City&Country: Cover Story-- Snapped UP

The office market in Kuala Lumpur City Centre has been rather lacklustre of late. However, at a recent preview of a stratified office project in Kuala Lumpur’s Golden Triangle, the response far exceeded expectations.

Despite the rainy weather, the first buyers started queuing up as early as three in the morning to get into the showroom for a preview of Sunrise Bhd’s Summer Suites on Jan 15.

By noon, about 80% of the units had been sold and before the weekend was through, only limited bumiputera units remained.

“We targeted the 400 units to be taken up within a week. Instead, they were snapped up within two days,” says Anne Tong, Sunrise general manager for branding and community development.

A buyer who introduced herself as Lee said her previous investments in Sunrise’s projects have paid off handsomely, and she has the same expectation for this development, when asked why she was keen to pick up a unit.

The listed developer made its name when it transformed about 100 acres of old rubber plantation land in Segambut into the exclusive highrise residential enclave known today as Mont’Kiara.

For another buyer, it was not only the brand that attracted him but the pricing. “The price is low compared to what is being offered in the city centre. The smaller units should make them  easier to be leased out,” says the buyer, who started queueing up at 6.30am.

The project, located off Jalan Sultan Ismail, Kuala Lumpur, comprises two towers on a 1.65-acre site. Only units in Tower A were open for sale. Prices started from RM688 psf, with the average being RM750 psf.

Meeting market demand
According to Tong, Summer Suites was created to meet market demand for competitively priced quality strata business space. The leasehold stratified project offers a concept termed as SoVo (small office, versatile office) business suites that are flexible, expandable and designed for maximum functionality.

“Since the inception stage, we have been focusing on crafting a development concept which meets current market demands, yet one that lives up to Sunrise’s brand propositions,” says Tong.

The 400 units offered for sale in the 24-storey Tower A range from 469 to 1,347 sq ft with a choice of 10 layout designs. Plans for Tower B have not been finalised, but the developer is mulling the idea of serviced apartments and may decide to keep it as an asset.

The entire development has a gross development value of RM480 million and comes with two levels of retail space, a swimming pool, gym, function room,  landscaped deck and food court.

“Summer Suites offers a rare opportunity for companies to own instead of rent their own prime business suites. The starting price of RM688 psf is very attractive as that kind of price for such a development in Kuala Lumpur city centre is very rare,” says Tong.

The affordable pricing, coupled with the prime location, is the project’s formula for success, she adds. She estimates the selling price for new offices in the city centre to be around RM700 psf and above, adding that the SoVo concept also fills a void in the market.

“The location is very strategic, and the affordability is there. It is ideal for young professionals, entrepreneurs, small businesses and businesses that do not require large offices,” she says.
The majority of buyers are locals and a good number are Sunrise’s loyal buyers.

Tong believes that some businesses in older office buildings with smaller units, such as Megan Phileo Promenade on Jalan Yap Kwan Seng and Plaza 138 on Jalan Ampang, might move to Summer Suites once it is completed.

The developer is also confident the offices at Summer Suites will achieve rents of RM5 psf and above.

“Rents around the area are about RM4 to RM5 psf and these are  larger units. Generally, the rates for smaller units are priced better,” says Tong. She estimates the rental yield for Summer Suites to be around 6% to 8%.

“Our properties have historically enjoyed value creation via sustainable capital appreciation and good rental yields,” she says, adding that it has won the developer the trust and brand loyalty of its purchasers.

“To sell out within two days of exclusive previews reflects the strong confidence our purchasers have in our brand,” adds Tong.

Previndran Singhe, CEO of Zerin Properties, attributes the overwhelming response to the brand name, saying, “Sunrise is a strong brand with a strong following, and this is its first true-blue city project. It also offers Sunrise’s followers a chance to diversify their investment portfolio.”

Foo Gee Jen, managing director of C H Williams Talhar & Wong (WTW), concurs, believing that if the project were by a lesser-known developer, sales might not have been so good.

“Sunrise has a good reputation and track record, so the confidence level is always high when it comes to its projects.

“The most attractive part of the development is the price, which is affordable, as well as the smaller sizes which are in limited supply in the city centre,” he says.

Foo estimates the selling price of Grade A offices to be around RM1,200 to RM1,400 psf. There are however, no offices similar to Summer Suites at the moment.

“There are buildings that offer smaller units but they are not of the same quality. The closest in terms of quality is Wisma UOA in Jalan Pinang, where the units are selling at around RM800 to RM1,000 psf,” he says.

Timing was also key, according to Zerin’s Previndran. “There is a lot of confidence in the market now due to the the Economic Transformation Programme (ETP), the high liquidity in the market and reasonable financing. These factors have created a demand for products such as Summer Suites for investment purposes.”

WTW’s Foo believes the ETP can bring in more foreign players which will spur demand for higher-end residences and Grade A offices.

“If the government can transform the market, especially the financial sector and also oil and gas, it can bring in more expatriates with deeper pockets. Then SoHo and serviced apartments will be the choice properties for them,” says Foo.

Diversifying its portfolio
From being a single-location developer, Sunrise has started diversifying its portfolio with multi-products in multi locations — in the Klang Valley, Bukit Jelutong, Kajang and Canada.

“In all these locations, the distinctive Sunrise brand quality and reputation is stamped on each of our projects, giving our customers wider opportunities to own a Sunrise property outside Mont’Kiara,” says Tong.

Its projects in the pipeline are worth an estimated RM8 billion. These include the Sime Darby joint venture project in Bukit Jelutong with a GDV of RM1 billion, landed development in Kajang, mixed development S3 in Dutamas and phase two of the hugely successful Quintet in Richmond, Canada. These projects are scheduled to be launched in 2011.

Phase one of Quintet, a mixed development with a GDV of RM1.2 billion, was fully sold within a day. Despite its success in Canada, Sunrise has not considered venturing into other countries.
“There are other markets but we do not have the competitive strength there. Unless we know we will do well, we will not go into that market,” says Tong.

She reveals, however, that Sunrise is looking at Singapore.  “Singapore is a very competitive market but we believe that the success of a project also depends on the concept and pricing,” she says.

Another addition to its business portfolio is the recently established hospitality business unit which was set up specifically to operate serviced residences, offering medium to long-term stays. The unit currently manages units in MK10 and Solaris Dutamas.

“There are already a lot of serviced apartments out there but again, it comes down to pricing and concept,” says Tong.

The company is awaiting approval for its hospitality brand name, with hopes of turning it into the likes of popular and recognisable regional brands such as Ascott.

Sunrise is set to merge with UEM Land Holdings Bhd after the latter received over 95% acceptances in a RM1.39 billion takeover bid earlier in the month. Upon completion, the merger will form Malaysia’s largest listed property development company with a landbank of about 12,000 acres.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 842, Jan 24-30, 2011