The return of Country Heights

KUALA LUMPUR: There has not been a new development at the Mines Resort area — the home territory of Country Heights Holdings Bhd (CHHB) — for many years, although its surrounding neighbourhoods have experienced rapid transformation.

CHHB, which is a major landowner in the area, has been keeping a low profile since the Asian financial crisis, while many developers — some with shorter histories — have flourished.

But, the years of sluggish activity at the Mines and CHHB may soon become a thing of the past. CHHB shares recently received a brief boost after the government announced that the Country Heights group, including CHHB, is planning a RM3 billion, 10-year integrated health and wellness resort project at the Mines Resort area.

The huge value of the project aside, the wellness resort's status as one of the Entry Point Projects (EPP) under the government's Economic Transformation Programme (ETP) has added some glamour to CHHB's image.

In a recent interview with The Edge Financial Daily, CHHB managing director Mark Victor Rozario said the company may reveal details about the wellness resort project as early as March, in conjunction with the launch of its expanded 30,000 sq ft (from 10,000 sq ft) "health screening centre", or at a later stage.

The expanded health screening centre, which is at CHHB's Palace of the Golden Horses hotel, is one component of the wellness resort project.

"CHHB is not the only land owner [in the Mines Resort area], Tan Sri Lee [Kim Yew, founder and major shareholder of CHHB] and other land owners in the Mines area are also involved in the project," says Rozario, who was previously part of the senior management team at the Sunway group.

He declined to provide details on CHHB's share of the wellness resort project or what the new development components would be, but said it is to be expected that the project will help add value to CHHB's landbank and properties at the Mines Resort area.

Countering the perception that the Mines Resort area is already mature, Rozario said: "There are still a lot of things that we can do here."

According to the company's 2009 annual report, CHHB still has 153.4 acres of "lake land" at the Mines, which were carried at a net book value of about RM13.8 million or RM2.04 per sq foot (psf).

But, while the psf-cost for the property is next to nothing, considering current market prices for nearby bungalow plots are between RM250psf and RM300psf, it is worth noting that the lake land is essentially a lake and is not land that can be easily developed.

According to Rozario, what can be done, however, is to construct a "floating structure" at the lake edge to monetise the lake while still maintaining the views, which are a valuable asset .

"This [development of floating structures] is quite common overseas, especially in Europe. Yes, it is a possibility here, but there is no plan for such a development at the lake yet," he said, explaining that there is still space for development at the Mines excluding the lake.

According to Rozario, what can be immediately developed or re-developed for the wellness resort project include some of the remaining plots of land at the Mines where current properties are located.

These sites include a small 1.77-acre plot currently tenanted by the Fatty Crab seafood restaurant; a 9.25-acre plot housing the Palace Beach Resort and Spa hotel; the 11.86-acre site of the Golf View Apartments; and a 12.05-acre plot where the Mines Waterfront Business Park is located.

"There is still space for development on this land. For example, we can build a few more blocks of high-rises on top of the podium [of the Mines Waterfront Business Park, currently used as a multi-storey car park]. We can also build an apartment or other tall structure on the Fatty Crab land," says Rozario.

He did not elaborate on how much built-up area could still be developed on the sites mentioned.

But, considering that CHHB acquired the land and sank in the necessary infrastructure costs many years ago, further development or re-development of the remaining land area at the Mines could generate lucrative returns for the company.

In its FY09 annual report, the 34.93 acres of the restaurant, hotel, apartments and business park sites were carried at a combined net book value of RM198.8 million or RM130.70 psf.

It is difficult to draw a direct comparison with other sites in the area because the CHHB's properties' net book value reflects not only land but property in various form such as offices and hotels.

As a reference, nearby commercial land in the Seri Kembangan area is fetching at least RM75 to RM100 psf, while built-up prices for high-rise properties in the area — be they commercial or residential — are between RM350 and RM380 psf.

Up to RM500 million in GDV over two years
Plans for the wellness resort project aside, Rozario says CHHB is also becoming more active in the property development scene, with projects worth RM400 million to RM500 million in gross development value (GDV) to be launched in 2011 and 2012.

"We were not very active in development over the past few years, focusing mainly on selling bungalow plots as we wanted to rebuild our balance sheet. Now, with our fundamentals improved, we plan to launch a few projects with a total of RM400 million to RM500 million in GDV over two years," says Rozario.

The bigger projects include a condominium development in Cyberjaya with a GDV of about RM70 million, condominiums at the Mines (GDV of RM130 million), the remaining bungalow lots in Country Heights Kajang (GDV of RM130 million) and a residential development in Alor Setar worth about RM50 million.

Other than the Mines Resort area and Country Heights Kajang, CHHB has other sizeable tracts of undeveloped land in the Klang Valley as well as its outskirts that appreciated in value over the years.

Rozario says the company has about 26.23 acres remaining in Cyberjaya for mixed development. He adds that the land holds good potential due to the opening of the KL-Putrajaya highway that has shortened the travel distance significantly between Cyberjaya and downtown Kuala Lumpur.

"We were the earliest in Cyberjaya and have the choicest location there surrounding the lake," he says, adding that the psf-price of condominiums or apartments in Cyberjaya is currently RM350 to RM400, which is similar to prices in the Klang Valley.

In CHHB's FY09 annual report, the Cyberjaya land, acquired in 1999, was carried at a net book value of RM42.37 million, or RM41.90 psf. It is worth noting that in August last year, Glomac Bhd bought seven acres or 304,920 sq ft in Cyberjaya for RM27.44 million or about RM90 psf.

CHHB also has 23.75 acres left in Country Heights Damansara, acquired in 2000, which Rozario says has benefited from surging land values in the nearby area brought on by the development of Desa ParkCity. To enhance the value of the land, he says the company has spent RM10 million to improve the accessibility to the area.

Improved balance sheet
CHHB's total borrowings as at Sept 30, 2010, amounted to RM342.9 million, against cash holdings of RM56.8 million. Net gearing was 0.4 times and its shareholders' equity RM705.5 million. The gearing level has been brought down significantly from 1.4 times in FY06, when net borrowings totalled RM796.2 million against lower shareholders' equity of RM568.1 million.

The group lightened its once debt-heavy balance sheet considerably following the disposal of the Mines Shopping Mall for RM432 million in 2007. The property is now part of CapitaMalls Malaysia Trust.

CHHB closed at 78 sen last Friday, giving it a market capitalisation of RM215 million, which is significantly below its shareholders' equity of RM705.5 million or RM2.56 per share. It does not have convertible securities outstanding that may dilute existing shareholders.

The Mines Waterfront Business Park offers stunning views of the lake and its surroundings

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