were classified as incoming supply, defined as units for which construction permits have been approved (whether or not construction has begun). Of this, 186,581 units were deemed to be under construction, implying that construction work has begun on 95.1% of the units with construction permits.

Total existing supply of residential properties stood at about 1.77 million units as at end-2Q 2013, with landed units accounting for 43.5% of total stock, non-landed properties made up 34.9% and low-cost housing was at 21.6%.

It notes that supply growth since end-2012 has been minimal at less than 1%, part of a wider slowdown in supply increase since 2006 that contributed to a rise in capital values in many areas of Greater KL since 2009.

Although the number of new starts has rebounded since 2011, it remained below levels seen during 2003 to 2007.

DTZ Nawawi Tie Leung executive director Brian Koh says that going forward, a slower but more sustainable growth in terms of new launches and take-up rate can be expected.Koh says that in the last quarter of 2013, the things to look out for in the property market include a potential hike in bank interest rates as Bank Negara is expected to introduce further measures to rein in household debts. Higher borrowing rates may also affect mortgage loan rates that may mean higher borrowing cost to housebuyers.

“Buying interest from foreign buyers, especially from Singapore, Hong Kong, China and Japan could cushion the softer domestic demand going forward,” Koh observes.

Meanwhile, Knight Frank’s First Half 2013 Real Estate Highlights says while prices have flattened over the past 12 months as a result of government cooling measures, more activities are expected post-election as additional cooling measures implemented in competing Asian markets such as Singapore, Hong Kong and China, may lead to greater interest in the Kuala Lumpur, Penang and Iskandar Malaysia property markets.

“Malaysia is an attractive alternative investment destination due to its stable property market and relative housing affordability that offers reasonable returns in terms of capital appreciation/rental income.

“New launches featuring a good mix of unit sizing, particularly those located near high-level infrastructure projects, are expected to attract strong take-up as they appeal to a wider market of buyers and investors,” the Knight Frank report says.

In the luxurious condominium sector, CBRE estimates 6,484 units to be completed in Kuala Lumpur during the second half of 2013.

Of the 42,979 units of high-rise development (condominiums and serviced residences) in Kuala Lumpur valued at or above RM500 per sq ft (psf), it says about 35% are considered to be “luxury” (valued at RM800 psf and above).

Knight Frank says that with prices of high-end condominiums expected to remain flat for the remainder of this year, investors and purchasers will have the choice of opting for more bargain condominiums in the city and its immediate neighbourhood of Ampang Hilir/ U-Thant as the price per sq ft narrows between city and suburban living.

New completions

While the majority of new launches are in the suburban areas, there are also a number of upcoming new developments in the KLCC vicinity, including projects such as KL Trillion Serviced Apartments and Verve Suites @ KLCC among others.

The Mont’Kiara vicinity is also seeing an increase in new launches, with projects such as Pavilion Hilltop, Residensi 22 @ Mont’Kiara, Sun Kiara Condominium, Kiara 163 Serviced Residence, Weida Mont’Kiara and others to be launched in the near future.

During the review period, there were two new completions in Mont’Kiara – Kiaramas Danai (287 units) and 28 Mont’Kiara (460 units).

Knight Frank says the office market is expected to remain challenging as supply continues to outstrip demand.

In KL city, demand for good grade dual-compliant office space is expected to remain resilient in the short term. Owners of old and dated office buildings are proactively seeking to upgrade and enhance their assets in a bid to remain competitive and retain tenants (and to attract new ones) amid a challenging leasing market.

The decentralised office location of KL Sentral, however, is expected to face further pressure on its occupancy and rental rates due to the recent completion of some 1.9 million sq ft and impending completion of some 1.7 million sq ft by year-end.

The short-term threat from these completions may, however, be mitigated as several buildings have secured anchor tenants.

Knight Frank says the impending opening of Nu Sentral later this year is expected to improve integration between the various completed components within KL Sentral and add further appeal to the transportation hub as a popular alternative office location, thus leading to improved demand and absorption rates in the medium to longer term.

With rapid developments of public transportation links (LRT extension and MRT lines), accessibility and connectivity between KL City and its fringe locations will be greatly enhanced. Coupled with the availability of good grade office space at competitive rental rates, this will accelerate the decentralisation process.

CBRE says some 6.27 million sq ft of new office space will be completed in the Greater KL region next year, although a considerable amount of this supply is located in strata-title or secondary buildings. Nevertheless, the market is set to remain poised in favour of tenants for the near future.

The KL city that constitutes the capital city’s golden triangle and central business district’s office market showed encouraging signs of life during the review quarter as vacancy rates fell to 12.7% (13.2% as at 1Q), on the back of some notable leasing activities.

Continued evidence of the ongoing flight to quality came in the form of an oil and gas major leasing over 200,000 sq ft of office space in Integra Tower, the recently completed prime office building within MGPA’s Intermark integrated development.

Overall, there was no change in average gross asking and passing rents for selected Grade A office space in the city, at RM8.10 psf and RM7.10 psf respectively.

As at the second quarter this year, the total supply of office space in Greater KL stood at about 91.1 million sq ft, 5% higher than the 89.2 million sq ft and up 5% year-on-year.

The second quarter of 2013 witnessed the completion of four developments, all located outside Kuala Lumpur city – Menara D’Damansara (253,000 sq ft of net lettable area), Plaza33 (530,840 sq ft), and Menara CIMB (609,000 sq ft) as well as Menara Shell (538,617 sq ft) located in KL Sentral.

The Star, 5/10/2013