A L L
P R O P E R T Y
T Harv Eker, motivational speaker and multi-millionaire
F O R T N I G H T L Y
W I T H
Don’t wait to buy real estate; buy real estate and wait
FRIDAY, DECEMBER 14 , 2012
Flipping can make an Average of US$ 30,000 each deal P7
Momentum gathers at key Iskandar Malaysia zone Medini on course for projects with gross development value of RM31.25 billion, with more in the pipeline
Syed Mohamed says Medini is being positioned as the central business district of Nusajaya
How Medini is anticipated to shape up
Mah Sing Group expects a GDV of RM1.1 billion for The Meridin@Medini
by Gunaprasath Bupalan A MODERN metropolis of international standards that transforms the region’s real estate landscape. That vision of Iskandar Malaysia in Johor is becoming a reality with the coming on board of a number of top-notch local developers with proven track records. Several of them have already signed up to partner with Iskandar Investment Bhd (IIB), the strategic de ve lo p e r of c at a ly t ic projects in the huge regional development, and their focus is on Medini, while another accomplished developer, an early bird in Medini, is expanding its landbank to further grow the area in a link-up with IIB. A nd more prom i nent property players, including from overseas, are beating a path to the doors of IIB. This le nd s c re de nce to t he asser t ion t hat wh i le 2011/2012 was defined as the Tipping Point for Iskandar Malaysia, 2012/2013 is being touted as the Banner Years in v ie w of t he e x p e c t e d launches of various projects. IIB president and CEO Datuk Syed Mohamed Syed Ibrahim stresses that it is important for the agency to ident if y t he crit ical c o m p o n e nt s t h at w i l l complement the ecosystem that has been put in place in
positioning Medini as the central business district of Nusajaya. The ultimate aim of these joint ventures (JVs) with developers of distinction is to elevate to new heights the profile of Medini as a preferred real estate and investment destination, he adds. Medini, stretching across 2,300 acres, is Malaysia’s single largest urban development to date and its d e ve lo p m e nt i s b e i n g undertaken as a publicprivate part nership involving companies of note. Overall, the international mixed-use development in Medini will have a maximum permitted gross floor area (GFA) of 182 million square feet. The expected gross development value (GDV) is US$20 billion (R M61.32 billion) over 15-20 years. About a fifth of Medini is to be developed by 2014 with a t a rgeted popu lat ion of 50,000. “Our vision for Medini to emerge as a central business district and a regional hub for contemporary business and lifestyle solutions is fast becoming a reality. With the 3Is – world-class infrastructure, investments and industry support – Medini in the next 3-5 years will be one of the most promising and preferred destinations for business, generating multiplier effects on the economy of Johor as
well as the country,” says Syed Mohamed. IIB, formed in November 2 0 0 6, i s t a s k e d w it h promoting, coordinating and investing in strategic and catalytic initiatives through JVs or contribution of land, either through sale or lease, or granting of concessions or development rights. Its main mission is to accelerate and enhance the overall growth and world-class status of I s k a n d a r M a l ay s i a by realising its maximum value through strategic ventures. Hence, it is select ively forging JVs with “best in class” partners who share its vision of creating an iconic hub of development in Asia. IIB has already sold on lease some of its prime land in Medini to the likes of Mah Sing Group Bhd, WCT Land Bhd, Distinctive Ace Sdn Bhd, UM Land Bhd and Zhuoda Real Estate Group from China. It is also forming a JV company with Sunway Bhd whereby 779 acres are being bought for RM412.7 million for a mixed integrated development at Su nga i Pe nda s w it h a potential GDV of RM12 billion. The accumulated total GDV to come out of these JVs is estimated at RM31.25 billion, and IIB is in the midst of identifying new JV projects for 2013. Among the partners in the four recently-signed JVs is Mah Sing Group, which is to
build The Meridin@Medini, a n icon ic i nteg rated d e ve l o p m e n t w it h a n estimated GDV of RM1.1 billion. WCT Bhd, a lead i ng Malaysian construction and p r o p e r t y d e ve l o p m e nt company with a global presence in key markets, especially the Middle East, plans to put up a mixed commercial project comprising office spaces, ret a i l compone nt s a nd apartments in Medini North over the next five years. Its unit, WCT Acres Sdn Bhd, is paying RM99.47 million to lease 18.12 acres for the development, which will have a GFA of 2.763 million square feet and an estimated gross GDV of RM1.5 billion. Syed Mohamed welcomes the WCT group’s entry due to its global expertise, having completed more than 300 high-quality projects in Qatar, the United Arab Emirates, Bahrain and India, as well as in Malaysia. With the group’s impressive track record valued at RM20 billion worth of construction contracts and RM4 billion worth of property sales achieved to date, he is confident that WCT will set new benchmarks of quality in Iskandar Malaysia. Meanwhile, local real estate developer Distinctive Ace Sdn Bhd, a member of the Distinctive Group, is acquiring 18.05 acres on lease for RM99.92 million. The mixed commercial project comprising business and
lifestyle components with expected GDV of RM1.5 billion will have a GFA of 2.752 million square feet. Called 18@Medini, it is designed to be a unique lifestyle destination. “Together with Distinctive Group, we have synergised our capabilities to give form and function to the real estate landscape for the development of 18@Medini, which by all means will ser ve to ma ke a nd complement Nusajaya into one cohesive ecosystem that b e f it s w h at we h ave env isioned,” says Syed Mohamed. Distinctive Group also has a JV with IIB to develop a luxury condominium project, to be launched in early 2013 with a GDV of RM500 million. Iskandar Residences will consist of two towers of 39 storeys and 28 storeys with a total of 633 units. Meanwhile, a subsidiary of the United Malayan Land Bhd (UMLand), Lextrend Sdn Bhd, is paying RM82.49 million for 13.22 acres on lea s ehold for a m i xed commercial and residential project with an expected GDV of RM1.4 billion. Syed Mohamed says the development will contribute towards shaping a new real estate landscape with a mu c h - i m p r o ve d u r b a n operating environment. Sunway Bhd continues to increase its foothold in Iskandar Malaysia with the acquisition of two parcels of freehold land totalling 779.07
acres adjacent to the 691 acres which it obtained about a year ago. The two pieces of land are being bought by a JV formed with a subsidiary of IIB for up to RM412.7 million. This expands Sunway’s total landbank in Iskandar Malaysia by 29% to 3,580 acres while the proposed development will boost the company’s total GDV to R M43 billion. I n total, Sunway will have 1,558 acres of development land in Johor, with an estimated GDV of RM25 billion, making it one of the largest landowners in Iskandar Malaysia. The JV for the Sungai Pe nd a s pr o j e c t w i l l concept ua l i s e, m a n age, implement and develop the site into a mixed integrated development with a potential GDV of R M12 bi l l ion, capitalising on the beauty of the natural surroundings along the river and the Straits of Johor. Syed Moh a med says, “With our continuing efforts to create an urban operating environment by catalysing change, Iskandar Malaysia cont i nues to at t ract investments and innovative developments from industry giants such as Sunway, which are committed to contribute to the creation of an ecosystem of a liveable city that will significantly transform the region's real estate landscape.” Sunway’s construction division has completed the construction of the Legoland Theme Park and is currently u ndertak i ng t wo major construction jobs – Pinewood Iskandar Malaysia Studios and the Central Utilities Facility at the Bio-XCell biotechnology park. SEE P4
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FRIDAY, DECEMBER 14, 2012 A L L
NEWS
POC 2013 on what’s hot in real estate, and more Wealth Mastery Academy will hold its Property Outlook Conference in KL on Jan 12-13 by Pavither Sidhu WHITHER the Malaysian property market? Wealth Mastery Academy Sdn Bhd (WMA) is organising a two-day conference featuring real estate investment experts, valuers and other players locally and overseas who will share their views at DoubleTree by Hilton Hotel Kuala Lumpur from Jan 12-13. WMA CEO Terry Ong told Real Reserve that the forthcoming Property Outlook Conference 2013 (POC 2013) will be different from those it organised earlier as the speakers will not only cover the outlook for the market but also highlight the opportunities in and investment strategies for the different sectors.
Additionally, an international speaker from the United States will give an overview on investing there as it has been attracting many mainland Chinese investors. The POC 2013 will cover, among others, an overview of the local economy and property market; demand and supply trends of property development and investment opportunities locally and overseas; the regional hotspots that will drive the market in locations such as Klang Valley, Greater KL, Penang and Iskandar; and each real estate sector’s performance and outlook. Participants will also get to know the Malaysian real estate investment trusts (REIT)’s performance and prospects, discover the se-
crets of buying properties with no mortgage or deposit, and learn how to use creative tax saving strategies to avoid costly property taxes. Speakers will include Ho Chin Soon, director of Ho Chin Soon Research; Previndran Singhe, CEO of Zerin Properties; George Stewart LaBrooy, CEO of Axis REIT Managers Bhd, vice president of the Asia Pacific Real Estate Association and chairman of the Malaysian REIT Managers Association; and Milan Doshi, property guru and author. Other local speakers are Michael Geh, senior vice-president of Raine & Horne International Zaki + Partners Sdn Bhd; Mohd Noor Abdul Salam, head of marketing & investment,
Iskandar Regional Development Authority; and Veena Loh, general manager of Malaysia Property Inc which promotes Malaysia as an international real estate investment destination. Meanwhile, those from the United Kingdom and US who will also be sharing their thoughts include Vincent Wong, author of Step by Step Guide to Lease Options; and Thomas Senatore, an authority on US Tax Lien and Tax Deed investing. The conference is expected to attract 1,000 participants from Malaysia and Singapore. Those who sign up now will get an early bird discount. For more information, visit www.propertyoutlookconference.com
MPI: Anti-foreign sentiment elsewhere benefits M’sia but … by ZOE PHOON OUR country is likely to be a significant, if not the biggest, beneficiary of “anti-foreigner property tax” in Hong Kong and other places, and of increasing outbound foreign direct investment (FDI) from Singapore and Japan. In Hong Kong, the government introduced a 15% property tax on foreign and corporate buyers of real estate. Like Singapore, it also raised stamp duty for speculators. In mainland China, the government announced limits on foreign buyers of its residential and commercial properties and in Australia, foreigners are prohibited from buying existing housing stock for investment. “The implications of antiforeign sentiments would benefit Malaysia as that redirects FDI to the country. “Most of the FDI are tied to real estate as multinational corporations (MNCs) look for suitable locations to target their markets, use the available talent pool or natural resources,” said Malaysia Property Inc (MPI) general manager Veena Loh. “Soft and hard infrastructures have made today’s globalised world flat … this makes Malaysia a good logistics centre as well as potential outsourcing and IT hubs,” Loh said in response to Real
Reserve’s questions on whether market cooling measures in Hong Kong, Singapore and elsewhere would favour Malaysia. She also sees Malaysia as the biggest beneficiary of Singapore’s increasing outbound FDI. In the meantime, she said, outbound FDI from Japan, as well as China-Japan squabbles over the “contested islands” and China’s lack of control over intellectual property which have made China less attractive to Japanese investors, would also benefit countries such as Malaysia which offer competitive wages, rent and logistics. On Hong Kong’s 15% property tax, Loh said it not only diverts mainland Chinese buyers’ attention elsewhere but is also punitive on expatriates who want to set up a permanent base in the special administrative region. In addition, MNCs previously considering to set up base in Hong Kong’s financial district may now look at Tun Razak Exchange in Kuala Lumpur which offers tax breaks and incentives to lure international Islamic banks, Islamic funds and wealth managers, venture capitalists and property developers. “Hong Kong and Singapore markets are volatile. During the global financial crisis, Singapore saw a 14% quarter-onquarter drop in the house price index in Q1 2009 and four con-
secutive declines compared to a one-off 2% softening in Malaysian real estate in Q4 2008. “Being Asia’s financial centres, Hong Kong and Singapore have been recipients of global money. Once touted as the world’s freest economies, both have pulled the brakes on foreign investors. Asian governments have been concerned about impending property bubbles as a result of speculation spurred by rising wealth and high savings. “This situation is exacerbated by greater ease in the flow of global hot money to the few remaining growth spots while consecutive quantitative easing by the United States Federal Reserve has increased global liquidity, making matters worse,” she pointed out. However, she said foreign investors have never considered Malaysia as a significant market for real estate play despite it being relatively low risk and stable. For instance, the Malaysia My Second Home programme has drawn property buyers but the number, around 1% of annual total residential property transactions, has been insignificant. On what the country can do, she suggested a departure from a “cheap image” to “branded image”: “Malaysia has been drawing MNCs targeting the mass market and small and medium enterprises (SMEs) which support them. This year, the country has be-
MALAYSIA Airports Holdings Bhd (MAHB) is consolidating its airside and landside hotels to create a new brand identity as part of plans to create a niche in the airport hotel business. The three properties – the existing landside hotel Pan Pacific KLIA currently managed by Pan Pacific Hotels Group, KLIA Airside Transit Hotel (ATH) and klia2 ATH
which will be ready in May 2013 – will assume the new Sama-Sama label. MAHB said in a statement that it “feels now is the right time to set a new direction for the future growth of its hotel business”. The new direction also means new opportunities for career growth for its hotel associates as it expands its business overseas. It said the internal announcement to the staff including plans for the hotels was well received.
Sama-Sama, meaning “togetherness” and “you’re welcome” in Malay, will see the airport hotels offer “an environment in which differences reside together – be they cultural, lingual or ethic”, the statement noted, adding they are intended to be “a place that connects all who pass through its doors to a multifaceted experience”. According to MAHB, it is also in the process of upgrading its existing hotel fa-
F O R T N I G H T L Y
W I T H
WorldNews ▶▶ Saudi Arabia on a RM400 billion building spree
SAUDI Arabia’s massive US$130 billion (RM398 billion) social spending package being fed into its economy, including a US$67 billion (RM205 billion) aid for housing, has sent some of the kingdom’s property stocks rallying on expectations of a new residential building boom. Shares of Dar Al Arkan, its largest listed property developer, for example, have gained 20% this year and close to 50% over 2011, outperforming Saudi Arabia’s benchmark index. “The government is willing to spend a lot of money in the property sector. We are really in the right spot,” said Youssef Al Shelash, chairman of Dar Al Arkan. Although the authorities have put the number of additional units needed by 2014 at 1.25 million, so far only 500,000 have been signed off, making the shortage of affordable units grave. Analysts said demand is fuelled by the passage of a mortgage law that provides a regulatory framework for issues ranging from foreclosure to oversight. The law is also expected to help feed an active secondary market and boost effective capital utilisation by lenders. Compared with the United Arab Emirates and Kuwait, Saleem Khokhar, head of equities at the National Bank of Abu Dhabi, told CNBC they are facing an oversupply situation whereas demand in Saudi Arabia is strong and competition is much less. In 2011, Saudi King Abdullah announced a stimulus plan to create jobs and build houses after the Arab Spring took the region by storm toppling leaders in Tunisia, Egypt and Libya.
▶▶ Dubai shines again
FROM being a financial desert, the Dubai property market worked itself back into being recognised as an investment oasis in 2011 and it is now one of the best places in the world to buy real estate, said local agents. In downtown Dubai, Select Property said rents are rising, which are boosting yields and making the emirate a global property investment destination once again. According to CEO Mark Scott, the firm has seen sales of properties hit RM74 million a month with Russians and Middle Easterners among top purchasers, followed by the British, thanks to Dubai’s potential for higher returns compared to the United Kingdom’s. The recession has matured the Dubai property market from being speculative to being more real estate-focused comparable to that of London, only with better yields, said Scott. In the last year, Select Property had seen a significant rise in sales, spurred on because Dubai properties now have the potential to return a yield of between 10% and 12%, Scott said, adding “when you take into account the average yield of 5% in London city, Dubai “remains one of the world’s best places to invest in properties”.
▶▶ S’pore caps home loan tenure at 35 years
If Malaysia doesn’t seize the opportunities and brand itself in countries that are looking outbound, it stands to lose out, says Loh
gun to attract investment interests from China to relocate SMEs keen to build a brand using it as a hub to reach out to the Asean marketplace. In Johor, the industrial parks tend to appeal to investments from SMEs in Singapore.” She said more marketing is also required for Malaysia to compete with others: “As our availability of cheap oil and gas has dwindled, promotional bodies need to market the country for its talent pool as have Singapore and Hong Kong. “Malaysia has an edge over them. Being multiracial has conditioned Malaysians to manage diverse workforces and multicultural teams for global or regional project management. Already, our workforce is tapped for high value service support project management and operations across Asia Pacific.”
MAHB rebrands its hotels under Sama-Sama by Geraldine Lim
P R O P E R T Y
cilities to provide “the best possible” services and experiences to guests. The Sama-Sama brand will be ready for operational launch for Pan Pacific KLIA by Jan 1, 2013. With the new identity, MAHB’s fully-owned subsidiary KL Airport Hotel Sdn Bhd and Pan Pacific Hotels Group have mutually agreed not to extend the management agreement for the landside hotel beyond Dec 31, 2012.
THE maximum tenure of all new residential property loans in Singapore has been capped at 35 years while loans exceeding 30 years will face significantly tighter loan-to-value limits. The Monetary Authority of Singapore (MAS) said the new rules are aimed at curbing the continued upward pressure on residential property prices driven by low interest rates and rapid credit growth. The rules, which apply to both private properties and Housing Development Board flats, are part of the government’s broader aim of deflating the property bubble. Without the new regulations, analysts feel the current global low interest rate climate will likely persist and spur demand in the residential property market, pushing up prices beyond sustainable levels. The eventual correction can be painful to borrowers and destabilise the economy, it noted. MAS said it is requiring more prudent lending because financial institutions have been lengthening the tenures of residential property loans with the average tenure rising to 29 years from 25 years over the past three years. Also, over 45% of such new loans granted by them have tenures exceeding 30 years.
▶▶ Women-only city in Saudi Arabia
CONSTRUCTION of the world’s first women-only city in Hofuf, a major urban centre in the Eastern Province of Saudi Arabia, is expected to start next year. And it’s not to become the world’s largest harem, but a place where 5,000 members of the fairer sex will be able to work in the textile, pharmaceutical and food processing industries. Targeted to create 5,000 jobs, the site was chosen for its proximity to residential neighbourhoods to facilitate the movement of women to and from their workplaces. The site will be equipped for female workers in an environment and working conditions consistent with the privacy of women according to Islamic guidelines and regulations. In Saudi Arabia, women are not allowed to drive but they make up 15% of the workforce. Now, new instructions from the Saudi government said they should have a more important role in the kingdom’s economic development and the proposed city is a part of the scheme. Designed to give women more opportunities to work while maintaining Saudi Arabia’s strict laws of gender segregation, it would be the first of several such cities there.
CONTACT real@themalaysianreserve.com
EDITORIAL
Andrew Wong Gunaprasath Bupalan Daniel Hong
ADVERTISING SALES BC Tiang 016.333.1288
Zoe Phoon Geraldine Lim
S. Sivaselvam Pavither Sidhu
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FRIDAY, DECEMBER 14, 2012
PROFILE
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Rural transformation private sector-style Injecting urban lifestyle into the outback is good business for property developer Andaman Group by S. Sivaselvam
GOING off the beaten track and blazing new trails has apparently become second nature to property developer Andaman Group. Since it came into being seven years ago, it has developed a knack for seeking out niche areas where its projects pay off handsomely. When Andaman came onto the scene in 2005, the Klang Valley was already experiencing a property overhang but it managed to secure pockets where property development had yet to penetrate on a large scale. Bangi and Serdang are cases in point. And its commercial and residential schemes took off. Likewise, the guaranteed rental returns scheme it introduced was true to its word. It made sure of this by creating demand for these properties and tying up the tenants to long-term occupancy before embarking on these schemes. It is little wonder, therefore, that Andaman is moving into another greenfield: Tier-3 towns, which are the small urban centres of rural areas. It is bringing the amenities of an urban lifestyle to these pockets of commercial activity. In doing so, it has unearthed latent pent-up demand for commercial properties that could subsequently lead to urban-style residences. “You don’t know what you need till you come across it” is the mantra behind this move. More than that, however, it is a demonstration that the private sector can play a significant role in stimulating economic transformation in the rural areas. Andaman has launched this Tier-3 initiative in two towns in Perak – Pantai Remis and Slim River – which are generally tucked away from the major traffic flows. While each of them is a hive of economic and business activity in its own right, serious property development has been absent for decades. Until now. Pantai Remis is a small rural coastal town about 180km from Kuala Lumpur and 50km from Ipoh. With a population of some 16,000, most of them engaged in the palm oil, rubber, rice, sugar cane and fishing industries, the
Pantai Remis Population: 16,000 Main economic activities: Palm oil, rubber, rice, sugar cane and fishing Catchment area: (Total population: 340,000) Ayer Tawar, Sitiawan, Manjung, Lumut
Slim River Population: 100,000 Main economic activities: Palm oil, rubber, manufacturing, automotive support Catchment area: (Total population: 150,000) Tanjung Malim, Behrang, Sungkai, Sabak Bernam
area has a thriving economy as reflected by the presence of four banks and a supermarket. However, the current crop of commercial developments there is not very large, undertaken mainly by private landowners developing their own small pockets of land. The absence of a sizeable commercial centre has led the Andaman Group to note a pent-up demand for new and modern offerings. While it sees the majority of the customer base to come from the town itself, it also discerns a larger catchment area: Within a 30km radius, there are four larger towns – Ayer Tawar population 30,000; Sitiawan, 30,000; Seri Manjung (the district’s principal urban centre), 250,000; and Lumut 40,000 – that it regards as forming a unique economic belt. Andaman Group’s sales and marketing director, Datuk Vincent Tiew, says: “In undertaking this commercial project, we are following our true calling, which is development. We are not constructing buildings but rather, creating projects that can spur the development of an area. “We see Pantai Remis as being in a strategic location that, together with improving infrastructure and con-
nectivity, will allow it to form a strategic economic alliance with Ayer Tawar, Sitiawan, Seri Manjung and Lumut. “It is also directly connected to Taiping, which is why we believe that many of our purchasers will come from there, too.” Andaman’s development – Taipan @ Pantai Remis – spans 13.4 acres of freehold land about a kilometre outside the town centre. It consists of 118 units of doublestorey shop-offices, three units of three-storey shopoffices (all with dimensions of 22ft by 70ft), priced from RM488,000 to RM728,000 for standard intermediate lots. The focal point of this commercial project will be
t he t wo - storey Cent ra l Square, consisting of retail lots, restaurants, a food court, multipurpose hall and a modern bus and taxi stand. The ground floor will be taken up by a hypermarket, while the first floor will provide recreation, entertainment and sports facilities. “We envisage Central Square as being the main commercial and transportation hub of Pantai Remis,” says Tiew. “We are confident its facilities, now lacking in the larger area, will draw the crowd and drum up business for Pantai Remis – until now, its populace have no after-work recreation and leisure places to go to and our project aims to alleviate this situation.
“The influx will also generate business for other commercial activities within the development, especially with the presence of the bus and taxi stands. “We believe that the inherent factors of the area, coupled with the reasonable pricing and modern and sleek design of our shop-offices, stand us in good stead.” According to Tiew, the Perak government as well as the Opposition have welcomed Andaman’s move into Pantai Remis as both sides recognise that no one had come to the area for decades with a systematic and strategic plan to transform it into a modern centre with all the facilities for an urban lifestyle. “We are in fact spurring social and economic growth through our development. As has happened with our other projects elsewhere, other developers are bound to stream into Pantai Remis in the wake of our efforts,” he adds. The development is being carried out by Anjuran Sentosa Sdn Bhd, a whollyowned subsidiary of the And a m a n Gr oup, a nd i s expected to be completed in mid-2014. Andaman launched its sales gallery at Pantai Remis in the middle of last month. Slim River is the second largest town in the Tanjung Malim district, with an estimated population of 100,000. It is exactly halfway between Kuala Lumpur and Ipoh (100 km either way). The majority of its people are engaged in the palm oil and rubber industries, as well as manufacturing, coupled with some business activities in the automotive industry due to its proximity to Proton City in Tanjung Malim. Slim River is about
Above and below: These modern and sleek designs bring city lifestyle to Tier-3 towns
Tiew: We spur social and economic growth through our development
20km north of Tanjung Malim town. Within the thriving town centre are a couple of banks but there is neither a shopping centre nor big supermarket, rather surprising given the population of 100,000, who do their shopping mostly in Tanjung Malim. The townsfolk live mostly in small and scattered housing estates, as well as villages all over Slim River. Many of them also live within the town, in traditional double-storey shophouses. There are just a few newer shop/office developments. Andaman sees in this reasonably thriving town pentup demand for new and modern development units and has come up with plans for a hypermarket, surrounded by shop-offices. Aside from the expected demand from the local people of Slim River, it feels that the business communities in neighbouring towns like Tanjung Malim, Behrang and Sungkai would also be keen to invest in such a sizeable commercial development just 20km to 30km from where they are. Andaman’s development, Taipan @ Slim River, will consist of 99 units of double-storey shop-offices, four units of three-storey shop-offices (all at 22ft by 70ft) and 11 units of dual-frontage 22ft by 80ft shop-offices with alfresco l a nd, pr ic e d b e t we e n RM488,000 and RM2.4 million. The centrepiece will be a double-storey 40,000sq ft commercial centre, consisting of a supermarket, restaurants as well as retail shops and service centres. “The reasonable pricing, coupled with the modern and sleek design, should stand us in good stead when offering our shop/offices for sale to the public,” says Tiew. Bella Advance Sdn Bhd, a wholly-owned subsidiary of Andaman Group, will develop Taipan @ Slim River on 13 acres of freehold land at the exit of the Slim River Interchange at the NorthSouth Expressway. The sales gallery for the development has opened in town and the expected completion will be in mid-2014.
THE MALAYSIAN RESERVE | REAL RESERVE
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JBCC property prices fast catching up with KLCC’s The RM1,200psf average selling price of luxury serviced apartments in JB City Centre is easily comparable to KL City Centre’s, notes Kenanga Research
by ZOE PHOON DEVELOPERS in Johor are generally a lucky lot: Buyers are cash-flush and sales of their projects brisk. Kenanga Research “feels extremely bullish” on the Johor property market following its November 2012 assessment since its last in March, citing two major factors for the vigorous market: Singapore-Malaysia government-togovernment collaborations and robust population drivers such as employment and affordable housing content. “The unusual buyer profiles and demand trends indicate an extremely resilient market as there’s a lack of supply of industrial spaces and concept-play residential properties. “At the same time, Singapore’s housing affordability issue makes Johor an attractive option. We remain positive on Johor over the next 24 months, assuming minimal general election risk,” the research house says. Its assessment is also based on its recent site updates of developers in Johor such as Crescendo Corp Bhd’s Nusa Cemerlang Industrial Park (NCIP), SP Setia Bhd’s Setia Sky 88, IJM Land Bhd’s Nusa Duta, WCT Bhd’s 1Medini and UEM Land Bhd’s East Ledang and Puteri Harbour. The southern state is “shaping up nicely” with Marlborough College having its first intake of students; Newcastle University Medicine Malaysia almost a year into operation now; and talk that the Johor-Singapore MRT could be launched in 2014 and built in four years, and when completed is expected to narrow the gap between Johor property prices and Singapore’s. Industrial space demand bullish Crescendo’s NCIP covers 527 acres of freehold industrial land surrounded by Educity, Southern Industrial and Logistics Clusters or SiLC, and Gerbang Nusajaya. It is located close to Port of Tanjung Pelepas, Pasir Gudang Port and Tanjung Langsat Port and is
accessible to the Second Link, Jurong Port and the Second Link CIQ. Kenanga Research says the main investors at NCIP are Singaporean (56%) and Malaysian (31%) small and medium industries such as engineering, food processing, parts manufacturing and packaging. Others are from the United States, Germany, Korea, Taiwan and Indonesia. With prices rising, Crescendo enjoys about 50% gross margins from the industrial park. Currently, about 300 acres there are undeveloped and Crescendo estimates a gross development value (GDV) of RM1 billion based on an average selling price (ASP) of RM350psf. Kenanga Research sees more upside to capital values, noting that rental yields are still decent at 6%. Given its low land cost, Crescendo is looking to keep 10% of the GDV for investment and develop 150 acres fronting the main road into commercial properties, and is believed to be in talks with a car showroom investor. Meanwhile, it will continue to launch semi-detached and detached factories at NCIP. It is also completing earthworks and the show village at its 1,300-acre Bandar Cemerlang (GDV: RM3 billion) township and plans to unveil 300 units of terraces in 2013 priced at about RM400,000 each targeting Malaysians working in Singapore. Sales are expected to be swift. Located near the Mount Austin and Setia Indah townships, Bandar Cemerlang is a 20-minute drive via the Eastern Dispersal Link from JB City Centre (JBCC). Crescendo has another 222 acres along Sungai Rekoh intended for a mixed development in three years’ time and 794 acres near Petronas’ Rapid (Refinery and Petrochemical Integrated Development) project site in Pengerang. The developer’s plans for the 794 acres would depend on progress of the Petronas project. Crescendo estimates its remaining landbank of 3,000 acres to be worth RM2 billion at current prices. Most of the land is three to 16 years old, imply-
Inspiration Park (above) and Noble Park residences (right) at UEM Land’s East Ledang township
ing an extremely low land valuation of RM3.43psf compared to current valuations of greenfield landbanks at RM8psf to RM10psf, says Kenanga Research. Fast take-ups in 1Medini Take-ups have been “extremely encouraging” at WCT’s 1Medini as the latter is the only “pure residential play” and has a special land title with no restrictions on foreign buyers including the RM500,000 threshold for property purchase, according to the research house. Located at the Medini mixed development, 1 Medini features 1,332 units of one- to four-bedroom apartments of 720sq ft to 1,704sq ft housed in two towers. Tower A’s 322 units released in February 2012 at RM450psf were fully sold even without incentives offered while 80% of Tower B’s 322 units were booked within a few weeks after they opened for registration at RM500psf, and many were repeat customers. WCT plans to roll out Medini Signature soon at RM550psf. 1Medini and Medini Signature have a total GDV of
“Buyers are willing to pay as such RM1.2 billion. Commencement of the Educity com- developments are hard to come by. We ponents, Legoland and Mall of Medini also notice increased buy-in of the Jois said to have excited property buyers. hor-Singapore collaboration story. About 60% of the buyers are locals,” Kenanga Research adds. Sellouts despite aggressive pricing Going by the sellout of the first phase comprising 353 units of semi-fur- Growing upgrader market nished serviced apartments of 500sq ft Likewise, IJM Land’s freehold gatedto 1,300sq ft priced from RM600,000 in and-guarded Nusa Duta development the 55-storey Setia Sky 88 located at located on the other side of the mature JBCC, Kenanga Research believes the Bukit Indah township and 10 minutes’ second phase of over 300 units with drive to Medini and JBCC via the similar built-ups, features and promo- Coastal Highway is experiencing tion schemes targeted for launch in “very quick take-ups of international mid-2013 will still achieve strong take- lots” by cash-rich buyers, mostly Maup despite “the indicative ASP being laysians working in Singapore, and as extremely aggressive at RM1,500psf”. a result “there’s no need for financing This is because the area lacks high- plans such as developer interest bearend residential supply and such pric- ing schemes”, according to Kenanga ing, it says, is easily comparable to that Research. New launches include two-storey of serviced apartments in Kuala Lumpur City Centre pegged between cluster residences with 2,900sq ft to 3,300sq ft built-ups priced from RM1,000psf and RM2,000psf. All units in the first phase were RM900,0000 to RM1 million (a considsnapped up within weeks of launch erable increase from similar units sold even though prices were stepped up from RM700,000 to RM800,000 12 to 18 aggressively: Tower 1 started out at an months ago) and two-storey semi-dees ASP of RM850psf in October and Tow- of 3,300sq ft to 3,600sq ft priced beer 2 was sold at an ASP of RM1,200psf. tween RM1.2 million and RM1.3 mil-
lion. For 2013, it plans to unveil its 50%-owned 96-acre gated-and-guarded township (estimated GDV: RM2 billion) in Tebrau located across Setia Tropika. The residential units are expected to be sold at ASP of RM400psf to RM500psf. The township will include an estimated 850,000sq ft retail mall which IJM Land, said to be in discussion with a foreign mall operator, may keep for investment. In the affordable segment, it launched D’Rich serviced apartments at RM500psf (80% taken up, remaining units are Bumiputera lots) early this year. Meanwhile, UEM Land’s East Ledang @ Nusajaya and CS2 @ Puteri Harbour are “seeing fruit”, according to Kenanga Research. The developer recently launched Phase 4A bungalows, priced at RM3.5 million to RM4 million or an ASP of RM700psf (“considered a new benchmark pricing for the development”) and Phase 5 semi-dees priced at RM1.8 million to RM2.3 million or ASP of RM600psf. Its upcoming Phase 9 townhouses are pegged at RM1.1 million to RM1.5 million.
About 60% of the buyers are Singaporeans “willing to consider living in Nusajaya and commuting to the island nation for work”. “Given the dearth of residential offerings in Nusajaya, rental yields are extremely promising at 7% to 9% … semidees can fetch monthly rental of RM8,000 and terraces RM4,000. We believe East Ledang’s main driver is its proximity to Medini and Educity which
have commenced operations. Singaporeans are considering Educity as a favourable-cost tertiary education destination for their children,” the research house says. On the CS2 @ Puteri Harbour 1,200-unit mixed development (estimated GDV: RM900,000), it expects the units’ ASP to be close to Imperia’s RM750psf “to ensure sustainable capital values”.
Despite the “extremely aggressive” indicative average selling price of RM1,500psf, the second phase of SP Setia’s 55-storey Setia Sky 88 condo in JB City Centre is expected to still achieve strong take-ups
From a trot to a gallop:
Investor interest in Iskandar IIB’s efforts to step up regional development are paying dividends
by Gunaprasath BUPALAN
Flagship B of Iskandar Malaysia sprawls across 2,300 acres of prime land.
ISKANDAR Malaysia has become a favourite property investment destination for both Malaysian and overseas buyers, in particular Singaporeans, due to proximity and comparative value for money. Other incentives also abound, including exemption from the minimum threshold of RM500,000 for purchases by foreign buyers and the exemption from having a Bumiputera quota, hence international buyers will also have a pick of choice units. Eligible companies in Medini, which takes up 2,300 acres within Iskandar Malaysia, that commence qualifying activities before Dec 31, 2015 can register for IDR (Iskandar Development Region) status to enjoy a 10-year income tax exemption, a 10-year withholding tax exemption for
services and royalties, import duty and sales tax exemption and exemption from real property gains tax. In line with Malaysia’s aspiration to be a developed nation by 2020, Iskandar Investment Bhd (IIB), the catalyst developer of Iskandar Malaysia, has geared itself towards contributing towards this realisation. Hence, it has identified several top developers in Malaysia with whom it is establishing joint ventures under lease purchase agreements that will offer stateof-the-art residential and commercial developments to both local and foreign buyers. The first batch of four lease purchase agreement joint ventures have been sealed and more are in the pipeline. Amongst them are with:
(From left) John Ng, IIB executive vice president, strategic marketing; Leong; Md Fuzi Ahmad Shahimi, Central Johor Bahru Municipal Council president; Datuk Syed Mohamed Syed Ibrahim, IIB president and CEO; and Jen (R) Tan Sri Yaacob Mat Zain, Mah Sing chairman
Mah Sing Group Bhd MAH Sing will be developing The Meridin@Medini, an iconic integrated development in Medini, with an estimated gross development value (GDV) of RM1.1 billion. The RM74.7 million 99-year lease purchase for 8.19 acres of prime development land in Zone A, Medini, was signed on Oct 18, 2012. The development will have a permitted gross floor area (GFA) of 2.14 million square feet or RM34.90psf. The Meridin@Medini will be a purpose-built development with a Live, Work, Relax and Rejuvenate concept comprising Meridin Suites residences, Meridin Linx small office versatile offices (SoVo), Meridin Walk lifestyle retail and Meridin Exchange corporate towers. The project is expected to take off in the second half of 2013 and registration of interest is underway.
“We foresee a lot of interest from parents whose children study in the various institutes of higher learning in EduCity@Iskandar like Newcastle Medical School, Marlborough College, Trust School and University of Southampton,” said Mah Sing managing director and CEO Tan Sri Leong Hoy Kum. “Our project offers an attractive entry point from only RM288,000, practical layouts, facilities and good security, giving them peace of mind to let their children reside in The Meridin@ Medini. For buyers who are looking for investment returns, an apartment costing RM300,000 can fetch rentals of RM1,500 to RM2,000 per month or gross yields of 6% to 8%, the highest returns amongst the various states. “We believe it is the right move to launch smaller unit sizes to ensure absolute affordability, in order to tap these markets.”
Taing (second from left) and Datuk Syed Mohamed Syed Ibrahim, IIB president and CEO, exchanging documents while Choe Kai Keang (left), executive director of engineering and construction of WCT Bhd, and John Ng (right), IIB executive vice president, strategic marketing, look on
WCT Land Sdn Bhd IIB added another jewel in its crown on Nov 2, 2012, with the signing of a lease purchase agreement for RM99.47 million with WCT Acres Sdn Bhd, a whollyowned subsidiary of WCT Land, for a property on 18.12 acres with a GFA of 2.763 million square feet. WCT Acres is set to develop the land with an estimated GDV of RM1.5 billion. The prime land will be developed into a mixed commercial project comprising office space, retail components and apart-
ments in Medini North over the next five years. “We are excited at the prospects as well as the future of Medini Iskandar, which will surely emerge as the nerve centre of modern lifestyles in the next decade,” said Taing Kim Hwa, managing director of WCT. “Our initial venture, 1Medini condominium, garnered excellent interest from the investor community as well as the market and we are optimistic about our future ventures in Medini Iskandar.”
Datuk Syed Mohamed Syed Ibrahim (third from left), IIB President and CEO, and Koh exchanging documents, witnessed by Wan Haslan Wan Hassan (left), IIB chief financial officer, John Ng, IIB executive vice-president, strategic marketing, Lim Ech Chan, Distinctive CEO, and Tony Tan, Distinctive director
Distinctive Group ON Nov 8, 2012, IIB signed a lease purchase agreement with Distinctive Ace Sdn Bhd, a member of the Distinctive Group, for 18.05 acres of prime land in Zone A of Medini involving a GFA of 2.752 million square feet for RM99.92 million. Strategically located at the confluence of Lebuh Kota Iskandar and the spine road leading to Legoland Malaysia and the Mall of Medini, the land will be developed into a mixed commercial project comprising business and lifestyle components called 18@Medini with a GDV of approximately RM1.5 billion. It will potentially emerge as a unique lifestyle destination, with a wide array of options to include retail spaces, small office home office (SOHO) units, small office versatile
office (SOVO) units, corporate offices, showrooms, food and beverage outlets, business and entertainment centre, indoor sports and exhibition centre, serviced apartments and a hotel. “We are happy that our journey and association with Iskandar Malaysia continues with our commitment to introduce to Malaysians as well as the world a new, vibrant and liveable city with best-in-class infrastructure, business and lifestyle solutions,” said Distinctive chairman Datuk Dr David Koh. “We look forward to jumpstart our third project in Iskandar Malaysia, 18@Medini, which I am confident will be the very heart of Medini Iskandar upon its successful completion in approximately five years.”
Datuk Syed Mohamed Syed Ibrahim (second from left), IIB president and CEO, and Datuk Ng Eng Tee, UMLand deputy chairman & executive director, exchanging documents, witnessed by John Ng (left), IIB executive vice-president, strategic marketing, and Chia (right)
United Malayan Land Bhd (UMLand) IIB signed a lease purchase agreement with property developer Lextrend Sdn Bhd, a subsidiary of United Malayan Land Bhd (UMLand), on Nov 21, 2012 involving a GFA of 2.17 million square feet on 13.22 acres of prime land in Zone B of Medini for RM82.49 million. The purpose-built development, with a GDV of approximately RM1.4 billion, will include townhouses, apartments, serviced apartments/SoHo, hotels, retail promenade with F&B outlets and a specialty retail centre. The location is readily accessible from the Johor Baru
city centre. “With its strategic location neighbouring Singapore and proximity to some of the world’s most rapidly growing and important economies as well as its range of attractive fiscal and non-fiscal incentives, Medini@ Iskandar Malaysia is poised to see an influx of foreign and high-level corporate investments,” said UMLand group CEO Charlie Chia. “Given the tremendous potential, the UMLand Group is committed to enhancing its presence as well as positively contribute to the emerging property market within this southern economic zone of Malaysia.”
FRIDAY, DECEMBER 14, 2012
6
A L L
FOCUS
P R O P E R T Y
F O R T N I G H T L Y
W I T H
Why building maintenance and compliance are essential Taking regular care of properties will retain their value and extend their lifespan STEWART LABROOY
“A THING of beauty is a joy forever …,” wrote John Keats. For the average man in the street, the term “maintenance” can mean many things. From your home to the car you own to the lawn mower you purchased, these things need regular maintenance to keep their appearance and performance at an optimum level. However, not many of us have a culture of maintenance. When I went to university in England, I marvelled at the university buildings we studied in. They were well over 100 years old but the brass shone, the floors were clean and the halls well painted. It felt that they would go on serving another 100 years to come. I wonder how many of our schools or universities in Malaysia will have a similar lifespan. Our cities and towns are littered with ugly neglected buildings – homes or shopoffices. This extends to the recreational facilities offered as well. There is an urgent need to inculcate among our population, especially our
children, the need for a maintenance culture. Asset management strategies The advent of REITs has had a significant impact on the beginnings of a maintenance culture in Malaysia and they continue to lead the way. The property portfolio of a REIT has to be constantly refreshed to retain tenants and enable a steady rise in rents to match inflation. The increase in rents is necessary as the operating costs of a building are constantly increasing – from the cost of security, electricity, cleaning, spare parts to manpower costs. If a REIT Manager was to let a building deteriorate over time by saving maintenance costs, then they would be faced with the loss of tenants, rising operational costs, an inability to increase rent and a drop in valuation. If you were to look at how REITs have steadily improved on their portfolios and organically grown their returns to unitholders, they have become a lesson to other property owners. The success of these asset management strategies is not lost on these owners as we are now witnessing more buildings being upgraded to position them-
selves to attract a better tenant class and prepare the asset for a possible sale. The maintenance function is all part of asset planning and facilities management which is at the core of all successful REITs. In doing so, they have established a comprehensive maintenance policy for their buildings with detailed schedules for maintenance cycles of all plant and equipment. In addition, the establishment of life cycle costs for equipment enables the REIT Manager to predict capital expenditure requirements for replacement of plant and equipment when they have reached the end of their economic life. An example of the areas covered by a comprehensive maintenance programme will include:
• Lift maintenance • E lect r ical pa nels
a nd wiring • Firefighting compliance • Air-conditioning • Lighting • Sewerage • Landscaping • Cleaning • Painting of the building • Building wash-downs • Car park equipment • Public address systems • Energy audits
• Security audits • Lobbies and toilets • Fire certificates • Building audits
Another aspect of the maintenance function centres on the production of annual budgets for the management to enable the finance department to predict with fair accuracy the costs of operating the buildings over a financial year and give a pretty accurate forecast of the annual distribution. The budgets must also capture the incremental cost of the ever changing regulatory landscape imposed by the authorities – for example, the fire regulations may change and that will require significant upgrades in a building or the mandatory organisation of fire drills all add to the operating cost of compliance. There is a growing need for the REIT Manager to recognise the increasing importance being given to green buildings, which means that in the realm of maintenance there is a growing need to be aware of trends in sustainability which has to be addressed in existing buildings to remain competitive. The need for all these services has to be wrapped in an organisational structure that can deliver the goods. A dedi-
cated team of facilities management specialists has to be part of the REIT Manager. Some REIT Managers outsource this function and some do it in-house. A dynamic and responsive facilities team is essential to give tenants the necessary confidence in becoming a long term tenant in the buildings the REIT serves. So when you drive around town and see a building being renovated or painted, the chances are it is part of a REIT portfolio. Maintenance not all about REITs However, maintenance is not all about REITs. The problems I see as emerging today is the proliferation of medium- and lowcost condominiums as land price escalation and cost pressures force developers to build inexpensive dense accommodation to cater for affordable housing requirements. The challenge here is the ability of owners of these units to organise themselves in management corporations to ensure a reasonable level of maintenance for these properties. Sadly this is not the case and you will see these good looking buildings slowly sink into a deplorable state of repair over time, leaving
many scars on the skyline of our cities. The local authorities need to come up with a long term solution in the maintenance of these assets. To conclude, the “If it isn’t broke don’t fix it” adage does not apply if we want to have beautiful cities and townships to live in. We need to ensure we fix our homes and buildings in a planned and regular manner. How many of us paint our house every five years, drain our septic tank every year (it’s free!), have our roofs cleaned every five years and address any rotting gutters, have a plumber to check our pipes every five years, or consider upgrading our kitchen and toilets every 10 years. You will be surprised how house proud you will be and how much better your house will retain its value. Have a look around and start to pull that paint brush out! Stewart LaBrooy is a prominent speaker on conventional and Islamic REITs in the region. He is chairman of the Malaysian REIT Managers Association, a board member of the Asia Pacific Real Estate Association and CEO of Axis REIT Managers Bhd, the first REIT listed on Bursa Malaysia in 2005.
Rise in syariah-compliant real estate financing by ZOE PHOON ISLAMIC financing has been used for real estate transactions for decades in Malaysia and the Middle East while non-Muslim countries such as the United Kingdom and Singapore have enacted legislative changes to pave the way for such financing arrangements. Now, throughout Asia and Australasia, there seems to be an increasing focus from other countries to tap this alternative source of capital, according to a report by information services firm Mondaq Australia. It said the global appetite is growing for Islamic finance and investment funds as viable alternatives to conventional debt funding especially in the current economic environment. For entities seeking to raise funds, Islamic finance gives them access to a larger investor pool. Moreover, syariah concepts and commercial real estate investments are complementary as both adopt a risk-sharing model.
nancing, from residential mortgage such as the United National Bank’s lease-based mortgage in the United Kingdom to large-scale financing like Qatari Diar’s Chelsea Barracks purchase and construction of the Shard of Glass in London. Emaar Properties in Dubai also used Islamic finance techniques to refinance existing facilities for the Dubai Mall development. The report said an ideal opportunity currently to explore Islamic finance as an alternative to traditional debt funding is this: Islamic investors including certain Middle East sovereign funds have traditionally preferred investing in prime real estate in the UK and Europe. Due to Europe’s economic uncertainty, there are increasing capital flows into commercial real estate in Asia and Australia, particularly industrial and commercial. Islamic finance can be adapted to suit the financing size and tenor, local tax laws, and may even be used alongside conventional finance.
Opportunities Islamic financing structures are not limiting, it said, citing innovations such as syariahcompliant real estate investment trusts (REITs). In Singapore, a business trust, which has been employed in conventional financing, can also be adapted to meet syariah principles for real estate funding. According to the report, Islamic finance can be used for a wide range of real estate fi-
Deciding factors However, there are key considerations for syariah-compliant real estate financing. One is the property’s proposed use: Islam forbids preparation or consumption of products including pork, alcohol, armaments and activities such as gambling and conventional banking. So using Islamic finance to fund a pork factory or casino is not permitted. It is less clear cut for a mul-
Islamic finance can also be used for large-scale funding such as construction of the Shard of Glass in London
ti-let property such as a commercial building which has a conventional bank branch. While conventional banking is prohibited, it does not form part of the primary usage of the property. Syariah scholars generally accept that Islamic finance can be used for multilet properties where the threshold of non-permissible activities is below 5%. Income received from such activities “must be cleansed” (donated to charity) and not form part of the profit distributed to investors. However, unless the income from non-permissible activities is very low or negligible, the cleansing element may deter the use of syariahcompliant financing as it means a slice of the income will not be available to pay returns to investors. The report said another consideration is local tax laws. Many countries impose heavy taxes and stamp duties on transfer of ownership in real property, especially the ijara or Islamic lease structure
which involves an initial sale and purchase of an ownership interest in property coupled with an undertaking by the obligor to buy the property at the end of the tenor. Taxes and stamp duties imposed on both sets of transfers could mean prohibitive costs for the customer and investors. But Malaysia, Singapore and the UK have amended local tax legislation to ensure Islamic finance transactions are granted the same tax treatment as conventional financing techniques. Financing methods A murabahah (cost plus financing) contract comprises a two-stage process whereby the financier buys an asset (commodities such as metals from a metals exchange) from the vendor at cost price and immediately sells it to the customer for a deferred, fixed rate price. The deferred payment entitles the financier to charge the customer a profit margin.
The customer then sells the commodity to a third party at cost price with immediate payment, thereby obtaining the financing to buy the real estate asset. Limitations of murabahah are the fixed sale price limits flexibility on rebates, and break costs on prepayment are not permitted. With an ijara (lease), the financier buys the property and leases it to the customer for a fixed term in return for rent. Rental payments include the profit component paid to the financier and may also be set by reference to a benchmark. The customer enters into a purchase undertaking to buy the property at maturity or upon a default for a price equals to the financing amount. As long as the financier has an ownership interest in the property, it must also bear the liabilities arising from ownership including maintenance, structural repairs and environmental matters. A lessor cannot pass these responsibilities to the lessee but it can
pass them on to an agent. The rent will be increased to reflect the agent’s costs. The istisna’a (procurement) structure is typically used for con st r uc t ion f i n a nc i ng whereby the customer commissions the financier to develop the property for a fixed price on deferred payment terms. The financier will commission the contractor to do the same for a lower price, the difference in price being the financier’s profit. When the property is delivered, the financier transfers title to the customer. Construction and payments may be phased or payments may be made on completion. The istisna’a may be coupled with an ijara to achieve long-term floating rate financing to enable the financier to receive periodic returns as the property is being developed. Another real estate financing method is the diminishing musharakah (co-ownership akin to partnership). It is based on the principle of risk sharing and is flexible enough to incorporate a variable rate of return, features that make it a popular choice. The financier and the customer co-own the property and the proportion of ownership reflects their contributions whether financial or by way of provision of management or other services. Each payment that the customer makes reduces the financier’s share in the property by the same percentage. Both also share in the risks of construction of the property and any declines in market value.
THE MALAYSIAN RESERVE | REAL RESERVE
FRIDAY, DECEMBER 14, 2012
7
ANDREW WONG EYE ON INVESTMENT
THE NASTY F-WORD IS NOT ONLY UTTERED IN CELEBRITY KITCHENS AND CORPORATE BOARDROOMS BUT ALSO THE REAL ESTATE ARENA. WE MIGHT AS WELL GET USED TO IT … AS we close out the year and prepare for the uncertainty of 2013, I’d like to set the record straight and come to the defence of a group that has for long been maligned. Much like how we use the four-letter “F” word to show our disdain for people and things that rile us, we have often vented our anger on this group, which coincidentally also has four letters beginning with an “F” in its name. For a long time, the “flip” of properties has been regarded as one of the main causes of property price surges, with even developers themselves saying flippers are not welcome in the marketplace as their speculative nature “pushes genuine buyers out and makes prices artificially hot”. “We don’t want them to come and buy to flip,” Datuk Ng Seing Liong, a former president of the Real Estate and Housing Developers’ Association of Malaysia, has been quoted as saying. “Too much speculation is no good (as it doesn’t give rise to) a long-term and sustainable market … ‘flippers’ are responsible for pushing up property prices faster than our incomes can rise especially in urban areas, and they are crowding out genuine wannabe homeowners and investors.” And so, the flip group has earned the unfortunate title of being the nemesis of buyers
seeking affordable houses. Because the former exists, the latter cannot – because they buy to flip for quick monetary gains, first timers and “genuine” hunters are robbed of the opportunity to own the roofs over their heads. So they’re so frowned upon. But whoa. While we can want to shoo flippers out of the market, we must recognise that they exist only because the environment allows them to exist. Without the right climate made up of buoyant demand, short supply, easy bank lending as well as favourable government controls and tax rates, it is unlikely they would sprout like mushrooms after rain. Flippers aren’t swindlers or tricksters … they are opportunists who see an opening and take advantage of it, the exit plan in their motivation being to make bags of money unlike home owners, whose intention is to buy for keeps. Contrary to popular belief, flippers cannot manipulate a market and influence prices. While it’s easy to point fingers at them for driving up prices in a hot market, does it mean they are also to blame when things suddenly turn cold? Many a time, caught in such a situation, those with the financial stamina have had to change their game plan from what was
Over 70 malls on drawing board in Greater Kuala Lumpur
Nu Sentral will be the country's first integrated green lifestyle mall located next to a transit hub, Kuala Lumpur Sentral by Pavither Sidhu THERE are more than 70 shopping malls on the drawing board in Greater Kuala Lumpur of which 35 are under construction in the Klang Valley with an estimated nett lettable area (NLA) of 23.20 million square feet of retail space. Of these, six malls with over six million square feet of nett floor space are expected to open for business in 2013. These are Nu Sentral in Kuala Lumpur Sentral by Malaysian Resources Corporation Bhd, Cheras Sentral in Cheras by Malaysian Land Properties Sdn Bhd, KLIA 2 by Malaysian Airports Holdings Bhd, Encorp Strand Mall in Kota Damansara by Encorp Bhd, D’Pulze in Cyberjaya by DPulze Ventures Sdn Bhd and Market Hall @ Pudu along Jalan Pudu by Nihon Properties Sdn Bhd. Among the others under construction, IOI City Mall in Putrajaya will have the largest NLA, of two million square feet, followed by KL Metropolis Matrade Retail 1’s 1.40 million square feet. The smallest will be One South Street Mall in Seri Kembangan, of 120,000sq ft. To date, Malaysia has over 330 shopping malls collectively offering over 100 million square feet of NLA and with a real estate value in excess of RM100 billion, said Malaysian Shopping Malls Association (PPK) president HC Chan. “Malls are huge investments as each could
cost RM400 million to RM500 million,” said Chan, noting that KL is listed as the second best shopping city in Asia Pacific in the Globe Shopper Index, created by the Economist Intelligence unit commissioned by Switzerlandbased shopping tourism company, Global Blue. “KL is just one spot below Hong Kong and ahead of Singapore, Sydney, Tokyo, Seoul, Bangkok and Shanghai. The ranking is recognition of the Malaysian mall industry, which was non-existent 40 years ago, as being among Asia’s top. “We have some of the world’s best malls and we look forward to working with the Tourism Ministry in promoting Malaysia as a shopping destination,” he said. Visiting malls in the Klang Valley has become a national pastime as people do more than shopping; they meet up with friends and family, pay bills, catch a movie, do their laundry, visit a dentist, enjoy a massage or run errands at the post office or bank. They swarm there on weekends to relax in a comfortable environment with controlled temperature, he noted. However, Chan noticed signs of some malls running on deficits lately, which he said is not good for developers, owners, retailers and consumers. “When mall owners, developers and retailers face higher business risk and lower profit margin, the high costs would be passed on to consumers in terms of prices and this is not good for the market.”
to have been a quick flip into a long drawn play. This has led to the birth of the specuvestor – the person who starts off as a speculator out for a quick kill but later becomes an investor as he tries to ride out a market lull by renting out his acquisition. I daresay more than a few specuvestors exist in the Kuala Lumpur city centre and Mont’ Kiara areas in the Klang Valley. But just as many – if not more – flippers have also drowned under falling prices, with the cause of their demise landing under the auctioneers’ hammer. So, just as much as they can make profits, they can also suffer and pay a hefty price. Nevertheless, the point is, for as long as there is a dynamic property market driven by free market forces, there will always be flippers. Which is why, rather than treat them as outcasts, unwanted children who should not be seen or heard, they should be brought under the spotlight and educated on the art of successful flipping. This is what’s happening in the United States in the wake of its subprime mortgage crisis that made the flippers who managed to survive the meltdown understand that they cannot operate merely on guts and glory. “You gotta be careful, really do your research, and know what you’re doing," Mike LaCava, a real estate investor who founded the House Flipping School to teach others about
the trade, was quoted as saying by the US News and World Report. Peter Souhleris, co-founder of CityLight Homes, a Boston-based house-flipping company, added that “you have to know your market and compare apples to apples … a lot of novice flippers really want their deals to work (but because they don’t know what their buyers want), they fudge up”. So closely monitored are America’s flippers that there are even statistics on them: According to RealTrac.com, close to 100,000 houses were flipped in the first half of the year, with each flip making an average of US$30,000 (RM92,000). The US News and World Report pointed out that successful flippers know their strengths and aren’t afraid to engage experts to help them realise their goals. Novices, it said, only “understand the cosmetic side of things, but they miss the fundamentals” of offering a good deal. Besides intimately knowing how much houses in an area are trading for, House Flipping School’s LaCava said flippers also need to know how to renovate their units to make them stand out and sell more quickly. Done the right way, flipping can be seen as more of an art rather than the crude pursuit of profits. And like art, sometimes a flip done right can be priceless.
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FRIDAY, DECEMBER 14, 2012
THE MALAYSIAN RESERVE | REAL RESERVE