L&G eyes land worth RM1b GDV

PETALING JAYA (May 14): Land & General Bhd (L&G), widely known as the developer of Bandar Sri Damansara, is currently in talks with several owners of prime land in the Klang Valley to either conduct joint developments or acquire the land, with potential gross development value (GDV) of RM1 billion, according to its managing director Low Gay Teck.

In an interview with The Edge Financial Daily last Friday, Low did not disclose the exact location of the land but conceded that L&G is seeking land located in mature, prime areas in the Klang Valley, because of the marketability factor. He said if everything goes well, the talks will be concluded in the next few months.

"We don't look at land size per se, we usually look at the potential GDV that could be generated from the development of the land. For example the Tuanku Jaafar Golf and Country Resort land we purchased, it's much bigger than the land where The Elements@Ampang is currently being built, but the potential GDV is actually smaller because it is located in Seremban.

"Land size is not the yardstick that you can measure, it's the GDV that you can derive from developing the land. Some of the land that we are looking at is smaller than the others, while some is bigger. In today's terms, for a prime [piece of] land to be developed in the Klang Valley, you are looking at between RM300 million to RM500 million in development cost," said Low.

L&G will be busy for the next eight years, developing the latest addition to its Bandar Sri Damansara township, Damansara Foresta. It is a unique high rise residential development which is built on 17ha of hillside land, of which only 8.5ha will be cleared for development. The group will retain the rest in its original form, which is forest.

Despite the more stringent requirement by Bank Negara Malaysia's responsible financing guidelines, L&G's two main projects, Damansara Foresta and The Elements@Ampang, have received encouraging response from the public so far, according to Low.

However, Low admitted that about 10% of financing applications by prospective buyers were rejected by banks due to the guidelines.

"With this new guideline, of course I have to say that it has affected the sales. Some of the buyers who were very keen to purchase, eventually couldn't do so because they couldn't get the financing. But I would say luckily the percentage of sales affected by this guideline is in the range of about 10%. It has affected the sales but it's not too drastic.

"This will also be healthy for the industry in the long run because it will not create a steep price escalation. It's tougher now for the developers but we believe in the long run, we are here to stay," Low said.

Since launching the first phase of Damansara Foresta earlier this year, the group has sold 550 of the 928 units with a GDV of RM800 million. The Damansara Foresta project will be developed over four phases, with a total GDV of RM2.5 billion over an eight-year period, said Low.

Together with the potential development of the Tuanku Jaafar Golf and Country Resort land in Seremban, which is projected to have a GDV of about RM550 million, and The Elements@Ampang, L&G has about RM3.8 billion worth of projects over the next decade.

Recently, L&G secured bridging financing of RM90 million from OCBC Bank (M) Bhd for the development of Damansara Foresta. However, Low said due to the encouraging sales so far, the group might not need to draw down the full credit facilities granted to them.

On the other side of the city, The Elements@Ampang is already enjoying 70% take-up rates for the two blocks of 42-storey service apartments. Based on a projected GDV of RM700 million, the project's total sales to-date is about RM490 million, which is already more than its gross development cost of RM460 million.

However, these sales figures will only be recognised according to the physical completion of the project itself, which will be stretched over two years, said Low.

As at 3QFY12 ended March 31, L&G's net profit was RM5.9 million, compared with RM13.4 million in the same period a year ago. Revenue was higher at RM52.9 million compared with RM28.4 million during the corresponding period.

L&G's share price ended the week at 35.5 sen, down from 40 sen last Thursday. The stock has declined by 28% from 46.5 sen on May 10, 2011, as interest in property stocks has softened due to a slowdown in the real estate market. YTD, the stock has retreated by 4.3% from 35 sen on Jan 3.