This article first appeared in The Edge Malaysia Weekly on August 14, 2017 - August 20, 2017
WCT Holdings Bhd, which is controlled by Tan Sri Desmond Lim Siew Choon, might be putting the proposed Paradigm KL retail mall project on hold simply because the property tycoon has a larger retail mall project, Pavilion @ Bukit Jalil, coming up just 5km away.
Slated for completion next year, Pavilion @ Bukit Jalil is a joint development between Ho Hup Construction Co Bhd and Malton Bhd, in which Lim has a 36.18% stake.
Paradigm KL is part of WCT’s Paradigm Garden City (PGC) integrated development in Taman OUG, located between Jalan Kelang Lama and Bukit Jalil.
While the two retail malls are bound to compete for shoppers and tenants, industry observers tell The Edge that Paradigm KL may no longer make commercial sense due to various other reasons. “Apart from being too near to Pavilion @ Bukit Jalil, where cannibalisation would occur, the site’s location right next to KESAS Highway is another issue. There are usually pipelines laid under highways, and developments usually have to be kept at a distance for safety reasons,” one observer says. “Removing the mall from PGC would ease some headache because you would have less property to build, giving the architect more room to manoeuvre at the design stage,” he adds.
The master plan for PGC, which sits on a 63-acre freehold parcel, includes luxury condos, a retail mall, a corporate office tower, retail offices and a hotel. The total gross development value (GDV) is said to be RM8 billion to RM10 billion.
WCT group managing director Datuk Lee Tuck Fook does not rule out the possibility of putting Paradigm KL on hold. “We are still in the process of reviewing, repositioning and rebranding all our projects in view of the current market conditions. The outlook for the PGC development remains positive, given its strategic location, and we will share details once our plans are finalised,” he says in an email reply to The Edge.
As the reviewing process is ongoing, Lee says WCT is not planning any new launches this year. Nonetheless, he reveals that the group is targeting to launch a residential project in PGC by 3Q2018. The 940-condo project has an estimated GDV of RM800 million.
Lee also assures that when it comes to project development of any kind, WCT will always comply with safety requirements. “All safety measures and assessments will be carried out in the design development stage in order to mitigate any possible risks that may arise. We are working closely with the authorities to ensure that the location of the existing utilities is taken care of and well coordinated,” he says.
“In fact, we have not encountered any major issues in the construction of Phase One (Waltz Residences) and earthworks are underway at the main parcel,” Lee adds.
WCT launched Waltz Residences — 38-storey twin towers on two acres — last September. While the take-up rate is not available, an investment analyst opines that it might be low at about 40% in the current soft property market, coupled with the uncertainties over PGC after the change of major shareholder at WCT last year.
“We are not too concerned as long as the new adjustments to PGC make business sense,” the analyst says.
The bulk of WCT’s revenue still comes from its engineering and construction (E&C) division, which accounted for 81% of total turnover for the financial year ended Dec 31, 2016 (FY2016), while the remaining 19% came from its property-related business.
For the first quarter ended March 31, 2017 (1QFY2017), WCT’s net profit tripled to RM33.08 million, from RM8.83 million a year ago, despite revenue declining 2.39% to RM473.39 million.
Revenue from the property development division fell 18.7% year-on-year to RM74.79 million in 1QFY2017, from RM92.02 million, while revenue from E&C increased 1.4% to RM383.37 million.
Profit from E&C ballooned to RM30.08 million, from just RM3.74 million in the previous year. In contrast, profit from property development shrank 38% to RM11.41 million.
However, AllianceDBS Research analyst Chong Tjen-San thinks that having Paradigm KL in PGC would help boost property sales. “Without the retail mall, it may make the residential component less appealing to buyers, reducing WCT’s pricing power. Of course, WCT has the option of scaling down the NLA (net lettable area) of the mall and bank on the extended LRT to help sales,” he says. The Sri Petaling Line LRT extension, whose Awan Besar station is less than 3km from PGC, began operation last June.
Kenanga Research analyst Adrian Ng thinks PGC has an advantage in terms of location, and even if WCT were to scrap Paradigm KL, he does not think that property prices at the development would decline significantly.
Affin Hwang Capital Research senior associate director Loong Chee Wei concurs that prices of properties in PGC would not drop sharply, pointing out that the OUG area is not short of retail space. “It wouldn’t be a surprise if they were to scrap the plan to build the mall, or have a smaller one to cater just for the PGC community. Because when there is already an integrated mall less than 5km away, it is risky in terms of occupancy to build one in PGC,” he explains.
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