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Eleven months ago, the sale of the 24-storey Wisma Angkasa Raya, located strategically across the road from the famed Petronas Twin Towers in Kuala Lumpur City Centre (KLCC), was the talk of the town.
Sunrise Bhd paid close to RM180 million for the building that sits on a prized 1.56-acre corner site located between Jalan Ampang and Jalan P Ramlee. The price works out to RM2,588 psf, setting a new benchmark for land in KLCC, a compelling address for multinational corporations, high-profile local corporations and super-luxurious condominiums.
A month earlier, in April 2008, YTL Group forked out RM85 million, or RM2,000 psf, for an almost one-acre site on Jalan Stonor, also in the KLCC area. This tract, however, does not offer a frontage or proximity to the Petronas Twin Towers or the view that Sunrise’s property purchase offers.
But today, property markets across the globe are lethargic, with prospective buyers eyeing cheap sales. Local property valuers agree that the KLCC condominium prices have dipped, but there is no consensus on the margin of decline (15% to 30% is the range being bandied about). 
Recently, listed Magna Prima Bhd announced that it was buying a 2.6-acre parcel, also in Jalan Ampang, where the 44-year-old Lai Meng Primary School and Lai Meng Kindergarten sit, for RM148.15 million.
Under the proposed acquisition, Magna Prima will pay property owner Lai Meng Girls’ School Association (LMGSA) RM148.15 million. The developer will then relocate the school and kindergarten to a 5.49-acre site in Bukit Jalil, Selangor.
Based on the selling price of RM148 million alone, the Lai Meng land is valued at RM1,300 psf. Magna Prima has said it plans to build on it an integrated RM1.3 billion commercial development comprising office and residential towers, with a gross floor area of about 1.2 million sq ft. The developer declined to offer details of its plans for the land, which has been valued at RM194 million by independent valuer Khong & Jaafar Sdn Bhd.
Last week, The Edge reported that the discount on the land price was due to the condition that Magna Prima has to “cause the transfer” of the 5.49-acre Bukit Jalil parcel, held by Ho Hup Construction Co Bhd’s 70%-owned subsidiary Bukit Jalil Development Sdn Bhd.
It was also reported that Magna Prima independent non-executive director Datuk Lye Ek Seang has a 3.69% stake in Magna Prima, while his wife Datin Viannie Damit@ Undikai acquired 17.54 million Ho Hup shares via Extreme System Sdn Bhd last May.
Interest in KLCC land
Market experts contacted by City & Country differ on whether KLCC land values are holding, but they do agree that the interest of developers has not waned.
James Wong, VPC Alliance (M) Sdn Bhd’s managing director, sees the Lai Meng land transaction as evidence that the property market has peaked and that prices are undergoing an adjustment.
Wong says several tracts in the vicinity of Jalan Ampang, located behind Renaissance Hotel, are going for between RM1,100 psf and RM1,300 psf. “The good days are gone and now is not the right time to let go of properties,” he adds.
Ho Chin Soon, master mapmaker and principal of Ho Chin Soon Research Sdn Bhd, offers another view. In the first place, he says, the tracts located behind the Renaissance Hotel are not able to command premium prices and thus should not be used to gauge the market. “These parcels of land do not command frontage to Jalan Ampang. Moreover, they are located close to Kampung Baru; so it’s no surprise that they cannot command high values,” Ho comments.
He says the Magna Prima deal has been the only major transaction in Jalan Ampang over the past few months. “This transaction alone cannot be used to conclude that land values are dropping in the KLCC area. In fact, for institutional land to command such a high valuation — of about RM1,700 psf — is something positive,” he adds.
Ho says LMGSA has actually got a good price for the land, considering that there is a burial site nearby. Most times, he adds, such property has to go at a discount.
Previndran Singhe, the CEO of Zerin Properties, describes the deal as a shot in the arm for the current weak property market. He says the deal has sent a strong signal that there is interest in the KLCC area and that prices have not softened. He adds that the Lai Meng site cannot command RM2,000 to RM2,500 psf, due more to its location than the current poor property market conditions.
Compared to the land bought by Sunrise, the Lai Meng site does not enjoy the view or proximity to the Petronas Twin Towers afforded by the former. Being a corner site, the Sunrise land will also enjoy a higher plot ratio.
Ho says land values in Jalan Ampang will endure because there are few parcels left there. “These owners are not desperate to sell... and with no major transactions in the past six months, land values there have been holding. I certainly don’t expect fire sales,” he says.
He adds that there are several family-owned parcels in Jalan Ampang, but he does not believe the owners are about to cash out. “All these have been around for the past two decades and I don’t see the owners putting them on the market. There are four parcels under the Robert Kuok group. The DNP Holdings group also owns a tract near Bangunan Getah Asli,” says Ho.
Anthony Chua, KGV-Lambert Smith Hampton’s director of valuation, says many parties have indicated interest in the car park lot located next to Lai Meng school, prompting its owners, Ng Shin Chiu & Sons Rubber Estates Sdn Bhd, to put up a “not for sale” sign on the land.
Next to the Sunrise land is where the former Bok House was situated. It is believed that the Korean owners of the 1.485-acre property paid RM1,800 psf for it more than a year go, but market talk has it that the land is now back on the market, with the asking price set at RM2,800 psf.
Several other car parks in the KLCC vicinity are believed to be up for sale. These aside, one site ripe for redevelopment is the Malaysian Tourism Centre located two doors away from the former Bok House land.
Elvin Fernandez, managing director of Khong & Jaafar, says while there seems to be a weakening in the high-end luxury condominium market in the KLCC area, there is still no clear support for this trend.
“There must be concluded prices to suggest that condo prices are falling. So far, the evidence we have is only anecdotal, based on the owners’ asking prices and the sentiment of the man on the street,” he says.
Should the weakness persist, lower condo prices will theoretically lead to lower land values, says Fernandez. However, given the scarcity of land and the owners’ holding power, he believes land prices will endure, particularly in hot locations like Jalan Ampang. “Moreover, should developers accept lower margins from their development, land prices will be maintained,” he adds.
Magna Prima’s buy
VPC Alliance’s Wong says the Lai Meng school site, classified as institutional, is attractive, given its location. He says the land had been on the market for the last three months and that several developers had approached LMGSA.
Market talk has it that even the Hong Leong group had indicated interest in the site.
Besides the price of the land and the cost of relocating the school and kindergarten, Wong points out that Magna Prima is expected to apply to convert the status of the land to commercial use. The premium for the conversion will be at least 30% or more of the land value as assessed by Kuala Lumpur City Hall, he says.
KGV-Lambert’s Chua says the developer will have to increase its plot ratio to between seven and eight times and this will cost a “substantial” sum. “Usually, the plot ratio for institutional land is low — for only 2 and 3-storey buildings.”
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 749, April 6-12, 2009
