Sime mulls over listing of property arm

A top official of Sime Darby Bhd says the group has broached the subject of listing its property arm with the view of extracting better value for shareholders.

Group chief operating officer Datuk Abdul Wahab Maskan says the listing of Sime Darby Property Bhd, which if it happens would be the largest in its sector on Bursa Malaysia, has been mentioned at group-level discussions.

"In terms of attributes for listing, I don't think the answer is no," says Wahab, when asked in London a week ago whether Sime Darby Property will be listed.

"However for a listing, we have to look at which combination gives us the best value. This has been mentioned at the group level. The group president [Tan Sri Mohd Bakke Salleh] also highlighted that this is not impossible because investors are expecting us to extract more value. Yes, we have a plan for that and it is being looked at."

While non-committal on a time frame for the listing, Wahab, who is also managing director of Sime Darby Property, says it is important to ensure all the ingredients are in place for a successful initial public offering exercise. "We must make sure that the assets we have … are prepared to the best level for the right moment."

According to Wahab, Sime Darby Property could be the largest property developer in terms of landbank size and potential development value if listed on Bursa, surpassing UEM Land Holdings Bhd and IOI Properties Bhd — the property arm of IOI Corp Bhd.

IOI has proposed a listing plan for its property arm, which could be the largest listing on Bursa with total assets of RM18.5 billion.

"If you look at the greater Klang Valley, which stretches from northern Selangor right down to Seremban, and the area from left to right … from Carey Island to the border of Gombak and Pahang … within this zone, the [Sime Darby] group's landbank that is identified for property development could come up to 35,000 acres. This area has the highest potential for urbanisation, and economic and population growth," explains Wahab.

The group COO says Sime Darby Property has a landbank of 19,000 acres, which could generate a total gross development value (GDV) of RM72 billion. The GDV includes that of projects that have been approved but have not commenced yet.

Of these, projects "that have been approved by the authorities and the board, and are under construction" have a GDV of RM42 billion, he adds.

It is worth noting that the numbers exclude Sime Darby Property's 40% share of the potential GDV of the Battersea project in London — the expected total sales value of which is £8 billion (RM38.3 billion) over 12 years. They also exclude the contribution of associate Eastern & Oriental Bhd as well as the potential financial impact of the group's vast landbank in Labu, Negri Sembilan.

"The Labu area — which we call the Vision Valley of Negri — is just a master plan now. We plan to have four or five townships and we are still working on the details and submission," says Wahab, adding that the project could take off with the building of interchanges and highways, which would improve accessibility to the area.

Wahab expects Sime Darby Property to register a better sales performance in FY2014 ending June 30. In FY2013, the company recorded property sales of almost RM3 billion. If its share of sales value from the first phase of the Battersea project of about RM1.3 billion is added, sales will total over RM4 billion.

The Battersea project is expected to give Sime Darby Property a boost. The first phase of the project — comprising 866 apartments with a total sales value of £850 million, was launched early in the year. Response was overwhelming with almost 90% of the units sold within two to three months.

According to officials, the second phase of the project — which entails the restoration and redevelopment of the derelict Battersea Power Station, will commence at the end of the year. Initial work will focus on the exterior and strengthening of the building's structure while interior work will start next year, together with the launch of some 300 luxury apartments sitting atop the power station and overlooking the River Thames.

The redeveloped Battersea Power Station building will have 1.6 million sq ft of net lettable area, of which 300,000 sq ft will be for the luxury apartments. The rest is for commercial developments such as a shopping mall, offices and an exhibition hall.

The commercial component of the power station will be kept for recurring income with only the apartments to be sold. With an estimated price of £2,000 psf, the luxury apartments are expected to fetch a GDV of £600 million based on rough estimates.

"The second phase will be the iconic building, where we will have a mixed-use development that will support not only the lifestyle trend of the entire Battersea development but also be a part of the regeneration of London. This is one step further for London. The building will have the kind of retail mix that will meet the criteria," says Wahab.

"We are conducting the selection process now. As of last week, there was early response from some of the big names [in retail]. We are confident because the attraction here is the Battersea Power Station and its central London location."

Sime Darby Property is still looking for overseas opportunities that "have the comparable impact of Battersea", says Wahab. However, its current focus is to ensure the smooth execution of the London project, which the group has undertaken with S P Setia Bhd (with a 40% stake) and the Employees Provident Fund (20% stake). This is in line with the company's global vision.

"We try not to go into many small projects but instead [go] into a few big-impact ones. We are always on the lookout. There have been people who have come to us for suggestions. There are some projects that we have appraised, but we have not brought anything to the board yet," says Wahab.

This story first appeared in The Edge weekly edition of July 15-21, 2013.

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