The Edge Top Property Developers Awards 2013: No. 2 - Sunway Bhd
TWO years after the merger of Sunway City Bhd and Sunway Holdings Bhd, Sunway Bhd has grown from strength to strength. Its property development division has an extensive portfolio of residential, commercial, retail, leisure and hospitality properties, including its flagship, the 800-acre Sunway Resort City (SRC). SRC is the first sustainable Green Building Index-certified township in Malaysia.
To date, Sunway has delivered more than 20,000 properties with a gross development value (GDV) topping RM20 billion. It is among the top five property-construction companies listed on Bursa Malaysia and has a landbank of close to 2,800 acres, with a potential GDV of RM22 billion and assets exceeding RM7 billion.
The developer is targeting sales of RM1.5 billion this year. Thus far, it has achieved sales of RM1.1 billion as well as unbilled sales of RM2.2 billion.
Its property-construction collaboration (prop-con) has given the developer an edge by enabling it to better manage its construction cost, create better designs and plan ahead. Sunway’s business model of ‘Build, Own, Manage’, as seen in SRC, places it in a unique partnership position with its customers.
SRC, where Sunway remains the largest co-investor, is a prime example of the benefits of this business model. This includes the developer’s continuous investment in the township’s infrastructure, including a 1km canopy walk, a RM130 million private-funded road expansion and a partnership with the government to build Malaysia’s first elevated Bus Rapid Transit (BRT). The BRT is expected to serve some 500,000 residents around Bandar Sunway, USJ and Subang.
Sunway is ready to scale new heights with several high profile projects in the works. Chief among them is the much-talked about Sunway Iskandar in Iskandar Malaysia, Johor, where the developer is looking to replicate the model and success of SRC. The 1,800-acre development has an estimated GDV of RM30 billion.
The Edge met with the busy joint managing directors of Sunway’s property development division, Sarena Cheah and Ong Pang Yen recently, to learn more about Sunway’s plans, the growth of the property segment, its business model and how ‘following the infrastructure” is the way to go.
|Ong (left) and Cheah say that Sunway’s business model allows the developer and customers to have alignment in interest for the long term|
The Edge: How has the past 12 months been for Sunway?
Sarena Cheah: I think it has been relatively good, although the earlier part of the year was slightly slower due to the general election. But since then, our property segment has been doing very well for all our key locations as well as our new launches.
Ong Pang Yen: In terms of the organisation, I think we have put forward a few initiatives. One of the most important is the prop-con collaboration, which gives us the advantages that we are seeking. That has very much been worked out in the last 12 months.
What kind of growth do you expect to see in the next 12 months and what are your priorities?
Cheah: I think the country as a whole will still be enjoying healthy growth, which we believe will be good for the property market. The majority of our launches are still in Malaysia, and the location of our land is very strategic, as most [of our landbank] is located near to up and coming infrastructure. Anyone knows that property is about location and accessibility, so the new infrastructure is very key for us. We have at least three key projects next to public infrastructure [Sunway Velocity in Cheras, Sunway Damansara and SRC].
Our construction segment is constructing some of the public infrastructure, such as the light rail transit (LRT), mass rapid transit (MRT) and BRT. Prop-con is very strategic for us as we can build and plan ahead, especially for the locations we are in. We can see how the infrastructure will blend in with our developments.
In the long term, I see healthy growth because the country is still growing. We are in key cities where there is urbanisation. It’s more important that we give the right products in the locations that we are in. There’s also the fact that most of our products are situated within integrated developments, which means having amenities at your doorsteps. We also have standalone projects. Those are more landed housing within gated and guarded communities.
So when the locations are strong, typically the property will do well. The property segment is still very important to the country. With demand from the younger population, there will definitely be opportunities for us to grow.
Sunway is now one of the largest land owners in Iskandar, Johor. What is in store for Sunway in Iskandar?
Ong: We have two very successful townships in Bandar Sunway and Sunway City Ipoh. I think the key theme in Bandar Sunway is rehabilitation and in Ipoh, it’s conservation and preservation. This is very much in line with the group’s business philosophy of sustainable and responsible development.
In Iskandar, we will have another unique and exciting theme — there will be lots of space, nature, conservation activities to showcase nature, and to educate people about the importance of nature. It will exemplify how development and nature can co-exist and complement each other.
If you look at our land in Medini, we are the lowest in terms of density. The 1,800 acres that we own will eventually be developed to a plot ratio of less than one. The other parcels in Medini have plot ratios close to two, some as high as three or four. That’s as much as I can say for now.
How does Sunway Iskandar hold an edge over other similar developments?
Cheah: Like Ong said, we have done it once in Bandar Sunway and a second time in Ipoh, so we have the ability to replicate. As a developer we have a very unique model: we build, we own and we operate.
The sustainable part of this model is key for us to be able to sell a concept overall to an investor or homeowner at the same time as we build and own some of the assets within the development. That makes us a core investor with our customers, as seen in SRC. Anyone who buys a property in SRC will benefit from the fact that we are the largest investor in the township, and are actually the core investors. That’s why there is always continuous improvement, focus and commitment to keep improving and bring in the necessary values and amenities into the resort. We hope to replicate this model, maybe in a different form and manner depending on the development, but because we have this model, it helps.
We also have our construction arm. It helps a lot, especially in a rising cost environment. Because we work together right from the beginning, we can plan ahead in terms of cost management, and then we can design accordingly to what we want to serve consumers.
As a business model, the foundation is very strong. To replicate is really coming up with new creative ideas to excite the international and local markets to come, stay and invest. But of course, with over 1,800 acres (in Iskandar) it is going to take quite a long time, about 10 to 15 years easily. It’s also good that Iskandar has already created its own identity thanks to all the catalytic projects. It’s quite different from SRC when it first started, it had to catalyse itself because it was an old tin mine and people didn’t want to come here.
In Iskandar now, people are looking at what is happening. So our role there will be quite complementary to whatever has come up. It’s exciting and pushes us to be more innovative. As Ong says, we are trying to co-exist with nature. I think we will have a very compelling proposition when we start launching.
What does the Sunway brand stand for and what qualities (if any) do you think need to be improved on?
Cheah: In terms of our brand, we have a good challenge. We are known for many things, which are actually reflective of what we do. I think if you look at us as a developer, we are just not a mere developer. We don’t just build the hardware, we also run and bring in the software. We don’t outsource, we run it because we feel that there is a lot of synergy in knowing what our customers want. That really brings a lot of value to sustain the development.
Sunway actually touches many types of people in different ways. Our brand extents far and wide and when you put it together, we are community builders who enrich lives. We are very much part and parcel of what we build as we live within and grow together with the township.
Improvement will be continuous. Moving forward, it’ll be the quality of service. How do we keep improving ourselves to give better value to customers? I think we are doing that but there is always be room for improvement.
|The BRT is expected to serve some 500,000 residents around Bandar Sunway, USJ and Subang|
Share with us some of Sunway’s ongoing and upcoming projects.
Cheah: Aside from Sunway Iskandar, the next exciting projects will be Sunway Velocity and Sunway Geo. The 23-acre freehold Sunway Velocity is situated along Jalan Cheras, about an eight-minute drive from KLCC. The exciting thing about the project is that it will be served by two MRT stations and it already has one LRT station nearby. The anchor is the one million sq ft mall, and we also have serviced apartments, retail and office suites. We have already launched a few products and we will be launching more serviced apartments, retail and offices suites.
We also have Sunway Geo, which is located at the corner of Sunway South Quay in Bandar Sunway. We have launched retail and office suites, which saw overwhelming demand. We have hit new pricing levels as well. The fact that it has public transport (BRT) connected to it with amenities close by, brings a lot of value to the overall development. We will be launching Sunway Geo Residence this month’s end.
One of the very exciting things coming up in SRC is the BRT, which has already started construction. It will transform the whole landscape of SRC. Other than this, we have pocket developments in the Klang Valley such as in Sunway Damansara. We will also be launching mostly landed homes in Penang island and the mainland.
Will Sunway be expanding overseas?
Ong: At the moment, we are in China, Singapore and of course, Malaysia. These are the focal areas. We are considering Indonesia because it’s an up-and-coming place with lots of potential. The overseas market is not a priority at this point in time but that doesn’t mean we will ignore it. We have to have a very sure footing first so we won’t rush into things.
|The 1,800-acre Sunway Iskandar has an estimated GDV of RM30 billion|
Cheah: We have small presences in a lot of countries but we are consolidating and watching the market. Singapore has been quite exciting for us; we recently won a tender for a five-acre site on Mount Sophia, which is a very prime location. We are planning a low-rise condo project there.
We are also building medical suites and hotel – Royal Square @ Novena – in Novena, which the Singapore government has termed as the medical hub of Singapore. We take a minority position in Singapore, and our projects are joint ventures with Hoi Hup Realty Pte Ltd. I think moving forward; we will be more strategic and be cautious in terms of acquiring landbank there. I think Singapore still has good potential. Being present in Singapore and Johor is strategic for us because we will have consumers between these two areas now that Iskandar has taken off.
How will the uncertain economy impact Sunway?
Cheah: In property, confidence is important. The confidence of the people and access to financing are the key things to look out for. The global economic volatility has been there for a while, but if you look at Malaysia, we still need more housing due to urbanisation and a growing population. The number of housing supply has dropped slightly from last year. The key is matching the supply to demand.
We are in strategic locations, so I believe the demand is still there. The confidence will be in projects that follow the infrastructure, which is what we are doing. At the same time, we are looking for more land in different locations to spread our presence.
The property market is still driven by local demand and the number of foreign buyers is not high. I think the government is working hard to ensure the growth is still there. I don’t think Bank Negara will be tightening so much that we can’t get financing. What the government is cautious about is the speculation, not real demand.
The beauty of this is that we can offer something of value, whether it’s public transport or developments next to something you need or want. Even if we sell to foreign buyers, we won’t go for those who want to buy and flip. For example, we have Japanese buying residential units in Sunway Geo because it’s near the Sunway Medical Centre. So we provide more than just a unit; we try to give a more holistic offering. In that sense, it helps differentiate us a bit.
Of course if the market slows down, we have to manage the situation. This is where the merger of the two companies has served us well. We have the property and construction divisions working together to really drive cost management and better design. All in all, we are very well packaged. Now, it’s more about execution. Sunway group has such a big asset base to support us and we are in healthy financial position. I think that is very key moving into uncertain times. In the end, property is about holding power.
Ong: The property cycle will go up and down. I think as far as we are concerned, we are quite well-placed to ride it out. People go for projects near infrastructure. In Sunway Damansara, we have the MRT, in SRC we have the BRT, and in Sunway Velocity, we have the LRT and MRT. In a challenging market, people will be more discerning and selective; they need to take a longer-term position, so following the infrastructure can’t be wrong. The other thing is that our customers are not just buyers, they are more or less our partners because we will be there for the long term. So we have alignment in interest for the longer term.
This article first appeared in The Edge Malaysia Weekly, on October 14, 2013.
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