So far this year, the number of deals involving malls or retail assets has reached a record and there is a possibility that more could be announced this year, industry experts say.

At least nine deals valued at over RM2 billion have been reported in the first nine months of the year, stretching from the northern state of Penang to Johor in the south and from the west of Klang Valley to the eastern state of Pahang.

Improved consumer spending and liberalisation of the market has helped spur interest in retail assets.

As the global economic recovery continues to be shaky, Malaysia has turned to domestic demand to boost its economy, chief economist at Bank Islam Azrul Azwar Ahmad Tajudin said.

“Malaysian consumers have proven to be rather resilient even during times of crisis. During the 2009 recession, the economy contracted by 1.7 per cent but private consumption was still in positive territory,” he added.

In year 2000, private consumption or consumer spending accounted for 43.8 per cent of the gross domestic product (GDP) while in 2010 the number surged to 53.3 per cent of GDP.

Azrul reckons private consumption will grow further to 54 per cent in 2011 and 54.6 per cent in 2012.

Malaysia Retailers Association has projected retail sales to grow 6 per cent this year, probably faster than the broader economic expansion seen at 5-6 per cent.

CB Richard Ellis (CBRE) Malaysia’s managing director Allan Soo expects a few more deals this year.

“REITs (real estate investment trusts) tend to look for both yield accretion and steady income streams. Retail assets here have a great accretion opportunity at the moment.

“Passing yields at acquisitions are mostly at 7 per cent but for trophy assets this may be pressured down to below 6 per cent. The pressure on yields results in higher valuations, so on a per sq ft basis, malls are now seeing better valuation than about five years ago,” Soo said.

At the same time, higher valuations have triggered previously less willing owners to part with their assets.

Another major factor was Malaysia’s decision to scrap a rule that required foreign investors to have a 30 per cent Bumiputera partner.

In addition, the Securities Commission’s endorsement of REITs as an investment alternative have also helped.

In January this year, CapitaMalls Malaysia Trusts (CMMT) said it would be buying The Gurney Plaza extension in Penang for RM215 million and in June it announced that it would be buying East Coast Mall for RM310 million.

In May, ARA Asia Dragon Fund won the bid for three shopping complexes – Klang Parade in Selangor, Ipoh Parade in Perak and Seremban Parade in Negri Sembilan. It paid some RM450 million to TMW Asia Property Fund, which had bought the malls for RM340 million in 2005.

Meanwhile, Adzman Shah Mohd Ariffin, founder of Hektar Property Services Sdn Bhd agreed that for some owners, a sale is actually part of their exit strategy to cash out.

“At the same time, foreign purchasers have found that the land/ownership law is more straightforward and properties in Malaysia are still cheaper than in other countries although at lower returns at times,” he said.

This week, we also received news that Bandar Raya Developments Bhd (BRDB)’s major shareholder Ambang Sehati Sdn Bhd, controlled by its chairman Datuk Mohamed Moiz Jabir Mohamed Ali Moiz, had offered to buy three retail assets belonging to BRDB.

The properties are The Bangsar Shopping Centre (BSC), CapSquare Retail Centre in Kuala Lumpur, and Permas Jusco Mall in Johor.

BRDB is believed to have received many offers for its trophy asset – BSC.

SOURCE: Business Times

KUALA LUMPUR: Sime Darby Bhd's planned purchase of a 30 per cent stake in Eastern & Oriental Bhd (E&O) last week will revive its flagging property business and also give it exposure to the Penang and Johor markets, analysts said.

For JP Morgan, the deal signals a more aggressive strategy from management to improve the property division.

"Sime's property division has generally been viewed as lacking push or not as aggressive as the purer developers.

"As it is, in the recently announced 2011 results, the property division was the underperformer with a 7 per cent year-on-year contraction in profits due to delays in obtaining approval for launches," it said in a research report.

Deutsche Bank AG said Sime is not present in the Penang property market currently and the deal would allow collaboration to enhance its property business in the long run.

Analyst Eltricia Foong said property development is estimated to account for 7 per cent of Sime Darby's 2012 operating profit.

"We reiterate our hold recommendation on Sime shares with a target price of RM9.30," the analyst said, adding that funding should not be a worry given its solid balance sheet and its recent RM690 million fabrication yard sale.

Sime Darby has proposed to buy the 30 per cent stake last week for RM766 million.

In Johor, E&O has a joint venture with Khazanah Nasional Bhd and Singapore's Temasek to develop a 84ha wellness township.

SOURCE: Business Times

There has been some trepidation over just what Bank Negara has up its sleeve in trying to tackle rising household indebtedness in the country.

Indications given previously were that new guidelines to address the issue of affordable borrowing and responsible lending would be out this quarter.

The reason for this has been the rise in consumer or household debt and the latest statistics show that much of that continues to be in the area of housing loans.

Mortgages continue to rise and the latest numbers indicate borrowing by people to buy a house has not slowed down at all despite regulation introduced late last year to limit the amount of money banks can lend to people buying a third home onwards.

Over the past couple of months, a white paper has been sent to banks to study how mortgages could be given based on just how much people could afford after making the deductions for their necessary household expenses and taxes instead of the gross salary they pull in each month.

Obviously, property players are resisting the introduction of such a measure. The impact is that people will be perceived as having less money to pay for their new mortgages should the rules of the game surrounding property loans change.

People still have a choice should those new rules come into force. Homes prices were up 12.2% last year in Kuala Lumpur and 11.4% in the first quarter in the capital, but reasonably priced homes could still be found in the secondary market. Just don’t expect to find one in the hot segments of the market though.

The hard fact, however, is that introducing a debt service ratio calculation in assessing loan amount eligibility is the right thing to do for the long-term sustainability of the household segment.

As of 2010, the debt service ratio for every ringgit earned by households is 47.8 sen. That would include debt taken by the household sector which includes property loans and car loans.

People have other obligations such as taxes, deductions for employees provident fund and daily living expense cost, which are increasing as inflation works its way through the economy.

As more Malaysians watch satellite TV, have mobile phones and subscribe to broadband, those expenses would appear to be the new norm rather than a luxury for most middle incomes and even households just below that bracket.

Should loans be given based on gross loans, and do not take into account the more realistic cost based on affordability, then the current boom in household credit and the property market will become a problem at a later stage.

Household debt is 76% and looks like it will rise and will emerge as a major problem should the economy turn for the worse, unemployment jumps up, interest rates rise, or should living costs keep on escalating.

Preparing for all eventualities should be the prerogative of not only households but policy-makers too, and being cautious when the numbers suggest the limits of just how much more debt the household sector can absorb should be something that should be tackled when times are still good.

SOURCE: The Star

Kelisa Residence, another condominium development by Tambun Indah in Seberang Jaya, Penang. This project comprises:

Type A: 1,549 sf.
Type B: 1,323 sf.
Type C: 1,097 sf.

Features:

– Located at heart of Seberang Jaya, near Carrefour Hypermarket
– Low density development, only 16 units per floor, total 142 units.
– Built up area from 1097 sf to 1549 sf
– Single block 10 storey condominium
– Facilities : swimming pool, gym, landscape garden
– 24 hours security
– Good feng shui, units facing north or south
– Covered car parks

Property Project : Kelisa Residence
Location : Seberang Jaya, Penang
Property Type : Condominium
Tenure : Freehold
Built-up Area: 1,097 sq.ft. – 1,549 sq.ft.
Total Units: 142
Indicative Price: RM218,000
Developer : Tambun Indah

SP Setia will develop the Penang People’s Park project on the grounds of the Penang International Sports Arena (Pisa). Pisa is an indoor sports arena close to the Penang International Airport.

GEORGE TOWN: The Penang government has set a precedent for housing developers in the state by allowing SP Setia Bhd to build extra units within any of its developments on the island over the next 30 years.

This comes under a build-operate-transfer (BOT) concession agreement that was signed on August 19 between the Municipal Island of Penang Island (MPPP) and Eco Meridian Sdn Bhd (EMSB), a wholly-owned subsidiary of SP Setia.

A summary of the concession, which was prepared by MPPP’s legal unit and disclosed yesterday, said MPPP agrees to grant EMSB the right to additional density of any SP Setia developments within Penang Island and this would be over and above the maximum permissible density for the land.

This must not exceed 1,500 residential units spread out on the island during the concession period.

The concession period is for 30 years and EMSB is also entitled to apply for a renewal for two further terms of 15 years each.

Pisa was completed in 2000 and sits on more than 10 hectares, serving as the largest and most comprehensive multi-purpose indoor venue on Penang Island.

The arena, which is owned by the Penang Island Municipal Council and managed by Penevents Sdn Bhd, boasts an Olympic-sized swimming pool and a spacious air-conditioned area, which has been designed to host conventions, exhibitions and entertainment shows, along with major sporting events.

The new project, estimated to cost up to RM300 million, is made up of three components – which include an international convention and exhibition centre, along with refurbishment works to the existing indoor stadium and aquatic centre respectively.

The concession also compels EMSB to build 450 low medium-cost housing units.

“The State Authority shall provide a piece of land for the purpose of the same,” the summary of the agreement said.

The deal also stated that MPPP has agreed to sell and transfer part of the 10 hectare plot to EMSB for the purpose of a hotel site with a leasehold title of 99 years.

The purchase price of the hotel site is RM13.7 million

Source: Business Times