THE economic climate has turned harsh and the signs of a slowdown in the domestic market are emerging — it is rather obvious that Datuk Wira Azhar Abdul Hamid has been entrusted by tycoon Tan Sri Syed Mokhtar Albulkhary, the sole shareholder of Tradewinds Corp Bhd, with the job to ensure the group pulls through the tough times.
When Azhar took the helm in April, many in the real estate industry were curious to know how the 54-year-old group managing director would execute the several mega projects that had been planned earlier, given that the property boom was over.
Among the slew of real estate projects are Tradewinds Square in Jalan Sultan Ismail, Kuala Lumpur; Menara Tun Razak in Jalan Raja Laut, KL; and Perdana Quay in Langkawi.
Should Tradewinds Corp proceed with all the proposed projects, the group will have to fork out a whopping RM30 billion.
In a meeting with digitaledge Weekly, Azhar is frank about Tradewinds Corp having to scrap some of its proposed developments because the current operating environment is not conducive for them, particularly office towers.
Holding onto a down-to-earth strategy and building the tallest or largest structures are certainly not what Azhar has in mind, at least in the current soft market. But he is quick to point out that the development on a prime tract in Belfield, near Kampung Attap, KL, will be a launch pad for the group to establish its footing in the property development industry. Tradewinds Corp is planning to start work on the Belfield residential cum retail project, which has a gross development value of RM3.8 billion, early next year (see “Belfield to price high-end units at an affordable price”).
Azhar stresses that Tradewinds Corp’s priority now is to grow its operating income to ensure there are steady recurring earnings. To do that, the group will have to either make its assets generate as much returns as possible or sell those that are not performing.
Also, Azhar is looking at building a third core business for the group, to supplement its earnings from property development and hotels.
Previously, Tradewinds International Sdn Bhd, a unit headed by Mohd Ali Rashed Alabbar, was set up with the aim of driving Tradewinds Corp’s commercial developments and attracting Middle East investment funds. Tradewinds International was once perceived as the core unit of the group.
However, when asked about the unit, Azhar says, “Tradewinds Corp is now the mother ship.
“I am here to try and grow the operating income, grow the business, restructure the company so that it can move on on its own. I am putting together a five-year transformation plan. And within that period, I am going to initiate the relisting of Tradewinds Corp.
“Because I have made that commitment, I am forced to add value to all the operations. To list back just the hospitality and property [businesses] is not enough; I need a third core business.
“We have not identified what to sell. We are doing a review now. If we cannot use an asset and it does not have a lot of upside potential or cannot add value over the next 10 years, we will consider selling it.”
Tradewinds Corp has over 4,000 acres in the country.
“[The] most important [thing] to me [now] is to enhance our operating income. Tradewinds Corp’s gearing is relatively low vis-à-vis its assets,” says Azhar. According to him, the total value of the group’s assets is between RM6 billion and RM8 billion.
The third core business, he says, will take advantage of the group’s land parcels that are left idle.
“The business will be potentially recession-proof. Our shareholder has land all over the country — in Johor, the west coast and the east coast. I can’t develop some of the land. We are looking at the food industry. It will require a very low capital outlay because we have the land,” he explains.
“We will try as many things as possible. If you try out 10 and are successful with five or six, that will be okay. You can never get 10 out of 10.”
In its financial year ended Dec 31, 2014, Tradewinds Corp suffered a net loss of RM65.6 million, compared with a net profit of RM13.58 million in FY2013. Revenue declined to RM529.3 million from RM713.07 million previously. The group’s total liabilities rose to RM2.36 billion, of which RM1.34 billion was short-term debt.
Several revenue-generating commercial properties have been shut down since Mutiara Beach Resort’s closure in 2006, with the intention of unlocking the values of the aged assets. They include two hotels (Crowne Plaza Mutiara Kuala Lumpur and Mutiara Burau Bay Beach Resort in Langkawi) and two office buildings (Kompleks Antarabangsa and Menara Tun Razak in Kuala Lumpur).
Several projects are being reviewed as Azhar is particularly concerned about a potential office glut, considering a few big projects are coming up in Kuala Lumpur. Three of the upcoming multibillion-ringgit projects are KL118 — Malaysia’s tallest building by Permodalan Nasional Bhd — and 1Malaysia Development Bhd’s Tun Razak Exchange (TRX) and Bandar Malaysia.
“MTR (Menara Tun Razak) has a development order for two office towers. Because of the present market conditions, we will revisit the plan to see if we should proceed to build them. We will do it if we are able to secure a tenant or a buyer. I am very concerned about the office glut,” he says. MTR is located on Jalan Raja Laut, directly opposite Menara Dewan Bandaraya Kuala Lumpur.
Another project that Tradewinds Corp isn’t in a rush to commence is Tradewinds Square in Jalan Sultan Ismail. Previously named Tradewinds Centre, the mixed-use development is planned to sit on an 8.58-acre parcel where Crowne Plaza and Kompleks Antarabangsa once stood.
“Tradewinds Square will have a GDC (gross development cost) of RM7 billion and GDV (gross development value) of RM20 billion. This is challenge [because] KL is not an established international destination. We have KL118, we have TRX and even MTR, which is 100% office space.
“I have to be very strategic and commercial. I cannot be in a state of denial, that everything I build, I can sell. It (Tradewinds Square) is a seven to eight-year project. In that seven to eight years, it is bound to hit a bump. So, what we are trying to do is estimate the finish. We want to finish when the economy is flying. But we need to ride the bump. We are not so concerned about the start [of the project]. However, we are concerned about the finish,” says Azhar. The group has obtained a plot ratio of 16 for Tradewinds Square.
“We will consider local and foreign partners to fast-track the project.”
He adds that the partnership must be equitable.
Yet another project that is under consideration is a landed residential development in Nusajaya, Johor. “I will need to do the infrastructure first, and that alone will cost RM200 million to RM300 million, which we are not ready to fork out now,” says Azhar.
And once Tradewinds Corp, which was delisted in September 2013, has grown its business and is on a stronger footing, a relisting exercise will be the next move.
“Belfield is what I am going to do (develop) as a launch pad. This is the best opportunity for me to do so. I don’t have baggage in the [property] industry and I have no track record. I am going to build Belfield and I am going to make sure that I can sell it within a reasonable period. How am I going to do that? I can! I need to build the trust. As a property developer, I don’t have a single development done yet.
“The first thing I need to do is to accept reasonable returns from the project. I am not going to sell it very cheap, but I am going to touch the market where people can afford. We will offer the best product at market-sensitive prices,” he says, adding that it will be a luxury development to be sold at affordable prices.
Prior to joining Tradewinds Corp, Azhar was the CEO of Mass Rapid Transit Corp Sdn Bhd. And before that, he was the managing director of Sime Darby Plantations Sdn Bhd.
“We want to be an urban property developer ... more strategic and gives a harder punch. And if I can get small parcels of land, say, about ¾ to an acre, to prove that I can be a boutique developer, I will do it.
“[And] in five years’ time, we should be on a good footing as far as property development is concerned and a respectable footing as far as hospitality is concerned. If I don’t list Tradewinds Corp by 2021, I would have failed,” he says, adding that he is looking at market capitalisation of RM10 billion.
There is also an option to list Tradewinds Corp as a real estate investment trust.
Beyond the five years, Azhar says, the group hopes to expand regionally.
This article first appeared in digitaledgeWeekly, on August 24 - 30, 2015.