AS the Malaysian economy gradually reopens, some property developers have already embarked on ways to boost their recurring income base and future-proof their business.
Like a hovering dark cloud, the uncertainties of the pandemic continue to linger.
However, this has not deterred developers from exploring new avenues to ensure business continuity.
IOI Properties Group Bhd (IOIProp) executive vice-chairman Lee Yeow Seng (pic) says the progressive rollout of vaccinations will help tremendously in facilitating a gradual recovery and reopening of the economy.
“When that happens, we will be ready to capitalise on new and emerging opportunities across our business segments,” he says in IOIProp’s recently released annual report.
“In the meantime, we continue to focus on strengthening our core competencies and developing new capabilities to widen our income streams.”
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 operating conditions.
According to the National Property Information Centre (Napic), industrial property transactions were up y-o-y in terms of both value and volume in the first half of 2021, spurred by the surge in e-commerce that drove demand for more warehouse space.
“At the same time, we are committed to delivering relevant offerings suited to current market sentiment and demand.”
Lee is hopeful that the gradual resumption of businesses and removal of movement restrictions will enable the company to jumpstart its hospitality and leisure business.
“We will continue to leverage marketing activities to cross-sell our leisure and hospitality brands portfolio to drive visitation and revenue.”
Lee says technology has been an effective tool in transitioning IOIProp’s operations to digital and propelling its reach to home buyers in the midst of lockdown measures.
“As a group, we are cognisant of its potential as a strategic platform to explore new avenues for business continuity.
“We are eager to incorporate more of it as a key enabler for business efficiency as well as innovative design concepts to suit new norms in working and living.”
IOIProp chairman Datuk Tan Kim Leong says the company will future-proof its business with digital technology.
“The group has leveraged on digitalisation to optimise business processes and increase customer engagement.
At a virtual media briefing, SimeProp group managing director Datuk Azmir Merican said the joint venture (JV) will help grow the property developer’s recurring revenue.
“We will continue to explore ways to deploy cutting-edge technology to enhance customer experiences and to automate, as well as to integrate business processes for greater synergy across our three major business segments,” he says in IOIProp’s 2021 annual report.
Lee adds that IOIProp will continue to practise active landbank management in its key operating locations to ensure the company can maintain a sustainable development pipeline.
“IOIProp is always on the lookout for expansion opportunities in markets where we are present.
“We will consider such opportunities as and when they arise, to enhance shareholder value.”
Last week, IOIProp announced that it had successfully tendered for a piece of land at Marina View, Singapore, for S$1.51bil (RM4.68bil) from the Urban Redevelopment Authority (URA).
The group said the parcel of leasehold land, successfully tendered by its wholly owned subsidiary Boulevard View Pte Ltd, measured 7,817.6 sq m or 0.78ha.
MIDF Research in a report says the land deal will boost IOIProp’s exposure in Singapore.
“We are neutral to positive on the land tender, as the proposed development on the land is expected to increase the investment properties portfolio of IOIProp.
“The land has a gross plot ratio of 13 times and is estimated to yield more than 100,000 sq m of space for 905 private residential units, 540 hotel rooms and 2,000 sq m gross floor area of commercial space.”
The research house notes that the land is strategically located within the Marina Bay area, which is Singapore’s major financial and business district.
“The land is situated close to IOIProp’s IOI Central Boulevard Towers office development,” it says.
TA Securities says it is cautiously optimistic about the land deal.
“Apart from the prime location and favourable acquisition price, it is a timely replenishment of IOIProp’s landbank in Singapore, which will allow the company to benefit from the Singapore private housing boom.”
Citing the URA, TA Securities says private home sales in the core central region increased by about 25% quarter-on-quarter in the second quarter (Q2) of 2021 to 1,930 units, the strongest quarter since the last quarter of 2010 when 2,014 units were transacted.
“On a year-on-year (y-o-y) basis, Q2 of 2021 private home sales jumped by more than 4.5 times.
“In the first half of 2021, nearly 3,500 luxury homes were sold, surpassing the annual sales from 2018 to 2020.”
Separately, Sime Darby Property Bhd (SimeProp) announced last week that it is tying up with real estate logistics services provider Logos Property Group Ltd to set up industrial development funds for clients in the logistics sector.
At a virtual media briefing, SimeProp group managing director Datuk Azmir Merican said the joint venture (JV) will help grow the property developer’s recurring revenue.
“With this JV, our target is that in five years, 30% of our income will be recurring,” he said, adding that the venture was also part of the company’s goal to move away from just being a property developer and become a real estate development company.
RHB Investment Bank is upbeat about the JV.
“We applaud management’s plans to set up a portfolio of investment properties so that the recurring income stream will mitigate the fluctuations in development earnings in the future.
“Apart from building 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 Park.”
The research house says the industrial land plots and semi-detached factories in both projects are seeing good demand so far, due to expansion by some local manufacturers.
“While Hamilton benefits from its close proximity to the airport, Elmina enjoys the spill-over due to depleting industrial land plots available in Shah Alam.”
Maybank Investment Bank also says it is positive on the deal.
“It will enhance SimeProp’s investment and asset management business, which currently manages five million sq ft of total net lettable area, thus broadening its income stream beyond property development.
“More importantly, it provides an additional recurring income source to SimeProp.
“The fund will be focusing 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 Centre (Napic), industrial property transactions were up y-o-y in terms of both value and volume in the first half of 2021, spurred by the surge in e-commerce that drove demand for more warehouse space.
Napic says a total of 2,562 transactions worth RM6.48bil were recorded in the industrial property segment during the first half of the year.
This was up by 29.4% in volume and 19.8% in value compared with the first half of 2019.
Meanwhile, Lee says IOIProp will continue to leverage accommodative policies and incentives such as the extended Home Ownership Campaign (HOC).
“Together with the prevailing low-interest rate environment, we expect these incentives will help entice potential home buyers and drive recovery in the property market.”
The HOC was initially kicked off in January 2019 to address the overhang problem in the country.
The campaign, which was initially intended for six months, was extended for a full year.
It proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.
The government reintroduced the HOC in June last year under the Penjana initiative to boost the property market after it was adversely affected by the Covid-19 pandemic.
The campaign has been extended to the end of this year, with property consultants and developers fully supporting the move.
In March this year, during the Real Estate and Housing Developers’ Association’s briefing on the property market for 2021, its president Datuk Soam Heng Choon revealed that since the HOC was reintroduced last June, a total of 34,354 residential units valued at RM25.65bil had been sold as at Feb 28, 2021.