UEM Sunrise set for Aussie take-off

By Sharen Kaur
Published in NST on November 23, 2013

LAUNCH BY END-2014: Melbourne chosen for its strong economic fundamentals and growth prospects UEM Sunrise Bhd will launch two projects in Melbourne, Australia, worth a combined A$1 billion (RM3.02 billion) by end-2014.

This is a key development for UEM Sunrise as the Australian venture is the group's first overseas foray as a combined entity.

UEM Sunrise is a merger between Sunrise Bhd and UEM Land Holdings Bhd, which took place in early 2011.

It has ongoing developments in Canada and Singapore, but those were projects held by Sunrise prior to the merger.

Chief operating officer Raymond Cheah said UEM Sunrise is eyeing more sites in Melbourne and Sydney because of their strong economic fundamentals and growth prospects.

"We decided on Melbourne first as there is high population growth rate, with 1,750 people moving to the city every week. The occupancy rate for apartments in Melbourne is about 97 per cent.

"The student population is also growing, helped by major universities set up in the city. We expect a lot of Malaysians investing in our two projects," Cheah told Business Times in an interview recently.

Last month, UEM Sunrise bought a 0.4ha site each in LaTrobe Street and Mackenzie Street, located within Melbourne's central business district, for a combined A$65 million.

The project in Mackenzie Street is expected to have around 388 units of one-, two- and three-bedroom apartments compressed into a 35-storey tower, priced from A$400,000 to A$600,000 each.

The LaTrobe Street project will offer around 1,000 units in two towers of more than 60 floors each, sitting above a five-storey retail podium.

Cheah said the tentative selling price for these units will be around A$450,000 and A$650,000 each.

The group had also shortlisted three Australian architectural firms - COX Architectural, Elenberg Fraser, and Fender Katsalidis Architects - to participate in a design competition.

"We will announce the winner on Monday. These are premium residential developments and they must be infused with arts and culture," Cheah said.

He is bullish on the prospect of both projects and expects the majority of the units to be bought by investors, first-time home buyers and empty nesters from Southeast Asia, including Malaysia and Australia.

"Both projects will change the landscape of Melbourne city," Cheah said.

Bina Puri targets more joint ventures

By Sharen Kaur

Bina Puri Holdings Bhd aims to seal new joint-venture deals in the property, construction, mining and power sectors here and overseas within the next four months.

Chairman Tan Sri James Foong Cheng Yuen said Bina Puri has been exploring new business opportunities in Malaysia, Thailand, Brunei and Iraq.

In the last two months, the group inked four joint-venture agreements to undertake three projects in Malaysia and one in Thailand.

These included a deal with the Kuching Hockien Association (KHA) for a mixed property development in Kuching, Sarawak, worth RM300 million, and a tie-up with Chinese and Thailand investors to build the Bangkok Marina Resort & Spa in Thailand for RM200 million.

The latest pact is with landowner Sentosa Jaya Sdn Bhd to undertake a mixed development in Kota Baru, Kelantan.

Bina Puri's winning formula has been to complete projects on time, within budget and according to all the necessary requirements.

"When opportunity knocks, it is hard not to accept. We decided to ink the four joint-venture agreements as part of the company's policy to move forward with the times.

"While many out there are pessimistic, we believe there will be progress and opportunities in the market ... which is why we are moving to Kelantan," Foong said, after inking the deal with Sentosa Jaya yesterday.

Under the 60:40 deal led by Bina Puri, the joint venture will build 339 units of apartments, 10 shops and 11 offices, with a gross development value of RM148.7 million.

The apartments will be sold at market rates, starting from RM450 per sq ft, Foong said.

He said construction will commence in the second quarter of next year, and completed within 36 months.

Sentosa Jaya is a leading developer in Kelantan. It is also involved in mining, heavy machinery and transportation.

Its managing director Datuk Razali Daud said 20 per cent of the project with properties worth RM24 million had been sold.

The project is expected to be fully sold within eight months after its launch in the second quarter of next year.

KL Sentral to enter final phase

By Sharen Kaur

GREEN BUILDINGS: MRCB will take 4 years to develop Lot F, says group MD MALAYSIAN Resources Corporation Bhd (MRCB) will develop the last parcel of land at Kuala Lumpur Sentral in Brickfields, here, which will feature green buildings worth more than RM4 billion, from next year.

Known as Lot F, the integrated mixed development will take about four years to complete, said group managing director Datuk Mohamad Salim Fateh Din.

“We will develop the land to add value to KL Sentral. It will take shape from next year as soon as we get the concept right.

“The buildings will have platinum rating and there will be 21 per cent energy savings for companies that operate there, among other features,” Salim said in an interview recently.
MRCB is talking to several multinational companies that have indicated their interest in relocating to KL Sentral.

Spread across 29.16ha, KL Sentral encompasses the RM1.1 billion world-class transit hub Stesen Sentral, several Grade-A office towers and suites, residences, hotels and a mall.

The development, which commenced in 1995, is expected to be fully completed in 2017, with Lot F being the final phase.

Properties under construction include St Regis Hotel and Residences, Nu Sentral mall, Q Sentral, Sentral Residences and 1 Sentrum.

There are currently eight green buildings at KL Sentral.

Meanwhile, MRCB is investing more than RM35 million to upgrade Stesen Sentral and build three bridges within KL Sentral.

Salim said around 150,000 passengers use the station daily and the figure is expected to double with the opening of the Kuala Lumpur International Airport 2 in Sepang next year.

He said the mass rapid transit project will also contribute to growth when completed in 2017.

“We need to upgrade the station and add new facilities, including additional parking areas,” said Salim.

MRCB keen to replicate project

By Sharen Kaur

MALAYSIAN Resources Corp Bhd (MRCB) plans to enter countries like South Africa and Pakistan to
replicate its RM15 billion Kuala Lumpur Sentral (KL Sentral) project in Brickfields, here.

Group managing director Datuk Mohamad Salim Fateh Din said MRCB has received enquiries from a number of countries to share the KL Sentral blueprint.

"It has always been MRCB's plan to replicate KL Sentral. We will go anywhere that requires a transport hub," said Salim, who is chairman of the Malaysia-Pakistan Business Council (MPBC).

Salim said for foreign markets, it may develop the project on a public-private partnership basis or go in as a
consultant.

"We can also build and transfer technology. KL Sentral is a home-grown brand. We have stabilised the concept and are open to sharing it with the rest of the world who want to know how we succeeded."

Salim was speaking after an official visit by Pakistan High Commissioner Shahid Masroor Gul
Kiani and representatives from MPBC to the new Shell Tower at KL Sentral.

Spread across 29.16ha, KL Sentral encompasses the RM1.1 billion world-class transit hub Stesen Sentral,
several Grade A office towers, suites, residences, hotels and a mall.

The development, which commenced in 1995, is expected to be fully completed in 2017, Salim said.

Shahid, meanwhile, said Pakistan, which has a population of more than 180 million, will need a development
like KL Sentral.

"We like KL Sentral as it is integrated and well-connected via rail and road. This development can be
replicated in three major cities, namely Lahore, Islamabad and Karachi.

"We are requesting MRCB to talk to business and political leaders in Pakistan about it," he said.

`Private operators can help KTMB become profitable'

By Sharen Kaur

PRIVATE railway operators could help loss-making Keretapi Tanah Melayu Bhd (KTMB) turn profitable, says Railwaymen Union of Malaya president Abdul Razak Md Hassan.

He said the operators should be allowed to use the rail network to move cargoes at a fee payable to KTMB.

This, he said, would help maximise utilisation of the rail network, in the country.

He said there is big demand for cross-border container movements as well as those of refrigerated container and cement cargoes.

Other untapped segments include the transport of automobile, structural and ore products and dangerous items such as oil and chemicals.

Abdul Razak said KTMB, as the sole operator, is unable to meet the demand of the existing cargo business due to a shortage of locomotives and flat wagons.

It is also unable to capture new business segments as it does not have an innovative financing method to move forward.

"KTMB is too dependable on government support.

"Private operators' innovative ways will explore cargo movement and make it feasible and profitable," he said recently.

Abdul Razak said the private railway operators could develop innovative ideas, technologies and cross-border cargo business to raise the market share for KTMB, which is now at three per cent.

The rest of the cargo in Malaysia is moved by air, sea and land transport operators.

According to him, the rail network in Malaysia is underserved in many areas.

"With multiple operators operating on the line and serving untapped business segments and areas, KTMB is able to earn revenues from fees and cargo movement.

"Both the public and private sectors could also enjoy new services at rates lower than other modes of transport.

"KTMB will remain KTMB, as a rail master. The mechanism and methodology of multiple operators must be decided by the board soon," said Abdul Razak.

The total length of the KTMB rail network after the dismantling of the line between Tanjong Pagar and Kranji in Singapore is 1,677km.

KTMB is the sole operator of the rail network and is responsible for the tracks, trains and infrastructure. It runs cargo, commuter and inter-city services.

It, however, has been registering losses since it was corporatised in 1992, though it did post net profits of between RM9 million and RM15 million from 1993 to 1995.

For fiscal year 2012, KTMB recorded a net loss of RM284 million on revenue of RM361 million.

`No dent in Johor housing market'

By Sharen Kaur

 NEW initiatives imposed by both the state and federal governments to cool the housing sector are unlikely to dent the Johor market, say analysts.

MIDF research head Zulkifli Hamzah said sentiment may be affected in the short term but foreign buyers are still purchasing properties in Johor due to the huge disparity between property prices in their home countries and Malaysia.

"We believe the additional two per cent levy will not affect foreign buyers' investment decisions," Zulkifli told Business Times.

Johor plans to impose a two per cent levy on foreign buyers across all segments of the market in the state, including the secondary market, starting May next year. The rate is lower than the four per cent to five per cent mooted earlier but will still amount to more than twice the current RM10,000 fee foreigners pay to buy properties in the state.

The levy comes on top of the recent cooling measures announced in the 2014 Budget, which will require foreigners to pay a 30 per cent tax for properties sold within five years of purchase.

"We should not over-react to the precautionary measures announced by the government.

"These measures will safeguard the long-term sustainability of the property market," Zulkifli said.

Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum said initiatives in the national budget may remove speculative element, but not fundamentals.

The developer has seven projects in Johor, including Meridin@Medini.

Leong told Business Times that as Meridin@Medini is more upper end as it is located next to Legoland and near Educity, the new measures will not dampen property sales.

He said pricing for the products is attractive for both local and foreign investors with the Meridin Suites and Meridin Linx iSovo indicatively starting from RM309,000 and RM298,000, respectively.

Mercury Securities head of research Edmund Tham said the new measures may deter speculators but foreigners will continue to buy properties in Johor as their second home.

Cooling appetite for properties?

By Sharen Kaur

COOLING measures introduced by the government in the 2014 Budget has impacted the property sector, with some developers saying they have seen dampening interest from buyers.

The lower-than-expected turnout at a major property fair here over the weekend is an indication of cooling appetite in the primary market.

"Property developers and buyers are uncertain over where the market is heading. They are not sure how the real property gains tax (RPGT) and the Developer Interest Bearing Scheme (DIBS) work," said industry players.

Given the effects of the cooling measures tabled in the national budget, Hong Leong Bank Research (HLB Research) reiterates its "neutral" stance on the sector.

HLB Research said in its latest research note that there may be an increase in non-performing loan ratios and loss of holding power.

It expects margin erosion due to raw material price spikes and/or lower selling prices, a slowdown in sales and fewer launches.

HLB Research also anticipates a slowdown in demand for the medium to high-end segment and in economic growth, as well as tighter lending policies by banks.

A survey by the research house shows that developers are avoiding offering DIBS for new projects, with some offering interest rebate schemes similar to DIBS for high-rise projects.

"Developers acknowledged that they expect the cooling measures to adversely impact their sales," it said.

It was reported that UEM Sunrise Bhd is offering cash rewards of RM4,000 a month for two years for its Arcoris project in Mont Kiara here.

The Real Estate and Housing Developers' Association Malaysia is also seeking further clarification from the government on the RPGT and DIBS, says its president Datuk Seri Michael Yam.

"The new RPGT rate is supposed to be effective from January 1 next year, but no one is sure whether it applies only to new properties purchased then or also to those acquired in the last two or three years," he told Business Times.

Yam expects the market to be soft for the next six months, with some developers delaying their launches.

"The government should monitor the situation and make adjustments if necessary," he said.

Malaysian-made train by 2020?

By Sharen Kaur

 CHINA'S major electric locomotive maker CSR Zhuzhou Electric Locomotive Co says Malaysia will be able to manufacture its own trains by 2020.

To facilitate this, CSR Zhuzhou's unit, CSR Kuala Lumpur Maintenance Sdn Bhd (CKM), will transfer its technology, expertise and know-how to Malaysia over the next five years.

This is CSR Zhuzhou's plan to help Malaysia rely less on foreign expertise before exiting the country's train maintenance service over the period, CKM director and general manager Luke Wang said.

Wang said the idea is to help Malaysia be less dependent on foreign experts to maintain trains.

"Not only will Malaysia have a sizeable workforce for the maintenance of trains, the country can one day manufacture its own rolling stocks," he said.

CKM currently carries out the maintenance, repair and overhaul (MRO) works for Keretapi Tanah Melayu Bhd (KTMB)'s trains. The company was awarded a two-year MRO contract worth RM133 million.

Three years ago, CSR Zhuzhou, a unit of China South Locomotive & Rolling Stock Corp Ltd, inked a RM1.9 billion deal with KTMB to supply 38 sets of custom-built six-car set trains.

Wang said CSR Zhuzhou is still talking to the Transport Ministry to extend the existing MRO contract which expires next February.

The Railwaymen's Union of Malaya (RUM), however, is against any extension.

According to RUM, CSR Zhuzhou or CKM did not comply with the requirements set out under the offset programme with the Malaysian Industry-Government Group for High Technology (Might).

"The deal requires CSR Zhuzhou to transfer expertise and technology to locals, but they have not done that. Only 30 per cent of its staff are Malaysians, and doing odd jobs," RUM said.

In response, Wang said CKM has been training locals here for the research and development of trains and sending them in batches to its headquarters in Zhuzhou to learn how to assemble trains.

He also said that CKM has 131 staff and 72 per cent are locals, employed mainly as technicians.

"We are working closely with Might and providing long-term education to bring more knowledge to Malaysians about the rail industry," he added.

More land swap deals in pipeline

By Sharen Kaur

 THERE will be more land swap deals between the public and private sectors in a drive to increase government revenue, which is currently at RM220 billion a year.

Minister in the Prime Minister's Department Datuk Seri Abdul Wahid Omar said besides reducing subsidies and introducing the goods and services tax, land swap is a good bet to improve the income base.

"There are parcels of land not suitable for the government because their value has gone up considerably. We will call for tenders and get developers to come in with the best plans and pricing," he said at the Public Private Partnership (PPP) conference, here, yesterday.

Wahid said under such deals, the private sector will build public facilities, such as army camps and hospitals, which will result in huge savings for the government.

"Land swap is a continuous effort. A developer can develop and commercialise the land and in return, the government will have surplus cash to fund other projects." In the past two years, major land deals have taken place in the Klang Valley.

SP Setia Bhd won a deal to build the 1National Institute of Health and apartments in Setia Alam, Selangor, in exchange for 21.2ha of land in Bangsar. It will also build a polyclinic and dental clinic in Bangsar, and pay the government RM217.11 million - the premium guaranteed profit for the proposed mixed development.

Primamuda Holdings Sdn Bhd got the old Brickfields district police headquarters land in exchange for building police stations in Jalan Travers.

On the PPP, Wahid said between 1983 and this year, 611 projects were implemented, saving the government RM182.5 billion.

"Under the 2014 Budget, the government has announced several infrastructure projects. PPP will come in for this," he added.

Dorsett sees SE-Asia travellers boosting hotel occupancy rate

By Sharen Kaur

Hong Kong-listed Dorsett Hospitality International (DHI) Ltd is targeting passenger growth in Southeast Asia to boost its business as travel in Europe and the United States is still low.

Airlines in Southeast Asia are growing rapidly as the region continues to develop economically. Low-cost carriers are expanding and gaining market share, stimulating passenger demand with attractive fares and new routes.

At home, the opening of Kuala Lumpur International Airport 2 (klia2) in May next year is expected to help drive DHI's growth in existing and new markets.

Dorsett Hospitality, controlled by tycoon Tan Sri David Chiu, owns, operates and manages 18 hotels under the brand Dorsett Hotels, d.Collection Hotels and Silka Hotels in Hong Kong, China (Shanghai, Chengdu, Wuhan), Malaysia (Kuala Lumpur, Johor Baru, Labuan) and Singapore.

In Malaysia, the group operates five hotels - Grand Dorsett Subang, Dorsett Regency Kuala Lumpur, Grand Dorsett Labuan, Silka Maytower Hotel & Serviced Residences and Silka Johor Baru.

The Malaysian properties have a combined 1,407 rooms, compared to 1,149 in China and 285 in Singapore. Hong Kong has the highest number room inventory with 2,317.

"Southeast Asia is definitely a market we are looking at developing further. Mushroom growth is the key strategy for the group," Dorsett Hospitality senior vice-president of sales and marketing Philip Schaetz told Business Times, here, recently.

"Our focus markets will still be Hong Kong, China, Singapore and Malaysia,"

For the financial year ended March 31, Dorsett Hospitality posted a net profit of HK$647.4 million (RM277.22 million) on revenue of HK$1.15 billion.

Its net operating margin was 43.3 per cent.

According to Schaetz, Dorsett Hospitality is currently looking at aggressively expanding its presence in Southeast Asia.

The group is aiming to tap the leisure markets in Vietnam, Myanmar, Thailand and Indonesia, either by setting up hotels from scratch, or buying over existing buildings and converting them.

It is also eyeing management contracts in Southeast Asia, where it intends to manage hotels as a third party operator.

Outside of the Southeast Asia region Dorsett Hospitality is eyeing Australia as a bigger market, Schaetz said.

"We have a good mix of properties in the low-scale (three-star), mid-scale (four-star) and up-scale (five-star) range." Scheatz said.

`New property measures to drive away investors'

By Sharen Kaur

NEW property cooling measures, such as raising the ceiling price of properties for foreign buyers to RM1 million, will be a big blow to Johor's Iskandar Malaysia region, says RHB Research.

The research house views that the 30 per cent real property gains tax (RPGT) for foreigners, for disposals within the first five years, will wipe out short-term foreign speculators to a certain extent as the minimum five years' holding period will drive them away.

Given such a situation and potentially higher land holding costs, it is uncertain if the Johor government will go ahead with the proposed four to five per cent processing fee that will be imposed on foreigners, as the impact of the 30 per cent RPGT is already detrimental, RHB said.

"We see downside potential for valuations of some stocks, particularly those that are highly exposed to the Iskandar region and have high proportion of foreign buyers," it said in its latest research note.

RHB said developers with high exposure to the Iskandar region will be the most adversely affected as the area has gained significant traction among foreigners over the past one to two years, especially Singaporeans, due to the strong Singapore currency.

They include UEM Sunrise Bhd, Sunway Bhd, SP Setia Bhd, Mah Sing Group Bhd, IJM Land Bhd and Eastern & Oriental Bhd.

"Medini, in particular, which has no Bumiputera quota, will likely see a knee-jerk slowdown in property sales over the near term, as the market is now less lucrative compared with before.

"While there is still demand for some attractive projects compared to a simple buying decision previously, potential foreign buyers will now think twice before purchasing properties in Malaysia," RHB said.

According to CBRE, foreign purchasers accounted for 54 per cent of total high-rise residential sales (sales by developers) in Nusajaya, and 39 per cent in Johor Baru and major suburbs.

In Penang mainland, RHB still sees healthy growth as local property demand is largely driven by genuine buyers for occupancy purposes.

EDTP works to start next year

By Sharen Kaur

Construction of the RM8 billion electrified double-tracking project (EDTP) from Gemas to Johor Baru will start next year before the high speed rail (HSR) project linking Kuala Lumpur and Singapore takes off.

Land Public Transport Commission (SPAD) chief executive officer Mohd Nur Ismal Kamal said the HSR project will take longer to start as the awarding of contracts will start only in the latter part of next year.

The Gemas to Johor Baru EDTP project, involving around 200km of double-track on existing alignment, is among the key projects highlighted by Prime Minister Datuk Seri Najib Razak in the 2014 Budget.

Mohd Nur Ismal said both projects are important in cutting travel time between Kuala Lumpur and Johor Baru, introducing regional KTM services to serve Penang, Kedah and Johor, and increasing freight by rail.

"It will be very similar to the Klang Valley KTM Komuter services. I can't comment on the cost for the projects. The Transport Ministry will award the contracts," he said yesterday.

Nur Ikmal Ismal said the ministry has completed the Gemas-Johor Baru EDTP study and SPAD will review the railway scheme that it submitted.

"The Gemas-Johor Baru and the HSR projects are different. They will each have their own alignment."

The Gemas-Johor Baru line development will complete the entire EDTP network.

The government has awarded EDTP contracts for the Ipoh-Padang Besar stretch, worth RM12.5 billion, to the MMC-Gamuda joint venture, and the Seremban-Gemas stretch, worth RM3.45 billion, to India's Ircon International Ltd. Both are ongoing.

The Rawang-Ipoh stretch was completed in 2008.

Meanwhile, Syarikat Prasarana Negara Bhd group managing director Datuk Shahril Mokhtar said he had hoped for allocation under the 2014 Budget for stage buses as this segment of public transport is facing tremendous challenges.

He said there was an urgent need to address the rising cost of tyres, spare parts and diesel.

On the extension of the light rail transit system to Port Klang, Shahril said he is unable to comment unless the feasibility study is completed and submitted to the authorities for approval.

Impact on builders

By Sharen Kaur

THE hike in the real property gains tax (RPGT) and raising the threshold for properties that can be bought by foreigners to RM1 million will have an impact on developers, builders say.

Glomac Bhd managing director and chief executive officer Datuk FD Iskandar Mansor told Business Times that the government should punish speculators and not genuine investors or serious house buyers.

"The RPGT of 30 per cent is high. When you buy a property, you want some form of capital appreciation. Some buy and sell houses within three to four years for emergency reasons," he said, adding that the measures may cause a slowdown in the property market and impact growth as the banking sector would also be affected.

SP Setia Bhd president and CEO Tan Sri Liew Kee Sin said while residential properties will be exempted from the goods and services tax (GST), it does not mean that the cost of supplying such homes will be free from GST.

Liew said developers will still have to pay a six per cent GST on nearly all the inputs required to build houses, and this can further increase the cost of construction.

Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum said the RPGT is aimed at speculators and since it is not an upfront tax, it would not be a deterrent to owner-occupiers or investors who buy properties for rental gains.

"In the long term, it may help to curb property speculation," he said.

Master Builders Association Malaysia president Matthew Tee believes that the RPGT increase can be maintained for a definitive period as there have been continuous hikes since 2010.

`Policies to cool property sector will affect secondary market

By Sharen Kaur
Property experts say any new policies introduced by the government in the 2014 Budget to cool the real estate sector will affect the secondary market.

Adzman Shah Mohd Ariffin, chairman of the Property Management, Valuation and Estate Agency division of the Royal Institution of Surveyors Malaysia, said those policies, including raising the real property gains tax (RPGT), will affect people who are upgrading or buying for their own stay.

"If the RPGT is raised, the seller won't make enough money to upgrade. Those buying in the secondary market may likely be paying more for their property as the seller marks up the price," he said after a briefing on the 23rd National Real Estate Convention 2013 recently.

Malaysian Institute of Estate Agents president Siva Shanker said speculation is now in the primary market, a segment that makes up about 15 per cent of total property transactions per annum.

"The RPGT jump in the first two years is not going to have any effect on the sellers as they are most likely to sell their properties in the third or fourth year after buying it.

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, meanwhile, proposed a slight rise in the RPGT to 20 per cent for disposals within two years, 15 per cent for disposals in the third year, 10 per cent in the fourth year and five per cent in the fifth year.