IOI Prop to build mall in Putrajaya

IOI Properties Bhd (IOI Prop) made its first foray into the retail industry in the mid-1990s, with the IOI Mall in Puchong. More than a decade later, the developer is now ready to realise its second mall — a garden mall located within a luxury resort.

The new mall — which will be developed within the IOI Resort in Putrajaya — when completed in 2013, will further boost the group’s recurring income, IOI Prop’s general manager Lee Yoke Har tells City & Country.

The mall will come up on a 33-acre site, on which also sit the Palm Garden Hotel and Putrajaya Marriott. Construction is scheduled to start later this year.

Lee says the new mall will cater for middle and upper middle-class families, with a focus on food and beverage (F&B) and entertainment.

It will have a gross development value (GDV) of RM800 million and offer a total net lettable area of 1.3 million sq ft, with 5,000 parking bays.

“It is more of a regional mall, targeting the residents of Putrajaya and the areas in its vicinity. It will have four shopping levels as well as two basements,” she adds, declining to elaborate further.

IOI Prop will not put the mall space on the market; these will all be leased out — having learnt a lesson from managing IOI Mall for the last decade.

“One lesson we have learnt is that in order for our property investment to be successful, we must retain ownership of the mall to control the tenant mix.

“Without being able to do so, all sorts of tenants will come in and one can lose control of the concept, which may later affect returns. So ownership and control is very important,” says Lee.

Will the mall be able to attract visitors outside Putrajaya?

Regroup Associates managing director Allan Soo  thinks so, given its size. Contacted by City & Country, he says the developer will have to look at the rest of the Klang Valley to make the mall more viable and different in terms of concept and merchandise.

Recurring income
The developer’s plan is to, within the next two years, increase recurring income contribution from property investments to 20% from the current 14% of the group revenue. The contribution is expected to grow further to at least 30% in five years.

For the year ended June 30, 2008, IOI Prop group revenue rose 11.8% to RM787.92 million from RM704.88 million in 2007. Net profit dipped a marginal 1.7% to RM390.27 million from RM397 million before.

To meet its target, the developer has been expand its retail portfolio. Recently, it introduced an integrated lifestyle office and retail development, IOI Boulevard, located diagonally opposite the IOI Mall.

IOI Boulevard comprises The Palette, a 108 by 240 ft retail courtyard inspired by London’s Covent Garden, and six office blocks — which have a total of 322 units — for a total net lettable area of 670,120 sq ft. At press time, some 70% of the units have been sold.

All 36 retail units at the Palette are for lease only as the developer wants full control of the retail tenant mix. So far, 50% of the units have been leased for between RM5.5 and RM6 psf.

While the recurring income contribution from IOI Boulevard may not be significant, compared with that of IOI Mall, the leasing only business concept adopted is strategic as it enables IOI Prop to have control the development and this in turn ensures sustainable returns, says Lee.

“IOI Boulevard is aimed at the professional working adults who may want to stay after working hours to relax in the evenings. It is a place for them to chill out; there will be bookshops, cafés and restaurants,” she says.

IOI Mall’s new wing
Besides IOI Boulevard, the developer also unveiled IOI Mall’s new wing in March. With an additional net lettable area of about 260,000 sq ft, the mall now bosts a total net lettable area of about one million sq ft to cater to the some 650,000 people living in areas such as USJ Subang, Seri Kembangan and Bukit Jalil.

The new wing has 100 retail units, of which 80% are now occupied by tenants such as TGIF, Papa John’s pizza, Seoul Garden, Elle, Sub Zero and Padini Concept Store.

Ronnie Francis, assistant general manager at Commercial Wings Sdn Bhd — a member of the IOI Group — says the wing has no anchor tenants, although there are “mini anchors”, with businesses that cater for teenagers, young adults and families. Commercial Wings manages IOI Mall.

“For fashion, we have the Padini Concept Store and Brands outlet. For household, we have Daiso and Ace Hardware. For F&B, we have Dynasty Dragon Seafood Restaurant and for entertainment, we have the expanded GSC (Golden Screen Cinemas), with nine screens, and Red Box Karaoke.

“These mini anchor tenants, together with the other tenants, provide the more affluent and sophisticated shoppers of Puchong with a new shopping experience. We expect to fill up the remaining 20% of retail space by year-end,” he says.
The old wing has more than 200 units and is almost fully occupied. It caters for the masses, with Jaya Jusco being the anchor tenant.
“The new wing complements the old one as it caters for a slightly higher-end market,” says Ronnie.

IOI Mall received more than 18 million shoppers last year, with the footfall growing about 10% annuallly in the last five years.
What is the impact of the current global financial crisis on IOI Mall? According to Ronnie, the impact has not been too drastic and tenants are renewing their leases.

“We have continued to raise rental rates but the percentage rise is slightly lower than before,” he adds.

What’s next
Besides the new mall in Putrajaya, IOI Prop plans to build themed retail and office parks in Bandar Puteri Puchong over the next three to five years.

“We have a 70-acre tract in Bandar Puteri Puchong, where we plan to build themed retail and office parks and target niche markets. They will be more lifestyle-oriented and we will be doing something like IOI Boulevard. We are also slowly moving into the higher-end market for our future developments,” she adds.

Lee says the company is studying the possibility of building a flyover or a tunnel in Bandar Puteri to cater for the increase in traffic to these new commercial centres.

Regroup Associates’ Soo says population mapping studies on the area show that the growth of Puchong is so rapid that submarkets are emerging within the district itself, thus allowing neighbourhood malls to become viable.

“So far, only IOI Mall serves this large catchment area of over 350,000 people in Puchong and there is a retail leak to Sunway Pyramid (in Bandar Sunway) on weekends.

“The hypermarkets are taking a significant share of the grocery side of the trade but there is still room for a number of small, well-planned malls to serve the population who live within a 10-minute drive of the district, who are not being adequately served by the existing malls,” Soo adds.




This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 758, June 8 – 14, 2009.