Developers innovate for continuity
As the Malaysian economy gradually reopens, some real estate developers have already embarked on ways to increase their recurring revenue base and make their businesses more sustainable.
Like a hovering dark cloud, uncertainties about the pandemic continue to linger.
However, that hasn’t deterred developers from exploring new avenues to ensure business continuity.
IOI Properties Group Bhd (IOIProp) executive vice president Lee Yeow Seng (pictured) said the gradual roll-out of vaccinations would go a long way in facilitating a gradual recovery and reopening of the economy.
“When that happens, we will be ready to capitalize on new and emerging opportunities in our business segments,” he said in IOIProp’s recently released annual report.
“In the meantime, we continue to focus on strengthening our core competencies and developing new capacities to expand our sources of income.”
Acknowledging that the pandemic has been a major disruption, Lee however adds that the Covid-19 pandemic has also presented opportunities for IOIProp to refocus on operational sustainability and efficiency, as the group continues to adapt to new developments. operating conditions.
“At the same time, we are committed to delivering relevant offers tailored to current market sentiment and demand. “
Lee hopes that the gradual resumption of activities and the removal of movement restrictions will allow the company to relaunch its hospitality and leisure activities.
“We will continue to leverage marketing activities to cross-sell our portfolio of leisure and hospitality brands to generate visits and revenue. “
Lee says the technology has been an effective tool in transitioning IOIProp’s operations to digital and propelling its reach with homebuyers amid foreclosure measures.
“As a group, we are aware of its potential as a strategic platform to explore new avenues for business continuity.
“We look forward to incorporating more of them as a key driver of business efficiency as well as innovative design concepts to suit new standards of work and life. “
IOIProp Chairman Datuk Tan Kim Leong said the company will ensure the sustainability of its business through digital technology.
“The group has taken advantage of digitalization to optimize business processes and increase customer engagement.
“We will continue to explore ways to deploy cutting-edge technology to improve customer experience and automate, as well as integrate business processes for greater synergy between our three main business segments,” he said. it in the 2021 annual report of IOIProp.
Lee adds that IOIProp will continue to practice active management of land reserves at its major operating sites to ensure the company can maintain a sustainable development pipeline.
“IOIProp is always on the lookout for expansion opportunities in the markets where we are present.
“We will be reviewing such opportunities as they arise, in order to improve shareholder value.”
Last week, IOIProp announced that it had successfully bid for land in Marina View, Singapore, for S $ 1.51 billion (RM 4.68 billion) from the Urban Redevelopment Authority (URA) .
The group said the leasehold plot, successfully auctioned by its wholly owned subsidiary Boulevard View Pte Ltd, measured 7,817.6 m² or 0.78 ha.
MIDF Research, in a report, says the land deal will boost IOIProp’s exposure to Singapore.
“We are neutral to positive on the land tender, as the proposed development on the ground is expected to increase IOIProp’s investment property portfolio.
“The land has a gross plot ratio of 13 times and is estimated at over 100,000 m² of space for 905 private residential units, 540 hotel rooms and 2,000 m² of gross floor area of commercial space.
The research house notes that the land is strategically located in the Marina Bay area, which is Singapore’s main financial and commercial district.
“The land is located near the IOI Central Boulevard Towers office development of IOIProp,” he says.
TA Securities says it is cautiously optimistic about the land deal.
“In addition to the prime location and favorable acquisition price, this is a timely replenishment of the IOIProp land reserve in Singapore, which will allow the company to benefit from the private housing boom in Singapore. Singapore. “
Citing the URA, TA Securities reports that private home sales in the central core region rose about 25% quarter-on-quarter in the second quarter (Q2) of 2021 to 1,930 units, the strongest quarter since last quarter of 2010 where 2,014 units were traded.
“On an annual basis (year on year), sales of private homes in the second quarter of 2021 have increased more than 4.5 times.
“In the first half of 2021, nearly 3,500 luxury homes were sold, exceeding annual sales from 2018 to 2020.”
Separately, Sime Darby Property Bhd (SimeProp) announced last week its partnership with real estate logistics service provider Logos Property Group Ltd to set up industrial development funds for clients in the logistics industry.
In a virtual press conference, SimeProp Group Managing Director Datuk Azmir Merican said the joint venture (JV) will help increase the property developer’s recurring revenue.
“With this JV, our goal is that in five years, 30% of our revenue will be recurring,” he said, adding that the business was also part of the company’s goal to move away from the simple real estate developer and become a real real estate development company.
RHB Investment Bank is optimistic about the JV.
“We applaud management’s plans to build an investment property portfolio so that the recurring income stream smooths out fluctuations in development income going forward.
“In addition to the construction of retail and commercial offices in the existing townships (Serenia City, Bandar Bukit Raja and Elmina), there are also plans to hold industrial properties and logistics warehouses in its Hamilton MVV and Elmina business parks. . “
The research house says there is good demand for industrial land and twin factories for the two projects so far, due to the expansion of some local manufacturers.
“While Hamilton benefits from its proximity to the airport, Elmina is enjoying the fallout due to the depletion of industrial land available to Shah Alam.”
Maybank Investment Bank is also positive on the case.
“This will enhance the investing and asset management activities of SimeProp, which currently manages five million square feet of total net leasable area, thereby expanding its revenue stream beyond real estate development.
“Most importantly, it provides an additional recurring source of income for SimeProp.
“The fund will focus on developing and investing in build-to-suit to lease or sell industrial assets, primarily in the logistics sector. “
According to the National Property Information Center (Napic), industrial property transactions grew in value and volume in the first half of 2021, driven by the boom in e-commerce which has boosted demand for more warehouse space .
Napic reports that a total of 2,562 transactions worth RM 6.48 billion were registered in the industrial property segment during the first half of the year.
It is up 29.4% in volume and 19.8% in value compared to the first half of 2019.
Meanwhile, Lee says the IOIProp will continue to take advantage of accommodating policies and incentives such as the Extended Home Ownership Campaign (HOC).
“With the prevailing low interest rate environment, we expect these incentives will help attract potential home buyers and stimulate the recovery in the housing market. “
The HOC was initially launched in January 2019 to address the overhang problem in the country.
The campaign, initially scheduled for six months, has been extended for a full year.
It proved to be a success, having generated sales totaling RM 23.2 billion in 2019, exceeding the government’s initial target of RM 17 billion.
The government reintroduced the HOC in June last year as part of the Penjana initiative to boost the real estate market after being affected by the Covid-19 pandemic.
The campaign has been extended until the end of this year, with real estate consultants and developers fully supporting the move.
In March of this year, during the Real Estate and Real Estate Developers Association’s 2021 Real Estate Market Briefing, its chairman Datuk Soam Heng Choon revealed that since the reintroduction of the HOC last June, a total of 34,354 residential units valued at RM 25.65 billion had been sold as of February 28, 2021.