City&Country: Cover Story-- Building with partners

MK Land Holdings Bhd, the master developer of the 750-acre Damansara Perdana in Petaling Jaya, Selangor, is exploring and embarking on new strategies to grow its property development business.

The company, says COO Lau Shu Chuan, has adopted fresh measures to increase its revenue and improve the quality of its products, although not all the old ones have been discarded.

MK Land is helmed by Tan Sri Mustapha Kamal Abu Bakar, who co-founded the company more than two decades ago with Datuk P Kasi. Mustapha took a one-year-plus hiatus from the company in 2007 before returning as its chief executive the following year. He then restructured the company’s senior management with a slew of new appointments, including four COOs to handle specific tasks. About two years later, three of the COOs — Balasundram R, Fatimah Wahab and Yusof Abu Othman — left the company, leaving Lau as the sole COO.

Lau had joined the developer in 2000 as general manager, coordinating its corporate finance activities. He was subsequently promoted to the post of head of business planning before assuming his current position.

The chartered accountant is also a certified public accountant with the Malaysian Institute of Certified Public Accountants. Prior to joining MK Land, he had worked with two of the Big Four accounting firms and a local public group of companies.

According to Lau, part of MK Land’s strategy going forward is to partner other developers via joint ventures, where viable, to develop projects on its land. He believes joint ventures can expedite the development of the listed company’s more than 5,000 acres located mainly in the Klang Valley, Perak and Langkawi.

In fact, MK Land entered into two joint development agreements with two developers last year. The first agreement was signed last May with Mammoth Empire Land Sdn Bhd to develop 48.7 acres of leasehold land in Damansara Perdana.

The plan is to build a high-end gated and guarded landed development called Empire Residence on the tract, featuring townhouses, semi-detached homes and bungalows. This will bring down the density of the township tremendously, observes Lau, adding that it is much cheaper to build landed homes than high-rises these days.

He says Empire Residence may be launched in the next quarter.

Located next to Armanee Terrace Condominium, which was developed by MK Land, the 48.7-acre tract was initially meant to house another four blocks of the condominium, which currently comprises two blocks. The 522-unit Block A was handed over to buyers at the end of 2005. Block B, which comprises 518 units that are fully sold, is still under construction.

“We don’t want to put too much of our resources into a particular project, overstretching them. Hence, joint ventures are a good option. Joint ventures will also allow us to speed up the company’s growth and help boost our image as a developer.

“Looking at all these factors, we thought, ‘let’s do it fast and get someone who is hungry and can do things fast.’ Mammoth Empire has completed some jobs ahead of schedule and some of its projects were quickly sold out. It has good followers, so it is good for us.

“We want to sell quickly, develop fast and change the way buyers perceive us. When we speed up, the returns are also better,” Lau explains.

In FY2010 ended June 30, MK Land’s net profit dropped 37.8% y-o-y to RM11.2 million despite a 31% y-o-y increase in revenue to RM323.5 million.

In 1QFY2011 ended Sept 30, net profit almost tripled to RM3.4 million from RM1.2 million in the previous corresponding period, thanks to good sales for the company’s projects and construction progress in the Klang Valley, particularly Damansara Perdana. Revenue, however, dropped 23.55% to RM61.77 million from RM80.8 million previously. Meanwhile, earnings per share grew to 0.28 sen.

To date, MK Land has completed a total of 7,329 homes in Damansara Perdana. The population of the township (excluding that of the commercial components) is estimated at 30,000.

MK Land’s other joint development agreement was signed last September with Mutiara Goodyear Development Bhd to develop 10.6 acres of freehold land in Cyberjaya, Selangor. The latter is revising its master plan, which is scheduled for launch this year.

“The previous plan catered for the student population in the area but the residential market there is very hot now. Therefore, our partner decided to change its plan to meet the demand. It will be more residential-focused now,” says Lau.

MK Land is also disposing of land to other developers as part of its growth strategy. Mammoth Empire, for instance, purchased several pieces of land in Damansara Perdana from MK Land, including two parcels totalling 26.8 acres, early this month. MK Land has identified several other plots for sale but did not disclose details.

Besides Empire Residence, Mammoth Empire’s current projects in Damansara Perdana include Empire City — an integrated lifestyle commercial development on a 23-acre site — and a mixed-use development known as Empire Damansara.

The low-profile Mammoth Empire is the developer of The Loft duplex condominium and The Ara Couture bungalow in Bangsar, Kuala Lumpur, and the Empire Subang mixed-use development.

MK Land, which built its reputation on developing affordable housing,  also aims to improve the quality of its products by adopting the Quality Assessment System in Construction (QLASSIC) in all its projects, says Lau, adding that this will be the norm going forward.

“We have formed teams just to listen to the purchasers and we will strengthen our future developments through such feedback. We are also putting other value-added and green building features into our developments. Our approach from now on is to maintain as much greenery as we can and try not to cut down trees.”

Rafflesia
Citing the RM1.3 billion Rafflesia flagship development in Damansara Perdana as an example of the “new” MK Land, Lau says the developer is striving to make its products more exciting. For instance, it is creating a lake and a park on eight acres in place of a retention pond in the initial master plan. Natural spring water running from the hills nearby will be channelled into the lake, says Lau.

Residents can hang out at the lake and park, which will be located in Rafflesia @ Park (formerly known as Parcel C).

The whole Rafflesia landed residential development is being developed in three components: Rafflesia @ Park (GDV: RM410 million), Rafflesia @ Hillside (GDV: RM330 million) and Rafflesia @ The Peak (GDV: RM560 million).

The 27.35-acre Rafflesia @ Park, offering a total of 208 semidees, was launched in 2007. The 56 3-storey semidees in Phase 1 are in the process of being handed over while the 34 units in Phase 2 and 32 units in Phase 3 are scheduled for completion and handing over by the end of the year.
Open for sale currently is Phase 4 with 16 3-storey semidees. Of these, 12 units have been sold since October.

Lau says the designs of the homes in the final two phases of Rafflesia @ Park are being redone and that instead of more 3-storey semidees, MK Land will launch 20 3½-storey semidees overlooking the lake in Phase 5 next month.

The developer has also added a plunge pool and a guest room to each of these units. With a built-up of 4,846 sq ft and land area of 3,226 sq ft, these units will cost RM2.5 million onwards.

“We want to improve and add value. We will keep improving as we develop the other two components of Rafflesia. We are even considering the zero-lot concept. We are the only landed development in the area with a conceptual modern design in a green natural setting,” Lau says.

The final phase of Rafflesia @ Park or Phase 6 will have 50 units and will be launched in early 3Q2011. MK Land plans to further change the design and layout of these units, which are located closest to the lake, based on customer feedback and add more facilities like a lift.

“The value of the properties will be reflected in their prices. For example, we sold Phase 1 of Rafflesia @ Park at about RM1.3 million to RM1.4 million. These are now going for RM2 million on the secondary market,” says Lau.

The developer will launch the 18.4-acre Rafflesia @ Hillside next year. This component will have 106 semidees with large built-ups. It will also see a new concept in the form of a central garden that is accessible to all units.

Rafflesia @ The Peak, which will sit 1,000ft above sea level and offer panoramic views of the surroundings, will offer 140 homes. MK Land is mulling exclusive bungalows on this site.

The developer still has 100 acres left in Damansara Perdana, located behind Metropolitan Square, for hilltop developments.

“Rafflesia is on a lower peak while this is a higher peak of more than 2,000ft above sea level. The development here will be exclusive and of low density. We will limit the units to make sure the development blends in with the terrain. You will see more green than houses and only 10% to 15% of the current forest here will be developed,” says Lau.

“We are very excited about MK Land’s prospects going forward. Our projects are doing well and we believe we are on the right track, going forward. We want to jumpstart a lot of things ... we are looking at more joint ventures. We have sold some parcels of land [in Damansara Perdana] and want to generate resources. We want to move things faster and we expect better growth from this.”

In its Damansara Damai project in Selangor, MK Land launched one of the two blocks of the One Damansara condominium in the middle of last year. Half of the 524 units, with built-ups of 986 to 1,396 sq ft, on offer have been sold. The second block will be launched next year.

In Ipoh, MK Land launched its 92-acre freehold Meru Perdana project in 2H2010. This township, located 7km from Ipoh town, saw overwhelming response from buyers. The first batch of 50 shophouses and 128 units of 1 and 2-storey terraced homes launched are sold while the 52 shophouses in Phase 2 are fully booked.

The developer soft-launched another 169 units of 1-storey linked houses recently, of which half are sold.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 843, Jan 30-Feb 6, 2011