FAR from the popular Gurney Drive in Jalan Gottlieb, Penang, an office building called NB Place is morphing into a block of serviced apartments named Tropic Suites. Developed by New Bob Group, the apartments will be fully furnished and leased out for short terms, says director Dr Lee Ville.
A diversified outfit, the group has interests in property development under NB Tropics, real estate under New Bob Realty and car rental, among others. In Penang, it has completed bungalow projects such as Preston Oak and The Manor and is working on another in Biggs Road. It also has a light industrial development on the island called The Gates.
|We did a feasibility study and found the location of Tropic Suites to be ideal for short-term leases — Lee|
According to Lee, the RM44 million serviced apartment project is the group’s first on the island and the reason for the name change is that “we will be branding our future projects under NB Tropics, so they will have the word ‘Tropic’ in their names”.
The 12-storey building will be refurbished and remodelled inside and outside while its façade will have a more modern look with an interesting geometric pattern, says Lee.
As the group already has a property management arm, it is a natural progression for it to enter asset management. “We are retaining 48 units for our own investment and selling 40 with guaranteed returns of 6% in the first three years,” explains Lee.
The apartments will be on Levels 1 to 11 while the ground floor will be for the management office. The built-up of the units ranges from 500 to 800 sq ft while prices start at RM500,000. As for the rental rates, Lee estimates them to be from RM250 to RM350 per day.
Tropic Suites is targeted at investors and not owner-occupiers. The latter could live in their units if they chose to, but the group is focusing on leasing out the apartments, which is why they will be fully furnished.
In addition, says Lee, the group will be able to get good prices for the fittings (about RM80,000 per unit) because it will be buying them in bulk.
Lee says the building was handed over to the main contractor in December last year and at press time, work had started on the first three floors. As the contract is for 12 months, the building will be augmented by end-2014. Then, work on the interior will start and be completed by February 2015. Lee hopes the certificate of completion and compliance will be obtained by mid-2015.
He says a reason for the conversion of office space into residential is that there is an oversupply of the former on the island. “With oversupply, you can’t charge high rents. So, converting NB Place to serviced apartments is a better long-term investment.”
Prior to the conversion, NB Place had an occupancy rate of about 80%. “We did a feasibility study and found the location of Tropic Suites to be ideal for short-term leases, from weekly to even monthly rents. Also, besides developing a product and selling it for profit, we wanted something with long-term returns,” remarks Lee.
However, property consultants differ from Lee’s assertion of an oversupply of office space. “There is no oversupply. In fact, there is a need for an MSC status building in Penang,” says Raine & Horne International Zaki & Partners director Michael Geh. There is only one MSC-compliant building, called Suntech, in Bayan Baru, he adds.
CH William Talhar & Wong’s director Peh Seng Yee concurs. “The office sector in Penang has been stable for a number of years and is expected to remain so in the near future. Construction of new purpose-built office buildings is subdued because developers are keener on developing residential projects due to the encouraging demand and hike of selling prices. So, the purpose-built office sector on Penang island is not expected to receive an abundance of new space that would lead to an oversupply situation.”
|An artist’s impression of Tropic Suites in Jalan Gottlieb|
At the present time, there is about 8.735 million sq ft of net lettable office space in Penang with an average occupancy rate of about 80%.
In fact, New Bob Realty revealed that the rental rate for office space is low in commercial buildings and that many companies will rent landed property rather than office space to run their businesses.
Whatever the case, New Bob Group is embarking on a different path for its products. In fact, Lee believes Tropic Suites will cater for the needs of medical tourists.
According to figures provided by the Penang Health Association via the Penang Global Tourism bureau, in 2008, the total number of patients in Penang was 226,291, which earned the state RM173.65 million in revenue. In 2013, patients totalled 337,823 and revenue RM371 million — up 49.2% and 113% respectively in six years. This is something Lee wishes to tap. In fact, he plans to talk to hospitals located close to Tropic Suites, including the nearby Penang Adventist Hospital, on working together to best serve the patients. The apartments could be used by those convalescing from treatment or by the families of patients needing a place to stay.
In Seberang Jaya, New Bob Group has a condominium project called River Tropics that has an estimated gross development value of RM50 million and sits on 2.8 acres of freehold land. The 18-storey block will have 148 condos with an average built-up of 1,350 sq ft.
River Tropics is slated to be launched in June this year at a starting price of RM400,000. Lee says the group is aiming for gold rating from Singapore’s BCA Greenmark and Malaysia’s GreenRE for the condominium.
To enhance the condominium’s surroundings, Lee says New Bob Group will spend about RM400,000 on beautifying the banks of a nearby river on state land. “The area, which is overgrown at the moment, will be landscaped and have a cycling track and benches.” The local council will then maintain it.
The riverbank beautification project will be completed in mid-2016, at the same time as River Tropics.
The group is also working on NB Tower, which comprises commercial suites, in Seberang Perai. Scheduled for launch in April, it will have 88 unfurnished units with built-ups of 800 to 1,100 sq ft. The selling price is from RM200,000 to RM300,000. NB Tower is located next to the ferry terminal and the Butterworth outer ring road.
Another project, which is in the planning stage, is an affordable hotel in Argyll Road, George Town.
“We are looking at building a small hotel based on the ‘flash packer’ concept in the middle of the year. It will combine the backpacker and budget models and cater for upmarket backpackers,” Lee explains.
“The hotel will offer a cleaner and trendier environment and affordable rooms [rates start at RM50]. We believe it has the potential to attract foreign and local tourists now that George Town is a Unesco World Heritage Site. Moreover, there are few hotels of its kind in Penang.”
Although the going has been good for the property market in Penang, new state housing rules came into play on March 1. Now, low-cost (RM42,000) and low-medium-cost (RM72,500) homes cannot be sold within 10 years of purchase. Affordable homes (up to RM400,000 on the island and RM250,000 on the mainland) cannot be sold within five years of purchase.
The other rules include a 3% levy on purchases by foreigners and a 2% levy on the seller of properties within three years of the date on the sale and purchase agreement.
Lee says while the intention of the rules is good, they will have an adverse effect on the market. “The state’s new policies will definitely impact sales for developers and even on the secondary market. But I see the situation as short term and once everyone absorbs the news and moves past it, I see the market picking up again. Because there haven’t been many launches so far this year, there isn’t an oversupply situation in the market. So, people will still need houses and more of them will probably move to the mainland.”
So, as New Bob Group ventures into asset management, it is keeping its ear to the ground.
|An artist’s impression of a fully furnished Tropic Suites unit|
This article first appeared in The Edge Malaysia Weekly, on March 31, 2014.
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