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