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

IOI Properties Group Bhd’s property development division continues to contribute the most revenue to the group but its property investment and hospitality and leisure divisions are also growing. Chief operating officer Teh Chin Guan believes this is a good thing to buffer the headwinds of a soft property market. Apart from that, the group’s large land bank allows it to tailor its products to market demand.

At the same time, the group is preparing to take advantage of the growth in the digitalisation of the property industry, chief sales and marketing officer Jason Tie says. It has set lofty targets such as trying to create a digital ecosystem that will change the way we buy property. Teh and Tie sit down with City & Country to talk about IOI Properties’ plans and the direction it is heading towards.

City & Country: How did IOI Properties perform in the last financial year (ended June 2019) and what were some of the highlights?

Teh Chin Guan: In the last financial year, our revenue dropped but we still maintained our profit because of our project in China, which is doing very well. The contribution from China is 32% of group revenue. In financial year 2020 (FY2020), which will end next June, we foresee

China’s contribution increasing to 50% and we are looking forward to Malaysia’s project revenue to also increase slightly.

We all know that the property outlook is still not very clear as we have internal and external issues, but nevertheless, we still expect a little bit of improvement from Malaysia and an even bigger improvement from China. Our revenue for FY2020 is estimated to be close to RM3 billion. This year, we are doing RM2.2 billion, so there is an expected 30% to 40% improvement in our revenue.

In Malaysia, we continue to have project launches in all our townships despite the soft property market. We have scaled down a bit and tweaked our products to meet affordability issues. And we emphasise more on townships in suburban areas where land cost is cheaper and where we can build more affordable products. For example, we recently launched Alanis, a serviced apartment project with full facilities in Warisan Puteri township, next to Xiamen University in Sepang.

In Puchong, despite the slowdown, we continue to improve the infrastructure. We are going to open the new interchange from Lebuhraya Damansara Puchong into Bandar Puteri Puchong and vice versa. We also widened the internal roads. IOI is spending close to RM64 million on this common infrastructure for the benefit of our current residents and future customers.

Why is IOI doing infrastructure improvement at this time?

Jason Tie: At the core, we are trying our very best to be a responsible and sustainable developer. So, in line with our tagline of “Lifestyle Influencer”, we want to support the area and the ever-changing lifestyle of our community. Our community is very important to us. Without them, we won’t be where we are today. So we engage with them, we hear their feedback and then we put in strategies or action plans and some programmes to enhance the life of our community to influence their lifestyle for the better.

How has this year and FY2020 been so far?

Teh: Our first-quarter results are up to September. So far, we are still hitting our targets although the low loan approval rates are tough, but we are meeting our sale targets. Our sales target for our new financial year is more than RM3 billion.

During the last four, five years when we had a slowdown in our property segment, we were lucky that we had property in Xiamen, China, and in Singapore. That contributed a lot to us. Malaysia sales have slowed but in China, they are doing well. The last financial year, Singapore didn’t contribute much because we have already sold our products. We are left with one project in Singapore that is ongoing called Central Boulevard, a RM10 billion project that will be completed in 2022.

Are you looking to increase the contribution to the group from the property investment and hospitality and leisure divisions?

Teh: Property investment and hospitality and leisure contributed around 30% of our revenue in the last financial year, which is significant to the group. Not everybody can operate a shopping mall or a hotel and still give you a good income. You need a good team of people, good hardware and good software — everything you need to make a successful business.

We are expanding IOI City Mall in Putrajaya and we are building a shopping mall in China. At IOI City Mall, we are expanding it by 1.1 million sq ft on top of the existing 1.5 million sq ft. In China, another 650,000 sq ft is coming out at the end of next year.

In hospitality and leisure, we will have three more hotels in our stable. One is called Moxy, and it will be next to our IOI City Mall extension. It will be the first Moxy hotel in Malaysia and have 495 rooms. It is a brand under Marriott International. Moxy will cater for young millennial customers. It has more common areas and shared self-service facilities for people to interact. We will complete this hotel in one year, after we have finished the expansion of the mall.

Another hotel we are constructing now is called Sheraton Grand in Xiamen, China. It will have 370 rooms and is slated for completion in 2022. This hotel is also under the Marriott International chain. Another is Fairfield by Marriott in Johor, also by Marriott International, with about 400 rooms.

What digital advancement are you hoping to include in IOI?

Tie: Our sales management process is completely digital now. As for work in progress, we are in the midst of digitising the internal workflow of sales documentation such as forms and relevant agreements. At our project sites, our quality assurance and quality control departments have digitalised the QA and QC workflow, which means every inspection will have real-time data on how each construction site is doing.

We are also trying to push the envelope to simplify the way property is bought. We sat down to figure out the whole process of buying property and the chart filled up two A3 pages. Nothing is digitalised in this process. So we will be trying to put all this together on one single platform. We are confident we can do it but we have just started this process.

What can you tell me about the senior living facilities in IOI Resort City, Putrajaya?

Teh: We are building a project called Gems Residence, a joint venture with Mitsubishi of Japan. In this project, we have allocated 100 of the 636 units for independent senior living. These units will cater for older people in terms of design and facilities such as ramp access and making them wheelchair-friendly. We have already started construction.

Tie: We are looking to launch this product in the first quarter of next year. The whole development is designed for health and wellness. Not only that, we have a universal design that applies to all ages. The 100 rooms are especially for seniors, with wider openings, railings, special switches and so on.

The thing we realise is that sometimes, we think that only the elderly need health care or wellness programmes. But if you look at the built environment we are in today, every one needs health assistance. For example, the built environment is designed for driving. It is difficult to achieve 10,000 steps a day, so our built environment can induce a lot of chronic ailments such as backaches, shoulder aches and so on — these are common now.

We call this development resort living with city conveniences. Also, it is multi-generational. Your grandparents can stay in a low-rise block, your parents in another block and you can stay in yet another. The large clubhouse has communal areas and we are talking to a service provider to provide health and wellness assistance daily.

What is your strategy to weather the soft market conditions?

Teh: First, we have embarked on our investment projects for recurring income. With our track record, we are very confident this will bring in more income for us. We have the advantage of being a developer with a large land bank in various locations. We have six townships in the Klang Valley in different areas and we have land in Johor and Penang as well as regionally, such as in Singapore and Xiamen. With the soft market situation, we will focus on the suburban areas where we want to develop our products. We have this opportunity compared with some developers that may not have so much land bank. We have this flexibility locally and we can go regionally, so we have many buffers.

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