IJM confident in spite of property market slump

It believes with the right product proposition and pricing, its projects will sell

IJM Land Bhd is confident its real estate offerings will continue to thrive in spite of the slowdown in the property market.

At the Property Market Outlook 2015 seminar earlier this month, real estate consultants alluded to the mismatch between market demand and what’s actually available for the public.

They said developers had been launching high-end condominiums and neglected to address the shortage of affordable residences for the public at large, resulting in a glut in upper middle to high-end residential units.

However, the 31-year-old IJM Land believes that when a developer has the right product proposition and pricing, its units will sell.

“During a property market slowdown, people may take longer to decide and it may be harder to obtain financing from the bank, but there will still be people who can afford to buy property,” chief executive officer and managing director Datuk Soam Heng Choon tells StarBizWeek.

IJM Land, a 64%-owned subsidiary of IJM Corp Bhd, will have its remaining 36% bought out by the parent company in a corporate exercise costing RM1.98bil.

In the share swap, the parent company will offer to pay RM3.55 for each IJM Land share it does not own, in the form of 0.5 IJM ordinary shares at an issue price of RM6.70 per share and 20 sen cash.

“Although there will be no major changes in the way we run things, we will get to participate in a bigger company. Being privatised by IJM Corp will give us the leverage of a bigger and stronger balance sheet and lower borrowing cost,” Soam says.

As of last year, IJM Land had unbilled sales of about RM2bil, and has a land bank of some 4,800 acres totalling an approximate gross development value (GDV) of RM30bil.

Currently, the property developer is developing two phases of its 58-acre township Pantai Sentral Park in Kuala Lumpur, a 99-year leasehold land to be developed over the next 10-15 years.

Planned for seven residential phases and six commercial phases, the project cost is RM2bil wth a GDV of RM2.5bil.

Following the launch and take-up of all 140 non-bumiputra units at its debut 211-unit residential tower Inwood Residences last September, IJM Land is planning to launch its second phase, Secoya Residences, this quarter.

In spite of the much discussed property slowdown, Soam believes that products with the right pricing and proposition would still sell.

“From affordable to high end homes, we have been catering to all categories of (buyers) in our projects such as in its Seremban 2 and Shah Alam 2 townships,” he says. “Furthermore, residences with a forest view (as in Pantai Sentral Land) are unusual in the Klang Valley. The only other area would be Jalan Gasing in Petaling Jaya and Pantai Hillpark.”

He points out that there are many empty-nesters in Kuala Lumpur, who would naturally move into a condo. With the surrounding greenery, Secoya Residences would be a conducive environment for this group of retirees, or even young families with a total family income of RM10,000 and above, Soam says.

Units of Secoya Apartments have an average price per sq ft (psf) of RM730-RM750.

As part of DBKL’s tie up with IJM, the town council is creating several recreational products in the 200-acre (forest reserve) such as the Taman Rimba Bukit Kerinchi, a 16-acre park for visitors, as well as an eventual educational phase to name trees and plants.

“We are building an entire community by creating an environment where dwellers will want to come down from their units to use the gardens,” Soam says. “We are targeting an affluent audience.”

Accessibility to Pantai Sentral Park will be made convenient due to the KL Seremban Highway and a link road from the New Pantai Expressway, which IJM will invest some RM50mil to build.

The township will also have a commercial component of serviced apartments and office towers, which is still under discussion.

While Pantai Sentral Park may be further from main roads and other developments now, Soam says that being further away from the highway would give residents more privacy from the hustle and bustle outside.

Other developments which have been compared with IJM’s Secoya include the leasehold 7.18-acre KL Gateway, which is located at the entrance to Bangsar South. The mixed integrated development comprises two office buildings, one of which is sold, serviced apartments above a retail podium block, and two blocks of premium residences totalling 466 units. Suez Capital Sdn Bhd is the developer.

The premium residences, sited on commercial land, were launched last May, priced at about RM1mil, or between RM900 psf and RM1,000 psf. Maintenance charges for the premium residences are 35 sen psf.

The other comparison is UOA Development Bhd’s South View Serviced Apartments in Bangsar South. UOA is the main developer of Bangsar South. The freehold development comprises two blocks of residences on commercial title.

Between both towers are a total of 1,204 units, averaging RM900-RM1,000 psf with a monthly maintenance charge of 22 sen psf.

While these are just two offerings being compared with IJM’s Secoya, there are other high-rise apartments in nearby suburbs selling within the price range of RM750–RM900 psf.

As more are being developed, would that result in an oversupply of residential towers in the area?

Another Mont’Kiara?

If one were to consider the master plan of Pantai Sentral, Mont’Kiara comes to mind as both townships have some similarities.

While there is no dispute as to Mont’Kiara’s location and success, it is dense with high rise condomoniums.

While IJM thinks RM750 psf is a reasonable price to pay for property in the neighbourhood – lower than the RM900-RM1,000 psf in nearby Bangsar South – it is worth noting that Pantai Sentral is still in the early years of development. The coming launch of the 3.47-acre Secoya Residences is only its second residential development there.

Soam says it would not be fair to liken the master planned development of Pantai Sentral with any other locations. He says it is planning Secoya for well-heeled retirees and there will be a lot of open space.

“Less than 10% of developers are willing to offer this as they don’t have the footprint or floor plate to do it,” Soam says.

“We plan well for retirees. Those who bought Inwood said they planned to live in it,” Soam says.

IJM’s other projects include Bandar Rimbayu which is currently in its fifth phase, four of which have been launched. According to Soam, they started out at RM600 psf in 2013 and are now fetching some RM800 psf for a terrace house.

”Currently, we are selling phase 5 and will build an American International School to cater to demand,” he says.

In Penang, IJM has launched all its phase one residential parcels, and is now in the midst of handing over four phases totalling 1,177 units.

“We’re now developing phase two of the 100 acres, which comprises both residential and commercial components, the former which we will launch at year-end. Reclamation works have been completed,” Soam says. - By The Star