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City & Country: IJM Land’s maiden foreign venture

CASH-RICH IJM Land Bhd will embark on its first development in the UK, the RM1.4 billion mixed-use Royal Mint Gardens (RMG).

To be launched later this month, the project is also the first foreign project by IJM Land that will be opened to the market — its Nonh Trach City Centre commercial and residential development in Ho Chi Minh City, Vietnam, is pending a better economic climate while its Yin Hai Complex shopoffices in Changchun, China, is under construction.

The project will also allow the developer to diversify its income. “London is so big and vibrant, compared with Malaysia, where our options are limited. There, your investors come from all over the world,” IJM Land Bhd managing director and CEO Datuk Soam Heng Choon tells City & Country.

RMG will be developed by Mintle Ltd, a 51:49 joint-venture between IJM Land and Lite Bell Consolidated Sdn Bhd. Knight Frank Malaysia, the local office of the UK-based international property services agency and a long-time consultant for IJM Land, is marketing the project.

The development is one of several new London property developments that have flooded Malaysia of late, vying for the attention of wealthy investors. Most prominent of these is the iconic RM4.5 billion Battersea Power Station regeneration by S P Setia Bhd, Sime Darby Property Bhd and the Employees Provident Fund. Its first phase, Circus West, which comprises 866 apartments at £1,125 psf, saw 600 units snapped up in what local papers dubbed a four-day “stampede”.

The Royal Mint Gardens (in circle) is near Tower Bridge

Malaysian developers there include Eastern & Oriental Bhd, who bought Princes House for £20.3 million; Oriental Holdings Bhd which acquired Kingsley Hotel for £42.7 million; and Amcorp Properties which bought an office building in Mayfair for £23.8 million.

Other competitors of new builds, according to a feasibility study by Knight Frank, are Roman House at Wood Street, which starts at £ 1.13 million per two-bedroom apartment (£1,250-1,300 psf) had achieved 90% take-ups of its 90 units since they were launched in January, while Providence Tower in Blackwall Way has sold 85% of its 368 apartments with most of the units sold in Asian exhibitions in the last six months. Prices averaged £700 psf. Over at One Tower Bridge, about 60% of the 353 apartments were sold at around £1,500 psf, with river-facing units commanding up to £3,000 psf.

Project specs
RMG will be developed on a 2.7-acre tract currently used as a car park along Royal Mint Street across the street from the 1,000-year-old Royal Mint, the body exclusively appointed by HM Treasury to mint coins for the UK.

Alongside this historical element are modern conveniences — the Docklands Light Railway (DLR), Underground Tube services, Tower Gate station and Tower Hill Underground Tube station. Canary Wharf, which is the second financial hub, is 15 minutes away via the DLR.

“Our project is at the edge of the Square Mile and has a lot of food and beverage outlets around. Alfresco dining is quite nice this time of year,” he says.

Some nearby tourist attractions include Tower Bridge and St Katharine’s Docks, while across The Thames is The Shard and the Millennium Dome.

RMG is divided into two phases with the first phase comprising 280 apartments spread over three blocks of 11, 12 and 13 storeys. The ground floor is a 30,800 sq ft retail space dedicated to F&B outlets, he adds.

Of the 280 apartments, 35 units are studios from 400 sq ft, and priced from £460,000. Then there are 140 units of 550 sq ft, one-bedroom apartments priced from £580,000, 72 two-bedroom apartments with built-ups from 820 sq ft, and 33 three-bedroom apartments with built ups from 1,100 sq ft. The latter is priced from £1.02 million. Prices psf hover around £1,100 psf. Maintenance fees are tentatively set at under £5 pounds psf per year.

“We are targeting high net-worth individuals with connections to the UK. Maybe they studied there once or they have kids studying there now. They may have family in London too. Maybe they need a safe haven investment because of currency fluctuation,” he says.

While property is indeed a hedge against inflation and other forms of volatility, there is also the shrinking value of the ringgit. However, he points out that the pound sterling too has weakened recently, so properties in London have not become more expensive even after currency conversion.

Additionally, IJM Land has roped in a few Malaysian banks to provide overseas mortgage loans. One of the banks has also agreed to offer loans of up to 85% of the property price, he adds.

The first phase features 280 apartments

According to Soam, “only a few hundred” potential buyers have registered their interest in the absence of aggressive marketing. “What is important is not the quantity, but the quality of the registrants, because they must be able to afford these units,” he stresses.

These units will be partly-furnished with kitchen cabinets, wardrobes and other fixtures that are standard for new apartments in London, he says. IJM Land will offer an optional loose furnishing package by a local interior designer worth £4,000 to £5,000 and leasing services from a local agency. “We are at the higher end of the market, so we will give you brands like Siemens, or something of that level,” he explains.

“Often, when Malaysians buy London apartments, it’s not for their own use but for investment purposes. So if they ask me, ‘how am I going to rent my apartment out?’, I can say with the help of these companies they don’t have to worry. The agency will lease out their apartments and manage them, but they will charge a fee of course.”

According to Soam, the biggest group of potential tenants in the area are professionals in the financial services sector that work in the Square Mile and Canary Wharf.

According to a Knight Frank Malaysia marketing executive, London property launches in Malaysia typically come with less freebies than projects here because of the high cost of real estate there. Besides kitchen cabinets, cooking hobs and similar fixtures, off-plan launches generally throw in a car parking space worth thousands of pounds for free. “A general rule of thumb is to offer extras that are represent a 5% discount on the property,” he explains.

RMG will be first launched in Malaysia on Sept 27, over a course of three days. A week later, the apartments will be marketed in Singapore. Then on Oct 18, RMG will be launched in Hong Kong.

Why allocate 40% of the units for Malaysians? “We don’t want the whole development to be occupied by just Malaysians, because then it will be like Malaysia Hall! We want to spread the ownership a bit and enable the locals to buy into and live there as well,” he says.

However, he concedes that while the UK market is warming up to the notion of buying properties off-plan, most locals preferred to buy built properties. There is also a strong rental market there, he adds.

The second phase of RMG features a 236-key hotel, 33 apartment hotels —suites serviced by hotel operators — and 79 apartments. Soam says the next phase will be launched later, but declines to reveal the exact date.

“There are a lot of hotel operators after us so we want to keep our options open. The hospitality market is very vibrant now, and this is a popular location because of nearby tourist attractions, so to get operators is not a problem.

“We were also approached by parties who want to buy and operate the hotel themselves. I would say hotel occupancies here are quite high, averaging 75% to even 85% per month,” he says.

While he will not divulge the names of interested buyers, he notes that they include funds.

Construction of RMG’s first phase will begin next year and is expected to be completed in 2017.

While values of London properties fluctuate according to global crises — the world’s wealthy flock to the city in times of trouble — Soam is confident that values will hold as long as London maintains its position among the top four financial services hubs worldwide.

“The more trouble around the world, the better off London is!” he says.

 

This article first appeared in The Edge Malaysia Weekly, on September 23, 2013.

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