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City&Country: Cover-- UEM Land trains sights on Klang Valley and Penang

Since the launch of Bandar Nusajaya in 2006, UEM Land Holdings Bhd’s focus has been on developing the flagship zone of Iskandar Malaysia in Johor. Many joint-venture deals have been sealed with local and foreign partners to build developments and amenities in the 23,875-acre township.

The seven signature developments that will catalyse Nusajaya's growth are Kota Iskandar (the new Johor state administrative centre), Southern Industrial and Logistics Clusters (SiLC), Afiat Healthpark, Educity, Puteri Harbour Waterfront Development, International Destination Resort and Nusajaya Residences.

To date, UEM Land has launched three residential projects as part of Nusajaya Residences — Nusa Idaman, Horizon Hills and East Ledang. As of March 31 last year, some 20,005 homes had been completed, with certificates of fitness (CF), in Bandar Nusajaya which now boasts an estimated population of between 80,000 and 100,000. The township is expected to house more than 500,000 people in more than 100,000 homes upon completion.

Meanwhile, the gross development value sold for residential projects undertaken by the developer and its joint-venture companies in the township currently stands at RM876.5 million.

At the same time, the developer is looking to diversify to other parts of Malaysia, knowing full well that it is unwise to focus on just one area.

A five-year strategic plan, to be implemented from 2010 to 2014, was recently approved by the company board of directors to acquire land outside of Bandar Nusajaya in an effort to make the company the largest developer in the region, UEM Land's managing director and chief executive Wan Abdullah Wan Ibrahim tells City & Country.

The plan
“Last year, the board of directos expressed their satisfaction at the execution of Bandar Nusajaya, and I think we managed to sail through the troubled times quite well. Although we said we may not be able to achieve our KPIs, the company managed to register a slight profit growth,” he says.

In its FY2009 ended Dec 31, the developer’s net profit grew 54.5% to RM114.6 million, from RM74.2 million the previous year.

“Hence, the board has directed me to look into acquiring land in hot spots. If you look at other developers such as S P Setia, they are everywhere in Malaysia and the world. We have set up a special committee chaired by the group managing director [to look at new landbank],” he adds.

The "hot spots" UEM Land is looking at are the Klang Valley and Penang, where the “turnaround is fast” for residential and commercial developments. Wan Abdullah believes the company is competent enough to move in that direction, proof of which are the awards garnered by Puteri Harbour and Horizon Hills in Bandar Nusajaya last year. Puteri Harbour won the Fiabci (The International Real Estate Federation) Best Master Plan Development award while Horizon Hills was named the Best Golf Development by the CNBC Property Awards 2009 for Asia-Pacific and Malaysia.

“I think we have the DNA… our profile is there. So, if we really go to new areas, be it in the Klang Valley or Penang, I believe we will succeed so long as it is a hot spot. We are looking at land we can develop over three to four years and allow us to turn around fast,” he says, adding that UEM Land is currently in discussions to purchase three parcels in Kuala Lumpur.

The developer plans to venture into the foreign market in 2012 under its five-year plan, but it has already started preparatory work for overseas ventures and may consider any opportunity that appears before 2012.

“Khazanah [Nasional Bhd] only has one property development company, which is UEM Land, and we are like the flagship property developer for them. They look at us from time to time to see how we can grow faster. If organic growth is too slow, maybe we will go for inorganic growth like mergers and acquisitions. It is exciting times for UEM Land,” says Wan Abdullah.

“We welcome the public to judge us, but we also want them to see what we have been doing and what we will be doing. Khazanah took over the company after the Asian financial crisis and there was a period of uncertainty, but now, we have evolved and will continue to evolve.”

UEM Land is the flagship company for the real estate investment and development business of UEM Group Bhd, which is wholly owned by Khazanah.

Khazanah, the investment holding arm of the government, holds a 77.1% stake in the developer.
UEM Land has over the last few years improved its competence by getting ISO and Conquas (Construction Quality Assessment System) accreditation for most of its housing developments in Bandar Nusajaya. It aims to attain these standards for most of its projects, moving forward.

“All this is to develop our competence and improve ourselves… we have a lot of chasing to do. You look at S P Setia and IJM. They are established and mature. In that sense, we are still new but we intend to be ‘up there’ in a very short period… that is the mandate given to us,” he says.

Symphony Hills
UEM Land will launch Phase One of Symphony Hills, a gated and guarded residential development in ICT hub Cyberjaya, by May this year to start the five-year plan rolling.

To be developed in four phases over the next six years, the RM1 billion Symphony Hills will be built on a 98-acre site that was acquired in 2008 for RM102.5 million. Phase One will comprise 46 units of cluster homes, 22 units of townhouses, 18 units of superlink homes and 36 units of semidees.

“The advanced units are now under construction. When we bring this product to the market, buyers will be able to experience not only the house but also the infrastructure.

“These are very exclusive units, and our target market [local and expatriate] is very demanding. That was why the launch of the first phase was somewhat delayed… if we had wanted to sell it off the plan, we would have launched it last quarter,” Wan Abdullah says.

This project will also be one of the few strata landed residential developments in the country featuring modern family facilities.

“We intend to copy some of the success stories, like DesaPark City and Gita Bayu in Kuala Lumpur, but we want to be better than them. This is all about competition,” Wan Abdullah says.

“The strata landed status allows the residents to maintain certain aspects of the project, such as landscaping and security, by themselves. Also, some of the buildings in the project, for example the clubhouse, will look like they are floating on water.”

The fact that developers such as Mah Sing Group Bhd and Glomac Bhd are developing in Cyberjaya shows that the ICT hub is the next growth area, Wan Abdullah says, adding that UEM Land is also looking at other pieces of land in Cyberjaya.

Funding
Two banks have approved funding facilities for UEM Land. Malayan Banking Bhd announced in November last year that it will offer the developer a bridging/term loan of up to RM177 million and a bank guarantee facility of up to RM30 million.

Another bank, which Wan Abdullah would not name, is still doing its documentation for a "big amount” facility.

UEM Land's relatively stable stock performance in times of turbulence has also allowed the developer to look into raising funds through the equity market. In January, it proposed to raise about RM970 million via a rights issue to repay its borrowings, pay for the acquisition of land in Cyberjaya, fund its property development and as working capital.

The issue price for the rights shares is expected to be fixed at a discount of at least 30% to the theoretical ex-rights price of its shares immediately before the price-fixing date, which would be determined and announced in due course.

“That [the rights issue] will bring in a lot of funds for us to pare down some long-term debts and also to raise some working capital. The banks and the parties are willing to underwrite and now it is a matter of getting approval from the shareholders. So, in terms of funding, it is already there,” Wan Abdullah says.
UEM Group has provided its irrevocable written undertaking to subscribe in full or procure the subscription in full of its entitlement under the proposed rights issue that is expected to be completed by April 30, subject to all approvals being obtained.

Challenges
There are challenges ahead for UEM Land, especially since it aims to become the biggest developer in the region, because the economy has yet to recover fully.

“At the company level, one challenge is talent management. We are a young company and we want to attract good talents because only with talents — human resource — can we achieve our goal. There is no point in having ambitious projects when there is no one to execute them… organisational challenge is one of my biggest,” Wan Abdullah says.

That, and UEM Land's aspiration to be to Khazanah what Singapore's CapitaLand is to Temasek, although UEM Land knows it has a lot of catching up to do.

The global credit crunch has been an obstacle for its projects in Bandar Nusajaya.

“We had difficulty selling during the global crisis. We brought some Singaporeans to the site… this is my third crisis and they have taught me that like the economy, the property market is a cycle. Everything that goes up will come down and vice versa.

“I see this as an opportunity — an opportunity for us to gain experience and improve ourselves internally.  We have also started to look at new projects because it takes time — about 18 to 24 months — to plan and develop a project to market. During this period, what we do is prepare ourselves for when the market comes back,” Wan Abdullah says.

Bandar Nusajaya
To develop Bandar Nusajaya as a regional attraction, several catalyst projects have been undertaken by UEM Land and Iskandar Investment Bhd. UEM Land has also created a new living environment in the township with the launch of four strategic initiatives — safety and security (Nusajaya Safety and Security Master Plan), sustainable environment (it has extended its grant with Universiti Kebangsaan Malaysia to develop a Nusajaya environmental master plan), telecommunications (infrastructure by Telekom Malaysia Bhd and Time dotCom Bhd) as well as an intelligent management city platform.

“We plan to make Nusajaya an intelligent city. Imagine a city with data on traffic, security, e-government… we want to create a single platform where this data can be uploaded and applications can sit on this single platform.

“This is still in the early stage and we have hired some consultants to teach us how to integrate all the systems in the city into a single platform that citizens and residents can use effectively,” Wan Abdullah says.

UEM Land is now in discussions with six prospective local and foreign partners (some in an advanced stage) for developments in Bandar Nusajaya, especially Puteri Harbour. Among the launches scheduled for this year are a 36-storey residential block and a 26-storey office building in Commercial South in Puteri Harbour. It is designed by HOK Architects of the US.

Nusa Bayu, a low-rise 5-storey apartment project in a joint venture with United Malayan Land Bhd, is also scheduled for launch this year. However, no details are available yet.

As for Singapore’s newly opened integrated resorts (IRs), Wan Abdullah says Singapore and Johor will be complementing each other in attracting visitors to the theme parks on both sides of the Causeway.

“For example, Singapore’s IRs with casinos are targeting adults and young adults while the proposed Legoland in Medini and Indoor Theme Park in Puteri Harbour cater mostly for families with young children,” he adds.

The tipping point for Nusajaya will be 2012, when all the ongoing projects achieve critical mass and a new demand structure evolves.

Newcastle University's medical faculty and Marlboro College Malaysia (an independent British co-educational boarding school), the coastal highway link to Johor Baru, the Bio Xcell theme park, the Columbia Asia Hospital, theme parks (Family Indoor Theme Park and LegoLand), hotels as well as Kota Iskandar will be up and running by then.

“By 2012, when all these are completed, a new demand trend for properties in Nusajaya will emerge,” Wan Abdullah says.

Currently, UEM Land has about 8,800 acres in the 23,875-acre Bandar Nusajaya while the rest has been used for infrastructure or sold to Khazanah and other parties. Of the 8,800 acres, some 5,800 acres are yet to be developed.

From its only baby of Bandar Nusajaya, UEM Land is slowly but surely expanding its development portfolio to other areas in Malaysia.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 796, Mar 8 - 14, 2010

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