City&Country: Magna Prima brings The Istana to Malaysians

For many years now, the overseas “hot spots” for Malaysian parents to send their children for tertiary education have included the UK, the US and, of course, Australia. The Land Down Under, compared with the other two countries, is closest to home, which could be why Malaysian children go there to further their studies and their parents invest in property there.

Niche developer Magna Prima Bhd saw this as an opportunity for its maiden foray overseas and acquired a mixed-use development right in the Central Business District (CBD) of Melbourne last year. 

“Why Melbourne? It is a Commonwealth country for starters, and its system and way of doing things is rather similar to ours in Malaysia. It is only a seven-hour plane ride away. Also, there are a lot of Malaysians in Australia — the country has been a second home for them. The shorter distance and the education system there are probably the main pull factors for Malaysians,” Magna Prima executive director Datuk Rahadian Mahmud Mohammad Khalil tells City & Country.

Melbourne, he says, is a fast-growing city and the size of its population is close to Sydney’s.
The acquisition of the project in Australia was completed in December last year. The project was then known as Dynasty Living and Australia-based developer Yucai Australia Pty Ltd sold it for A$26 million (RM83.92 million) due to financing problems.

“Basically, we acquired a project that came with approvals/permits and sales already attached. It was over 60% sold when we took over and our intention was to continue with it as it was, to complete it and deliver,” Rahadian says. The buyers were almost equally made up of locals and foreigners. The gross development value (GDV) of the project is A$210 million and the developer expects to make about A$50 million out of it.

The project comprises a 25-storey apartment building on a 2,700 sq m site. It has 320 units with built-ups ranging from 403 to 4,458 sq ft. Some 62% of the units sold by the previous developer were fully furnished one, two and three-bedroom apartments. The 403 sq ft one-bedroom unit was priced from A$309,000 while a 4,458 sq ft 2-storey penthouse was sold for A$1.3 million.

Magna Prima has since renamed the project The Istana to “suit us better by giving it a more Malaysian feel and associating it with luxury units”.

The remaining units were officially launched for sale on Feb 24 to the Malaysian market in Kuala Lumpur. Rahadian says there has been a slight 5% increase in the selling prices of the units, which come unfurnished.

“There is an option for ID packages if our buyers are interested. Our average price of about A$7,500 psm is very competitive compared with nearby developments. [The price is] actually lower than that of our competitors on the same street,” he adds.

In fact, Rahadian says due to the population growth and demand for property in Melbourne, there is still a shortfall and, therefore, room for capital appreciation. According to the Australian Bureau of Statistics, Victoria (of which Melbourne is the capital city) saw an 84,200 or 1.5% increase in population in June 2011 to 5.6 million from the previous year.

Rahadian says the main selling point of The Istana is its location. It is just 10 minutes by foot to the nearest train station (Flagstaff station) and five minutes to the famous Queen Victoria Market. It is also right in the heart of the CBD in Melbourne and close to shopping centres, Victoria University and Flagstaff Gardens, which, constructed in 1880, is Melbourne’s oldest garden park.

“We have only 120 units left to sell in The Istana and I am confident of selling them in Malaysia. Looking at how other Malaysian developers have sold their Australian properties here, we expect to do well,” says Rahadian.

A Malaysian developer that has seen good take-up of its recent launch in Melbourne is S P Setia with its A$470 million Fulton Lane, which comprises two apartment towers, one 29 storeys and the other 45 storeys, with a retail component on the ground level. Since June, more than 80% of the 291 units in the shorter tower have been sold.

Magna Prima has been receiving a lot of enquiries for The Istana. “We also have nine retail units on the ground floor, which are not yet open for sale. We may decide to keep the units for recurring income,” Rahadian reveals. The retails units have built-ups of between 40 and 151 sq m. The development also features facilities such as a residential theatre, which can accommodate up to 50 people.

Depending on the number of units left following the Malaysian launch, the developer may explore the possibility of appointing overseas agents to sell The Istana in countries such as Indonesia, Thailand and Singapore.

The Istana is Magna Prima’s first overseas project, which is in line with its business strategy. “This project came by chance. For now, we have no plans to expand overseas but if the opportunity arises, of course we will look into it. Malaysia remains our main focus, mainly in the Klang Valley.
“We focus on pocket developments with high GDV and fast turnaround so The Istana suits our business model. We took a look at it and decided it was good,” Rahadian shares, adding that there were many suitors for the project when it was up for sale.

In fact, Rahadian says the deal was done very quickly. He and another director personally went to Australia to seal the deal: “They [the seller] were quite impressed because while everyone else was just talking, we went there with the cheque,” he had disclosed in an earlier interview.

On the current property market in Australia, Rahadian says it has slightly levelled off but as far as the developer is concerned, it does not expect The Istana to be affected as its target market comprises international buyers.

“In Australia, there is a rule whereby non-residents can only buy new properties so any levelling of the property market will not really affect us,” he adds.

Meanwhile, construction of The Istana is set to commence soon and it is expected to be completed by end-2013.

Projects in Malaysia
Magna Prima has four ongoing projects in Malaysia and they include the three fully sold housing projects of One Sierra in Selayang, Seri Jalil in Bukit Jalil and Alam D’16 in Shah Alam, as well as the mixed-use commercial project Boulevard Business Park in Jalan Kuching.

The first phase of Boulevard Business Park  comprises shopoffices. They were launched in 2Q2011 and have been 80% taken up. To be launched in 2Q this year are 288 serviced apartments with an indicative price of about RM500 psf. The built-ups of the serviced apartments range from 950 to 1,300 sq ft. The final phase would be a retail mall, with a net lettable area of 150,000 sq ft, which will be launched in 2013.

The developer is set to begin construction on the much talked about new Lai Meng Girl’s School in Bukit Jalil in March. As reported, the 5.5-acre tract, which was purchased from Santari Sdn Bhd for the relocation of the school from Jalan Ampang, was acquired for RM10.7 million. The developer plans to launch a project with an estimated GDV of RM1 billion on the former 2.6-acre site of the Lai Meng Girl’s School in 2013. Plans are an office tower and a block of integrated hotel and residences.

Other projects in the pipeline are mixed-use development Gasing Lifestyle in Jalan Gasing, Petaling Jaya, with an estimated GDV of RM760 million and high-rise residential Nostalgia D’16 in Section 16 in Shah Alam. The developer says preliminary designs being explored for Gasing Lifestyle are for a multi-storey lifestyle retail and shopoffice development. The purely commercial project would have a net lettable area of about 65,000 sq m. Nostalgia D’16 is pending approval from the authorities but is envisioned to consist of two blocks of high-rise apartments.

Moving forward, Rahadian says, “We are in the midst of acquiring more land, particularly in the Klang Valley. We are not township developers. We focus more on fast turnaround niche projects, which take maybe three to five years to complete — mainly pocket developments in good locations.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 899, Feb 27-Mar 4, 2012