SP Setia Bhd, one of the country’s leading developers, is investing up to RM30 million to put up an integrated rail transport hub at its RM6 billion KL Eco City mixed development in Kuala Lumpur.
The company is constructing a KTM commuter station, which will be incorporated with the existing Abdullah Hukum light rail transit (LRT) station at the project location by the year 2013.
Executive vice president Richard Ong said SP Setia is in the process of completing the design proposals intended for the KTM station with the rail authorities.
“Subject to the authorities’ requirements, the KTM station is estimated to cost around RM30 million,” Ong told Business Times.
SP Setia, through its unit KL Eco City Sdn Bhd (KLEC), is developing KL Eco City on the former Kampung Haji Abdullah Hukum site at the end of Jalan Bangsar. The 10-year development will contain a number of residential towers, offices and a 5.7 million sq ft retail podium.
Ong said KLEC has started initial works on the site such as earthworks, tests piles and transferring of existing utility services, as well as realignment of Sungai Pantai (river diversion works).
Substructure works which includes piling and foundation are likely to begin in two months, said Ong, who happens to be KLEC project director.
Ong said these are part of the construction works for Phase One of the project, comprising 12 blocks of boutique offices, a strata office and a corporate office tower on a four-storey retail podium, worth almost RM2 billion.
SP Setia will build a pedestrian bridge connecting KL Eco City and The Gardens at Mid Valley City to further enhance the Malaysia property development.
In the meantime, SP Setia will invest RM150 million to connect KL Eco City to the Federal Highway by the use of two dedicated ramps.
The ramps will allow traffic in the direction towards Petaling Jaya and Kuala Lumpur to gain direct access into KL Eco City and to leave the development directly onto the Federal Highway.
There will also be linkages to Jalan Maarof in Bangsar through Lingkaran Syed Putra. KL Eco City will also have direct access to and from the New Pantai Expressway (NPE) using the existing Jalan Pantai Baru and Jalan Bangsar interchange.
Ong said SP Setia has obtained all the essential approvals from the pertinent authorities concerning the design proposals for the ramps and the linkages.
“Tenders have been called and the evaluation process and award is expected to be completed in the next two to three months,” he said.
BUYING Malaysia property that finally becomes deserted is a excruciating experience for many house buyers. It not only harms purchasers who have lost their hard-earned money but also affects the property industry’s standing which has taken a whipping owing to unethical activities of a small number of culprits.
This is primarily so when the abandoned project is not caused by factors such as economic downturn or withdrawal of purchasers, but exclusively owing to irresponsible people who assert to be “developers” but do not hold a license to do so.
It was of late reported that our Housing and Local Government Ministry has recognized 195 abandoned developments that have no license to operate in our country. I am perplexed as to how these “developers” are able to begin their projects when they do not even possess a license to apply for financing in the event they are required a bridging loan, and is their sales and purchase (S&P) agreement appropriately attested by a lawyer prior to the start of selling?
In this situation, what can be done and who should take part in minimizing these unlawful developers? Evaluating our existing housing development process would provide us with some ideas.
When a developer plans for a housing project, he must first secure the essential approvals and licenses from the pertinent authorities such as the development order, building plan, advertising permit and developer’s license. The developer then may require to source for a bridging loan from a financial institution and this is followed by hiring the services of lawyers to prepare the legal documents that will include the S&P agreement.
As the project is launched to the market, the developer will oblige the buyers to sign the S&P agreements in order to finalize the purchase. Should the purchaser obtain a housing loan from a bank, the bank will enter the picture to process the loan application submitted by the purchaser. These are the basic procedures involved in developing and marketing a housing project in Malaysia.
For unlicensed development, the regulatory bodies are not in the picture. In such cases, it becomes obvious that the lawyers and/or bankers, both representing the house purchaser, have a role to play as the first line of defense to safeguard the interest of the purchaser.
Therefore, there are questions that asked for an answer. How is it doable for financial institutions to endorse the end financing loan for a property development in the absence of all or part of the required approvals and licenses? The same questions are posted to lawyers who get ready all the legal documents for unlicensed development.
I suppose everyone has a part in identifying irresponsible players in the industry, particularly the bankers and lawyers with their better access to information and strong regulatory network as compared to the general public. As a purchaser and a customer, you would have anticipated your banker and lawyer to carry out due diligence to guarantee that your interest is not compromised.
In other industries, professional practitioners who do not express the right message and do not look after customers’ interests can be given severe punishment as their action may be construed as negligence, fraud or even criminal breach of trust.
According to the record of National House Buyers Association, in the case of Keng Soon Finance Bhd (1996), a financial institution had approved a loan to an unlicensed developer, and it was decided that the loan and the security offered were invalid. The bank is unable to institute the foreclosure proceedings on the said land and consequently could not recover its loan.
Under our Housing Development Act, a property developer that engages in, carries out or undertakes housing development without a proper license can be subjected to a fine between RM250,000 and RM500,000 or to imprisonment for a term not exceeding five years or both. This is an opportunity to take action against unlicensed developers. While we have the law in place, it is likewise important to make certain that strong enforcement comes along.
For house buyers, you are strongly advised to buy property from reputable developers and to do thorough “shopping” and analysis prior to affixing your signature on the dotted lines. Responsible developers are eager to work hand-in-hand with purchasers and welcome the role of the National House Buyers Association which advocates the protection of house buyers in Malaysia. We should stand jointly as a team to fight against irresponsible developers.
And for anyone of you who believe that you have purchased one of those unlicensed developments as mentioned earlier in the article, it is right time to write and call your banker or lawyer for clarification.
KUALA LUMPUR: Malaysia Building Society Bhd (MBSB) will fund the builder and buyers of Malaysia’s major abandoned housing project, to be found in Bandar Baru Salak Tinggi, Sepang as part of its efforts to decide its corporate legacy accounts issue.
MBSB, which is 65.5%-owned by the Employees Provident Fund (EPF), will grant term and bridging finance facilities of up to RM215mil to builder NCT United Development Sdn Bhd (NCT), and an added RM243mil to the buyers, said MBSB CEO Datuk Ahmad Zaini Othman.
“When the new management (of MBSB) came in in 2009, we wanted to find a way on how we can resolve these legacy problems.
“And one of the ways is to support this project through NCT to revive the project.
“This project have been unresolved for more than 10 years,” Ahmad Zaini said.
“We foresee they’re (the buyers) are going to face problems to secure financing from the banks.
“So we are also putting up another package which is the end financing package to support purchasers.
“We are shifting the corporate risk from NCT to the purchasers,” he added.
Buyers will have to pay an interest rate of base financing rate minus 0.5%, which is somewhat more costly compared with conventional loans because of the fact that these borrowers are mostly in their 50s. This is according to MBSB.
MBSB is also classified as an ‘exempt finance company’ and as a result it is not restricted by any financial regulators in Malaysia.
“It is only fair and just to do so as they (these borrowers) have honoured their initial obligations but failed to receive their end of the bargain,” Ahmad Zaini said.
Following deliberations with the purchasers, an accord was arrive at to separate them into two classes.
According to NCT, one class of buyers who desire to carry on with the purchase will have to top up another 30% to the original purchase price of either RM140,000 (for 20X70) or RM97,000 (for 18×60) units.
These units have make out a price appreciation of about 80% from the time it was abandoned.
The second group of buyers can obtain a full amount as refund for their units as construction of their units was at a minimum.
“This is a big step for us.
“Hopefully it will be a win-win situation for all,” Ahmad Zaini said at the signing ceremony here yesterday, adding that there were two more such abandoned legacy projects that were scheduled to be revived.
“NPL (non performing loans) will not go away unless and until you revive the project,” he said, adding that MBSB’s net NPL stood at 8.5% as at December 2011.
The project, named Taman Kenanga, was deserted in 1999.
The developer, Kumpulan Sepang Utama Sdn Bhd (KSUSB), is at present in liquidation.
The signing of the said agreement yesterday has involved three parties – MBSB, NCT and KSUSB’s liquidators, GTC Corporate Advisory Sdn Bhd.
According to MBSB, the Malaysia property housing project was abandoned by reason of the cost overruns together with the “unfavorable economic situation then”.
It will be renamed Sepang Perdana and is likely to be completed within the span of two years, said NCT CEO Zulfikri Saidin.
The project was originally earmarked to have 2,536 units of commercial, linked houses and low cost houses on 110 acres.
Based on the most recent research report conducted by Knight Franks, in March 2012, the Grade-A office market continued to be the weakest property sector in Hong Kong property. The retail sector persists to outperform on the back of strong demand from retailers, at the same time as the residential market reported additional rebounds throughout the traditional peak season. However, the Grade-A office leasing market saw signs of more correction, with large-scale transactions continued to be scarce.
Prime office
Companies continued to scale back their operations, ensuing in slow-moving leasing activity. Only a handful of Grade-A office leasing transactions were documented last month. Remarkable deals included a 12,000-sq-ft low floor in Exchange Square in Central, taken up by Hong Kong Exchanges and Clearing for HK$100 per sq ft per month.
Armani leased two floors totaling 34,000 sq ft in Kerry Centre, Quarry Bay for HK$40 per sq ft per month, while Swatch committed to one and a half floors in the same building, covering 25,000 sq ft.
More companies looked to surrender existing leases owing to weak business environment. Grade-A office rents in Central had decreased by about 16% by the end of March, from its peak in mid-2011.
Mr Thomas Lam Ho Man, Head of Research at Knight Frank in Greater China, anticipates the same to go down further 10–15% in the rest of 2012. In the meantime, rents in non-core districts will stay, thanks to low vacancy levels and continued relocation demand.
Luxury Residential Sentiment in the residential market remained robust, fuelled by more reductions in mortgage interest rates and the results of two residential site tenders. Residential sales surged 192% month on month, the highest level since November 2010. The number of secondary home sales climbed up by 200% to 9,923 and a few luxury flats were allegedly transacted at record-breaking prices.
A 3,966-sq-ft, high-floor duplex in Hong Kong Parkview, Island South and a 2,169-sq-ft duplex in Hillsborough Court, Mid-Levels Central were sold for HK$19,617 and HK$25,357 per sq ft, respectively—the highest prices in these developments to date. Mr. Lam thinks this momentum, however, will not be maintained with slow progress in the global economic recovery. Homebuyers will waver to buy with decreasing available flats, escalating asking prices and limited room for negotiation. Residential sales and home prices may fall again in the coming months.
Prime Retail
Rivalry between retailers for prime retail space showed no signs of abating. From February, the sales value of retail properties has doubled to about HK$7 billion and shop rents in prime retail areas increased by 3.5% in the first quarter of this year. The outlook for Hong Kong’s prime retail market continues to be positive in the midst of sustained leasing demand. Luxury retailers are expected to keep on outbidding existing tenants and secure prime spaces. Mr. Lam expects retail rents in core areas to rise about 10% in 2012.
PETALING JAYA: United Malayan Land Bhd (UMLand) will be having negotiations with Iskandar Investment Bhd (IIB) about investments in Medini, Iskandar Malaysia.
The developer said in a filing with Bursa Malaysia yesterday that it had entered into a collaboration agreement with IIB to have a discussion about its proposed investments in the flagship project. Situated in the Nusajaya development zone, Medini is one of the five flagship developments and part of the eight catalyst developments of Iskandar Malaysia, in addition to Johor State New Administration Centre, Puteri Harbour, Southern Industrial and Logistic Cluster, Afiat Healthpark, EduCity, International Destination Resort and Nusajaya Residences.
IIB president and chief executive Datuk Syed Mohamed Syed Ibrahim said in a press statement that the 2,230-acre Medini is well-positioned and on track to be converted into the central business district of Nusajaya.
“The proposed investment by UMLand, one of the renowned property developers in the local real estate industry, does not only reflect the attractiveness of Medini as an investment hot spot but will add a new dimension to the vibrancy of the lifestyle development,” he said.
UMLand chief operating officer Lim Eng Kuan said that UMLand had been a main player in the Johor property industry ever since 1990, beginning with its initial development Bandar Seri Alam.
“Over the years, the group has made concerted efforts in collaboration with the state government and has seeded vast infrastructure and amenities allowing the group to spread its wings further in Johor.
“This can be seen in the group’s strong presence in the region with projects in four out of five flagship zones of Iskandar Malaysia,” he said, adding that the group had also acquired several parcels of land amounting to 1,000 acres in the Iskandar region, earmarked for industrial, commercial and residential development.
It was lately reported that Medini’s Arab investors is likely to dispose of their land over time in favor of other Malaysia property developers.
JOHOR BARU: Selia Pantai Sdn Bhd is searching strategic partnerships with domestic and foreign investors to fast track the development of its on-going SouthKey project.
Managing director Datuk Mohamed Zaini Amran said the company was at present conferring with some reputable Malaysia property developers as well as that of Singapore for partnerships.
“We are looking at partners who can add value to our long-term development project,” he said at the launch of SouthKey by Johor Mentri Besar Datuk Abdul Ghani Othman on Saturday.
Mohamed Zaini said the joint-venture development would engage certain precincts of the project which would be divided into nine different development zones.
He said the company liked to work with Singapore-based developers as this would open the way for the company to draw property buyers from the republic.
Mohamed Zaini said the new ruling introduced by Singapore for foreigners purchasing private properties in the republic would profit property developers in Iskandar Malaysia.
Singapore had in December last year imposed a 10% duty stamp for foreigners buying private residential properties in the island state increasing the selling price by 10%.
“We are banking on our project’s strategic location to attract buyers not only from Singapore but also those from outside Johor and other countries in the region,” he said.
Mohamed Zaini said apart from its strategic location, the company also saw Iskandar Malaysia as another strong pulling factor to aid sell the project.
He said phase one made of 128 units of Lakefront strate-titles shop offices consist of three, four, five and eight-storey blocks with prices varies from RM918,000 to RM15.50mil. Ninety-seven per cent of the units have been sold.
SouthKey is situated on a 133ha in the Majidee Army Camp area which called as the “last remaining large prime development land” about 4km north of the Johor Baru city centre.
It enjoys good accessibility and connectivity by means of three major highways the Tebrau Highway and Southern Link Expressway and soon-to-be-opened Eastern Dispersal Link Expressway.
The project, with a GDV of RM13bil, will take about 15 years to develop and is a 70:30 joint venture between Selia Group and state-owned Kumpulan Prasarana Rakyat Johor.
Remember when people used to talk about FILTH?
If you haven’t heard about it then, let me inform you that FILTH was an acronym for “Failed in London, Try Hong Kong”.
It was used as a handy collective noun for all British bankers, advertising types and – yes – even journalists, who, having found the competition back home a little too rigid for their inadequate talents, have come to a decision that their careers might have a better chance if they moved to Hong Kong.
Well, the world has revolutionized since then. These days Hong Kong is more likely to be the first choice, whether it is for launching a career, or a stock market offering.
And in the event that you failed to make a success of things here, then in all likelihood you’ll have transfere somewhere else.
At this time, it’s not so much FILTH as SIHTS: “Sank In Hong Kong, try Singapore”.
And it doesn’t just pertain to underperforming Brits. Even Li Ka-shing is at it.
This week it appears that the one-time Superman of Hong Kong’s stock market is to have another bash at launching a yuan-denominated initial public offering for a real estate investment trust.
And subsequent to last April’s offering for his yuan-denominated Hui Xian reit failed awfully to put the Hong Kong property market burning, this time around he’s planning to start on his new offering on the Singapore stock exchange.
It will be fascinating to see whether Singapore investors are any more naive than their Hong Kong counterparts, who shrewdly showed defiance to the nonsense sales pitch put forward for the Hui Xian deal.
Hui Xian was sold as a doubly attractive stock. Investors were notified it would not only offer them exposure to the attractive yields produced by the reit’s underlying property portfolio, they were also led to think that for the reason that the stock was denominated in yuan, they would profit additionally from any appreciation in the Chinese currency.
As Monitor explained at the time, this pitch was not only plain and simple wrong; it also showed a disturbing degree of financial ignorance.
That’s because, provided there is plenty of liquidity about, the currency in which a stock is denominated has no effect at all on its performance.
That may sound strange at first, but if you think it carefully, it makes good sense.
Stocks, including REITs, are valued in accordance with their earnings. So, let’s picture a mainland company with Hong Kong dollar-denominated H shares listed on the Hong Kong stock exchange.
If our company is valued at a price-earnings ratio of 10, and produce earnings of 10 yuan a share, at the present exchange rate its earnings per share will be HK$12.29, which means the stock will be priced at HK$122.90.
Now imagine the yuan appreciates by 5 per cent. The Hong Kong dollar value of its earnings per share will now be HK$12.90. Since the stock is still valued at a price-earnings ratio of 10, its price will swiftly increase to HK$129 – a gain of 5 per cent.
In other words, any appreciation of the yuan will automatically be reflected in the stock’s price, even if the company’s shares are denominated in Hong Kong dollars. As a result, there is totally no advantage for investors in buying yuan-denominated stocks.
In fact there may possibly be a disadvantage, should the yuan’s liquidity in Hong Kong drain away.
Hong Kong investors were duly unconvinced by last year’s offering for the Hui Xian reit. As the first chart shows, its shares have unhappily underperformed its closest counterpart on the Hong Kong exchange, the Hong Kong dollar-denominated Yuexiu reit.
In reply to this failure, Li is taking his next yuan-denominated reit offering to Singapore, in the hope that investors there will fall for the supposed currency attractions of its shares and reward him with a premium valuation.
It’s doubtful whether they will. In the last few months, investor enthusiasm for holding yuan investments has abated. As the second chart below shows, by the end of January the pool of yuan-denominated bank deposits in Hong Kong had shrunk from its November high by 8 per cent.
With senior mainland officials declaring that the yuan is at present fairly valued in the foreign exchange market, it is tough to imagine that investors in Singapore will be lining up to buy reit shares just because they are denominated in yuan.
It looks as if this “sank in Hong Kong, try Singapore” offering is equally likely to go under in Singapore too. As our more anagrammatically-minded readers will by now have worked out, SIHTS is about right.
There was a lot of talk late last year that property prices will fall in 2012 after the abrupt rise in the residential sector over the past few years. So far, we have not witness any of that.
What we are seeing are:
â— Bank Negara’s constricting guidelines on consumer lending have started to work. Loan applications and loan approvals have fallen in January;
â— in some locations, house prices and rental have started to ease; and
â— Developers are offering very attractive terms ever since the beginning of this year.
Keep your finger on these three factors and let us now take a look at today’s launches. In some of these launches, buyers need only to pay about 1% down payment of the property price instead of the required 10% on signing of the sale and purchase agreement. The stamp duty and legal fees are also relinquished and there is no need to pay anything else pending the completion of the property. Such schemes have enticed many Malaysia property buyers.
The question to ask is: If the market is as good as many claimed it to be, why are developers offering such schemes? When a property is sold, it is registered as a sale. But the absolute revenue of the unit is yet to be paid.
For simple calculation purposes, 10% of a RM500,000 property is RM50,000. If the first 10% is paid, this RM50,000 is registered as revenue by the developer, but in the sales column, a sale of RM500,000 is recorded. That is why the sales and revenue figures differ considerably.
If a developer permits a buyer to pay only 1% of the purchase price, this does not necessarily mean he “loses” that other 9%. He will get it back after a certain period of time. The same goes for the waiver of the stamp duty and legal fees. The developer has to pay the lawyers for services rendered. All these charges and fees are packaged into the deal which the buyer will have to bear in due time. As iIn this case, later rather than sooner.
Developers tenders such enticing terms with the primary intention of making a sale. Many of these schemes are offered in condominium projects because there is by and large an excess in this segment. While such schemes may catch the attention of genuine buyers who need a roof over their heads and who are grateful that they can reschedule payment, it also draw those who can afford forking out that 1% down payment and take a gamble that they will be able to offload it when the project is completed.
If one is to go around some parts of the Klang Valley today, there are some finished high-rise with large mobile numbers displayed on windows. It may not be so simple to offload units when there are so many of them.
What is apparently absent, and which many would like to see are more launches of landed housing. However, this is doubtful to happen. Only the secondary market is offering landed units, which may clarify to a certain degree the reason why the secondary market was quite strong last year. This is applicable not only for the Klang Valley, but for Penang as well and is a manifestation of strong domestic demand notwithstanding the many pessimistic predictions for this year.
When a developer regarded a piece of land, he consider how much he can make from it. If he were to build a condominium and throw in a variety of facilities, he can sell more houses than if he were to build landed units. That’s the reason most of the launches at present are high-rise projects, be it condominiums or serviced apartments.
Developers are also restricted by what they have. Increasingly, land in city centers and fashionable areas are getting smaller. Which explains why in highly dense areas, condominium projects continue to be sprout up in the most congested of areas?
The development of landed units can only take place when there is large tracts of land, which also explains why the big boys like Mah Sing and SP Setia are speculating further away from city centres.
The other noticeable factor in todays launches are the size and price of the condominium units. Most of the units are small. Studio apartments may be in the 500 sq ft range or thereabouts while those targeted at families may be three-bedroom units with built-up areas of 1,200 sq ft onwards. Most of the launches today are priced close to RM700, 000 onwards. On a per sq ft basis, the price is still increasing, whether it is a Petaling Jaya address or a Bukit Jalil one.
So, while sales volumes may languish in newly-launched projects (which explains why developers are offering units for sale with a 1% downpayment), on a per sq ft basis, prices does not seem to be stabilizing. Developers are trying to uphold affordability by having smaller units, deferring payment and leveraging on low interest rates.
Assistant news editor Thean Lee Cheng is pleased that Bank Negara is watching the household debt and lending in the property sector personally as this year promises to be an exciting one.