Landmark House

DESPITE the current weak market conditions, property developer Eastern & Oriental Bhd (E&O) is planning about RM1 billion worth of launches locally in the next six months (1H2016).

It is also looking to expand its business overseas, particularly in the UK. It recently secured the approval of shareholders to list its indirect wholly-owned subsidiary, Eastern & Oriental PLC (E&O PLC), on the London Stock Exchange’s Alternative Investment Market (AIM).

In a Nov 30 report, AllianceDBS Research says the listing plan is on track for 4QFY2016 and it is estimated it will reduce E&O’s net gearing to 54% from 75% as at September 2015.

The key risk for the property developer, according to the research house, is the weak sentiment among property buyers that could eventually drag down group sales.

Eric Chan, deputy managing director of E&O, concedes that the current property market is soft amid a volatile economic environment. He says the group is monitoring the market and will adjust its sales and marketing plans accordingly.

Noting that cycles are the norm in the property market, he adds that the group’s focus is on riding out the present challenges by being prudent and disciplined while remaining responsive to change.

Thames Tower

“We are keeping a keen eye on our targets while closely monitoring the current market conditions and ensuring a state of preparedness to respond effectively,” says Chan.

He notes that these challenges do require the company to exercise prudent financial planning and management to address current needs and prepare for better times.

The group’s future launches include Avira Garden Terraces Phase 2 in Medini Central, Iskandar Malaysia, Johor, and a limited number of superlink villas and super-terraced houses in its Seri Tanjung Pinang (STP) development in Penang.

In Kuala Lumpur, its joint venture project with Mitsui Fudosan Co Ltd to build a high-rise serviced apartment block at the intersection of Jalan Conlay with Jalan Kia Peng is also expected to be available for preview in 1H2016.

Avira Garden Terraces Phase 2, located in Medini Central, is currently open for registration. Phase 1, which consists of 208 terraced houses on a 21.4-acre tract, was launched in 2Q2014.

The entire Avira development occupies 207 acres of leasehold land. It is a mixed-use development that will eventually comprise terraced and semi-detached houses, bungalows, condominiums, serviced apartments and a retail village. Anchored on the concept of wellness, there will be a dedicated 12.5-acre Wellness Sanctuary within the development.

Eric ChanE&O recently launched The Tamarind executive apartments Tower B in STP, offering 552 units in a 33-storey block. These 3-bedroom, 2-bathroom units range from 1,047 to 1,772 sq ft and are priced from RM660 psf, with an average price of RM765 psf. Some 60% of the units were taken up within two weeks of the launch in early December.

Covering more than seven acres, The Tamarind is a RM900 million freehold high-rise development comprising 1,104 units in two 33-storey blocks. The Tamarind Tower A was launched in February 2015.

E&O’s landbank in Malaysia stands at approximately 1,800 acres in Kuala Lumpur, Penang and Iskandar Malaysia, which will be developed over the next
10 to 15 years. Apart from the 760-acre STP Phase 2 and the Avira development, it has the 135-acre Elmina West in the Klang Valley.

“We are open to new opportunities and will consider these as they arise, taking into consideration factors such as alignment with the group’s positioning and the strategic value of the property,” says Chan.

London venture

The proposed AIM listing of E&O PLC is part of the group’s international expansion strategy, which will enhance the visibility of its property development and investment activities as well as raise awareness of the brand in the UK, apart from a bottom line contribution at the group level.

“With the proposed listing of E&O PLC, it will become an associate company, whereby its financial performance will not be consolidated into the group’s financial results,” says Chan. “Instead, E&O PLC will contribute via E&O Bhd’s 30% shareholding in the UK entity.”

He adds that the group is currently focusing on the prime location of central London.

“We hope to capitalise on the opportunities in central London, where our properties are located, which is experiencing a high demand for housing against a backdrop of restricted supply constrained by a scarcity of land.”

E&O embarked on its maiden overseas venture in February 2014, with the launch of Princes House in Westminster, central London.

The developer converted and refurbished the 1920s neo-classical building into 54 units — 20 residential and 34 serviced apartments. The units range from compact 428 sq ft studio apartments to a 2,714 sq ft penthouse.

The main reason E&O chose London for its first overseas venture was its status as the single biggest centre for global ultra-high-net-worth individuals
(UHNWIs), Chan says.

The Tamarind

The World Ultra Wealth Report 2014, he adds, estimates that there are about 200,000 UHNWIs globally, with a combined wealth of almost US$30 trillion (RM128.8 trillion).

With many UHNWIs going to London from Asian countries like China, Hong Kong, Singapore and Malaysia, Chan notes that this fits the profile of existing E&O customers — repeat buyers who hail from these countries.

“[These UHNWIs] place property investments high on their agenda,” he says. “The established brand recognition they already possess for E&O puts us at an advantage when marketing our London properties.”

Besides Princes House, properties in E&O PLC’s portfolio include Landmark House and Thames Tower in Hammersmith and ESCA House in the Bayswater area. These projects have a collective estimated GDV of £308 million (RM1.978 billion).

The UK entity is proposing to refurbish Landmark House and Thames Tower to create a mixed-use residential development for sale, Grade A office space and potentially other commercial uses.

A planning application will be submitted upon the completion of consultations with the London City Council.

ESCA House is slated for redevelopment into a six-level residential building comprising 26 luxury units with associated car parking space.

A planning application was submitted to the Westminster City Council in June 2014, Chan notes, which includes the application for its change of use from commercial and residential use to residential as well as to extend the net saleable area to 34,527 sq ft.

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This article first appeared in City & Country, a pullout of The Edge Malaysia Weekly, on Dec Jan 4, 2016. Subscribe here for your personal copy.

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