OSK Property plans to launch RM3bil properties in Sungai Petani

Tan: 'We are also planning to launch high and medium-end condominium properties in the future.

GEORGE TOWN: OSK Property Holdings Bhd plans to launch some RM3bil worth of properties in Sungai Petani over the next 10 to 15 years via subsidiary OSK Properties Sdn Bhd.

OSK Properties head Paul Tan told StarBiz that there would be some 5,000 units of landed, high-rise and commercial properties with a gross development value (GDV) of around RM3bil developed on a 405ha site, which is part of the Bandar Puteri Jaya project.

Some 5% of the RM3bil project would comprise commercial properties, Tan said.

“The RM3bil GDV includes a RM300mil shopping mall and 400 units of landed properties with a RM240mil GDV that we plan to launch next year.

“The shopping mall, scheduled for completion in 2016, will have one million sq ft of gross built-up area.

“We are also planning to launch high and medium-end condominium properties in the future.

“The plan is now awaiting approval from the local authorities,” Tan said.

Tan said the company had recently launched the RM100mil RoseVille gated and guarded project in Bandar Puteri Jaya.

It comprises 220 semi-detached and bungalow units priced between RM372,000 and RM525,000. The residents will have access to a recreational clubhouse with comprehensive facilities.

Tan said a special planned feature of RoseVille was the 1km one-km long wide walkway that winds the outer road, providing all residences easy access to the private clubhouse via secondary paths. It is also surrounded by landscaped parks and lakes.

“The response has been very good, as we have already secured registration for 30% of the properties,” Tan said.

The advantage of the RoseVille project is that it is located about 15 minutes from the Sungai Petani town and is an half hour’s drive to Penang, according to Tan.

“It is also 30 minutes to Kulim,” he said.

On the Bandar Puteri Jaya project, Tan said OSK had developed some 7,000 units of residential and commercial properties with an approximate GDV of RM1.2bil since 1999.

The group is now developing some RM2.5bil worth of projects in Selangor, which include luxurious high-rise, villas and commercial schemes such as the Pangaea, Mirage by the Lake, Mirage Residence and Sutera Damansara projects.

For more information on Building and Construction seminars, please visit www.asiapacificevents.com

Home prices under pressure

Bank Negara says there are signs of prices moderating

PETALING JAYA: Malaysia is seeing signs of a possible moderation in overall house prices, data from the central bank show.

The growth in the Malaysian House Price Index (MHPI) declined to 9.6% in the fourth quarter of 2013, compared with 12.2% a year earlier, according to Bank Negara.

This was the first time since the third quarter of 2011 that the MHPI was below 10%, and the improvements were recorded across most states and most types of dwelling.

It said sales and new launches slowed in the last quarter of 2013, possibly due to the various measures imposed to cool down the housing sector since 2010.

“It’s possibly due to the wait-and-see attitude of some developers and buyers following the prohibition on developer interest-bearing schemes in November last year, further increases in real property gains tax in January this year, higher minimum purchase price for houses by foreigners, and uncertainties regarding the potential impact of the goods and services tax,” Bank Negara said.

The central bank pointed out that there was no conclusive evidence of a housing bubble in the country. It added that analysts, rating agencies and international organisations, such as the International Monetary Fund, had lauded the pre-emptive and concerted measures taken by the Government and Bank Negara since November 2010 to curb excessive speculative activities in the domestic property market and promote a sustainable housing market. (See table)

It also said that the bulk of home purchases continued to be for own occupation or medium to long-term investment.

“This was corroborated by data that showed 84% of home loan borrowers only had one outstanding housing loan account,” it said in an email response to StarBiz.

The central bank said borrowers were less inclined to dispose of their properties in response to a downward movement in property prices as their loan repayment capacities were not depend on the home equity value or expected capital gains. This was considering the medium to long-term nature of their ownership and investment horizon.

This scenario could limit the potential for a sharp increase in default incidences and credit losses to banks in the event of a price correction in the property market.

Based on a single factor sensitivity analysis on the housing loan portfolio of banks with a stressed probability of default (PD) of up to 10% (about four times the current PD) and adverse correction in house prices of 40%, banks’ excess capital buffers stood at more than five times the estimated expected losses.

Bank Negara said although the MHPI had expanded annually by between 10% and 12% since 2011, outpacing income and rental growth, the rate of growth in house prices remained significantly below those observed in some neighbouring economies.

It pointed out that while elements and pockets of speculative activities were present, the upward pressure on house prices was largely explained by structural factors.

“Demand continues to outpace new supply of houses by a large margin, particularly in the low to medium-priced segments and in major employment centres,” it said.

Demographic factors, given Malaysia’s relatively young population and labour force, increasing urbanisation, and general inclination to own a house, are expected to sustain strong demand for affordable residential properties in major urban centres, likely outstripping supply over the near and medium-term.

“Part of the mismatch in the market was due to rising land prices and construction costs that increased the incentive for developers to build high-end properties where the margins are higher,” the central bank said.

On the part of the Government, a number of schemes have been introduced to increase the supply of and access to financing for the purchase of affordable housing via PR1MA, MyHome and My First Home schemes.

In addition, the National Housing Council was set up in 2014 to develop strategies and action plans in a holistic manner, coordinate legal aspects and property price mechanism, and ensure provision of homes in a more efficient and expeditious manner.

Bank Negara said the earlier Government measures had also resulted in reduced credit-fuelled speculative purchases of residential properties where the annual growth in the number of borrowers with three or more outstanding housing loans has declined substantially to about 4%, from a peak of 15.8% prior to the
implementation of the measures, to account for only 3% of housing loan borrowers.

There are also improvements in banks’ housing loan portfolio quality and underwriting standards with impaired housing loans remaining low and stable at 1.4% of total bank loans to households (2013: 1.5%; 2012: 1.9%; 2011: 2.3%).

A similar trend was observed in the gross amount of impaired housing loans, which declined further to RM4.7bil from RM5bil at end-2013 (2012: RM5.4bil; 2011: RM6bil).

It said the proportion of outstanding housing loans with loan-to-value (LTV) ratio above 70% tapered to 46.6% (2012: 50.1%), providing a comfortable buffer for banks against a decline in the value of the underlying collateral relative to the outstanding amount of a housing loan in the event of defaults.

Banks have also demonstrated an increased rigour in the assessment of factors which support property valuations, such as the level of development in a specific location, population density, status of overhang, existing and potential demand, and the number and value of turnover of properties within the surrounding areas.

It was also observed that the lower margin of financing was applied by banks on new housing loans for properties in locations where price increases have been stronger. In the more recent period, valuations used for this purpose have excluded values inflated by incentives offered by developers to house purchasers, which can increase house prices by between 10% and 30% above the intrinsic values.

Mitrajaya on track to achieve RM1.5b order book

KUALA LUMPUR: Mitrajaya Holdings Bhd said it remains on track to meet its RM1.5 billion order book target for its construction division in its financial year ending Dec 31, 2014 (FY14).

Its outstanding order book currently stands at RM1.1 billion.

“Achieving the RM1.5 billion target will not be an issue as we are bidding for some RM3 billion worth of jobs, out of which we are optimistic of securing at least RM400 million,” Mitrajaya managing director Tan Eng Piow told The Edge Financial Daily after the group’s annual general meeting yesterday.

Projects the group is bidding for include RM600 million worth of jobs at Petroliam Nasional Bhd’s refinery and petrochemical integrated development in Johor and building works at Bandar Nusajaya, also in Johor, worth RM620 million.

Currently, the group’s two biggest projects are the Malaysian Anti-Corruption Commission building in Putrajaya worth RM427.9 million and a condominium project for UEM Sunrise Bhd at Symphony Hill, Cyberjaya worth RM277.4 million.

The group is also targeting to achieve revenue of RM500 million to RM600 million in FY14.

“We should be on target to achieve this, as we have our RM1.1 billion outstanding order book, and we should be raking in RM30 million to RM40 million in revenue per month just from our construction division,” said Tan.

The group reported revenue of RM104 million for its first quarter ended March 31, 2014.

As for its property division, Tan said the group plans to launch its luxury condominium development in Wangsa Maju, Kuala Lumpur before the end of next month. This project has a gross development value (GDV) of RM650 million.

“We are looking possibly at a soft launch before the end of next month, with an official launch most probably in September or October,” he said.

In terms of the targeted take-up rate for Phase 1 of the project, Tan expects the group to achieve 70% to 80% within three months of the launch based on the feedback and enquiries it has received from potential buyers.

Mitrajaya also plans to develop 15 acres (6.07ha) of land in Puchong Prima, Selangor into a mixed development next year, with a GDV of RM1.5 billion.

“The authorities have given us their approval in principle, so currently we are finalising the design for it,” said Tan.

The development features a five-storey shopping mall, three blocks of serviced apartments and a boutique hotel.

Tan believes that concerns over the impending goods and services tax as well as the property cooling measures introduced in Budget 2014 can be overcome.

“Property is very much dependent on location, so when a property has good locality and [an appropriate] price range, people will find ways [and the necessary means] to acquire it,” he said.

On the group’s healthcare division, which comes under its 51%-owned Optimax Eye Specialist Centre Sdn Bhd, Tan said there are no plans to increase the number of Optimax centres.

“Currently, the number of centres is sufficient. We invest a capital expenditure of some RM3 million per year to upgrade the equipment at our centres,” he said, adding that the group’s construction and property divisions are the main contributors to the group’s revenue and he expects this composition to remain.

Tan says Mitrajaya plans to develop 15 acres of land in Puchong Prima into a mixed development next year.

 

Tan says Mitrajaya plans to develop 15 acres of land in Puchong Prima into a mixed development next year.

 

This article first appeared in The Edge Financial Daily, on June 19, 2014.

For more information on Building and Construction seminars, please visit www.asiapacificevents.com

Golsta may enter property market

KUALA LUMPUR: Businessman Tan Sri Clement Hii, who in February emerged as a major shareholder of Golsta Synergy Bhd with a 27.27% stake, has plans for the company to enter the property market in the near future.

Today, Hii owns 52.21% of Golsta, whose principal business is in heavy machine manufacturing.

“These are only plans at the moment and are all subject to shareholder approval, but one possible area to go into is property development,” he told theedgemalaysia.com after SEGi University Group’s annual general meeting yesterday.

Hii did not, however, specify a timeline on this plan but said it might happen in “the near future” depending on the “suitability and viability” of the available projects.

Earlier news reports had speculated that Hii was looking at injecting his privately-held property business into a listed company.

Hii’s HCK Capital Group has a property development arm with several major projects in the Klang Valley and Perak.

According to Hii’s personal blog, HCK Capital Group has secured property projects worth RM3.8 billion in gross development value (GDV) within three years of establishing its property division. G Residences and Jazz Residences in Ara Damansara are among those listed in HCK’s portfolio.

Hii has already begun injecting part of HCK Capital Group’s business into Golsta by incorporating its hospitality and hotel management arm, HCK Hospitality Sdn Bhd.

“The incorporation is expected to enhance the group’s long-term future earnings and net assets,” said Golsta in an announcement to Bursa Malaysia yesterday.

For the first quarter ended March 31, 2014, Golsta’s net profit rose 44% to RM1.1 million from RM783,000, while revenue rose 18% to RM15.2 million from RM12.9 million a year ago.

On his plans for SEGi University Group, Hii said the focus will include improving the university’s academic quality, infrastructure and overall branding.

“Our focus currently is on conventional programmes and online programmes for students. What we really want to do is to ensure that any future growth to SEGi is sustainable,” Hii said.

He said the market for education remains huge as less than 28% of working adults have diploma qualification or higher.

Hii said the “blended learning” programmes are suitable for busy working adults as they can do their courses and interact with their lecturers online.

Hii: These are only plans at the moment and are all subject to shareholder approval, but one possible area to go into is property development.

This article first appeared in The Edge Financial Daily, on June 19, 2014.

For more information on Building and Construction seminars, please visit www.asiapacificevents.com   

Citigroup pays record US$697m for Hong Kong tower

HONG KONG: Citigroup Inc paid a record HK$5.4 billion (US$697 million or RM2.25 billion) to a unit of Wheelock & Co for a Hong Kong office tower that will bring most of its 5,000 employees in the city under one roof.

The price for the 512,000 sq ft property in the Kowloon East district is the largest ever office transaction in Hong Kong, the New York-based bank said in a statement on Tuesday. The tower, scheduled for completion by the end of 2015, will be used to house staff currently spread out across offices in the city, said Weber Lo, the bank’s chief executive officer for Hong Kong and Macau.

Citigroup’s purchase may mark a return of investment demand in Hong Kong’s office market as falling vacancies and high rents pose a challenge for companies seeking large office spaces. Banks and insurers, including Agricultural Bank of China Ltd and Manulife Financial Corp, have bought buildings in the city, which is home to the highest office rents in the world after London, according to property broker Cushman & Wakefield Inc.

“The lack of supply in Hong Kong has been a challenge for many large occupiers, such as Citi, who are in Hong Kong for the long term,” said Sigrid Zialcita, managing director of research for Asia-Pacific at Cushman & Wakefield in Singapore. “Hong Kong has not lost its lustre as a regional financial hub, even with competition from Singapore and Shanghai.”

The overall vacancy rate in Hong Kong fell for a second consecutive quarter in the first three months this year, to 3.6%, according to CBRE Group Inc, which advised on the transaction. Office rents in Central may drop as much as 5% this year on increased demand from mainland Chinese firms and an improved economic outlook, the realtor said.

Citigroup is paying about 20% more for the Kowloon tower than Manulife, which paid HK$4.5 billion last year to Wheelock for a similar-sized block at the same development, called One Bay East. The waterfront district where the two towers are located, formerly an industrial zone, is earmarked by the Hong Kong government as an alternative financial hub.

“There aren’t many banks historically that have bought their real estate,” said Ben Dickinson, head of Hong Kong markets at broker Jones Lang LaSalle Inc. “Most banks in Hong Kong prefer to retain the flexibility leasehold occupation offers them. It’s going to be interesting to see if it changes the perception for occupiers in Hong Kong whether more people will look at purchase.”

Hong Kong is one of the eight markets in Asia where the bank generates more than US$1 billion of revenue annually and has close to 5,000 employees, Citigroup spokesman James Griffiths said.

The purchase “underlines our belief and confidence in Hong Kong’s continued growth as a leading global financial centre and hub for some of our core regional businesses,” Stephen Bird, Citigroup’s Asia-Pacific chief executive officer, said in Tuesday’s statement. — Bloomberg


This article first appeared in The Edge Financial Daily, on June 19, 2014.
 

For more information on Building and Construction seminars, please visit www.asiapacificevents.com

PJD to acquire Melbourne land for A$145m

KUALA LUMPUR: PJ Development Holdings Bhd (PJD), through its 75%-owned subsidiary Yarra Park City Pte Ltd, has entered into a put and call option deed with an Australian developer for the purchase of a piece of freehold land measuring 2.026ha in Southbank, Melbourne for A$145 million (RM439.8 million) cash. The proposed transaction works out to RM2,013 per sq ft. In a filing with Bursa Malaysia, PJD said the land, to be purchased from developer Dynasty Falls Pte Ltd, is located in the inner urban central business district (CBD), which houses many offices of major corporations, high-rise developments and landmark buildings such as the Melbourne Convention and Exhibition Centre, and Melbourne’s tallest building — Eureka Tower. PJD said in a statement that it deems the acquisition to be ideal for long-term development with strong growth potential, given that it is one of the last pieces of sizeable prime land available for development in the Melbourne CBD. The basis of deriving the purchase price, said PJD, is on a willing buyer, willing seller basis, premised on the strategic location of the property, best estimate of the indicative market value and comparison of recently transacted prices of properties located within the vicinity. “A formal valuation is currently being carried out, details of which will be disclosed upon signing of the contract of sale of real estate,” it said, adding that the estimated time frame for completion is expected to take effect in July 2014. However, PJD didn’t say how it would fund the acquisition that seems to be a major exercise for the group. PJD had net total borrowings of RM328 million as at March 31, 2014, against shareholders’ fund of almost RM1 billion. The group reported a net profit of RM75.9 million for the nine-month period ended March 31, on revenue of RM705.5 million. Nevertheless, there has been speculation that PJD may embark on a corporate exercise to raise funds or to be merged with OSK Property Holdings Bhd to form a bigger entity. Both property development outfits are controlled by veteran investment banker Tan Sri Ong Leong Huat who holds 26.8% and 70% stakes in the companies respectively. This article first appeared in The Edge Financial Daily, on June 20, 2014. For more information on Building and Construction seminars, please visit www.asiapacificevents.com

S P Setia’s bid for Bangsar land turns unconditional

KUALA LUMPUR: S P Setia Bhd said the privatisation agreement between its 50%-owned unit Setia Federal Hill Sdn Bhd (formerly Sentosa Jitra Sdn Bhd), the government and Syarikat Tanah dan Harta Sdn Bhd has become unconditional.

This brings the property developer closer to acquiring the 51.568 acres (20.86ha) of land in Jalan Bangsar here, in exchange for the development of a RM845 million integrated health and research institute, 1NIH Complex, on a 41.115-acre piece of land located in S P Setia’s Setia Alam township in Shah Alam, Selangor.

In a filing with Bursa Malaysia yesterday, S P Setia said the Health Ministry was satisfied that the conditions set out in the privatisation agreement had been fulfilled and that the effective date of the privatisation agreement had been determined to be June 17.

The agreement dates back to a 2011 proposal in which the Public Private Partnership Unit (PPPU) in the Prime Minister’s Department had granted Setia Federal Hill approval-in-principle to enter into negotiations with the PPPU and the ministry over the development of the health complex.

The government’s approval-in-principle to the proposal submitted by Setia Federal Hill was subject to the transfer of the Setia Alam land to the government and the submission to the government of a letter of offer evidencing that Setia Federal Hill has secured the project financing in respect of the 1NIH Complex.

Setia Federal Hill plans to redevelop the Bangsar land into an integrated mixed residential and commercial project and provide the government with a 20% share of the net profit from the redevelopment.

Currently, five agencies of the National Institute of Health, which the Health Ministry is responsible for, are situated on the land. They are the NIH Secretariat, the Institute of Health Management, the Institute of Public Health, the Institute of Health System Research and the Institute for Health Behavioural Research.

This article first appeared in The Edge Financial Daily, on June 20, 2014.

For more information on Building and Construction seminars, please visit www.asiapacificevents.com