PROPERTY sales may be softening but SP Setia Bhd group managing director Datuk Liew Kee Sin is confident the group's massive 3,000-acre project, Bandar Setia Alam in the Klang Valley, will be a money churner for many years to come.
“We have grown through the difficult times and became a big, billion-ringgit company during those times,” he told StarBiz in an interview.
“I think maybe it was because we were careful in the things we did, buying land in the right location with the right infrastructure and at the right price.”
SP Setia's track record during “the bad times” is commendable, and so has the success of its projects. Its residential projects in Johor have done well even though the market in the south is extremely competitive.
“In the Johor market, developers are faced with stiff competition as there is plenty of land. Margins are thin and despite that, we are doing well,” he said.
The group's Pusat Bandar Puchong development has been a commercial success for the company, which Liew puts down to not only the improvements in infrastructure in the Puchong area but also the pricing of its units.
Now Liew hopes to concoct that same elixir of success in the company's biggest undertaking to date - Bandar Setia Alam, previously called North Hummock Estate.
Although some investors were initially sceptical when SP Setia bought about 4,000 acres for about RM600mil deal back in April last year, Liew said investors now realised that the acquisition price – RM3.50 per sq ft – was a steal.
The company's shareholders backed that assessment and forked out RM330mil to allow SP Setia to buy the land. The rights issue to raise that money was oversubscribed.
Bandar Setia Alam is a massive development by all accounts and is seen as the flagship project for the group to allow it to grow at 10% per annum. The size of the housing estate is 3,000 acres and the width of the land is 7.5km. SP Setia is looking, based on a draft that is almost finalised, to build about 44,000 units of houses, from low-cost units to bungalows, on the land. SP Setia will sell the remaining 1,000 acres.
The project would have a variety of themes and draw from the group's expertise in creating award-winning landscapes and parks. Liew said the assortment of themes would allow the group to cater to different market segments, which he described as the KL market, Shah Alam market and the Klang market.
The estimated gross development value of the project back in October 2002, assuming SP Setia fully develops the land bank of its North Hummock Estate on its own, was RM7.3bil over a period of 15 to 20 years.
“There were five other parties that looked at the land before SP Setia, and they were thinking of access through Jalan Meru. There is no way Klang alone can take 4,000 acres of new property,” he said.
“We did our homework. We asked whether the authorities would allow us to punch a highway through the land and they have been very helpful,” he said.
By building a 1.5km road from Bandar Setia Alam through to the NKVE, SP Setia would open an alternate route to the North-South highway and the Kuala Lumpur market. SP Setia plans to build a six-lane highway for RM100mil that links the NKVE to Jalan Meru.
“I think the demand is still there, especially in the Klang Valley. Johor is suffering because of massive retrenchment but we are still selling well,” he said.
SP Setia will launch its first phase of houses catering to the Klang and Shah Alam markets by the third quarter.
“The high-end market houses will be launched in the first quarter of next year,” he said, adding that the group would draw from its experiences from its Duta Nusantara project to create the upmarket enclave within the project.
SP Setia would also be moving its headquarters to Bandar Setia Alam to show its commitment to the project. Analysts, one of whom called SP Setia “a property factory”, do not question SP Setia's track record but have doubts whether the company would be able to sell so many houses at the township.
AmResearch executive director Gan Kim Khoon said the supply of houses in the vicinity of SP Setia's Bandar Setia Alam was going to be tremendous as Kumpulan Guthrie, Golden Hope and Sime UEP Properties had and would come out with more units in the years ahead.
The supply of houses alone in Klang is expected to surge with WCT Engineering, Gamuda and IOI Corp building housing estates in and around the town.
“It depends on the strategy SP Setia is going to adopt and the market segment it targets,” he said.
K&N Kenanga head of research Seow Choong Liang said the one thing going for the project was that development was headed west of Kuala Lumpur because of the improvement in infrastructure and availability of land.
“SP Setia has caught the right cycle and started developing houses in areas that are not yet matured,” he said, adding that the company could not afford to stand still as there was pressure on it to grow.
Liew said SP Setia was satisfied with just 3,000 acres from its North Hummock Estate and would proceed to sell 1,000 acres of its land in a tender in two months after receiving the final approval for Bandar Setia Alam.
“With this cash I receive, I can either put the money into this project or whatever project the company wants to get into,” he said.
Liew added that since SP Setia announced it wanted to sell 1,000 acres, it had received about 25 inquiries from interested parties.
Analysts feel that SP Setia, after enhancing the value of land at Bandar Setia Alam, would be able to get between RM5 and RM6 per sq ft from the tender exercise.