City&Country: LBI Capital to diversify into hospitality

Niche developer LBI Capital Bhd looks set to diversify into the hospitality industry with its proposed hotel developments in Genting Highlands and Batu Ferringhi in Penang.

The Genting Highlands project will be in Gohtong Jaya, near Awana Genting Highlands Golf and Country Resort, on a 5.3-acre site that was acquired last year for RM5.5 million. There are plans to capitalise on the popularity of the highland resort.

“There are not enough hotels to cater for all the visitors to Genting,” says LBI Capital managing director Datuk Jeffrey Ng Ching Heng. “When Genting Highlands has a big event or concert, nearly all the hotels in the area are full. So we’ve decided to build a hotel to meet this need.”

Hotel suites will be sold and investors can then lease them back to be managed by a hotel management firm which has yet to be selected. “We are hoping to offer investors a 6% guaranteed return over a period of six years,” says Ng.

Room sizes will range from 480 to 1,600 sq ft, and the suites will be priced between RM300,000 and RM1 million. They will be launched in July or August. The hotel block, with 400 rooms, has a gross development value (GDV) of RM120 million.

The developer will also build an 18-storey luxury serviced apartment tower, in which each apartment unit will take up the entire floor. “We hope to secure a hotel management company to manage it once the development details have been sorted out,” says Ng, adding that the units will be either leased back to the developer or the hotel operator to be managed. Another 15 to 20 villas may be built later depending on how well sales of the other phases go.

LBI Capital also has a 4.5-acre piece of land in Batu Ferringhi, on which it plans to build concept shops and a boutique hotel. This will be the group’s maiden project on the island. The developer bought the parcel in December 2010 for RM15 million. Ng says the group plans to launch this project next year.

Some property developers are happy to remain niche players, preferring to take on small projects in prime areas. LBI Capital is one such developer. It was incorporated on Aug 21, 1978, and listed on Bursa Malaysia in 1991, but it had started as Len Brothers Industries Sdn Bhd in 1965, later changing its name to Len Brothers Rubber Products Industries Sdn Bhd.

In 1995, the company was sold to Rumpun Hijau Capital Bhd. Then in 2003, Ng Tiong Seng Corp Bhd took over Rumpun Hijau. On Oct 4, 2004, the company changed its name to LBI Capital. Its core business had been the manufacturing of motor vehicle parts and rubber mould products since 1979 before entering property development in 2004. Its property development strategy is simple — niche developments in mature areas, preferably in the Klang Valley.

Nonetheless, should a good opportunity come up outside the Klang Valley, the group will not let such opportunity slip by, hence the proposed projects in Genting Highlands and Penang.

“We are always on the lookout for land that has development potential,” says Ng. “We cannot afford to be choosy. So long as the land meets our return on investment [target] of 20% or more with little upfront for investment, we will consider it.”

LBI Capital has developed projects valued at almost RM450 million over the last seven years.

These projects include the 3½- storey shopoffices in Taipan Damansara 1 and 2 in Ara Damansara, which have a combined GDV of RM212 million; the shopoffices, bungalows, terraced homes and shop apartments (GDV: RM60 million) in Puncak Lagenda in Taman Bukit Mewah, Johor Baru; the 2- and 3-storey shopoffices (GDV: RM73 million) in Putra Walk in Petaling Jaya; the zero-lot bungalows (GDV: RM62 million) in Avenue Putra in Petaling Jaya; and the 2-storey terraced and semi-detached houses (GDV: RM24 million) in Pinggiran Permata in Sri Gombak, Kuala Lumpur.
Its upcoming launches in 2H2011 include Aman Jaya, I-Hub Puchong and Desa Saujana, which are expected to generate an estimated GDV of RM200 million.

Upcoming launches
Aman Jaya is a luxury residential product that will be sold by invitation only. The 11 units of 3-storey bungalows will be developed on a 3.1-acre leasehold parcel in Section 14, Petaling Jaya.
The land, situated at the boundary of Section 14 and Kampung Tunku, and not far from the Taman Paramount LRT station, Aman Jaya park and Sri Aman secondary school, was bought in May 2009 for about RM74 psf. The GDV of the project is RM50 million.

“I spoke to several people who live in PJ to get an idea of what [type of] house they wanted to live in,” says Ng. “The feedback included having three generations living together under one roof, thus I had a lift installed in the house so that the elderly can access the upper floors without using the stairs.”

The bungalow will also have a courtyard on the top floor and a meditation area, which Ng says can be used for meditation, yoga or prayers, irrespective of the owner’s race or religion. With built-ups starting from 7,100 sq ft and land sizes from 7,000 sq ft, the bungalows will be priced from RM3.9 million to RM6 million.

Ng says he isn’t rushing to launch the project as he wants to ensure that the residents living in the vicinity are not affected by the development work in anyway. He plans to complete the earthworks first, then the perimeter retaining wall and piling, before launching sometime in 2H2011.

Ng’s son, Raymond Ng Yew Foong, a director of the group, says a private viewing for potential buyers will be held with the hope that all the units will be sold on the same day.

The developer has another residential project — Desa Saujana@Bandar Saujana Putra in Hulu Langat, which is not far from Puchong — where it is building 170 units of 2-storey terraced houses. There are two types of houses to choose from, namely Saujana and Putra. The houses, measuring 70ft by 20ft with built-ups from 1,620 sq ft, are priced between RM338,000 and RM578,000. The leasehold project, which sits on 10.2 acres, has a GDV of more than RM60 million.

Phase 1 of Desa Saujana, which has two phases, was pre-launched on April 11. Of the 74 units launched, 33 have been sold to date.

The developer is also going to launch an industrial project in Puchong Mas called Puchong I-Hub soon. The 36-acre leasehold development will feature four semidee, 26 detached, and 15 low-cost factories. The built-ups will range from 10,000 to 16,000 sq ft, while the land sizes will be from 20,000 to 40,000 sq ft. Starting from RM3 million, Ng says the factories are ideal for small and medium enterprises.

Ng says that since LBI Capital has these projects underway, it prefers to look for land when its projects are nearing completion so that the group does not get stuck should there be an economic downturn.

Other projects in its pipeline include the building of SoHo units on the last parcel of land in the group’s Puncak Lagenda development in Johor, which is about 12km from Johor Baru city centre.

“It’s just behind Kemayan City, an abandoned shopping complex, which we understand will be revived,” says Ng. The 13-acre development has shops, apartments, terraced and semidee houses — all fully taken up. The proposed SoHo units on the 1.2-acre remaining land are pending approval.

LBI Capital also recently acquired a 2.5-acre commercial leasehold plot of land in Shah Alam. Plans for the land are still being finalised.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 863, June 20-26, 2011