This article first appeared in The Edge Financial Daily on December 14, 2018
KUALA LUMPUR: Eco World International Bhd (EWI), in which Eco World Development Group Bhd (EcoWorld) has a 27% stake, aims to acquire land in London to build an additional 5,000 built-to-rent (BtR) homes over the next five years.
This comes on top of 12 existing sites it owns in London with the potential to deliver some 4,000 units, said EWI chief executive officer (CEO) Datuk Teow Leong Seng at a media briefing yesterday.
EWI recently signed a £389 million (RM2.1 billion) heads of terms agreement with US-based Invesco Real Estate via its 70%-owned unit EcoWorld London to build 1,084 BtR units. In total, it targets to build at least 10,000 units in the UK over the next five years.
“We want to grow the UK’s BtR market from a million-dollar one (currently) to a billion-dollar one,” said Tan Sri Liew Kee Sin, EWI chairman, who was also present at the briefing.
The group is already in serious discussions with other pension and wealth funds to acquire more BtR developments, Liew said.
On the risks of the developments, he said, “We will not build (the BtR homes) until we find an investor to buy.”
The deal with Invesco was made on a forward-funded basis, which allowed EcoWorld London to recover approximately £66 million of its land cost shortly after the exchange of contracts.
“The good thing about this business is that we sell (on a) forward-funded basis, so we (also) get our land cost,” he said.
BtR developments typically take two-and-a-half years to complete, Teow said. He admitted that the margins for BtR homes have not been as high as homes sold on the open market, but explained that the internal rate of return has been much higher due to a lack of marketing costs, among other things.
Meanwhile, Liew highlighted that among the benefits of the BtR scheme is that investors pay for the development by progress billing. This sets it apart from the typical developments in the UK, where payments are only made upon 75% completion.
The chairman said EWI is not planning to venture into other countries in the near future as it is focusing on building the BtR market in the UK.
While Brexit uncertainties are affecting open market sales, he added that BtR developments have continued to draw strong interest from global funds.
In total, Malaysia-based Eco-World aims to achieve RM12 billion in sales by 2020 from both its Malaysian and international operations on a targeted 50:50 basis.
On the home front, EcoWorld will be launching its ‘Home Ownership Programme with EcoWorld’, also known as HOPE, in January 2019, which aims to increase purchases by home occupier across all its local developments.
EcoWorld CEO Datuk Chang Kim Wah said the programme would be targeted at young home buyers under the age of 40 who are interested in technologically-advanced homes.
“Of course, it will not be cheap,” said Liew, maintaining that the scheme would not be similar to the FundMyHome scheme launched by EdgeProp.my — in which EcoWorld is a participating developer — nor target affordable homebuyers.