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City&Country: Cover Story-- Branching out

While the idea of owning and managing car parks may be seen as unexciting for many, it has proven to be a profitable and stable business that has given SCP Group a solid foundation for its foray into property development.

SCP was established in the aftermath of the 1997 Asian Financial Crisis when its founders sought a recession-proof business. After some 15 years, what started off as Systematic Corporate Parking Sdn Bhd has become one of the country’s largest car park operators, owning and managing over 37,000 parking bays nationwide.

The company subsequently expanded into property development in August 2009. However, it was only last year that its property development business became really active with the launch of four projects over a 12-month period.

SCP’s first two projects were launched in Wangsa Melawati, Kuala Lumpur. The first was Dataran Wangsa, a series of showroom shopoffices (April 2011) followed by 29 three-storey bungalows in an enclave named Damaisari @ Wangsa Melawati (June 2011). A month later, SCP launched Centro Shah Alam, a 20-storey commercial building. In February, SCP proceeded with its first development in Kota Kinabalu, Sabah, called Inanam Capital, which consists of 16.69 acres of industrial showroom shopoffices.

The four projects have a total gross development value (GDV) of RM583 million over 27.4 acres. SCP plans to build on that momentum as it has plans for more projects in the Klang Valley and Sabah, directors Ahamad Latib and Calvin Low tell City & Country.

Although the group’s property projects are parked under various companies, its property development division is helmed by SCP founders Chuah Swee Guan, Ahamad Latib, Ng WyMin and Eric Wong as well as Low who joined the group last year. All were actively involved in the property sector before SCP.

Chuah and Wong are former directors of what was then known as Phileo Land Bhd, a public-listed property firm (currently known as ECM Libra Financial Group Bhd) while Ng and Low previously held the posts of CEO and COO respectively at property developer Asian Pac Holdings Bhd. Ahamad was a valuer and partner at Khong & Jaafar Valuers Sdn Bhd and is currently the principal of KJ Property Management Services Sdn Bhd.

Low, who joined SCP in 2011, is not involved in the group’s car park business and focuses solely on its property division.

Recession-proof venture
Car park acquisition and management is a relatively niche business. Ahamad tells City & Country that the idea to start a car park business was a result of a teh tarik session at the group’s favourite hangout spot.

“There we were, four property players at a mamak stall. All of us were going through quite a bad patch after the 1997 economic crisis, which made us very cautious about investing. Somewhere along the conversation, we ended up discussing recession-proof businesses and we came up with the idea of acquiring car parks,” he says.

However, starting a business after a major recession was not easy and Ahamad remembers it was a struggle at the start. “Banks were very careful about lending back then and the four of us had to put in extra effort to persuade them to give us a loan to help with the business.”

The group acquired its first 7,500 parking bays at Phileo Damansara 1 and 2  in Petaling Jaya, Selangor, for RM100 million. “After that, it was smooth sailing. We acquired more car parks as we grew. Now we own 10,500 parking bays at seven sites in the Klang Valley.”

Having come a long way since that fateful teh tarik session, SCP’s car park division now has total assets of over RM300 million and a paid-up capital of approximately RM23 million. Apart from Phileo Damansara 1 and 2, it also owns parking bays in Megan Avenue 1 and 2 along Jalan Yap Kwan Seng in the KLCC area; Dataran Palma in Ampang, KL; Leisure Commerce Square in Bandar Sunway, Selangor; and Taipan Commercial Centre in Subang, Selangor. All the car parks, consisting of multi-storey, open air and underground developments, have freehold car park land titles.

Ahamad states that the initial plan to venture into the car park business did not include managing car parks belonging to others. However, building managements started contacting SCP to manage their car parks and the company decided to take on another role. “It makes sense. We have the expertise, experience and system to manage a car park, so why not?” says Ahamad. Currently, SCP manages 27,000 parking bays it does not own in office buildings, hospitals, multi-storey car parks and shopping malls.

The group is gearing up for a busy few years ahead. SCP has several proposed projects — two awaiting approval and another three in the conceptual planning stage. The two projects pending approval are a 32-storey condominium on a 1.2-acre plot with a GDV of RM140 million along Jalan Loke Yew in Cheras and a gated and guarded residential development in Sabah dubbed [email protected] in Kota Kinabalu, a 6.96-acre enclave that will comprise 96 terraced houses with an estimated GDV of RM90 million.

“We hope to officially launch these projects by year-end. Looking further ahead, we have three more projects with an initial gross development of RM750 million in the conceptual stage,” says Low, adding that the group is also looking at the possibility of developing a shopping mall within the Klang Valley.

The three projects in the planning stage are Inanam Capital 2, a 30-storey mixed-use development in Sabah; Bukit Damaisari @ Menggatal Kota Kinabalu, a gated and guarded township; as well as a yet-to-be-named RM500 million mixed-use development in Balakong, Selangor.

Inanam Capital, SCP’s first project in Sabah, is located in the small town of Inanam just 10km away from the Kota Kinabalu city centre. The development has a GDV of RM268 million spread over 16.7 acres — the largest development of its kind in Inanam.

Inanam Capital comprises eight blocks of modern-looking yet highly functional three-storey industrial showroom shopoffices located in the centre of a bustling commercial area and close to the industrial and commercial districts in Kolombong and Lintas.

Although it comprises industrial shopoffices, Inanam Capital is ideal for a variety of businesses from light industry to commercial and retail. The full-height glass front on the first and second floor is suitable for businesses to showcase their products and services while the 24 ft-wide premises and a ground floor with additional design has an industrial loading capacity of 5KN/m2.

The built-up varies from 3,574 to 5,540 sq ft while prices range from RM1.34 million to RM2.2 million. There are 184 lots or 552 units with a total built-up area of 800,000 sq ft over the eight blocks.

Approximately 70% of the development has been taken up.

Sabah calling
Low and Ahamad are bullish about the property sector’s prospects, especially for Sabah’s market.

Each year, Sabah attracts millions keen to enjoy its lush forests, beautiful beaches, diving sites and exotic wildlife. According to a statement released by the Ministry of Tourism, Culture and Environment Sabah in February, there were 2.84 million tourist arrivals in 2011, who were estimated to contribute RM4.98 billion to the state. Officials are projecting 2.93 million visitors this year.  

What prospects do the Land Below the Wind hold for property developers and why is SCP so keen on making it a target after the Klang Valley? For one, the Sabah market is familiar to the SCP directors.

“During our years in Asian Pac, Ng and I dealt with several commercial and residential projects in Kota Kinabalu such as the KK Times Square and Karamunsing Capital 2. What we realised is that the market there is increasingly vibrant and rich,” says Low.

He adds that the market is “ripe” and that the town is in need of quality and neatly planned developments like those seen in the Klang Valley. “Karamunsing Capital 2 is all that, and hence the development was sold out on the day of the launch in 2006,” he says.

Low points to the massive population boom and influx of tourists in recent years that could bode well for the property sector. According to the Department of Statistics, Sabah has seen steady growth in its population from half a million in the 1970s to 3.2 million in 2010. As at December last year, young adults and youths between the ages of 15 and 40 made up 51% (or 1.6 million) of the Sabah population. As this group ages and starts settling down, it will no doubt ramp up demand for homes in the coming years.

The increased number of international flights to Kota Kinabalu airport has also contributed to tourism growth. “We’ve noticed there have been more foreigners taking up the Malaysia My Second Home Scheme in Sabah in recent years. The Koreans have been known to buy condos there for winter getaways and as retirement homes. There is also a small number of Bruneians buying properties in Sabah,” says Low.

A balancing act
As the group takes huge strides in the property business, the expansion appears to be underpinned by its car park business. Ahamad explains “The steady, recurring income we’ve garnered from our car park business provides us with stable funding for our projects. The car park business is attractive due to its stable recurring yields and we plan to maintain that. But in terms of growth, the property business triumphs! ”

SCP currently earns annual revenue of RM45 million from its car park division. With its healthy financials, is the company considering a listing? “Well, the car park business is long due for a listing. We submitted our application to the Securities Commission Malaysia in 2005. Although the company qualified, we eventually decided to withdraw our application as we felt the timing was not right,” says Ahamad, adding that there are now no plans to list SCP anytime soon. “For now, we want to focus on our property division,” he says with a smile.

The group seems to be adopting a quick turnaround strategy for its property business. Low explains “We dont like to leave land idle for too long. Hence, we are very specific and particular about what we want and where we want to buy. Once we’ve acquired land, we set to work
on the master plan almost immediately.”

At the moment, the company has a landbank of 63.63 acres and is scouting for more land and joint-venture opportunities, setting its sights on potential niche developments in the Klang Valley and Sabah.

Low is confident the company has found a comfortable balance in its portfolio for long-term profitability, sustainability and growth. “We still have a very positive outlook on the market. Yes, the tightening of loans has temporarily dampened property demand but we believe transactions will pick up again by the end of the year.”


 

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 907, April 23-29, 2012

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