The Edge Top Property Developers Awards 2009: A strong comeback

Sime Darby Property Bhd clinches the top spot in The Edge Top Property Developers Awards 2009, proving that size does matter if you want to stay ahead of the competition. But beyond financial strength, being sensitive to market needs, building sustainable communities and constantly pushing the envelope when it comes to design and marketing properties are also what make this company outstanding.

Sime Darby Property Bhd’s managing director Datuk Tunku Putra Badlishah Tunku Annuar says the company made a conscious decision to not participate in last year’s edition of The Edge Top Property Developer Awards. “At the time, we felt we were not ready and we wanted to wait a year to consolidate so that we would make a strong comeback.”

And that the company certainly did by taking the top spot this year. As a result of a merger in 2007, which created one of the largest property groups in the country, Sime Darby Property has the wherewithal to be and grow as a formidable property player, both in the Malaysian and international markets.

(Prior to the merger, Sime Darby’s presence in the ranking was through Sime UEP Properties Bhd, which took the sixth spot in the 2007 edition of the awards.)

Sime Darby Property — a non-listed division of Sime Darby Bhd — was created when Sime Darby Bhd, Kumpulan Guthrie Bhd and Golden Hope Plantations Bhd were merged. In terms of landbank, Sime Darby Property owns one of the largest in the country — about 17,300 acres. Of this, 4,500 acres are ready for immediate development while 9,100 acres have been earmarked for development within the next five years.

Sime Darby Property has “emerged stronger, more efficient and more effective after the merger”, thanks to achieving economies of scale in developing and marketing its properties and adopting the best practices of the merged entities, Tunku Badlishah says. It is these strengths that have helped the company weather the current slowdown in the property market.

Like many players in the market, Tunku Badlishah says, the most challenging period in terms of sales was from 4Q2008 to 1Q2009. “It was an uncertain period for everyone. From our focus group studies, we learnt from prospective customers that while they still wanted to buy houses, the uncertainties made them delay the purchase. So, we came up with a scheme to allay their fears.”

The scheme — Parade of Homes 3 — offered prospective buyers of housing and commercial properties across all 10 of its developments various incentives, such as an interest rate of BLR minus 2.3%, special downpayment scheme (where customers can opt to pay in instalments of up to 12 months) and no interest charged during the construction period. Held from March 7 to June 15, the scheme’s third instalment raked in sales of more than RM1 billion. (The first, held in June 2008 over nine days and the second from Nov 14 to Dec 15, made sales of over RM246 million and RM100 million respectively.)

Having completed projects like Balmoral Hills in Singapore, the developer is actively looking for more opportunities onthe island stateTunku Badlishah acknowledges that these sales contributed to the company’s strong financial showing. For FY2009 ended June 30, Sime Darby Property recorded a pre-tax profit of RM458 million on a turnover of RM1.408 billion. That the company managed to pull through almost unscathed despite the economic uncertainties is a testament to the success of the merger.

“We have been able to use economies of scale, especially in the way we marketed the Parade of Homes; we were able to roll out a single marketing platform for all the townships. We were able to create a high level of awareness of the scheme and our townships by using the combined marketing dollars more effectively,” Tunku Badlishah says.

The developer was also able to secure savings of 5% to 30% in the purchase of materials by combining the purchasing power of all the various townships, he adds. The processes of the merged entities were also studied and the best practices selected to enhance the various departments within the company.

While Sime Darby Property appears to be reaping the benefits of the merger, Tunku Badlishah admits that there were challenges, especially in getting the right people for the respective jobs. “Even now, we are still undertaking job profiling for every position and competence analysis to see if we have the right person for the job.”

No room for complacency
While the company managed to weather the storm, Tunku Badlishah says it learnt an important lesson from the difficult times — one cannot be complacent. “We have to always be sensitive to market needs and react quickly to market sentiments,” he says, pointing out that this is key to staying ahead of the competition.

In reiterating the importance of creating a product that prospective buyers would desire, Tunku Badlishah refers to his experience as managing director of Auto Bavaria (a Sime Darby company that is the authorised dealer for BMW vehicles). “The product was an easy sell because people desired it and so it was only a question of affordability.” And while he is hesitant to equate a Sime Darby property to the luxury brand, the desirability factor, he says, is vital. “In the 1980s and 1990s, people would queue up for Sime UEP’s properties; the design of these properties captured the imagination of the property buying public then.”

Today, with more developers entering the market, he recognises that to stand out is a challenge. In response to this, Sime Darby Property has established a R&D innovation department tasked with scouring the globe for trends in property development. Every fortnight, the department churns out a report encompassing new launches and building methods and technology. “Through the work of this department, we come up with interesting product prototypes,” he says, adding that the developer expects to roll out some of these innovative designs across all its townships next year.

With its tagline of “Developing Sustainable Futures”, a key focus of the department is to come up with products that are more environment-friendly, says Tunku Badlishah.

One initiative that he is excited about is the Idea House, a prototype dwelling whereby the developer systematically adopts the strategies used in the construction of the house — in part or its entirety — for future projects. The 2-storey house currently under construction in Denai Alam will boast several green features, such as an East-West orientation, a rainwater-harvesting system and photovoltaic (PV) panels on the roof.

In designing green homes, the developer is also sensitive to the concerns that such homes may come with a hefty price tag. “While we hope that buyers can pay the premium, it’s also our job to make green products that pay for themselves. For example, in the case of installing PV panels, yes, it’s going to cost more but we tell our buyers the savings on the electricity bill over 10 years will cover the initial cost” says Tunku Badlishah.

Opportunities at home and abroad
While the outlook for the property market depends on the general economy, going forward, Sime Darby Property sees opportunities in all areas of its operations — development, asset management and hospitality and leisure. To this end, the company is focused on strengthening some of these operations, such as the rebranding of Darby Park serviced apartments and the renovation of the Kuala Lumpur Golf and Country Club.

It is also actively exploring opportunities overseas. With two recent projects under its belt in Singapore — the Orion and Balmoral Hills — Tunku Badlishah says the company has, over the last four months, been looking for acquisition opportunities on the island state. The developer is also exploring opportunities in the UK, both greenfield and brownfield endeavours.

Sime Darby Property is also set to launch its waterfront development, Eagles Cove (previously known as Oyster Cove), in Australia’s Gold Coast sometime next year.

Tunku Badlishah says the developer is keen to expand its presence in China too. The company recently acquired 400 acres in Weifang prefecture in China’s Shangdong province and is expected to commence on the groundbreaking for the mixed development this month. “We will continue to look for opportunities but at the moment, we’re concentrating on this development… we’re excited about it, especially since it is in the fastest growing province in China.”

Although revenue from its overseas operations comprises only 10% of turnover, Tunku Badlishah hopes this will grow to 25% in five years. “Ultimately, a 50:50 contribution is ideal,” he says.

As for the risks involved in doing business abroad, he says besides being prudent and conservative, the developer is fortunate that the Sime Darby group has a significant overseas presence. “The Sime Darby group is in 20 countries whereas [Sime Dary] Property is only in six countries. So, we have the advantage of piggybacking on the group.”

Meanwhile, on the home front, Sime Darby Property hopes to unveil its pilot “sustainable neighbourhood” development — the 1,000-acre Elmina East in Shah Alam — sometime next year. The layout plan that has been submitted to the authorities is pending approval.

Recently, the developer completed the concept plan for its Sime Darby Vision Valley, encompassing a development area of 80,000 acres that comprise Selangor Vision City (made up of Subang Jaya and Putra Heights, Carey Island, Ampar Tenang and Sepang Estate) and Negeri Sembilan Vision City. Spanning two decades and with a gross development value of between RM25 billion and RM30 billion, the project boasts several strategic clusters — sport, healthcare and wellness, education, aviation and maintenance, repair and overhaul, green-tech park, tourism and entertainment.

With the completion of the concept plan, the company can now embark on marketing the development, Tunku Badlishah says.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 776, Oct 12-18, 2009.

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