Leveraging a proven formula for success

This article first appeared in City & Country, The Edge Malaysia Weekly, on November 6, 2017 - November 12, 2017.

I was confident from day one that it [Mid Valley Megamall] would do well...” — Tan

IGB Corp executive director Tan Boon Lee (third from left) with The Edge Media Group publisher and group CEO Ho Kay Tat, president of the Malaysia-China Business Council and prime minister’s special envoy to China Tan Sri Ong Ka Ting, EdgeProp.my managing director and editor-in-chief Au Foong Yee and City & Country editor Rosalynn Poh

An artist’s impression of Blackfriars in London

A show unit of Stonor 3, one of the company’s ongoing developments

Southpoint Tower, the third and final phase of the 50-acre Mid Valley City, is likely to be completed this year

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No. 8 (joint ranking) — IGB Corp Bhd

It is fine weather on the day of our interview with IGB Corp Bhd managing director Datuk Seri Robert Tan at his penthouse office in Mid Valley City. Through the large windows, we can see, spread out before us, the 50-acre mixed-use development and, in the background, the Titiwangsa mountain range.

“On a really clear day, you can see Genting Highlands from here,” Tan says as he prepares for the interview after a photo session.

Mid Valley City, which he had conceptualised more than 20 years ago, comprises two shopping malls, three hotels and seven office buildings. The final parcel in the development — office and residential block Southpoint Tower — will open by the middle of next year.

About 70% of the corporate office space at Southpoint has been leased, according to Tan. The residential units, which are located above the office levels, will be open for sale upon the completion of the block.

“The residential component was an afterthought because Southpoint Tower was meant to be a full office tower,” he says. “However, after looking at the situation around here [Mid Valley City], we thought residences would be a good idea, so about 30% of the building is residential. That is about 100 units with built-ups of 1,200 to 5,500 sq ft. We will run these units as serviced suites with various services, such as concierge, and they will be managed by IGB.”

When Mid Valley Megamall opened its doors in the 1990s, the term “megamall” was new but now it is a familiar concept to Malaysians. Tan had the idea for a large-scale shopping mall after seeing many successful megamalls overseas.

“Some megamalls [overseas] are situated in the middle of nowhere, yet many people visit them,” he says. “So I looked at [the location of] Mid Valley City and saw that we had a population of five million within a 5km radius. I said to myself at the time, ‘If I can’t make it work, either I am stupid and doing something wrong or Malaysians are not ready for shopping malls of this size’ … It was a gamble and if it hadn’t worked, IGB would not exist in the form it does today. Of course, being the first megamall in Malaysia, there was a lot of headache at the beginning but I never had any doubts. I was confident from day one that it would do well — but we didn’t know how well.”

Together, Mid Valley Megamall and The Gardens Mall have a total net lettable area (NLA) of 2.6 million sq ft. Mid Valley Megamall’s offerings cater more for the general public while The Gardens is the higher-end lifestyle shopping space.

As the development of Mid Valley City is coming to an end, IGB is focusing on Mid Valley Southkey Megamall in Johor Baru, which will be completed by next year. Tan says the 36-acre development, which is situated within the Southkey township, will be a replica of Mid Valley City in Kuala Lumpur — albeit on a smaller scale.

With an NLA of 1.5 million sq ft, Mid Valley Southkey Megamall is 30% smaller than Mid Valley Megamall. Tan says there are committed tenants for about 80% of the space and that the mall’s offerings will be similar to those of Mid Valley Megamall while the next phase will be akin to The Gardens.

“It is exactly the same as Mid Valley City, where we built Mid Valley Megamall first and then The Gardens Mall,” he says. “It is a proven success … but, of course, times have changed, so we will put more lifestyle offerings in Mid Valley Southkey Megamall to attract the Singaporeans. It is a five-minute drive from the Johor Baru Customs, Immigration and Quarantine Complex on the Eastern Dispersal Link Expressway.”

Established in 1964, IGB has evolved into a property investment company with assets in Asia-Pacific, Europe and the US. These assets — which are mostly retail, commercial and hospitality properties — have significantly contributed to the company’s financial success.

Its commercial properties include office towers such as The Gardens North and South Tower, Menara IGB, Hampshire Place and Menara Tan & Tan, while its hotel portfolio includes St Giles The Gardens — Grand Hotel & Residences in Kuala Lumpur, St Giles Makati in Metro Manila, The Tank Stream in Sydney and MiCasa All Suite Hotel in KL.

Tan talks to City & Country about the company and its plans going forward.

City & Country: How would you describe IGB Corp’s performance in the last 12 months?

Datuk Seri Robert Tan: Lower revenue for the first six months of this year was offset by a 32% increase in pre-tax profit to RM255.3 million compared with the first half of 2016. Several things contributed to this, including the better performance of the group’s property investment and hotel divisions, and there was a RM34.3 million one-off gain from the disposal of the Renaissance Hotel Kuala Lumpur.

Barring unforeseen circumstances, IGB is optimistic about another fruitful year for its businesses and stakeholders.

What do you think sets IGB apart from other developers?

IGB has, over the last two decades, built up its portfolio of investment properties, which includes Mid Valley Megamall and The Gardens Mall, 15 hotels with a global footprint and 2.8 million sq ft of commercial office space. It is the recurring income from this portfolio of investment properties that differentiates IGB from traditional, pure property developers.

Our ability to design, construct, complete and manage mixed-use developments also differentiates us from other developers. To date, the Mid Valley City project has not been successfully replicated by any other property developer. We are also able to unlock value without needing a huge land bank — such as the mixed-use development Blackfriars in London with a gross development value of about £850 million 

(RM4.7 trillion), which will include a public square on a 1.8-acre parcel.

We have a proven track record with quality niche products, such as the G-Residence and Three28 Tun Razak condominium projects and Park Manor at Sierramas. Our financial holding power enables us to optimise the timing of our projects, such as the one fronting the Chao Phraya River in Bangkok and 18 @ Medini in Johor.

How is the current market situation impacting the group’s retail business and what is your strategy?

We are fortunate to be in a good location in the Klang Valley, with easy access via public transport and multiple major highways. Thus, our catchment potential is tremendous. Both Mid Valley Megamall and The Gardens Mall attract different categories of shoppers and, given that the malls are adjacent to each other, there is plenty of spillover of shoppers and tourists from one mall to the other. 

Basically, shoppers are able to find everything they want either in Mid Valley Megamall or The Gardens Mall. We are also continuing to enhance our retail assets so that they remain attractive to shoppers, by realigning space or creating additional retail space to offer more choice.

Another differentiating factor is the software — refreshing and improving a retail concept to provide a memorable shopping experience and keeping up with current trends, including introducing new tenants with in-demand products that will continue to attract more shoppers of all ages.

How is the progress of Mid Valley Southkey Megamall?

Mid Valley Southkey Megamall is on track for its soft opening on Aug 8 next year. Negotiations with prospective tenants are ongoing, including anchors, junior anchors and speciality stores.

The mall will comprise six levels of retail, two levels of basement parking and eight levels of elevated parking, forming part of the larger RM6 billion integrated mixed-use development that will comprise three hotels, four office towers and serviced apartments.

What is IGB’s focus in the near future in terms of projects and business?

Our focus in the near future is to embark on more projects to enhance IGB Group’s recurring income stream. The group’s major projects include Mid Valley Southkey Megamall and Blackfriars. Other mixed-use developments are the one on the Chao Phraya River and 18 @ Medini.

What do you hope to achieve this financial year?

We hope to complete Southpoint Tower, the third and final phase of Mid Valley City, as well as timely progress on other ongoing projects such as Mid Valley Southkey Megamall, Stonor 3 and Blackfriars.

Based on IGB Group’s financial results for the first half of this year, we hope to achieve another fruitful year for the company and all its stakeholders.

In your opinion, what is the outlook for the property market in the next 12 months?

The property industry — like other industry — is experiencing and will continue to experience cycles, and we anticipate a gentle upturn in demand in the near future. Lower interest rates, less stringent housing loan requirements and an improved investment sentiment are all important factors to stimulate a recovery in the property sector. It is well known that there is a substantial number of first-time homebuyers who are unable to obtain financing for their intended purchases.

Growing urbanisation will continue to sustain demand for strategically located properties at different price points, and prices for such properties will continue to grow.