Permaju Industries Bhd, a Sabah-based company listed on Bursa Malaysia with a market capitalisation of about RM190 million, is set to diversify into property development with its first launch in 3Q2012.
The company, which was incorporated in 1996, has its core business in the automotive industry. However, it is making its foray into property development with a mixed-use township known as Princess Heights, a 109-acre leasehold tract in Sepangar just 15 minutes from Kota Kinabalu’s town centre.
Princess Heights, which will be split 80:20 between residential and commercial units, will be developed in two main phases. The development sits on a slightly elevated tract with views of the surrounding mountains in Kota Kinabalu. It has an estimated gross development value (GDV) of at least RM700 million, which the developer believes may increase within the six years it will take to complete the township.
Permaju Industries’ core business was timber-related until it diversified into automobile distribution and the provision of automobile-related services. The group has set an ambitious target for its new property division — it wants the property business to contribute 50% to its profit after the third year, executive director Datuk Eddie Chai Woon Chet tells City & Country. He adds that there will be more announcements in the near future on Permaju Industries’ property ventures.
Permaju’s entry into the property sector is via its acquisition of 70% of Hardie Development Sdn Bhd (HDSB) for RM33.68 million in 2010. HDSB had in 2003 entered a joint venture to develop Princess Heights with Supernesa Sdn Bhd, which in turn has a development agreement with Sabah government agency Sabah Housing and Town Development Authority to develop Princess Heights on the land owned by the state.
Chai says, according to the agreement, HDSB needs to contribute two blocks of apartments to SHTDA.
“Why property? We chose property development because we think it is the most profitable industry for us to venture into. We chose Kota Kinabalu because Sabah was where we started our timber business, so we thought it was only appropriate that we developed our first project there,” he adds.
The 33- year-old Chai is no stranger to property development as he has more than 10 years of experience developing the Alamesra township in Kota Kinabalu and projects in Kuala Lumpur under his own private company. According to an article in City & Country last July, Alamesra is located just opposite 1Borneo Shopping Mall and Universiti Malaysia Sabah. The 265-acre leasehold township project with a GDV of RM1.3 billion is more than 50% complete.
Chai believes there are still many opportunities in Sabah. “The property market has been very active there, especially residential. Newly launched terraced homes in Kota Kinabalu, with built-ups of 2,100 sq ft are easily being sold for RM600,000. There are still not enough houses in Sabah and the younger generation from Sabah who may currently be working in Peninsular Malaysia are looking to buy their own property back home.
“Another interesting thing is that no matter if they are young or old, Sabahans like to invest in property. In Kuala Lumpur, one may look to buy cars or something but in Sabah, the business people seem to be interested in property. This has made the Kota Kinabalu property market vibrant over the past years. And foreigners mainly target the condominium market,” he says.
The first launch in Princess Heights will comprise walk-up apartments and 60 shopoffices. The 3-storey shopoffices with built-ups of 3,400 to 3,600 sq ft have indicative prices of around RM700,000, or between RM270 and RM300 psf. The walk-up apartments have an indicative price of RM200 psf with an average built-up of 1,000 sq ft. Apartments with lifts, which will be launched at a later date, have an indicative price of RM250 psf.
“There are many apartments in Kota Kinabalu and sales have been good. For example, some newly launched apartments in the town centre are selling for RM500 to RM600 psf and these are smaller units of around 700 sq ft.
“There is a lot of demand for properties below RM1 million and we are confident that we can sell well. For example, our walk-up apartments will cost below RM300,000. There have been a lot of enquiries coming in since we put up our hoarding in the area and started our earthworks and infrastructure works. We are in the midst of piling for the apartment block. We have not even started marketing our project,” Chai says.
Permaju Industries is also looking to develop a 10-acre commercial tract there and recently announced that the anchor tenant for its commercial component will be Mydin Mohamed Holdings Bhd, a local retail organisation with more than 72 outlets nationwide. While further details were unavailable at press time, the commercial tract agreement will be with Permanent Engineering Sdn Bhd, which will act as a project management company and lease the commercial component to Mydin Holdings for 20 years. A Bursa announcement states that the total development cost of the commercial project is about RM150 million.
Chai believes the land value of Princess Heights will increase up to five times its current value of RM33 million with the attractive offerings in the commercial tract, which is situated in the middle of the township. He says Princess Heights is targeted mainly at the local market. Chai adds that future projects from Permaju Industries would continue to cater for the medium and higher-end markets.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 913, June 4-10, 2012