Foreign Interest In Properties
THERE was renewed interest from investors in property stocks last week, enthusiasm not seen since a sell-off of these stocks in the region when the subprime loan crisis erupted in the US in October last year.
One of the factors for this re-discovered interest is the trend of en bloc sales of commercial and condominium properties projects to institutional investors.
These en bloc sales enable the developers to instantly sell 100% of the units in these properties.
The impact of these transactions on the revenue and earnings of these developers is significant over the next two years, as the sums involved are large.
Furthermore, pre-tax profit margins from these sales are lucrative, typically about 30%, as they comprise high-end properties being developed.
Mah Sing Group Bhd's sale of The Icon@Mont Kiara and the East Wing of The Icon@Tun Razak late last year, for instance, produced revenue to be booked of about RM540mil. This is equivalent to the revenue of half of a RM1bil township that generally takes at least a few years to develop.
Other developers that have made en bloc sales include Glomac Bhd which, through a 51% owned subsidiary, sold its Glomac Tower for RM576.9mil late last year.
This year opened with two exciting en bloc sales. Bandar Raya Developments Bhd announced last week that a 70%-owned subsidiary would sell Office Tower Two of its Capital Square complex in Kuala Lumpur for RM439.3mil cash that would be received progressively.
This is an encouraging turn of events as the sale price will enable the group to resume construction of Office Tower Two, which was suspended since 1997, some 10 years ago. In addition, the cash will also enable the group to develop the rest of the Capital Square complex.
Interestingly, the buyer is a German real estate investment management company, which shows it's not just Middle Eastern investors that are keen on high-end properties in this country.
Just a day after Bandar Raya's announcement, Sunway City Bhd said Block B of its Palazzio condominium was sold to a company called Radiant Splendour Sdn Bhd, which is reportedly linked to Middle Eastern investors.
En bloc sales represent unbilled sales which will progressively be recognised as revenue.
With such sales, there are now several developers with unbilled sales totalling over RM1bil.
Source :The Star 14/01/2008 Close Window