While the finishing touches are being put to the two-tower Pavilion Residences, the owner of one of these towers is getting ready to sell the luxury condo units in what is described as a “depressed market”.
IMMO Pavilion, a German investment services group that acquired Tower 1 en bloc in 1H2008, believes it is the right time to sell as it sees confidence returning to the market.
The towers, which have 368 condo units, sit atop a 7-storey retail podium that houses the Pavilion KL shopping mall on Jalan Bukit Bintang in Kuala Lumpur. The towers and mall are part of the 12.6-acre leasehold Pavilion Kuala Lumpur urban development project. The project has a gross development value of over RM3 billion and also features a 19-storey office tower and a 180-room boutique hotel.
The owner of Tower 2 is international financier Kuwait Finance House (KFH), which previously held a 49% stake in the entire Pavilion KL development through Baitak Asia Real Estate Fund, a joint venture between KFH and Singapore-based Pacific Star Group. The remaining stakes were held by various offshore companies associated with the Malton group. KFH disposed of its stake in December last year.
The units in the 50-storey Tower 2 were launched in 2006 and the keys will be handed over at a ceremony on May 18. About 90% of the units were sold within six months of the launch, with foreigners from 25 countries making up half of the purchasers.
KFH, which initially owned both residential towers, had sold Tower 2 units at an average of RM1,000 psf in July 2006 while mulling plans to sell the 43-storey Tower 1 en bloc to a serviced apartment operator. Two years later, all 163 units in Tower 1 were sold to IMMO Pavilion “at market rate”, which was about RM1,000 psf, according to Pavilion Residences’ exclusive marketing agent DTZ Nawawi Tie Leung.
IMMO Pavilion, a local holding company, is part of the IMMOPortfolio Target Return Fund managed by SEB Asset Management. As at Dec 31, 2008, IMMOPortfolio Target Return Fund had assets worth €553.3 million (RM2.6 billion), with a global investment focus on diverse property asset classes.
The Frankfurt-based SEB is one of Germany’s largest real estate fund managers, with about €11 billion of real estate assets under its management. This is its second investment in Malaysia.
Late last year, SEB took up a 70% stake in the RM280 million Citta strip mall development through a joint venture with Puncakdana Sdn Bhd. Located near Ara Damansara off the Subang Airport Road in Subang, Citta has a net lettable area of 424,467 sq ft and is expected to be completed in 2H2010.
While construction has started, leasing began recently. The company is expecting to sign up a supermarket retailer soon, according to its retail consultant Regroup Associates.
Last July, IMMO Pavilion appointed Pacific Star Asset Management Pte Ltd, a member of Pacific Star Group, as the asset manager for Pavilion Residences 1. Pacific Star Asset Management also manages SEB’s growing property portfolio in various asset classes in Asia, such as Malaysia, Japan, Singapore, China and Australia, says Ng Kok Siong, executive vice-president of Pacific Star Asset Management.
Pavilion Residences 1
Just before the height of the global financial crisis six months ago, the owner was mulling selling the Tower 1 units for RM1,800 to RM2,000 psf, says Ng. Back then, the selling price of other luxury residential developments within the KLCC vicinity, such as The Binjai and Four Seasons, were said to have breached the RM2,000 psf mark. “However, the financial tsunami brought about a lot of uncertainty and the murky market made us decide to hold back. Using the local stock market performance as a barometer, we feel the timing is now right (to sell) as confidence is coming back,” Ng tells City & Country.
IMMO Pavilion has decided to employ a more pragmatic approach by offering more realistic selling prices of RM1,300 to RM1,400 psf for Tower 1 units. “We feel that Malaysia has not been that affected by the financial crisis and that the market is gradually turning warm. Coupled with the recent announcement by the Malaysian prime minister on the immediate removal of the 30% bumiputera equity quota (in 27 services subsectors), this will bring in groups of investors and subsequently, benefit us as the Pavilion KL project is a world-class development on a thriving shopping belt,” says Ng, adding that recent property launches in nearby Singapore have been well taken up too. All these developments bode well for the release for sale of the Tower 1 units.
According to DTZ Nawawi Tie Leung residential marketing adviser Eddy Wong, the selling prices of the Tower 1 units are “very competitive” as Pavilion Residences is touted as a six-star residential development that offers quality lifestyle and commercial convenience with potential capital appreciation.
“Prospective buyers need not worry about how the project will turn out. They are no longer buying a dream but a reality… Also, they can choose the unit they like, be it those with views of the Petronas Twin Towers or the Royal Selangor Golf Club. With the low housing interest rates now, it is more attractive to acquire properties — which is the best hedge against inflation,” says Wong. The secondary market values for the units in Tower 2 are expected to be around RM1,500 to RM1,600 psf, he adds, while rental values are estimated to be about RM4 to RM5 psf. So far, there hasn’t been any actual secondary market transactions as Tower 2 owners are not allowed to sell their units until they are completed.
Ng is confident of a strong take-up, thanks to Tower 1’s selling prices as well as its value-added services. According to him, the company is also close to securing a deal with a five-star US hotel management company to offer laundry, housekeeping and concierge facilities for at least five years.
“We want to maintain the integrity of management by bringing in a professional operator. Buyers who opt in will have to pay more money to furnish the units in accordance with the specifications laid out by the hotel operator and sign a five-year deal to lease back their units in return for monthly rental returns,” says Ng, adding that the company is offering its high-profile buyers hassle and worry-free services. The finer details of the agreement are being worked out now, he says.
Meanwhile, Wong says Tower 1 has registered more than 500 interested buyers since the sell-out of the Tower 2 units in 2006. “We will be organising private viewings for our registrants this month. Then, we will open the remaining units for sale to the public in June.”
With only six units on each floor, the cheapest — a 2-bedroom unit with a built-up of 1,234 sq ft — is RM1.5 million, while the most expensive — a 4,227 sq ft, 4-bedroom home — is priced at a whopping RM5 million. Maintenance fee is 60 sen psf.
In addition, there are three 1-bedroom units with a built-up of 680 sq ft and six duplexes with built-ups of 5,743 to 7,174 sq ft that are going for RM6 million to RM7.5 million. There is also a 17,719 sq ft penthouse, which has been booked since early this year.
The units come with concealed air-conditioning, designer kitchen cabinets equipped with appliances and a panic button in the master bedroom. The 1 and 2-bedroom units each comes with a parking bay while 3 and 4-bedroom units will be allotted two. The duplexes and penthouse come with three parking bays. Amenities include swimming and wading pools, private Jacuzzi rooms, a gymnasium, tennis court, playground as well as a sunken terrace filled with water.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 754, May 11 – 17, 2009.
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