A MOST UNLIKELY project is taking shape just a stone’s throw from the luxurious Seri Tanjung Pinang enclave in the Pearl of the Orient, one of Malaysia’s most expensive real estate markets.
Aspen Group is developing Tri Pinnacle, a residential high-rise comprising affordable and low-cost apartments, on Mount Erskine at Tanjung Tokong. Across Tri Pinnacle’s site are luxury condominiums The Peak and The Latitude by Ivory Properties Group Bhd.
The project derives its name from its three towers that are 30, 31 and 32 storeys high. Two of the towers comprise a total of 859 affordable apartments that have a built-up of 800 sq ft and are priced at RM299,000 each while the last tower offers 390 low-medium-cost apartments with a built-up of 600 sq ft and price tag of RM72,500 each. Each apartment comes with a parking bay in the project’s 10-storey car park podium.
The facilities are a swimming pool, a wading pool, a gymnasium, a landscaped garden, a barbecue area, a multi-purpose hall, a children’s playground and a jogging path.
The project is expected to commence sometime in 1Q this year and be completed in 2018. As it is an affordable housing scheme, the project will only be sold via ballot to qualified buyers who are certified to be in the middle-income group and are registered with the state housing department.
Tri Pinnacle’s affordable apartments are RM299,000 each. They fall into the second tier of affordable housing that is priced from RM200,001 to RM300,000. They are available to buyers whose monthly household income does not exceed RM8,000.
There are two other tiers. In the highest tier, the prices range from RM300,001 to RM400,000. These homes are available to buyers whose monthly household income does not exceed RM10,000. In the lowest tier, homes are priced at RM200,000 and below and are available to buyers whose monthly household income does not exceed RM6,000.
As part of measures to control prices, the homes can only be sold after five years from the date on the sale and purchase agreement. Those who need to sell their homes within this period must appeal to the state government and can only sell their properties to buyers who have registered with the state. The price will not be set by the government but it will be determined on a willing buyer, willing seller basis.
One of the factors that make Tri Pinnacle remarkable is that it is the first private affordable and low-medium-cost housing scheme to kick off in Penang. “We were not given any special incentives by the state government for this project,” Aspen Group co-founder and CEO Datuk M Murly tells City & Country.
Aspen Group may only be two years old but the faces of the company are old hands at real estate development. For example, Murly and co-founder Datuk Seri Nazir Ariff had worked for Ivory Properties, a longtime fixture on Penang’s property scene. It is worth noting that Murly was only 26 when he was made a director of Ivory Properties in 2012. This made him among the youngest directors of a listed entity who was not related to its major shareholders.
Aspen Group and Ivory Properties represent very different things, says Murly. The former wants to be known for “good quality affordable housing” while the latter is known for its luxurious products, such as its Tanjung Park condominium and townhouses in Tanjung Tokong, Palace Hill in Bukit Gambier and Moonlight Bay gated residential developments, Island Resort luxurious landed homes in Batu Ferringhi.
There are also other private affordable housing schemes in Penang, such as Tropicana Bay Residences at Penang World City in Bayan Mutiara, which is a joint development with Tropicana Corp Bhd. Meanwhile, M Summit Group is developing Ramah Pavilion in Teluk Kumbar.
Projects under the state government include Hijau e-Komuniti at Batu Kawan, Duo Residensi at Teluk Kumbar, and those in Pintasan Cecil, Kampung Jaya, Mak Mandin, Ampang Jajar, Bukit Mertajam, Juru and Ujung Batu by the Penang Development Corporation. Projects tendered out to private developers include Chelliah Park City in Jalan S P Chelliah in George Town and one in Jelutong that will be developed by Zubicon Sdn Bhd and Nova Mulia Sdn Bhd.
Conventional wisdom dictates that affordable housing be built in high density on cheap land. Usually, land costs less if it is located away from the city. While Tri Pinnacle will offer over 1,200 apartments when it is completed in 2017, its 9.97-acre freehold site was not acquired cheaply, comments Murly.
The group also spent RM12 million on building another road to the site and RM24.5 million on development charges, rezoning fees and converting the land type to residential from hill. The construction cost of Tri Pinnacle is RM250 million while its gross development value (GDV) is RM499 million.
Conventionally, due to their loss-making nature at worst and low margins at best, the low-cost, low-medium-cost and affordable segments are cross-subsidised by luxurious and commercial properties.
However, Murly is offering an unconventional solution.
“For affordable homes, I doubt that you need to cross-subsidise. See, we formulated a business model like AirAsia’s, which I like to reference because it is the easiest way to make people understand us.
“When you buy AirAsia tickets, you can choose to have allowances for excess baggage, your drink, food, insurance, even WiFi on board. So AirAsia gives you options but they are affordable.
“So, our options need to be priced such that people can see the value of getting them from us instead of externally. Therefore, the cross-subsidy element comes from the ancillary income, such as the upgrading packages, services we provide. So we are a one-stop centre. You can have tiles, timber, do up your kitchen or study if you want.”
“When [AirAsia co-founder and CEO Tan Sri Tony Fernandes] said, ‘I want to fly and this is the cost of flying, but I want to move the majority of people around’, people said he was crazy and asked how he was going to make his money.
“Nowadays, the market is very informed because people the world over are connected. They want to pay the best price possible for the service [and products] they get and property has become that kind of product.
“So we thought, ‘Let us make it affordable and give them an option to upgrade or do up the house’. Here, the homes are empty shells. You don’t have lighting, ceilings, nothing. So post-completion, most properties must undergo renovation.
“Nowadays, basic renovation costs about RM50,000 while RM100,000 is a comfortable sum. So we thought, ‘Why not give them renovation packages to choose from, then do it for them?’”
While he declines to reveal the exact prices and details, he notes that the packages — which include furniture — will be priced under RM100,000.
The secret lies in offering a realistic variety of choices and then achieving viable volume. “For example, I can give you 10 choices of packages. If you’re single, you may not want to upgrade your kitchen but your study, for example. Then, so long as I can achieve a 70% to 80% subscription rate, it becomes viable because of the volume,” Murly explains.
He also believes an affordable housing project can only take off if it offers more than 1,000 homes. Moreover, it makes maintenance easier as the cost will be spread among more households. “Low density is a luxury and everybody wants that. But as a homeowner, you need to look at how much it will cost to maintain your facilities and if you cannot afford it, then you must find a way to share it.”
Why embark on affordable housing? Murly’s belief is that housing shapes society. Affordable housing that is well designed and located in urban areas will keep people out of trouble and give them a means of upward mobility as it promotes homeownership and property is a wealth-creation tool.
“For young people, there are good opportunities in the many affordable homes coming their way. But they must choose the right location and the right development. When you strike that, you will make money. The 2007 to 2009 cycle will not repeat itself. If it does, prices would have gone too high already.”
Nonetheless, Murly does not see affordable housing as a cross to bear. In fact, he sees it as a huge opportunity because that is where the greatest demand lies right now and for the foreseeable future.
“When the prices just kept going up in Penang, I saw a huge potential in affordable properties. Even if it’s just for a group of young professionals, that’s good enough because there is a limit to how many units we can build. You can have all the resources in the world but to put out 10,000 homes a year will be a huge challenge. Having said that, if you did sell 10,000 units a year, you will find people queuing up to buy from you,” he observes.
There is no existing data on the supply of homes priced under RM400,000. However, judging by demand for its properties, Aspen Group is doing something right. So far, 30,000 people have registered for Tri Pinnacle’s affordable units. The state government is in the process of approving eligible buyers.
“Based on the rough figure given by the State Housing Department, it has received more than 100,000 applications for affordable housing (as at late November),” Murly says.
Tri Pinnacle and Aspen Group’s other projects that will be built under this model are an astute way of building the group’s brand as a trusted developer of affordable housing.
“I see good potential in what the government has not been able to do on its own. It will eventually have to look at private developers who have a good story and are able to do it well. I am doing this in the hope that the government recognises our seriousness about building affordable properties in urban areas. When the government steps in, it can really accelerate development,” Murly remarks.
He predicts that in the future, affordable housing projects will be tendered out on a concession basis. “Aspen’s mission and core business is to provide affordability and quality homes to everyone. As we are the first developer to initiate a private affordable housing project, we hope the government understands our business model and forms private-public partnerships with us.
“Such partnerships can be done on an even larger scale so that more people can benefit from the projects. When we talk about private-public partnerships, Aspen will have sole control of master planning and marketing of the project and deal directly with eligible buyers. The government will ensure the affordable units are allocated to genuine buyers and not sold to speculators. On top of that, it will have to ensure a transparent and fair selection process to prevent abuse by real estate investors.”
Besides Tri Pinnacle, Aspen’s other projects are Beacon, HH Residences and Aspen Vision City.
Beacon, which is coming up in Sungai Pinang, is a mixed-use development with one block of executive suites and four commercial lots. Its key features are a sky bar and lounge. There will be a total of 300 suites with a built-up of 883 sq ft and priced at under RM600 psf. The GDV of the project is RM191.5 million.
Besides the sky bar, which also includes a garden and pool, other facilities are a swimming pool, wading pool, gymnasium, landscaped gardens, barbecue areas, multi-purpose hall, children’s playground, management office, jogging path, meeting and conference rooms and a concierge. This will tentatively be launched in 3Q2015.
HH Residences is coming up on 4.51 acres of freehold land in Tanjung Bungah. Comprising 15 shoplots, two blocks of luxurious condos and a block of affordable condos, the project — whose name was inspired by the old Hong Hong Printing Co Sdn Bhd press that used to occupy the land — has a GDV of RM788 million. Prices of the condos are under RM700 psf. Construction is expected to start this year and completion is set for 2018. This will tentatively be launched in 4Q2015.
For now, Aspen Group is focusing on Penang, but it plans to eventually expand to the Klang Valley. Murly is keen to take the group’s affordable housing model south.
Aspen Vision City
Aspen Group’s biggest project to date is Aspen Vision City, a 245-acre freehold mixed-use development in Bandar Cassia, Batu Kawan. This project will be developed by Aspen Vision Land Sdn Bhd, which is owned by Aspen Group and Ikano Pte Ltd (the operator of IKEA, the Swedish furniture store, in Singapore, Thailand and Malaysia and shopping malls in Thailand and Malaysia).
With a GDV of RM8 billion, the project comprises a central transport hub, an international school, condominiums and suites, hotels, medical centre and healthcare facilities, shopoffices, affordable apartments, a central island park, office towers, a shopping mall and commercial and retail spaces. The first phase is named Verve and will comprise 451 units of gated and guarded 3-storey and 4-storey shophouses that are priced from RM1.2 million. Tentatively, this phase will be launched sometime in 1Q.
It is worth noting that IKEA is opening here since announcing plans for a northern branch some time ago.
Its location and choice of partner initially surprised the market, as did Aspen’s decision to buy the undeveloped Bandar Cassia land at RM484 million or RM45 psf in September, recalls Murly.
What stopped the Swedish furnishing giant all this while was the high cost of land and a lack of partners that shared its vision — to be a part of a sustainable and affordable development. Murly says what helped Aspen’s proposal was that its development featured well-planned commercial properties, which are lacking on the mainland.
The values of IKEA and Aspen are certainly aligned — both companies are in the business of creating affordable products. As Forbes put it, IKEA founder Ingvar Kamprad is “ruthless” in his pursuit of cost efficiency.
IKEA’s formula for creating affordable yet stylish furniture revolves around production volume and the design process. It builds in great quantity and uses unconventional designs, alternative production methods and reduces waste to drive down costs.
Aspen likewise controls prices with options and counts on a high volume of subscribers to make the frills more affordable.
“One aspect of the IKEA concept is to locate the stores outside the city centre, where land is cheaper,” says the furniture store in a 2003 statement.
Meantime, if Bandar Cassia takes off, it will be the new hub of the mainland. That will be an interesting development to watch.
This article first appeared in The Edge Malaysia Weekly, on January 12 - 18 , 2015.