Record property values
Posted on | July 30, 2007
By THE STAR
Mah Sing Group Bhd announced the sale last week of its first office building project, which set a record transacted price of RM714 per sq ft for an office property in Kuala Lumpur.
MAH SING Group Bhd, which has proved itself as a housing developer, demonstrated last week it could also thrive in the commercial property sector.
It announced on Thursday the sale of one block of The Icon, the first grade A office complex it is constructing, for RM174.4mil cash. That works out to RM715 per sq ft of its proposed net lettable area.
That is a record transacted price of an office building in Kuala Lumpur, quite an achievement for Mah Sing on its first outing in this sector.
It is also a fair price for the buyer, Koperasi Permodalan Felda Bhd, which is assured a gross rental yield of 7% by Mah Sing. The lease-back arrangement will enable Mah Sing to manage tenancies so as to maintain the image of the first of its Icon series of office buildings.
For Felda, there is also the potential of appreciation in the value of the building by the time it is completed.
Mah Sing will also participate in that potential as it continues to own the second tower block of The Icon, which is located along Jalan Tun Razak.
In the current transaction, Aseambankers said in a note on Friday, a pre-tax profit margin of least 35% or about RM60mil is anticipated from the sale of the first tower block.
That works out to about RM30mil a year over the two-year construction period, which is significant for the group which earned a net profit of RM65mil last year.
Mah Sing is developing another office building in its Icon series in the high-end Mont’ Kiara area of Kuala Lumpur. This, as well as the second block of The Icon at Jalan Tun Razak, could be sold this year, or at a higher price on their completion.
Malaysian Resources Corp Bhd set its own record in its Kuala Lumpur Sentral project area last week. It announced on Friday the sale of land and turnkey construction of an office tower for CIMB-Mapletree Real Estate Fund 1 for RM404mil cash, or RM663 per sq ft of net floor area.
This is believed to be the highest MRCB has transacted in its Sentral area. In an earlier transaction, it sold an office tower in the same area to Employees Provident Fund at RM525 per sq ft.
Among small property companies, Land & General Bhd’s (L&G) share price rose 36% to 64.5 sen last week, raising its total market value to RM386mil, which is actually not small.
This market value is even larger than the RM363mil market value of Glomac Bhd which has a commercial property project – Glomac Tower – close to the Petronas Twin Towers. Glomac expects to launch that at about RM1,000 per sq ft, setting a record for an office building when it is transacted.
L&G is in a net cash position after disposal of much of its assets. Lien Hoe Corp Bhd, with a market value of RM108mil, is another property company that is successfully clearing its debts.
Lien Hoe announced last week it completed the sale of the Atria shopping centre in Petaling Jaya and the week before, the sale of Kompleks Lien Hoe in Johor Baru. As the Atria was sold for RM75mil cash, and Kompleks Lien Hoe for RM94.7mil cash, Lien Hoe received a total of almost RM170mil cash this month.
In addition, the company said in April it would sell a piece of land in Seri Kembangan, Kuala Lumpur, for RM65mil, and earlier this month, it announced the sale of its head office building, Lien Hoe Tower, for about RM53mil. When these asset sales are completed, Lien Hoe would have repaid almost all its borrowings.
That would leave it with the Hotel Armada and Plaza Armada complex in Petaling Jaya, which is carried in its books at about RM110mil.
It had earlier formed a joint venture with Eksons Corp Bhd to build shops and a hypermarket in Puchong, an arrangement in which Lien Hoe provided the land and cash-rich Eksons would make available the working capital.
As Lien Hoe would soon be debt-free, it is expected to undertake, on its own, a luxury condominium on a piece of land it still owns in Johor Baru.
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