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Trust in property

Azuan Arif Ariffin seems to have a perpetual smile as he looks out the window from his large executive room at the top floor of Wisma Prowara, located off Jalan Melaka in downtown Kuala Lumpur. At 34, he oversees more than RM9 billion worth of property projects in Malaysia for the government-linked AmanahRaya Group.

The young chief operating officer of AmanahRaya Hartanah Sdn Bhd (AmanahRaya Hartanah) is a key figure in AmanahRaya Group’s 2007 corporate restructuring exercise, which provided the platform for the group’s foray into property development.

The restructuring saw the group establish, for the first time, a property management and development arm housing four wholly owned subsidiaries — AmanahRaya Hartanah, AmanahRaya Development Sdn Bhd, AmanahRaya Properties Sdn Bhd, and AmanahRaya Project Management Sdn Bhd. At the apex of this new structure is AmanahRaya Hartanah, with Azuan heading the division and reporting to AmanahRaya Group managing director Datuk Ahmad Rodzi Pawanteh.

In little less than two years, the new division has built up an impressive development portfolio without too much fanfare and publicity. Not surprisingly, most people may be forgiven for asking “Azuan, who?” City & Country spoke to Azuan recently for his first exclusive interview touching on the reasons behind the group’s move into property development.

The group has kept a low profile about its new venture as part of its strategy to vertically integrate into the related property market, that is, to develop and manage it within one big family, which is the AmanahRaya Group.

All this while, the group has been known for providing trust, wills and legacy management services, and is also involved in asset management and real estate investment trusts (REITs). Its unit, AmanahRaya-JMF Asset Management Sdn Bhd (AmanahRaya-JMF), currently manages RM7.5 billion in funds.

The new structure, launched in January 2007, enables the group to establish property-related joint ventures with third parties, including state governments, public-listed and private companies. The property management and development division is now ready to trumpet its achievements, given that it has a total gross development value (GDV) of more than RM9 billion accumulated from 12 projects under its belt. The projects are located in Selangor, Penang, Perak, Johor, Melaka and Kuala Lumpur.

“It took us two years to finally speak to the media for the first time about our new wing, as we wanted to make sure that everything is in place. And being wholly owned by the Ministry of Finance (MoF), we are governed by strict corporate governance rules and are always prudent in our approach and culture,” says Azuan, who has been with the group since October 2006.


Fast-track promotions
Azuan, who has a degree in real estate valuation and finance from the City University of London, was previously working at DTZ Nawawi Tie Leung and Colliers Jordan Lee & Jaafar Sdn Bhd before undergoing a four-year stint in project management in Australia.

Upon returning to Malaysia in October 2006, he was offered a senior executive’s post at the infrastructure and project development department of AmanahRaya-JMF. Azuan says he took up the offer despite the “meagre” salary.

However, it proved to be the right decision as he fast-tracked up the corporate ladder, with three promotions within two years. Azuan was appointed COO of AmanahRaya Hartanah in August 2008, succeeding Abdul Malek Abbas, who is now group managing director of Gold Bridge Engineering and Construction Bhd. Prior to the appointment, Azuan was a senior manager-cum-head of development and investment at AmanahRaya Hartanah.


Keeping it within the family
Azuan explains that it was during the group’s corporate restructuring exercise that the decision was taken to form the property sector. “It serves to integrate the existing activities within our group. If we have REITs, why shouldn’t we also have a development section? In this way, we can maximise and preserve the funds within our group,” he says.

With the restructuring, AmanahRaya Hartanah is now in charge of property development and is constantly seeking opportunities for joint ventures and acquisitions. “In AmanahRaya Hartanah, we have responsibilities ranging from project management and monitoring, feasibility studies, valuations to sales and marketing. We are the project managers right from the greenfield land to dealing with architects, engineers and consultants to get the building up and completed,” he explains.

“Once you have ventured into development, why don’t you have your own technical people to run it? And that’s where AmanahRaya Development comes in when technical aspects are concerned.

“These are the people required to go on-site and get their shoes dirty. Some stay on-site 24 hours to make sure every single drop comes out from the cement trucks provided by the contractors and they will report back to us of any fault,” says Azuan.

The company outsources the services of architects, quantity surveyors, and civil and structural consultants as part of the consulting team. “We do have our own civil, mechanical and electrical engineers for monitoring purposes at Hartanah, and they are the ones who approve the progress billing payments,” he says.

Upon completion, Azuan says: “We’ll hand over the projects to AmanahRaya Properties (wholly owned by AmanahRaya Project Management) where our own registered property managers will carry out maintenance and facilities management functions. So we pay our subsidiary rather than third parties and this helps save a lot of money.”

He further explains: “For example, we may approach a hotel group to lease the hotel we have developed. We then inject the same hotel into our REITs. The returns generated will go into the common fund and this will allow us to keep the money rolling and to develop other projects; in turn, yields generated will go back to the fund.”


Early accolades
The group’s move into property development has not gone unnoticed. In fact, it has already received some accolades. Early last month, AmanahRaya Hartanah won the 2009 South East Asia Frost & Sullivan Industrial Technologies Award as the “Company of the Year” (Excellence in Community Improvement) in Malaysia’s building construction market.

Azuan says AmanahRaya Hartanah was honoured to receive the award, especially since it has been in the industry for only two years. “It proved that what we have been doing all this while has been recognised,” he adds.


Risky strategy?
He says when it comes to service, the group always support community welfare, adding that customer satisfaction comes first. The commitment to bring positive changes to the surrounding communities was what motivated the company to undertake the task of turning around several abandoned projects. These included the AEON Jusco Megamall in Penang (GDV: RM450 million) and the Olives mixed development project (formerly known as Jana Towers) in Subang Jaya, Selangor (GDV: RM495 million).

AmanahRaya Hartanah managed to revive the AEON Jusco Megamall to its full potential, with Jusco as the anchor tenant. The project, revived in November 2006, was completed in August 2008.

Azuan dispels suggestions that it is a risky strategy to be taking over abandoned projects, especially since the group is a custodian of public funds. “We do a feasibility study first… before taking over projects, including abandoned ones. This is to ensure the projects are economically viable and will help create more jobs and a better living environment,” he says.

Besides reviving abandoned projects, the group has embarked on joint ventures to develop new ones as well as undertake private financing initiatives under the build-lease-and-transfer concept for concession periods of between 15 and 20 years.

For example, the group is developing the Selangor Syariah Courts complex in Shah Alam on the build-lease-and-transfer concept. “This is a 20-year lease where we build it for the Selangor government which, in turn, will pay us rents for the next 20 years. Eventually when the lease lapses, we’ll transfer the property to Jabatan Kehakiman Syariah Negeri Selangor,” says Azuan. The project, with a GDV of RM353 million, is due to be completed in June 2010.

Other projects being undertaken by the group are The Lakehill Resort City, Johor  (GDV: RM6.4 billion; completion date: 2014); Pine Sanctuary, Penang (GDV: RM491 million, 2012) and the Haven-Lakeside Residences in Tambun, Perak (GDV: RM64.4 million, 2011). (See table for full list of projects.) Meanwhile, Lakehill Resort City, an integrated township development, will be jointly managed and developed by both Oriental Pearl City Properties Sdn Bhd and Amanahraya Development. Construction started in February and may take between six and eight years to complete.

Located in the eastern corridor of Iskandar Malaysia, the project, on 638.3 acres of freehold land, is about 3km from Masai and 29km from Johor Baru city centre. It is near the modern integrated township of Nusa Damai Commercial Centre patterned on the likes of Lan Kwai Fong (a renowned dining and entertainment district in Hong Kong).

The resort — comprising residential, commercial and recreational properties — is designed to be a self-sustaining satellite township to cater for the affluent locals, expatriates and retirees looking for a resort lifestyle in Johor. It also aims to be a business, tourism and entertainment hub.
 

Duplicating Olives
Azuan beams with pride when he talks about the Olives project. Sitting on 6.87 acres of freehold commercial land, the project, formerly known as Jana Towers, was rebranded as Olives in December 2008.
Located on Jalan SS16/1, Subang Jaya, it is near the Subang Parade shopping mall, Carrefour and Sime Darby Medical Centre. The first phase consists of four 17-storey blocks of luxurious serviced apartments with a total of 314 units (built-up: 1,469 to 5,535 sq ft). Each individual unit will have a built-in studio. The prices range from RM895,000 to RM3.3 million.

Phase 2 will consist of two Grade A office towers with total built-up of 340,000 sq ft, and another block of four-star boutique hotel with 305 rooms. Phase 1 is due for completion at year-end, with Phase 2 in mid-2011.

Apart from sports and basic facilities, Phase 1 also provides concierge and courier services and assistance for bill payments and online bookings. All these are made possible through a partnership with Dropzone (M) Sdn Bhd, a multi-service provision company.

“This project is challenging as it was once abandoned. My objective is to change the perception of the investors, and I believe we have regained their trust,” says Azuan.

At present, 192 units have been sold and the company is talking to several interested parties to purchase the remaining 122 en bloc. “In 2007, buyers purchased the units at only RM280 psf and now we are offering the fully furnished 122 units at around RM600 psf, with 8% annual guaranteed return.”

The successful turnaround of Olives has prompted AmanahRaya to duplicate the concept in some of its future developments. “We have identified a few plots of land in the Klang Valley and the outer ring of Kuala Lumpur, such as Cheras and Sentul, where we are going to duplicate the Olives concept.

“Like YTL (Land & Development Bhd) which rebranded Sentul (in its urban renewal project), we also intend to do the same for our projects in less popular areas with growth potential,” says Azuan.


Major property player?
The emergence of AmanahRaya Group as a property player is attracting attention from industry observers, including property consultants. Adzman Shah Mohd Ariffin, DTZ Nawawi Tie Leung’s senior director, believes there is great potential for AmanahRaya Hartanah to stand out as one of the key players in the future.

“It is difficult to categorise Hartanah because it is a trustee company and now a developer. As it is wholly owned by MoF, every activity of the company will be monitored by the government,” says Adzman Shah.

Anthony Chua, KGV-Lambert Smith Hampton director, concurs, saying AmanahRaya Hartanah is one of the emerging developers with strong financial muscle. “It is a new kid on the block, and therefore it is important it builds up a solid track record. This can come with good management, especially when funding comes from the public. So it has to be extra careful with every investment it makes,” says Chua.

Though the AmanahRaya Group’s foray into property development has been relatively low key, its growing presence in the local property market means that it will increasingly come under greater public scrutiny.

 

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 754, May 11 – 17, 2009.

 

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