Gems in the Golden Triangle

THE EDGE WEEKLY ISSUE#991

THE WEEK OF DECEMBER 2 – DECEMBER 8, 2013

By Ben Shane Lim, Hyzah Zakaria & Siow Chen Ming

The government, GLCs and corporations are today the biggest land and property owners in the heart of Kuala Lumpur.  But old rich families too own parcels here with billions of ringgit in development potential.  We point out the gems…………

Government measures to tighten lending to the property sector have not dented demand for prime land in Kuala Lumpur.

A record-breaking deal was done two weeks a go where a 3.11-acre parcel in Jalan Ampang was sold for Rm3,300 psf.  By comparison, the government sold the 5.44-acre Seri Melayu Restaurant site to Jerantas Sdn. Bhd for the Harrods Hotel project at RM1,800 psf last year.

The 3.11-acre parcel, which sits in the shadow of the Petronas Twin Towers, had belonged to the Loke Wan Yat estate and was sold to Singapore-listed developer Oxley Holdings Ltd for a whopping RM446.7 million.  The estate belongs to the descendants of Loke Yew (1844-1917), who had come to Malaya in 1860 and later became a rubber and tin mining baron.  The estate has a pile of assets that have been kept for decades and the tract sold to Oxley is where the Chef Choi Restaurant and Pelita eatery are located.

“You can easily justify the price for such a prime location, especially if you assume a plot ratio of 12 times, which they should have no trouble getting,” says CB Richard Ellis Sdn Bhd managing director Allan Soo.

As congested as KL is, the Loke’s family land is not the last undeveloped parcel in the city.  Many more with huge potential – often seen as uncut gems – are held by other old rich families.

In fact, the Loke family has a few more valuable parcels in the Golden Triangle (please refer to pages 72-75 of The Edge Weekly issue #991), making them one of the largest private landowners in KL.  Including their recently sold parcel, the family was sitting on land worth RM1.3 billion, according to property consultants.

As the Lokes have shown little interest in developing the land themselves, it is likely that they will sell the rest of it at some point.

One notable parcel owned by the Loke family is where the Hakka Restaurant is located today, opposite Datuk Seri Desmond Lim’s Pavillion Kuala Lumpur.  The land has remained untouched by the vigorous development around it.  The family also owns the piece of land that now houses the Butter Factory, a club that is popular with KL’s young crowd.

The two parcels measure a combined 3.56 acres.

Not too far from the Hakka Restaurant, the Loke family has another 4.34 acres tucked away in the Changkat Kia Peng cul-de-sac, near the Top Hat Restaurant.  A few well-maintained bungalows, surrounded by lush greenery, occupy the land now, the largest of which is used by the Johor royal family.

CBRE executive chairman Christopher Boyd estimates the worth of the Loke family’s outstanding land (after the Oxley deal) at around RM850 million.  He believes the family will have little difficulty in finding a buyer, should it decide to put the land up for sale.

“Outside the city centre, things have cooled down a little but foreign buyers, in particular the Japanese, South Koreans and Singaporeans, are still very keen on developing land in the city,” says CBRE associate director Nabeel Hussain.

“These guys have the fund to back them and tend to favour developing residential properties since you can simply sell the units, unlike an office building that you have to hold and rent out.  Mitsui, for example, has been very successful in this,” he says, highlighting the recent launch of the Mews, a joint venture between Mitsui Fudosan Residential and Eastern & Oriental Bhd (E&O) in Jalan Yap Kwan Seng.

Another example of the strong demand for land in KL is the acquisition of the Lai Meng School site in Jalan Ampang by Magna Prima for a total consideration of RM209 million or RM1,845 psf in 2009.

The price Magna Prima paid includes the cost of relocating the school to its new premises in Bukit Jalil.  On top of that, there is a huge Muslim cemetery at the back fo the school.

“It is going to be very challenging to develop that piece of land.  I’m surprised Magna Prima did not try to find an alternative site.  Malaysians are still quite superstitious and the side facing the graveyard will be a tough sell,” says a real estate veteran.

While the Lai Meng Schood land will be redeveloped next year, two doors a way, next to the Pakistan High Commission, is an open air car park with a sign that states in bold red letters, “THIS LAND IS NOT FOR SALE”.

The 3.6-acre parcel is owned by Ng Chin Siu and Sons Rubber Estates Sdn Bhd, which belongs to the Ng family, which once owned many parcels in Desa Hartamas and Mont’ Kiara.  The family was also a partner of Eng Lian Group, which is famous for developing Bangsar.

“I think the Ngs are fed up with the low offers for the land, hence the sign,” jokes a real estate consultant, who believes selling the land will be a challenge because it has a narrow front to Jalan Ampang while the back of it faces the Muslim cemetery.

Across the road from Lai Meng Schood, however, the prospects for development are slightly brighter.

According to property industry sources, the popular Zouk nightclub will soon be moving out to make way for a redevelopment.  The one-acre parcel the club sits on belongs to the family of former finance minister Tun Daim Zainuddin and Reliance Pacific Bhd. (please refer to pages 1 & 75 of The Edge Weekly issue #991)

Another interesting name that cropped up in the survey of KL’s re-developable properties was Datuk Lim Foo Yong, who established the Hotel Merlin chain.

Lim Foo Yong’s family still owns valuable sites in Jalan P Ramlee

Apart from owning Wisma Lim Foo Yong opposite Istana Hotel, Lim, who will be 100 years old next year, also owns a 1.56-acre plot off Jalan P Ramlee, next to Menara TA One.  With the Petronas Twin Towers barely 200M away, this plot is ideal for redevelopment, say CBRE’s Boyd.

The land is currently occupied by several one and two-storey restaurants and some open-air car parks.  Market observers say since Lim’s eldest son Ooi Chai became a full-time Jesuit Priest, there has been little interest to redevelop the land.  It is learnt that Ooi Chai himself has retired from the parish and is not in the best of health.  But is the land ripe for redevelopment?

Down Jalan P Ramlee, the popular strip of nightclubs is already undergoing changes.  The Beach Club and Espanda owned by the late Ronnie Choong have been moved a few doors up to make way for a proposed office development a the corner of Jalan P Ramlee opposite the Shangri-La Hotel.

After Choong’s death in a motorcycle accident in May this year, his wife, Judy Ng, now oversees the project.

Up Jalan P Ramlee, TA Group is also preparing to redevelop an open-air car park into a 260-unit serviced apartment  building that will face the Twin-Towers.

Another interesting individual who cropped up in our search for prime vacant land in KL is Lawrence Lui, the son of Macau casino magnate Lui Che Woo, who controls Galaxy Entertainment Group.

California-based Lawrence and his wife Gorretti Lo have been linked to the 1.42-acre open-air car park opposite the Butter Factory.  Little known Bressay Investment Ltd controls Jatur, which is the owner of the plot of land.  Both Lawrence and his wife are directors of Jatur.

“With the success of Banyan Tree just round the corner, it’s not hard to see Lui’s land and the Hakka Restaurant land doing very well as residential developments,” says CBRE’s Nabeel.

While the areas closer to KLCC or Pavillion are seeing many new developments, there could also be new activities in the Jalan Raja Chulan / Bukit Ceylon area, which is near the popular Changkat Bukit Bintang nightspot.

The 0.94-acre plot in Bukit Ceylon that belongs to Lim Yee Teck’s family, which is currently being used as a car park, could also be put on the market.  Liquidators are disposing of the family’s various assets, including this plot of land.  The family is better known for its controlling stake in public-listed TAHPS Group Bhd.

Private owners aside, the biggest owner of development land in the Golden Triangle is KLCC Property Holdings Bhd, which as over 8.41 acres of vacant plots around KLCC Park.  However, its management has indicated that it is in no rush to develop these properties.

Another landowner bidding its time is the YTL group, which has a 3.59-acre parcel in Jalan Bukit Bintang next to Prince Court Medical Centre.  Sources say the group has not drawn up any plans for the land. 

While it makes economic sense to develop land that is vacant or being used for car parks and restaurants, there is also a case for redeveloping existing buildings.

“The rule of thumb is, if the value of the building itself is less than the value of the land, then there is a case for redevelopment,” says Nabeel.

Two prime examples of buildings that have high redevelopment potential are Bangunan Getah Asli across the Twin Towers in Jalan Ampang and Wisma MCA, he adds.

Wisma Central is another good example, but its strata title status and the fact that the shop units are individually owned will hamper a redevelopment.

“Right now, the law in Malaysia requires developers to get 100% of the owners to agree.  Of course, that is impossible.  There will always be the last one or two who will hold everyone else to ransom and demand a higher price.  However, if the law changes and lowers that threshold to 75%, we will see some interesting redevelopments in the city,” says Boyd.

“Compulsory acquisition is the only way to undertake urban renewal now, but such a move would be highly unpopular,” he adds, citing Wisma Cosway as another candidate for redevelopment.

One property that he would like to see redeveloped is the low-rise, low-density Desa Kuda Lari (Running Horse Village), which was built by Tan & Tan and was the first luxury condominium in KL.  As its name suggests, its residents used to have a great view of the old Selangor Turf Club, but now the development is surrounded by skyscrapers.

Owners of old buildings that have lost their shine but are not economical to tear down and rebuild might opt to do what is being done to the MAS building.  Permodalan Nasional Bhd (PNB) is refurbishing the offices and demolishing the podium to make way for a new hotel.

Property watchers say concerns about the direction of the market and supply overhang in the office and residential space do not appear to have had any impact on what is happening in the Golden Triangle yet.  Indeed, the transformation of the city’s skyline appears to be gaining momentum.

Amidst all this, the old rich landowners are sitting patiently on their pots of gold, waiting for the right price to exit.