City&Country: Prime space for sale

Amanah Harta Tanah PNB 2 is disposing of three commercial buildings in the vicinity of Jalan Masjid India and Jalan Tuanku Abdul Rahman. For those eyeing this popular trading and shopping spot, the sale is an opportunity that does not come along often.

In downtown Kuala Lumpur, the bustling area of Jalan Masjid India and Jalan Tuanku Abdul Rahman (TAR) is considered one of the most expensive retail/commercial spots in the country. Many property consultants and agents can attest that despite the high rents, demand for commercial space in this location is still high.

For those looking for properties in this vicinity, three major commercial buildings are being put up for sale at the same time. These buildings, and two others in Penang and Ipoh, are under a real estate investment trust (REIT) — Amanah Harta Tanah PNB 2 (AHP2) — managed by Pelaburan Hartanah Nasional Bhd. The properties are being disposed of in line with the termination exercise of the trust. Trading of AHP2 units have been suspended since March 12 until the completion of the termination exercise. YY Property Solutions Sdn Bhd has been appointed the sole agent to handle the sale of the five properties. The tender submission date for Menara AHP2 in Penang is on Nov 5, and for the remaining four buildings, Nov 6.

It is understood that two buildings — Bangunan TAR on Jalan TAR and an office building with the address No 1,3 and 5 on Jalan Medan Tuanku Satu — have leases with banking group Malayan Banking Bhd (Maybank) that run till 2011. Bangunan TAR is fully occupied by Maybank, while more than 70% of the Jalan Medan Tuanku Satu property is occupied by Mayban Finance Bhd as well as other tenants. The third building is Plaza Mayban Trust on Jalan Masjid India, which is fully occupied by Mydin Mohamed Holdings Bhd.

All the properties are freehold, and the reserve prices for Bangunan TAR, No 1,3 and 5 Jalan Medan Tuanku and Plaza Mayban Trust are RM11.8 million, RM8.46 million and RM10.8 million respectively.

At the last revaluation of the three properties on Jan 15 this year by PHNB, in compliance with REIT guidelines that state real estate investments are required to be revalued once every three years, Bangunan TAR was valued at RM11.8 million and the Jalan Medan Tuanku property at RM9.4 million, while Plaza Mayban Trust was valued at RM12 million.

Property consultants familiar with real estate in the vicinity tell City & Country that the reserve prices were at fair value. Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam says the reserve prices of all the three buildings are currently at market value, adding that these properties would need to be upgraded.

Plaza Mayban Trust
Kumar says Mydin Mohamed Holdings, the tenant occupying Plaza Mayban Trust, a 7-storey building with a net floor area (NFA) of 32,952 sq ft on Jalan Masjid India, may be the best buyer for the property. “Now, there’s an opportunity for Mydin to buy the building. Previously, it was under a REIT, so there was no such opportunity. Besides, Mydin might have some nostalgic feeling about the property, and if it wants to buy the building, it will most probably be the strongest bidder,” he explains.

If Mydin moves out, it might be difficult for it to get a similar building in the same location, says Kumar. Moreover, Masjid India is a tourist attraction and a popular place for Indian traders and properties there, especially shoplots, are in demand, he adds.

According to Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng, the building can command a good rental rate as it is located in the heart of Masjid India, a well-known shopping area with the Indian and Malay communities. “Shops in Masjid India fetch high rents and it is rare to see any empty shoplot for long as there is a long queue of retailers waiting to set up business,” he adds.

Plaza Mayban Trust’s reserve price of RM10.8 million or RM327 psf does not appear to be expensive, he says.

This building is perhaps the most prominent among the three. KGV-Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua says an intermediate, 5-storey shop, with a NFA of 9,000 sq ft, on Jalan Masjid India can fetch about RM7.5 million today. “Based on this, Plaza Mayban Trust may seem like a bargain,” he says.

No 1,3 and 5 Jalan Medan Tuanku Satu
Raine & Horne International Zaki + Partners Sdn Bhd executive director Lim Lian Hong says the Medan Tuanku property is located in a secondary site and is congested most of the time. “The property has limited alternative use. It is good for a bank as it ensures a secure investment if the tenancy is long, with good rents of at least 8% gross return,” he says. The building has a NFA of 25,584 sq ft.

While Medan Tuanku has attracted a lot of local companies that have set up offices there, it does not enjoy the same vibrant environment as Jalan TAR and Jalan Masjid India, says Henry Butcher’s Tang.

However, he notes that the property, currently 70% occupied by Maybank, has good frontage and exposure to a busy stretch of Jalan Sultan Ismail. Hence, the reserve price of RM8.46 million or RM330 psf does not seem expensive.

According to Hall Chadwick’s Kumar, the building was originally three shoplots, which were later converted into one 5-storey office building. “I think Medan Tuanku has not reached its true potential, unlike Masjid India and Jalan TAR. There are some private Islamic fund offices in the area and so they may be potential buyers for the property for expansion purposes,” he adds.

Bangunan TAR
Bangunan TAR, a 9 ½-storey office building with a basement, is 100% occupied by Maybank. The property has a NFA of some 41,434 sq ft.

According to Henry Butcher’s Tang, Jalan TAR was the shopping destination of choice for city folks before the advent of big air-conditioned malls. “At that time, departmental stores, such as Globe Silk Store, Mun Loong [both have since ceased operations] and Kamdar, were household names with shoppers in and outside Kuala Lumpur.”

Although Jalan TAR has lost some of its business to new malls in Bukit Bintang, KLCC, the city fringes and the suburbs, Tang says Jalan TAR has retained its charm and appeals to the lower and middle-income groups.

He says the stretch of Jalan TAR near the SOGO shopping mall is busier and more prestigious than the one closer to Chow Kit. Thus, property values are higher around the SOGO area. “Bangunan TAR is closer to the Chow Kit area and its price will reflect its location. The reserve price of RM11.8 million, or RM285 psf, seems reasonable and should provide a decent yield if the buyer can manage to find tenants to fill up the building,” he says. Tang adds that the location is less prestigious for an office building and rents will have to be lower to attract companies to locate there.

Hall Chadwick’s Kumar says Bangunan TAR is probably the building with the weakest investment opportunity compared to Plaza Mayban Trust and the Jalan Medan Tuanku building because of traffic congestion, limited parking space and a lack of proper entrance and exits. “But then again, it may still appeal to some people,” he adds.

On the other hand, Raine & Horne’s Lim says Bangunan TAR is a secure investment because the tenant is Maybank. “There are parking problems as it faces a busy road, but perhaps the plus point is the monorail, which gives convenient access to other parts of the city,” he says.

Another two buildings previously under AHP2 that are being sold by tender are Menara Kinta (formerly known as Bangunan Mayban Trust Ipoh) in Jalan Tun Sambanathan, Ipoh, and Menara AHP2 (formerly known as Bangunan Trust Penang) in Lebuh Penang, Penang.

Raine & Horne’s director Michael Geh says Menara AHP2 is a purpose-built building which fronts Bishop and Penang Streets. “It is a prominent and strategic corner in the middle of Penang’s central business district,” he adds.

Menara AHP2 is a 14-storey building that includes five levels of car park and a basement with a NFA of 63,820 sq ft. It carries a reserve price of RM12.6 million. It is currently more than 50% occupied. Menara Kinta is a 15-storey office building with a basement level, NFA of 140,352 sq ft and a reserve price of RM16.2 million. The freehold building is currently about 60% occupied.

However, Hall Chadwick’s Kumar believes there is an oversupply of commercial properties in Penang. “While capital values remain high there, rental yields are low,” he says, adding that Penangites prefer shoplots to high-rise buildings for their businesses.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 778, Oct 26 – Nov 1, 2009.