UEM Sunrise to strike balance between mid-market and luxury projects

By E Jacqui Chan

/ The Edge Property |

May 15, 2017 8:00 AM SGT

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Although Malaysian developer UEM Sunrise may be more conservative than its competitors in its approach, it has proven to be resilient in a challenging market. It ended FY2016 with sales of RM1.36 billion ($441.5 million) — 37% higher than the targeted and revised RM1 billion. It is worth noting that the results were bolstered by the southern region, which contributed 50% to total sales versus 12% in 2015.

For now, UEM Sunrise has three priorities: to build the brand into a reputable, value-driven developer of signature properties; to expand its geographical base and adjacent businesses; and to nurture a serviceorient ed culture.

“Engagement” appears to be the key word for the developer as it seeks to keep its customers happy and create products suited for the current market.

Anwar Syahrin Abdul Ajib, the developer’s managing director and CEO, says: “We want to engage our customers more. We want to keep them happy and keep them in the loop on what is happening at the organisation. We do surveys, go to property fairs to talk to buyers. We have about 15,000 Tresorians. All this gives us an insight into the various markets that we have and the kind of things that we should look at.”

Tresorians are holders of UEM Sunrise’s privilege card, Tresor, which is designed to reward customers who have purchased its properties.

“We recognise that customer experience is critical to building our brand value and we are placing more emphasis on creating a customer-centric mindset within the organisation,” says Anwar, who is very happy that the developer’s post-sales customer service and engagement have improved significantly.

The developer is also working to enhance its completed projects. Anwar says, “For example, we are doing a few things to beautify East Ledang in Johor. We are doing up Signature Lake there because it was not done properly. We are putting in a jogging track and other facilities so that the residents can enjoy what they bought a lot more.

Diversifying products and location

UEM Sunrise is looking to diversify its product offerings by venturing into both the mid- and exclusive landed property markets. Anwar points out that the former is enjoying high demand now whereas the latter offers the potential for an altogether different kind of luxurious lifestyle ensconced in serenity and privacy.

UEM Sunrise has two mid-market projects ready to be launched: Dahlia in Serene Heights, Bangi and Serimbun in Bukit Indah, Johor. The former comprises 170 two-storey terraced houses with an estimated gross development value (GDV) of RM144.1 million; the latter consists of 214 two-storey houses with an estimated GDV of RM106.7 million. Dahlia will be launched in 2Q2017 and Serimbun in 3Q2017.

“These amounts of GDV are a bit more contained and the take-up will be good. Launches like these will allow us to manage our costs better than a big launch with a big GDV. We have to be very clear about our target market. I always challenge the team to know the target market and whether they will buy,” says Anwar.

UEM Sunrise plans to launch RM1.7 billion worth of projects this year, with a sales target of RM1.2 billion. Also scheduled to be launched in the second half of the year are the integrated Solaris Parq in Solaris Dutamas and the high-rise residential Mayfair, St Kilda Road, in Melbourne, Australia. The former comprises 576 serviced apartments with an estimated GDV of RM735 million and the latter will have 158 units with an estimated GDV of RM713 million.

Anwar says, “We are still working on the unit price psf for both projects, so the GDV is just an estimation. We had more than 900 units in Aurora Melbourne Central and more than 400 in Conservatory, Melbourne. Mayfair will be smaller but it will be very exclusive.

“With Mayfair, we are trying to cater more for the local market. For Aurora and Conservatory, we had 20% to 30% local buyers. This time, we are aiming for 40% to 50%,” says Anwar.

Mayfair is designed by world-renowned Zaha Hadid Architects and is targeted at the ultra high-end market.

“We are going to do 10 units per floor and, honestly, coming up with the layout has been tricky for us. We are putting in two- and three-bedroom units and five that measure 3,000 sq ft. Normally, to be safe, we do smaller units in Melbourne but, here, we are catering for the local market. With only 158 units, we reckon there shouldn’t be a problem,” says Anwar.

Source: UEM Sunrise

UEM Sunrise’s Mayfair project in Melbourne is designed by Zaha Hadid Architects and targeted at the ultra high-end market

Geographical diversification

In a bid to strike a balance in its portfolio, the developer is looking to be more diverse when it comes to its geographical locations. “Geographical diversity will help reduce our market risk and strengthen our revenue profile. Within Malaysia, we believe there is scope for much greater expansion beyond Iskandar Puteri. We are actively looking to increase our landbank in the central region with a focus on hot spots that carry high potential for growth,” says Anwar.

As for the international market, UEM Sunrise is wrapping up its operations in Canada. The developer recently sold three plots totalling 4.9 acres in the country for RM372.6 million to local developer South Street Development Group. This move will allow the developer to focus on the Malaysian market and Australia.

“We are pleased with our performance in Melbourne and will be open to acquiring more landbank in this city as well as others in Australia and elsewhere in the international space that fits our brand profile,” says Anwar.

Iskandar Malaysia still a key market

To support these strategies, the developer will continue to emphasise operational efficiencies and keep its costs low, as it expects profit margins to keep narrowing as the cost of labour and materials rises.

At home, the southern region remains a key area for the developer as most of its landbank is located there. It has about 8,900 acres, including through joint ventures, in Iskandar Puteri, Desaru, Kulai and Mersing comprising land for projects in the pipeline and ongoing ones such as Puteri Harbour, SILC and Afiat Healthpark. The total estimated GDV of the to-be-launched projects is RM93 billion.

Anwar says, “I know people’s view of Johor is not favourable and our share price is tied to that. But we are doing something about it. In general, about 50% of our sales come from Johor, and the central region and international market contribute about 25% each. Moving forward, we hope to increase the contribution from the central region, so we are looking at more launches outside Johor.

“We are not just another developer building houses in Iskandar. As a part of Khazanah Nasional, we are a part of a bigger agenda because Iskandar Malaysia is Khazanah’s brainchild. To create a metropolis there, we had to build catalytic developments such as Puteri Harbour.”

Iskandar Puteri (formerly Nusajaya) is essential to UEM Sunrise as a long-term growth driver in the southern region.

With the Malaysia-Singapore highspeed rail coming into play, UEM Sunrise has more plans for its developments in Iskandar Malaysia. It will be developing Gerbang Nusajaya, which is expected to generate a GDV of RM42 billion, over the next 25 years.

Location is one of several decisive factors in the company’s land acquisitions, says Anwar. “The location must already have developed value or have the potential to be developed into a premier address. In developing a premier destination, we seek strategic partnerships to [build] the necessary infrastructure, facilities and amenities for sustainable communities.

“We will also build on our placemaking aspiration by capitalising on our current assets — such as Puteri Harbour, Publika, Mall of Medini and Anjung — to undertake activities that create dynamic and vibrant communities in all our built environments.”

Sluggish market sentiment

Anwar expects the property market to continue to be sluggish this year. Although demand remains flat, he believes there will be bright spots, especially in the mid-market landed and affordable segments.

UEM Sunrise has close to 500 acres in the Klang Valley, which will generate enough GDV for the next five to 10 years.

“The products we have in Mont’Kiara are high-end and the ones in Bangi are mid-market. We need to have the mid-market products somewhere between Bangi and the centre of KL. That is the strategy, so we are looking for sizeable land now. We are talking to a few parties and, hopefully, we can secure something,” says Anwar.

“Ultimately, it is about the product, and what drives it is our vision of building communities. It has never been about building a fancy building; it is about the kind of community we try to create. So, it is important for us to really understand the market we want and the communities we want to create.

“We are buying in Melbourne partly because we already have a team there. I’m not convinced by the markets in other parts of Australia yet, although it has been said that Brisbane is the next place of growth. We may look at London if the market and prices are right.”

UEM Sunrise has about RM4.1 billion in unrecognised revenue, which, Anwar says, will provide near-term earnings visibility from progress billings. “We will also continue to adopt strategic approaches and space out our launches in line with consumer sentiments and market demand. This has proved to be a success, as shown by our launch of Melia Residences in Johor.”

Melia Residences is the developer’s first landed residential development in Gerbang Nusajaya and it contributed RM126.6 million to total sales of RM1.36 billion last year.

“We aim to maintain our position as a leader in the property development industry by bringing in concepts that are original and unique. We will also continue to benchmark ourselves against the industry in terms of being the best-in-class developments to our customers,” concludes Anwar.

E Jacqui Chan is a deputy editor of City & Country at The Edge Malaysia

This article appeared in The Edge Property Pullout, Issue 779 (May 15, 2017) of The Edge Singapore.

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