Land sale by Johor Sultan sets record prices

THE EDGE WEEKLY ISSUE#992

THE WEEK OF DECEMBER 9 – DECEMBER 15, 2013

By Cynthia Blemin

The sale of about 116 acres of prime land in Johor Baru by Johor ruler Sultan Ibrahim Ismail Sultan Iskandar to a China-based developer last Monday has not only set tongues wagging, but also drawn much attention because of its record-high price.

The landmark deal has been the talk of the town following an announcement to the Hong Kong Exchange on Dec 2 by GuangZhou R&F Properties Co Ltd, a property developer from China, that it had offered to pay a whopping RM4.5 billion for six plots in south Johor.

This works out to RM890 psf, which is more than double what was paid by another China-based developer, Country Garden Holdings Ltd, for a seafront property in Danga Bay in December last year.  Country Garden bought a 57-acre tract from Iskandar Waterfront Holdings Sdn Bhd for RM900 million or RM363 psf.

In the recent deal, the Johor Sultan is selling four plots of vacant freehold land and two plots of reclaimed freehold land to R&F Development Sdn Bhd (formerly known as Modern Valley Sdn Bhd), which is a wholly-owned subsidiary of GuangZhou R&F.

According to the Companies Commission of Malaysia (CCM), the shareholders of R&F Development are Zatizam Zahari and Zalifah Kadis.  Interestingly, they are also shareholders of VC Mahawangsa Sdn Bhd, which is keen to take over the controversial cattle-farming firm National Feedlot Corp Sdn Bhd (NFCorp).

VC Mahawangsa is the investment vehicle of businessman Datuk Anuar Othman.  The takeover of NFCorp is seen as paving the way for Anuar to make a comeback to Corporate Malaysia.

Although there is no mention of the exact location of the 116 acres in the announcement, industry observers say a premium seafront property where the old customs and immigration for lorries was housed and which has since been abandoned could be a part of them.

This property is in the heart of Johor Baru, just a stone’s throw from the Causeway, and straddles Jalan Tanjung Puteri and Jalan Sultan Ibrahim.  It is also less than a kilometre from the new Customs, Immigration Quarantine (CIQ) Complex that started operations in 2008.

The old CIQ, which as located next to the Causeway, was returned to the state government in a swap for another parcel of land for relocation of the CIQ Complex, which was built by the federal government.

Last month, the Malay Chamber of Commerce Malaysia (MCCM) announced its plan to develop the 40 acres of prime land that housed the old CIQ Complex.

MCCM president Datuk Syed Ali Alattas said the chamber became the owner of the old CIQ site and several parcels of prime land in Johor Baru for a nominal fee following a court order in December 2009.

Syed Ali, who declined to reveal the amount paid for the 40 acres, said then that one of the parcels, which was at least two acres in size, in the highly sought-after area of Danga Bay was obtained for just RM1 through the court order.

He said the project would include condominiums that could easily fetch RM1 million each based on current market prices.

On the valuation of the land sold by the Johor Sultan, a real estate valuer says although there may not be any justification for the high price, it could set a new benchmark for land cost in Iskandar Malaysia.

In the sale & purchase agreement (SPA), GuangZhou R&F states that the RM4.5 billion price was determined through direct negotiations with Sultan Ibrahim.  It also says it paid a deposit of RM100 million for the land and would pay the remaining sum in four instalments over three years.

“The board considers the consideration fair and reasonable, having taken into account current market conditions in Malaysia, the location, development costs and development potential of the land,” it adds.

On why it is buying the land, GuangZhou R&F says it has been exploring opportunities outside China with a view to tap fast-developing markets overseas and to boost the group’s growth.

“Malaysia, with its sizeable Chinese community and favourable government policies that are attractive to foreign purchasers, if well suited for the venture of the group outside (China).”

It is no surprise that GuangZhou R&F’s interest in Johor comes after the reported brisk sales of Country Garden’s waterfront residential units in Danga Bay.  Close to 25% of the buyers of the 8,000 units launched there in August were from China.

In just a few months of acquiring the land, Country Garden managed to bring a steady streams of buyers from China to view its showroom and book units in its iconic coastal view development, which is located just five minutes from the JB city centre and faces Singapore.

President of Malaysian Institute of Estate Agents Siva Shankar tells The Edge that it is not surprising that there has been speculative buying of property in Iskandar Malaysia in the last two years.

“I think they have bought on the strength of the huge public relations exercise that has been going on, especially the lifestyle condominiums.  There are about 20,000 to 30,000 units that are undergoing various stages of completion within Iskandar.”

Although Siva is full of praise for Johor’s efforts to lure investors to the state, he cautions that there should be some form of control, especially with Iskandar turning into a lifestyle destination offering.

He notes that too much development focusing on lifestyle living and high-end condominiums could have a spill-over effect and inflate the prices of houses and land not only in Iskandar Malaysia, but also other places, such as Penang and the Klang Valley.