Kuok controlled company develops high-end project on Puteri Harbour land
NEWS of Robert Kuok buying land in Islandar Malaysia in April 2013 made a splash two years ago. The launch of the mixed-development project on that land is set to get tongues wagging in different ways.
Southern Marina, a 12.5 acre development which PPB Group Bhd, Kuok Brothers Sdn Bhd and Khazanah Nasional Bhd own, is set for launch. After completing various regulatory processes to merge the land into a single block in December, Southern Marina has started its pre-launch sales and indications are that demand is brisk for the first tower it is launching.
PPB’s trump card though is price. Given the prime location of the property within Iskandar Malaysia, and the benchmark price of RM334 per sq ft Kuok Brothers paid for the land two years ago, the average price of the condominiums that will be open for sale is said to be below what other high-rise developments in the neighbouring vicinity are going for.
The average price of RM950 per sq ft is lower than what rival property companies are selling their high-rise homes, which can go well north of RM1,000 per sq ft.
“We believe this is the right price. We saw a big jump in prices two to three years ago and we thought the jump was not realistic,” says PPB managing director Lim Soon Huat.
What PPB, a diversified company with interest ranging from flour milling to cinemas and property, is launching over time will be four tower blocks with a retail and office component. First out of the gate is Tower 1, which will see 220 units launched and is expected to be completed at the end of 2018. The price of the units range from RM836,888 to RM4.15mil.
Size of units range from 769 sq ft for 1+1 bedrooms to 3,317 sq ft for penthouse. Units with the most keen interest has been the 2+1, of which close to 80% of what is going to be built in Tower 1 has been booked. Some 50% of the units, which consists also of 3+1 condos and garden units with private terraces, for sale in Tower 1 has been booked by mainly Malaysian buyers.
Southern Marina will have a total of four towers, of which one will be the second tower of Southern Marina residences. The other two will be an office building with suites and the final building will be an upmarket seafront residence.
The property will have retail space, which PPB intends to keep for recurring income. A promenade, in between the buildings and the marina, will be integrated to an adjacent upcoming project, which UEM Sunrise will build.
Fronting the project in Puteri Harbour will be a marina, which Lim says will be key for the project. “Marina and waterfront properties have a long history of enjoying significant value appreciation,” says Lim, who adds that keeping the price where it is allows for buyers to enjoy some capital appreciation. There is a discount of 5% for buyers of property before the official launch.
The Southern Marina project is being built at a time when property developers are facing sluggish market conditions down south where concerns of a brewing glut in South-East Asia’s largest integrated development has enveloped the area.
Prices have surged because of a wave of speculative buying and with so much supply coming onstream in the years ahead, which can lead to a glut of houses in the state, PPB feels buyers have to be given value.
“Sentiment has been weak but we are encouraged by interest during the preview,” says Lim. He notes that quite a number of the buyers have been professionals living in Johor and Singapore. Another group are Johoreans working in Kuala Lumpur.
Building its property division
PPB is no stranger to the housing industry. While it is more famous for its flour milling, animal feed and cinema businesses, the group has had a long presence in Johor where it built townships.
It built Taman Pelangi, Taman Molek and Taman Ponderosa in Johor. The Southern Marina project represents the move into the high-end, high-rise segment for the group. PPB has a township in Cheras called Taman Segar where bungalow houses are being constructed. There are also developments in Penang and Kedah.
Lim says the group owns pockets of property in the Klang Valley that has development potential. Most of its landbank is in Kedah which remains a long-term potential, where it is likely to build shophouses first.
PPB, though, has other land it could develop. It is planning to develop 4 acres of land in Taman Megah in Petaling Jaya and 5 acres in the heart of Georgetown, Penang, as development of its Southern Marina proceeds.
Out of all of its main divisions, housing is the smallest, contributing about 10% to group profit. The biggest contributor to profit is its 18.3% stake in oil palm giant Wilmar International Ltd which generates about 65% to 75% of PPB’s profit.
“Our plan is to grow the property division and also look out for new land,” says Lim. PPB has RM985.5mil in cash and short-term investments.
The moves to beef up the property business is an organic move for PPB and the sluggishness that is seen in the proerty market could be an advantage to PPB as prices gravitate towards more realistic levels.
The other part of the group that is doing great has been its cinema business. With the Malaysian box office growing rapidly, the profitability of cinema chains such Golden Screen Cinemas (GSC) has been lifted.
Lim says its 274 cinemas are in 31 locations across Malaysia and will be expanding to 10 new locations, mostly out of the Klang Valley, in the next three years.
The use of IT has helped the company run more efficiently as it helps with bookings and programming.
“It’s a cash business but labour costs are going up,” says Lim, who adds that another wrinkle GSC has to manage is the stronger US dollar.
The dollar’s strength will affect its flour and animal feed business but the experience PPB has should allow it to deal with the ups and downs of its operations.
“We have been in this business for 40 years and have the experience to manage it. What is important is distribution and the ability to run manufacturing efficiently.”