Share
Nothing in its name suggests tin mining or smelting but that is where the 124-year-old The Straits Trading Company Ltd started back in the Straits settlement days. In fact, in 1912, it was the largest tin-smelting company in the world.
What is even less known about the Singapore-based company — which, in March, announced its plan to seek secondary listing on the Main Market of Bursa Malaysia sometime this year with a market capitalisation of S$1.16 billion (RM2.85 billion) as at July 5, 2011— is its property development history in Malaysia. Straits Trading is one of the oldest public listed companies in Singapore.
Its 54.84%-owned subsidiary, Malaysia Smelting Corporation Berhad (MSC) is listed on Bursa and Singapore Exchange Securities Trading Ltd.
“Our earlier projects were not significant — mostly shoplots and housing for the miners and other employees,” says Eric Teng, Straits Trading’s CEO of property and hospitality.
It was not until 1983 that the company made its mark on the local property development scene, with Taman Selat in Butterworth, Penang, comprising 95 shophouses. Then it disappeared off the radar screen for two decades before resurfacing to undertake the development of Federal Hill, an exclusive high-end project comprising bungalows, townhouses and a condominium in Kuala Lumpur. It is located within a few minutes drive to Bangsar and Midvalley City. Federal Hill, which has a gross development value (GDV) of RM302.52 million, was later sold to IGB Corp Bhd.
When asked about the long interval between projects, Teng says the company is very prudent when it comes to selecting its projects and has not approached the market aggressively. However, it is now ready to jump-start its property business in Malaysia, a move largely driven by government efforts to transform the country into a high-income nation by 2020.
“The government has a very clear vision of the country’s development. I think it is not just us but also other investors and companies that believe in this vision and want to participate in the growth,” remarks Teng.
He sees Malaysia as a more attractive market than its regional peers. In terms of growth, he believes most of the other countries in the region, including Singapore, will slow down whereas Malaysia will pick up.
“Malaysia’s growth will also be more sustainable and that is very important. Most of the developments here are backed by cash and are not speculative by nature,” Teng points out.
Furthermore, changes are looming in Singapore and Malaysia that will affect the property markets of both countries and bring about new opportunities.
However, Teng cautions against two myths -- that land is scarce in Singapore and so property prices will always go up, and that as Malaysia has abundant land, property prices will always be flat. The reality is that Singapore is witnessing the after-effects of its recent general election with the People’s Action Party-led government prepared to adopt radical measures to moderate property price increases while in Malaysia, the Economic Transformation Programme is being rolled out progressively, he says.
“Furthermore, the Northern Corridor and Iskandar Malaysia in the south are new growth opportunities that can compete with the established Klang Valley market,” he adds.
Underpinning all these are improved government-to-government relations between the two countries. Teng believes that Singaporeans and Malaysians, being strong traditional investors in each other’s countries, are beginning to see new openings.
“Malaysians may not find Singapore property prices any more expensive than the UK’s or the US’ while Singaporeans will view property investment in Malaysia beyond Johor. Thus, expectations and interest will likely increase in some parts or states of Malaysia and this convergence over time can only benefit the property markets in both countries,” he reasons.
With this in mind, it makes sense for Straits Trading to maximise its resources and align its growth with Malaysia’s plans to transform the country.
Making its presence felt in Ipoh
The developer has already started a key project in what some would consider an unlikely location — Ipoh.
Its freehold development The Thompson-Flora Tropika Residences is a joint venture with Taiko Development Sdn Bhd that comprises 46 bungalows and a clubhouse in a gated and guarded environment.
Phase 1 was launched last year and has sold 15 out of its 30 units. It is scheduled for completion at the end of the year . Phase 2, which will offer 16 units, will be launched after the completion of Phase 1.
The 13.14-acre development is located in Ipoh’s prime residential area of Jalan Tun Dr Ismail and Lorong Tun Dr Ismail, a location that Teng says is similar to Singapore’s famed Nassim Hill with its array of bungalows.
Priced at between RM2.3 million and RM2.5 million each, the bungalows with built-ups from 4,677 sq ft to 6,900 sq ft are arguably the most expensive in Ipoh.
“The sales of Phase 1 were very encouraging and important as they highlight the potential of the project. Signs have shown that there is a take-off,” says Teng, who credits the success of the project partly to Straits Trading’s partnership with Taiko.
“We have the land and Taiko has strong knowledge of the market here as it hails from Ipoh,” says Teng.
Taiko’s largest project is the 1,200-acre Bandar Seri Botani in Ipoh.
Considering that Ipoh is better known for its limestone hills, food and laidback charm than property, the question that arises is, why Ipoh?
“I have been asked that question many times,” laughs Teng, adding that the developer sees strength in weakness.
While he does not deny that the pace of living is slow in Ipoh, especially compared with that of Kuala Lumpur, he believes that the idyllic life is well suited to those who want a second home to get away from the hustle and bustle of the city or as a retirement home.
“Not only is Ipoh located between Penang and Kuala Lumpur, but it is also a lot closer than people think. Infrastructure has come a long way; these days, you have the highway, railway and Firefly, which is flying twice a day from Singapore to Ipoh compared with three to four times a week before,” Teng observes.
The buyers are a mix of locals from Ipoh and city folk from the Klang Valley, but Teng also sees a market for foreigners, especially Singaporeans. He says Straits Trading has plans to market Thompson-Flora Tropika and other upcoming projects in the island state, banking partly on the Malaysia My Second Home programme.
“You’ll be surprised that there are actually quite a lot of foreigners residing in Ipoh, including a sizeable Korean community,” says Teng.
He concedes that at this point, Ipoh is not an attractive investment destination because the yields are low, but is not ruling out its potential.
With the rapid increase in the number of flights between Singapore and Ipoh by Firefly and the construction of the double-track railway, the future looks promising, he adds.
Creating a competitive edge
Moving forward, Straits Trading has set it sights on the high-end market with a focus on niche lifestyle products. This is a market segment that the company excels in, given its track record in Singapore. Among its notable projects are Gallop Green and Gallop Gables — both freehold residential developments located in a prime residential area within close proximity to the Singapore Botanic Gardens and Orchard Road.
“These two development
s are examples of what we do best — quality niche and lifestyle properties. We want to create a difference. We look at properties that are interesting in nature and size and that fit our philosophy, not just do what is common or trendy. It’s about finding your own niche,” explains Teng.
He is familiar with the top developers in Malaysia and stresses that Straits Trading is not here to earn a spot in the top 10 list. He believes that the important thing for a company is to realise its potential and capability to compete successfully.
“We are actually renowned for our ability to deliver good quality products and that to us is more important than how big our projects and company are in the property market. I suppose it is also easier for us to have that focus as our company is diversified and we are not a pure property player,” he says.
In the early days, many of Straits Trading’s opportunities came from mining land — as was the case with Thompson-Flora Tropika — but it is now looking for fresh opportunities in terms of land acquisition and partnerships with other developers.
“We actually prefer joint ventures; it does not necessarily have to be our land. We are looking at engaging landowners to work with us. This approach has always worked better for us, even in Singapore,” says Teng.
The locations being considered for its niche property developments are Penang, Ipoh, the Klang Valley and Melaka, which Teng feels is showing good growth.
He adds that the company is also looking at developing two parcels with development potential that the group currently owns — 26.6 acres in Butterworth, Penang, and 3.18 acres in Ipoh.
Since last year, the company has embarked on feasibility studies of both sites and Teng is particularly keen on the Butterworth tract.
“Penang is getting crowded and increasingly expensive, so there is opportunity for the mainland to be developed. It’s akin to the early days of Hong Kong and Kowloon. We will tap the demand there for residential products. We are also considering medical and educational facilities as there is a market there as well,” says Teng.
Straits Trading is also considering ventures in the hotel and commercial market in Malaysia and research is being carried out to determine where the demand for properties in these two segments is the strongest.
The group owns 14 hotels under the Rendezvous and Marque brands. Its hotels are located in major cities throughout Asia-Pacific, including Sydney, Shanghai and Singapore.
In Singapore, the company is developing Five Chancery, which comprises 12 units of 2-storey strata bungalows with private swimming pools. The project kicked off last July and has since sold six units at S$1,200 to S$1,300 psf. Because these are landed properties, only Singaporeans are allowed to buy them.
Straits Trading also recently raised eyebrows when it acquired 14 units in Holland Collection, a lifestyle apartment development in the republic.
“People asked, ‘I thought you’re a developer, so why are you buying?’ We have different strategies for different products — this is for investment. We will hold them for up to five years and sell when the price is right. In the meantime, it will give us good rental yields,” says Teng.
It is a strategy the developer has employed many times. For example, nine years after the completion of Gallop Green, it still retains about 33 units. It recently sold two units measuring 3,218 sq ft and 3,509 sq ft for S$1,850 psf each. In Malaysia, the developer still owns 17 shophouses in Taman Selat. Straits Trading has also unveiled its newly redeveloped Straits Trading Building in Singapore in May last year. The 28-storey building costs S$60 million and was built on the site of the old building on Battery Road.
While its name is established in Singapore, Straits Trading’s journey in Malaysia is just beginning. With the encouraging response to Thompson-Flora Tropika, the developer has grown more confident in the past year and after decades of flying under the radar, Straits Trading is ready to carve a niche in the Malaysian property market.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 866, July 11-July 17, 2011
