Wednesday, 24 April 2013

ROBERT KUOK PAYS HEFTY PREMIUM FOR ISKANDAR LAND, HIGHEST PER SQ FT TRANSACTION RECORDED


The recent announcement that the Kuok Group’s JV with Khazanah to purchase 12.5 acres of prime land in Iskandar Malaysia for RM182 million with the purpose of building high rise residential and retail units with a view of the Straits of Johor, has attracted false allegations that the land was sold below market value.
 
This is highly ridiculous as the Kuok-Khazanah JV set a new price benchmark of nearly RM334 per sq ft (psf) for Nusajaya land.
 
In January, the same vendor UEM Land Holdings sold 43.6 acres in Puteri Harbour to Liberty Bridge Sdn Bhd for RM401 million or the equivalent of RM211 psf, translating to a 58% premium for the Kuok-Khazanah land transaction.
 
These allegations only serve to reiterate Malaysia’s sad story of attracting investors, only to frighten them away with our insecurities.
 
Investors come into Malaysia for its economic potential but because their investments are criticised so severely with wrong facts thrown in to confuse the issue, many investors run for the hills for cleaner, safer investment pastures in the region.
 
Critics have to differentiate between gross development value prices which is the price of property after land has been developed and cost of land which has not been developed.
 
If the land sold to the Kuok-Khazanah JV is Iskandar Malaysia’s all time high, how can it be below market value? Prices of land anywhere in the world are determined based on the last transaction made and in this case, it was RM211 psf.
 
By all logical reasoning, the land price in Johor is still below that of the Klang Valley and Penang. So allegations that the land should have been sold to the Kuok-Khazanah JV at RM700 psf does not hold water.
 
This has been verified by Johor Bahru Real Estate and Housing Developers’ Association (Rehda) chairman Koh Moo Hing who said property prices in Johor Bahru are still low when compared to Kuala Lumpur and Penang though Iskandar Malaysia is responsible for successfully stimulating the property sector in Johor Bahru.
 
As a comparison, the price of completed properties such as terrace houses in Horizon Hill range from RM400 to RM500 psf.
 
Meanwhile, recent land deals in Iskandar Malaysia revealed transaction prices of RM20 per square foot (psf) for a disposal of 614 acres of land by DRB-Hicom Bhd in April this year; RM12.20 psf when Sunway Bhd bought 779 acres of land for RM413 million in December last year and RM22 psf arising from the acquisition of 227 acres of land for RM220 million by Dijaya Corporation Bhd in August 2011.
 
So, don’t kill the goose that lays the golden egg. Investors may find other regions more attractive than Malaysia .
 
Malaysia could only stand to lose by spooking the investment community.
 
Firstly, Malaysia could lose out in its government coffers as MOF will benefit from taxes from the sales transaction; taxes on profit paid by the Kuok-Khazanah JV, construction companies; stamp duty from the purchase and employment generated by the project
 
Public listed company UEM Land and its minority shareholders will benefit from the sale of this land as well. Land is only as good as its commercial value.
 
Meanwhile, construction companies will enjoy jobs while the population will have more employment and business opportunities.
 
If at all, Robert Kuok in this deal had to pay 58% more than the last transaction which was completed just 3 months ago. That’s tough.
 

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