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

A testament to the saying, “when the going gets tough, the tough get going”, Sunway Bhd has continued to evolve and perform in an uncertain and challenging climate.

For its financial year ended Dec 31, 2018 (FY2018), the group recorded revenue of RM5.4 billion and profit after tax and minority interest of RM658.4 million, up from RM5.2 billion and RM627.5 million respectively in the preceding year.

Last year, Sunway launched RM2.1 billion worth of projects, compared with RM1.1 billion in the previous year. Projects with a total gross development value (GDV) of RM880 million were launched in the Klang Valley and Iskandar Malaysia, Johor and those worth RM1.2 billion were launched in Singapore and China. It registered sales of RM1.9 billion in FY2018, up from RM1.2 billion in FY2017.

For the six months ended June 30, 2019, the property division reported revenue of RM201.4 million and profit before tax of RM70.1 million, compared with RM221 million and RM77.6 million respectively, in the previous corresponding period.

Sunway has a land bank of 3,359 acres with a total GDV of RM58.9 billion. As at June, it has unbilled sales of RM2.7 billion.

The group had a few major launches in 2018 and this year, including the first residential tower of Sunway Velocity Two in October last year. Located next to Sunway Velocity in Cheras, the serviced apartments are fully sold. In May, the first tower of Sunway Avila in Wangsa Maju was launched and has seen a 90% take-up rate.

Other launches include Phase 2 of Sunway Citrine Lakehomes in Sunway Iskandar and Sunway GEOLake Residences, the final phase of the GEO series in Sunway South Quay.

On the international front, Sunway, with its joint venture partner Singapore’s Hoi Hup Realty Pte Ltd, launched Rivercove Residences in Singapore and launched Phase 2 of its 25-acre Sunway Gardens and Tianjin Eco City, China. The latter is a joint venture with Sino-Singapore Tianjin Eco-City Investment and Development Co Ltd, the master developer of Tianjin Eco City.

We speak to the managing director of the property development division, Sarena Cheah, about the future of Sunway’s property division and its strategies to keep growing the business.

City & Country: How have the past 12 months been for Sunway?

Sarena Cheah: The market has been challenging. So, we continued to locate our products within our existing developments and other locations where we believed they could sell. There was a well-balanced contribution from Malaysia and overseas projects.

Our sales have been doing well and we will continue to look for land bank. The launch of Sunway Velocity 2, which is near Sunway Velocity, was encouraging as the units were sold within a few months. Sunway Avila, too, did well with a 90% take-up rate.

As a group, we are well diversified. We are not pushed to continue to launch just to drive the numbers because our investment properties have grown quite sizeable over the years. The contribution from investment properties, including offices and  malls, is giving us very comfortable recurring income.

Sunway has been active in Singapore recently as well as in China. Can you share with us your plans to grow its presence overseas?

We have three new launches lined up in Singapore next year. We have been in Singapore for about 10 years and we will continue to build on our joint ventures with our partner, Hoi Hup Realty Pte Ltd. We had planned a launch in Singapore this year but we had to defer it because we could not find a location for the sales gallery.

We have also won a tender to acquire a 27,712.5 sq m parcel in Tianjin, China. It is not a new site, it is within Tianjin Eco City where we have a development. It’s an adjoining piece.  So that should move very fast.

We are looking at the UK but in a different manner, which is to set up a fund management platform to explore opportunities in student accommodation as well as offices. Due to the uncertainties in the market now, we want to play in a segment that is relatively safer, and student hostels is not something new to us. We manage about 8,000 beds in Malaysia. And with our tie-ups with the University of Cambridge, Oxford University and Harvard University in the US, we are connected to universities across the UK and the US. We will also look at development opportunities but we are a bit more cautious there. We are on track with our plans, so expect an announcement soon.

Going forward, the international contribution will pick up a lot. It will vary between the years because of the different accounting standards. For example, this year we will not see any overseas contribution but next year, we will have quite a lot. If we average it out, I think we will look towards a 30% contribution from overseas projects and, hopefully, maybe over the longer term, it will go up to 50%.

Integrated developments have always been the core of Sunway, especially with its “Build, Own, Operate” business model. Going forward, will it remain the key focus for the company, and what components do you feel will become more essential in a township?

One model is to integrate three or more components in every township or transit-oriented development (TOD), depending on demand, of course. I believe healthcare will be key. We have an aggressive plan for healthcare in which every one of our townships will have a medical centre, as well as education. Of course, components such as retail and offices will be there.

We will not only put in hospitals, we will build and integrate them with education and senior living. We believe that senior living should not be driven from the development side but from healthcare, and it will be located within our communities.

That is why our strategy going forward is to have a very strong integrated township in every region in the country. These townships should showcase who we are and what we are about and they will make up about 50% of our overall development portfolio. TODs will take up another 20% to 30% and the remainder will be standalone sites in strong locations.

Can you share with us your plans for senior living?

Our first senior living development is located next to Sunway Medical Centre in Sunway City and will be completed in two years’ time. We have received a lot of requests for and questions about senior living.

At this point, in Malaysia, while there are parties developing such developments, no one has really started a model for senior living to be tested. We will provide wellness services, nursing care and assisted living for those who require more care. But we are also designing the development to offer independent living, meaning those who are still strong and independent.  It is important that while the senior living development is close to the hospital, it does not feel like it is part of the hospital.

We will need community activities that will keep the seniors interested. So, we are looking at things they can do, such as pursuing a hobby or some may even want to lecture in our education institutions. In the longer term, we will have a performing arts centre just opposite the medical centre.

Are there plans to expand to other states in Malaysia?

We will continue to look but unless the joint venture or deal makes a lot of sense, we will review accordingly. We get a lot of requests and invitations because I think businesses and people like this model — that is how we ended up in Iskandar Malaysia with Sunway Iskandar. We were approached to go in because the place needed developers to create catchments and lifestyle communities. We are looking for opportunities overseas as well, so we have to be very clear about our priorities.

What do you think are the contributing factors to the continued success of Sunway?

People know us as a brand that does more than property development. I think a lot of buyers would typically look at who the developer is, its financial and brand track records and the projects it has done.

This is why, whether the market is good or bad, we must continue to build good-quality products. There is no two ways about it. At the same time, if the market is slow, it is time for us to build up our customer service platforms. People have a lot of choices these days. The differentiation can’t just be in products anymore, it is also about our philosophy and how we take care of the people. That is seen in the townships we operate in. So, branding does help. Some may not know us as a property developer but they may know us in education or healthcare, or even Sunway Lagoon.

Where does the Sunway brand stand in the overseas markets?

I believe most people would research a new brand, so track record really helps. If it were our first product in the country, we would have to work very hard to ensure that it sells and is delivered well.

We are more mature in Singapore and we are not new in China. As for the UK, we are buying or building student hostels and our hostel operators in Malaysia are part of the Asia Pacific Student Accomodation Association, which is an Australian based organisation overseeing members in Asia Pacific.  So we are not completely new in the market because our operators are part of the international association. That will help us to get the right information and make the right decisions on what to go into, especially in a new country.

What is Sunway’s strategy to grow or sustain the business in an unfavourable climate?

In times like these, there are a lot of opportunities to look for land bank. We want to add land with a faster turnaround. That is why you have seen us buying smaller plots recently, to rebalance the profile of our land bank in Malaysia. We will continue to play within the three spaces of master townships, TODs and standalone developments. Sometimes, half of our townships and TODs are investment properties, which is good because that adds confidence to our development. Take Sunway Velocity, I think the reasons why we were able to sell out and command very good rental rates were the integration and the timing of when we put in the investment, and how we built the connectivity to ensure easy living. People like the fact that we own at least 40% to 50% of a development because we will have more to lose.

More important now is how we introduce better connectivity and better conveniences, especially in the light of smart and sustainable townships. How do we use technology to make it more convenient, more seamless? These days, commuting takes up a lot of time.

What is the market outlook for the next 12 months?

I think the property industry is fragmented. The market may be slow but there are some locations that are doing well and prices are holding up very well too. So, in every market there are opportunities.

We are aware that there is a mismatch between demand and supply, as well as in location and pricing. We have to dig deeper into exactly where the oversupply is and why there is no demand. We have been fortunate as where we have been launching, we see a lot of demand. Financing is the issue. People want to buy but they can’t get the financing.

While we have dropouts, the rate has not been very high. Perhaps that means we are attracting the right buyers now. I think that as long as we continue to put out the right product with the right pricing and target the right group, we will do well.

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