Cover Story: Creating products for the mid and ultra high-end markets

This article first appeared in City & Country, The Edge Malaysia Weekly, on May 8, 2017 - May 14, 2017.
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WE may not be as exciting as some of our competitors but we are realistic,” smiles UEM Sunrise Bhd managing director and CEO Anwar Syahrin Abdul Ajib as we make ourselves comfortable in the developer’s new sales gallery in Publika Shopping Gallery.

Though the developer is more conservative in its approach, it has proved to be resilient in this challenging market. It ended its 2016 financial year with sales of RM1.36 billion — 37% higher than the targeted and revised RM1 billion. It is worth noting that the results were bolstered by the southern region, which contributed 50% to total sales compared with 12% in 2015.

“We said we were going to target just RM1 billion, then suddenly we hit RM1.36 billion. While we push the team internally, we don’t over-promise the market. Sometimes, when people are forced into a corner, they react differently. That is what we did with our team. If you look at our sales revenue, yes, it came down from the previous year but it should be noted that it has always been consistent,” says Anwar.

For now, UEM Sunrise has three priorities: to build the brand into a reputable, value-driven developer of signature properties; to expand its geographical base and adjacent businesses; and to nurture a service-oriented culture.

“Engagement” appears to be the key word for the developer as it seeks to keep its customers happy and create products suited for the current market.

“We want to engage our customers more. We want to keep them happy and keep them in the loop on what is happening at the organisation. We do surveys, go to property fairs to talk to buyers. We have about 15,000 Tresorians. All this gives us an insight into the various markets that we have and the kind of things that we should look at,” says Anwar.

Tresorians are holders of UEM Sunrise’s privilege card, Tresor, which is designed to reward customers who have purchased its properties.

“We recognise that customer experience is critical to building our brand value and we are placing more emphasis on creating a customer-centric mindset within the organisation,” says Anwar, who is very happy that the developer’s post-sales customer service and engagement have improved significantly.

The developer is also working to enhance its completed developments. “For example, we are doing a few things to beautify East Ledang in Johor. We are doing up Signature Lake there because it was not done properly. We are putting in a jogging track and other facilities so that the residents can enjoy what they bought a lot more .

“It’s about looking back at the assets that we have and making them nicer to give back to our customers, so they can appreciate these more. We’re doing the same for Serene Heights and we are looking at Mont’Kiara, where there are areas that we can spruce up,” says Anwar.

While most companies are cutting back on advertising during these challenging times, Anwar believes it is important to engage the public.

“We should ensure that they still know about us, remember us and are as excited as us about what we do. I’m pushing the team to be more aggressive on that front as well; advertising is expensive, so we have to make sure the money is well spent.”

Anwar says it is going back to the drawing board and assessing the land bank, the planned products and whether they are still relevant to the current market.

“We will probably fine-tune some products. Maybe, there are products that we want to hold on to now because we may not get the take-up we want and we may expedite some. Products these days go beyond the price per square foot; now it is about the absolute price. So we are trying to design more efficiently. We are engaging more of our staff as well because they are similar to our target market. The process is more involving,” says Anwar.

 

Diversifying products and location

UEM Sunrise is looking to diversify its product offerings by venturing into both the mid and exclusive landed property markets. Anwar points out that the former is enjoying high demand currently while the latter offers the potential for an altogether different kind of luxurious lifestyle ensconced in serenity and privacy.

“The thing is, people see us as a premium brand, so that is what they expect from us. We want to give something that is premium-ish with attractive pricing to get into that market segment. I think there are still first-time homebuyers in the mid-market. It’s just that they are more careful. They don’t want to rush, so we are not rushing too.

“We want to gauge the market and see what the other developers are doing with their launches. We have, for example, a product in Johor that is in the RM500,000 to RM600,000 range, for which we are waiting to pull the trigger,” he says.

UEM Sunrise has two mid-market projects ready to be launched — Dahlia in Serene Heights, Bangi, and Serimbun in Bukit Indah, Johor. The former comprises 170 two-storey terraced houses with an estimated gross development value (GDV) of RM144.1 million while the latter consists of 214 two-storey houses with an estimated GDV of RM106.7 million. Dahlia will be launched in 2Q2017 and Serimbun in 3Q2017.

“These amounts of GDV are a bit more contained and the take-up will be good. Launches like these will allow us to manage our costs better than a big launch with a big GDV. We have to be very clear about our target market. I always challenge the team to know the target market and whether they will buy,” says Anwar.

UEM Sunrise is planning to launch RM1.7 billion worth of projects this year with a sales target of RM1.2 billion.

Also scheduled to be launched in the second half of the year are the integrated Solaris Parq in Solaris Dutamas and the high-rise residential Mayfair, St Kilda Road, in Melbourne, Australia. The former comprises 576 serviced apartments with an estimated GDV of RM735 million and the latter will have 158 units with an estimated GDV of RM713 million.

“We are still working on the unit price psf for both projects, so the GDV is just an estimation. We had over 900 units in Aurora Melbourne Central and over 400 in Conservatory, Melbourne. Mayfair will be smaller but it will be very exclusive.

“We are trying to cater more for the local market with Mayfair. For Aurora and Conservatory, we had about 20% to 30% local buyers. This time, we are aiming for 40% to 50%,” says Anwar.

Mayfair is designed by the world-renowned Zaha Hadid Architects and is targeted at the ultra high-end market.

“We are going to do 10 units per floor and, honestly, coming up with the layout has been tricky for us. We are putting in 2-bedroom and 3-bedroom units and five that measure 3,000 sq ft. Normally, to be safe, we do smaller units in Melbourne but here, we are catering for the local market. With only 158 units, we reckon there shouldn’t be a problem,” says Anwar.

In a bid to strike a balance in its portfolio, the developer is looking to be more diverse when it comes to its geographical locations.

“Geographical diversity will help reduce our market risk and strengthen our revenue profile. Within Malaysia, we believe there is scope for much greater expansion beyond Iskandar Puteri. We are actively looking to increase our land bank in the central region with a focus on hot spots that carry high potential for growth,” says Anwar.

As for the international market, UEM Sunrise is wrapping up its operations in Canada. The developer recently sold three pieces of land (total: 4.9 acres) in the country for RM372.6 million to local developer, South Street Development Group. This move will allow the developer to focus on the Malaysian market and Australia.

“We are pleased with our performance in Melbourne and will be open to acquire more land bank in this city as well as others in Australia and elsewhere in the international space that fit our brand profile,” says Anwar.

To support these strategies, the developer will continue to emphasise operational efficiencies and keep its costs low as it expects profit margins to keep narrowing as the cost of labour and materials rises.

At home, the southern region remains a key area for the developer as the bulk of its land bank is located there. It has about 8,900 acres, including through joint ventures, in Iskandar Puteri, Desaru, Kulai and Mersing. This comprises land for projects in the pipeline and for ongoing ones such as Puteri Harbour, SILC and Afiat Healthpark. The total estimated GDV of the to-be-launched projects is RM93 billion.

“I know people’s view of Johor is not favourable and our share price is tied to that. But we are doing something about it. In general, about 50% of our sales comes from Johor, and the central region and international market contribute about 25% each. Moving forward, we hope to increase the contribution from the central region, so we are looking at more launches outside Johor.

“We are not just another developer building houses in Iskandar. As a part of Khazanah Nasional Bhd, we are a part of a bigger agenda because Iskandar Malaysia is Khazanah’s brainchild. To create a metropolis there, we had to build catalytic developments such as Puteri Harbour,” explains Anwar.

Iskandar Puteri (formerly Nusajaya) is essential to UEM Sunrise as a long-term growth driver in the southern region.

With the Malaysia-Singapore high-speed rail coming into play, UEM Sunrise has more plans for its developments in Iskandar Malaysia. It will be developing Gerbang Nusajaya, which is expected to generate a GDV of RM42 billion, over the next 25 years.

“We are looking at bringing in private investors for a private marina to complement the existing public marina. And in the near future, we will be developing a convention centre. There are a lot of things we are putting in motion,” says Anwar.

Location plays a key role in each development, he adds, and it is one of the several decisive factors in the company’s land acquisitions. “The location must already have developed value or have the potential to be developed into a premier address. In developing a premier destination, we seek strategic partnerships to create the necessary infrastructure, facilities and amenities for sustainable communities.

“We will also build on our placemaking aspiration by capitalising on our current assets, such as Puteri Harbour, Publika, Mall of Medini and Anjung, to undertake activities that create dynamic and vibrant communities in all our built environments.”

Working with market sentiments

Anwar expects the property market to continue to be sluggish this year. But though demand remains flat, he believes there will be bright spots, especially in the mid-market landed and affordable segments.

UEM Sunrise has close to 500 acres in the Klang Valley, which will generate enough GDV for the next 5 to 10 years.

“The products we have in Mont’Kiara are high-end and the ones in Bangi are mid-market. We need to have the mid-market products somewhere between Bangi and the centre of KL. That is the strategy, so we are looking for sizeable land now. We are talking to a few parties and, hopefully, we can secure something,” says Anwar.

“Ultimately, it is about the product and what drives it, is our vision of building communities. It has never been about building a fancy building; it is about the kind of community we try to create. So, it is important for us to really understand the market we want and the communities we want to create.

“We are buying in Melbourne partly because we already have a team there. I’m not convinced by the markets in other parts of Australia yet, although it has been said that Brisbane is the next place of growth. We may look at London if the market and prices are right. Things may be uncertain now but it is London. I have a feeling no matter what happens, it will be all right.”

UEM Sunrise has about RM4.1 billion of unrecognised revenue, which, Anwar says, will provide near-term earnings visibility from progress billings. “We will also continue to adopt strategic approaches and space out our launches in line with consumer sentiments and market demand. This has proved to be a success, as shown by our launch of Melia Residences in Johor.”

Melia Residences is the developer’s first landed residential development in Gerbang Nusajaya and it contributed RM126.6 million to total sales of RM1.36 billion last year.

“We aim to maintain our position as a leader in the property development industry by bringing in concepts that are original and unique. We will also continue to benchmark ourselves against the industry in terms of being the best-in-class developments to our customers,” concludes Anwar.