PETALING JAYA: Strong partnerships and established business relationships are helping smallish property developer Amcorp Properties Bhd (Amcorp Prop) to weather the current volatility in the property market.
Some of these partnerships date back to just after the global financial crisis in 2009 when Amcorp Prop decided to enter the market in London.
Amcorp Prop managing director Ben Lee said the company continued to ride on its decision it has made then and opined that the short-term volatility due to the Brexit decision has not had much of a negative impact upon the company.
“The dynamics of the London property market is still very much intact and London is a world city with the depth and liquidity. The city is also the focus of international investors.
“While we may be a small company in Malaysia, we have strong partnerships with names such as Temasek and Grosvenor who are our partners for some of our projects,” Lee said.
“Grosvenor is a very old and established company that belongs to the Duke of Westminster. They own almost the entire freehold development in Mayfair and Belgravia,” he added.
Amcorp Prop’s portfolio mostly consisted of stakes in projects that were located in prime areas within matured world cities with at least two centuries or more of historical civilisations, Lee said.
He said the plan was to leverage on these partnerships to enter the markets of other cities in the world.
“We have done very successful joint ventures in the UK and in our next phase, we want to replicate them in Japan and other parts of Europe,” he said.
The company’s latest venture in Madrid, Spain, saw it expanding on the existing partnership with Grosvenor.
It signed a joint-venture (JV) agreement in July for it to own half of the JV company. Amcorp Prop’s capital commitment for the project is 35 million euros (RM153.65mil).
Amcorp Prop said in its announcement that the JV would allow it to leverage on the expertise and experience of Grosvenor, which has been operating in Spain since 2000, to benefit from the recovery of the Spanish real estate market.
The JV also allowed it to further diversify its international property investment and development portfolio, the company said.
Amcorp Pro’ capital commitment for its Madrid venture will be funded internally and through borrowings.
The company, which was initially only in London, now has presence in Japan, which it entered into last year, and Madrid.
“We would like to build a pipeline of interesting sites to see if we can secure them. We are looking further at Madrid, Japan and London. We always focus on the right product, the right place and the right location,” Lee said.
Today, it also mostly focuses on properties for the discerning ultra high-net worth (UHNW) buyers.
It started to move away from the mid-priced segment to luxurious developments in London from 2013 with average selling prices of above £3,600 per sq ft.
Meanwhile, the company has seen lumpy recognition of profits from its various projects in the past years and its ongoing luxury projects in London will not be reflected yet to its financials in the near to medium term, given the way it treats this in its accounts.
“We do not recognise the project on progress basis but only upon completion. So, for the two projects we are working on now in Burlington Gate, Mayfair and Holland Park, Campden Hill, we have not recognise their profits,” its chief financial officer Johnson Yap said.
In the last reported first-quarter ended June 30, Amcorp Prop had seen a normalisation in net profits when it reported a gain in the corresponding quarter from the disposal of Merchant Square in Paddington London.
This gain amounted to RM60.13mil that was recognised in the same quarter a year ago.
Only one analyst covers the stock at Affin Hwang Capital Research and it was downgraded to a “hold” in July shortly after the Brexit vote due to uncertainty in demand.
The rating was kept at “hold” after Amcorp Prop’s results were announced at the end of August, as Affin Hwang said the company’s earnings would likely remain lacklustre until the fourth quarter of the financial year 2017 upon the partial completion and hence recognition of the Campden Hill project.
It also noted that Brexit remained a wildcard for now.