City&Country: Belleview plans REIT for its properties

After nearly three decades as a developer, Belleview Group managing director Datuk Sonny Ho has not lost any of his passion for the property industry. Meeting the suave and confident gentleman recently to discuss the group’s future plans, one is immediately drawn to his willingness to share how the challenges faced by the company have only made it all the more resilient.

This resilience has seen the group embarking on numerous and varied projects from affordable housing, such as the Pangsapuri Desa Nipah in Balik Pulau, to luxury products such as the condominium Bellisa Court, as well as commercial and retail projects like the All Seasons Place — all in Penang. To date, the developer has completed RM2.5 billion worth of projects with the majority of its projects in Penang and Kedah.

“In its 28 years of operation, Belleview has gone through many challenges,” Ho says. “In 1991, it was the impact of the Gulf War; in 1997, it was the Asian financial crisis; in 2001, it was 9/11; 2003 was the SARS [epidemic]; and 2008 was the US subprime crisis. Through these challenges, the group has become stronger. When you survive a crisis, you get more experienced and become stronger.”

And now, with its experience and expertise, the developer is planning to enter a new real estate arena — real estate investment trusts (REITs). The group plans to park some of its commercial and retail projects under the proposed REIT in the near future.

“Belleview has found its niche, being able to now own, develop and manage commercial retail properties and all this we plan to combine into a REIT,” Ho says.

“In 24 to 36 months we are going to complete a total of RM2 billion to RM3 billion worth of commercial and retail projects with an estimated total net lettable area of 2.7 million sq ft. They will not be for sale. It is the group’s intention in two to three years’ time, if market demand for REITs is still strong, to list a REIT for our commercial and retail components.

“The REIT structure will provide us with an effective mechanism to unlock value for our shareholders and the proceeds can be reinvested in new opportunities with higher prospects or used to strengthen the balance sheet.

“It is our objective that, with the REIT as a platform for our continuing real estate business, Belleview will ultimately provide the REIT unitholders with long-term and sustainable distribution of income and capital growth.”

Belleview is looking to acquire more land in Penang, Kedah, Johor’s Iskandar Malaysia and Kota Kinabalu, Sabah, for commercial and retail development with the aim of injecting them into the proposed REIT at a later date. At present, the developer’s landbank is mostly in Penang and Kedah.

Belleview will continue developing residential projects, “the bread and butter” of the group, but in terms of gross development value (GDV), Ho sees the developer moving to a 70% commercial to 30% residential ratio from the present 50:50.

Belleview’s completed commercial projects to date — all in Penang — include Belissa Row, Burmah House, Burmah Place, Harmony Square, Heritage Club, Maju Utama, Taman Kheng Tian Business Centre, Vantage Point, 1st Avenue and Island Plaza. 1st Avenue and Island Plaza have been sold to an international investment fund.

Of the lot, the 4-storey Burmah House and the 5-storey Burmah Place are providing the best returns to the developer. “They are in prime locations on Jalan Burmah,” says Ho. “The land was purchased at a very cheap price many years ago, and both have always been 100% occupied. We have a ROI of 8.5% yield.” Both buildings are anchored by financial institutions such as AmAssurance in Burmah Place, and Maybank and RHB in Burmah House. The former has a net lettable area of 35,000 sq ft while the latter has 50,000 sq ft.

This year, the developer has two commercial and retail projects along with five residential developments for launch with a total GDV of RM1.84 billion.

The commercial projects are Aman Central mall and Star Avenue commercial centre, located in Alor Setar, Kedah. The residential developments include the Autumn Tower — the last of four towers — at All Seasons Park in Ayer Itam, Penang; Moulmein Rise, Pulau Tikus; W Residence in Jesselton, Penang; Kulim Techno City Phase 2C3 in Kulim Hi-Tech Park; and Amansuri Residences in Alor Setar (see box).

On the prospect of Belleview being listed, Ho says that is no longer a priority. “We are comfortable with the company staying private,” he explains. “Raising funds and capital is not an issue at all because the support of the banks is good, so we have no problems with financing.”

Hospitality plans
For the future, Ho says the group is considering another new sector — hospitality. “We are going to build our first hotel — a four-star hotel — in Alor Setar and tie up with a hotel operator to run it. We are not looking to be a hotelier as we can’t become one overnight. So it is better to be a hotel owner and find the right brand to synergise with the group.” More details will be announced next year, he adds.

Ho reveals that in the future, Alor Setar will be one of the group’s key development locations. “We are looking at expansion beyond Penang and Kedah provides the best location in terms of proximity,” he explains. “Belleview’s development concept in various condominiums, hypermarkets, commercial properties and hotel has given Alor Setar a refreshing look and status, and therefore we have received very positive response to all our development projects.

“The people of Alor Setar are looking forward to an upgraded lifestyle which comes with better facilities, synonymous with developments in Penang and Kuala Lumpur, to cater to today’s increasing lifestyle demand.”

As for the overall property market in the country, Ho says the next 24 months are crucial because many projects will be completed by then and, depending on what happens in Europe and the US, it could directly affect our economy and consumer confidence. In Ho’s opinion, consumer confidence is the most important indicator of how the local property market will perform. So in the next 12 to 24 months, if all is well in Europe and US then there should not be any adverse situation in Malaysia.

Ho is also concerned with the loans taken for residential projects under the deferred interest-bearing schemes offered by developers in the past few years. “Most developments are currently under construction and you won’t see the real effect until completion, whether the purchasers can service the loan.”

With so many projects to oversee, how does the group ensure quality and delivery of the products?
“You need a whole team of in-house professional managers, supported by a very strong team of consultants and builders, not just a main contractor but a pool of specialist contractors,” Ho explains.  Over the years, the group has shortlisted the right people to work with and thus has been able to maintain quality and delivery times, he adds. 

“Another forte of the group is we can identify the right location for the right type of development. Over the last 10 years, after the lessons from 1997, we have become very accurate in our survey and reading the right timing and audience to target.”

Ho also selects his own team whose members on average are in their 40s. “This is the best age because they are dynamic, have the energy, are willing to learn and have at least 10 years of work experience.”

Building the right team to manage Belleview’s projects will certainly stand Ho in good stead when it comes to achieving success.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 910, May 14-20, 2012

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