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The Edge Top Property Developers Awards 2013: No. 5 - IGB Corp Bhd
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FOR an established name in the property industry, IGB Corp Bhd has been relatively low key in the past. However, things are changing recently — the group been making aggressive strides into Johor.
In an impressive show of its confidence in Iskandar Malaysia, last year, the IGB announced plans to replicate its successful Mid Valley City township down south, with a mall measuring 1.5 million sq ft, hotels, upmarket homes and commercial components.
In June this year, it bought a controlling stake in Johor-based Distinctive ACE Sdn Bhd for RM33 million cash. The privately-held property firm purchased four parcels of leasehold land in Pulai, Johor, from Medini Land Sdn Bhd for RM99.92 million last November. In the same month, IGB announced it would jointly undertake an integrated commercial project with Distinctive ACE in Medini. With a gross development value (GDV) of RM2 billion, the project will cover over 18 acres and will have retail space, offices, serviced apartments and a hotel.
Around the same period, IGB entered into a joint-venture agreement with Tower Ray Ltd for the establishment of a 50:50 JV company, Black Pearl Ltd.
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| Good opportunities relate to location and the price of an asset. IGB has no preferred geographical region or country when seeking opportunities to acquire assets. With that said, however, regions or countries that are more accessible and have a good legal and tax framework, and banking infrastructure would be among the top consideration for our real estate investments. — Tan |
IGB managing director Datuk Seri Robert Tan shared in an earlier interview in August that he was mulling several big projects with the cash raised from its hugely successful retail mall real estate investment trust (REIT). This could include another sizeable venture into Johor and the UK.
Iskandar Malaysia has tremendous potential for long-term growth, he says, when contacted in an email interview recently on his upcoming plans. Tan, however, remained coy about the details of his upcoming projects in Johor and UK, explaining that the announcements will be made to Bursa Malaysia “at the appropriate time”.
IGB has a unique strategy, which sets it apart from other property developers. Its main strategy is to build and keep, making it one of the biggest landlords in town. Indeed, the group has done well for itself by sticking to this plan — most of its profits are derived from recurring rental income from its diverse portfolio of long-term commercial, retail, residential and hospitality assets spanning Asia, Australia, the US and Europe.
On top of its core property investment portfolio, IGB manages a portfolio of non-property-related investments, which mainly consist of civil, building construction, investment holding and project management services.
In a filing with Bursa in end-August, IGB said its net profit rose 9% year on year to RM61 million in the second quarter ended June 30. The group credited the profit growth to a larger contribution from the property investment and hotel divisions. However, its revenue slid 3% to RM251.8 million, which it said was due to the lower contribution from the property development division. Meanwhile, the group’s first-half net profit fell to RM109.1 million versus RM113.4 million a year earlier while its revenue rose to RM494.8 million from RM483.7 million.
Below, Tan shares his plans for IGB going forward.
The Edge: Unlike most developers, IGB gets the bulk of its profits from its hotels and renting out commercial space, instead of its developments. What is your secret to maintaining such a successful formula?
Datuk Seri Robert Tan: IGB’s strategy to build and keep, and not build and sell, arose from a strategic shift by the top management more than 10 years ago to expand the group’s recurring income base in its core business activities of retail, office, commercial as well as hotels and hospitality. By practising husbandry in the management of these assets, we ensure their continued attraction and value.
Any chances of another REIT happening in the near future?
The group has substantial office, commercial as well as hotel and hospitality assets. Our office and commercial assets have a total net lettable area of about 2.2 million sq ft. Another 800,000 sq ft will be completed by 2016. We currently own 13 hotels — eight of which are in Malaysia and five overseas, with a total of around 5,500 rooms. We are constructing two hotels in Penang and one in Ipoh, which will collectively contribute 890 rooms. We will also be converting an office building in Sydney, Australia, into a 270-room hotel.
No formal decision has been made to list another REIT at this time.
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IGB has branched out into education with the IGB International School in Sierramas, Sungai Buloh. How key is this new division to the group?
The group’s venture into education is driven by our belief that this sector continues to be underserved, and that it will provide the group with a better platform to carry out our part in corporate social responsibility, which is to provide bright and needy students with access to an international standard of education. Although it is not important for the sector to contribute significantly to the group’s profit, we do not foresee that it will require any subsidy in the longer term.
The group is on the lookout for opportunities abroad. Which region or country have you set your sights on and why?
Good opportunities relate to location and the price of an asset. IGB has no preferred geographical region or country when seeking opportunities to acquire assets. With that said, however, regions or countries that are more accessible and have a good legal and tax framework, and banking infrastructure would be among the top consideration for our real estate investments.
It was reported that IGB has established a JV company, Black Pearl Ltd, to explore opportunities for property investments and other businesses in the UK. Can you elaborate more on this venture?
Announcements will be made to Bursa at the appropriate time.
IGB has been investing in Iskandar Malaysia in a big way in the past few months. Why do you think it is the right time to move into the state?
Iskandar Malaysia has tremendous potential for long-term growth, which was well explained in a recent article in The Edge by Datuk Syed Mohamed, the president and CEO of Iskandar Investment. IGB already has a presence in Johor with our Southkey project. Thus, with the group setting up its infrastructure in Johor, it made sense to participate in the Iskandar region, especially when the opportunity arose for us to acquire a lease for over 18 acres of land in the prime Zone A in Medini.
Does IGB have any other development plans closer to the Klang Valley in the near future?
We have a 500-acre landbank in Kundang, near Rawang, which has been earmarked for future development. Our other land parcels in the Klang Valley are located at Wangsa Maju, Melawati and Damansara Heights.
Some RM500 million has been earmarked for various projects locally and abroad. Can you reveal more details about these projects?
That capital expenditure is for investment in the group’s core businesses, both local and overseas, as well as the group’s new international school at Sierramas, Selangor, which is scheduled to commence operations in September 2014.
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Your outlook on the property market in 2014?
Barring unforeseen circum stances, we expect the local property market to remain stable in the year ahead.
In your opinion, what are the biggest challenges in the market now?
The biggest challenges are external factors, which is primarily the global economy. Although the Asian economies are relatively stable, a cushioned contagion effect cannot be discounted if the US and European economies do not perform according to market expectations in 2014.
Your take on the topic of affordable housing?
IGB supports a sound government policy on affordable housing. This is because we firmly believe that Malaysians from all walks of life have a right to own decent housing. Thus, affordable housing should be made available to those who are economically deserving. However, such a policy must be a careful and structured one which must not affect the value, aesthetics and desirability of any development.
This article first appeared in The Edge Malaysia Weekly, on October 14, 2013.
