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City&Country: Green change

While green developments are in the early stages of adoption in Malaysia, there is no doubt that they have come a long way. There are 27 Green Building Index (GBI) certified buildings in Malaysia while 179 applications have been submitted over the last two years.

These days, a new green-certified development is hardly a novel concept. Cynics may even dismiss the concept as a marketing gimmick. What is rare is a development going for certification after some of its phases have been sold.

Such is the case of the 43.7-acre integrated mixed-use development The Atmosphere in Seri Kembangan, Selangor. The development, a joint venture between property developer Tempo Properties Sdn Bhd and timber company Eksons Corp Bhd, has been awarded Singapore’s Building and Construction Authority Green Mark Certification (Provisional). It was also crowned the regional winner in the mixed-use development category at the 2011 Asia Pacific Property Awards.
The three-phase development comprises a hypermarket, shopoffices, SoHo suites, a hotel, serviced apartments and a regional retail and commercial centre.

Phase 1, which involves the construction of the hypermarket, has been completed. The nine-acre development was sold to Giant Hypermarket, which has since begun operations.

The 20.1-acre Phase 2 comprises 136 shopoffices, boulevard shops and retail outlets with a gross development value of RM300 million. The developer has retained about 20% of the units.

Phases 2A to 2D were launched in 2009 and are over 90% sold. The final portion of  Phase 2 will be launched in 2H2011. The proposed regional retail and commercial centre will be developed in Phase 3.

Khoo Boo Hian, CEO of Tempo Properties, acknowledges that the certification process was no walk in the park.

The developer faced resistance from the architects and consultants as the certification process required some changes to the approved designs.

“But the biggest challenge was the buyers because the sales and purchase agreements had all been signed. We couldn’t just make changes as we pleased,” says Khoo.

The last-minute decision to obtain Green Mark certification was not due to a lack of planning or the developer being fickle-minded. In fact, The Atmosphere had been conceptualised and designed with the environment in mind.

What initially stopped the developer from going for the green accreditation was the same thing that has hindered many other developers — cost.

“We talked to consultants about things like rainwater harvesting and photovoltaic cells and found that they were not viable. We had to pass on an additional 10% to 15% cost to the buyers,” says Khoo.

He adds that government incentives were of a limited amount and had an expiry date.

Then came Farizan d’Avezac de Moran, senior partner of Singapore-based GreenA Consultants.
“Farizan said she could help us get certified for a fraction of the cost that we were looking at. We gave her the brief, and she worked out all the items that we needed. She also busted the myth of recycled water and photovoltaic cells being compulsory items for a green development,” says Khoo.

Farizan obtained the certification with an incremental cost of only 2%. Her job was made slightly easier by the fact that the development already had green elements in place when she started.
“Tempo and Eksons were already green in terms of thinking and methodology. We did a study before we were appointed, and pulled out all the low-hanging fruit to present to Green Mark. We found that with a bit more investment, the development would meet the requirements ” says Farizan.

Farizan feels that most developers, hampered by a lack of understanding, can be hesitant to adopt green concepts.

“I think the focus is on what is out in the media and, somehow, green is sold in a Bento set where you have this in one corner and that in another corner. You get the common things like solar panels, water harvesting and recycling but there is actually so much more to green, especially in practice,” she says.

Khoo offers another explanation as to why developers are slow to adopt green concepts. The benefits are only tangible for standalone buildings because they are owned by the developer. The benefits come in the form of reduced electricity costs and premium rents due to their appeal to environmentally conscious multinational companies.

“However, for a development like ours where the units are sold, the developer will not see the direct benefit. To some developers, it will seem as if they are just spending money,” says Khoo.

Different developers have different business perspectives; some seek certification to sell or rent at a higher price while some sincerely want to go green, says Farizan.

“Do you approach green from a bottom line point of view or from a sustainable point of view? At the end of the day, it needs to make economical sense. Combining a business perspective with a green agenda is something that needs to be done really well,” she says.

Cost is often the biggest hurdle. Farizan has met developers that are under the impression that going green would cost them a substantial amount of money.

“The world standard is actually a 0% to 2% increase in cost. We have shown that 2% is possible but if you want to go platinum and spend more, it is up to you.”

Another notable accomplishment is that all the materials used for the construction of The Atmosphere were found locally, dispelling the notion that certain materials for green developments have to be imported at a higher cost. But finding the right suppliers did require resourcefulness.
“It was not just about finding the suppliers, it was also about the cost. It was a big challenge but all our hard work paid off, and I think we learned from the experience,” says Farizan.

As for Khoo, he hopes that the people involved in the project will apply the knowledge they have gained to their other projects.

“I feel that everyone has benefited from this experience. We actually helped some of the suppliers send their products for testing and certification. Now, the certified products can be a new source of business for them,” says Khoo.

Selling green to buyers
Creating a clearer understanding of green is crucial to buyers as without demand, there will be no supply.

“You can’t sell the Green Mark or GBI logo to buyers, it will mean little to them. You have to sell the benefits such as low overheads, continuous rental and capital appreciation, and how they can help buyers,” says Farizan.

She adds that it is also important to explain the functions of the green features, otherwise an owner may decide to replace the double-glazed glass with something else without consideration.

The developer organised briefing sessions so that the architect and Farizan could explain the whys and hows to the buyers.

The first question the buyers asked was expected: ‘’Do we have to pay extra?”

“The answer is no. The units are already theirs, and we don’t expect them to pay extra. What we want is in the long term, once the owners and tenants start to see the benefits for themselves, they will consider buying or renting only green developments in the future,” says Khoo.

Farizan was pleased with the response, especially since it was obvious that the buyers were truly interested to understand more about green developments.

Their work even captured the attention of the Subang Jaya Municipal Council (MPSJ), which extended an invitation to the team for a discussion.

“They had a lot of questions for us. They were baffled as to how we managed to obtain the Green Mark certification without the common features such as solar panels. It was an interesting session and, again, very encouraging to see interest from the authorities,” says Farizan, adding that this was more proof that education is important.

However, Khoo stresses that green is just one aspect of The Atmosphere. Careful considerations have been given to its design. Among its unique features is a two-ground-floor design, which Khoo says is the first of its kind in Southern Klang Valley.

“Usually for shops, the third floor and above generate much lower rental yields. So, we have created a car park on the bottom floor and a boulevard on the top floor to generate traffic flow for the upper floors,” he explains.

Tang Seng Fatt, executive director of Eksons, adds that there is also “a 1.3-acre piazza which serves two functions; it creates human traffic and gives the inner shops more visibility. This is to ensure that there are no dead areas, and every row and shop will have its own value.”

The developer is striving to create a shopping mall experience. To achieve that, the developer has put in a playground, public washrooms, nursing rooms, ramps and rails for the disabled, and public phones.

Farizan is particularly impressed by one feature. “It has a maze! And such a nice one at that,” she says.

She praises the landscape architect and horticulturist for not just their work with the greenery in the development.

“Green can create brand recognition and with such wonderful greenery, I can see people coming in, creating and enjoying activities in The Atmosphere,”  says Farizan.  

Increasing value
To control the tenant mix, the buyers have signed agreements that give the developer exclusivity for a certain period of time to lease out their units.

“Our newly set-up leasing team has its work cut out for it. We don’t want to just sell and leave. We want this place to thrive and become a vibrant hub for this part of the Klang Valley,” says Khoo.
He stresses that this is not a leaseback option but rather a service for the buyers. Based on market research and with the added green certification, Khoo estimates an 8% rental yield for the units.

“When we first launched, the rental yields were about 6%. So once everything is in place, 8% should not be a problem.”

However,  the developer is looking at a lower yield for its own units.

“We need to get the units occupied first in order to draw in the crowds,” explains Khoo.

Even though the first handover of Phase 2 is only scheduled for 2H2011, capital appreciation of the units has already gone up by about 15%.

“We have owners saying they have ready buyers willing to pay such prices, which is heartening. But we are controlling the situation and have asked them to wait until the handover,” says Khoo.
The indicative price for the upcoming launch of Phase 2E will be RM400 to RM500 psf, a jump from the RM200 psf at its first launch two years ago.

Tempo Properties, which has a portfolio of residential projects in Taman Cengal Utama, Taman Prima Tropika and Seremban, will focus mainly on Phase 3 of The Atmosphere for now. Phase 3 is still in the planning stages.

“There are already several major shopping malls in the area such as IOI Mall and The Mines. So it is important for us to know how to position ours,” says Khoo, adding that Phase 3 will also include a hotel, serviced apartments and office blocks.

He believes that by going green, the developer has addressed the needs of its three main stakeholders — the investors, the tenants and the customers.

“Investors can be assured of high rental returns and capital appreciation while tenants will enjoy brisk business. And customers will have a place to shop, eat and play,” he says.


 

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 864, June 27-July 3, 2011

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