SunCity beefs up office offering

Sunway City Bhd (SunCity), which first made its foray into property development two decades ago, has in recent years reinforced its reputation as an integrated property development player. Among the more significant projects it is synonymous with include the Sunway Integrated Resort City in Bandar Sunway and several niche high-end developments in the Klang Valley, such as Sunway Vivaldi @ Mont’Kiara, Sunway Palazzio and Sunway Damansara.

The developer has also been busy increasing its commercial portfolio — which includes hotels and shopping malls — over the past decade, and feels that the time is right for it to start unlocking the value of its commercial assets. The developer has amassed 1.5 million sq ft of net office space, and the bulk of this space — more than 10 acres — can be found within the 800-acre leasehold Sunway Integrated Resort City.

“We certainly have the property management expertise and it is now time to beef up our office space offering,” says Ngeow Voon Yean, SunCity’s managing director for property investment.
The refurbishment of Sunway Tower 2, formerly known as Wisma Denmark, will be completed this month. Photo by Patrick Goh
Two years ago, the developer acquired Wisma Denmark in the heart of Kuala Lumpur for RM170 million.

 “When this site [Wisma Denmark] was put up for sale, we saw it as a great opportunity for SunCity to have an iconic presence in the Golden Triangle. The growth potential here is enormous and this site has good frontage on the thoroughfare of Jalan Ampang,” says Ngeow, adding that just behind lies the green lung of Bukit Nanas. The site is located between Dang Wangi LRT station and the abandoned Grand Hyatt project on the intersection of Jalan Sultan Ismail and Jalan Ampang.

The Wisma Denmark acquisition includes an office block comprising 27 levels of office space, eight levels of car parks and several freehold parcels of adjoining vacant land totalling an acre. At the time of acquisition, the building — with a net lettable area of 276,000 sq ft — was only 40% to 50% tenanted as the civil courts had moved out. The average rent rate was about RM4 psf.
The developer has spent a year refurbishing the Wisma Denmark building at a cost of RM26 million and has renamed it Sunway Tower 2. The building’s façade has been upgraded and now sports an improved entrance with an air-conditioned lobby.

“Sunway Tower 2 is a Grade A office building with energy-saving features,” says Ngeow. Retail space has also been created on the ground floor and SunCity has secured a travel agency and chain café to take up space there.

With the refurbishment — mainly on the exterior of the building — scheduled for completion this month, some new tenants are expected to move in, including an oil and gas company. Some of the old tenants have stayed on despite the increase in rent rates to between RM5 and RM6.50 psf, with the lease option set at 3+3 years.

The move to refurbish the building has borne fruit as SunCity has managed to achieve 100% tenancy for the building. “This building is centrally located and they [the tenants] also like the upgrading works we have done,” says Ngeow.

SunCity is also working on a plan to build an annexe — another Grade A office building — on the adjacent parcels. This building, Sunway Tower 1, will have 30 levels with a net lettable area of 330,000 sq ft and is expected to employ green features that bear the standard of Singapore’s Building and Construction Authority’s Green Mark.

“We have been experimenting with several designs for this building but have yet to set a firm timing on when to start construction work. Let’s see how the market moves,” says Ngeow. Ngeow: When the Wisma Denmark site was put up for sale, we saw it as a great opportunity for SunCity to have an iconic presence in the Golden Triangle

Final piece of the jigsaw
Ngeow is optimistic that SunCity’s Bandar Sunway township in Selangor is ready for commercial offerings in the form of office suites and SOHO (Small Office, Home Office) units. “We want to attract multinational corporations and may even have our buildings certified with MSC status,” he says.

One of the office parcels is located next to an extension of Sunway Pyramid. The 1.8-acre tract was acquired from Farlim Group Bhd and sits just in front of Sunway Lagoon Resort’s theme park. It is currently utilised as a car park. Development plans there include a 2 to 3-storey retail podium with a 20-storey office suite tower on top. According to Ngeow, SunCity hopes to start construction on the Grade A building — tentatively known as Sunway Pyramid 3 — next year. “With a net lettable area of 277,000 sq ft, we hope to get rents of between RM5 and RM6 psf,” he adds. The project is targeted for completion in about three years.

Another landmark development that will come up opposite the Sunway Resort Hotel & Spa on a 4.75-acre tract will be a tower featuring office and SOHO suites. “This will be the last piece in the Bandar Sunway jigsaw puzzle,” says Ngeow, adding that his team is getting the office space ready for the group’s proposed real estate investment trust (REIT) exercise, which had originally been planned for the second half of last year.

With assets valued at RM3.7 billion, including Sunway Pyramid Shopping Mall (net lettable area: 1.7 million sq ft), Monash University, Sunway University College, Sunway Resort Hotel & Spa, Sunway Pyramid Hotel, Menara Sunway, Sunway Carnival Mall in Penang and Tambun Hypermarket in Ipoh, the proposed REIT would have been the country’s largest.

However, the impact of the global financial crisis on the local economy threw a spanner in the works and the listing of SunCity REIT had to be postponed. Early last year, it was reported that SunCity was more keen on listing the REIT in Singapore where the tax regime is more attractive to investors in relation to withholding tax. However, a recent news report cited SunCity executive director Datuk Jeffrey Ng as saying Malaysia has become the preferred listing destination for SunCity’s proposed REIT while not ruling out other proposals for reverse takeovers in Singapore and Australia.

With such a valuable collection of commercial properties in its stable, SunCity is in an enviable position of being able to ride the region’s economic recovery by picking the right platform to list its proposed REIT.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 760, June 22 - 28, 2009.
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