This article first appeared in The Edge Financial Daily on February 3, 2020
KUALA LUMPUR: Although the Malaysian property market is experiencing slow recovery due to oversupply, Australian-based infrastructure and property group Lendlease Group is confident there will be demand for its ‘value-proposition’ residential tower in the upcoming financial district here, the Tun Razak Exchange (TRX).
“We can’t predict the market, but we can give buyers facts. What people do is compare the relative pricing of Kuala Lumpur, versus some of the other cities. If you look at Kuala Lumpur, people see a lot of embedded values because of the price point they are entering. So people will make those calls, because they will make those comparisons,” said Lendlease Asia chief executive officer Tony Lombardo in a recent interview with The Edge Financial Daily.
“When I look at where the market is here in Kuala Lumpur, it is not too dissimilar [from other markets]. In my view, in terms of where the fundamentals are, I think people can see some appreciation in the long term,” he said.
Lombardo said Lendlease’s first residential tower in TRX comprises 444 units, while the second tower has 442 units. The group is planning to launch its first tower soon.
“Depending on how demand [is like], we may launch the second tower as well ... we will determine how many [of the second tower] to be released into the market [later],” he said.
As at end-September last year, National Property Information Centre data shows that Malaysia’s residential property overhang stood at 31,092 units, down 3.8% from 32,313 units recorded as at end-2018.
In the same period, the country’s commercial property overhang grew 39.7% to 24,820 units, of which 70.3% or 17,459 units are serviced apartments.
While Lombardo acknowledged that the market has been soft for the past few years, he said property buyers should take a long-term view of the market. “This (Tower 1) will be completed in 2023, it is a 39-month construction period. We got to make a long-term view of the market, [so] buyers are buying at the right time of the cycle now,” he added.
Access to public transport infrastructure is also a key advantage, according to Lombardo.
“One of the key things we are seeing globally is urbanisation projects. Because of their connectivity and amenities, people are now willing to pay a price premium, and they are paying for that proximity to have access to various things.
“From my perspective, the reason why Lendlease decided to go after TRX in the first place was because the site will [integrate with] the MRT (Mass Rapid Transit) interchange, so it is the only site in KL where you can access 68 stations [across the Klang Valley] once the second line opens in 2021,” he said.
Retail mall sees 50% of net lettable area taken up
The residential towers are part of the 17-acre (6.88ha) The Exchange TRX, a RM10 billion mixed development comprising six residential towers (2,400 units), a luxury hotel, an office building, a retail mall, and a 10-acre rooftop park.
Already, 50% of the retail mall’s net lettable area of 1.3 million sq ft has been taken up by committed leases, said Lombardo.
“So we definitely feel we are in a very good position to get this lease close to 100% before opening,” he said. Lendlease targets to open the mall by end-2021.
“Like everything else, the market will go through cycles and that is normal, [especially] for real estate. If anything, I would like to be developing things at the right time and cycle, [and] that is what we feel we are doing at the moment.
“The market will eventually start taking off — I can’t predict exactly when — but we feel pretty comfortable that we are building the right product at the right time, and the market actually appreciates what we are doing,” he added.
’Positive’ experience despite change of government
The Exchange TRX is being developed by a 60:40 joint venture between Lendlease and the ministry of finance’s wholly-owned TRX City Sdn Bhd, formerly known as 1MDB Real Estate Sdn Bhd.
“For us, globally, we are always working with governments as our key stakeholders, and changes in governments — it is normal. When we started out, from my perspective, looking at the team at TRX [City], we are dealing with [CEO] Datuk Azmar [Talib], who has been there throughout the journey, and we have met various ministers since things have changed. It has been extremely positive here so far, no problems,” Lombardo said.
“We just move forward. We need to build the relationship with the new stakeholders, to make sure they are clear in terms of what we are about to deliver. We just need the certainty. For us, when the new government came in, like any government, they reviewed the project, and went through the commitments they need to make,” he said.
“To me, it [the review] was quite fast. Within the first couple of months [after 14th general election], they came out and committed to the project. From my perspective, that was fast — very quick in comparison to other experiences we had as an international developer,” he added.