City&Country: The Edge Property Excellence Awards 2011-- Sunway: Bigger, better and stronger

The miserable wet day and gloomy skies did nothing to dampen the cheery mood of Sunway Bhd managing director of property investment Datuk Ngeow Voon Yean and managing director of property development (Malaysia) Ho Hon Sang.

The gentlemen proudly drew our attention to the numerous posters hanging on the walls of Sunway’s headquarters, with the fiery red words “Bigger. Better. Stronger.” leaping off the glossy surface — an apt declaration for the company following the merger of Sunway City Bhd (SunCity) and Sunway Holdings Bhd. The merged company — Sunway Bhd — was listed on the Main Market of Bursa Malaysia on Aug 23.

With the merger, Sunway’s property development business now has a combined unlaunched landbank of over 2,160 acres and an estimated gross development value (GDV) of RM22.3 billion. Its core businesses are property development and construction, and it has a market capitalisation of RM2.53 billion as at Sept 20.

Sunway has come a long way since taking on the development of an 800-acre wasteland in the mid-1980s and transforming it into the RM10.6 billion Sunway Integrated Resort City. The company has gone from strength to strength, delivering over 17,000 properties with a GDV of over RM20 billion.

Last year, Sunway achieved a first with the listing of Sunway Real Estate Investment Trust (SunREIT), becoming the first integrated real estate conglomerate in the country. The trust has an appraised asset value of RM4.38 billion and a market cap of RM3.011 billion as at Sept 20.
Among SunREIT’s assets are Sunway Pyramid Shopping Mall, Sunway Putra Place, Menara Sunway and Sunway Resort and Spa.

Sheltered from the elements in a cosy meeting room, Ngeow and Ho talked to The Edge about the future of the newly merged entity.

The Edge: How will the merger between Sunway City and Sunway Holdings help grow the property development business?
Ho Hon Sang: The merger is an opportunity to house all of Sunway’s property development activities under one roof of the merged entity called Sunway Integrated Properties Sdn Bhd.

Datuk Ngeow Voon Yean: There is now more collaboration between our property and construction businesses. With construction being in-house, there is a smoother flow of the development process. To further improve this, we have implemented the Virtual Design & Construction (VDC) methodology. VDC is an integrated approach to managing design and construction using digital information models to increase profitability and reduce risk exposure throughout the project. Ultimately, VDC methodology aims to achieve higher cost efficiency and greater time management for each project.

Ho: We will continue to place an emphasis on human capital development, which has been a part of the Sunway culture from the very beginning. We believe that our people are our strength. With the merger, we have the rationalisation of human resources from these two separate companies. We congregate the talent and resources to move forward stronger towards a common goal.

Can you share with us some medium and long-term plans and strategies for Sunway’s property development business?
Ngeow: If you look at the major developers, such as Mah Sing Group Bhd and S P Setia Bhd, they have gone into township and mixed-use developments in a bigger format. Sunway has been at the forefront of this concept of live, work and play, with Sunway Integrated Resort City being our flagship.

We like the word “integrated” because we feel that the integration of different components, various assets and businesses is very important and easier said than done. We have been working on this concept for many years and you can see it in many of our schemes.

Ho: Our short-term strategy is to focus on integrated developments. We believe this will be a unique feature of our merged entity and also as a property developer. The property division currently contributes about 70% to the group’s turnover.

We will also continue to drive the Lifestyle of Health and Sustainability (Lohas) philosophy. Lohas is now a strategy for our property development arm and all our future offerings will deliver the five pillars of Lohas — health and fitness, the environment, personal development, sustainable living and social justice. This is rational because today’s consumers are evolving towards green and holistic living choices.

Sustainability is meaningless without quality. We constantly take steps to deliver products and services of unrivalled quality and value for our customers. This has helped to solidify our status as a leading community master developer with a high-growth property development segment and a stable base of income from a high-yielding property investment segment.

In an increasingly competitive and constantly evolving market, how will Sunway Bhd continue to stay one step ahead of its competitors?
Ngeow: It is important for us to keep abreast of the latest concepts for consumers and developers. We are very conscious of our brand building. We do have a very strong brand positioning, and to achieve and sustain that, we have to make sure we are able to execute and deliver on our promises. We constantly strive to improve our talents and service levels. For example, although we get an average rating of about 90% from our hotel customers, every year, we aim to push that level higher.

A mitigating factor for us is that we have both property development and investment. The high growth rate of the property development division and the very stable income from the investment division form a unique business model.

Ho: It will be hard for competitors to copy the fundamentals we have. Sunway has vast experience in residential and non-residential developments, and the management of various types of assets such as hotels, medical centres, universities, shopping malls, theme parks and eco-luxury spas.
We are a complete supply chain. We control the destiny of our business journey from planning, constructing and launching to maintaining to unlock its value, again via SunREIT.

What is Sunway’s brand known for? What qualities do you think can be improved further?
Ngeow: We are positioned as a lifestyle community builder. We build to meet the demands and needs of the changing and evolving lifestyle of the communities. The market perceives us as long-term rectifiers. When we do things, we do it passionately for our customers. Every touch point is important to us.

Ho: I believe the market views us as stable, strong and very committed in what we do. There are a few hiccups here and there, but at the end of the day, the feedback we gathered from customers is that we solve their problems. We will not run away; we are here for many more years to come. We are not some fly-by-night developer that takes up a few projects, makes some money and disappears.

Ngeow: We do not deny there are problems and mistakes. Our policy is that once a problem comes to our attention, we will act on it immediately. We do not shy away from complaints; we mediate and try to rectify the problems.

What kind of growth can we expect to see from Sunway in Malaysia?
Ho: We will be looking at Penang and Ipoh in the north, Johor and Singapore in the south, and of course the Klang Valley. We have been in Ipoh and Penang for a long time now, but Johor is still a new market. There will be activities in Johor next year and if a good opportunity arises, we will acquire more land there.

There will be a focus on management expertise. Everything we do, we grow organically; whether we are building hotels, shopping centres or hospitals, we manage them ourselves.

We will also expand our commercial developments, such as education campuses, student residences, hospitals, shopping malls, hotels, resorts, theme parks, convention centres, corporate office towers and post-residential property development phase projects.

Ngeow: For property investment, we will be focusing on improving and building new infrastructure where our developments and investments are in Ipoh, Penang and the Klang Valley. This will help generate value and indirectly impact rental yield, which will help with recurring income.

We are constantly on the lookout for valuable landbank in Malaysia and overseas. We also seek strategic opportunities to extend our reach and expand our portfolio in the form of attractive retail, leisure, hospitality and commercial developments.

As for SunREIT, we acquired Putra Place, which comprises a shopping mall, hotel and office tower, at a public auction this year for RM514 million. That itself should be more than enough to keep the REIT active. Once the refurbishment is completed, the value is estimated to rise to about RM800 million. While we are looking at other acquisitions, we are taking a cautious approach as the market is showing signs of uncertainty. It is a scenario of waiting to see if there will be a better acquisition.

Can you tell us more about Sunway’s plans for regional expansion?
Ngeow: We are already in China, India, Australia and Singapore. We are actively expanding into China and India, two of the world’s fastest-growing economies. Sunway was selected by Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd to participate in the development of a 7,400-acre project in China, taking a development area of 102 acres.

In India, we have formed a partnership with Opus Developers and Builders Private Ltd to develop Sunway Opus Grand, a 35-acre development in Ameenpur, Hyderabad.

Ho: If the opportunity arises, we will look into integrated developments overseas. Integrated properties would require a bigger investment and some may need gestation periods, but we believe that given time and if we do it correctly with the right model and mix, we will be able to hold on to our income stream even better.

What significant upcoming projects can we look forward to?
Ngeow: On the horizon is the development of The Pinnacle in Bandar Sunway, a grade A office tower next to Menara Sunway with a GDV of RM440 million. Another project is SP3, a mixed-use development comprising office towers and retail space next to Sunway Pyramid Shopping Mall. SP3 has a GDV of RM375 million. The Pinnacle will be launched by year-end and SP3, early next year.

Ho: Up north, we will be developing the Lost World Mall, located within the 1,400-acre Sunway City Ipoh. It is the largest integrated township in Perak, featuring residences, The Banjaran Hotsprings Retreat, Sunway College, Lost World Hotel, retail outlets and the Lost World of Tambun theme park.

We are also expecting to launch very soon, the Sunway Montana project in Desa Melawati. The 56.4-acre freehold project comprises courtyard villas, semi-detached homes and zero-lot bungalows.

How do you keep the prices of your products at a reasonable level in the face of rising inflation?
Ngeow: We can’t run away from inflation, so we have to look at ways to improve productivity and setting key performance indicators to guide and steer the company to better performance and results. We are very optimistic about the implementation of VDC, which we hope will be able to help us optimise the cost of construction, with fewer mistakes and less wastage as well as seeking alternative sources for building materials. Of course, there are challenges, but we are definitely working on all fronts to see how we can rein in costs so that consumers do not have to accept the full brunt of rising costs.

Ho: We are also hoping the Economic Transformation Programme works. If it does, we can expect to see more economy activity, like in Hong Kong and Singapore. When the income level is higher, it can commensurate with the prices of real estate. It is important, because if the country continues to stay on the same path, we will be in big trouble.

With so much economic uncertainty in the world today, how will it impact the local property market? What is Sunway’s strategy in such uncertain times?
Ho: At the very least, sentiment will be affected. You read the papers and what you see are economic crises in Europe and the US, high unemployment rates and so forth. However, if you look at Malaysia, you will see a lot of projects being rolled out, such as the mass rapid transit project and the development of greater Kuala Lumpur. You do not hear about unemployment in this country. That means people still have monthly incomes, and with monthly incomes, a person’s state of mind is stable. So domestically, we have economic activity.

The banks’ savings rates today are so unattractive and those who have the money will look at properties as an investment and a hedge against inflation, especially properties by reputable developers.

I will not rule out a possible drop in demand, but I don’t believe there will be a drop in prices. Sunway is not a mass production developer; we work on creating innovative products and ensuring that our service is good. We believe these factors are strong enough to sustain our business.
We also have our investment business, which generates recurring income. So if we encounter any problems with our developments, we have the investment business to balance it out. That is the beauty of Sunway Bhd.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 878, Oct 3-9, 2011