The S P Setia story

S P Setia Bhd president and CEO Tan Sri Liew Kee Sin and deputy president and COO Datuk Voon Tin Yow have come a long way since they first met as colleagues in a development company in 1990.

"I left the bank to join a development company. I was at the bank for five years, did not do well there, so I joined one of my clients. My client was a developer, hardware trader and manufacturer. I met Voon there. He joined three months after I did and became the engineer of the project," recalls Liew.

Liew and Voon say while they had fun and were regular lunch mates, the company was not managed well and salaries were often delayed.

"So when this land [225 acres in Ampang via the acquisition of Syarikat Kemajuan Jerai Sdn Bhd] came about, I told Voon, 'Here also die, outside also [may] die, let's die outside.'"

And with those words, the two put up whatever cash they had and went to look for friendly bankers to finance their purchase of SKJ.

"To me, from day one, I believed in teamwork. We must be together. I am just a banker so I needed an engineer. I asked him [Voon] if he wanted to follow me and he said okay. He was, and still is, my first right-hand man. We started out in Taman Bukit Indah Ampang in 1990. We rented an office and I remember our first day. We had no furniture. He went back to his house and brought one table and four chairs from his kitchen. That's how we started," Liew says.

He was then 32 years old while Voon was 33.

Subsequently, the dynamic duo developed Pusat Bandar Puchong. In 1996, S P Setia acquired SKJ on a share swap basis and the two became directors and shareholders (with less than a 10% stake) of S P Setia Bhd.

They then invited Datuk Teow Leong Seng, the banker who helped finance their first acquisition in 1990, to join them.

Liew remembers the 1997/98 Asian financial crisis as one of the high moments of his journey: "When we first joined Setia in 1996, our market capitalisation was RM800 million. Then in 1997, our market cap dropped to RM197 million. But the company was doing well as we had RM300 million cash despite the drop in our market cap. Voon and his team revised all our layout plans for our Bukit Indah Johor project in Johor Baru.

"We downsized to single-storey houses [from double-storey] and therefore, the gross development value was also lowered. That year alone, by the end of 1998, we had sold RM500 million worth of properties. We were the only guys selling in the whole country and we concentrated on selling at that point in time to civil servants who can get loans come what may."

The developer acquired a 4,000-acre freehold former plantation, North Hummock Estate in Shah Alam, from the family that controlled See Hoy Chan Group in 2002. Of the 4,000 acres, about 605 acres were sold to the Selangor State Development Corporation (PKNS) while another 791 acres comprise the award-winning eco-themed Setia Eco Park. Setia Eco Park is a joint venture between S P Setia, Great Eastern Life Assurance (M) Bhd and the Employees Provident Fund. The rest of the tract makes up Setia Alam, S P Setia's award-winning and self-contained flagship township, which was first launched in 2004. To date, the developer has sold 12,000 homes in both Setia Alam and Setia Eco Park.

The first mall in the township – Setia City Mall – opened in June 2012. The mall, with a net lettable area of 740,000 sq ft, is situated in the 240-acre Setia City green commercial centre. Liew says the mall gets 80,000 visitors during the weekends.

The Setia City Convention Centre, or what Liew refers to as Setia's latest pride and joy, opened recently and the hall, which can accommodate up to 200 tables, has been booked up to March next year. "At first, people said there would not be demand for a convention centre here. We have taken bookings to only March 2014 as we have plans to extend Setia City Convention Centre then," he adds.

Offering an extensive product range that includes townships, eco sanctuaries, luxury residences, high-rises and integrated commercial developments, the developer has built a solid base in Malaysia. S P Setia was ranked No 1 in The Edge Malaysia Top Property Developers Awards for the seventh time in 2012.

The group ventured overseas in 2007 when Vietnam's top state-owned conglomerate, Becamex IDC Corp, chose it as a partner to develop the 558-acre EcoLakes in My Phuoc, located 30km from Ho Chi Minh City. Since then, S P Setia has ventured into Singapore, Australia and China.

Last September, the developer, via a joint venture with Sime Darby Property Bhd and the Employees Provident Fund, acquired the iconic landmark Battersea Power Station in London. The 40-acre site has a gross development value of £8 billion.

S P Setia is the only Malaysian developer to have been recognised four times by the International Real Estate Federation (Fiabci) Prix d'Excellence Awards – two for Best Master Plan Development, one for Best Residential (low-rise) Development and a Specialised Project (purpose-built) award. The projects that received these accolades are Setia Eco Park in Shah Alam, Selangor (2007-2011) and Setia Eco Gardens in Johor Baru (2009-2012).

Liew was also the recipient of the inaugural The Edge Malaysia Outstanding Property Personality Award 2012 for his achievements in raising the profile of his company in the country and internationally.

Battersea: The crucial work is done

Tan Sri Liew Kee Sin's eventual departure from S P Setia Bhd means he will not see the ambitious Battersea Power Station development in London to the end in 10 to 15 years.

Even though a 40:40:20 consortium comprising S P Setia, Sime Darby Property Bhd and the Employees Provident Fund is undertaking the project, Liew is seen as its driving force.

However, Liew credits executive vice-president and CFO Datuk Teow Leong Seng with planning and executing the bid. Teow and his team studied the bid for 18 months before moving in with the winning offer of £400 million.

"The crucial parts have been done. We have resolved the two biggest risks of Battersea Power Station — the Tube extension, which has been approved by the British government, and the launch of the project," says Liew.

He draws parallels between the Battersea Power Station development and S P Setia's acquisition of 4,000 acres of plantation land in Shah Alam (now the home of Setia Alam and Setia Eco Park) some seven years ago that made the company one of the country's leading property players.

"To me, the Northern Line extension is our NKVE link and the 40 acres [in Battersea] are the 4,000 acres in Shah Alam. So with Battersea Power Station, we can say we have done what we need to do before, but in a different country," he explains.

The extension of the Northern Line Tube link to Battersea is considered crucial to the project as it will link the area to the high-end housing area of Chelsea located across the River Thames.

Of the 800 apartments in Phase 1 of the development, 400 priced at around £1,000 psf have been sold via launches that began in January this year in London, Kuala Lumpur, Singapore and Hong Kong.

"Our London team had targeted to sell 200 units a year. In the end, through clever planning and marketing, we sold 400 in just a few months," remarks Liew.

Three men and their 17-year journey

S P Setia Bhd's top management, comprising president and CEO Tan Sri Liew Kee Sin, deputy president and COO Datuk Voon Tin Yow and executive vice-president and CFO Datuk Teow Leong Seng, talk to Jenny Ng and Rosalynn Poh about their 17-year journey together that will end with Liew's imminent departure.

The Edge: Can you tell us what your Long Term Incentive Plan (LTIP) is about and how it is different from the Employee Share Option Scheme (ESOS)?

Tan Sri Liew Kee Sin: The LTIP has three components — ESOS, Restricted Share Plan (RSP) and Performance Share Plan (PSP).

Under RSP, a member of staff can, for example, be given 10,000 shares at, say, RM3 and this is given for free. Even if the share price drops to RM1, it is still your share. You don't worry about funding or borrowing. It is your share. You can keep it until the share price goes up or sell it any time. There is no risk to the staff. PSP is meant for senior staff and it is driven by key performance indicators (KPIs) and other bigger objectives.

Datuk Voon Tin Yow: ESOS doesn't necessarily align staff performance with rewards. The majority of staff do not feel their everyday work has any correlation with the share price. When we have these three things going together, we can design things to suit every level of staff. For example, most of the staff will get RSP. It is measured on short-term KPIs. As you move up the ladder, the senior managers get a blend of RSP, PSP and ESOS. PSP is meant to drive future growth. The composition may vary depending on the level.

Liew: Manager level and below will get RSP and they concentrate on their department's goals and KPIs. If you achieve them, we give it to you. They don't need to worry about the senior staff driving the company to greater heights, share price performance and all that. They just need to worry about their own and their department's KPIs. Under ESOS, for example, even if they perform well, if the share price drops, they get nothing. [Under RSP], the uncertainty is moved away from the staff. I don't think any corporate entity has ever done it the way we have structured it. It is a staff retention tool.

Datuk Teow Leong Seng: When the shares are granted to the staff, it is not vested immediately but over a period of time. Every year, if KPIs are met, we grant you the shares, but they will be vested over three years. It is on a rolling basis. The shareholders have approved the whole scheme, which is 15% of the share capital. Then the ESOS committee will decide how to award it.

Tan Sri, what have been your high and low moments in your 17 years with S P Setia?

Liew: For the company, it was the 1997/98 Asian financial crisis and how we overcame it; Setia Alam; and of course Battersea.

In terms of the lowest moment, it was in 2007 when a bridge we were constructing from the New Klang Valley Expressway (NKVE) collapsed and four workers were killed. We felt so sad that four workers died. It was a bad time for us.

For me, personally, my proudest moment was when we formed the S P Setia Foundation in 2000. We have raised around RM85 million to RM90 million to give to charities. The best part is the education programme and now, we have 2,400 children under our Setia Adoption Programme. We give these underprivileged children RM1,000 a year to buy books and to pay for tuition, food, uniform and so on. We make sure the children in this programme have a chance in life. The programme runs in Peninsular Malaysia and Sabah. We sponsor them from primary school to college. Our joy last year was when one of the girls we sponsored graduated with a law degree.

If we don't give people a chance in life, then the poverty cycle will never be broken. Education is key to this.

There are concerns that you will not see the Battersea project through to the end.

Liew: Battersea is an eight million sq ft project and it will take 10 years to complete. My contract doesn't last that long. The project's joint-venture partners include Sime Darby Property Bhd and the Employees Provident Fund and it is driven by a British team. The brains behind Battersea Power Station is not me. It is Teow. He found the project, did all the research for 18 months and spent every other week in London to make sure all the angles were covered. He has been the chairman of the management company from day one, so there is continuity already.

Tan Sri, seated here in Setia Eco Park, can you tell us how you negotiated the purchase of 4,000 acres from See Hoy Chan Group, which itself is big? So how did the deal come about?

Liew: Again, there is continuity because Teow was involved in the negotiations. In everything we have done, like the Semenyih land that we bought recently, the negotiations were done by Voon and me. This land was Teow and me. Battersea was Teow and me. So, these two gentlemen have been with me every step of the way. So, in terms of knowing each other, what we want and the standards we want, we know already.

This deal, for example, 4,000 acres in 2002, we were looking for only 1,000 acres. When we were told, take all 4,000 or nothing, I said, my goodness. At the time, Setia was very small. 4,000 acres, we'll die! But the owner said either 4,000 or nothing.

We were a bit worried ... 4,000 acres that were landlocked. From a financial point of view, I asked Teow, how are we going to do this? So Teow came up with a structure that split it into three things: Setia Alam and Setia Eco Park and then sell some to PKNS to get some cash flow.

Then the engineer (referring to Voon) took over. There was no access to the land from the NKVE, but he found a way of building a road through.

Financially, Teow came up with this fantastic idea of preference shares and rights and a seven-year bond to fund the acquisition and development.

Tan Sri, how's your relationship with Permodalan Nasional Bhd (S P Setia's major shareholder)?

Liew: Cordial and quiet. We have closed that chapter [PNB's hostile takeover of S P Setia in 2011]. If that chapter doesn't close, I can't move on [and] the reason we are doing this [announcing the succession plan] is to close that chapter. So, I don't want to talk about it anymore. It's over already.

Will your agreement with PNB lapse when you leave?

Liew: Yes, the actual date is March 2015. If I leave early, it lapses.

But the spirit of the agreement is that PNB will not get too involved with management.

Liew: Yes, PNB has declared publicly that it will not be involved in management.

Will that spirit change with your departure, whenever that is?

Liew: PNB has always maintained that it doesn't get involved in any of the companies it owns.

What are you moving on to then?

Liew: Because I'm still relatively young, as you say, there are lots of things I want to do but haven't done yet. So I'll study it first.

Is it true that you'll be going into property development?

Liew: Wait and see.

This story first appeared in The Edge weekly edition of Mar18-24, 2013.

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