City & Country: Cover Story - ‘No such thing as a slow period’

SOMETHING is brewing at Berjaya Land Bhd, but it is not another land deal. The property development arm of conglomerate Berjaya Corp Bhd has in recent years become better known for its costly and controversial land deals in Malaysia instead of its new projects. Lim Ching Choy, who joined Berjaya Land as executive director in November, feels that it is time for a change. “That’s why I was brought in [because Berjaya Land is quiet locally]. I know it’s a tall order but I plan to achieve sales in all our immediate projects by April 2015, which is the end of our financial year,” he tells City & Country. The group has projects worth more than RM2.5 billion lined up over the next year and Lim plans to sell all of these properties by 2015. In the financial year ended April 30, 2014, its property development segment saw revenue of RM201.9 million and net profit of RM2.6 million. Lim took over the group’s local projects from CEO Datuk Francis Ng, who now looks after Berjaya Land’s projects abroad — Jeju Airest City in South Korea (183.7 acres, gross development value of US$3.2 billion), The Four Seasons Place in Kyoto, Japan (five acres, RM1 billion), The Great Mall of China on the outskirts of Beijing (18.5 million sq ft built-up, RM7.5 billion), and two projects in Vietnam. Lim is no stranger to the real estate industry, having spent the last 12 years as the CEO of HCK Capital Sdn Bhd, group managing director of Ho Hup Construction Co Bhd, CEO of Magna Prima Bhd and CEO of Mah Sing Group Bhd. Before joining the real estate industry, his career in the banking sector spanned almost 20 years. Can he achieve his ambitious goal? He believes it is possible through sheer hard work. I think if you have a plan, a target, you have to work even if it’s the holidays … that’s why sometimes it’s good to launch during the holiday season, because you’ll have less competitors” — Lim “My philosophy is to work 365 days a year. I work during Chinese New Year, I work during Hari Raya. There is no such thing as a slow period because it depends on your marketing and how you position yourself. That’s why I will launch Jesselton Villa [in Penang] on the fourth to eighth day of Chinese New Year at Plaza Gurney. I think if you have a plan, a target, you have to work even if it’s the holidays … that’s why sometimes it’s good to launch during the holiday season, because you’ll have less competitors. Because they are resting, I am working.” He lists three immediate launches that will keep the group occupied over the next year, including its Ritz-Carlton Residences at Berjaya Central Park. The entire development was announced in 2009. However, the project took a while to launch, prompting some quarters to assume that the project had been abandoned. Why launch it now? “We revised the plans a lot to be in line with market requirements. For example, our Ritz-Carlton Residences was revised to have smaller units to suit demand and it is already near completion. Not many developers launch their projects now but we are almost ready to sell our project,” he explains. Developed to sell The group will continue to market its Menara Bangkok Bank at Berjaya Central Park, a 2.7-acre freehold mixed-use development on Jalan Ampang, Kuala Lumpur. The 48-storey building is named after Bangkok Bank, which bought the top eight floors (105,000 sq ft) in 2011 for RM100 million. Meanwhile, Berjaya Sompo Insurance Bhd, an associate of the Berjaya group, took up six floors or 78,000 sq ft , bringing the tower’s total sales to RM315 million. The group is putting 15 storeys on the market with an estimated value of over RM200 million. The offices will come with en suite executive bathrooms with showers, low-e glass, variable refrigerant volume system, carbon dioxide level monitoring on all floors including the seven floors of parking bays, and a high-efficiency lift system with destination control system. The building also comes with lots earmarked for commercial use and food and beverage outlets. While Berjaya Land is selling the offices on a per floor basis, the offices will be issued strata titles upon vacant possession and completion of payment. This means the owners will be able to sell the offices individually on the secondary market, says Lim. He adds that the offices are targeted at investors, multinational corporations and companies that wish to own office space in Kuala Lumpur’s central business district. “We are targeting to sell 5 to 10 floors in the next three months. In fact, we are already negotiating with several parties. We are looking at not just local companies, but also foreign buyers who are keen to invest in Malaysia, especially the office sector. For Singaporeans, it is cheap because it amounts to around S$600 per sq ft and we are targeting yields of 7% net so that is very attractive,” he says. “We are in talks with two foreign companies now, while a number of local companies have expressed interest in our project. They are keen to buy some floors as they get to keep the units and enjoy capital appreciation while paying less in instalment than what they would pay in rent. “Assuming you get an 80% loan to finance your purchase, you end up paying only RM5.80 psf over the next 30 years. This beats paying RM8.50 to RM12 psf for a building of the same standards.” However, despite the building’s apparently good prospects, Berjaya Land is not interested in keeping the building. “We are a developer, not an investment holding company, so it makes more sense for us to sell the building,” he explains. Next up is the Ritz-Carlton Residences, which will feature 48 storeys of fully-furnished serviced apartments. About 70% of the units will offer a view of the Petronas Twin Towers and KL Tower, and a premium will be placed on these units. “We are looking at late February or early March to officially launch the residences. Today, all 16 units of the penthouses have already been reserved while 40 typical units have been reserved,” he says. Some facilities exclusive to the residences include concierge service and pools. “The office tenants have the right to look at the pool, but not swim in it,” he jokes. Lim is banking on the fact that the development is strata titled, and has facilities for individual units, green credentials and a Golden Triangle address to attract buyers. He hopes this product will sell despite the oversupply of office space in Kuala Lumpur, coupled with competition from decentralised areas with depressed rents. “That the office market is depressed is misleading. Valuers describe the office market as depressed in general, but there is still interest in green and MSC-certified office buildings,” he says. YY Lau, director of YY Property Solutions Sdn Bhd, concurs: “New office buildings that are at strategic locations and equipped with MSC Status and green building certifications are expected to be in a better position to secure tenants if the landlords offer reasonably higher rental rates than the buildings without these two features,” she tells City & Country. Outside of Kuala Lumpur, the group will proceed with The Link 2, its Bukit Jalil mixed-use development next to its Bukit Jalil Golf & Country Resort. The Link 2 will comprise condominiums and shopoffices. Phase one will comprise “affordable” serviced apartments and 4- and 6-storey shopoffices. Over half of the shopoffices have already been sold, while the serviced apartments are not yet available for sale. “We haven’t decided on the price yet but the new launches nearby are selling at around RM770 psf, so we definitely cannot sell below that price,” says Lim. Bukit Jalil has seen a slew of new condominium launches in recent years but he is banking on Berjaya Land’s history in the area to push the project through the market. Some of the group’s previous projects in the area are Covillea, Savanna 1 and 2, Arena Green Apartments, Greenfields Apartments, The Link, KM1 and Green Avenue Condominiums. The group has around 14 acres left in Bukit Jalil. This includes the second phase of The Link 2, which will be launched at a date to be determined later. See Kok Loong, principal of Metro Homes Sdn Bhd, observes that most buyers are investors who took advantage of rebates and the now-defunct developer interest bearing schemes. “Most the buyers are investors because of developer interest bearing scheme (DIBS) and rebates. There is also a small group of end-users that prefer to stay in prime locations with easy access to KL, Puchong and PJ. Usually, they are from nearby areas like Puchong and Serdang,” says See. According to him, gross yields of condos in the area are around 5% to 6%. Most investors prefer to sell their units immediately instead of holding onto them as it firstly costs around RM20,000 to RM30,000 to furnish the units for tenants, and secondly, capital appreciation of new condos over the past three years range from 10% to 20% per year. Over in Penang, the group will launch its Jesselton Villas development, which is adjacent to the Penang Turf Club and the exclusive Jesselton Heights enclave. So far, about 50% of the lots have been reserved by investors from Penang, Kuala Lumpur, Singapore, Hong Kong, Thailand and Indonesia, he says. The project will comprise vacant bungalow lots instead of the bungalows, semi-detached homes and low-rise condominiums previously planned. While Berjaya Land is only offering vacant lots within the gated and guarded project, it will offer design and build services to the buyers in the future. However, the designs and prices of the bungalows have yet to be firmed up. Lim is undeterred by what many players and observers say will be a challenging period ahead. “There have been sales in the past two months and so far the response has been positive. The regulations and policy changes in the industry have not actually had an impact on these projects because these are very good locations. “I think buyers in niche and high-end projects are less sensitive to all these. I think if you are an owner and mid-term investor, you will not be affected. As an investor, my personal view is that if you want to make money from properties, your holding period has to exceed five years to reap good returns. I think that differentiates the speculators from the long-term investors,” he says. This article first appeared in The Edge Malaysia Weekly, on January 20, 2014. For more information on Building and Construction seminars, please visit www.asiapacificevents.com