This article first appeared in The Edge Financial Daily, on November 11, 2015.
KUALA LUMPUR: S P Setia Bhd, the country’s biggest listed developer by sales, will be submitting its proposal for the old Royal Adelaide Hospital (RAH) site in Australia early next year.
S P Setia acting president and chief executive officer Datuk Khor Chap Jen said after being shortlisted, the next step is to submit a more detailed proposal for the site.
“We are working out [the proposal]. We will submit the proposal probably by early next year though the submission date has not been fixed yet,” he told The Edge Financial Daily at the topping-out ceremony of KL Eco City’s strata office tower here on Monday.
On the outcome of the bidding, Khor said it would be up to the Adelaide council.
“It would depend on how fast they can shift the hospital,” he said, adding that the South Australian government is building a new hospital and is in the midst of shifting the hospital.
According to the government of South Australia official website, the new RAH is expected to open in 2016.
The Australian newspaper reported last week that S P Setia, in a joint venture (JV) with Investec Australia Ltd (IAL), had been shortlisted to bid for the contract to transform the A$500 million (RM1.55 billion) old RAH site into a more upscale area.
The daily reported that the S P Setia-IAL JV is one of four shortlisted bidders in the race for the mixed-use project, along with construction giant John Holland with parent group China Communications Construction Co Ltd in partnership with the Adelaide-based Commercial & General, listed giant Lend Lease Group, and tycoon Lang Walker’s property company.
The four master developers shortlisted for the mixed-used precinct are to present schemes after their initial visions for the 7ha site were selected by Renewal SA after a process handled by real estate agency JLL.
The developers are to come up with schemes to transform the existing 275,000 sq m of buildings into a project that could rival elements of Sydney’s Barangaroo precinct, another site undergoing an urban transformation, which is expected to be completed in 2023.
When asked about the equity interest in the JV with its Australian partner, IAL, Khor said the two parties have yet to work out the details as the bidding is still in the early stage.
“We haven’t worked out the details. We agreed to work together. We (S P Setia) will definitely take an active part,” he said.
Khor said the weakening of the ringgit is not expected to affect the funding of the project should the S P Setia-IAL JV succeed in the bid.
He said the funding would most probably be generated via internal funds from the two projects in Australia.
“In Australia, we have two projects. Both of our projects are sold out. We have just delivered Furton Lane. I think we have our money there,” he added.
If S P Setia were to bag the RAH project, it would be the developer’s third project in Australia. The property developer’s first project is in Melbourne known as Fulton Lane, featuring a luxury apartment development. Its second is the Parque apartment project in Melbourne.
Khor opined that S P Setia would have a fair chance of winning the bid.
“Our advantage is that we are already in Australia. Our name is known. We spent five, six years there. We know the authorities, although not in Adelaide,” he said, adding that the bidding will ultimately depend on the strength of its proposal.
Meanwhile, speaking to reporters after the topping-out ceremony, Khor said although 2016 will be “challenging”, S P Setia is targeting to perform “as well as or better” than 2015.
“There is still [an] underlying demand for properties in Malaysia; it’s just about getting the right products,” he noted, adding that potential buyers will opt for smaller units during challenging times.
For the third quarter ended July 31, 2015, the developer posted a net profit of RM261.79 million, an increase of 153.32% from RM103.32 million a year ago. Revenue rose 80.58% to RM1.63 billion from RM902.66 million.
For the nine months ended July 31, 2015, S P Setia’s net profit rose 115.14% to RM590.3 million from RM274.37 million a year ago. Revenue was up 62.4% to RM4.19 billion from RM2.58 billion.
S P Setia will be changing its financial year end to Dec 31, instead of Oct 31.
The company will also launch a serviced apartment project worth RM500 million at its KL Eco City development in the middle of next year, according to S P Setia acting deputy president and chief operation officer Datuk Wong Tuck Wai
To date, the group has launched RM3 billion worth of properties in KL Eco City, which include a 35-storey strata office tower with a gross development value (GDV) of about RM306 million.
The strata office tower is already 100% sold, and it is one of seven office towers and boutique offices planned for the KL Eco City development.
It will officially open its doors and be handed over to purchasers by July 2016.
The 25-acre (10.12ha) KL Eco City will be one of the largest integrated mixed commercial and residential developments in Malaysia, with 7.5 million sq ft gross floor area and total GDV of RM7 billion.
As at April 30, 2015, the group has 30 ongoing projects, with an effective stake of 4,198.35 acres in undeveloped remaining land bank and RM71.27 billion in GDV.
Shares in S P Setia closed three sen or 0.9% higher at RM3.35 on Monday, with a market capitalisation of RM8.8 billion.