This article first appeared in City & Country, The Edge Malaysia Weekly on November 6, 2017 - November 12, 2017
No. 9 – UEM Sunrise Bhd
We are doing a lot better this year,” says UEM Sunrise Bhd managing director and CEO Anwar Syahrin Abdul Ajib. “We went through a tough two years based on the numbers — but credit to the team for sticking to it and ploughing their way through. Everyone is trying their best.”
UEM Sunrise has once again made it to the top developers’ rankings in The Edge Malaysia Property Excellence Awards this year. Despite the generally weaker sentiment, the group remains confident it can meet market demand with new campaigns and launches. “We are focused on creating the right products that the market wants, offering the best customer service and executing our projects well,” Anwar says.
Comparing past half-year financial performances since its listing in 2008, the company has achieved its best revenue to date. In 1H2017, total revenue was RM1.4 billion, mainly due to strong construction progress from products such as Residensi 22, Estuari Gardens and Teega, both in Puteri Harbour in Johor, as well as Arcoris Mont’Kiara in Kuala Lumpur. This is in addition to the disposal of its land in Alderbridge, BC, Canada, to Canadian real estate developer South Street Development Group for RM371.4 million.
In the central region, the group is well known for its upmarket high-rise residential, commercial and mixed-use developments, largely in affluent Mont’Kiara, including
28 Mont’Kiara, Arcoris, Residensi Sefina, as well as creative retail establishment Publika in Solaris Dutamas.
As the master developer of Iskandar Puteri in the southern region, the group is currently undertaking the second-phase development of the area, namely the 4,551-acre Gerbang Nusajaya that will be developed over 25 years and is expected to generate a gross development value of RM42 billion. The project features several developments, including Nusajaya Tech Park, Fastrackcity, Melia Residences and Denai Nusantara.
Internationally, UEM Sunrise has three ongoing projects in Melbourne, Australia — Aurora Melbourne Central in the central business district, Conservatory in Mackenzie Street and, its latest, Mayfair in St Kilda Road. The group has a completed 4.8-acre mixed-use development known as Quintet in Vancouver, BC, Canada, while a 30-acre beachfront mixed-use development in Durban, South Africa, is still in the development stage.
As the steward of the organisation, Anwar remains steadfast in having the right values and building a culture of delivering to its customers. “We are talking about passion, success, teamwork, integrity … and to focus on these values. If we do that, everything else will take care of itself because I still believe the best way to promote a company is through word of mouth,” he says.
Anwar talks to City & Country about UEM Sunrise’s upcoming plans and direction.
City & Country: How has the year been for UEM Sunrise?
Anwar Syahrin Abdul Ajib: It has been a busy nine months, with three months to go before the year end, and we are very pleased with the year-to-date financial results, including our performance so far.
In the first half, we were focused on selling inventory and preparing for new launches in the second half. We have also been running campaigns and started handing over units at Teega in March and Arcoris in June. We are expecting to see the completion of Residensi 22, Estuari Gardens, and Bayu Angkasa in Nusa Bayu towards end-2017.
We are in negotiations to secure land bank in the central region as well as monetising some of our land in Iskandar Puteri, mainly via the disposal of selected parcels, in addition to Southern Industrial & Logistics Clusters Phase 3.
By the end of 1H2017, we had RM3.3 billion worth of revenue yet to be recognised, which gives us visibility in terms of revenue recognition for at least one to two years, regardless of new sales. Meanwhile, profit after tax and non-controlling interest for 1H2017 was RM155.8 million, almost three times 1H2016’s RM57.7 million.
Not including our new products, which are mostly being launched in 2H2017, we achieved RM391.7 million in sales during 1H2017, mainly from existing inventory at Estuari Gardens, Melia Residences, Symphony Hills in Cyberjaya, Serene Heights in Bangi, Aurora Melbourne Central and Conservatory.
The company recently disposed of three parcels of land in Canada. Is this in line with UEM Sunrise’s business plan and does this mark an exit from the Canada property market?
The land that we recently disposed of in Alderbridge, Vancouver, was acquired in 2014 and is close to Quintet, our only project in Canada. We were pretty excited about the Alderbridge project and had initially planned to develop it, but something else came along that was pretty interesting in terms of offer. And since our international focus is currently on Australia, as we have three ongoing projects there, we decided to realign our focus to Australia and to look for more opportunities there and to exit the Canadian market, for now. I wouldn’t say we will not go back again.
How do you plan to expand the company’s international business in the near future?
We like our international projects. They are very nice and will remain an important element for us. They are at a different level altogether and that really pushes us to do better. We are very proud and excited, and seeing the UEM flag on our ongoing international projects really drives everyone here.
International projects are about exporting our capabilities. If there is a market abroad and we can understand the country’s regulatory framework and manage the risks, our organisation has the capability to do projects anywhere in the world. We consider any business plan that can be immensely beneficial, and when it comes to expanding our international business, there is a higher degree of caution as the company is selective in terms of location, considering we want land with a quick turnaround.
Our South Africa project, which comprises retail, hotel and residential components, is going ahead and we have selected the winning design for the residential component. However, as our strength lies in residential, we are looking for investors for the retail and hotel components. The waterfront tract overlooking the Indian Ocean is a beautiful site.
In Melbourne, we recently launched Mayfair, our third project in Australia. Aurora Melbourne Central is fully taken up and construction is ongoing. We are planning the handover in stages by end-2018, similarly for Conservatory.
What is the company’s focus going forward? Any plans to acquire more land?
Our focus is to grow our property development business and we are sticking to launching RM1.2 billion to RM1.5 billion worth of products every year. If we can do more, we will. But it has got to be market-driven and we have to assess the market carefully.
Ideally, we aim to launch our products evenly across the three areas we are in — internationally, the Klang Valley and Johor. It must be said that Johor is an important market but it is not our only focus. If the market is slow in Johor, we have the flexibility to increase our launches in the Klang Valley or internationally, and vice versa.
The company is looking to increase its land bank in the central region by 2020, through outright purchase or collaboration with landowners via joint-venture arrangements. We are particularly focused on areas that have a high potential for growth and we want to make sure that whatever land we acquire has the potential to last for the next 10 years. Our remaining land bank in the central region is about 5% of the total and we believe there is scope for greater expansion, and that there are still a lot of areas with good opportunities.
We still have smaller pockets of land [in the central region] but our main strategy is building townships and communities, like Mont’Kiara. Also, as transit-oriented developments (TODs) are expected to become more important, especially those targeting the middle-income segment, we are focusing on master planning TODs in view of the potential high-speed rail station in Gerbang Nusajaya.
What is the outlook for the local property market?
The market in general is still cautious but we have to look at it specifically. Nonetheless, we need to be careful with the management of finances and offer the right product in the right location.
For example, our launches in Serene Heights have been pretty strong and well received because of the prices, good location and the overall concept. Serene Heights is a non-stratified landed product while most of the developments in the area are stratified ones. We believe there are certain property segments, particularly landed homes in good locations, that have good demand from genuine homebuyers. We are also seeing more rent-to-own schemes in the market.
Meanwhile, our recently launched Residensi Solaris Parq in Solaris Dutamas, at RM1,200 psf, shows that there is strong demand and that people are willing to spend on something they feel is right and worth it. All the 2,500 sq ft penthouses at Residensi Solaris Parq are taken up and we are expecting a 50% take-up by year end.
It is a very interesting market and we believe there is still strong demand.
What are your thoughts on the southern region market performance?
While the concern has been about the oversupply of high-rise units in the southern region, we believe that positivity is coming back due to the high-speed rail and incoming investments. Despite some short-term challenges, we believe the long term is positive. Meanwhile, it is important for developers to manage cash flow and launch products carefully — in the right location and with the right product mix. We observe that the market is more receptive to landed mid-market residences at the moment.
We remain confident of our performance in the southern region as sales have contributed positively since 4Q2016. For the six months ended June 30, property development sales stood at RM391.7 million, of which 46% was contributed by projects in the southern region, in particular, Estuari Gardens, Melia Residences and Denai Nusantara.
What challenges does UEM Sunrise face in the current market?
As we have close to 10,000 acres in the southern region, or 77% of our remaining land bank, our exposure is relatively high compared with our peers, and that is a challenge, especially in the current soft market.
Other challenges include overall affordability for buyers and the rising cost of materials, labour and compliance. One of the ways we have addressed this is through our ‘Easy Own Plan’ homeownership programme that offers options for either a low down payment, rent-to-own/easy financing or other privileges such as loyalty benefits, extended defect liability and property management services.
What do you hope to achieve in this financial year?
We hope, and are on track, to achieve our RM1.2 billion sales target and to continue to deliver operationally and financially to meet the expectations of all our stakeholders. We intend to meet our sales target through our inventory and new launches.
In terms of GDV, we are on track to achieve RM1.7 billion worth of launches for the year, having launched RM1.2 billion worth of projects, starting with the RM58.5 million Dahlia, Phase 1B1 of Serene Heights, followed by the RM1.1 billion Mayfair and RM370.5 million Solaris Parq Residences Tower A. The estimated GDV for the entire Solaris Parq development is RM2.9 billion and it will comprise two residential towers, office and residential suites and retail.
The final project to be launched this year, in the fourth quarter, is Serimbun in Iskandar Puteri, a mid-market residential development with a GDV of RM142.1 million comprising 2-storey terraced houses near Bukit Indah.
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