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AFTER many years in the construction business, Kimlun Corp Bhd has decided to make a foray into property development with a SoHo (small office/home office) development — Hyve — in Cyberjaya.
The project comprises two towers — one 20 storeys high and the other 21 — on top of a five-level podium on an elevated 4.95-acre freehold enterprise site. Built-ups range from 450 to 1,035 sq ft while selling prices start at RM215,000 or RM480 to RM670 psf. Soft-launched before the Chinese New Year, about 60% of the 768 SoHos have already been sold.
"Property development and construction … there is a synergy," says CEO Sim Tian Liang. "Construction is a downstream activity and property development is an upstream activity and we want to move in that direction — a vertical integration."
Kimlun started as Kimlun Earthworks Sdn Bhd on Oct 21, 1977, focusing on construction and infrastructure projects. Listed on Bursa Malaysia in 2010, Kimlun is headquartered in Johor and has an office in Damansara Uptown, Petaling Jaya. As a construction outfit, it has completed numerous residential and infrastructure projects in Johor and the Klang Valley.
Beehive concept
"The concept of Hyve is that of a beehive, of bees living and working in a hive," explains executive director Pang Khang Hau.
"There are no shops on the lower floors. From our research, we found that other projects near us have shops. To differentiate ourselves, we've decided to be mostly residential, almost like a full-fledged condominium," he says.
The decision to build SoHos was to maximise the development value of the land. Hyve is targeted at small families, investors and professionals, with rental yields estimated to be 6%.
The project will have 80,000 sq ft of space for recreation and facilities, including a business centre, clubhouse, swimming pool, jogging track, WiFi hotspots and private function rooms.
"The SoHos are already small, so we want to create some space for residents to have a work-life balance," says Pang.
The site, which was acquired in 2010 for RM65 psf, is on Persiaran Multimedia. It is not far from multinational corporations such as DHL, Fujitsu, HSBC and IBM, as well as several call centres.
Pang says the call centre workers will find Hyve ideal as they will not have to live outside Cyberjaya and travel to work. In any case, highways such as Lebuhraya Damansara-Puchong (LDP), ELITE Highway and Maju Expressway (MEX) make access to and from Cyberjaya a breeze. Hyve is expected to be completed at end-2016.
The decision to build a SoHo project in Cyberjaya is probably a sound idea, considering how well such projects have done.
According to PA International Property Consultants managing director Jerome Hong, SoHo projects in Cyberjaya such as Garden Plaza@Cyberjaya, Shaftsbury Square, D'Pluze, Serin Residency and The Place@Cyberjaya have recorded a sales rate of 90% to 100%.
But he cautions: "Though the sales rate of these under-construction developments is overwhelming and occupancy of existing projects such as D'Melor, Cyberia Crescent 1 & 2, Cyberia Smarthomes and Domain I&II, has averaged between 80% and 85%, the true demand remains to be seen."
However, he adds, better connectivity as well as several projects that have retail components, such as Shaftsbury Square and the upcoming D'Pulze and Centrus Mall, will slowly attract people to reside in Cyberjaya, transforming it into a self-sustaining township.
With so much happening on the Johor property development scene, it may seem strange that Kimlun has ventured outside its traditional stomping grounds. However, Sim believes this is necessary for the company's growth.
"As a company, we want to grow, including geographically," he says. "We have been doing construction in the Klang Valley for many years and see it as a vibrant area. We also want to be involved in property development. At the time we acquired the Cyberjaya land in December 2010, the Klang Valley was more active than Johor."
Among the construction jobs the company has completed in the Klang Valley are the Hijauan Saujana serviced apartments in Subang and low-cost flats in Jinjang North.
Johor
Kimlun's push into property development is slowly gaining momentum with recent land purchases in Medini in Johor and Nilai in Negeri Sembilan.
In Medini in Nusajaya — a key component of Iskandar Malaysia — Kimlun recently acquired 5.31 acres from Medina Land Sdn Bhd for RM31.06 million.
"Everything is still in the planning stage with a targeted construction start date of early 2014," says Sim.
Kimlun aims to develop serviced apartments, offices and retail products.
Does Sim see the Johor market overheating in the future?
"For the past 18 years, Johor's property market has been hibernating with very slow growth. With Iskandar Malaysia, the government has pumped in a lot of money to improve the infrastructure, such as highways," he says.
"The government has also provided a lot of incentives in the five flagship development areas. All these, along with impetus projects like EduCity and Legoland, have given people confidence in Johor. After the period of slow growth, I don't think there will be overheating. My only concern is that prices may be rising too fast, but demand is still there with investors from Singapore and China coming in."
How well the Johor property market performs will be known by 2015 as nearly 16,000 to 17,000 residential units will be completed by then, says Sim, adding that take-up rates have been good so far.
On whether the outcome of the 13th general election will cause any disruption to growth, he says: "The election will not cause much disruption to the progress of Iskandar as certain policies are in place to ensure development continues."
In Nilai, Kimlun acquired 42.5 acres of agriculture land for RM27.36 million in 2011, with plans to build factories. It is in the process of converting the land use from agriculture to industrial. If all goes according to plan, construction could start as early as 3Q2014.
For now, Kimlun remains focused on its main activities of construction and manufacturing concrete products. But the plan is to see property development contribute between 10% and 20% to the bottom line in the next 5 to 10 years, with construction accounting for 60% to 70% and manufacturing, 20% to 30%.
"We don't want to be too dependent on construction," says Sim.
Construction makes up about 80% to 85% of turnover now with the rest coming from manufacturing. Kimlun hopes to make an impact on property development by capitalising on its construction experience.
This story first appeared in The Edge weekly edition of May 6 - 12, 2013.
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