AMCORP PROPERTIES BHD (AmProp) is expected to announce soon its first property investment and development in Tokyo, continuing its push into international markets that began with London, where it has been involved in several projects since 2009.

According to group managing director Ben Lee, AmProp and its joint-venture (JV) partners in Japan are finalising the deal to acquire a serviced apartment block in the stylish and affluent neighbourhood of Shibuya in central Tokyo, which will be refurbished into a prime residential complex.

The apartment block is called Forest Nanpeidai and based on information on property listing websites, it is just 10 minutes by foot from the Daikanyama and Shibuya MRT stations.

AmProp estimates the project’s gross development value (GDV) at US$89 million (RM323 million).

“When we decided to go overseas, we decided to invest in global cities. This is because of their position as investor magnets, continuing to attract investments and job-seekers from around the world. Among them, London and Tokyo are undeniably at the top,” Lee tells The Edge.

In April last year, AmProp, through its subsidiary Amcorp Far East Ltd, entered into a co-investment agreement with Grosvenor Asia Pacific Ltd, NRJ Investment Ltd and True Lead Investment Ltd to set up a JV company with an initial capital of US$130 million.

Grosvenor Asia is a subsidiary of the UK-based Grosvenor Group with which AmProp is collaborating on several property investments and developments in London. NRJ and True Lead are subsidiaries of Nan Fung Group, Hong Kong’s largest privately owned property developer.

“To us, the partnership model is important. Many investors think it is very risky for a smallish property developer to go overseas. But our model is different in the sense that we tie up with some of the biggest companies in the world,” says Lee.

AmProp’s committed investment to the JV company is limited to US$50 million. Grosvenor Asia chipped in US$50 million as well while the rest comes from the two subsidiaries of Nan Fung. The JV company is mandated to invest in high-end residential and commercial properties in Tokyo.

Besides the Forest Nanpeidai project, says Lee, AmProp and its JV partners are also looking at acquiring Court Annex Roppongi, a serviced apartment complex in Roppongi in the district of Minato that is currently operated by Asahi Homes Ltd.

“We chose to be in London and Tokyo because these are global cities with the highest number of ultra-high net worth individuals. In Asia, Tokyo is the most favoured city for real estate investment and development, according to PWC,” he adds.

The population of Tokyo’s central districts of Chiyoda, Minato, Shinjuku, Shibuya and Chuo has grown to almost one million from 700,000 in 1995, according to the Statistics Bureau of Japan. High-end residential and office rents have also been increasing in these districts since 2012, Lee points out.

Before its latest venture in Japan, AmProp started its international ventures in September 2009 with the acquisition of two office buildings in Paddington, London, worth £50.5 million.

A year later, in October 2010, it acquired a commercial property in Baker Street for £16.25 million and then in December, it purchased a freehold residential property in Kensington for £7.3 million.

AmProp disposed of all three properties between 2010 and 2012 and recorded a gain of £25 million on total investments of £74.05 million.

Having passed the phase where it was basically trading London’s properties after doing some minor window dressing, AmProp has embarked on developing and adding value to the properties in which it has since invested in the UK through other joint ventures.

These include Pavilion D in the Neo Bankside area in the South Bank district (GDV: £57 million or RM306 million), Burlington Gate in the Mayfair area (£271 million or RM1.46 billion) and the Holland Park Villas land in Kensington (£593 million or RM3.19 billion). AmProp’s stakes in the respective projects are 75%, 25% and 16.7%.

The JV partners for the above projects include Grosvenor Group and Native Land of UK as well as Singapore-listed Hotel Properties Ltd (HPL).

On March 28, AmProp announced another JV with HPL, Native Land as well as Singapore’s sovereign wealth fund Temasek Holdings for the redevelopment of the Ludgate House and Sampson House in Bankside Quarter in South Bank.

The £1 billion development, in which AmProp has a 30% stake, will offer 489 residences and offices and retail, leisure and cultural facilities. It is located directly opposite the City of London, across the River Thames.

The entry of Temasek as AmProp’s latest JV partner shows the confidence of global investors in the group, says Lee.

The announcement of the Bankside Quarter development saw the share price of AmProp (fundamental: 2.4; valuation: 2.4) rise 5.13% to 82 sen. As at last Thursday, the stock had gained 18.6% to 92.5 sen, giving the company a market capitalisation of RM550.1 million, and increased 23.33% year to date.

“Temasek knows we have ground knowledge of the projects we are undertaking. While it would have done a lot of research on the London property market, it is very comfortable to let us give our input on the project,” says Lee.

Having disposed of its three earliest investments in London, AmProp will only be able to recognise profits from its development projects from the financial year ending March 31, 2017. Holland Park Villas in Kensington will be completed in October 2016 while Burlington Gate in Mayfair will be ready by February 2017, says Lee.

Holland Park Villas is a super-premium residential project that is just a two-minute walk from Holland Park in the Kensington-Chelsea area while Burlington Gate is a prime residential redevelopment project in which AmProp has a 25% stake. Lee says 83% of the apartments in Burlington Gate have been sold at an average price of £3,726 psf.

While the Petaling Jaya-based AmProp is only a minority shareholder in some of the JVs, it works closely with the other investors to come up with the best development plans for the projects, he adds.

Some may think AmProp is just riding the established brand names of Grosvenor, Native Land and HPL in the London projects but Lee begs to differ. “If we were just an investor, the likes of Grosvenor, which has a long history and is one of the more prominent developers in London, wouldn’t need us. Temasek would not need our money if all we can provide is funding.”

And the fact that Grosvenor and Nan Fung are willing to co-invest with AmProp in Tokyo shows their confidence in its market knowledge and its capability to come up with innovative development concepts, Lee adds.

AmProp’s combined effective share of the GDV of the UK projects comes up to £509.5 million (RM2.74 billion), an attractive figure relative to its market capitalisation of RM550.1 million. The company’s net debt was only RM30.6 million as at Dec 31, 2014, compared with its shareholders’ funds of RM951.37 million.

Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for details on a company’s financial dashboard.

This article first appeared in The Edge Malaysia Weekly, on April 13 - 19, 2015.

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