Tuesday, 30 April 2019

(NST) Land valuations gap between private and public sectors should be narrowed

KAJANG: The government is looking to narrow the price gap between land valuations carried out by the public and private sectors, Finance Minister Lim Guan Eng said.

He said the jarring gap in prices was due to the different methodologies employed by the Valuation and Property Services Department and private sector valuers.

"As a government with integrity, we want input from all stakeholders, and regular discussions should be held between the Valuation and Property Services Department and private companies," he said.

This was so that property valuations that accurately reflect the property market could be made, Lim said after launching the Malaysian Property Market 2018 report here today.

Under the ongoing Home Ownership Campaign (HOC), he revealed that early registration for properties worth RM9 billion had been recorded.

He, however, cautioned that the amount was the value of early registrations made, and not actual sales figures.

"This is not the value of purchases made, but early registration for those who indicated an interest in the property," he said.

Lim reiterated that the stamp duty exemptions for residentials sold under the HOC, which runs for six months to June this year, was applicable to Malaysians and not foreigners.

The government launched the HOC to address oversupply of properties in the market, with incentives such as stamp duty exemprions on residentials priced between RM300,000 and RM1 million.

For houses sold above RM1 million and up to RM2.5 million, Lim said the stamp duty exemption applies for the first RM1 million, and the rest will be charged at three per cent.

Previously, a one per cent stamp duty fee was imposed on buyers for the first RM100,000 of the purchase consideration, two per cent for RM100,001 to RM500,000, and three per cent from RM500,001 to RM1 million.

Stamp duty on loan agreements for properties up to RM2.5 million is also exempted under the HOC, compared with the previous rate of 0.5 per cent.

(The Star) RHB Research expects the economy to pick up in second half

KUALA LUMPUR: RHB Research expects a pick-up in construction activity with the resumption of the East Coast Rail Link (ECRL) and Bandar Malaysia projects will have multiplier effects while an improvement in exports growth will see the economy picking up in the second half of 2019 (2H19).

It said the revival of these projects signals that, after almost a year in power, the Pakatan Harapan government is ready to restart part of its fiscal-spending engine to help support the economy.

“In addition, we believe the government’s review of its other projects – to ensure that costs are reasonable – is likely to have been completed as well, and the disbursement of development spending should gradually pick up pace.

“This is in line with our expectations, after having seen 10 years ago how the Selangor and Penang state governments jumped-started their construction activities a year after gaining power in these two states,” the research unit said in its latest report.

RHB Research expects construction activity to gradually pick up momentum in 2H19 after it slowed to 2.6% in 4Q18 from 6.7% in 2017. This is expected to bring up activity in the production of construction-related building materials as well.

“This, together with a likely improvement in the country’s exports in the 2H19, suggests that economic growth in Malaysia will likely pick up pace during this period, in our view.

“As a result, we expect real GDP growth to inch up to 4.8% YoY in 2H from 4.5% in 1H, bringing the full-year 2019 growth to 4.6% before improving further to 4.8% in 2020,” it said.

RHB Research said although the revival of the ECRL will be at a significant lower cost of RM44bil, compared with its earlier cost of RM65.5bil, it believed its impact to the domestic economy is unlikely to be reduced. This is because the multiplier effect will likely be greater due to a more efficient way of costing and spending, it added

As for the direct government debt, the research house pointed out that it has since risen slightly to 51.8% of GDP in 2018 and is expected to increase to 52.1% of GDP in 2019.

The direct debt, however, is projected to ease back to 51.9% of GDP in 2020, as the Government reduces its fiscal deficit to 3% of GDP during the year from a projected 3.4% in 2019.

(NST) AmanahRaya REIT targets RM2b fund size in 2-3 years

KUALA LUMPUR: AmanahRaya-Kenedix REIT Manager Sdn Bhd (AmanahRaya REIT), the management company of AmanahRaya Real Investment Trust (ARREIT), has targeted to grow its fund size to RM2 billion in the next two to three years.

As at March 31 this year, ARREIT had 15 properties with total asset value of RM1.5 billion, located in Kedah and Langkawi in the north as well as Subang Jaya, Damansara Heights, Petaling Jaya, Shah Alam and Kuala Lumpur in the Klang Valley.

“We aim to continue acquiring yield and value accretive assets in the long term and strive to grow our fund size to RM2 billion in the next few years.

“We are always ready to acquire and are currently eyeing buildings in good locations including Class A office buildings and good retail malls.

“In terms of the dividend and capital values, we are targeting new acquisitions of sizeable assets located in the prime areas within the Klang Valley as well as major cities in the northern and southern region with great potential for growth,” Amanah Raya Bhd group managing director Adenan Md Yusof told NST Business after AmanahRaya REIT’s annual general meeting here today.

AmanahRaya REIT and ARREIT are subsidiaries of Amanah Raya Bhd.

For the financial year ended December 31, 2018, ARREIT’s total value asset was 1.83 per cent lower at RM1.5 billion with 15 properties from RM1.53 billion in 2017. This was due to the disposal of Silver Bird factory in Shah Alam.

On January 16 last year, ARREIT completed the acquisition of Vista Tower, The Intermark for RM455 million.

Rental income significantly increased to RM96.68 million in 2018 from RM60.42 million, mainly contributed by the rental income from Vista Tower.

This translated into a higher net realised income of RM34.97 million in 2018 from RM31.65 million in 2017.

ARRREIT has declared a total distribution per unit of 6.1 sen compared to 5.5027 sen in 2017.

(NST) ECRL needs to bring industrial growth to East Coast - Azmin Ali

MELAKA: The East Coast Rail Link (ECRL) project needs to bring new industries and industrial sector development to the East Coast, which in turn, spurs economic growth that benefits the people, says Economic Affairs Minister Datuk Seri Mohamed Azmin Ali.

He said if there were no new industries and growth, no cargo to be transported via the ECRL, then there is be no reason to proceed with the project.

“Among the new conditions we laid down was to bring new industries to the East Coast. The ECRL is important if there is industrial growth that can generate economic growth and transfer of industrial cargo to Port Klang,” he said.

Mohamed Azmin said this to reporters after delivering his keynote address titled “People’s Hope Development: A New Malaysia Mechanism or Just a Rebranding?” at the Melaka Berwibawa Seminar in Bandar Hilir, here today.

The two-day seminar, which started yesterday, was officially launched by Melaka Chief Minister Adly Zahari earlier. Also present was Deputy Primary Industries Minister Datuk Seri Shamsul Iskandar.

It was reported that the ECRL project would be revived and the construction costs for Phase 1 and Phase 2 have now been reduced to RM44 billion from RM65.5 billion.

Mohamed Azmin said the project’s RM21.5 billion savings was not due to the scaling down of its scope and specifications as alleged by several parties, instead they remained unchanged.

“It is still double track and the alignment and distance is about the same. What happened is that we do not allow them to pass through Gombak as there is a dam there and we do not want any problems (to occur). This decision was made when I was the Selangor Menteri Besar.

“We also have the Klang Gates Quartz ridge which was registered with Unesco as the world’s longest quartz ridge and we do not want them to bore through it and construct a RM10 billion tunnel. We’ve saved almost RM10 billion here.

“We are against the abuse of power, corruption and leakages, and we will continue with these practices and principles, including for the Bandar Malaysia project which will be governed by a new development concept,” he added.

(The Star) No plans for new govt hub

Due to a shortage of land, Komtar will remain the state administrative centre for now, said Chief Minister Chow Kon Yeow.

“Nevertheless, we will go back and discuss how best to fulfill Tun’s request,” he said when responding to the call by Yang di-Pertua Negri Tun Abdul Rahman Abbas for a new government administration capital on reclaimed land.

Chow said the suggestion was something new and visionary by Abdul Rahman.

“Tun is saying this due to the recent fire at Komtar and we respect his view, but it would not be possible for now as it would be hard to find the land and money for the project,” he told reporters after the launch of the Penang 2030 Guide booklet at Loft 29 in Church Street Ghaut, George Town, on Saturday.

Chow, however, said that to have a new state assembly building, something Tun had said in his 2015 speech, would be a more viable option that could be done.

On a separate matter, Chow said the deficit budget mentioned by Abdul Rahman during his speech at the state assembly on Friday was a non-audited figure.

“The Auditor-General has not released the final figure, which could be different.

“We would not know the final figure for 2018 until it is approved by the Auditor-General’s office,” he said.

According to Abdul Rahman’s speech, the expenditure for 2018 was RM1,005,318,896 compared to income of RM987,050,138.69, incurring a deficit of RM18,268,757.31.

Abdul Rahman had reportedly suggested that a new administrative complex should be built to house its legislative assembly and administrative centre all under one roof.

In his opening speech at the state legislative assembly temporarily held at Dewan Sri Pinang on Friday, he said the state government could build the new complex on reclaimed land.

He, however, did not elaborate further on the exact location.

On April 5, a malfunctioned air-conditioning unit was blamed for the fire at Komtar which forced about 2,000 civil servants and state exco members, including the Chief Minister, to evacuate the building.

Initial investigation by the Fire and Rescue Department revealed that the thick smoke from the building was from a smouldering insulation of the air-conditioning duct.

Setia Urus manages the iconic 65-floor complex in the heart of town. During the incident, the weekly state exco meeting on the 28th floor was also interrupted, with all the lawmakers having to leave the building.

(The Star) New Shah Alam bus terminal to begin operations on May 1

The new Shah Alam intercity bus terminal in Section 17 will be operational by midnight tomorrow.

Shah Alam deputy mayor Mohd Rashidi Ruslan said operations would be moved from the temporary facility in Section 13.

“Police will be on hand to ensure that traffic is managed smoothly,” he said during the Shah Alam City Council full board meeting.

It was earlier reported that Terminal 17 in Jalan Jenulung 17/21 was expected to begin operations in July last year but it had been delayed for almost a year due to technical reasons.

The total cost of the terminal was RM8.4mil and the operating system and centralised ticketing system installed is similar to the one at Terminal Bersepadu Selatan in Bandar Tasik Selatan.

Mohd Rashidi said passengers can buy tickets from all 41 bus companies at each of the 10 counters provided.

“Customers can also buy their tickets online to eliminate touts.”

He added that phase two of the project would include the building of 30 food stalls and a multi-level parking facility. Work is expected to start by the end of the year.

Monday, 29 April 2019

(The Star) Govt urged to review RM1mil threshold for foreign buying of properties

Johor Housing, Communications and Multimedia Committee chairman (centre) with Johor Real Estate and Housing Developers Asscoaition (Rehda) branch chairman Datuk Steve Chong Yoon On (left) and Johor Mapex 2019 organising chairman Andrew Tan at the launch of Johor Mapex 2019 on Saturday. - ZAZALI MUSA /The Star
Johor Housing, Communications and Multimedia Committee chairman (centre) with Johor Real Estate and Housing Developers Asscoaition (Rehda) branch chairman Datuk Steve Chong Yoon On (left) and Johor Mapex 2019 organising chairman Andrew Tan at the launch of Johor Mapex 2019 on Saturday. - ZAZALI MUSA /The Star 

JOHOR BARU: Johor Real Estate and Housing Developers Association (Rehda) is calling the government to consider reviewing the current threshold of property acquisition by foreigners.

According to Johor Rehda chairman Datuk Steve Chong Yoon On, the minimum threshold of RM1mil per unit imposed in 2014 should be reverted to RM500,000.

The measure was introduced by the previous administration to stabilise domestic prices from excessive speculation to enable local interests to acquire quality properties valued less than RM1mil per unit, especially residential units.

The guidelines on the acquisition of properties issued by the Economic Planning Unit in the Prime Minister’s Department was first enforced on June 30, 2009 to replace the Foreign Investment Committee Guidelines, which have been abolished.

“The review of the RM1mil threshold is timely in view of the slowdown in the domestic property market in the recent years and developers are operating in difficult situation,’’ he said.

Chong said that the authorities both at the Federal and Johor Government levels should not be alarmed as local buyers were unlikely to be affected should the suggestion to be implemented.

He said there should not be much impact as developers only allocate 10% of the properties developed in their project for foreign buyers while the remaining units would still under the possession of locals.

“Malaysia is not going to lose anything as properties are immovable assets and they (foreign buyers) are unlikely to start tearing down their houses and transporting them back to their home country,’’ added Chong.

He said Johor was unique due to its close proximity with Singapore and the state government would benefit with Singaporeans owning properties especially in Iskandar Malaysia.

“Johor will collect quit rent and assessment rates from them as they also will spend their money on food, utilities, necessity items and bringing benefits to local economy,’’ said Chong.

Similarly, he said if the Federal and Johor governments were serious in encouraging home ownership among Malaysians, they should assist developers in their undertakings.

“Measures should be made to reduce development costs and reduced red tapes, when developers able to sell more houses, the money will be used to build affordable houses for the people,’’ said Chong.

On the upcoming Johor Malaysia Property Expo 2019, to be held at KSL City Johor Baru from April 26 to 28, he said that buyers should take advantage to buy their dream properties.

(The Star) New KFC outlet to cater to 7,000 students

Sime Darby Property Berhad COO(Township Development) Datuk Wan Hashimi Albakri (seated, right) and QSR Brands (M) Holdings Bhd MD Datuk Seri Mohamed Azahari Mohamed Kamil (seated, left) signing a MoU to develop the new KFC Drive-Thru in Bandar Universiti Pagoh witnessed by Johor Mentri Besar Datuk Dr Sahruddin Jamal (standing, middle), Home Affairs Minister Tan Sri Datuk Muhyiddin Yassin (standing, second from right) and Johor Corporation president and chief executive cum QSR Brands chairman Datuk Kamaruzzaman Abu Kassim (standing, second from left).
Sime Darby Property Berhad COO(Township Development) Datuk Wan Hashimi Albakri (seated, right) and QSR Brands (M) Holdings Bhd MD Datuk Seri Mohamed Azahari Mohamed Kamil (seated, left) signing a MoU to develop the new KFC Drive-Thru in Bandar Universiti Pagoh witnessed by Johor Mentri Besar Datuk Dr Sahruddin Jamal (standing, middle), Home Affairs Minister Tan Sri Datuk Muhyiddin Yassin (standing, second from right) and Johor Corporation president and chief executive cum QSR Brands chairman Datuk Kamaruzzaman Abu Kassim (standing, second from left). 

MUAR: The first ever KFC drive-thru restaurant in Bandar Universiti Pagoh (BUP) is expected to meet the demand of more than 7,000 students currently studying in universities around the area. 

The 0.36ha proposed site for the restaurant is expected to be completed by June 2020 and is at the centre of four universities in Pagoh, namely, Universiti Tun Hussien Onn Malaysia, International Islamic University Malaysia, Universiti Teknologi Malaysia and Politeknik Tun Syed Nasir. 

The project is a partnership between Sime Darby Property Berhad and QSR Brands (M) Holdings Bhd in a common aim to spur the local economy while also providing job oppurtunies to the community here. 

Sime Darby Property chief operating officer (Township Development) Datuk Wan Hashimi Albakri said BUP was the ideal location for the new KFC branch as it is expected to be a hot-spot among students. 

“BUP is a unique township and the first multi-varsity intergrated education hub in the country with thousands of students from four universities. 

“We expect the number of students here would grow to at least 10,000 when the project is completed next year,” he said. 

He said this during the Memorandum of Understanding (MoU) signing between the two companies here on Thursday (April 25). 

Meanwhile, QSR Brands managing director Datuk Seri Mohamed Azahari Mohamed Kamil said the new KFC branch here are among 67 other KFC branches expected to be open in the next three years. 

“Our target this year is to open at least 24 branches nationwide and we expect to open at least three branches in Johor where the focus here will be on drive-thru. 

“We will also focus on a partnership model whereby our partners will provide the infrastructure for the store and we will provide the management and services,” he said. 

He added that the model will be a win-win situation for QSR Brands and its partners as it will reduce the capital expenditure (capex) for QSR Brands while also increse the number of people visiting the area develop by its partner. 

(The Star) Stellar project in Puchong

IOI Properties will host the soft launch of Stellar Suites, touted to be the first small office versatile office (SOVO) tower in Puchong, in June.

The 0.57ha project, located 50m from Bandar Puteri LRT station, is also said to be the first transit-oriented development in the mature township.

Targeting SMEs, the Stellar Suites has 342 office suites and currently offers two types of units, including 16 duplex units ranging from 1,485sq ft to 1,550sq ft. The remainder are signature units ranging from 861sq ft to 1,055sq ft.

The 31-storey building will have 16 units per floor on the upper levels, eight units of retail shops on the ground floor and eight levels for parking.

Its completion is expected to be in the first half of 2022.

Sales and marketing manager Kee Tuan Choon said the guest lobby was designed to promote a prestigious corporate image, with turnstile guest access security system and six lifts.

Its accessibility and design have received encouraging feedback from potential buyers during the project preview last weekend.

The 31-storey Stellar Suites.

“Presentation and image are very important for the potential group of buyers of the up-and- coming offices in Stellar Suites. It will make a strong corporate presence for companies occupying these offices.

“The units have versatile, business-friendly layouts and open-plan interior spaces to suit the needs of various types of businesses.

“We are positioning it as the first affordable purpose-built office suites in Bandar Puteri Puchong. Prices start from RM540,000,” he said.

He added that Stellar Suites was a strata-titled freehold.

The SOVO tower houses two meeting rooms, a boardroom and two outdoor terraces on level 14. Tower occupants will also have access to lifestyle facilities, including the Sky Gym that has steam baths.

The project falls under the property ownership incentives in IOI Properties’ recently introduced IOI F.R.E.E Ownership Campaign. F.R.E.E stands for flexible financing options, rebates, extra rebates and exemptions on stamp duty.

In addition to the Government’s waiver of stamp duties for both memorandum of transfer and loan documents, the developer is covering all sales and purchase agreement and loan legal fees.

Currently, there is also a Stellar Suites introductory offer where buyers who successfully refer another buyer will be entitled to 24 months of free maintenance.

(The Edge Financial Daily) Sunway REIT is expected to continue to balance its portfolio

Sunway Real Estate Investment Trust (April 26, RM1.87) Maintain buy with a higher target price (TP) of RM2.02: Sunway Real Estate Investment Trust (REIT) has completed the acquisition of its first education asset for RM550 million. Of the full amount, RM340 million is funded through perpetual note programme (perps). We think that the coupon rate for the perps will be higher than its existing loan interest rates of slightly over 4% but the purchase should still be earnings-accretive as the debt-to-equity ratio is 38:62.

We estimate that the new asset will makeup about 5% of Sunway REIT’s total revenue for financial year 2020 forecast (FY20F). Earnings contribution for FY19F is expected to be limited to two months. We also expect one-off fees arising from the establishment of the perps to be minimal and will most likely be offset by the positive contribution of the asset.

We expect the upcoming quarter core net income to be on par with the set of numbers in the previously corresponding period. We expect this to be supported by positive rental income growth from Sunway Pyramid.

Meanwhile, the improved office segment is offset by the weaker performance from the hotel segment. That said, the refurbishment work at Sunway Resort and Spa had come to an end towards end-2018 and we expect recovery in revenue from the hotel going forward earnings for FY20F up by 1% to factor in the inclusion of the education asset.

Looking ahead, we expect Sunway REIT to continue to balance its portfolio in order to achieve earnings accretion in the long run. Th is may include further acquisition of more assets from the “others” segment.

Currently, Sunway REIT owns The Sunway Medical Centre, an industrial asset in Shah Alam and the education property other than its retail, hotel and office segments. We are positive about this strategy as the long-term tenancy agreement from this category may buff er the income volatility of the hotel segment, thus providing better stability for the REIT. Subsequently, we have included the contribution from the education asset into our earnings estimate for FY20F but leave FY19F estimate unchanged.

Maintain “buy” with adjusted TP of RM2.02 as we roll over our base year. Our dividend discount model-based valuation (required rate of return of 7.4%; terminal growth rate of 2%) is maintained. We like Sunway REIT for its integrated asset cluster in a mature township and stable prospects from its crown jewel Sunway Pyramid Mall. Dividend yield is estimated at 4.8%. — MIDF Research, April 26

Sunday, 28 April 2019

(The Star) Malaysia to learn IBS from China’s builders

Malaysia is bringing in Chinese builders to share their expertise in the Industrialised Building System (IBS).

Eight companies signed a memorandum of understanding (MoU) with Syarikat Perumahan Negara Bhd (SPNB) for the affordable home projects throughout Malaysia.

They are China Export & Credit Insurance Corporation, Sany Cons­truction Industry, Jiangsu Provincial Construction Group, KAVA Interna­tional Group, China Rainbow Inter­na­tional Investment, Shaanxi Coal & Chemical Industry Construction (Group), China Energy Group and China Railway Engineering Group.

IBS is a technique of construction whereby components are manufactured in a controlled environment, then placed and assembled at the construction sites.

Currently, only about a dozen Malaysian companies are equipped with the technology.

They have a total capacity for constructing about 20,000 homes a year, far lower than the government’s mission of building one million units in a 10-year period under Budget 2019.

Housing and Local Government Minister Zuraida Kamaruddin has assured Malaysian developers that they would not be deprived of their chances as they, too, would get portions of the projects.

“Local players will benefit in technology transfer,” she said after witnessing the MoU signing bet­ween SPNB and the Chinese companies here on Friday.

Also joining the MoU signing were Malaysia-based Splendid Forte with China Rainbow Interna­tional Investment Co (CRIIC) and China Construction Infrastructure Survey Engineering Design and Cons­truc­tion Group (CSCEC); and PLB Engineering (Malaysia) with China Railway No.3 Engineering Group.

Tan Sri David Kong, the Nirvana Asia founder who also owns Splendid Forte, said the company and its Chinese partner would be developing a new township in Semenyih named Bandar Harapan.

He said 15,000 affordable homes, with a selling price of no more than RM300,000, would be built there using the IBS technology.

“This technology helps to speed up the construction process at a cheaper cost, as some materials could be made on site.

“It is proven to be safe and of good quality. Engineers will put into consideration the humid and hot weather of Malaysia, land structures and other factors,” he said.

Constructing a 100sq m home, for example, would take about nine months using the conventional way but with IBS, the unit could be completed in just two months, said Kong.

Saturday, 27 April 2019

(The Star) MoF does not appear in Bandar Malaysia development so far

Conspiciously missing from the revival of the Bandar Malaysia property development fanfare is the role of the Ministry of Finance.

From the government side, the key persons are Economic Affairs Minister Datuk Seri Azmin Ali and Prime Minister Tun Dr Mahathir Mohamad. Azmin signed the framework agreement for the reinstatement of Bandar Malaysia while Dr Mahathir made the announcement last week.

Neither Finance Minister Lim Guan Eng nor the secretary-general of the ministry Datuk Ahmad Badri Mohd Zahir had said much although Bandar Malaysia Sdn Bhd, which holds the 484 acres, is an entity within the ambit of the ministry.

The chairman of Bandar Malaysia is Datuk Asri Hamidon who is also deputy secretary-general of the Finance Ministry. Asri, who heads all investments of MoF, is the chairman of 1Malaysia Development Bhd and TRX City Sdn Bhd, the company which owns the TRX Exchange development.

Sources say that the matter has not come up to MoF because what has been signed is only a “framework” to reinstate the project.

The details of the framework are being worked out between the government and the joint venture of Iskander Waterfront Holdings- China Railway Engineering Corp (IWH-CREC).“It’s only a framework agreement between the government of Malaysia and IWH-CREC. The developer has conditions to fulfil under the terms to reinstate the project. Notably IWH-CREC has to put down the deposit of RM1.24bil, which is a huge amount.

“As long as Bandar Malaysia is under the MoF, the matter has to come to the ministry eventually for signing. Generally when the government agrees to the framework, the MoF representative would sign off,” says a source.

IWH-CREC joint venture is led by Tan Sri Lim Kang Hoo who is making a second attempt to undertake the development of the single largest piece of property development project in the city.

Based on history, the approval from MoF is crucial if IWH-CREC is to see through its second bid for Bandar Malaysia.

IWH-CREC made its first bid for Bandar Malaysia in 2015 when the land was under 1MDB, which was under the watch of former Prime Minister Datuk Seri Najib Razak and Arul Kanda.

After a tender process, IWH-CREC won the mandate to development Bandar Malaysia. Real estate firm CH Williams Talhar & Wong ran the tender process for 1MDB, where Arul was the president and chief executive.

The outcome was announced before the end of 2015 because the sale of Bandar Malaysia was an integral part of the restructuring of the debts of 1MDB.

In May 2016, the certainty of IWH-CREC completing the deal with the MoF became a subject of speculation as 1MDB’s debt problems were increasingly a thorn in the flesh for Najib. 1MDB wanted to close the deal fast as it needed the money to meet its mounting debt obligations.

Eventually, 1MDB had to seek assistance from the MoF, which resulted in the latter taking control of the beleaguered fund.

On May 31, 2016, former Treasury secretary-general Tan Sri Irwan Siregar helmed the board of 1MDB. A year later, TRX City Sdn Bhd, announced that the agreement with IWH-CREC had lapsed because the latter did not meet the financial obligations.

Bandar Malaysia’s parent company is TRX City which in turn is owned by the MoF.

Irwan had announced that an international tender would be called to seek expressions of interest for Bandar Malaysia. However, it did not materialise.

(The Star) Mammoth project, massive questions

On the face of it, the massive Bandar Malaysia project, to be developed over prime land valued at over RM12bil, seems like the grand prize that any property developer would hope to win. However, the reality is that the developers of the project will have a long, winding path, fraught with challenges.

Even before the first brick has been laid down on the development, many are questioning if the master developers – under tycoon Tan Sri Lim Kang Hoo - will be able to pull this off. Observers say the key issue will be in terms of maximising value from the 484-acre land, given that a significant chunk of it will have to be set aside for affordable homes, “green lungs” and infrastructure – from which they will not see much returns, if any.

Another question is in relation to the impact the sprawling mixed development project will have on the severe glut situation in the property market.

Prime Minister Tun Dr Mahathir Mohamad announced last week that the iconic Bandar Malaysia project, which was terminated in May 2017, would be making a comeback with an expected gross development value (GDV) of RM140bil. The news came barely two weeks after the announcement of the revival of another mammoth development - the East Coast Rail Link (ECRL). The announcement came as a positive surprise to many, and created a lot of excitement in the stock market.

Shares of companies like Ekovest Bhd and Iskandar Waterfront City Bhd (IWC), which investors thought would benefit from the project, surged, quickly hit limit-up. Analysts also welcomed the decision with Ambank Research, among others, saying the revival of the two projects would bring down the market risk premium and improve investor sentiment. Even the World Bank is upbeat about the move.

In a briefing last week, the World Bank Group said the revival of the two projects will have a positive impact on the country’s economic growth in the medium term. “Certainly, public investment would be supportive of growth in the medium term from a gross domestic product perspective,” lead economist for Malaysia Richard Record was quoted as saying. Bandar Malaysia has not always been met with such enthusiasm.

The project was first announced by former Prime Minister Datuk Seri Najib Razak back in 2011. Previously owned by the controversial 1Malaysia Development Bhd (1MDB) investment fund, the integrated property development, situated at the old airport site in Sungai Besi, was also supposed to be a terminal for the high-speed rail (HSR) – yet another mega project scrapped by the Pakatan Harapan government last year.

In December 2015, the Finance Ministry entered into an agreement to sell a 60% stake in Bandar Malaysia for RM7.4bil to a 60:40 consortium comprising Iskandar Waterfront Holdings Bhd and China Railway Engineering Corp Sdn Bhd (IWHCREC). The companies were to be the project’s master developer.

In May 2017, however, the government surprised the market by calling off the deal, citing the failure of the purchasing parties to fulfil payment obligations. Fast forward to two years later, under the new ruling government, it looks as though Bandar Malaysia still stands a chance of becoming a reality – and in the hands of the same master developers.

Is it feasible?

While there is a lot of optimism surrounding the project as it is expected to boost the construction sector, the stock market and overall investor sentiment, questions have began to arise about the feasibility of the project.

The master developers of the project will need to fork out a handsome sum of money to the government as deposit for its 60% stake in the project. According to the statement by the Prime Minister’s Office last week, IWH-CREC has to make an advance payment of RM500mil in addition to the original deposit of RM741mil, which must be paid within 60 days from the official reinstatement of the project.

This gives the consortium two months to cough up some RM1.24bil. The market is waiting to see where this cash will come from, and which financial institution will lend it such a large sum of money.

Based on previous reports, the government had returned the original deposit of RM741mil to the consortium some time in May 2017.

If this first step – of securing the necessary funds – is fulfilled, the next will be for the consortium to get the required regulatory approvals before it can commence works. Another question about the project, is the current value of the 484-acre land.

In May 2017, when the Finance Ministry (MoF) called off the deal to sell 60% of the project to the consortium, it cited the share sale agreement governing the development because the developers had failed to meet the payment obligations despite being granted repeated extensions.

It said given “the significant appreciation in the value of the Bandar Malaysia land”, the MoF would be retaining 100% ownership of the site.

Fast forward to two years later, it looks as though the value of the land has remained at RM12.35bil. This is based on the 10% deposit of RM1.24bil that the consortium now has to fork out for 60% of the project, which values the entire land at about RM12.35bil or RM585.4 per sq ft.

IWH-CREC’s RM7.41bil bid for the 60% stake had also valued the entire tract at RM12.35bil back in 2015,

According to CIMB Research, IWH’s share of total acquisition cost amounts to RM4.4bil for its 60% stake, while CREC’s share works out to RM2.9bil.

“We calculated that the 60% stake sale for RM7.4bil translates into a RM12.4bil valuation for the 483-acre,” it said.

In view of the value being at RM585.4 per sq ft, what kind of returns would this mammoth project give the developers?

It is clear that deep pockets will be needed in order to execute a project of such a scale, as it will span at least 25 years – during which holding costs will apply.

Minus some 150 acres for green lung and possibly 30 acres estimated for the 10,000 affordable homes, the developers will be left with some 300 acres.

Assuming one-third of the remaining land is used to build infrastructure such as roads, it leaves about 200 acres for development.

To estimate how much the developers can make with the remaining 200 acres of land, we can look at Affin Bank Bhd’s purchase of 1.25 acres of land in the Tun Razak Exchange (TRX) from 1MDB in 2015 for RM225mil, which works out to about RM4,699 per sq ft or RM205mil per acre.

Even if the 200 acres in Bandar Malaysia are sold at this price, it will amount to RM41bil.

Assuming the development is stretched over 25 years – or longer – the gross proceeds from the sale of the land is potentially higher.

To get an idea of the size of Bandar Malaysia, it is about 6.5 times larger than the entire KL Sentral development, which began in the 1990s, and is yet to be completed today.

Property glut

The other major concern is the impact of Bandar Malaysia on the domestic property market, which is already grappling with a severe oversupply situation? Axis REIT Managers Bhd investments head and former Malaysian Institute of Estate Agents president Siva Shanker says while the revival of the project is good news for the property sector, it must be done “sensibly and carefully” in view of the existing oversupply situation. Siva says the country is in need of large projects such as Bandar Malaysia to kick start the economy, as the trickle down effect from such massive project will be huge, benefiting players throughout the supply chain.

“I personally feel that it is a good development – it will be an injection of adrenaline for commercial activity in the country,” he tells StarBizWeek. However, he says it was important that the developers do not to worsen the oversupply of commercial and residential property in the market. Occupancy rates for office buildings, he says, are hovering around the high 70%, leaving about 20% to 30% still vacant. “While we are seeing new office buildings filling up, it is at the expense of the older buildings. “If we just continue building, without knowing what the market really needs, then occupancy levels are just going to worsen and it will take years to resolve this situation,” he says.

The problem lies in the fact that the industry is lacking reliable and in-depth data on the supply and demand situation. “We need to do market research to determine what the market needs, what we currently already have, and the preferences of the buyers – in terms of pricing, for example. “Otherwise we will just continue building what we think is right, at the price we think is right,” he says.

It is interesting to note that the number of affordable homes that are to be built under the Bandar Malaysia project is 10,000 units – double the initial figure of 5,000 units in the masterplan before the project was cancelled. In the announcement of the project’s revival on April 19, the prime minister’s office said the project would include the construction of a people’s park, 10,000 units of affordable homes, bumiputra participation throughout the project, and priority for local content in the construction process.

The government expects major international financial institutions, multi-national corporations and Fortune 500 Companies to be drawn to set up their regional headquarters in Bandar Malaysia.

It added that tech giants Alibaba and Huawei had indicated interest to establish their ICT centres at the development. Moving forward, it will be interesting to see whether the tax incentives previously announced for the project will be maintained.

Under the previous administration, the developers, as well as potential investors were offered a slew of incentives for participating the project. In June 2016, Najib said the incentives would include a 10-year income tax exemption and eight years of exemption from stamp duty, as well as real property gains tax and withholding tax. He announced that IWH-CREC and its wholly owned subsidiaries would also be given exemptions from import duty on selected construction materials which were not manufactured in Malaysia.

“In addition, the government has also agreed to consider granting tax incentives to top high-ranked global companies and financial institutions (taking part in the project).

“We are also considering other measures such as industrial building allowance, accelerated capital allowance, deduction of rental payments, stamp duty exemptions for service agreement or pre-package incentive, to other investors and tourism operators,” he said during the signing ceremony of the IWH CREC Sdn Bhd shareholders agreement at that time.

If the government decides to maintain such incentives, it will definitely boost sentiment about the project.

Reinstating the cancelled HSR project, observers say, would be another boon for the project.

Going forward, the market awaits further information about project, and more importantly, to see whether Bandar Malaysia will become a reality this time – some eight years since it was announced.

(The Star) Many cannot afford a home in the city

Owning a home has increasingly become out of reach for many in Malaysia.

According to Khazanah Research Institute, the median house price for the country grew at a compound annual growth rate (CAGR) of 23.5% between 2012 and 2014, while median household income grew at only 11.17% over the same period.

The median multiple affordability for the country had remain above the 3.0 threshold for housing affordability since 2002.

The not-for-profit think tank said the issue partly stems from the unresponsiveness of housing supply to real demand.

The report said that data from the Construction Industry Development Board and the National Property Information Centre indicated that house prices in Malaysia have almost doubled since 2008 while construction costs – labour, material and machinery, and equipment – have increased only slightly in the same period.

The disproportionate increase in prices and costs suggests either increasing profit margins, land prices or regulatory costs, it added.

Below are some salient takeaways from the report:

(The Star) Expressway project to finally get off the ground on Sept 1

GEORGE TOWN: After years of delays, construction of the elevated highway from Air Itam to Tun Dr Lim Chong Eu Expressway will start on Sept 1.

The highway is a vital road for some 300,000 Penangites living in the most densely populated part of the island.

The Yang di-Pertua Negri Tun Abdul Rahman Abbas announced the much-awaited date when opening the first meeting of the second session of the 14th State State Assembly yesterday.

“It is scheduled to begin on Sept 1 after all the technical approvals are obtained,” he said.

More than half of the population on the island’s northeast district, or almost 300,000 people, reside in Air Itam, Bandar Baru Air Itam and the adjoining Paya Terubong, and they only have two narrow routes out of their suburb, which are heavily congested during rush hour.

The 5.7km dual carriageway, with two lanes on each side and which 70% are elevated, will take them to the expressway and on to Bayan Lepas Free Trade Zone in just five minutes under normal traffic conditions with a speed limit of 70kmph.

The highway will have three interchanges, allowing motorists to get on and off from Jalan Thean Teik, Jalan Yeap Chor Ee and Jalan Sultan Azlan Shah. It is expected to be completed in three years.

Several roads in Kampung Pisang in Air Itam, are also undergoing road widening works to complement the upcoming bypass.

This and two other road projects are part of the island traffic dispersal system of the proposed Penang Undersea Tunnel, a 6.5km tunnel beneath the seabed between Gurney Drive on the island and Bagan Ajam in Butterworth.

The other two projects are the 12km North Coastal Paired Road between Tanjung Bungah and Teluk Bahang and the 4.2km bypass connecting Gurney Drive to Tun Dr Lim Chong Eu Expressway, which are expected to be ready in 2022.

Abdul Rahman also said the state government plans to hold discussions with Prasarana Malaysia Berhad and Finance Ministry on the future of Penang’s ferry service.

“The state realises that this service must be upgraded, especially its frequency at peak hours but Prasarana is facing financial constraints,” he said.

In an exclusive report recently, The Star revealed that Prasarana has yet to received the RM90mil announced by the federal government in August to upgrade and maintain the ferry service.

It was reported that it costs RM31mil annually to provide the service but with only RM7mil collected in fees, Prasarana forks out RM24mil a year since it took over the service from Penang Port Sdn Bhd in May last year.

(The Star) All you need to know about Penang just a click away

GEORGE TOWN: Find out how many Penangites are obese, how many local SMEs are controlled by women, how little tourists spend here and many more honest assessments of the state’s socio-economy in The Penang2030 Guide. Readers will get a frank view of the challenges Penang faces and a comprehensive plan to overcome them.

Did you know that the average tourist in Penang spends a mere RM1,166 per visit?

The Penang2030 Guide points out that tourists in Kuala Lumpur spend RM2,885 each on average, in Bang­kok (RM2,849) and in Singapore (RM4,266).

“A greater variety of quality products across the island and mainland is needed to attract higher-value tourists,” the writers of the Guide said, laying down six objectives and three targets for tourism players to work towards.

They include attracting investments for at least five new high-value international tourism products by 2030, roping in education providers to create a higher quality of customer service, and strengthening the quality of domestic tourism to promote sustainability.

The planners and analysts behind Penang2030 Guide found out that the GDP contribution of Penang’s creative and cultural sector is a paltry 0.9%.

The contribution of this sector Malaysia-wide is 1.6% and in Thailand, a decent 12%.

“To diversify Penang’s economy, new drivers of growth are required to tap into local strengths and emerging global trends.

“The emerging creative sector in Penang includes tech start-ups and culture-based activities. But its contribution to the GDP is less than 1%. A coordinated effort that mirrors the success of the manufacturing industry is required,” the Guide said.It also revealed that Penangites shun public transport, with just 3.2% of them using it, compared with 19.6% in Kuala Lumpur and 67% in Singapore.

Penangites also seem uninterested in a participatory democracy because only 2.8% of Penangites use the Internet to participate in online consultation or voting to define civic or political issues, compared with 11.8% of Selangorians.

And despite every effort to encourage gender equality, women still own only 16% of local SMEs.

In what can be seen as a transparent account of Penang’s challenges, the state government invites Penangites to study the Guide and play a role in helping to achieve the targets and objectives spelled out in the 33-page book.

“With help from Penang Institute and Think City, and other advisers that my office has access to, my government would like to herewith present The Penang2030 Guide to the public. It is an evolving document that expresses my goal to not leave anyone behind as Penang moves on towards to greater heights,” wrote Chief Minister Chow Kon Yeow in the foreword.

“Penang2030 is, in many ways, my invitation to everyone concerned with the well-being of Penang to work with each other, and with the many arms of the government, to make Penang a place that is even more enviable than it already is,” he added.

The guide outlines dozens of objectives, key initiatives, foundational projects and targets that Penangites must focus on to achieve a high Happiness In Penang (HIP) Index.

The state will use four indices in the HIP Index, nicknamed FEEL (Freedom, Environmental conservation, Economics and Liveability), to keep an eye on how happy Penangites are.

Chow launched his Penang2030 vision last August to create a “family-focused, green and smart state”.

(The Star) Jagdeep: Affordable homes should be standardised nationwide

GEORGE TOWN: There should be a national cap on what constitutes affordable housing prices such as low and low-medium-cost homes, said state Housing Committee chairman Jagdeep Singh Deo.

He said the maximum prices of such homes should be standardised nationwide and states should not be allowed to set different ceiling prices.

“Some states have raised their ceiling prices for low and low-medium-cost homes to RM60,000 and RM100,000 respectively.

“But many states including Penang maintain these at RM42,000 and RM72,500,” he said.

Jagdeep declined to reveal which states had raised the prices but said this was brought up in previous National Affordable Housing Council meetings.

“Many other states are also against raising the prices but a few states have already implemented higher ceiling prices for low and low-medium-cost.

He was commenting on one of the recommendations of the Special Report on the National Housing Policy that called for “localised affordable housing measures to enhance the monitoring and evaluation framework of states and local authorities”.

“The first thing I want to ask is what measures do they want to allow to be localised? If they want to allow the ceiling prices to be different, then I disagree,” he said.

Using Kuala Lumpur as an example, Jagdeep said if affordable housing ceiling prices were allowed to be higher there than in Penang because of land prices, it would only make matters worse for people living in Kuala Lumpur.

“The living cost in KL is already up to 10 times more than in Penang for some expenses. Raising the ceiling prices of housing there will make living cost worse.

“The government must control the prices,” he said.

He stressed that Penang would never allow the ceiling prices to change.

For affordable housing, he said, Penang would keep the price at under RM300,000 on the island and under RM250,000 on the mainland.

“For low and low-medium-cost housing, we are sticking to RM42,000 and RM72,500 respectively.”

(The Star) Deal inked to develop M’sia’s first AI park

Malaysia is to develop its first artificial intelligence (AI) park.

The park will serve as a platform for the development of AI solutions such as speech recognition, robotics and smart city tech­nology.

It is also planned to be a regional epicentre for data management, research and development and commercial ecosystem.

An agreement was signed yesterday between Malaysian company G3 Global Bhd (G3) and its Chinese partners SenseTime Group Ltd and China Harbour Engineering Co Ltd (CHEC) on the setting up of the AI park, with the total investment at US$500mil (RM2.07bil).The location of the park has yet to be identified.

The agreement was signed between G3 executive chairman Wan Khalik Wan Muhammad, SenseTime president for Asia-Pacific Business Group Jeff Shi, and CHEC chairman Lin Yi Chong.

The ceremony was held after Tun Dr Mahathir Mohamad’s visit to SenseTime’s office here.

The Prime Minister also tried his hands on the self-driving car system at the company, which specialises in AI technology.

(The Star) Dr M endorses the BRI

With all of China as his stage, Tun Dr Mahathir Mohamad gave a massive endorsement to the country’s Belt and Road Initiative (BRI), saying all will benefit from the ease of travel and communication the development strategy will bring.

The Prime Minister said that with trade driving the world, it was only natural that land and sea passages be better developed.

“The Silk Road, the land passage between East and West, has not received much attention. Yet it must be obvious that with modern technologies the passage can be improved.

“Without a doubt, the utilisation of these passages will enrich all the littoral states along the way, as much as the great nations of the East and West. I am fully in support of the Belt and Road Initiative. I am sure my country, Malaysia, will benefit from the project,” he said in his speech at the High-Level Meeting of the Second Belt and Road Forum for International Cooperation held at the China National Convention Centre here yesterday.

The forum attracted over 5,000 participants from 150 countries including leaders from around the world, such as Russian President Vladimir Putin, President Rodrigo Duterte (Philippine), President Abdel-Fattah al-Sisi (Egypt) and Prime Minister Nguyen Xuan Phuc.The BRI, also known as the One Belt One Road (OBOR) or the Silk Road Economic Belt and the 21st-century Maritime Silk Road, is a strategy adopted by the Chinese government involving infrastructure development and investments in 152 countries and interna­tional organisations in Europe, Asia, Middle East, Latin America and Africa.

Dr Mahathir said just as massive trade by ships helped spawn the development of huge bulk carriers, the land passage should also “respond” to the increased trade between East and West. He also suggested that bigger trains be built for the purpose.

“If ships can be built bigger, why can’t trains be equally big to carry more goods and raw material and people? Have we reached the limit in terms of the size and length of trains? I think not,” he pointed out.

Dr Mahathir, who is on his second visit to China since becoming the 7th Prime Minister last May, said the world has the technology and funds to bring about such improvements.

He said freedom of passage along these routes was important and warned against bureaucratic hassles slowing down the speed of travel.

“It is essential therefore for these passages to be free and open to all,” he said, adding that the passages must be made safe as terrorism and wars would render the modern marvels and also delivering the benefits promised.

“Yes, the Belt and Road idea is a great. It can bring the landlocked countries of Central Asia closer to the sea. They can grow in wealth and their poverty reduced.

“As the sea routes and land routes improve, trade and travel will grow, and with this, the wealth of the world will increase for the betterment of everyone.

(The Star) Looking towards China

Johor confident of bringing in Rm8bil worth of investments after trade mission to the Middle Kingdom

JOHOR BARU: The state government hopes to tap into China’s advanced robotics technology to help automate the local furniture industry in Johor.

International Trade, Investment and Utilities Committee chairman Jimmy Puah Wee Tse, back from a recent trade mission to China, was impressed that a factory there was using robots to manufacture furniture.

“This factory in Hebei, Wuhan is the first such factory in China.

“We have a huge furniture industry in Johor and we hope local factories can eventually use this technology to reduce dependency on foreign workers,” he said.

He added that the use of such technology would help produce furniture of better quality and make Muar furniture more competitive in the global market.

On the trade mission, Puah said he visited the Guangzhou Custom Home Association in Hangzhou and Suzhou to promote investment potential in Johor.

“So far two companies have expressed interest to invest here,” he said, adding that a gear box manufacturing company would also invest in a plant in Johor, with investments totalling Rm28mil.

He said the company, which would begin operations in three phases this year, was expected to export their products worth Rm28mil within a year to the United States .

“The company’s operations will lead to the creation of at least 60 high-tech job opportunities for the locals,” he said.

Puah said the state government was confident of bringing in Rm8bil in investments by the end of the year.

Currently the state’s major investors are from China and Singapore.

“I am confident that based on our strategy, we will be able to hit our Rm8bil mark this year.

“As of last year until June, based on figures provided by the Malaysian Investment Development Authority, we only achieved Rm1.7bil,” he said.

(The Star) Linked to LRT station and mall

With construction of Datum Jelatek entering its final stages, the mixed development project in Ampang hopes to attract more residential buyers as well as tenants into the soon-to-be completed Datum Mall.

“Datum Jelatek is the first masterpiece project by DatumCorp which has sold 70% of its residential units while the mall has achieved 60% tenancy in the first quarter of this year,” said Selangor Mentri Besar Amirudin Shari.

DatumCorp International is a wholly-owned subsidiary of Selangor State Development Corporation (PKNS) and was established in 2012 to take charge of mixed development projects in strategic areas around Selangor.

The project is DatumCorp International’s RM1.2bil transit oriented integrated development next to the Jelatek LRT station. A link bridge will be constructed to connect the station to Datum Jelatek.

The mixed development comprises 712 residential units over 2.29ha and is linked to a 319,000sq ft retail mall.

Amirudin said more than 50% of the resiential units had been bought by bumiputra.

Datum Jelatek consists of four towers – Daneeya, Ayaana, Basheera and Careema – which are connected by Malaysia’s first sky ring, a circular podium measuring 8.9m in width that will link all four towers on the 27th floor.

Amirudin and PKNS chief executive officer Datuk Mohd Azizi Mohd Zain also witnessed a signing ceremony between DatumCorp and MyAngkasa Az Zahara which took up an en bloc purchase of 379 residential units in two towers within Datum Jelatek.

The agreement will see the units placed under a rent-to-own scheme initiated by MyAngkasa Az Zahara for government servants.

Government servants can opt to purchase the units after renting it for five to 10 years at a rate to be disclosed later.

“This is a good initiative to assist them (government servants) to realise their dream of owning a residential unit near Kuala Lumpur,” said Amirudin.

The four-storey Datum Mall will feature anchor tenants Pacific Marketplace and Pacific Concept Store.

The mall, which is scheduled to open next year, also has an 600-seater event hall which will be managed by famed wedding caterer, Pak Tam.

After the ceremony, Amirudin also met with tenants who will be opening outlets at the mall.