City & Country: Sunway City’s property development duo

It is perhaps the first and only listed company on Bursa Malaysia that has three managing directors. Sunway City Bhd (SunCity) recently appointed former COO Ho Hon Sang as managing director, property development (Malaysia), to take charge of local projects. He replaces Ngian Siew Siong who has been entrusted with a new portfolio — managing director, property development (international).

Managing director of property investment Ngeow Voon Yean, meanwhile, manages the group’s diversified portfolio of 4.86 million sq ft of retail, commercial, hospitality, leisure and entertainment as well as healthcare properties.

Some may find the appointment of Ho, announced on March 19, somewhat puzzling when the company already has two managing directors. However, Ngian as aptly says, “When you want to go global and you want to be serious about the new frontier, you must have someone wholly dedicated full time.” 

His new role will allow him to focus completely on growing the international division, which is necessary since the group is looking at the division to contribute half of its property development division revenue in five years. Currently, overseas operations contribute less than 5% to the property development division.

Ho, on the other hand, will look after the Malaysian operations. Besides its current markets in Penang and the Klang Valley, SunCity is looking to make its first foray into Johor to strengthen its presence locally.

At the same time, the developer intends to promote the philosophy of Lohas (lifestyles of health and sustainability) in its developments. This will be done through the five pillars of Lohas — health and fitness, personal development, the environment, sustainable living and social justice.

In an exclusive interview with City & Country, Ngian and Ho talk about their new responsibilities and growing the business.

Exploring new frontiers
A civil engineer, 58-year-old Ngian has been working in the property industry for more than 30 years, 25 of them with SunCity. He joined the company as project manager in 1985 and founded the property development division. He was also recently elected the Real Estate and Housing Developers’ Association Selangor branch chief for the 2010-2012 term.

“One of the key responsibilities of an MD is to grow the company. We have grown to a size where we find that to achieve exponential growth we have to look for new growth avenues. It is a natural progression for us to go international … Look at all the multinationals all over the world. General Electric, for example, more than 50% of their revenue comes from business overseas.

“Exploring new frontiers is very exciting. We take this overseas expansion very seriously because we are aiming for 30% revenue contribution from overseas operations in 2013 and 50% by 2015,” says Ngian.

Population represents market size, and SunCity is keeping a very close eye on India and China with their combined population of 2.6 billion against the global population of 6.5 billion, hence the international division.

The developer already has an office in Jiangyin, China, and an office in India. It is planning another office in Tianjin, China, by September as it is developing there.

A plus point, according to Ngian, is that both countries have had very strong economic growth over the last 10 years and have few restrictions on foreign investors.

The Indian government even allows developers to sell without approval, he adds, while there is no control over pricing and payment method in China. The Chinese government requires home buyers to pay at least a 40% downpayment before applying for a loan. Even then, Ngian says the developer will be able to collect the remaining payment two months later when banks release the loan.

“These two countries also allow 100% foreign ownership of a project. But in both cases we choose to have a local partner because when you go to a foreign land, it is better for you to have a partner who can help you, who understands the local culture and practices, especially the market. They can do better networking than us because we are new.

“All our partners, except for Tianjin Eco-City, are construction firms and they understand the industry,” he says.

Another advantage of joint ventures is that the holding cost is lower for the developer. As at May 31, SunCity’s total overseas unlaunched landbank was 421 acres, valued at some RM7.85 billion.

In China, its total landbank stands at 119 acres, while it has landbank of 49 acres in India. The remaining 253 acres are in Australia.

SunCity’s current focus is mainly on China, whose emerging economy represents vast opportunities and huge demand, especially from the middle class. Its maiden launch in China comprised 213 condominium units in Sunway Guangzhao on May 23, priced at an average of RMB4,900 psm (RM235 psf).

The launch attracted more than 100 people who camped out overnight, according to Ngian. Some 65% was sold on the first day of the launch despite the Chinese government’s concerns over the possible bursting of a real estate bubble.

“The government has increased the downpayment to 40% and raised interest rates. However, to our surprise, demand is still very strong. Furthermore, these buyers paid with cash when they signed the sale and purchase agreement,” says Ngian. 

The 17-acre Sunway Guangzhao project has a gross development value of RM492 million. To be developed in four to six phases over three years, the project will comprise medium-end condominiums and speciality shops. It is a 39:26:35 joint venture between SunCity, SunwayMas Sdn Bhd and Shanghai Guanghao Real Estate Development Group Co Ltd.

The second phase of 187 condos will be launched this month. The retail component of the project, located below the residential component, will only be launched at the end of the project.

Tianjin Eco-City
Tianjin Eco-City is SunCity’s main focus this year, following a collaboration agreement with Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd (SSTEC) for the RM5 billion eco-themed project in Tianjin Binhai New Area in China in April.

Under this 60:40 joint venture between SunCity and SSTEC, SunCity will develop 102 acres of the 7,400-acre Tianjin Eco-City. The developer is now in the final stages of a six-month feasibility study of its component in the project.

The developer will build its component, comprising more than 90% residential properties, based on the Lohas concept. It will be the first development of its kind in the Tianjin Eco-City project.

“We will incorporate all five elements of Lohas into the project. We are aiming for the gold standard under the Green Building Evaluation System in China,” Ngian says.

For health and fitness, he explains, SunCity has to make sure the development has sufficient space for residents to exercise. Personal development includes the setting up of kindegartens and schools as well as a reading area.

The SunCity component in Tianjin Eco-City will be completed in five years, and the majority of the project will comprise mostly condos and apartments.

The project consists of four parcels. The only parcel fronting the river will be used to develop villas and townhouses, while the remaining parcel will have condominium and commercial properties. The component will also have two schools, three kindergartens and two neighbourhood centres.

There is a green belt in the 7,400-acre township that passes through SunCity’s component. An underground train will run along the green belt. Commercial space will be built near the train station and will be the last to be launched.

“The condominium component will have different heights, from 10 to 18 storeys, and will sell from RMB12,000 psm (about RM570 psf). The villas, of course, will fetch a premium. We are looking at the first launch in the third quarter of next year. The commercial space will have a retail component on the lower three floors, a level of SoHo (small office home office) and a 10-storey office tower,” Ngian says.

Tianjin Eco-City is a government-to-government mixed development between China and Singapore. The project’s master developer is Keppel Group of Singapore, while several developers in the region were invited to participate, including Mitsui Fudosan of Japan, FarGlory of Taiwan, Shimao of Hong Kong and Vanke of China.

The project is the largest eco-city under development in the world, and it is aimed at creating an ecologically and socially sustainable environment for residents. It is expected to have 110,000 homes for about 350,000 people over the next 15 years.

India
SunCity has two projects in Hyderabad, India, but it changed their design plans as the economic crisis affected demand. It is finalising the design for one of the projects, Sunway Opus Grand Residency, and plans to launch it by this year-end.

The original plan was to build high-rises, but the developer has since changed part of the design to low-rises such as 3-storey townhouses. The project was soft launched last year, according to Ngian, but the market “was not there yet”.

This RM380 million project in the suburb of Ameenpur will be developed in four to six phases over five years.

Sunway Opus will serve as a benchmark for the developer’s venture into the Indian market, Ngian says. It is still looking at the design of the other project in Hyderabad — Sunway MAK — with MAK Projects Private Ltd, the developer of the world-class gated and guarded Banyan Tree Retreat in Hyderabad.

Sunway MAK will consist of both low-rises and high-rises that will be completed in several phases over the next three to five years. It is located in the growing southern corridor of Hyderabad, and within close proximity of the Rajiv Gandhi International Airport and Hardware Park.

“The recovery in India is slower [than in China]. India’s main expertise is IT (information technology) and it depends very much on the US and Europe. However, on the plus side, the country grew 8.1% in   the last quarter,” Ngian says.

Coming up next
While its strategy is to focus on both China and India and to establish a foothold in these countries, SunCity is also looking at Vietnam due to its market size and demand.

“In the longer term, Vietnam is a very good country to venture into. We are studying several proposals for projects in Ho Chi Minh City. Commercial activity there is more vibrant and it is a busy city. We hope to make some announcements next year.

“We hope the timing is right … Malaysian developers went into the country a few years ago at the the peak and terms were negotiated during that period. Many [projects] are not off the ground yet because they were hit by the economic crisis, super-inflation and the depreciation of the dong. I think planning is very important in business … going in during a recession and riding the boom when the economy starts coming back,” Ngian says.

SunCity made its foray into Australia with the acquisition of the 540-acre Sydney Wonderland in 1997. The theme park was closed and the developer converted the land into “employment land” in Australian terms, essentially for warehousing and manufacturing purposes.

It sold 250 acres to Australand Industrial No.111 Pty Ltd, before it went into a 50:50 joint venture agreement with the company to develop the remaining 290 acres into an industrial park. Out of the 290 acres, some 130 acres are gazetted as conservation land, while 15 acres were sold to Best & Less, seven acres to Cassons and 25 acres to K-Mart early this year.

The construction of the warehouses is scheduled for completion by 2012.

Green developer
SunCity is known for its promotion of green technologies. Besides creating value for customers, this could have something to do with Ngian’s background and his love for gardening.

“I love landscaping and gardening. That’s why I love nature. You must have the love for nature and trees, then only will you have love for the environment. I come from a farming family … working on the vegetable/fruit farm and dirtying your hands is nothing new. I plant all the plants in my garden myself,” says the father of three.

The accreditation by Singapore’s Building and Construction Authority (BCA) Green Mark for SunCity’s Sunway Palazzio development in Sri Hartamas, Kuala Lumpur and Sunway Challis Damansara in Sunway Damansara, Selangor, came about because the developer wanted to know how its projects fare as green buildings, so it submitted these two projects to the BCA.

To its surprise, the residential high-rise development Sunway Palazzio obtained the Green Mark Gold Award (provisional), while Sunway Challis Damansara received the Green Mark Certified Award (provisional). Sunway Challis Damansara is the first landed residential development to receive the BCA award.

“When we received the award, the good news was that the building is green, but the bad news was the units were fully sold so we couldn’t mark up the price or use the award as a marketing strategy,” laughs the ever-cheerful graduate of the University of Leeds.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 814, July 12-18, 2010