Mah Sing to venture into Sabah with RM830 million project

KUALA LUMPUR (March 26,20120: Mah Sing Group Berhad will be entering the Sabah property market with a mixed development dubbed Sutera Avenue with an estimated gross development value (GDV) of RM830million on 8.67acres of prime commercial land along the Coastal Highway in Kota Kinabalu’s Central Business District (CBD).

A joint development agreement was signed for the proposed joint development of 4.26 acres for an entitlement of RM39 million or approximately RM210 psf.  Mah Sing is also entitled to exercise an option for 4.41 acres of an adjacent site at an entitlement price of RM216psf or approximately RM41.5 million within six months of this agreement.

“We are keen to enter the Sabah market due to the vibrancy of its economy which has benefited from the wealth of natural resources including oil palm, timber and oil and gas. Tourist trade is strong and provides a large market catchment, coupled with the domestic population base,” said Mah Sing group managing director Tan Sri Leong Hoy Kum in a statement on March 26.

“Kota Kinabalu together with the surrounding towns of Penampang, Tuaran and Kota Belud in Sabah has a population of approximately 800,000. Our maiden foray into Sabah is on a highly visible location in Kota Kinabalu’s CBD, and coupled with our planned offerings which meet market demand, we are very excited about the prospects of this new market,” he added.

The developer plans to offer multi-storey shop offices fronting the Coastal Highway and sreet mall retail lots as well as serviced apartments for the first phase of 4.26 acres.  These shop offices will incorporate the unique concept inspired by its 30 Jewels and Gourmet Street shops in Icon City Petaling Jaya

The retail units will be designed for F&B and street mall retail concept, in synergy with the shop-offices while the serviced residences will incorporate contemporary lifestyle concepts that will be sought-after by both local and foreign buyers.

The site is located diagonally opposite the 5-star Sutera Harbour Resort and KK Times Square.

“Sutera Avenue is a perfect fit with our business strategy; the location is second to none, facilities and amenities abound, and we can launch the project quickly in line with our fast turnaround business strategy.  We shall develop the project over 5 years, and intend to commence registration of interest by the second half of this year, as early as the third quarter,” said Leong.

According to WTW’s Property Market 2012 report, major condominium developments launched in the CBD have seen developer selling prices at new benchmark prices.  In addition to increasing land costs and scarcer choice development lands, the hype on condominiums is also spurred by the favorable economic climate backed by earnings from good palm oil prices over the last few years.

The existing supply of purpose-built office space in Kota Kinabalu currently enjoys high occupancy rates of 91% due to the lack of new supply and the conversion of some office buildings to hotels in the last 1-2 years.  Rents and values are rather stable although there are some upward movements in rents and values for prime and newer office buildings within the CBD.

The retail sector remains stable with established retail malls and those with good management and differentiated offerings maintaining high business levels.

Sabah’s wealth of natural resources has created an economic boom and its breathtaking landscape has also made Sabah a popular choice for both tourists and business travelers, so much so that tourism is expected to contribute over 10% of Sabah’s GDP.

“Kota Kinabalu is a premier tourist destination and is projecting about 2.75 million tourist arrivals in 2012, after attracting more than 2.63 million tourists in 2011.  Close to 850,000 international tourists visited Sabah in 2011, with more than 300,000 from South Korea, Hong Kong, Japan, Taiwan, China, Macau and Singapore.  More than half of Sabah’s international tourists are repeat visitors, with close to 80% of them paying for accommodation during their travel.  With their intimate knowledge of the region and frequency of their visits, we believe these tourists are also our potential investors,” said Leong.

This is Mah Sing’s second land deal in as many months, as the developer has a landbanking target of acquiring new projects with potential gross development value of RM5 billion in 2012.  With the acquisition of Sutera Avenue, the Group’s landbank now stands at 1,226 acres with remaining GDV and unbilled sales worth an estimated RM16.27 billion, giving them strong earnings visibility for the next 5 to 7 years.