YTL’s long-term view pays off
By Cecilia Chow and Charlene Chin
/ EdgeProp |
With businesses ranging from luxury resorts to bespoke residences, the Malaysia-listed property giant controlled by the Yeoh family has the ability to ride out the storms. Mark Yeoh, executive director of YTL Hotels, tells EdgeProp why.
For the past decade, Malaysia-listed conglomerate YTL Corp has stayed invested in Singapore, through the tumult of the global financial crisis and eight rounds of property cooling measures from September 2009 to June 2013 when most foreign investors fled.
If anything, it is a lesson in how tenacity, patience and foresight can pay off when investing in real estate — a lesson that still holds true for the group today.
YTL Corp set the benchmark in the last collective sale fever when it purchased Westwood Apartments en bloc for $435 million in November 2007. The purchase price translated into a land rate of $2,525 psf per plot ratio (ppr) and is still a record for a collective sale site.
Even though the property market cratered in recent years, YTL went ahead to redevelop the prime freehold site at the corner of Orchard Boulevard and Orchard Spring Lane into the 77-unit luxury project, 3 Orchard by-the-Park. Designed by renowned Italian designer Antonio Citterio (famous for his design of Bvlgari Hotels around the world), the project was completed last year with units designed as “villas in the sky”.
The show suites at 3 Orchard-by-the-Park are now being fitted out with Italian brand Armani Casa furniture, which YTL Corp represents in Malaysia. 3 Orchard-by-the-Park is expected to be launched in 2H2018.
Yeoh: My father used to say that when you buy property, you will never go wrong. Over the long-term, it will always appreciate. You just need to have sustaining power to hold it. (Credit:Samuel Isaac Chua/The Edge)
Prescient timing
Mark Yeoh, executive director of YTL Corp and executive director of its subsidiary YTL Hotels & Resorts, says: “My board has taken a long-term view on the project.” That stance has proven to be prescient.
In 2014, the government announced plans for the 43km Thomson-East Coast Line, scheduled to be fully operational by 2024. One of the 31 MRT stations on the new line — the Orchard Boulevard MRT station — will be located directly across the road from 3 Orchard-by-the-Park. Construction is currently underway.
With sentiment in the residential market soaring, YTL Corp’s widely expected selling price of at least $4,000 psf for 3 Orchard-by-the-Park is in line with the asking prices of other recently launched luxury condos. City Developments’ New Futura on Leonie Hill Road, which was launched at the start of the year at an average of $3,200 psf, is now fetching prices above $3,500 psf. Wing Tai Holdings’ Le Nouvel Ardmore has consistently hit $4,000 psf. Guoco-Land’s Wallich Residence at Tanjong Pagar Centre, although 99-year leasehold, saw prices top $4,000 psf last November.
Incidentally, YTL was also the developer of 13 villas known as Kasara and 18 villas on Sandy Island at Sentosa Cove. The Yeoh family’s Singapore home is on Sandy Island.
The show suites at 3 Orchard-by-the-Park are being fitted with Casa Armani furniture in preparation for launch sometime in 2H2018 (Credit:Samuel Isaac Chua/The Edge)
‘Sustaining power’
“My father used to say that, when you buy property, you will never go wrong,” says Yeoh, 52, son of the late Malaysian billionaire Yeoh Tiong Lay. “Over the long term, it will always appreciate and prove to be a good investment. You just need to have sustaining power to hold it.”
He likens the 3 Orchard-by-the-Park buy to the family’s purchase 35 years ago of a unit at The Estoril on Holland Road in prime District 10. The purchase price for the unit in the freehold, luxury condo was $800,000 to $900,000. “When we bought it in 1983, everyone laughed at how much we paid for it,” says Yeoh, who was in Singapore recently.
Last month, The Estoril was sold en bloc to Far East Consortium International for $223.94 million. For the 40 apartment owners, it means walking away with $4.6 million apiece. The Yeohs would have made more than five times the original purchase price.
Yeoh is the youngest of seven children. His father, who passed away last October at 88, founded the eponymous Yeoh Tiong Lay Corp in 1955 as a construction company.
The business has since expanded to include a wide range of activities, from oil and gas to technology, as well as property development, hotels and real estate investment trusts. It is led by eldest son Francis, who is managing director of the group. He and his siblings are on the board of directors of YTL Corp.
JW Marriott Kuala Lumpur (pictured) was purchased during the Asian Financial Crisis, which also saw the opening of YTL’s The Ritz-Carlton Hotel Kuala Lumpur on Dec 1, 1997 (Credit: YTL Hotels & Resorts)
Expanding hotel portfolio
As executive director of YTL Hotels,Yeoh oversees a portfolio of 30 hotel assets worth more than RM5 billion ($1.7 billion) today. About half of the hotels have been injected into the YTL Hospitality REIT, which as at 2QFY2018 (ended December 2017) had an asset size of RM4.127 billion. The hotels include JW Marriott Hotel, The Majestic Hotel and The Ritz-Carlton in Kuala Lumpur; the flagship resort Pangkor Laut and Cameron Highlands Resort in Malaysia; Hilton Niseko Village in Japan; and Sydney Marriott, Brisbane Marriott and Melbourne Marriott in Australia.
Last December, YTL Hotels and Marriott International signed agreements to develop four new luxury hotels in Asia: two to be located in Malaysia and flying the JW Marriott and Edition flags; and another two in Japan: an Edition and a W Hotel in Niseko Village, Hokkaido.
YTL Hotels has had a long-term relationship with Marriott International spanning more than two decades. Of 36 hotels in YTL Hotels’ portfolio today (including six under development), 11 are Marriott International branded hotels. It started during the Asian financial crisis, when YTL Corp purchased the JW Marriott in Kuala Lumpur, along with two prime shopping centres in the city — Starhill and Lot 10 — for RM323 million in cash in October 1998.
In December 1997, YTL Hotels opened the Ritz-Carlton Hotel in Kuala Lumpur, which was “relaunched and refreshed” in April 2016.
The Sydney Harbour Marriott Hotel (pictured) was one of three Marriott hotels in Australia purchased from Commonwealth Bank of Australia in 2012 (Credit: YTL Hotels & Resorts)
Playing with a 1,800-pound gorilla
Mergers and acquisitions of big hotel groups have wrought the biggest change in the industry, observes Yeoh, but there is room for smaller players such as YTL Hotels. “The big chains will get bigger, and if you want to play, you have to marry the big chains,” says Yeoh. “The alternative is to become a niche player, and that’s where we excel as well.”
Consolidation in the hotel industry has been widespread over the past three years. In December 2015, AccorHotels announced that it was buying three iconic brands — Fairmont,
Raffles and Swissotel — for $2.9 billion. Two years ago, Marriott International paid US$12.2 billion for its rival, Starwood Hotels & Resorts.
“I’ve always joked that there used to be three 900-pound gorillas in the hotel industry — Marriott, Starwood and Hilton,” says Yeoh. “But since Marriott bought over Starwood, they
are now a 1,800-pound gorilla.”
Being a hotel owner, Yeoh subscribes to the view of “the right horse for the right course”. While Marriott has been giving YTL Hotels “very good opportunities and good deals”, Yeoh is also actively in talks with Hilton. “We’re looking at other opportunities with them,” he says.
While Yeoh is interested in owning a hotel in Singapore, he feels the entry level is still “quite high”. He adds, “I think we have to be patient, and do the right deal.”
The Niseko Village is on a 617 ha site, and contains two hotels, two 18-hole golf courses, spas and will see at least two additional hotels in the pipeline (Credit: YTL Hotels & Resorts)
Deal for the annals of history
Tenacity and patience have marked the YTL group’s deals. Looking back, Yeoh’s most memorable deal — one that he believes ought to be entered into the annals of history — was
struck in Starbucks at Changi Airport Terminal 3 in April 2010. It was the ¥6 billion acquisition of Niseko Village resort in Hokkaido, Japan.
“I remember that because I didn’t have time to meet with the vendors, and so we decided to meet at the airport,” he relates. “I flew in from London and arrived at Changi Airport at 5am. The Japanese flew in from Tokyo. We met, signed the deal, shook hands, they flew back to Tokyo and I flew back to KL.” The vendor of Niseko Village was Citigroup in Japan, which
was forced to sell its assets in Japan during the global financial crisis.
The 617ha resort (5.3 times the size of Sentosa Cove) is located on the northern island of Hokkaido and features two hotels: the 200-room Green Leaf Hotel and the 506-room Hilton Hotel. There are also two 18-hole golf courses, ski trails and ski lifts, as well as natural hot springs. “They had already done most of the heavy lifting, and we enhanced the
master plan,” says Yeoh.
Less than a year after YTL Hotels’ purchase of Niseko Village, an earthquake struck off the coast of the northeast of Japan that led to the Fukushima Daiichi nuclear accident on March 11, 2011.
“I was very nervous initially,” says Yeoh. “But people from Fukushima then moved to Hokkaido. Traditionally, Niseko did well during the white [winter] season and bled during the green [summer] season. Since then, however, it has been busy throughout the year, even in summer. So,that has worked well for us. God has blessed us.”
The Ritz-Carlton Koh Samui which opened last October is one of the hotels owned by YTL Hotels and managed by Marriott International (Credit: YTL Hotels & Resorts)
One of the biggest landbank owners in Niseko
Following YTL Hotels’ purchase of Niseko Village, it refurbished both the Hilton Hotel and the Green Leaf Hotel. In December, the group announced that it had signed an agreement with Marriott International to add three new hotels in the resort: Ritz Reserve, W and Edition.
Yeoh reckons that, at 2.000 acres, YTL Hotels’ landbank in Niseko Village is one of the biggest in Niseko. YTL has also built eight Kasara branded townhouses in Niseko Village. As hotel occupancy rates at the resort are 95% during the white season, the eight townhouses have become part of the room inventory and have not been marketed for sale yet.
The group has started developing a maiden residential block of apartments in Hinode Hill. It is scheduled for completion by October 2019, in time for the next white season, adds Yeoh.
YTL Hotels purchased The Academy Hotel, which is being refurbished, and will reopen later this summer (Credit: YTL Hotels & Resorts)
Brexit opportunities
Outside Asia, YTL Hotels saw opportunities in the UK after the Brexit vote in June 2016. The group acquired three hotels in the UK in September 2016 and two in February 2017. “We’re currently refurbishing them and they will reopen in the summer,” Yeoh says.
He remembers the acquisitions of The Academy Hotel, which was one of the three hotels purchased in 2016, and Threadneedles Hotel, one of the two acquired in 2017. His colleague
went to see Threadneedles. “He loved it, as it’s just behind the Bank of England and had a great dome,” says Yeoh. “I went to see The Academy. It was a dump, but everything works.”
The Academy Hotel had many little rooms, which the previous operator said were popular with the ladies from the city who wanted to freshen up. “Basically, it was a love hotel,
and YTL doesn’t do that,” he says.
The Academy Hotel is now being refurbished. “Andrew [Jordan], my [executive vice-president], couldn’t understand why I wanted to buy it,” says Yeoh. “I told him Threadneedles
is trading at 70% occupancy, and perhaps it can be improved by 10% to 15%. But this ugly duckling [The Academy Hotel], if we just spend another £5 million refurbishing it and bringing it up to the standard of Threadneedles, the returns will more than double.” The hotel will
be opening later this year.
be opening later this year.
Yeoh believes having YTL Construction as an associate is important. He adds, “At YTL, we don’t believe in diversifying; we believe in intensifying. Our core competency has always been construction, and it’s a major component of what we do. So, when I build a hotel, I always believe that I can build it 30% cheaper than my competitor.”
YTL Hotels owns two historic hotels in Malaysia, namely The Majestic Hotel Kuala Lumpur and The Majestic Hotel Malacca (Credit: YTL Hotels & Resorts)
Pangkor Laut backstory
Yeoh cut his teeth in the hotel business at Pangkor Laut, YTL Hotel’s first luxury hotel property. He was still a law student at King’s College, University of London.
It all began when the late Sultan of Perak, Sultan Idris Iskandar Shah, wanted to turn the island into a luxury resort. To help realise his dream of transforming Pangkor Laut into a
world-class resort, Sultan Idris Shah approached YTL Corp, which was then a construction company, to build a resort on the island in 1982.
The Sultan made frequent trips there, occasionally inviting special guests to the island, says Yeoh. “He had Frank Sinatra there once and, on another occasion, Hugh Hefner, because the Sultan thought of building a Playboy club and casino there,” recounts Yeoh.
The Sultan also wanted the resort completed before he ascended the throne as the Agong, or King, but he died of a heart attack before
realising his dream.
When YTL was rushing to complete the project, it was during the recession of the mid-1980s. World-renowned architect Bill Bensley, who had just started his career then, was engaged to design Pangkor Laut Resort, which opened in 1985.
Today, the 300-acre Pangkor Laut private island is part of the YTL Hospitality REIT portfolio and has 142 villas and eight estate properties.
Pangkor Laut Resort, YTL Hotels’ flagship luxury resort that opened in 1985 (Credit: YTL Hotels & Resorts)
Building houses in Seychelles
When Yeoh graduated in the late 1980s, he was sent to Seychelles. Dr Mahathir Mohamad, Malaysia’s Prime Minister then, had signed a pact with Seychelles to promote cooperation between the two countries.
YTL was asked to build houses in Seychelles, and Yeoh was despatched there. “It was a beautiful island, but the accommodation was worse than what we had in Pangkor Laut initially,” he says. “But in Seychelles, they were selling at RM500 a night, and we were going for just RM50 a night then. And I thought, ‘Wow, we’re at the wrong end of the market.’”
Today, Pangkor Laut commands rates from about RM735 a night.
In 1988, Mahathir introduced Visit Malaysia Year to attract tourists. The Ministry of Tourism and Culture was set up the year before. “My father was called to support the initiative,” says Yeoh. “I was the only son who was enjoying my life as a lawyer at Shook Lin & Bok LLP and
I was asked to come back, and that’s how I started in the hotel business.”
YTL Hotels also owns Gaya Island Resort in Kota Kinabalu (Credit: YTL Hotels & Resorts)
High Speed Rail effect
Now, Yeoh sees the greatest opportunity for real estate price uplift in the Kuala Lumpur-Singapore High Speed Rail (HSR) project. Early last month, a YTL Group and Tabung Haji joint venture was said to have been selected as a project delivery partner for the project.
Yeoh points to London and Paris and the impact of the Eurostar highspeed rail on real estate prices there. “Before the Eurostar, real estate values in London were almost 20 times those
in Paris,” he says. “I bought an apartment at Quais de la Seine right by the river in Paris a long time ago for about four million francs. It’s probably worth €4 million [$6.4 million]
now.”
now.”
When he was a student in England, he used to see people living in Birmingham or Brighton commuting to London daily for work. It was the rail track that made it possible. “Beyond
lifestyle choices and cost, the positive effect will be broad-based, across the whole economy,” he observes.
In the KLCC area, luxury condo prices are about RM2,000 psf today, or $677 psf in Singapore. In the city state, however, even the new suburban 99-year leasehold condos are
now selling at $1,300 to $1,400 psf. “So, just think of the arbitrage opportunity that it presents,” says Yeoh. “You could be living in Batu Pahat and working in KLCC, or you could be living in Melaka and working in Singapore.” The fact that you can take a train directly from KL to Singapore and arrive within 90 minutes is compelling, he adds.
This is yet another instance of patience and foresight that could pay off again for Yeoh and the YTL Group.
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