City&Country: KFH Malaysia stays upbeat

Though it aborted two property finance investments here last year, the Kuwait Finance House (KFH) group remains optimistic about Malaysia.

altKFH (Malaysia) Bhd (KFHMB) CEO Jamelah Jamaluddin tells City & Country the company will explore direct investments in Malaysian property by way of purchasing the assets or shares of a company.

She did not disclose the amount the bank has allocated for direct investments in Malaysian property. However, the bank will be investing up to RM6 million in the 624-acre Medini Central @ Iskandar in Johor over the next 15 to 20 years. In the past, Jamelah stresses, KFHMB was mainly involved in financing local property projects.

One of KFH’s aborted deals last year was the en bloc purchase of The [email protected] Razak from Mah Sing Group Bhd. The RM237.1 million deal was to have been done via a special-purpose vehicle set up by KFHMB’s parent Kuwait Finance House KSC and Australia’s Autron Corp Ltd.

The second purchase that was shelved was the en bloc acquisition of Menara YNH, in Jalan Sultan Ismail, Kuala Lumpur, from YNH Property Bhd. In December last year, YNH Property told Bursa Malaysia that KFHMB had notified it in writing that the latter would “no longer be proceeding with the formalisation of the sale and purchase agreement as per the terms and conditions of the offer letter dated Jan 11, 2008”. YNH Property is considering taking the bank to court for backing out of its commitment to buy the 45-storey office tower worth RM920 million.

Direct investments, Jamelah explains, currently make up a very small part of KFHMB’s business. As a group, KFH has invested about RM3.35 billion in Malaysia since it began operations in 2005.

“Of the RM3.35 billion, a good part is directly from Kuwait and some from third party investors via our specialised funds. KFHMB sometimes takes only 5% of the investment opportunities. Most of the time we come in via financing rather than direct investment,” she says.

Total exposure to real estate financing and investments via equity participation constitutes about 20% of total KFHMB’s financing exposure.

Among its most notable financing investments are in the RM1 billion Pavilion retail mall and residential towers and the US$330 million (RM1 billion) investment in Medini Iskandar city development in Johor.

Others include The Oval and The Avare in the KLCC area, Sunway South Quay in Bandar Sunway, The Sanctuary in Penang, Lot B in KL Sentral, as well as the recently-completed The Pearl on Jalan Stonor.

Jamelah adds that the property-related portfolio constitutes less than 10% of the bank’s overall business. It provides financing according to the musharakah and/or mudharabah structures, in which the bank and customer form a partnership combining their capital or labour and share profits.

Medini Iskandar
KFHMB is looking at attracting both buyers for and developers to build high-end residential, commercial and office spaces at Medini Iskandar, located within Bandar Nusajaya.

“Our vision is to establish world-class educational institutions adopting the university of the future concept. KFHMB led a consortium in 2008 to invest about US$329 million in Medini Iskandar via Medini Central Sdn Bhd,” she says.

Medini Central is majority-owned by Al-Nibras 2 Ltd, a private fund company managed by Kuwait Finance House (Labuan) Bhd, which is in turn a wholly-owned subsidiary of KFH Malaysia. Its other shareholders are Iskandar Investment Bhd and Jumeirah Capital of Dubai.

Medini Central @ Iskandar is part of Medini Iskandar development, comprising Zones F, G and I, which will be the trade and logistics zone, creative zone and heritage zone respectively.

The remaining six zones in Medini Iskandar will be developed by Global Capital, which consists of Aldar Properties, Millennium Development and Mubadala Development Company.

The trade and logistics zone will offer top-notch integrated services including warehousing, distribution (transport and freight services), packaging, customs clearance and business process outsourcing. The creative zone will provide a digital ecosystem and infrastructure for international agencies, studios and companies involved in technological R&D, animation, broadcasting, movies, television and the digital content and applications sector.

The heritage zone is a development of exclusive residential properties including bungalows, semidees, link homes and condominiums. There will be a private school, clubhouse, resort house and suburban commercial centre.

“The project is attractive because of its location bordering Singapore and between the booming economies of China and India. Also, the government provides a range of attractive fiscal and non-fiscal incentives,” says Jamelah, who succeeded Datuk K Salman Younis as KFHMB CEO about two months ago. Salman was also KFHMB managing director.

Jamelah is not new to KFHMB. She was deputy CEO and head of the corporate and investment banking division in 2005.

What kind of properties would excite KFHMB? Jamelah says they like residential developments in the Klang Valley, especially in the Kuala Lumpur City Centre (KLCC) area and the Golden Triangle, because these products enjoy good a response from buyers in the Gulf Cooperation Council.

The company is also interested in investing in and financing residential and commercial projects, within the guidelines of syariah principles, in prime locations in Penang, Indonesia and Australia.

Going forward, Jamelah expects better prospects for the real estate sector in Malaysia as fundamentals are heading north with  the economy returning to growth in 4Q2009.

“The property market looks positive with the improvement in Malaysia and Asia’s GDP. Consumer sentiment and confidence are positive. However there is a need to tread with caution... as the US and Europe are still in the doldrums,” she says.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 801, Apr 12 - 18, 2010

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