Institutional buyers to drive office property market

By THE STAR

PETALING JAYA: The office property market will continue to hold out well with strong interest from local and foreign institutional buyers, industry players said.

Knight Frank Ooi & Zaharin Sdn Bhd managing director Eric Ooi said in the past year, the capital values of Grade A office space had appreciated by between 20% and 30% to RM1,000-RM1,300 per sq ft. Rentals grew by 20% to 30% as well to RM7.50-RM8 per sq ft.

Meanwhile, super prime office space in the Petronas Twin Towers commands rentals of between RM10 and RM12 per sq ft.

According to Ooi, institutional buyers continue to see good upside potential in capital values and rentals of quality office buildings in Kuala Lumpur and this bodes well for the market going forward.

An analyst with a local brokerage said a lot of foreign and local institutional funds wanted to hedge against inflation and were on the lookout for strategic acquisition of prime office buildings with high yield potential.

“Property investment, especially in commercial properties, is still considered the better option for high yield potential compared with investment in the lacklustre equity market,” he said.

Axis REIT Managers Bhd chief executive officer Stewart LaBrooy said with the recent budget incentive for real estate investment trust (REIT) in the form of lower withholding tax for local and foreign investors, REIT managers would be looking at more ingenious ways to enhance their asset values by making more yield accretive purchases.

The tax rate on REIT dividend received by foreign institutional investors will be slashed to 10% from 20% while for individual investors (both foreign and local), the withholding tax will be reduced to 10% from 15%.

LaBrooy said the office market, which had made substantial gains in capital values and rentals in the past 12 months, continued to offer good upside potential.

“There is no overbuilt situation for Grade A office space in the city centre and the number of transactions at new record prices underscores the positive market sentiment,” he added.

In its latest Real Estate Highlights, Knight Frank Research said the first half of this year saw several transactions on “forward purchase” basis that recorded capital values surpassing RM1,000 per sq ft.

Kuwait Finance House (KFH) entered into an agreement with YNH Property Bhd for the purchase of half of Menara YNH along Jalan Sultan Ismail for RM920mil or about RM1,230 per sq ft.

KFH was also involved in another forward purchase agreement to buy Glomac Tower for RM576.85mil, or RM1,120 per sq ft.

The latest office building in the city to be transacted is Menara Citibank in Jalan Ampang, Kuala Lumpur. The buyer, IOI Corp Bhd, is said to have proposed a price of RM573mil or RM970 per sq ft for the building.

Another building that is believed to be up for sale is Menara Standard Chartered on Jalan Sultan Ismail, which has a price tag of close to RM300mil. The front-runner to bid for the building, which is owned by Government of Singapore Investment Corp Real Estate, is said to be ING Real Estate.

Tax breaks to buy first home By THE STAR

This is the first of a three-part question-and-answer series provided by PricewaterhouseCoopers for The Star readers on various aspects of Budget 2009.

Q: My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.

A: If you are buying a low-cost house, you will get full stamp duty exemption on all documents, including loan agreements. However, if you are buying a medium-cost house of up to RM250,000, you will get a 50% stamp duty exemption on the loan agreement, in addition to the 50% stamp duty exemption on the sale and purchase agreement currently available. However, you need to be a Malaysian citizen to be eligible for the exemption and it is limited to the purchase of one residential property only. Please note that the stamp duty exemption is effective for sale and purchase agreements executed from Aug 30, 2008, to Dec 31, 2010.

As you do not have a fixed income, you may benefit from the Housing Credit Guarantee Scheme, which is a fund set up to assist those without fixed income to obtain housing loans from any financial institutions to purchase low- and medium-cost houses.

Q: I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?

A: Your rental income would be subject to tax in Malaysia as it is a Malaysian sourced income. Prior to 2009, your rental income will be taxed at a non-resident rate of 28%. However, under the proposed legislation, your non-resident tax rate will be reduced to 27% in year of assessment 2009.

by The Star

CapitaLand divests stake in KL tower

Source : Business Times - 30 Aug 2008

CAPITALAND is divesting its 30 per cent stake in a company that owns Menara Citibank, a 50-storey office tower in Kuala Lumpur’s Jalan Ampang, for RM176 million (S$75.5 million). Upon completing the divestment, the Singapore-based property giant will recognise a gain of about S$22.1 million.

The company being divested is Inverfin Sdn Bhd, whose principal asset is Menara Citibank. CapitaLand and the other Inverfin shareholders - Citibank (50 per cent) and Lion Group (20 per cent) - are selling their respective shareholdings in Inverfin to IOI Corporation Bhd.

The total consideration for the divestment is RM586.7 million and based on the net asset value of Inverfin which values the property at about RM733.6 million, this works out to about RM1,000 per square foot of net lettable area for the freehold property.

CB Richard Ellis Singapore and RE Group Associates Sdn Bhd acted for Inverfin’s shareholders.

CapitaLand Commercial Ltd CEO Wen Khai Meng said the group will recycle or redeploy proceeds from the divestment to tap on new opportunities in the growing Malaysian market.

The Malaysian real estate market continues to enjoy good growth underpinned by the country’s healthy economic performance, CapitaLand said in a statement yesterday.

Riding on this positive backdrop, CapitaLand has continued to expand its investments in Malaysia through Quill Capita Trust (QCT), which owns nine properties in Cyberjaya and Klang Valley. In addition, CapitaLand manages the US$30 million Mezzo Capital Fund, which has invested in five residential projects in Kuala Lumpur, and the US$270 million Malaysia Commercial Development Fund (MCDF).

MCDF holds stakes in two sites in Kuala Lumpur Sentral to build offices and serviced apartments with retail amenities, and has other projects located in quality residential and commercial precincts including Mont’ Kiara and the Kuala Lumpur City Centre area.

The group is planning to list a Malaysian mall real estate investment trust (Reit) this year, barring unfavourable market conditions. The new Reit will initially comprise three shopping malls worth RM2 billion - Penang’s Gurney Plaza, and Mines Shopping Fair and Sungei Wang Plaza in Klang Valley.

Project exists but is not official yet

IPOH: A proposed RM180 million housing project in Seri Iskandar, at the centre of a graft probe, exists -- contrary to the claim by the menteri besar that it does not.

Sources told the New Straits Times that one of the exco members detained by the Anti-Corruption Agency for alleged graft had even showed a third party the land earmarked for the mammoth project recently.

It is understood that the idea to develop a large parcel of land in the Perak Tengah district for housing cropped up during an informal meeting at the Perak Tengah district office and was immediately acted upon by one the suspects.

"The third party was even taken to the proposed site before he agreed to submit a proposal to develop the land.

"It is still in the early planning stages. This is why searches by the state government on the project did not come up with anything," a source said.
Menteri Besar Datuk Seri Mohammad Nizar Jamaluddin said on Wednesday the project did not exist, shortly after the ACA announced the arrest of six people in its probe into allegations that they had received RM120,000 to expedite the approval process.

Perak Tengah district officer Hasim Hasan said even if a survey on the said land had been carried out, it was strictly between the parties concerned.

It is understood that the ACA will call Hasim later today to record his statement to facilitate investigations.

REIT managers seek withholding tax waiver

MANAGERS of real estate investment trusts (REITs) in Malaysia are hoping that a removal of withholding tax for investors will be included in next year's federal budget. The move is crucial to spur growth in the industry and to keep Malaysian property trusts competitive, they said.

"We would like to see a waiver or substantial reduction in withholding tax. Currently the withholding tax is notably higher compared to markets such as Singapore, Thailand and Hong Kong," Quill Capita Management Sdn Bhd chief executive officer Chan Say Yeong said. The company is the manager of Quill Capita Trust.

Lowering withholding tax would directly make Malaysia property trusts more regionally competitive, improve foreign direct investment into the country and increase the after-tax yield, he said.

"Such a move will attract foreign pension funds that are looking for long-term investments with higher yield as well as individual investors seeking higher return than bank deposits," Chan told Business Times via e-mail.

He added that the resulting better yield and foreign investor interest from the waiver will further generate confidence in developing Malaysian REITs.

His view was echoed by Stewart LaBrooy, the chief executive officer of Axis REIT Managers Bhd, who told reporters of a similar wish during a company briefing this month.

Malaysia imposes a 15 per cent withholding tax and 26 per cent tax on foreign investors and 20 per cent on institutional investors. In Singapore, there is no withholding tax on individuals and only 10 per cent tax on other investors, LaBrooy said.

Despite their defensive nature, as property trusts generally pay higher dividends, their share performance were not spared by the current weak market. So far, there has not been a single REIT being listed this year, after a few years of solid growth.

"The slowdown in the global economy and the tightening in liquidity due to US subprime issue have impacted the growth of the equity market in general, not just limited to REITs," Chan said.

Still, he said, Malaysian REITs have a lot of untapped potential as properties in the country are still generally undervalued and the economy is poised for sustainable long-term growth.

"The waiver in withholding tax that we are hoping for will create positive response in the market, helping to attract foreign inves-tors and individual investors."

Malaysia remains a new and fledgling market when it comes to the REIT industry, Chan said. Hence, investor awareness and education need to be continued and strengthened to boost industry prospects, he said.

Malaysia's Opus Group scouts for India buys

NEW DELHI: Malaysian government-owned infrastructure major OPUS is scouting for medium-sized infrastructure and engineering consultancy firms to partner with in India on niche infrastructure projects. The focus of OPUS is to provide expertise and the technical know how to bring, develop and manage environmentally-friendly construction methods in India.

OPUS has recently set up an office in Chandigarh with plans to expand to other cities in the near future. OPUS has been working with clients to develop and manage their infrastructure and built environment assets. In countries like New Zealand, UK, Malaysia and Australia, OPUS has been an advisor, manager and partner, and has worked with clients to develop and maintain assets that include highways, rail, airports, bridges, sports complexes, hospitals, maritime ports and other facilities. OPUS holds assets worth $233 mn in New Zealand and South East Asia and has a turnover of $260 mn in the fiscal year 2007.

OPUS is a subsidiary of Malaysia-based UEM Group, and has been providing technical and project management expertise for UEM Group’s large scale projects such as expressways and the Malaysia-Singapore and Malaysia-Penang sea bridges. In India, UEM Group has executed Rs 2,300 crore worth road projects with partners such as GMR and Hindustan Construction (HCC).

“We are looking to acquire some firms or enter into joint ventures with Indian infrastructure players so as to bid jointly for expressways and roads at the state and national levels. The objective is to bring both expertise and finance to the table. However, we are yet to finalise our expenditure budget for India,” UEM country director Muhinder Singh said.

UEM also plans to forge strategic consortiums with Indian players for real estate and townships in Punjab, Haryana, Rajasthan and Delhi in the North and Tamil Nadu, Gujarat and Maharashtra in southern and western India respectively.

UEM Group is the largest toll concessionaire in South-East Asia and wants to introduce new techniques such as resource optimisation, asset management and preservation methods to Indian road development.

“We undertake projects right from the conception and inception to maintenance and value addition years after the asset is created,” remarked Muhinder.

UEM Group has also constructed Malaysia’s light rail system and may consider such urban transport projects for India.

Malaysian Pacific Corp banks on LakeHill Resort

PETALING JAYA: It was all quiet on the central front for property-based Malaysian Pacific Corp Bhd (MP Corp) due to a delay in the sale of its Wisma MPL in Kuala Lumpur.

The delay was due to its strategy for a partial sale with a view for joint development of a tower block rather than an outright sale of the entire property.

Such a joint venture was in the best interest of the company and its shareholders, as management worked towards obtaining a better price and terms, the company said in its latest results announcement.

There is, in addition, a southern front in the group’s development strategy. It has about 500 acres of freehold land near Pasir Gudang in Johor that is master-planned for its proposed LakeHill Resort township.

Artist's impression of the proposed Asia Pacific Trade and Expo City

That may sound like just another township but one of its components is the proposed Asia Pacific Trade and Expo City (Aptec). This will be developed as a wholesale trade and distribution hub, with proposed participation from merchants and manufacturers from China, India and other countries in Asean.

The Federal Government is understood to be interested in supporting and participating in the LakeHill project. Hence, one of its agencies is expected to sign for a stake in the project next week.

With the Government as a partner, development of the whole project, including Aptec, should be facilitated.

The concept for Aptec is that products from the region will be brought to one location for the convenience of buyers instead of them having to fly to each country to view the products.

In addition, the whole project is within the Iskandar Malaysia area in Johor which the Government is keen to develop. MP Corp is applying for Iskandar development region status for the LakeHill project so that companies operating there will qualify for tax incentives.

Industry sources said it was also planned that a foreign party, expected to be China-based, would take a stake in the LakeHill project.

Equity participation by both the Government and, in particular, the Chinese party, was envisaged to erase or reduce the bulk of the bank borrowings of the MP Corp group.

The group had borrowings of RM178mil against an investment property valued at RM225mil and land held for development of RM139mil. The group’s shareholders funds totalled over RM200mil at end-March.

Finance costs amounted to RM11.4mil in the nine months to March 31, 2008, and the group is working towards the right direction to reduce or eliminate that.

MP Corp is led by Datuk Bill Ch’ng, an architect who became a developer and businessman many years ago.

E&O Property to be delisted

KUALA LUMPUR: E & O Property Development Bhd (E&O Prop) will be delisted from the Bursa Malaysia main board today.

Eastern & Oriental Bhd (E&O) said in a statement yesterday the delisting marked the completion of the merger exercise between E&O Prop and E&O.

The enlarged entity would enable the group to consolidate its financial and operational expertise and resources to better seize growth opportunities in the increasingly competitive local property landscape.

By The Star

Surviving the property slowdown

Word has it that a Kuala Lumpur property developer recently called up its purchasers to refund them their deposits collected earlier. The developer is opting to put its project on hold rather than proceed with losses, as building material and other costs continue to rise.

As the property sector sinks deeper into a quagmire, industry watchers are worried that some projects may even be abandoned. Master Builders Association Malaysia (MBAM) president Ng Kee Leen has warned that "if this (rising cost of building) persists, the whole industry may collapse." He added, "Political instability due to the outcome of this year’s general elections had also affected the construction and property sectors." Unless the government does something fast, developers may be left with no choice but to abandon projects due to escalating building material prices, a serious shortage of construction workers and weak market sentiments. Analysts say that the hardest hit will be properties costing below RM250,000. Buyers in this range might hold back as they see their household income shrink due to higher food and fuel costs.

Unfazed by the negative sentiments, some developers are still upbeat on their high-end projects. Mulpha Land recently announced plans to launch four new projects in prime areas within Kuala Lumpur over the next two years. Top on the list will be eight bungalow units with built-up areas between 10,000 and 12,000 sq ft priced from RM15 million each in the exclusive Bukit Tunku neighbourhood. And in the adjacent neighbourhood of Bangsar, it will offer seven units of three-storey bungalows priced at between RM9 and RM10 million. Built-up areas for these bungalows will range from 8,500 to 9,600 sq ft. Elsewhere in the so-called Embassy Row area of Ampang, it will build 12-units of luxurious apartments with sizes starting from 3,700 sq ft at and a tag of RM1,000 psf onwards. Mulpha will also build a Class A office building in the city. The 23-storey building will have a leasable area of 270,000 sq ft and will be designed by renowned New York architects Kohn Pedersen Fox who designed the Shanghai World Financial Centre.

SP Setia has also announced its maiden high-end condominium project in the city. Their six-acre freehold Setia Sky Residences will have 844 units ranging in size from 1,044 to 1,679 sq ft. Most of the units will have a clear view of the Petronas Twin Towers and indicative price is RM800 psf. But it remains to be seen how a high-density project can be marketed as a "luxury" condominium.

Glomac Bhd’s group managing director Datuk FD Iskandar is of the opinion that demand for properties above RM1 million remains good and these high-end units usually take only a week to be taken up. SP Setia’s group managing director also shared the same sentiments. He was reported as saying that "higher-end property investors were more resilient and recession-proof."

Meanwhile investors are generally divided on whether to enter the property market now or to avoid it altogether. With inflation expected to surge to a high of 6 per cent and no fresh leads in the stock market, many prefer to be cautious. Some experts are of the opinion that the weaker market and slower take-up rate for new properties might result in property prices coming down despite rising building material and labour costs. Henry Butcher’s chief operating officer Tang Chee Meng was quoted as saying, "Confidence in the economic climate is vital for a buoyant property market. People will buy property if they see that there is room for capital appreciation."

Prime Minister Abdullah Ahmad Badawi was reported in the media as saying that Malaysia’s economy is stable even though the country is faced with global crises such as the increase in fuel and food prices. "There is nothing to worry about. We continue to attract foreign investments and we are still a preferred investment destination," he reiterated. He also said that Malaysia’s economy is still on track to achieve at least 5 per cent growth this year as the fundamentals are strong.

But perhaps Reapfield Properties’ president David Ong sums it up best when he said, "Property is one of the best investments in time of inflation. Any time is a good time to buy." - (www.property-report.com)

CapitaLand to enlarge Malaysia footprint

By ANGIE NG

CAPITALAND Ltd, which sees good growth potential in Malaysia's property market, is keen to expand its presence in the country by going into more exciting and challenging projects that will spice up the local property landscape.

The Singapore-based property group has the capability to add value to property projects through its Midas touch and strong branding.

CapitaLand has expanded to over 20 countries including China, India, Australia, Vietnam, Thailand and Japan to reduce its dependence on the city-state of 4.7 million.

According to a senior executive, Malaysia is one of CapitaLand’s key markets in South East Asia and the group is committed to being a long-term real estate player in the country.

“What we have achieved in Singapore so far are exportable and we are doing that in China, Vietnam and Thailand. We have big plans for Malaysia as well,” he told StarBiz in Kuala Lumpur.

In Malaysia, the company has executed its real estate value chain and is one of the largest foreign investors in the real estate market.

Through its US$30.5mil real estate private equity fund, Mezzo Capital Fund, CapitaLand has invested in five high-end residential projects. These are Zehn Bukit Pantai in Bangsar; Seni Mont’ Kiara; Kiaraville and Tiffani by i-Zen in Mont Kiara; and Hampshire Residences, located within the Kuala Lumpur City Centre area.

“These investments are in line with our premier, award-winning homes across the Asia-Pacific,” he said.

Last March, CapitaLand, together with Maybank Group, successfully closed the US$270mil Malaysia Commercial Development Fund (MCDF).

MCDF, one of Malaysia’s largest property funds with an expected gross development value of US$1bil, is looking to invest in real estate development projects in Kuala Lumpur and the Klang Valley.

In the commercial property sector, the company has a 30% stake in Menara Citibank, a prime 50-storey freehold office building located in Kuala Lumpur’s Golden Triangle.

In service residences, CapitaLand's The Ascott Group owns and manages seven properties in Malaysia with a total of 814 units.

The company is also eyeing a bigger stake in Malaysia's real estate investment trust (REIT) market.

Its plans to list a REIT with RM2bil (US$613mil) of assets will see the country’s first foreign-sponsored REIT on Bursa Malaysia later this year.

The company will group its shopping mall assets in Malaysia for the trust.

CapitaLand has been eyeing a presence in Malaysia’s retail market for a while now and started building its asset portfolio last year.

The company had last August paid RM770mil to buy Gurney Plaza in Penang and RM435mil for the Mines Shopping Fair in Seri Kembangan, Selangor. Its latest acquisition was a 61.9% stake in Sungei Wang Plaza for RM595mil in June.

Enhancement works are ongoing to spruce up the facilities and add new space to the shopping malls.

In 2007, CapitaLand and Malaysia’s Quill Group listed Quill Capita Trust (QCT) on the main board of Bursa Malaysia. The trust is managed by Quill Capita Management Sdn Bhd.

Quill Capita Management is 40% owned by CapitaLand Financial Ltd through wholly owned unit CapitaLand RECM Pte Ltd, while Quill Resources Holding Sdn Bhd and Coast Capital Sdn Bhd each has a 30% stake.

Quill Capita Management chief executive officer Chan Say Yeong said: “The Malaysian real estate market is undergoing a stage of rapid growth following healthy economic performance over the past few years.

“Riding on this positive backdrop, CapitaLand has continued to expand and strengthen its footprint in Malaysia through QCT, which owns nine properties in Cyberjaya and Klang Valley, and the US$270mil MCDF.

“We believe Malaysia will enjoy sustainable long term growth and we see real estate value increasing over the years,” Chan added.

QCT’s initial asset portfolio of four quality commercial properties valued at RM280mil has since grown to nine assets in Cyberjaya and the Klang Valley worth RM680mil.

The trust has potential access to a pipeline of completed properties to be developed by CapitaLand’s MCDF and Quill Group.

To further diversify its geographical presence, it recently acquired the freehold RM132mil Tesco building in Jelutong, Penang, which carries a 24-year remaining lease with Tesco.

CapitaLand also has four listed trusts – CapitaMall Trust, CapitaCommercial Trust, CapitaRetail China Trust and Ascott Residences Trust – on the Singapore Exchange.

Developer sets sights on JB

Tanah Sutera wants to make its project the central hub of Skudai

JOHOR BARU: Tanah Sutera Development Sdn Bhd wants to position its Taman Sutera Utama development as the “central hub of Skudai”.

General manager Steven Shum said the development on a 48.562ha site would offer business, entertainment and education facilities.

“Being located along the Johor Baru-Skudai-Senai Growth Corridor within Iskandar Malaysia augurs well for its future growth,’’ he told StarBiz.

Shum said the catalyst of the hub would the RM75mil Sutera Mall, Johor Baru’s latest retail complex that would be opened tomorrow.

Sutera Mall at Taman Sutera Utama that will be opened on Friday.

The three-storey mall with 27,870sq m floor area offers a wide range of tenant mix from 250 outlets.

Shum said it was well linked to matured and developing residential estates – Taman Ungku Tun Aminah, Taman Sutera, Mutiara Rini, Bandar Selesa Jaya, Nusa Bestari, Bukit Indah, Taman Impian Emas, Tampoi, Kempas and Senai.

He said these estates had a population of 500,000 , which offered a ready market.

“The mall is easily accessible from the city centre via Jalan Skudai, Perling Highway, North-South Expressway and Singapore by the Second Link crossing,” he said.

He said the company would be launching the RM60mil Entertainment City project year next to the mall next year.

The proposed project includes cinemas, a bowling alley and food court with office and hotel blocks.

“The retail sector in Johor Baru has the potential to grow but it is still largely untapped unlike Kuala Lumpur and Singapore,” said Shum, adding one way to grow the sector was for the state government to have more friendly policies.

Tanah Sutera Development is a consortium of local and Singapore-based companies, namely Permodalan Nasional Bhd, Lembaga Tabung Angkatan Tentera, CapitaLand, Keppel Land and Lee Rubber Co (Pte) Ltd.

SMEs stand to gain from Iskandar Malaysia'

JOHOR BARU: Small- and medium-sized enterprises in Iskandar Malaysia have been assured that they will benefit from the expected influx of major foreign investors.

Menteri Besar Datuk Abdul Ghani Othman said SMEs should not worry about being sidelined as they had an important supporting role to play.

"The trickle effects of the projects will definitely go down to the local SMEs," he said after opening the Johor SME Exposition 2008 at the Angsana shopping complex here yesterday.

On claims that the local SMEs had yet to receive any benefit from Iskandar Malaysia, Abdul Ghani said all quarters should not jump to conclusions before the whole plan for the development corridor could take off.

He had previously promised that the first of a series of major projects in Iskandar Malaysia would start before the end of this year.
Iskandar Region Development Authority (Irda), the administrator of the development corridor, had from time to time been criticised for not being sensitive to the needs of the local business community.

The latest criticism came from Domestic Trade and Consumer Affairs Minister Datuk Shahrir Abdul Samad, who was quoted on Aug 3 as saying that Iskandar Malaysia had yet to produce any direct benefit, especially for small local businesses.

Shahrir, who is also the Johor Baru MP, claimed that the needs of residents in this city were not given priority in Irda's plans.

"Even if this project turns out to be a success, it would not seem likely to be ours," he was quoted as saying.

Without referring to Shahrir's statement, Abdul Ghani said those expecting to benefit from the development needed to give it time to mature as proper planning and the drawing of huge investment had to be done in a comprehensive and structured manner.

"Please bear in mind that Iskandar Malaysia is just two years old. We have to be patient with it."

Earlier, Abdul Ghani told a group of SME operators that their resilience in weathering economic downturns over the years was proof that they had a role in ensuring the continuous growth of Johor.

"The SMEs have their own unique characteristics which make them important players in our economy.

"The state government will continue to support them and provide whatever assistance available."

Abdul Ghani said the state government's recent decision to acquire a 20 per cent stake in water concessionaire SAJ Holdings was meant to ensure better water tariffs, not only for households but also businesses and industries.

"I will not say that the tariffs will be reduced but it will be relatively better, considering the present circumstances."

Energy, Water and Communication Minister Datuk Shaziman Abu Mansor had announced the state government's acquisition last Tuesday, saying it would profit Johor as SAJ would from now on be required to pay for the water it took from the state.

CapitaLand's retail REIT may boost Malaysian sector

A plan by CapitaLand to list a pure-play retail REIT on Bursa Malaysia later this year could draw more investor interest to the country's REIT sector. REITs in Malaysia have suffered from a perceived lack of liquidity. "Local REITs generally lack liquidity as they are perceived to be too small in their issue and capital base, and REITs with larger asset size like CapitaLand's will be able to attract greater trading interest," one analyst noted. Star Publications (Malaysia) (08/05)

Malaysia needs to win back confidence

By THE STAR

KUALA LUMPUR: Malaysia needs to regain foreign investors’ confidence to spur the current property market, says Selangor Dredging Bhd (SDB) managing director Teh Lip Kim.

“They feel insecure here because of the current political instability. Instead, they prefer to invest in other countries such as Singapore,” she said after a media tour of its Park Seven Residences at Persiaran KLCC.

Teh Lip Kim standing in front of Park Seven Residences

Sold out since early last year, Park Seven received its certificate of fitness for occupation on April 22.

Teh said Malaysia still offered cheaper properties than Singapore and she believed the demand for niche market was still present.

“There are still people with money in the market. When they want to buy properties, they become more selective.

“That’s why SDB always believed in branding to attract them,” she said, adding that its on-going projects in Malaysia and Singapore would always focus on the niche market.

“What makes us different from the other players is the concept that we introduce every time we launch our projects.

“By doing that, we usually manage to sell 30% to 40 % more than our competitors,” she said.

On the increase in construction cost, she said developers would have to pass part of the burden to buyers.

SDB would be developing its land bank in Taman Melawati, Jalan Ampang, Damansara Heights and Petaling Jaya soon, Teh said.

“Apart from that, we are looking to invest in countries that are more transparent and have stable financial systems, such as Australia, Thailand and Vietnam.”

Budget proposals to kickstart property

Having taken tough measures to counter the rising cost scenario, property developers have stepped forward to suggest a series of measures that can help kickstart the industry and put the players on firmer ground.

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has highlighted that among other things, the bumiputra quota release mechanism should be standardised, structured and transparent.

Rehda president Datuk Ng Seing Liong has proposed:

·An automatic release of the quota units to be in place after six months of a project's launch or when a project has reached 50% in its construction, whichever is earlier;

·Discounts for bumiputra buyers to be capped at 5% and only applicable for houses RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts;

·The low-cost housing ceiling price to be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs;

·A reduction or waiver of stamp duty rates for house purchase that average between 2% and 3% now. which will also help reduce the people's burden;

·Granting tax exemption for dividend income to unitholders to give a much-needed lift to the real estate investment trust (REIT) market.

Developers have been harping on some of these issues for a long time but attention from the Government is more urgent now.

The mantle of protectionism should be unshackled so as to create a more level playing field. Developers, already bracing for tougher days ahead, do not want to be further burdened by some of these practices.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25% to 30% higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures.

Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers.

Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

Malaysia has a relatively young population where almost a third of the 26 million people are aged 25 to 44, and the country still needs a fairly big number of houses each year.

There will still be demand for houses, especially good products at competitive prices in the right locations.

While demand for medium and lower priced properties has dropped, the high-end market is still holding out as buyers in this segment are less affected by the rising cost of living.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows.

By The Star (by Angie Ng)

Rehda outlines plans to boost Malaysia’s property market

by News Editor

In its Budget 2009 memorandum, the Real Estate and Housing Developers Association (Rehda) has proposed a number of initiatives that it hopes will provide a boost to Malaysia’s struggling property market.

Rehda notably suggests reviewing the bumiputra quota release mechanism to make it more structured and transparent.
Rehda president Datuk Ng Seing Liong has proposed an automatic release of the quota units to be in place six months after a project´s launch or when a project has reached the halfway stage in its construction, whichever is earlier.

Liong also suggests discounts for bumiputra buyers should be capped at 5 percent and only applicable for houses priced RM250,000 and below as purchasers in a higher market segment are more financially secure and do not need such discounts.

In addition the low-cost housing ceiling could be be raised to RM60,000 a unit from RM42,000 currently to mitigate the effect of increased construction costs.

A reduction or waiver of stamp duty rates on house purchases, currently between two and three percent, is another suggestion to help the demand side of the market.

Already many new project launches have been delayed to avoid unnecessary cost over-runs, now 25 percent to 30 percent higher than earlier projections.

Most developers see more challenges on the horizon with food and petrol price hikes, escalating costs of construction and expected rise in interest rates to contain inflationary pressures. Their woes have been exacerbated by the weak take-up rate that prevents them from passing on the rising costs to buyers. Many of these buyers are adopting a wait-and-see attitude especially in view of the uncertain interest rate scenario.

With sales for lower priced property expected to remain soft, more developers should consider coming up with more versatile designs and smaller projects with shorter turnaround time and better cash flows, said Liong.

Govt move to reduce functions won’t hurt hotels much

By LOONG TSE MIN

WHILE certain quarters in the hospitality sector are making a hue and cry over the Government's recent move to reduce its functions at hotels, the situation may not be as bleak as painted, judging from the views of industry observers.

According to the Malaysian Association of Hotels (MAH), three- and four-star hotels have lost about RM120mil in revenue up to the middle of July since the Government issued a directive on June 9 to its departments and agencies to reduce the number of events at hotels.

Executive director B. Sarjit Singh said the association was appealing to the Government “to be more relaxed” on the ruling.

“We have written to the Tourism Minister asking her to help rectify the circular to civil servants to stop using hotels for functions,” he said,

Kumar Tharmalingam

The minister indicated she would take up the matter, but there has been no result as yet, he said.

Something that may weaken MAH's argument is the huge growth in foreign tourist arrivals that has boosted hotel occupancy and average room rate growth this year so far.

Occupancy rates in Kuala Lumpur for the second quarter ending June 30 stood at 74%, up from 66.5% in the first quarter.

Average room rates have grown to RM221 per night for the second quarter from RM168 in the first quarter.

However, Sarjit Singh said three- and four-star hotels that depended on government functions for up to 70% of revenue were currently seeing a dilution in revenue.

If the situation were prolonged, he said there was a possibility of the industry reducing its manpower and not recruiting more staff.

At the same time, with high fuel prices and inflation, hotels were seeing a rise in operating costs.

For instance, electricity rates for hotels had gone up 26% in June, he said.

Inflation was also beginning to hurt domestic tourism that was also a substantial component of earnings, he added.

However, continuing high occupancy and average room rates have led property consultants to conclude otherwise.

Property and real estate consultants Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam sees only the “top 10 hotels” being impacted by the austerity drive.

Previndran Singhe

But even so, five-star hotels are currently benefiting from a tourism boom continuing from the past 18 months to two years.

“There isn't such a significant loss. Maybe a slight drop but not too severe,” Tharmalingam said.

“Despite the Government's austerity drive, it would still need to hold functions,” he said.

He added that a more likely scenario was for government departments to switch from five-star venues to three- and four-star venues.

“Of the 36,000 (hotel) rooms available in Kuala Lumpur, fewer than 10,000 are five-star,” Tharmalingam said.

“Three- and four-star, and older hotels in the city would be the beneficiaries,” he said.

At the same time, the private sector would still need to do business at hotels, he said.

Private sector conference budgets might rise, as companies need to spend more on marketing on concerns of a downturn.

Zerin Properties chief executive officer Previndran Singhe was equally bullish on the sector.

“Tourism and hospitality industries in Asia are growing at a whopping 10% annually, four percentage points higher than the world average.

“Among Asian countries, Malaysia recorded one of the highest growth rates at 20%.”

He said Malaysia was among the tourist magnets of the region with soaring tourist arrivals.

A survey showed that in the first five months this year, Malaysia registered tourist arrival growth of 23% compared with the previous corresponding period.

China showed a 5.6% increase, while tourist arrivals in Hong Kong, Singapore and Thailand were up 9.5%, 12% and 15% respectively.

Singhe said there were clear indications of future success of the hotels and resorts industry in Asia, with a projected 1.6 billion international travellers to the region by 2020, almost twice last year's figures.

“Although it is fair to assume that this rate of growth cannot be sustained due to the increases in fuel prices and other 'mega crises', the number of potential travellers is so huge that the long-term growth prospects will remain substantial by any measure,” he added.

What is also interesting to note, according to Singhe, is that tourism profitability in Asia has also improved significantly and is already exceeding that achieved in Europe and the Middle East.

“In addition, 18 Asia-Pacific countries are expected to receive US$110bil in additional tourism revenue over the next three years,” he said.

Al Rajhi Bank buys property

KUALA LUMPUR: Al Rajhi Bank (Malaysia) is purchasing 36 units of i-City Cybercentre 1 office suites for RM95mil, marking its first property venture in the country.

The purchase accounted for 80% of the units completed in the first phase of i-City, a RM2bil township on 72 acres in Section 7, Shah Alam.

“The investment of Al Rajhi in i-City demonstrates its real value and increasing interest among Middle Eastern companies in our property market,” I-Bhd director Eu Hong Chew said after the parties signed a sale and purchase agreement yesterday.

I-Bhd is the developer of iCity.

I-Bhd director Eu Hong Chew (left) and Al Rajhi Bank (Malaysia) CEO Ahmed Rehman posing with the signed documents for the purchase of RM95m worth of office units in i-City, Shah Alam, by the Al Rajhi Bank.

The purchase is to be completed over the next two to three months.

The first phase of i-City comprises 44 units totalling 300,000 sq ft. I-Bhd will retain 20% of the units for local information and communications technology companies. – Bernama

i-City in Malaysia sold before it is built

by News Desk

I-Bhd’s i-City project in Shah Alam, will be the first commercial development in Malaysia to boast of three world class data centres following strategic partnerships with Intel, Telekom Malaysia and Universiti Industry Selangor, won an MSC status for the freehold commercial township and positioned itself as an ICT-based developer.

The data centres comprise a 3,500 sq ft hosting facility catering to small and medium enterprises and two 70,000 sq ft world-class Tier 4 purpose-built ready data centres catering to global information and communications technology companies. Al Raji bank (Malaysia) agreed on Monday to purchase 36 units of i-City Cybercentre 1 office suites for RM95mil. The purchase accounted for 80% of the units completed in the first phase of i-City.

Like Nexus Norwest, Australia’s most intelligent strata office building, i-City is about doing business in a faster, cheaper and simpler way. The difference between the two is that Nexus Norwest is a third the size of i-City’s Phase 1.

Ricky Lim, I-Bhd chief innovation officer, said with i-City’s MSC status, tenants could enjoy many benefits including super broadband with Gigabit connectivity, no import duties for multimedia equipment, 15 minutes emergency response, no restriction on recruitment of foreign workers and 10-years’ tax exemption. I-Bhd is also providing 100% power backup supply in 15 seconds. All buildings in i-City will be connected.

Lim Boon Siong, I-Bhd deputy chief executive officer, adds: “I-City is on track. We are creating a special niche by investing in technology that can add value to our property and benefit our tenants and purchasers.”

24-07-2008: SunCity: REIT listing later this year

by Lim Shie-Lynn

KUALA LUMPUR: Sunway City Bhd is evaluating various proposals for the listing of its real estate investment trust (REIT) in view of the overall bearish mood in the markets, its executive director Datuk Jeffrey Ng said.

Ng said that the property developer would continue with the listing of SunCity REIT in the second half of this year. However, he did not elaborate if the REIT listing would be delayed until market conditions improved. SunCity REIT has assets worth RM3.7billion.

Upon listing, the SunCity REIT was touted to be the largest in the country, with a property portfolio comprising three segments — retail, hotel and commercial.

Among the properties that would be injected include the Sunway Pyramid Mall which has a market value of RM1.63 billion, Carnival Shopping Mall in Penang, Monash University campus, Sunway University College and Menara Sunway.

Other properties included in the REIT would be the Sunway Resort Hotel & Spa and Pyramid Hotel.

“With the various properties involved, there would be fair bit of work to do as we recognise that the market is soft,” Ng told The Edge Financial Daily.

However, he declined to elaborate whether the company would opt to list in Singapore.

Compared with Malaysia, Singapore offers attractive incentives in REIT investments as investors are exempted from withholding tax.

According to the Singapore Exchange Ltd, foreign institutional investors and corporations are subjected to a 10% withholding tax up to February 2010. For REIT investment in Malaysia, a withholding tax of 28% is imposed on foreign institutional holders while individual investors are taxed 26%.

Analysts said the real estate investment industry in Malaysia (M-REITs) would be headed for tougher times as a result of the negative sentiment in the property sector due to rising construction costs and a decline in the housing take up rates.

JP Morgan said the growth of M-REITs was unlikely to outperform the property sector. It said the overall weak consumer and business sentiment arising from higher costs could lead to a slowdown in rental revisions.

The research firm said there was a lack of liquidity in the stocks. In a recent report, JP Morgan downgraded SunwayCity to a neutral stance as there was a possibility of the property developer delaying its REIT listing.

“Despite the strong asset base of properties to be injected into the REIT, we fear that the listing may be delayed given the lack of appetite for new equity and the recent de-rating of REITS overall,” property analyst Simone Yeoh said in the report.

JP Morgan revised the SunCity target price to RM2.16 from RM2.50 previously. It had also reduced the property developer’s earnings by 6% for FY08 and 13% for 2009 to account for softer residential property sales.

“Sunway City is evaluating proposals in the REIT structuring to make this listing successful. It is a matter of pricing and packaging the assets given the current market situation that we are in,” Ng said.

REIT growth held back by (lack of) incentives

REIT growth held back by (lack of) incentives

July 24, 2008 at 14:33 pm · Filed under Investment

This article by TonyCHGoh is extracted from The Edge online edition on 21 July 2008:

KUALA LUMPUR: Although most real estate investment trust (REIT) valuations are relatively cheap now, declining well below their current net asset value (NAV) per unit in tandem with the recent decline of the market, investors are still reluctant to invest in them due to the unattractive tax structure and incentives, analysts said.

Analysts said the lack of investor confidence in the REITS had to do more with the issue of withholding tax and lack of other incentives rather than the unattractive yields or asset quality.

At the moment, Malaysia has one of the most unfavourable tax regimes for REIT investment. A witholding tax of 28% is imposed on foreign investors, while individual distributions received by investors are taxed as high as 26%.

In comparison, Singapore’s REIT investors are exempted from withholding tax but foreign institutional investors and corporations are subjected to a 10% withholding tax. In Hong Kong, the withholding tax system no longer exists.

Based on selective counters, at the close of trading last Friday, Starhill REIT ended at 87 sen per unit (NAV: 97.2 sen), UOA at RM1.13 (NAV: RM1.39), Tower REIT at RM1.09 (NAV: RM1.45), Axis at RM1.64 (NAV: RM1.65), Quill Capita at RM1.04 (NAV: RM1.20) and Atrium REIT at 76 sen (NAV: 99 sen).

Atrium, StarHill and UOA are trading below their IPO prices. The annual yield of the six REITs averages 9.41%, representing a favourable and good return on investment (ROI), particularly amid the high inflation and slowing growth environment.

“Given the lack of new incentives and new regulations to spur the industry, we are unlikely to see any major upward movement in the unit prices of the REITs and their values will continue to be depressed in tandem with the current market condition,” an analyst said.

While REITs offered one of the highest ROI, analysts said it was not enough to lure investors to invest in small capitalised stocks.

“While the returns are basically good, if compared to the returns from the market, the current structure governing REIT investment has hardly changed since its inception in 2005 as the successor to the old property trust.

“The incentives, tax structure and rules have to be revised, hopefully in the coming budget, in order for the REIT industry in Malaysia to flourish,” an analyst said.

In terms of asset quality, the top picks among analysts are UOA REIT and Starhill REIT, while Axis REIT is the favourite in terms of management quality, as it has been one of the most aggressive in terms of acquisitions and property portfolio diversification.

UOA REIT, with properties predominantly consisting of offices and commercial buildings, provides a good benchmark in the recovery and demand of office space, especially in and around the Kuala Lumpur’s central business district (CBD).

Starhill REIT had on July 11 announced a revenue of RM108.23 million for the year ended June 30, 2008 (FYE08), an increase of 9.5% over RM98.84 million in FY07, while net income was up 11.8% to RM81.27 million from RM72.69 million.

Mayban Trustees Bhd, the trustee of Starhill REIT, undertook a revaluation exercise on Lot 10, Starhill Gallery and JW Marriot Hotel that would increase the valuation of the company’s prime properties by RM254.36 million. As at June 30, 2008, Starhill Gallery and Lot 10 had occupancy rates of 99% and 94%, respectively.

The analysts said the current depressed REIT prices did not reflect their relatively strong fundementals as an inflation-beating investment that could provide a consistent dividend stream due to the strong asset quality.

But for the sector to see some excitement among investors, there is no denying the fact that the local REIT industry needs a boost in having better incentives that are at least on par with regional peers.

Malaysian property market slowing as developers warn of soaring costs

Malaysian market slowing

Buyers in Malaysia are facing rising prices because of soaring construction costs, it is claimed.

Developers are warning that they are struggling to cope with higher costs which they are having to pass on at a time when demand is already slowing because of the global credit crunch.

Prices increases in fuel and power charges are pushing up costs by as much as a third but developers say they are hopeful interest from India, Pakistan and Russia will keep the market moving forward.

'If developers increase their prices by a third in the current climate it may be difficult to sell,' said Regroup Associates managing director Allan Soo.

Regroup's Klang Valley Housing Property Monitor, which keeps track of the secondary market, showed a slight decline even in prime areas. Compared with 2007, when foreigners bought up almost everything available, Mr Soo said this segment all but evaporated in the first quarter of 2008.

However huge price increases are not inevitable and location is the key to whether developers can ask higher prices, according to the Real Estate and Housing Developers Association (REHDA). 'Just because the cost of materials goes up does not mean the price of homes will also go up,' said chairman Ng Seing Liong.

But the outlook for the second half of this year is uncertain, he added. Local demand has waned and most developers will just have to accept lower profits, it is believed. There are concerns, however, that smaller builders without strong reserves may not survive.

Although interest from foreign buyers from traditional markets is falling the real estate industry remains confident that a surge in interest from other countries and from institutional buyers should help sustain the market.

BLand gets offers for Seychelles hotels

BERJAYA Land Bhd (BLand) has received offers to buy both its hotels in Seychelles for US$62 million (RM201 million), its resort and hotel division head Foo Toon Kee said.



They are the four-star 232-room Beau Vallon Bay Beach Resort & Casino on Mahe Island and the three-star 80-room Seychelles Berjaya Praslin Beach Resort Seychelles.

"We have been operating there for over 10 years. We might consider the sale. We are still contemplating whether to sell or redevelop the place," Foo, the acting head of Berjaya Hotels and Resorts, told Business Times in an interview.

Should Berjaya decide to sell the property, it would be in line with its future plans to focus on five-star hotels and resorts.

Berjaya has had a presence on the popular island resort for over a decade.

When asked what would be a comfortable sale number for the hotels, Foo said: "They could fetch US$70 million (RM227 million) ... but I am not saying that we will definitely sell.

Yet another property it may consider selling if the price is to its satisfaction is the three-star Berjaya Georgetown Hotel in Penang. The 323-room hotel has a book value of about RM80 million.

The hotel produces a lower profit margin than its five-star hotels. It has an earnings before interest, taxes, depreciation and amortisation margin of about 20 per cent versus 45 per cent for the five-star properties.

In the event that the hotel is not sold, Foo said, the group may consider rebranding it to better distinguish the various star categories of the hotels under Berjaya.



By New Straits Times - Business Times - (by Vasantha Ganesan)

Acacia Tower @ Park Residences, Bangsar South (New Launch - Introduction)

Acacia Tower @ Park Residences, Bangsar South (New Launch - Introduction)

Location : Bangsar South, Kerinchi
Description : Hillside condo part of large mixed development
Tenure : Leasehold
Land area : 60 acres
Launch Price : From RM629,000 to RM3,484,800(average of RM410psf)
Built-up : 1,190sf and 2,095sf
Total units : 470 (Block Acacia alone) out of 2100 units in the entire condominium development
Expected Completion : March 2011
Developer : Sunny Uptown Sdn. Bhd.(subsidiary of UOA Group)




Bangsar South is technically not part of Bangsar at all. It in fact lies right next to Kerinchi where Pantai Hillpark is, but as postcode sells, the developer has decided to associate this entire development with Bangsar instead. Bangsar South is an intergrated development consisting of 5 components altogether, rather similar to Mid Valley City just down the highway. There are The Park Residences, The Village, The Horizon, The Vertical and The Sphere. The Horizon are 2 blocks of 10 and 11 storey boutique offices, The Vertical are 10 blocks of 20 storey offices, The Village is an area where you find loads of F&B outlets, whereas The Sphere is a retail mall. The Park Residences will ultimately consist of 8 blocks of condominium towers altogether, eventually with 2100 residential units in total. First off would be Blocks Acacia and Begonia, with the first still open for sale now. At RM410 persf on average, it is very affordable compared to developments in actual Bangsar where prices have even breached RM1000 persf. However, there are still developments still within the borders of Bangsar though on the outskirts which are around RM520-570 persf still, namely Gaya Bangsar and Suasana Bangsar. If you would still prefer something with actual Bangsar address, then it would seem that Gaya and Suasana are both better options than Park Residences at Bangsar South. Of the three developments, only freehold one is Suasana Bangsar, an added edge.

For own stay, take a look at Mid Valley City further down Federal Highway. Is living in an intergrated mini city your idea of a residential abode? With the convenience comes loads of traffic congestion. You can forget the idea of seclusion or exclusivity. Everything is overly exposed when you choose areas like Mid Valley City or Bangsar South. Privacy is an issue, that's for sure. That's the price you have to pay for living within an intergrated city. If that is what you crave for, then yes, you can consider Bangsar South. There is one thing you might want to take note of, Bangsar South is located right next to some DBKL low cost flats. If that is a bother to you, then perhaps Mid Valley City might be a better option. Well, both developments are of leasehold tenure anyway, and Mid Valley City is completed after all.

For investment, capital appreciation and tenantability will mirror Mid Valley City's performance in the long run, not the whole of it, but rather a considerable fraction of it. That will take time however, as offices and retails in Bangsar South will take some time to fill up from the date of completion. So, do not expect overnight miracles the moment you receive your keys to The Park Residences. Capital appreciation at Mid Valley City was some 40% about 2-3 years after completion. Immediate capital appreciation was around 25% upon key handover. I foresee Bangsar South to appreciate some 20-25% in the long run, as Mid Valley City is generally better located than Bangsar South. Mid Valley Mega Mall was also more established when Northpoint Condominium came into the scene, whereas with Bangsar South, everything is starting from scratch. As for tenantibility, again, it will take time. Note that even when Acacia and Begonia blocks are completed in 2011, the other 6 blocks of condominium towers are not, and that will affect tenantibility to an extent. Also note that The Vertical, Horizon and Sphere will be far from completion as well. So, if you decide to invest here in Bangsar South, be prepared to wait for years before everything matures. Again, remember that with Mid Valley City, Northpoint was a built-then-sell development. When it was launched into the market, most of Mid Valley City was already shaping up, with Mid Valley Mega Mall much established already. This is not the case with Bangsar South.

KFH acquires KD20mn offices project in Malaysia

Kuwait Finance House (KFH) announced that it acquired a KD20m, 25,000 square meter, 20-storey office building in the Malaysian capital Kuala Lumpur, from Mah Sing Group in partnership with Autron Corporation that KFH possesses 80% share of the deal.

The International Real Estate Department Manager Ali Al-Ghannam stated that the real estate project called The Icon Jalan Tun Razak is rendered a fruitful investment opportunity.

Moreover, it is one of the businesses managed by KFH Asian Real Estate portfolio, which was established four years ago, and continues to achieve high returns for its investors.

Al-Ghannam stressed that the deal reveals the role that KFH plays in the East Asian region since it firmly planted its roots in Malaysia by establishing an independent bank that was capable of receiving many awards in a very short period of time that did not exceed four years.

KFH-Malaysia has sealed several prime investment deals in various fields, where it linked KFH with East Asia.

He added that the Asian markets are the platform that served as a turning point for other international markets, since it witnesses many benefits like flourished economy, prime investment environment, legislations, and encouraging laws; in addition to high growth rate witnessed by such markets.

National Real Estate Conference To Attract Over 600 High-profile Delegates

KUALA LUMPUR, July 16 (Bernama) -- The 19th National Real Estate Convention 2008(NREC 2008), from Aug.26-27, is expected to attract over 600 high-profile delegates from Malaysia and the region.

To be held at the One World Hotel in Bandar Utama, Petaling Jaya, the NREC 2008 would cater for those individuals who need to be in the inside-lane of the dynamic Malaysian real estate market.

"It will be held in a setting designed to maximise interaction and dialogue," said organising chairman, Previndran Singhe at a media briefing here today.

According to Previndran, a comprehensive and innovative professional programme had been drawn up for the NREC 2008.

"Among other things, the conference would highlight strategies for decision makers in real estate companies to deal with with the current economic situation," Previndran explained. the group chief executive officer of Zerin Properties explained.

Reputable and experienced speakers such as Ir. Ciputra,the past world president of FIABCI Indonesia and Wong Ah Long, the former chief executive officer of Suntec City Singapore will grace the NREC 2008.

Previndran, the group chief executive officer of Zerin Properties, urged all real estate industry players, including property developers, architects and bankers to attend the NREC 2008.

The registration fee for the NREC 2008 is RM599 per person, including convention materials, tea-breaks and lunch.

-- BERNAMA

Developers holding back projects amid rising costs

HE housing sector will suffer from a lack of new products as developers are holding back projects amid rising costs.

The number of projects abandoned by developers may also rise as they are not able to sustain the development cost, said the Malaysian head of Fiabci, an international real estate federation.

"While some developers are increasing selling price by 30 per cent due to higher costs, others may build smaller homes, or one third of the current size and maintain prices, to remain profitable," said Datuk Richard Fong, who is also Glomac Bhd group executive vice-chairman.

Fong was briefing the media on the upcoming 19th Real Estate Convention Conference (NREC 2008).

Besides cement price, which has gone up by 50 per cent in the last three months, and steel, which has doubled to RM4,000 per tonne, developers are burdened with more expensive copper wires, cables and transport charges.

"Some developers are taking the stand to postpone launches until prices stabilise," he added.

Fong said a slowdown in the housing sector, which encompasses 140 sub-sectors, will have a cascading effect on real estate, engineers, architects and consultants.

Banks and transport firms will also suffer unless the market improves, he said.

"The market is still sound. It's a good time to buy houses which have been launched as the next time a developer launches a new project, it will cost 30 per cent more," added Fong.

Institution of Surveyors Malaysia immediate past-president Datuk S.R. Abdullah Thalith Md Thani said new launches will slow down unless prices in the secondary real market rises, encouraging developers to launch again.

"The current scenario is an opportunity for the industry to innovate. In these challenging times, the government should revise the quota for low-cost housing and Bumiputera ownership," he said.

"The country is not facing a recession but cash flow problem," he added.

NREC 2008, which will be held at One World Hotel from August 26 to August 27, is organised by Fiabci, ISM and the Association of Valuers and Property Consultants in Private Practice, Malaysia.

It will address current industry concerns and strategies, among others.

More than 600 local and foreign delegates are due to attend the event, which will be launched by Minister of Housing and Local Government Datuk Ong Ka Chuan.

By Sharen Kaur (Business Times)

Increase in material cost

The recent increase of prices of building material are being published and discussed in many articles in the newspapers as well as online news portals. The extent of increase in price is reported to have caused more than 30% increase in cost of construction. Prices of items like steel bar and cement have increased the most and others to a lesser extent.

Some developers have announced that prices of new launch will see an increase of 25% to 30%. Let us see objectively if the proposed increase is justifiable.

The selling price of a property is computed with of the followings:-

1. Cost of construction
2. Professional fees
3. Finance charges
4. Authorities processing fees & contribution
5. Office overhead
6. Land cost
7. Profit margin

Out of the above list of cost, two items namely cost of construction and land cost constitute the major portion of the selling price.

Cost of construction forms about 40% or higher percentage of the selling price depending on the location of development. In city area where land cost is high, cost of construction constitute a smaller portion of selling price. In rural area where land cost is low, construction cost form the major part of the selling price.

Assuming if the construction cost constitute about 40% of the overall development cost, then an increase of 30% in cost of construction will only result in approximately 12% (0.4 x 30%) increase in the selling price if the developer were to maintain the profit margin in absolute dollars and cents, however if the developer would want to maintain the margin in term of percentage of the cost, then the resulting increase would be higher than 12%. In any case there would not be a corresponding increase of 30% in selling price just because the price of construction has increased by 30% as the cost construction is only a part of the overall selling price.

In fact, the price of properties in prime area has been increasing at much faster pace even before the recent huge hike in material price due to increased demand from investors hoping to sell later at higher price.

Those who have bought properties before the recent hike in material price may be pretty happy now that the price of property in good location will see good support because even if there are new launches in the same area, the price will not likely to be cheaper because the cost of construction has gone up and there are no indication at the moment that the price of material will soften.

KLCC Property Holdings positive on earnings

KUALA LUMPUR: Integrated real estate developer KLCC Property Holdings Bhd is optimistic of its earnings prospect despite challenges in the current economy.

According to group chief executive officer Hashim Wahir, its outlook remains positive, as the demand for office space in prime areas of the city centre remains strong and stable.

Kashim Wahir

A major part (46%) of the company's revenue is derived from property investment and office rental, followed by hotel property (21%), retail centre (27%) and management services (6%), he said after the company AGM yesterday.

“For the hotel operations we need to be innovative, focus more on marketing and sustain occupancy. For example, Suria KLCC is registering 99% occupancy. "

Hashim disclosed that ExxonMobil was renewing its lease agreement with KLCC Property's wholly owned subsidiary Arena Johan for Menara ExxonMobil. The management expects a 3% increase in rental revenue every three years.

“The traffic volume at the Suria KLCC currently stands at 40 million people per year. KLCC Property has yet to see any impact from the decline in domestic demand and consumer spending,” Hashim said.

Asked on KLCC Property's acquisition plans, Hashim said its hands were full with Lot C development in the KLCC precinct, which was under the substructure phase, and Lot D1, which is in the planning stage, but it did not discount the possibility in the future.

Plans for Lot D1are expected to be finalised in one to two years.

By The Star

Unesco boost for George Town

TOURISTS and Penangites have given the thumbs up to Tuesday's announcement of Georget Town obtaining the World Heritage Status from United Nations Educations, Scientific and Cultural Organisation (Unesco).

Australian tourists Kate Beckett, 30, and her boyfriend Jamie Wallis, 36, said it was important to preserve the cultural sights in Penang.

They had visited the clan jetties, E&0 Hotel, Fort Cornwallis and Goddess of Mercy temple.

Steve Teper, 59, from the United States said he found George Town a great city, adding that the announcement was just fabulous.

“George Town deserves to be listed and I enjoy visiting the heritage buildings in the city,” he said.

Australian tourist Elizabeth Ayders, 57, hoped for more heritage buildings to be retained.

“It is a pity to see some of the heritage buildings being demolished and blocks going up.

“These are the old colonial buildings that should be kept as part of history,’’ she said.

School teacher Dorothy Ramplin, 65, said some new buildings were ugly.

“I prefer the heritage buildings, especially the Cheong Fatt Tze mansion,” said the Australian tourist.

IT manager Frederic Misheletti, 35, who came from France with his family and friends said George Town was a great city which deserved to be preserved.

“Congratulations to the people of George Town,” he said.

Artist Alex Leong, 39, who loves to draw heritage buildings, said:

“I love Penang very much especially the heritage buildings, which is why I draw them so that I can still see them some day when they’re gone,” he said.

On Monday evening, Unesco accorded George Town and Malacca World Heritage Sites status when the Paris-based World Heritage Council met in Quebec, Canada.

Among the historical sites in George Town are Lebuh Acheh historical enclave, Lebuh Acheh Malay Mosque, Jalan Mesjid Kapitan Kling Mosque, Goddess of Mercy Temple, Khoo Kongsi, St George’s Church, Assumption Church, St Xavier's Institution, Convent Light Street, Little India, the museum and court building, the commercial area of Beach Street, Fort Cornwallis, Esplanade, City Hall, the clan jetties and the port areas.

By ANN TAN (The Star)

Servcorp investing RM96mil in i-City project

SYDNEY: Australia’s Servcorp Ltd, the world’s second largest serviced office operator, is investing US$30mil over five years into state-of-the-art concierge services for I-Bhd's RM2bil i-City project.

The 72-acre integrated commercial development in Section 7, Shah Alam, would be equipped with seamless wireless access, integrated information and communications technology and building networks, as well as multimedia and collaborative tools.

“This concierge services concept will make i-City the first real estate project in Asia where all the services are connected via one network,” said Servcorp chief information officer Marcus Moufarrige.

He was speaking to reporters yesterday prior to signing an agreement with I-Bhd, who was represented by deputy chief executive officer Lim Boon Siong.

The concierge services are divided into two areas – the human services element provided by Servcorp and the innovative technology element provided by i-Office2 Sdn Bhd.

i-Office2 is a joint venture with I-Bhd in which Servcorp’s subsidiary Office Squared would hold 65% equity interest.

The concierge services would also be supported by a gigaspeed fibre optics network that would allow for complete connectivity and mobility while its “last-mile fibre optics to the units” network would have a capacity of up to 10Mbps.

Additionally, the network would also have super broadband redundancy and the components for Web 2.0, a second-generation Internet development.

Servcorp has had a presence in Malaysia since 1988 when it provided office services to Menara Haw Par. The company currently extends these services to Menara Standard Chartered and Menara Citibank.

Moufarrige said businesses locating to i-City would have a choice of whether to take up the services offered by Servcorp and the joint-venture company.

“The average fee charged to our clients in Australia is about A$140 per seat per month (per Internet connection) but it really depends on what level of service the clients want,” he said.

He added that the services would be charged on a different scale in Malaysia.

When completed in 2012, i-City would comprise a shopping mall, corporate towers, corporate suites, shop offices, serviced apartments, data centres, a hotel and an innovation centre.

By FINTAN NG

Bolton eyes bigger Penang land bank

High-End Residence: Azman taking a closer look at the model of the Surin Condominium project

PROPERTY developer Bolton Bhd expects to spend RM200 million to increase the size of its land bank on Penang Island, giving a boost to its newly-launched maiden project, featuring a RM130 million condominium development, in the island-state.

Bolton said it is satisfied with its initial investment in Penang and is on the lookout for additional land bank for acquisition as well as opportunities to jointly develop with landowners to bring Bolton's brand and property products to the state.

"We are currently evaluating acquisition opportunities in Penang and have seen three or four proposals," its executive chairman Datuk Azman Yahaya told reporters at the launch of the "Surin" luxury condominium project in Tanjung Bungah yesterday.

"We feel Penang would be ideally suited to serve as a hub for our planned growth in the northern region, thus our commitment of another RM200 million investment," he added.

Azman said with the RM200 million, Bolton is looking at developing residential properties with a gross development value ranging between RM600 million and RM800 million.

He said the projects in Penang will comprise high-end landed properties in gated communities as well as high-rise developments.

"We hope to complete our acquisition during this financial year," he said, adding that one of the parcels of land being eyed is in George Town.

Azman also said that Bolton has no intention of slowing down, rather "in higher-end developments where margins are high, we will be able to absorb the increase in building materials cost".

With a development value of RM200 million, the Surin project sits on 1.4ha of land and offers 390 luxury condominium units tagged from RM364,988 to RM1.2 million per unit.

The project is scheduled for completion by 2011.

Bolton's executive director Chan Wong Kwong said 65 per cent of the 198 units in the first tower have been sold prior to the official launch.

"About 30 per cent of these buyers are foreigners from Hong Kong and Singapore," Chan said.

By New Straits Times (by Marina Emmanuel)

Fewer project launches in Penang

GEORGE TOWN: There will be fewer property projects launched this year in Penang due to the rising cost of fuel and building materials.

“This is reflected in the new launches lined up for exhibition at the upcoming Malaysian Property Exhibition (MAPEX) 2008 scheduled to be held on the island from July 11 to July 13.

There are only three new launches this year for MAPEX 2008, with a gross sales value (GSV) of RM44.5mil, compared to seven last year, which had a GSV of RM300mil,” Real Estate Housing & Developers' Association (Rehda) Penang chairman Datuk Jerry Chan said at a press conference.

The three launches would see 207 housing units launched on the island and mainland.

Chan said the majority of the units launched would be priced below RM250,000 a unit but the new houses were 30% more costlier than those available in the market.

There were currently 6,571 units of houses being constructed on the island and mainland with an estimated GSV of RM1.7bil, added Chan.

Chan said in view of soaring energy and building prices, there would be no new developments of low cost and low medium cost houses, which were currently priced at RM42,000 and RM75,000 respectively.

“We are appealing to the state government to revise these prices. Otherwise developers would resort to building only expensive homes comprising less than 150 units per scheme, which does not require them to build affordable housing,'' he said.

“We are also appealing to the state government to allow developers to have higher density and larger built-up areas for projects in the city.”

Chan said Malaysia was the only country where developers had to undertake the building of low and low-medium cost units.

“Worldwide, this responsibility is shouldered by governments as is the case with healthcare and education,” he added.

By The Star (by David Tan)

SP Setia beefs up commercial assets

SP SETIA Bhd, Malaysia's most valuable property developer, plans to build its first retail mall for RM750 million as part of plans to have more commercial assets.

Almost all of the group's income now comes from residential property but it wants to change that strategy.

"We are planning to increase our commercial content from three per cent now to some 20 to 30 per cent in two to three years. We want to move into commercial as the properties will give us higher value," group managing director Tan Sri Liew Kee Sin told reporters at a briefing in Shah Alam yesterday.

The four-level mall will be built within Setia City, the commercial hub of its flagship township, Setia Alam, in Shah Alam, Selangor. It will have almost as much space as the popular Mid Valley Megamall, with a gross floor area of 1.23 million sq ft.


SP Setia's unit, Bandar Setia Alam Sdn Bhd (BSA), will build it with Lend Lease Asian Retail Investment Fund 2 Ltd (ARIF) via an equally owned joint venture firm, Greenhill Resources Sdn Bhd.

ARIF is a real estate fund advised by Lend Lease Investment Management Pte Ltd, which is part of Lend Lease Corp Ltd, an Australian property group.

The mall is the fund's first retail project in Malaysia.

The mall, which may include a hypermarket, is expected to be opened by the end of 2011 as construction starts in the next six months.

At the signing of the joint venture agreement in Kuala Lumpur yesterday, Liew said Greenhill will buy 12.2ha from BSA for RM119.57 million.

There is also a hospital and university campus project in the pipeline at the 63.2ha Setia City, he said.

"We expect profits from the retail mall to flow through after 2011," he added.

Liew did not rule out building more commercial properties with ARIF, adding that it would sell more land to the Australian fund if it wants.

Meanwhile, Liew said SP Setia is on track to meet its RM1.5 billion sales target this year as it has been achieving monthly sales of up to RM120 million from its mature townships.

It has 16 ongoing projects worth RM30 billion.

The firm made a net profit of RM260 million for the 12 months to October 31 last year. Its revenue was RM1.15 billion.

Liew said SP Setia will continue to launch new projects despite weak market sentiments globally. It is also on track to launch its RM2.5 billion EcoLakes project in Vietnam by October.

By New Straits Times (by Sharen Kaur)

Malaysia’s Berjaya gets license to build HCMC university township

Chairman of the city people’s committee, Le Hoang Quan, handed over the license to Dato’ Francis Ng Sooi Lin, CEO of Berjaya, at the HCMC Reunification Palace in the presence of government officials from Vietnam and Malaysia and real estate executives.

The Vietnam International University Township (VIUT) will be located on a 925-hectare site in Tan Thoi Nhi Commune in Hoc Mon District, around 19 kilometers from the downtown area.

VIUT will be an integrated township comprising four main themes – work, knowledge, lifestyle and leisure.

Besides an international university campus, it will also have a town center with office buildings, commercial blocks, hotels and convention facilities and civic and administrative zones.

Berjaya said VIUT would have additional facilities, like a river port, entertainment parks and sports arenas.

A range of waterfront and riverfront housing is also planned to be built.

Dato Francis Ng said, “We are very happy to receive this investment certificate which is the fourth of our seven property development projects in Vietnam.”

The approved initial investment is $3.5 billion.

The township is expected to be ready in 10 years and accommodate 75,000 residents.

Nguyen Huu Tin, city deputy chairman, said, “The first half of 2008 saw HCMC draw FDI worth $7 billion, and VIUT is the single largest project to date.

“It will not only boost economic development but also provide a high quality workforce for HCMC and the key southern economic area.”

Berjaya has lined up projects worth $10 billion over the next 12 years in Vietnam, including a $230 million commercial center in Dong Nai Province, a $500-million commercial and residential project called Thach Ban New City in Hanoi and the $1.9 billion Vietnam Financial Center comprising six buildings in HCMC’s District 10.

Speaking at the ceremony, Datuk Sri Ong Ka Chuan, Malaysian Minister of Housing Development and Internal Affairs said, “Congratulations HCMC for the selection of Berjaya as the project investor.”

Berjaya is listed on the Malaysian Stock Exchange.

Reported by Vinh Bao