City&Country: Cover Story-- Venturing into new territory

KSL trains its sights on Klang Valley

Building on its experience of more than 20 years in Johor, KSL Holdings Bhd is shifting its focus to a new playing field — the Klang Valley. It is starting off with a 496-acre mixed-use development in Bandar Bestari in Klang, Selangor, and a niche 0.8-acre, low-rise condominium in Jalan Madge in the Kuala Lumpur city centre.

KSL’s maiden development was a row of shophouses in Tenang, Johor, in the 1980s. It then launched township Taman Melawati in Skudai, Johor, in the 1990s. Since then, the developer has gone from strength to strength in the southern state.

The bread and butter for the group are three ongoing integrated township projects in the Iskandar Malaysia corridor — Taman Nusa Bestari (92 acres) in Johor Baru, Taman Bestari Indah in Ulu Tiram (283 acres) and Taman Kempas Indah (96 acres) also in Johor Baru. Additional income comes from shopping mall KSL City (2.73 acres) and hotel KSL Resort.

KSL was founded in Segamat, Johor, by brothers Michael Khoo Cheng Hai, Khoo Hwa Seng and Khoo Tien Sek who still look after the day-to-day running of the company. Michael is group chairman while Hwa Seng, as group managing director, runs the business in Johor and Tien Sek, as group executive director, oversees operations in the Klang Valley with Michael’s son Patrick.

City & Country recently caught up with Patrick, who is the project director of Bandar Bestari, for an update on the group’s plans for growth in the Klang Valley.

Leap of faith
While most developers based outside the Klang Valley plan to stick to home turf until the global economic storm blows over, KSL is going against the flow.

In fact, says Patrick, the company is actively looking to add to its 500 acres in the Klang Valley. According to the 30-year-old, KSL’s total landbank stands at 2,000 acres, the majority of which (1,500 acres) is in Johor (JB, Muar and Segamat).

“As the Klang Valley is the country’s main property hot spot, good locations are getting extremely scarce,” he observes. “We are especially keen to establish a strong name for ourselves as a township developer here, although the group is also interested in buying land for commercial and industrial purposes.”

Patrick, an engineering graduate from the University of Nottingham, had worked as a civil engineer for two years in Singapore before joining the family business in 2009.

He says since KSL was listed on Bursa Malaysia in 2002, it has been generating a net profit of RM60 million to RM70 million while maintaining a gross profit margin of 40% every year.

While the figures are impressive, the group sees the potential to further increase profits with Bandar Bestari expected to contribute “at least another RM20 million to RM30 million to net profit over the next few years”, he adds.

The group’s condominium development in the KL city centre, meanwhile, has a gross development value (GDV) of RM200 million and is expected to be completed by 4Q2012. “It is called Madge and it will be very exclusive with only 50 units on 10 floors and prices starting at RM2,000 psf,” says Patrick.

For the moment, however, he has his hands full preparing for the upcoming soft launch of Bandar Bestari.

Bandar Bestari
Bak kut teh, cendol and fresh seafood are not the only things that have been luring people to Klang. Indeed, large integrated township developments have mushroomed on the fringes of the royal town, especially in the areas bordering Shah Alam.

According to the Department of Statistics, Klang’s population in 2009 was 823,200 compared with 643,436 in 2000. This represents an average annual population growth rate of 1.1% against the national average of 1.3%. Klang’s current population is about 832,600, spread across 636 sq km.

Property players with ongoing projects in Klang include IOI Properties (Bandar Puteri and Bandar Putera), Gamuda (Ambang Botanic and Bandar Botanic) and WCT Land (Bandar Bukit Tinggi 1, Bandar Bukit Tinggi 2 and Bandar Parklands).

KSL hopes to make its presence felt in Klang with Bandar Bestari, which is located in south Klang and offers mainly mid to high-end homes and commercial centres. Upon completion in 8 to 10 years, the township will boast 18,300 residential and commercial properties with a total GDV of RM3 billion.

There are also plans for KSL City 2, which would be larger than the group’s flagship mall in JB (total gross floor area of 880,000 sq ft). The tentative GDV of KSL City 2 is RM2 billion.

“Bandar Bestari’s location in Klang is good as it has become very accessible thanks to the Kesas Highway, the North Klang Valley Expressway (NKVE) and the Pulau Indah Expressway.” Making the location even more attractive is the upcoming Banting-Taiping Highway, a fact that is reflected in the rise in property prices in the area in the past few years.

“For example, prices of 2-storey terraced houses in the first phase of nearby township Bandar Parklands have doubled over the past two years, from RM270,000 to RM560,000,” Patrick points out.

KSL had acquired the former oil palm plantation land for Bandar Bestari in 2009 from Prospell Enterprise Sdn Bhd for RM156.5 million, which translates into about RM8 psf. Prices here have since risen substantially to RM50 psf, says Patrick.

The group had initially announced that it would launch Bandar Bestari towards 2H2011. So, why the delay? Patrick says this was because the developer had been busy treating the soft soil on the site.

“I agree that last year would have been a better time to launch Bandar Bestari. But then again, we wanted to make sure we provided quality homes. To do that, we needed to ensure the foundations were sound. So we sacrificed six months and spent between RM40 million and RM50 million on treating the soil.”

The additional time also gave KSL the opportunity to take a closer look at the development’s concept. “We will be investing a lot more in landscaping. Currently, we are focusing on completing our show village and a 50-acre riverside public park. The park will follow the concept of a French garden with a 2.5km natural river running through the entire stretch,” explains Patrick.

He says the developer hopes to open the park to the public by the end of the year. However, to maintain exclusivity, the clubhouse in Bandar Bestari will be only for the residents.

The township will comprise a 90-acre commercial component and a roughly 316-acre residential component. The remaining 90 acres are designated for facilities and landscaping.

The soft launch of the first phase of Bandar Bestari — Canary Garden — consisting of 72 semi-detached cluster homes and semidee homes with a GDV of RM350 million, is scheduled for April this year. Prices start at RM788,000 for the 2,008 sq ft semidee cluster homes while the 3,200 sq ft semidees are going for more than RM1 million.

KSL expects good sales based on the encouraging response to its registration exercise on its website recently. Within a week, more than 100 people, most of whom were Klangites, had registered their interest. Hence, the developer is targeting the locals for the development.

“We also haven’t done any serious marketing or promotions yet,” remarks Patrick. “At the moment, we have only put up banners and billboards to create awareness in the surrounding areas. Once the project is officially launched, we will step up our marketing efforts to capture more attention.”

Malls and hotels
There have been recent concerns over the oversupply of retail mall space in the Klang Valley. According to Allan Soo, managing director of CB Richard Ellis Malaysia, “there is an oversupply in terms of total square feet as we now have 7.1 sq ft of mall space per person in the Klang Valley — the same as in Singapore and higher than in Bangkok [6.5 sq ft]”.

Soo bases his calculation on the estimated 6.1 million population of the Klang Valley, according to the 2010 census, and total NLA of Klang Valley malls of about 43.73 million sq ft as at 3Q2011, according to CBRE’s research data.

Asked why KSL plans to build a mall amidst such concerns, especially when there are two other malls located just 15 minutes away from Bandar Bestari — AEON Bukit Tinggi Mall and TSI Holdings’ wholesale mall GM Klang — Patrick says he believes Klang is ready for another based on a KSL survey. “We found that the Klang consumer market is extremely vibrant and that it is ready for another mall.”

KSL also has the advantage of having built a mall and operating it, he adds. “KSL City in Johor enjoys 90% occupancy of its total gross floor area of 880,000 sq ft. By comparison, the first phase of Johor Premium Outlets has a gross built-up of 330,000 sq ft.” KSL City opened for business in December 2010.

To cash in on KSL City’s popularity and high footfall, the developer built a hotel and serviced apartments above the mall. Some 26 storeys high and housing 1,000 suites, KSL Resort is a five-star hotel and the group’s first foray into hospitality. Named D’Esplanade residences, the 608 serviced apartments are spread over two 33-storey towers.

“Our serviced apartments were launched at RM550 psf in 2010. Now, they are fetching RM800 psf,” says Patrick. At the moment, 60% of the 500 to 18,000 sq ft units have been sold and are expected to be completed by next year. On whether the developer will follow the KSL City model in its Klang project, Patrick says, “We don’t rule out the possibility.”

Klang currently has seven shopping malls: Bukit Raja Shopping Mall, AEON Bukit Tinggi, Klang Parade, Shaw Centre Point, Centrio Mall, GM Klang and Klang City Square.

Last month, RHB Research Institute released a report advising investors to keep a watchful eye on KSL, in which it maintained a “buy” call on KSL’s shares and called it a “rising star among the small mid-cap property players”.

Indeed, the new kid on the block has already created a buzz in town that may not fizzle out anytime soon. Clearly, this developer from the south is determined to prove itself and establish its name in the Klang Valley.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 898, Feb 20-26, 2012