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Tang Group buys site in Iskandar for RM750m mixed-use project

DENNIS Chiu, managing director of privately held Tang Group of Cos in Singapore, has been looking for a development opportunity in Iskandar Malaysia since last year. He recently managed to purchase a 7.92-acre (about 345,000 sq ft) prime site in Medini, within Nusajaya for RM49 million. The official signing ceremony between Medini Land, a wholly-owned subsidiary of Iskandar Investment Bhd (IIB), and Global Skyline, a subsidiary of Tang Group, was held on the evening of Nov 28.

The 99-year leasehold site purchased by Tang Group is made up of three parcels, with a total gross floor area (GFA) of 1.38 million sq ft. Situated in Zone A of Medini, it is near LegoLand Malaysia, Mall of Medini, EduCity and Puteri Harbour. Medini is considered "the nerve centre" of the 240,000-acre Nusajaya in Iskandar, according to Syed Mohamed Syed Ibrahim, president and CEO of IIB. "It's very important for Medini to take off because it's the CBD of Nusajaya," he says.

Called iMedini Walk, the planned development by Tang Group will be designed by renowned international architectural firm Aedas. It will be a mixed-use development with residential and serviced-apartment blocks, a hotel, more than 150 shophouses, as well as a retail mall with a new "shop-office" concept. The mixed-use development is expected to have a gross development value of RM750 million, and is scheduled to be completed in 2018.

This is Tang Group's maiden project in Iskandar. Chiu and his family, who were originally from Hong Kong, control the Hong Kong Stock Exchange-listed Far East Consortium International, a conglomerate involved in property development, hotels and property investment in Australia, Hong Kong, Malaysia, New Zealand and Singapore.

Chiu is not surprised at Iskandar's transformation as he has witnessed something similar in Shenzhen, which was considered Hong Kong's hinterland for the past 15 years. "I still remember in 1997, during the handover [of the British colony to China], if you told people you were buying property in Shenzhen and said that prices there would match those in Hong Kong someday, people would say you were crazy," he recounts.

Today, luxury residential prices in Shenzhen are averaging RMB39,071 psm, according to CBRE Global Research's 3Q2012 report on the China property market. Residential units are therefore trading at four times higher than the RMB10,000 to RMB15,000 psm seen over a decade ago, adds Chiu.

Five years ago, it was a challenge trying to persuade investors in Singapore to go over to Iskandar, says IIB's Syed Mohamed. As a strategic developer, IIB therefore focused on developing the infrastructure and catalytic projects within Nusajaya's four clusters: education, tourism, wellness and healthcare. These catalytic projects include Marlborough College, LegoLand, Gleneagles Hospital and Pinewood Studio.

Incentives for foreign investors and developers in Medini were also put in place. These include income-tax breaks and exemption from Malaysia's Foreign Investment Committee rules. For instance, developers and investors in Medini are not required to apply for approval to sell 100% of their residential units to foreign individuals, says Syed Mohamed. Elsewhere within Malaysia and even in Iskandar, some restrictions still apply. As a result, Medini has attracted not just investors from Singapore, but also from Japan, China and even South Korea. "It is becoming a truly cosmopolitan place," says Syed Mohamed.

Deals by Singapore property developers and investors have certainly picked up pace in recent months. In October, Singapore government-linked Ascendas Land International partnered Malaysia's UEM Land Bhd to develop a S$1.5 billion tech park on a 519-acre freehold site at Gerbang Nusajaya.

On Nov 29, Vantage Bay, an integrated development in Johor Baru located near the Causeway, was said to have received the go-ahead from the Iskandar Regional Development Authority. The RM10 billion project is a 70:30 joint venture between Singapore billionaire investor Peter Lim and the Johor royal family.

Central to the Vantage Bay development is a medical hub to be operated by Thomson Medical Centre, in which Lim is a substantial shareholder. When completed in 10 years, the 10ha (1.08 million sq ft) freehold site will contain a medical campus, apartments, hotels, a convention centre, as well as shopping malls and offices.

"Whenever Singapore property prices are at a peak, some of the money will be looking for investments in neighbouring countries," notes Donald Han, special adviser to HSR Property Group, who was at the Tang Group's signing ceremony. "The spillover effect is now felt in Iskandar."

There are also some push factors, concedes Tan Tiong Cheng, chairman of Knight Frank, who was also at the signing ceremony. If the Singapore government introduces more restrictions on the purchase of industrial land and reduces the inflow of foreign workers, a lot of SMEs will have no choice but to consider Iskandar as an alternative solution, says Tan.

Chiu agrees. In fact, he is confident of Iskandar's success, given its symbiotic relationship with Singapore. "In Singapore, land is scarce and labour cost is high," he says. "Johor [Iskandar] is no longer just an opportunity. I think for us in Singapore, we cannot [afford to] ignore Johor anymore."

This story first appeared in The Edge Singapore weekly edition of Dec 3-9, 2012.

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