Landbanking in Iskandar Malaysia a Gem

Causeway

Is the special economic zone of Iskandar Malaysia in Johor approaching a tipping point, or has it already been reached?

 

Whatever one’s view may be, it appears a moot point based on the pick-up in corporate interest and the rush by developers to landbank.

 

In 2008-09, a few started to landbank, with the initial land purchases limited to a couple of hectares for the construction of schools or educational institutions.

 

In the years that followed, the land deals have increased in frequency and size with the vendors almost invariably government-linked entities that own large tracts of land in the state such as UEM Land, Iskandar Investment Bhd and Iskandar Waterfront Holdings (the masterplanner for the Danga Bay, city centre and Tebrau Coast areas).

 

Support

 

Transactions are growing annually. Last year, 11 major deals were transacted according to data compiled by AmInvestment Bank. The year 2013 may even see a marked acceleration since heavyweight Singapore entities and personalities appear to have endorsed the zone.

 

After prolonged negotiations stretching over two years, Singapore’s CapitaLand and Temasek last month announced a joint venture with Malaysia’s Iskandar Waterfront Holdings in a mixed development on 28 hectares which estimated gross development value has been pegged at RM11 billion (S$4.4 billion).

 

Another “Singapore-Malaysia” partnership that has added to the buzz concerns Liberty Bridge, which acquired 18 hectares for a mixed project. Liberty is made up of a consortium of tycoons, Surin Upatkoon, Wan Azmi Wan Hamzah, Lee Oi Hian and Singapore’s Wee Ee Chao.

 

China’s Country Garden Holdings also signed on the dotted line late last year, joining a list of foreign investors that includes Australia’s Walker Corporation, and Singapore’s Ascendas and Azea Properties.

 

From Klang Valley, the beeline heading south includes almost all the big boys such as Sunway, Dijaya Corporation, Eastern & Oriental, Mah Sing, WCT, Bandaraya Development, and SP Setia.

 

Sunway Bhd, in which the Government of Singapore Investment Corporation has a 12 per cent stake, has already indicated it does not plan to do things by half measures.

 

Its involvement via its construction arm in building structures such as Pinewood Studios and Legoland may have convinced the group of Iskandar’s potential. Sunway bought 26 hectares in the region at the end of 2010 and then surprised a year later with another 280 hectares for RM745 million.

 

Today the group puts its total landbank in Iskandar at about 728 hectares and claims to be the second largest land owner in the Nusajaya precinct.

 

A stone’s throw from bustling Singapore, Iskandar’s potential is undeniable, particularly now that both governments are on cordial terms and reading from the same page.

 

“Iskandar is compelling because of its strategic location,” observes Sunway founder and chairman Jeffrey Cheah. “The entry of catalytic developments and brands, continuous influx of foreign investments and attractive incentives adds to its magnetism.”

 

That Sunway is going big on Iskandar has added to the company’s prospects.

 

“An attractive proxy to Iskandar” is how Affin Investment Bank describes the group while RHB Investment Bank says compared to government-linked entities Sunway is “a cheaper and lower risk Iskandar play”.

 

WCT is also favoured by others. It is AM Investment Bank’s top Iskandar pick because it is “a prime mover and solid proxy to the booming property and infrastructure scene”.

 

WCT has 17 hectares in Medini and was one of the first off the ground. Its high-end developments have gained from RM450 psf at initial launch to RM650 psf at present says AM Investment.

 

With some 418 hectares of undeveloped land in Iskandar, SP Setia is also no slouch; the company has seven on-going projects, mostly residential.

 

It is however building a business park to cater to growing demand from small to medium sized enterprises including those desiring to relocate from Singapore because of soaring rentals on the island state.

 

As one of the largest landbank owners in Iskandar, UEM Land will be hard to beat when it comes to business parks.

 

“Iskandar Malaysia, particularly Nusajaya, will see stronger interest from Singapore buyers partly due to the participation of Singapore’s Ascendas Group to set up an integrated tech park. This in turn will act as a stronger catalyst to pull in more commercial activities in Iskandar,” opines UEM managing director and chief executive Wan Abdullah Wan Ibrahim.

 

He adds that UEM Land would focus on Nusajaya this year and ensure a continuous roll-out of catalyst projects to spur employment creation, as well as population and traffic growth.

 

The integrated park, along with Singapore billionaire investor Peter Lim’s Motorsports City will form part of its Gerbang Nusajaya project – a massive 1,842-hectare development comprising residential and commercial real estate, as well as activity malls and trade centres to be completed over 25 years.

 

Presently, the state-owned developer also has two on-going residential projects in Nusajaya.

 

A planned zone that is already reaping the benefit of billions of ringgit in infrastructure and catalyst projects to attract investors, building a mixed development or integrated township is projected to be a much simpler process in Iskandar.

 

The Sunway group forecasts the time needed to transform Sunway Iskandar into an integrated township will be much shorter compared to its Bandar Sunway in the Klang Valley (15-20 years), and is excited about the possibilities thrown up by its large landbank.

 

Choices

 

The 28 hectares acquired by the CapitaLand joint venture will also allow it to showcase its offerings which are expected to include a marina and better security since the land is essentially a reclaimed island.

 

With so many developers rushing to break ground, buyers could be spoilt for choice. Iskandar developers, however, argue that interest remains robust and will increase once other catalytic projects such as Khazanah and Temasek’s Urban and Wellness resorts are completed.

 

They are also encouraged by the tightening of guidelines governing the acquisition of properties in Hong Kong and Singapore as this could push more buyers to Iskandar, as well as the widening price disparity between Singapore and Malaysia real estate since this could prompt more Singaporeans and companies to seriously consider relocating to Johor.

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