Lagenda Tunjong to be economic and tourist hub

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THE excitement and passion they have for their latest project — Lagenda Tunjong in Kota Baru, Kelantan – is evident as Datuk Zawawi Ismail and Kenneth Tiong of Sara-Timur Urban Development Sdn Bhd meet City & Country for an interview.

Chairman Zawawi and deputy chairman Tiong are keen to share their thoughts on the project, set to be unveiled on June 23 (at time of writing), along with its flagship component, CheSiti Village Mall.

Sara-Timur Urban Development is part of Sara-Timur Sdn Bhd — a construction and development firm with roots in Sarawak that established its corporate headquarters in Kuala Lumpur. The aim was to seek greater opportunities in the robust property development market in the peninsula.

Sara-Timur Urban Development was specifically set up to develop Lagenda Tunjong (formerly known as Kota Bharu [email protected]) — a RM1.2 billion integrated development on 40 acres of leasehold land. The project will have residential, commercial, hospitality and retail components amid modern amenities. Besides creating a new urban hub with the city area, Lagenda Tunjong is aimed at attracting greater economic activity to the East Coast.

"Our philosophy is to design something that will be a catalyst for growth in Kota Baru," says Zawawi. "It has to be something that stirs the imagination of the population."

He says the group already had many years of experience in construction and development before embarking on Lagenda Tunjong.

"The growth has been gradual and this has given Sara-Timur a lot of time to develop its competencies in civil, mechanical, and especially value engineering."

"To be competitive in the construction industry, you need to know how to manage a project well. If you start wrongly, it can cost you money. Sara-Timur does a lot of value engineering before the start of a project and we are good at determining where to start building. From that experience, we built up the ability to go into property development with ease … we know what is the cost of building and exactly how much money can be made out of it. We are well-positioned."

The construction arm has done well. "As at today, our outstanding construction work in progress exceeds RM1.2 billion. The value of completed construction projects in total is over RM4 billion," says Tiong. "We started property development four years ago, starting with a residential project in Sibu. Then we went to Kota Kinabalu and developed a condominium and a hotel. Now we have Lagenda Tunjong."

Lagenda Tunjong will be developed by Sara-Timur Urban Development, in partnership with Perbandaran Menteri Besar Kelantan and Tunjong Development Corp Sdn Bhd, with 30% of the saleable products in the development available for purchase by non-Kelantanese. Tiong explains that because land in the state is either privately owned or Malay reserve land, those who are not from Kelantan are usually not allowed to invest in properties in the state.

CheSiti Village mall

The 9.6-acre CheSiti Village Mall will be a street mall offering 224 retail units, with a net lettable area (NLA) of about 490,000 sq ft. About 200,000 sq ft or 100 units will be up for sale.

The concept is inspired by "outlet malls" such as Harbour Town in Australia, according to Zawawi. He hopes that it will be more than just a shopping destination and will be a place to present local arts and activities, such as top-spinning.

"From our market research, we understand the needs of Kota Baru," Tiong says. "Kelantan is not ready for big malls like Mid Valley Megamall so we designed a street mall as a shopping haven that will be an ideal place for tourists as well as for family and friends to gather. We hope to attract investors and shoppers from Golok in Thailand as well." Golok is a town across the border in Thailand, a short distance from Kota Baru.

The structure of CheSiti Village Mall, which will have a gross development value of RM400 million, was designed to spread out in a fan shape. The front will consist of an 8-storey office building with an attached 4-storey podium section. The retail portion will be three storeys high with dual frontage, with lots measuring 26ft by 70ft.

Zawawi believes the mall will offer an investment opportunity that regular shopping centres won't be able to provide. "In a 'box mall', most developers don't sell. They will keep and lease out the lots, but with our street mall, there is an opportunity for individuals to invest and buy."

The retail lots range in size from 1,604 to 5,748 sq ft, with prices starting at RM774,000 to RM6.147 million, or RM444 to RM1,187 psf. Rental rates are estimated to be RM6.20 psf, with estimate yields of 11% over a 10-year period. Construction will commence by 4Q2013 and it is scheduled for completion by mid-2016.

Tiong says the streets will be themed to provide visitors with a taste of the local heritage, but within a modern facility, with escalators and covered walkways.

The village mall, which will have about 1,000 parking bays, will offer free bicycles and buggies to help visitors get around easily. The design is also handicapped and elderly-friendly. Green features include rainwater harvesting and energy saving lights. Managing the tenancy mix will be Sara-Timur's associate company, Saracorp Resources Sdn Bhd — a joint venture with an Australian retail consultant.

Growth in Kota Baru

Lagenda Tunjong is an important development for the state, as it is sited within the 2,000-acre Bandar Baru Tunjong which has been designated for urban development.

"The 40 acres [we are developing] is the core location to attract commercial activities. Our development is not only an urban development but also a tourist attraction to enhance the economic growth of Kota Baru and trading activities between Kelantan and Thailand," says Tiong.

The cross-border trade in the area is vibrant. Zawawi believes Lagenda Tunjong will be an economic and tourism hub that will bring growth to the area.

"Our research shows that the area we are developing is a very strategic location. The Thai border is about 25km away, and there is a main trunk road between Kota Baru and the south of Kuala Kerai and Gua Musang. On the east side, there is a trunk road to Besut in Terengganu and so on," he says.

"A proposed highway from Gua Musang will eventually pass our development. So to exploit these opportunities, we decided to build something meaningful to bring a new lifestyle and modernity into the area."

Components

While CheSiti Village Mall is the first development to be launched, it will not be the first to start operations. That honour will go to Lagenda Galleria — a hypermarket. Tiong says the tenant will be one of the country's top three hypermarket operators but declined to elaborate. Construction is set to start in 4Q2013 and be completed by end-2014. The hypermarket has an NLA of 160,000 sq ft.

Zawawi explains that it will take CheSiti Village Mall some time "to fill up" and the hypermarket will create the "buzz" to attract people to the area.

According to Tiong, research shows that the two existing hypermarkets in Kota Baru — Tesco and Pacific Hypermarket and Departmental Store in KB Mall — are 100% occupied and doing well.

Other components that will come on-stream over time include lifestyle apartment block Prima Lagenda and Mercure Hotel by Accor. The former, with a GDV of RM175 million, is slated for completion in mid-2016, while the latter will have 300 rooms and a 2,000-person capacity grand function room. Lagenda Tunjong will also house a cineplex, with an ice-skating rink. There will also be open spaces and greenery for visitors to enjoy the outdoors.

Future plans

Besides Kelantan, the company is also exploring opportunities in Johor, Penang, Sarawak and Sabah.

"We are looking at the possibility of going public. But from a business point of view, we will continue enhancing our construction activities, which is still our core business," Tiong says. He adds that construction makes up 80% of the group's annual turnover compared with 20% from property development. He hopes the contribution of property development will rise to 40% in three years' time.

Sara-Timur's ongoing projects include the RM156 million Jade Residence and Jesselton Point Hotel and Suites, in Kota Kinabalu, Sabah. The 15-storey Jade Residence, launched in September 2011, sits on a 2.89-acre tract and will offer 135 units. With built-ups from 1,484 sq ft and starting prices of RM705,000, the current take-up rate is 80%.

Jesselton Point Hotel and Suites will be located at the northern section of Kota Kinabalu's central business district. The RM94 million 25-storey hotel will have 140 rooms, 118 hotel suites and 25 business suites. This project is a joint venture between Sara-Timur and Haji Adinin and Sons (B) Sdn Bhd.

In Sibu, the developer is developing the 33-acre Taman Tiong Ung Siew in five phases. It comprises 326 units of 2-storey terraced, semi-detached, detached and affordable houses as well as 2-storey shophouses. The GDV is RM98.2 million.

Tiong says the company is moving in small steps into retirement homes in Sarawak, Sabah and Johor. The division, to be called SaraCare, is still in the planning stage and will be a partnership with an Australian company.

With Lagenda Tunjong, the Sara-Timur group is well on its way to establish itself as a key player in the property development market.

This story first appeared in The Edge weekly edition of June 17-23, 2013.