S P Setia's venture Down Under takes off

MELBOURNE: For S P Setia Bhd, the next phase of growth could be coming from Down Under.

The property group will be launching its maiden property venture in Australia, Fulton Lane, that has an estimated gross development value (GDV) of A$470 million (RM1.5 billion) in September.

In fact, S P Setia is on the lookout for more land to expand the Fulton Lane project as well as other development projects there.

Setia (Melbourne) Development Co Pty Ltd CEO Choong Kai Wai said the S P Setia unit is constantly looking for land in the city and suburban areas of Melbourne and Sydney.

An artistic impression of Fulton Lane.He said S P Setia was expecting profit margins of about 20%, which he considered was comparable with projects in most major cities in emerging markets.

On simple back-of-the-envelope calculation, assuming profit margin of 20%, the A$470 million project will likely fetch a profit of about A$94 million, or RM302 million.

S P Setia posted a net profit of RM251.8 million or 24.77 sen per share for FY10 ended Oct 31, compared with RM171.2 million or 16.84 sen per share for FY09. Revenue came in at RM1.74 billion versus RM1.4 billion previously.

For the nine months ended April 30, the group achieved a net profit of RM154.2 million compared with RM89.4 million in the previous corresponding period. Revenue rose nearly 31% to RM1.01 billion from RM772.9 million a year ago.

According to Choong, Setia Melbourne is open to acquiring land outright for its projects or taking over planned property projects from property players lacking the financial muscle to get the projects off the ground.

He maintained that Setia Melbourne had the capacity to run more than one project concurrently and was hopeful of obtaining some of the land the company had bid for.

Fulton Lane, a two-block, high-rise residential project with retail space, opens for Phase 1 preview at end-June, ahead of the launch scheduled for September.

Choong said Setia Melbourne currently concentrated on residential and mixed development projects, and had no plans to build commercial properties in Australia.

"In the first few years we are looking at quick turnaround and easy-to-sell projects and as long as there are good returns, we will commit the capital. We are here in Australia for the long haul," he told reporters last week. The company will build townships once it is established there.

Choong is upbeat on the Melbourne real estate scene, which is buoyed by growth in student and migrant population, and shortage of housing.

The S P Setia group has also embarked on projects in Vietnam, Singapore and Australia as part of its strategy to extend its regional reach.

Meanwhile, Choong said Setia Melbourne has seen strong interest in its Fulton Lane project from prospective Malaysian, Singaporean and Australian buyers.

Setia Melbourne will launch some 297 units for Phase 1 while Phase 2 will offer over 400 units.

Fulton Lane comprises a 28-storey block facing Franklin Street and a 44-storey block facing A'Beckett Street. Construction of Fulton Lane is slated to begin next year with completion expected in 2014.

The project will have a ground floor shopping arcade or laneway connecting the two streets in the true fashion of Melbourne's unique laneway culture of cafes and boutiques nestled in back alleys.

"If you're building a project of this magnitude, you have to tap the psyche of Melbourne," said acclaimed architect Karl Fender, whose firm is designing the Fulton Lane project.

Fulton Lane is located on a one-acre site which is said to the largest remaining undeveloped site in the northern part of the Melbourne central business district (CBD).

Setia Melbourne acquired the land for A$30 million through tender last March and is banking on Fulton Lane's strategic location at the border of Melbourne's CBD and Carlton, the education precinct of Melbourne's inner city.

Adding to its strategic location, Fulton Lane is only a stone's throw away from Queen Victoria Market, Flagstaff Gardens and the Melbourne Central train station.

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