Monday, 30 April 2018

(NST) Sarawak government to build more affordable houses

PETRA JAYA: The state government is focusing on building more affordable houses in Sarawak under the Rumah Mesra Rakyat 1Malaysia initiative.

Chief Minister Datuk Patinggi Abang Johari Abang Openg said his administration wanted to focus on projects that could directly improve the livelihood of the people especially low and medium-income earners.

He said the state government will develop more affordable houses from Sungai Midin until Sungai Salak for the people soon.

“When we elevate the quality of life for the people, it will also help to hasten development and spur economic growth in the state,” said Abang Johari in his speech during his walkabout programme at the Rumah Mesra Rakyat 1Malaysia in Sungai Midin here today.

Works Minister Datuk Seri Fadillah Yusof, who is Barisan Nasional (BN) candidate for the Petra Jaya parliamentary seat, and Syarikat Perumahan Negara Bhd (SPNB) chief executive officer Datuk Ahmad Azizi Ali were present.

Abang Johari, who is the state BN chairman, said the name of the housing estate would be changed into Taman Midin.

Jointly developed by SPNB and the state government, there are 52 units of houses there.

Abang Johari also said the state government would use income generated from the oil and gas industry for development programmes in Sarawak.

“The increase in the income of the state will be returned to the rakyat through the implementation of people-centric initiatives such as the development of more affordable houses.

“Apart from improving the wellbeing of the people, the project will also help to stimulate the local economy.

“We will also forge greater ties with the federal government, which have benefitted the people in the state for years,” he said.

(NST) Westports proposes to buy Pulau Indah land for RM116.19m

KUALA LUMPUR, April 30 (Bernama) – Westports Holdings Bhd’s wholly-owned subsidiary, Westports Malaysia Sdn Bhd (WMSB), has proposed to acquire a piece of leasehold land measuring 154.2 hectares in Pulau Indah from the Selangor State Development Corp (PKNS) for RM116.19 million.

In a filing to Bursa Malaysia today, Westports said it had accepted the letter of offer from PKNS today after having successfully bid for the land and will now execute the proposed acquisition.

It said the purchase consideration will be satisfied entirely in cash which will be funded by internally generated funds and bank borrowings.

“The proposed acquisition is for a terminal expansion as the current preliminary port design for Container Terminal 10 to Container Terminal 19 requires additional land acreage to accommodate new wharf and container yard space to facilitate the effective operations of the new container terminals,” said Westports.

The group said the utilisation of the proposed land for terminal expansion would be possible only after land reclamation had been carried out, adding that WMSB had implemented the land reclamation process at its existing Container Terminal 6, 7, 8 and 9.

The proposed acquisition would not have any impact on the share capital and shareholdings of the substantial shareholders of the group as well as any material effect on the net assets, gearing and earnings per share of the group for the financial year ending Dec 31, 2018, it added.


(NST) Prasarana to take over Penang ferry services tomorrow

GEORGE TOWN: Prasarana Malaysia Bhd, through its subsidiary Rapid Ferry Sdn Bhd, will take over the Penang ferry operations from Penang Port Commission (PPC) tomorrow (Tuesday).

PPC chairman Datuk Tan Teik Cheng said the current ferry services had been handled by Penang Port Sdn Bhd (PPSB) since January 1, 1994, following the privatisation of Penang Port.

He said Rapid Ferry, as the new operator, would also take over all properties owned by PPC at the Sultan Abdul Halim Ferry Terminal (Butterworth) and Raja Tun Uda Ferry Terminal (George Town) through a leasing agreement.

“In line with the decision of the federal government last year, Penang ferries will be handed over to Prasarana from May 1, 2018 with its day-to-day operations to be handled by Rapid Ferry staff.

“Under this acquisition agreement, all PPC properties under PPSB would be leased to the new operator from that date onwards,” he said at the signing of the Penang ferry services takeover agreement here today.

Prasarana was represented by its chief financial officer Mohd Rafizee Abd Rahman, while PPSB by its chairman Datuk Syed Mohamad Syed Murtaza.

Tan said the ferry fares were expected to remain at RM7.70 for cars, motorcycles (RM2), pedestrians (RM1.20) and 60 sen for students.

This is based on the approval of the board of directors of PPC and Prasarana.

“We expect the ferry services to undergo a transformation process aimed at providing a more efficient, competitive and capable services that will meet the consumers’ needs.

“PPC, however, will remain as the port authority and regulatory authority over operations and operators, as well as continuing to operate existing ports,” he said.

Prasarana is expected to hold a separate media conference on May 5 to present its short-term and long-term planning in the daily operations of Penang ferries.

(The Edge Financial Daily) Pavilion REIT growth seen to be driven by Elite Pavilion buy

Pavilion Real Estate Investment Trust (April 27, RM1.44)

Maintain outperform with a target price (TP) of RM1.55: Pavilion Real Estate Investment Trust’s (REIT) first quarter of financial year 2018 (1QFY18) realised net income (RNI) of RM65.3 million came in well within our and consensus expectations (26% and 25% respectively). No dividends were declared as expected. We maintain our FY18 estimate (FY18E) and FY19E core net profi t of RM252 million and RM267 million. FY18 and FY19 will see net lettable area (NLA) expiries of 24% and 52% on modest single-digit reversions, while FY18 growth is also driven by the Elite Pavilion acquisition. We maintain “outperform” and our TP of RM1.55 on a +1.6 percentage-point (ppts) spread and the 10-year Malaysian Government Securities (MGS) target of 4%.

Gross rental income (GRI) was up by a solid 11% due to higher rental income from Pavilion Kuala Lumpur. This resulted in RNI increasing by 15% on slight RNI margin improvements. Quarter-on-quarter, the top line was up by 2% mainly from higher rental income from Pavilion Kuala Lumpur. However, increased operating cost (+5%) due to similar reasons mentioned above and a slightly higher financing cost (+3%) caused RNI to be flat.

FY18 and FY19 will see 24% and 52% of portfolio NLA expiring on single-digit reversions. Although lease expiries in FY19 appear lumpy, we are not overly concerned as the bulk is from Pavilion Kuala Lumpur, which should have no issue maintaining full occupancy on decent reversions. The proposed acquisition of Elite Pavilion is expected to be completed in FY18 and will be funded by borrowings, and we are mildly positive on the acquisition. The Fahrenheit88 acquisition is still on the table, pending the sponsor’s intention to sell, while we believe Pavilion REIT is eyeing cap rates closer to 6.5%. We reckon that Pavilion REIT may acquire third-party assets from WCT Holdings Bhd. FY18 growth will be driven by the acquisition of Elite Pavilion and single-digit rental reversions from lease expiries, while FY19 will be driven by organic growth. Our FY18E and FY19E gross dividends per unit (GDPS) of 8.6 sen and 9.1 sen (net dividends per unit [NDPS] of 7.8 sen and 8.2 sen) suggest gross yields of 6% and 6.3% (net yields of 5.4% and 5.7%). Based on FY18E GDPS/ NDPS of 8.6 sen/7.8 sen and an unchanged spread of +1.6ppts to our 10-year MGS target of 4%, our applied spread is +0.5 standard deviation above historical averages to encapsulate investors’ concerns about oversupply issues and overnight policy rate hikes, but we may look to remove this once confi dence returns to Malaysian REITs’ (MREITs) valuations.

Our applied spread is on the thinner end among MREITs under our coverage (of +1.4ppts to +2.4ppts) which we believe is warranted given Pavilion REIT’s strong rerating potential from possible asset injections, aided by its healthy balance sheet and low gearing of 0.27 times. Pavilion REIT warrants an “outperform” call on inorganic growth potential and a decent gross yield of 6% versus retail peers’ average of 6.1%. Risks to our call include bond yield expansion versus our target 10-year MGS yield, and weakening rental income. — Kenanga Research, April 27

(The Edge Financial Daily) ‘No recovery signs seen for housing glut’

(Subtitle) Situation could worsen with thousands of incoming units this year 


KUALA LUMPUR: Thousands of incoming high-rise units this year could exacerbate the residential property glut, offering no encouraging signs of an upturn this year, said property consulting firm Nawawi Tie Leung. 

According to the firm, the situation is also not helped by the rising cost of living in Malaysia, causing a mismatch between asking prices and income of prospective buyers. 

Condominiums priced above RM500,000, especially, contributed significantly to the number of unsold units in the market, while demand for high-end homes was further curbed due to changes in stamp duty pressure on prices, said Nawawi Tie Leung. 

“With more than 6,000 units of high-end condominiums slated for completion throughout 2018, this significant incoming supply will bring more challenges and is likely to contribute to a larger inventory of unsold residential homes this year,” said a report “Election provides a brief distraction to market challenges” released last Friday. 

Of this 6,176 units slated for completion this year, about 49% will be located outside the city centre, the firm said. 

More units are also expected to come on board the secondary market, exerting greater downward pressure on prices, it said. 

In the first quarter of 2018 (1Q18), prices of high-end condominiums eased marginally by 1.5% quarter-on-quarter to RM751 per square feet, with rents declining 3.3% to RM2.95 per square feet. 

Effective from Jan 1, for homes costing more than RM1 million, stamp duty was increased from 3% to 4% to discourage property speculation, with Bank Negara Malaysia issuing warning of potential financial risks. 

Coupled with growing uncertainties in the environment and lack of new catalysts to drive sales, the residential market in 2018 is expected to remain “subdued”, said Nawawi Tie Leung. 

Similarly, the office market is expected to remain challenging on the back of lacklustre demand from the oil and gas sector, despite oil prices recovering to US$70 per barrel level. 

While serviced office or co-working operators will form part of the demand — as they seek to open more offices in the Klang Valley — the incoming office supply of more than 10 million square feet in the next few years will phase out older buildings unless they are refurbished or repurposed. 

As such, the property consulting firm expects occupancy and rental rates to remain under pressure. In 1Q18, the occupancy rate fell from 80.4% to 80% due to continued low absorption and large amount of supply; while average rental rate in the office space fell slightly from RM6.02 per square feet to RM5.98. 

Over at the retail sector, sales of brick-and-mortar malls expanded by 2% in 2017, lower than forecast, despite stronger aggregated private consumption, said Nawawi Tie Leung.

(The Edge Financial Daily) Foreign retail store openings still outnumber closures


KUALA LUMPUR: Recent news of a number of retail store closings and their exit from the country have been alarming. But statistics show that the total number of new retailer entrants still outnumber the total number of retail stores that closed.

A total of 71 new retail brands made their maiden foray into Malaysia last year, while another 24 new foreign brands opened their first store in the first quarter of 2018 (1Q18). 

And the number is growing, said Retail Group Malaysia (RGM) managing director Tan Hai Hsin. 

“There are more foreign brands opening rather than closing ... and as long as the economy is stable, this trend will continue,” Tan told The Edge Financial Daily on the sidelines of the Malaysia Retailers Association’s (MRA) Retail Conference 2018 last week. 

Since January last year, the domestic market saw a staggering number of store closures with brands like True Fitness, GAP, Tous Les Jours, Bubba Gump and more recently, Th e Loaf. Other closures included Hello Kitty Café, Dazzling Café, Pumpkin Patch and Bulgogi Brothers. 

Tan, a retail consultant who works closely with MRA, said however, the local retail sector is witnessing more first-time brands entering Johor, followed by the Klang Valley. He cited Royal Tea from China, Omaya from South Korea, Th e Alley from Taiwan, and Emack & Bolio’s from the US. 

Tan said many foreign brands use Singapore as a springboard to Southeast Asia. 

“Once they are settled in Singapore, they tend to move into Malaysia. Often, they expand into Johor Baru due to cost and management. 

“If they expand into Johor, they do not need to set up a new office because they can manage [the business] from across the causeway,” he added. Often, these new brands are also brought in by Johorians. 

As for the composition of the 71 new retail brands, Tan said they are from 17 countries. As many as 61 of these brands are from outside Southeast Asia with seven from Europe. The others are North America (seven), Australia (four) and the Middle East (three). Of the 71 new brands, 62 are in food and beverage and 31 are in the fashion and fashion accessories business. Seventy-five per cent of these new openings were in the Klang Valley, while 15% were in Johor. 

The 24 new foreign brands that expanded their retail presence to Malaysia this year came from 13 countries. The highest numbers originated from Singapore and Taiwan. These brands made their way into shopping centres and shops located in the Klang Valley, Johor, Pahang and Seremban. 

Examples of new foreign brands in Malaysia included United Nude from the Netherlands, Coldstone, Rebecca Minkoff and Roberto Coin from the US, Off -White from Italy, Burger & Lobster from the UK, and Paul and Café Richards from France. 

Meanwhile, Tan pointed to an interesting fact: The number of local retail store closings is higher in Johor than in the Klang Valley. 

“Many local cafes opened in Johor Baru, but they closed within a year. This has become a norm in Johor,” he said. 

“[But] interestingly, new outlets come up quickly to replace the old ones [that closed]. This compared with the Klang Valley where once a café shuts, it is usually difficult to find a replacement due to an oversupply,” he said.

(The Star) Timely opening for Klang’s new Tamil school

The opening of SJK(T) Taman Sentosa in Klang is timely for those who have worked towards seeing this project through.

The school which is located in Taman Sentosa within the Kota Raja parliamentary, has four blocks of four-storey buildings and 22 classrooms.

The school was opened by MIC president Datuk Seri Dr S. Subramaniam in a grand ceremony attended by some 1,000 parents, children and residents.

Dr Subramaniam said the opening of the RM22.8mil school, marked the country’s 525th Tamil school and was Barisan Nasional’s commitment towards meeting the Indian community’s education and welfare needs.

He said seven schools were pledged to the Indian community in the last general election and two had been built including SJK(T) Lunas in Kedah.

“Four of the remaining schools are at different stages of construction while work on one more is about to start,” he said.

Deputy Education Minister Datuk P. Kamalanathan, who also attended the event, said the Government spent RM1bil on Tamil schools over the past eight years.

“This shows that the Government is committed towards uplifting the education standard of Indians in the country,” he said, adding that about 1,000 non-Indian pupils were also students in Tamil schools throughout the country.

Kota Raja MIC division chief Datuk R. S. Maniam said the establishment of the school had brought joy among the Indian community in Taman Sentosa and its surrounding areas.

“The children from here have been attending schools in other areas such as Kampung Jawa, Taman Sri Andalas and Bandar Bukit Tinggi.

“Now, they can attend classes in their own neighbourhood in a more conducive environment,” said Maniam who is contesting the Sentosa state seat in GE14.

Maniam said the school which has modern amenities such as an amphitheatre, staff room and open air badminton court, can accommodate 800 pupils.

Maniam said the school which has 239 pupils and 13 teachers opened last week.

“We expect the number to increase by two folds when the new school session begins early next year,” he said.

(The Star) Indian settlers‘ dream of new home realised

About 300 former Indian settlers from the Kampung Pandan Indian settlement in Kuala Lumpur received keys to their much-awaited dream homes in Pandanmas 2 low-cost apartments in Kampung Pandan recently.

From living in a slum-like setting with cramped quarters, the residents can now move into brand new units costing RM42,000.

“It’s a dream come true,’’ said Mary Angilina, 57, a long-time resident of the Indian settlement.

“I have lived here since the day I was born. Words cannot describe how I feel right now,’’ Mary added.

Mary had applied for a loan from Yayasan Wilayah Persekutuan under the rent-to-buy scheme that would enable her to eventually own her own unit.

“I cannot afford to buy in cash. Under the scheme I can pay on a monthly instalment of RM215 for 20 years,’’ she said.

About 300 former Indian settlers from the Kampung Pandan Indian settlement in Kuala Lumpur received the keys to their homes at the Pandanmas 2 low-cost apartments.

“It is worth it. We have new units measuring 800sq ft with three bedrooms and two bathrooms,’’ she said, adding that it was a luxury compared to her living condition before.

Incumbent Federal Territories Minister Datuk Seri Tengku Adnan Tengku Mansor, who presented the keys to the residents, said the Government allocated RM50mil to Yayasan Wilayah Persekutuan to help the residents own units.

“Those who want to buy (units) but are unable to get a loan from the banks can now do so via Yayasan’s rent-to-buy scheme,’’ he said.

“They may not have the proper documentation and income tax report to qualify for the loan, so Yayasan will give them the loan to pay the developer,’’ added Tengku Adnan.

Meanwhile, 10 buyers who are part of the 1,920 buyers of the Rumawip Residensi Pandanmas 2, also received the keys to their apartments.

Built by property developer Aset Kayamas Sdn Bhd, the project is part of the Federal Territories Housing Scheme (Rumawip), a strategic partnership between Kuala Lumpur City Hall (DBKL) and private developers to build a targeted 80,000 affordable homes for middle-income earners in the city by 2020.

The units are between 850sq ft and 900sq ft in size and were sold for RM280,000 and RM300,000 respectively.

(The Star) Maintaining a retail brand

Family businesses often run the risk of failing in the hands of the next generation. Founders may worry that the drive they had to succeed would diminish with each passing on of the reins.

But the Doshi brothers – Shyam, 61, and Minesh, 50, – can say that in their lifetime, they’ve given P. Lal Store all that they could to grow it to where it is today and to ensure that the business remains intact for the next generation.

The burden to keep growing the company is no longer on our shoulders, say the third-generation owners.

“We are generally happy with where we are. There may be some plans in the future but we will not be the ones controlling these plans. It will depend on the next generation,” Shyam says.

This year marks the store’s 89th year.

Heating up: The winter wear market has become fiercely competitive over the years as more and more players join the fray.

P. Lal Store was founded in 1929 by Prabhulal Doshi, a migrant from India determined to make a success out of what little he had. He progressed from a salesman to the owner of P. Lal Store, then housed in a rented shop on Batu Road (now Jalan Tuanku Abdul Rahman) in Kuala Lumpur.

One of his four sons, Bhansukhlal Doshi, eventually took over the business and focused on imported men’s leather shoes and winter clothing.

The nine-storey Wisma Lal Doshi on Jalan Tuanku Abdul Rahman was a testament to the company’s rapid growth.

Although Shyam and Minesh, Bhansukhlal’s sons, spent much of their younger years within the store, neither had any initial interest in being next-in-line to run the business.

“In fact, I didn’t like the business at first. I didn’t like being stuck in a place for long hours,” says Shyam.

But academics wasn’t his forte and Shyam decided to help with the business at the age of 18.

Right price: Alka (right) and Shyam note that pricing is key in maintaining competitiveness in a niche market such as leather shoes.

However, he was forced to take up the mantle in 1987 when their father suffered a heart attack.

“I had to do this fulltime and I took full control over the business. After that, things came in naturally. We started to focus even more.

“Previously, we were like a small-scale department store. We did bow ties and bedding and all that. We decided to throw it all out and concentrate. And at that time, we noticed that others weren’t doing winter clothing so we grew that,” he says.

Focusing on leather shoes and winter clothing turned out to be a good bet for P. Lal Store. In the late 1980s, there weren’t many other players offering winter clothing, ensuring good margins and growth for the company.

When Minesh started helping out a few years later, business was already thriving and running well without him.

“I was just helping out. It made no difference whether I came in or not,” Minesh laughs.

But after their father passed away in 1997, Shyam told his brother to step up.

They decided to separate the business into two different segments – Shyam was to oversee the leather shoe business while Minesh took on the winter clothing business.

“That was a big challenge because I didn’t grow into managing the business. I was thrown into the deep end and I had to survive. I had to learn the hard way on how much to order, what style will work and what would sell.

“But it was a nice challenge. I still had my brother as back-up,” Minesh shares.

A new home

The brothers decided to move out of their flagship building on Jalan Tuanku Abdul Rahman in 2008 when traffic in the city became unbearable. They found a new place along Jalan Gasing, Petaling Jaya, which Shyam notes is a lot more conducive for their customers.

There is ample space and parking lots, he says.

Their current place has a total built-up area of 24,000 sq ft.

However, there were delays in completing the new building and P. Lal Store only opened its doors again in 2011.

Learning curve: Minesh has to learn how to manage the business after his brother told him to step up.

“Because we took a while to open again, people thought we had closed down for good. So business took a dip when we reopened in 2011,” Minesh says.

Additionally, competition in the winter clothing space was, by then, in full swing as more players had made their way into the market.

“We decided to go more on quality stuff.

“But keeping up with the other stores can be quite difficult. They operate out of malls and have many branches. We only have this one store. So that affected us. At the end of the day, winter clothing is not so much about fashion. So convenience plays a big factor, in that consumers will just go where’s convenient rather than go to specific stores to get specific winter wear,” he adds.

But given its long history, P. Lal Store still has its appeal, particularly with long-time customers. Apart from catering to a slightly more upmarket crowd within the vicinity of Jalan Gasing, Minesh says they continue to draw loyal customers from out of town.

Things are similarly competitive for Shyam’s leather shoes business, especially with the advent of online shopping.

P. Lal carries a wide selection of branded leather shoes including Loake, Barker and Cheaney from England, Morissette from Turkey and Sioux from Germany.

“We take pains to ensure our pricing is competitive – at least, compared to the country of manufacture – to have a good size of the market.

“This is a small market but these shoes can’t be easily copied in China. And we can’t grow the market any bigger. That’s just the make-up of the market. But it is still a market that’s big enough for us,” says Shyam.

Asked if he intends to get on the e-commerce bandwagon, and Shyam gives a firm “no”.

Big dreams: Justine says the business still has room to expand.

Been there, done that, he says. And it wasn’t a good experience at all.

“Suppliers of good brand names don’t like their products to be heavily discounted through online sales. We were selling our shoes online for a while and were doing well. Ultimately, that success cost us our relationship with some of these manufacturers.

“So we decided to respect the geographical boundaries and deal only in Malaysia. So we are not going in that direction anymore, not even locally. We are sticking with good ol’ brick and mortar,” Shyam explains.

Nonetheless, he admits that its time online gave the company a boost in sales. When they first started selling shoes online in 1999, they were shipping out 20 pairs a year. By 2008, they were doing 20 pairs a day before they stopped their online operations.

Sales has, notably, taken a hit in recent years due to various factors such as the introduction of the Goods and Services Tax, currency fluctuations and the growing online retail trend.

P. Lal Store currently makes a collective revenue of slightly less than RM3mil a year. Sales is evenly split between the shoes and winter clothing business.

At the tail end

While Shyam and Minesh have tried to be good stewards of the family business, they acknowledge that there is no certainty as to who will take over from them.

Their hopes rest on Minesh’s nine-year-old daughter – their only heir.

“My brother and I have modernised the business from my father’s time. The fourth generation will probably be my daughter if she’s interested in the business. For now, she likes coming to the shop,” says Minesh.

For sure, he would try influencing her interest in the business, but maintains that the choice to take up the baton will be hers.

Apart from her, there is no other back-up plan for P. Lal Store. The brothers are contented to let the business take whatever course it will when the time comes.

Minesh’s wife, Justine Doshi, believes the business still has room to expand and grow into something bigger. Back to being a mini-department store, perhaps?

Difficult soles: The leather shoes business took a dent with the advent of online shopping.

“We have the space. And I can see every level in this building selling different types of winter products. We are seeing more demand in the winter market for items like ski-related things. Who knows?” she mulls.

For now, Minesh and Shyam are happy to sit back and enjoy the fruits from decades of hard work.

“The growth period is over for us now. It’s not so much, now, about making money. It’s about keeping the name and the prestige of the brand. That’s good enough.

“Retail brands have come and gone. But we’ve probably been able to stay so long because we didn’t have the greed to want to expand and move in a reckless and risky manner. We stuck to our roots and decided to do this like a boutique store catering to a specialist crowd,” says Shyam.

Eleven years from now, when P. Lal Store hits the 100-year mark, they hope to still be around to celebrate the milestone. But Shyam doubts there would be much difference to the company from how it is now.

“But our confidence is here in the business. Just as we are a generational business, we’ve also seen generations of customers come to us and they know us as a household name,” concludes Shyam’s wife, Alka Doshi.

(The Star) Property retail segment consolidates

PETALING JAYA: Although the property retail scene will remain challenging in the next couple of years as a result of rising retail space and the competition brought about by e-commerce, the retail sector will continue to grow, albeit at a much slower pace, backed by more “targeted valued content and offerings” using different delivery channels.

Piecing together a 2018 first quarter report from property consultancy Nawawi Tie Leung and two presentations made by Savills Malaysia deputy executive chairman Allan Soo and Retail Group Malaysia managing director Tan Hai Hsin last Thursday, the overall consensus was that the retail sector would continue to grow, brought about by new entrants replacing those who have left, with departmental stores closing unprofitable outlets and retailers downsizing or leaving altogether and new entrants taking their place.

The outcome of the upcoming election will also have long-term implications on the economy going forward.

“Whether there is continuation of tried and tested policies of the present administration, or a drastic overhaul, is dependent on the election results.”

Aside from the general election, the Nawawi Tie Leung report said occupancy of malls in Kuala Lumpur eased to 86% in the first quarter of 2018, compared to 87% in the last quarter of 2017.

As with all other sectors of the economy, the digital economy continues to wield its influence over the sector.

New delivery channels and payment options, backed by fintech, will continue to emerge to lure customers to part with their cash, be it physical cash or new payment options, in order to grow the retail industry pie which last year was reported by Retail Group Malaysia to be worth RM99.8bil.

The May 9 elections may just be a bit of a distraction to the market in the second quarter. Tan said the retail growth rates for the April-June quarter is estimated to be 3.7%, a drop from the 5.4% expected in the first quarter, helped by the Lunar New Year season. The third quarter is expected to bounce up to 5.2%.

On an annual basis, projected retail sales are forecast to grow at 4.7%, both Nawawi Tie Leung and Retail Group Malaysia said.

Three years after the introduction of the goods and services tax (GST) effective on April 1, 2015, Tan said the retail sector has “yet to recover from it”. He was presenting his paper “Retail Today: An Overview” at the Retail Transformation, Creativity & Beyond: A Diverse Perspective held on April 26.

The rate of retail sales growth rate was 5.5% in 2012, 4.5% in 2013, 3.4% in 2014 and 1.4% in 2015. Retail sales rate went up marginally to 1.7% in 2016 and reached 2% in 2017.

Some quarters said the GST has contributed more than RM40bil to the country’s coffers. Challenges include the weak ringgit which invariably “pushed prices of retail goods higher” in 2017, said Tan.

Coupled with that, “rising cost of living continues to weaken the people’s purchasing power” in 2017, which has led to various closures of foreign speciality stores and departmental stores.

Nonetheless, changing circumstances and the market “present new business opportunities” although he expects consumers to remain cautious on retail spending.

“They will continue to look out for value-for-money goods and services,” Tan said, adding that despite the various delivery channels, bricks-and-mortar stores, Internet or mobile, the retail industry is about services and content.

“The shopping experience will be elevated through new technologies like ewallet, social media and in-store infotainment,” he said.

While Tan considered every changing circumstance as a business opportunity, Savills’ Soo took a different approach.

He posed the question of whether the current retail sector, with its burgeoning floor space and e-commerce, was going through an apocalypse... or retail renaissance?

The success of the sector will be driven by demographics, presented by a new generation of younger and more tech-savvy consumers and wealthier tourists.

(The Star) Making home ownership a reality

A person's castle is his or her home but increasingly, in many parts of the world, having one’s own home has become out of reach, particularly for the millenial generation.

In cities like London, where, according to think tank Resolution Foundation, half of all British millennials would rent homes into their 40s and a third into their retirement, and Hong Kong, which had been named the least affordable real estate market in the world for an eighth year by property consultancy Demographia, homes are being priced out of reach.

Unfortunately, this looks likely to be the trend for many mega cities, including New York, Tokyo and Beijing.

The challenge of providing and improving access to affordable homes is expected to get more critical with the United Nations estimating global population to reach 8.5 billion by 2030, 60% of whom will be living in urban centres.

This means an estimated three billion people will need new housing and basic urban infrastructure by then, putting pressure on housing delivery systems.

But without proper finance solutions, many urban poor will not be able to afford formal housing.

Already, affordable housing is a worldwide concern for cities, with 330 million urban households in 2014 thought to be living in substandard housing or are financially overstretched by housing costs.

With that in mind, the Malaysian Government has put into place a range of schemes designed to help the young and the poor own homes across the country.

Prime locations: Perbadanan PR1MA aims to offer affordable, quality housing in urban areas to those in the middle-income group.

Among these are MyHome, MyDeposit, Perbadanan PR1MA Malaysia, the 1Malaysia Housing Projects for Civil Servants, and Rumah Bina Negara (RBN), Program Perumahan Rakyat (PPR) and the Perumahan Rakyat Termiskin (PPRT) programme.

The different schemes are to ensure all pockets of Malaysian society are catered to in the Government’s assistance of home ownership as well as during every step in the actual process involved in owning a home.

Perbadanan PR1MA, which was set up with the passing of the Perumahan Rakyat 1Malaysia Act by Parliament at the end of 2011, aims to offer affordable, quality housing in urban areas to those in the middle-income group or what is known as the middle 40% earners (M40) group.

This is the group which, besides being priced out of the private property market, is not eligible to apply for low-cost housing such as those units under the PPR scheme.

Charged with planning, developing, constructing and maintaining affordable housing, Perbadanan PR1MA seeks to provide 500,000 units priced at between RM100,000 and RM400,000.

On March 24, the Prime Minister announced that the Government was on track to deliver on its pledge of providing one million affordable homes in the country under various schemes.

Out of this, PR1MA, he said, had built more than 18,000 homes nationwide with an estimated RM4bil in gross development value in just under two years.

Among the hot sellers are the PR1MA units in Jalan Jubilee in Bukit Bintang which received subscription rate of more than 20 times.

To enable Malaysians to embark on their first step of actually owning a home, which usually means coming up with a deposit to book their first unit, there are the MyHome and MyDeposit schemes, run by the National Housing Department and the Urban Wellbeing, Housing and Local Government Ministry.

While MyHome – where a RM30,000 subsidy, including deposit payments, is paid by the Government to a private developer – targets first-time buyers from households earning between RM3,000 and RM4,000 in the M40 group, MyDeposit provides the same facility to households with income of between RM3,000 and RM15,000.

Last year, the ministry successfully awarded 952 MyHome scheme recipients instead of the actual target of 600 recipients.

A total of 7,066 housing units under the scheme have also been approved nationwide with RM127mil spent in subsidies as of January this year.

The offer of a grant under MyDeposit is open to property priced at RM500,000 and below while that for MyHome is considerably lower at RM80,000 to RM120,000 in Peninsular Malaysia and RM90,000 and RM120,000 for Sabah and Sarawak.

For first-time buyers from households with income of between RM4,000 and RM6,000, they are eligible to apply for the subsidy under MyHome2 for homes priced at between RM120,000 and RM200,000 in both the peninsula and Sabah and Sarawak.

However, it is not just those living in urban centres or the middle-class who are benefiting from the Government’s provision of easier access to home ownership.

The Rumah Bina Negara (RBN) programme provides affordable housing for those from the second generation of Rubber Industry Smallholders Development Authority (Risda) and the Federal Land Consolidation and Rehabilitation Authority (Felcra) settlers, aged between 18 and 45.

This is done in the hope of increasing their assets and encouraging them to remain in their villages without migrating to the cities.

Under the programme, RM20,000 is given to subsidise the total construction cost of each unit. During the tabling of Budget 2017, it was announced that a RM200mil allocation had been put aside for the programme, to be implemented by the Rubber Industry Smallholders Development Authority (Risda) and the Federal Land Consolidation and Rehabilitation Authority (Felcra), both under the Rural and Regional Development Ministry.

With a target of building a total of 7,000 units of housing, both agencies have also partnered with Agrobank to provide financing facility for applicants.

For the low-income group, Program Perumahan Rakyat (PPR) or People’s Housing Project has been in place since 1998, providing shelter primarily for squatters and the urban poor.

Developed by the National Housing Department under the Urban Wellbeing, Housing and Local Government Ministry, homes under the scheme come with two categories – PPR homes for rent and PPR homes for sale.

The homes include both high- rise flats and landed property, which can nowadays cost more than RM200,000 per unit and built in rural areas such as Lenggong, Perak, and Baling, Kedah.

For as low as RM124 per month, poor families can choose to rent the low-cost units or buy these for RM35,000 in Peninsular Malaysia and RM42,000 in Sabah and Sarawak.

Although the PPR flats have come under criticism for their living conditions in recent years, it cannot be denied that the scheme had helped many of the urban poor to own homes.

In Kuala Lumpur alone, there are some 75,000 PPR units and other low-cost apartments.

The above are not the only initiatives to help Malaysians own homes as there are also plans to revive abandoned housing projects, transit homes for youths in the bottom 40% of the low-income group or B40 as well as the Perumahan Rakyat Termiskin (PPRT) programme, tasked in rebuilding dilapidated houses and repairing homes damaged due to disasters.

This last scheme, under the Rural and Regional Development Ministry, is for those in the extremely poor group registered under the Government’s e-Kasih welfare system, with priority given to the elderly, disabled and single mothers. All these measures are to make sure that one really does not have to come out with a fortune to own one’s home in Malaysia.

(NST) Tourism boom in Sabah

KOTA KINABALU: Sabah has weathered many challenges to achieve outstanding performance in tourism, with its rich natural environment and cultural diversity as advantages to propel the industry.

With aggressive promotion and the increase of flights into Sabah, tourist arrivals have continued to scale up over the past years since 2002 with only a slight drop in 2014.

According to statistics from the Sabah Tourism Board, tourist arrivals in 2014 were recorded at 3,230,645, a 4.5 percent drop from 2013. However, tourist arrivals picked up the following years and have continued to grow.

Last year’s tourist arrivals exceeded the 2016 influx, from 3,427,9,08 arrivals to 3,684,734. Tourism receipts have also increased from RM7.249 billion in 2016 to RM7.82 billion in 2017.

As at January this year, Sabah recorded 312,670 visitors as compared to 294,557 tourists in the same month in the previous years. International and domestic tourists are expected to grow by year end.

Sabah Tourism, Culture and Environment Minister Datuk Seri Masidi Manjun said the tourism industry is unpredictable, especially when it is surrounded by “bad news”, which create perception among travellers.

“Perception dictates travel patterns and decisions, and this makes the industry difficult to predict. You could be doing exceptionally well today and suddenly nosedive for no apparent and logical reason. The MH370 and the perennial kidnappings are good examples.

“Sabah has weathered many challenges and we have done fairly well for the last five years, bearing in mind over 95 per cent of our visitors come in by air.

“Air connectivity was our biggest challenge, having to convince foreign airlines to fly to Sabah and persevere long enough for them to earn reasonable profit from the flight sector. It’s purely a business decision for an airline to fly to Sabah,” he said.

Today, there are 12 foreign airlines flying to Kota Kinabalu on scheduled flights from 16 foreign destinations with total flight frequencies of 183 per week.

With additional 453 weekly domestic flight frequencies from outside Sabah, it has made Kota Kinabalu International Airport the second busiest airport in Malaysia after the Kuala Lumpur International Airport.

Stressing that tourism is a competitive industry, Masidi said Sabah should take note of the aggressive tourism promotion in Vietnam, Cambodia, Philippines and Indonesia.

He noted these countries would be Sabah’s biggest competitors in the future as they have many products, adding Indonesia, having thousands of islands, has the biggest potential to emerge as the most popular tourists’ destination in the South East Asia region.

Speaking on Sabah’s rural tourism, Masidi stressed the rural community is a crucial component of the industry’s development to ensure tourism dollars are spread out.

“Sabah’s rural areas especially in the West Coast are beautiful. These are the new tourism products that we are marketing to disperse the tourist crowds from the capital. There are few things that need to be done.

“Access like roads to the rural areas need to be improved and upgraded. The rural community needs to be educated and trained on how to handle tourists,” he said.

(NST) Poverty alleviation through rural tourism development

KOTA KINABALU: Over the years, Sabah has seen a growing number of homestays and camping grounds cropping up, overlooking scenic views of rivers, nature and mountains in the rural areas.

Districts such as Kadamaian, Kiulu, Ranau, and Tambunan among others have become quaint destinations of choice for vacationers in search of the experience of living closer to nature.

Nature-based activities such as hiking, trekking, water rafting, and even extreme sporting events have also increased following its popularity among travel adventure enthusiasts.

Such eco-tourism potential has moved many rural villagers into taking the opportunity to generate income and create quality tourism products in line with the state government’s effort to develop rural tourism and elevate the people’s economic status.

Prior to 2014, rural tourism development was not fully implemented throughout Sabah until Sabah Tourism Board (STB) chairman Datuk Joniston Bangkuai, in realising its potential, called on STB to look into the matter.

A Rural Tourism Product Unit was setup immediately to identify potential rural tourism products and to encourage involvement of village community as well as local authority. This followed by activating the Tourism Action Council in all districts throughout the state.

Small districts namely Kiulu in the Tuaran parliamentary constituency and Kadamaian in the Kota Belud parliamentary constituency were then chosen by STB management as two pioneer districts for rural tourism development.

“The effort taken to introduce and develop rural tourism for two years has resulted in the implementation of Visit Kiulu Month (April 2017) and Visit Kadamaian Month (May 2017).

“This 2017 visit month programme has significantly impacted the locals as the programme is able to promote the two districts locally and overseas. For example, the influx of tourist into Kiulu has provided direct profits to the villagers.

“In both Kadamaian and Kiulu, the ‘lung washing’ activities such as hiking and trekking have successfully attracted local tourists and those from China, South Korea, and Europe,” said Joniston.

This success has motivated villagers from other districts such as Tambunan, Kota Marudu, Tenom, Keningau, Kudat, and Ranau to follow the footsteps of implementing and developing rural tourism in their respective areas.

During the 2017 visit month, Kadamaian recorded 90,000 tourist arrivals with RM900,000 in tourism revenue while Kiulu received 53,000 tourists with RM4.3 million in tourism income.

Joniston hoped the target of 400,000 visitors and RM20 million tourism receipts could be generated through Sabah rural tourism, which comprises 25 districts, this year.

“For STB, we will continue to promote and market rural tourism products and implement a strategic plan. STB will also continue to work with district tourism action council (in 25 districts) to bring Sabah’s rural tourism to the international level by 2025,” he stressed.

As at January 2018, almost 98 per cent of District Tourism Action Council have been activated to bring tourism progress in rural districts throughout the state.

Saturday, 28 April 2018

(The Star) Valuation dept: Industrial segment poised for good growth

While the Malaysian property sector is still a while off from seeing better days, it’s far from doom and gloom.

According to the Valuation and Property Services Department’s (JPPH) Property Market Report 2017, the industrial property sub-sector has weathered the past couple of years pretty well and is poised for good growth.

“The industrial sub-sector though contributed the least to the overall property market, plays a significant role generating investments and employment opportunities.

“As Malaysia embraces Industrial Revolution 4.0 and the digital economy, a different ball game is expected of the industrial property sub-sector,” it says.

Industrial Revolution 4.0 refers to the paradigm that machines are now able to autonomously adapt and coordinate their tasks to meet human needs.

One initiative that is expected to support the sector’s performance, says JPPH, is the setting up of a Special Border Economic Zone in Bukit Kayu Hitam, which will be the new attraction for both domestic and foreign investors on the northern zone of Malaysia.

“Another is the establishment of a Digital Free Trade Zone (DFTZ), which will see KLIA as the regional gateway. The first phase of DFTZ is foreseen to have 1,500 small and medium enterprises participate in the digital economy and is expected to attract RM700mil worth of investment and create 2,500 job opportunities.

“On the same note, Cyberjaya will be transformed into a global technology hub and a smart city.”

In November, CIMB Research in a report said the industrial segment has a strong growth trajectory through acquisitions and organic growth, given the tight industrial space supply.

“Demand for new high-quality industrial assets will transform the segment, which has led to several new mega-distribution centres that carry high price tags as retailers start turning to logistics.

“Notably, UK-based retailer Marks & Spencer is building a 900,000-sq-ft distribution centre with one million products processing capability per day and will consolidate its 110 warehouses into just four.”

The sector is also expected to be bolstered by the growth of the e-commerce segment.

“We believe that there will be a demand for larger warehouses eventually - in tandem with the growth in online retailers,” says a property analyst.

According to JPPH’s Property Market Report 2017, the industrial property sub-sector recorded 5,725 transactions worth RM11.64bil in 2017.

“Compared with last year, the market volume increased by a marginal 2.1% but value declined by 3.1%. Most states recorded contractions in market activity but the commendable growth in Selangor and Johor at 19.5% and 9.5% respectively helped support the overall marginal growth.

“These two states accounted for 34.2% and 14% of the total market activity respectively. By type, vacant plots formed 31% of the total transactions, followed by terraced factory with 28.7% market share.”

JPPH says the industrial overhang remained minimal though the volume kept growing since 2016.

“There were 999 units worth RM1.51bil in 2017, showing an increase of 11.4% and 27.1% in volume and value respectively. Johor also took the lead in the industrial overhang with 40.7% (407 units) of the national total.”

JPPH adds that the industrial development front was less active as shown by the marginal increase of 0.4% in completion to record 1,851 units, whilst starts and new planned supply decreased by 20.7% and 34.3% respectively to 850 units and 710 units.

“As at year-end, there were 113,173 existing industrial units, with another 5,675 units in the incoming supply and 7,513 units in the planned supply.

“Prices of industrial property were stable across the board. One and a-half storey semi-detached factories in the Petaling District fetched between RM4.1mil to RM5.7mil. In Johor Bahru, similar factories in Taman Perindustrian Cemerlang ranged from RM2.3mil to RM2.7mil.”

As for the other property sub-sectors, the residential property market recorded 194,684 transactions worth RM68.47bil in 2017, which were 4.1% lower in volume compared with 2016, but they increased by a marginal 4.4% in value.

By price range, demand continued to be in the RM200,000 and below price points, accounting for nearly 45% of the residential market volume.

Last year saw 77,570 units of new launches, higher than those recorded in 2015 (58,411 units) and 2016 (52,713 units).

Kuala Lumpur recorded the highest number of launches in the country with more than 22,000 units. Its sales performance was at a low 19.5%, followed by Selangor with 13,522 units and Johor, 7,926 units.

The commercial property segment, meanwhile, continued to decline but at a modest rate, says JPPH. There were 22,162 transactions recorded worth RM25.44bil in 2017, down by 6.7% in volume and 29.2% in value compared with 2016.

The retail sub-segment’s performance was stable at 81.3% in 2017 compared with 81.4% in 2016, recording an annual take-up of more than 6.78 million sq ft.

Kuala Lumpur, Selangor, Johor and Penang saw a significant take-up rate as their newly completed shopping complexes secured commendable occupancy.

Johor was leading with nearly 2.82 million sq ft followed by Selangor (1.17 million sq ft), Kuala Lumpur (1.01 million sq ft) and Penang (778,833 sq ft).

(The Star) Penang’s heritage property conundrum

High asking price and unattractive rental yields put off investors

The selling price of heritage properties in George Town is expected to consolidate between RM550 per sq ft (psf) and RM1,800 psf because interest from overseas investors has waned due to unattractive rental yields and high asking price.

Raine & Horne Malaysia senior partner Michael Geh tells StarBizWeek that over the past 12 months the transactions for heritage properties in George Town have slowed.

“Even at the present price of between RM550 psf and RM1,800 psf, it is still difficult to find buyers, although the pricing is competitive compared with heritage properties in other countries,” Geh says.

According to National Property Information Centre’s data, heritage property transactions in George Town in 2017 were between RM2,300 psf and RM2,800 psf.

“The properties with land areas of 2,108 sq ft and 1,288 sq ft are located at Armenian Street and Penang Road, sold respectively for RM5mil and RM3.64mil last year. However, these high-value transactions are rather unusual.

“The most popularly transacted prices in 2017 ranged between RM1,000 psf and RM1,800 psf.

“The larger the land area of the heritage properties, the lower the price psf.

“The smaller the land area, the higher the price per square feet,” Geh adds.

High price low yield: Heritage properties in inner George Town. The prices have skyrocketed over the past few years. — LIM BENG TATT / The Star 

From 2002 to 2012, heritage properties in George Town were in dilapidated conditions but some passionate locals and overseas investors entered the scene, refurbished and restored some of them.

“After spending substantially on them, it was normal for them to expect some kind of return on investments (ROI).

“However, the annual rental yield, hovering now between 2.5% and 3.8% per annum, is not attractive enough to draw further attention from overseas investors,” Geh says.

According to Geh, the monthly rental is hardly sufficient to cover the interest.

“If you were to buy a heritage property in a prime area for RM1.8mil, with an 80% loan, the monthly interest on the loan is about RM10,000.

“However, due to the poor rental market, it is difficult to get that monthly rental amount.

“The actual rental paid is between RM3,000 and RM8,000, depending on the location, size and condition of the pre-war property.

Geh says the rental yield should be more than 5% in order to be attractive.

The rental yield is the net rental over a 12-month period divided by the market value of the property.

According to Geh, the choices of what you can do with a heritage property is pretty much limited in George Town.

“Heritage properties are usually renovated to be used as a food and beverage (F&B) outlets or as hotels in George Town.

“Thus, all over George Town, you can see many F&B outlets and budget hotels competing for business. This leads to pricing pressure and eventually margin erosion.

“Whether the tourist arrivals and size of the local population can in the long run sustain the F&B and hotel businesses remain to be seen.

“Potential investors will always consider the ROI,” Geh said.

According to Geh, there is good long-term prospects if investors are not after immediate ROI. If that is the case, then investing in such properties is a wise decision simply because the supply is limited.

There are only some 3,853 units of such properties in George Town’s heritage core and buffer areas, according to George Town World Heritage Inc.

According to Geh, there are people interested to buy such properties for long-term investments or for business purposes. The deciding factor is the price. If the selling price is attractive and have a good yield, there will be transactions.

“But how many are willing to lower the selling price after spending a hefty sum to restore the properties. This is why the asking price is high,” he adds.

On The Rice Miller Hotel & Godowns in Weld Quay, which is out for sale by tender, Geh says the property should have no problem attracting interest from local and overseas buyers involved in the hospitality industry.

The Rice Miller Hotel & Godowns, comprising two restored nineteenth-century heritage buildings, has a hotel, a residential component and commercial outlets.

Property Talk principal Steven Cheah concurs that the asking price of heritage properties in George Town are on the high side.

“There are overseas investors from Singapore, China, and Hong Kong looking for heritage properties in George Town, but are deterred by the high asking price. They are trying to get 5% to 10% knocked off from the current pricing.

“These investors are looking to generate a rental income from their investments,” he said.

Meanwhile, Ghee Hiang Group executive chairman Datuk Ooi Sian Hian says the economic viability of heritage properties in George Town is precarious.

Ooi is a professional architect specialising in the restoration of heritage properties.

“Currently, landowners have a tough time finding tenants who can afford the rentals and be able to operate their business profitably. There are too many conceptual themed museums, souvenir shops, lodges, food and beverage outlets in George Town now for the businesses to be sustainable.

“Moreover, there is an overhang of office space and issues of traffic congestion and acute car-parking shortage within George Town. These issues make it unattractive to convert heritage properties for office use.

“If the plan is to renovate the property for residential use, there is the need for car parking bays. If you can’t provide that, you would have to pay RM25,000 as contribution to the local authorities.

“Investors or initiators may not acquire any more heritage properties in George Town if they cannot derive a reasonable income from their investments. Furthermore, heritage property values are not in tandem with rental yields,” he adds.

Ooi says the present conservation of the heritage core zone in George Town is too large.

“It is about 250 hectares at the buffer and core zones. That’s a lot to cover if there are at all significant places and areas of interest true to Unesco’s elements of living heritage and cultural diversity values.

“It will take about a week for tourists to cover on foot. They would need bicycles to cover the area where there are a lot of vehicles.

“Since there are no special lanes for the non-motorised vehicles, it is rather dangerous. In Malacca, at least the streets in the heritage zones, smaller and manageable in scale, are closed to motorised traffic,” Ooi says.

The Malaysian Institute of Architects (PAM, Northern Chapter) past chairman Datuk Lawrence Lim says foreign investors may lose interest in this segment of the property market due to high restoration and conversion costs.

Most owners prefer to sell to investors because of prohibitive restoration cost.

“Conversion fees to change residential usage to commercial is also high, at RM100 per square metre which works out to about RM19,000 for a pre-war property of about 2,000 sq ft in built-up.

“You would also need to pay RM25,000 for a car park bay to the local authorities if there is no plan to provide car parking bays,” he added.

After factoring restoration and conversion costs, they hesitate to buy because it would take some time before they could recoup their investments.

“Our Lim Association owns a number of heritage houses in George Town that have attracted the attention of foreign investors. The feedback from them is why spend so much just to convert the property for commercial use before even doing business, which may turn out to be unprofitable,” Lim says.

Restoration cost is high due to the stringent requirements by the local authorities to use authentic construction materials with cost of restoration ranging between RM150,000 and RM500,000 per unit.

“The cost to restore the roof alone is about RM80,000, while the cost to replace floor tiles is between RM70,000 and RM80,000. A 2,000 sq ft built-up area can cost about RM150,000,” Lim adds.

Lim, who is also East Design managing director, says the company is now undertaking restoration projects for heritage houses in Hong Kong Street and Magazine Road.

“We are restoring the Kun Kee building at Hong Kong Street, the manufacturer of Penang’s famous white coffee. The other project is 10 pre-war units in Magazine Road, for commercial use.”

The core heritage zone of George Town covers 109.38 hectares and includes heritage hotpots such as Love Lane, Malay Street Ghaut, Carnavon Lane and Carnavon Street.

The buffer area covers 150.04 hectares and includes Dr Lim Chwee Leong Road, Prangin Road, and Transfer Road.

(The Star) How the best property deals came about

Apart from the 14th general election, the other big news in the local business scene was the sale of 37 high-end residential properties in the prestigious address of Bukit Damansara.

It is the locality where the country’s elite live. The roads are wide with lush greenery and it is relatively safe compared to many other places. Bukit Damansara was not developed as a gated and guarded development, but security is generally tight, with most houses having their own private guards.

The 37 units comprising villas, bungalows and semi-detached houses are located within a planned development in Bukit Damansara. The Seri Beringin and 9 Beringin developments are the only projects with gated and guarded facilities.

Out of the 37 units, 30 units come with an added layer of security and clubhouse facilities. In a nutshell, the properties would be the “dream” home of most people – to live in a secured area in Kuala Lumpur’s most prestigious address.

Most of the properties were snapped up within hours, an indication of their attractive pricing.

The seven villas ranging from RM6mil to RM8.4mil were sold out within two hours of being opened for sale.

The buyers were mainly people who were familiar with the area.

They either own an existing property in the vicinity or have been scouting around the area for some time to understand the market value.

The villas come with a swimming pool, a view overlooking Taman Tun Dr Ismail and all the high-quality finishing that none would quibble about. The transacted price was between RM650 per square foot (psf) and RM850 psf.

The double-storey and three-storey detached and semi-detached houses were sold at less than RM900 psf. Almost all the 30 units were sold within the first day.

It was a good price, considering that the market price of empty plots of land in the area is about RM700 psf, with desperate sellers wanting to let them go for RM600 psf even.

Throw in a new bungalow with a swimming pool and high-quality finishing and the market price is easily at least RM1,200 psf.

SP Setia Bhd, the company that put up the properties for sale, said that it was “fair value”, considering the current property environment.

Property agents say that the prices were below market value like similar properties up for sale in the area. They say that the quick take-up is testimony of the attractive prices.

SP Setia is the leading property developer in town, commanding a 13% share of the Bursa Malaysia Property Index. It is managed by a team of people with a wealth of experience in the property market.

Why would they want to let prime property in a prestigious address go cheap?

To understand the logic, one must go back to understanding how these properties came about in the first place.

The properties were originally a part of Syarikat Perumahan Pegawai Kerajaan Sdn Bhd that was merged with Island & Peninsular Bhd (I&P).

Last year, SP Setia took over I&P under a rationalisation exercise spearheaded by Permodalan Nasional Bhd.

SP Setia inherited the properties after the RM3bil corporate exercise.

Like any other company, post-takeover, the management’s job is to look at how to maximise profit for shareholders. Apart from reducing cost, the new management has to check on the inventory level to ensure it is not holding on to too many unsold properties.

In the current soft property market environment, only properties in prime areas are highly sought-after – for the appropriate price that is.

The villas were completed in late 2015 under a build-and-sell concept. The original price was nothing less than RM1,200 psf. The cheapest unit was going for RM9.5mil and the most expensive was RM12.2mil, then.

For that kind of money, most people would prefer to just buy a piece of land in a prime area and build their own dream house in their own design and finishing.

On hindsight, if the parcels of land where the villas were built were sold without a structure, they would probably have gone off the market a long time ago at a good price.

As for the detached and semi-detached properties, they were built with the objective of being rented out. They were never up for sale.

There is an art to undertaking the build-for-sale and build-for-rent property projects. The developers need to understand the market well and be prepared to hold on to the properties even if the returns are low.

SP Setia is not in the business of holding inventory of properties. It is not in the business of undertaking build-to-sell or build-to-rent properties.

When it took over I&P, the management would have sold the unsold units first, and among them, the units in Bukit Damansara would have been the best of the choices available.

However, the transacted price is not the benchmark for future property prices in the Bukit Damansara area. Such deals come only when the developer has a reality check – which does not happen often.