This article first appeared in City & Country, The Edge Malaysia Weekly on November 11, 2019 - November 17, 2019

UOA Development Bhd has seen steady growth despite the slow property market, thanks to its conservative stance on development. Managing director C S Kong believes in developing the right product at the right time to ensure optimum results. This prudent approach has stood the company in good stead over the years and this year, it has maintained its place among the Top 10 developers, having first appeared in the list in 2013 and then from 2015 to 2018. Furthermore, it again received the Best in Quantitative Attributes accolade this year.

Its performance in the financial year ended Dec 31, 2018 (FY2018), proved its resilience — revenue rose to RM1.263 billion from RM1.078 billion the year before. Even though its pre-tax profit fell to RM505.85 million from RM676.02 million, Kong is satisfied with the company’s results, considering the challenging market.

UOA had no new launches last year while this year, it launched Goodwood Residences in September. The 40-storey residential project in Bangsar South has a gross development value of RM600 million and offers 678 units with built-ups of 947 to 2,002 sq ft each. They are priced at RM750 psf.

Meanwhile, its hospitality division — UOA Hospitality Sdn Bhd — is expanding with a new concept hotel called Komune Living, which is based on the co-living concept. It has 648 rooms with built-ups of 17 sq m (about 183 sq ft) to 38 sq m (about 410 sq ft) each that are for short-term and long-term stays. Komune Living also has a co-working component and shared facilities to encourage interaction. The other two hotels managed by UOA are VE Hotel & Residence and Invito Hotel & Residence (formerly known as Capri by Fraser).

In addition, Kong is venturing into the aged care and medical service industries, albeit in baby steps. While aged care in Malaysia is slow in gaining traction, he believes it is only a matter of time before people embrace this need.

Below is an excerpt from the interview with Kong, who explains his views on the property market as well as UOA’s performance and future plans.

City & Country: Describe UOA’s performance in FY2018 and so far in 2019?

C S Kong: I think performance-wise, we were able to maintain our results compared with the previous year. Looking forward, I think it will be difficult [to sustain the performance] but this year’s results are satisfactory.

We had no new launches last year but we did have one launch this year, which is Goodwood Residences. In terms of sales, it is too early to say because Goodwood Residences is a new launch.

It isn’t that we didn’t want to launch any new projects. It just so happened that the projects in the pipeline were not approved yet.

What is your view on the property market so far?

The challenge, I think, for the property market is the oversupply situation and also the economic situation like the US-China trade war, where there is a feeling of uncertainty among the people. Some want to know what will happen to Malaysia, despite people saying that with a trade war, the country may benefit, but we have yet to see if this is the case. So, I think a lot of people are taking a wait-and-see position.

Malaysia has an oversupply situation in office and residential products. Its property market has been booming for so many years and a lot of people bought properties for investments. But those who bought for investments have found it difficult to get tenants. It also depends on the location. In some locations, I think, units can be vacant for years. So, with this phenomena, investors are very cautious.

Also, those projects that are [targeted at owner-occupiers] have to be [more] affordable. When it comes to affordable housing, it depends on the land price.

Some might say that the oversupply situation has been exaggerated. What would you say to the government or the people about this issue?

I think we need to stimulate the economy. When people have confidence, then those who have houses that cannot be rented out will still find it good in terms of investment properties.

Although I believe there is an oversupply situation in Malaysia, location is really important for a development to be successful. If you have a good public transport system integrated with food outlets, amenities … I think there will be demand.

What are some new projects in the pipeline?

We plan to launch a project near Jalan Ipoh. This will be UOA’s next anchor project. It will be an integrated development with a mix of residential, commercial, retail and hotel components. Work on the commercial elements, including an event and function hall, has started as part of our plan to transform it into a hot spot for younger people to live, work and play.

There is Aster Green Residence in Sri Petaling. It is developed to cater for people with adult children in the neighbourhood and nearby areas. As it is in a mature area, I think there will be demand for this project. It will be 38 storeys with 440 units and have 3-storey commercial spaces and a facilities floor.

We are also constructing a centre for active senior citizens. Located at Bandar Tun Razak, the project’s name is Golden Pines and will feature an elderly-friendly residential concept with care services. It will be a place for them to meet people, make friends and exercise. It is something like a children’s day care centre but for senior citizens, in an engaging, comfortable and safe environment.

A medical hub will also be developed soon. We are very excited because people who specialise in medical services have approached us. At the moment, we have not signed anything, so I cannot disclose the name. They found Bangsar South to be suitable to set up a medical hub, the reason being that there is a ready population and also the Setiawangsa Pantai Expressway coming in.

The medical hub, which we are going to build, is also connected to LRT (light rail transit) and MRT (mass rapid transit) stations. So, location-wise and also due to the demand there, I think medical services will be quite popular. It’s not that we ‘feel’ it will do well but it has been proved because we have some existing medical services in Bangsar South and they are doing quite well.

Basically, the medical hub will provide services for doctors who need, say, a diagnostic centre or an operation theatre. Everything will be under one roof. It will be something like Singapore’s Novena Medical Center. So, medical practitioners can have their office and do their operations or other medical procedures.

What project concepts or designs are you looking to develop in the future?

Our concept is to make a place that people want to come to. That is what Bangsar South is marketing — there is openness, a lot greenery, comforts with conveniences. The future projects will have this concept as well.

Of course, we’d like to have another township development because that is where you enhance the value as you develop. Like Bangsar South, the land price appreciates after a few years as you develop the land.

In Malaysia, a good location is difficult to find but we have a good one in Jalan Ipoh. This 20 acres of land that we paid over RM200 million for has the DUKE in front of it while the Kentonmen MRT Station is being built nearby and it will be completed next year. We are starting earthworks now and the first phase will be commercial products. We have been quite successful in organising events, like at the Nexus’ Connexion Conference & Event Centre, so we want to continue doing that and bring that to the Jalan Ipoh project and it will be a bigger venue with a lot of flexibility.

In your FY2018 annual report, it is stated that you have cash reserves of RM578.6 million. Do you plan to acquire more land with this cash?

I don’t think we are planning to acquire more land because there is the oversupply situation. You need to find something niche and that not many people are doing. So, that is why we are going into the aged care wellness industry, which many are not doing.

We are also providing medical services. We feel that in a location like Bangsar South, it is mature enough to have a medical hub. Not a hospital, but a place that provides medical services. So, the money which we have will be able to support us for this. We are reserving that money for these things.

What would you say to your shareholders as they wait for better times to come?

I feel that we have done quite well for our investors. Over the years, there has been recurring income from the group. For example, the car park in Bangsar South collects about RM30 million per annum. If you include all the income from our investment properties, I think we can easily collect over RM100 million a year. We have the Nexus and three hotels, so all this income you add together, I think we’re quite comfortable that we will continue to pay dividends to our shareholders.

But the market is cyclical. The most important thing is that you must be able to manage risk — when the times are good, you don’t overspend; when times are bad, there’s opportunity but with opportunity you have to see whether it’s the right time to grab it. But if you have money, you are king.

Will you expand your hotel business?

We definitely want to expand. We have three hotels already — Invito Hotel & Residence (formerly known as Capri by Fraser), VE Hotel & Residence and Komune Living. One day, we would like to list them in a REIT (real estate investment trust). But I think the time is not right yet because we do not have enough hotels. I think, definitely, we’re going to have more hotels but we have to be careful because what we have learnt over the last five years is, it is not about having enough hotels or not — it is about having a strong team.

You must have a strong team, otherwise, if you expand too fast, you would kill yourself. We must get the right formula to succeed.

For Komune Living, before we built it, we tested it out — we did a room mock-up. It was basically to see how we would control the cost and how to build something efficient, so you do not overprovide something but also do not underprovide as well.

What trend(s) do you see that you feel will impact the property industry?

Developers are going into affordable homes. To be frank, with affordable homes, you can make profits. It all depends on the land price and how efficient you are. So, there will be more affordable homes. The higher-priced homes will take a while to be absorbed.

For UOA, we are quite comfortable and we don’t need to really fight for profit. We develop niche products that are not in the market. However, I don’t mean that we are in the right direction, but we are always experimenting to ensure that we find the right product for the market.

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