SINGAPORE: The Singapore-listed developer has made bets worth more than RM1 billion in Malaysia, with its crown jewel, Sutera Harbour, in Sabah and an upscale condo in KL City Centre.

Two years ago, while prospecting for business deals in Kota Kinabalu, the capital of Sabah in East Malaysia, Singapore-listed GSH Corp’s CEO Gilbert Ee and executive chairman Sam Goi checked themselves into one of the five-star hotels at Sutera Harbour Resort.

“[The property] certainly caught our eye when we first went there,” says Ee.

“But we didn’t intend to buy Sutera Harbour.” On the last day of their stay there, while discussing a deal with a local businessman, they were informed that the resort development was in some financial distress and had been put up for sale.

A buyer had already been secured.

Six months later, Ee received a phone call.

The deal with the buyer had fallen through, and the property would be theirs if they were interested in buying it.

“We had to move in quickly,” relates Ee.

By January 2014, GSH had paid RM700 million for a 77.5% stake in the 384-acre Sutera Harbour Resort, which includes two five-star hotels — the 456-room resort-style The Magellan and the 500-room business hotel, The Pacific — as well as a 27-hole championship golf course designed by Graham Marsh and a marina with 104 berths.

Room rates at The Magellan range from RM650 to RM1,200 a night, and The Pacific commands room rates of RM530 to RM970 a night.

Along with the existing resort property, GSH also acquired majority stakes in two adjacent residential development land parcels, which brought the total purchase price to RM1.3 billion.

One parcel of 12.11 acres is located adjacent to The Magellan hotel, and will be developed into a 460-unit luxury condominium project called The Vista at Sutera.

GSH owns a 67.5% stake in the development site.

The other project, The Point at Sutera, will occupy a 13-acre plot and will also be developed into a private condo project of some 400 units.

GSH holds a 75% stake in The Point.

Sutera Harbour was originally developed by another Singaporean, Edward Ong, president of Singapore-based, family-owned property deve loper OCK Group, who had ventured into Kota Kinabalu (KK) in 1993.

An ambitious project, the US$450 million Sutera Harbour Resort was built on reclaimed land, launched in 1994 and officiated by former Malaysian prime minister Dr Mahathir Mohamad when the resort opened in 2000.

Over the years, some of the land parcels adjacent to the resort were sold to individuals, for development into bungalows, and another 10 acres were sold to another developer, which built a landed housing estate with terraced and semi-detached houses.

About 70% of the landed homes have already been developed.

Designed as a gated community, Sutera Harbour “is like a mini Sentosa Island”, says Ee.

Similar to the upscale, 117ha Sentosa Cove waterfront residential enclave on Sentosa Island, the high-end condos in Sutera Harbour sit on reclaimed land and will be sold on a 99-year leasehold tenure.

And just as Sentosa Cove is a short drive from the CBD in mainland Singapore, Sutera Harbour is just a five-minute drive to the city centre of KK.

A major attraction of KK is that one could be enjoying the crisp mountain air at the peak of Mount Kinabalu some 4,000m above sea level early in the morning, and be soaking in the sun on Manukan Island, a 10-minute boat ride from the city, that same afternoon, says Ee.

In the evening, one of the best places from which to enjoy the sunset is Sutera Harbour.

“It’s one of the few places in the world where you have the mountain behind you and the sea in front of you in a compressed setting,” he adds.

Views from The Vista
GSH intends to launch the 460-unit The Vista by year-end.

According to Ee, 65% of the units will enjoy direct sea views, and 25% will have golf course views.

The project is designed by Singapore’s oldest architectural firm Swan & Maclaren, with interiors by Patty Mak of Singapore- based Suying Metropolitan Studio, a renowned interior design firm behind many luxury homes in Singapore.

“Quite a lot of people have registered their names for units, and they are mainly Singaporeans,” says Ee.

Beyond Malaysia and Singapore, GSH plans to launch The Vista in Hong Kong and key cities in China and Taiwan.

“There has traditionally been an [affinity] between people in Kota Kinabalu and those from Hong Kong and Taiwan,” he observes.

“It’s probably because of the proximity, with both Hong Kong and Taipei located within a three-hour flight from KK.” Meanwhile, Singapore is just a two hour flight from KK, with the airport located within a 10-minute drive from Sutera Harbour.

In Sabah, all strata property, including condos, are sold on a 99-year leasehold basis.

“There is little resistance from foreign buyers purchasing KK property on 99-year leases,” says Ginn Lai, associate director of Knight Frank Malaysia (Sabah Branch) in an email response to queries from City & Country.

Lai estimates that average prices of highend condos in KK are in excess of RM1,000 psf.

“However, the definition of high-end in KK is very subjective,” he adds.

“While location is a determining factor, the level of finishing and fit-out is equally, if not more, important.” For example, most condos in KK are delivered with minimal interior specification, which means just flooring, basic sanitary ware, electrical and lighting points.

Condo buyers will therefore have to carry out additional renovation for lighting, air-conditioning, fitting out of kitchen cabinetry and appliances, as well as wardrobes and bathroom fittings at their own cost.

“There is a considerable gap between buyer expectations and what is delivered when keys are handed over,” concedes Lai.

GSH Corp hopes to bridge that gap, as the units at The Vista will be sold with kitchen cabinetry, wardrobes and bathroom fittings.

The smallest units are expected to be around 1,200 sq ft, two-bedroom apartments.

More than half the units measure between 1,500 and 1,700 sq ft, and will have three bedrooms and a study.

Buyers will also be entitled to membership at the golf course and marina.

While GSH is still mum about the pricing of the units at The Vista, Knight Frank’s Lai indicates that new residential developments in prime locations offering a higher level of interior fit-outs, with average unit sizes of 1,500 sq ft, will be able to command prices between RM1,200 to RM1,500 psf.

Sabah market at a tipping point?
According to Knight Frank in its inaugural Sabah report last August, residential properties in the pipeline in KK total 53,956 units, with condos accounting for 14,708 (27%) and landed properties, 39,248 (73%).

A new supply of 4,318 condos is expected to come onstream over the next three years.

There are no significant landed developments in the pipeline, however, because of rising land costs and land scarcity.

The Sabah government is keen to grow its tourism business, especially eco-tourism, with its cluster of islands at Tunku Abdul Rahman marine park, hotel resorts, the orangutan nature reserve in Danum Valley, which Prince William and Catherine visited in 2012, and Mount Kinabalu.

Upscale hotel players have also entered the market.

In 2012, YTL Hotels opened its luxury resort on Gaya Island, located a 15-minute boat ride from KK.

Another upscale brand, Alila, will be opening its Alila Dalit Bay resort in 2017.

Club Med, which already has a presence in West Malaysia at Cherating, in Kuantan, is exploring the possibility of a Club Med in Sabah.

Visitor arrivals in Sabah grew from 2.88 million in 2012 to 3.38 million in 2013.

However, it dropped to 3.23 million in 2014, below its original target of 3.5 million visitors.

Likewise, the first three months of 2015 saw a slide in visitor arrivals to 768,261, which is 8.9% lower than the 843,415 recorded from January to March 2014.

The reason for the significant drop in visitor arrivals since 2H2014 was attributed to a series of high-profile kidnappings of foreigners and businessmen along the east coast of Sabah by armed militants.

That led to a 37% fall in tourist arrivals from China — its biggest market — last year.

Sutera Harbour, being located on the west coast of Sabah, is relatively safe from militants and pirates, says GSH’s Ee.

Being a gated community, it is also a sought-after address among the wealthy in KK, he adds.

Next launch in Kuala Lumpur
In December 2013, GSH purchased a prime piece of land in Kuala Lumpur for RM132.4 million from Tropicana Kia Peng Sdn Bhd.

The 1.4 acre (62,726.4 sq ft) site will be developed into a 51-storey luxury condo tower on Jalan Kia Peng in what is commonly known as Embassy Row.

The 596-unit, high-end condo will be called Eaton Residences, and is situated just 800m from the Petronas Twin Towers in KL City Centre and a short distance from the Bukit Bintang shopping belt.

Eaton Residences, which is also a 99- year leasehold condo, is targeted for launch in 2H2015.

“Once again, we’re developing a high-end development with a focus on views,” says Ee.

“The units on one side will face the Petronas Twin Towers and those on the other side will have unobstructed views of the golf course at the Royal Selangor Club.”

Like GSH’s two condos in KK, Eaton Residences in KL will be designed by Swan and Maclaren, with interiors by Mak of Suying Metropolitan Studio.

The units will have full-height glass windows to maximise the views.

Average unit sizes will range from 600 to 800 sq ft.

The top floor will have facilities such as a swimming pool cantilevered 2m over the edge of the building.

“The feeling up there will be similar to being on the Skypark at the top of Marina Bay Sands,” says Ee.

Pricing of Eaton Residences is expected to start from about RM1 million for a 600 sq ft unit, with average prices in the RM1,500 to RM1,800 psf range.

The recent announcement that the Singapore terminus for the Singapore-Malaysia highspeed rail will be located in Jurong East has given projects in Jurong a shot in the arm.

The last stop in Malaysia will be at Bandar Malaysia in KL.

“The added connectivity will definitely benefit our project [Eaton Residences], which is located in the heart of KL’s golden triangle,” says Ee.

More projects in KL are likely to be launched in Singapore in the coming weeks to capitalise on the news of the high-speed rail, predicts Tan Hong Boon, regional director at JLL, who is currently based in KL and overseeing the Malaysian business.

“When the highspeed rail was announced last year, developers were excited by the prospect of more development land parcels opening up along the route,” he says.

However, the strong US dollar and concerns about the economic prospects of the Malaysian economy have also resulted in the ringgit’s depreciation, says DTZ Research in its 1Q2015 Kuala Lumpur report.

As such, the high-end condo market in KL saw a slight drop in both rental and capital values in 1Q2015.

Average rents eased 2% from RM3.49 psf in 4Q2014 to RM3.42 psf in 1Q2015, while overall average prices of high-end condos fell 3.2% to RM749 psf from RM774 psf.

Investment activity in KL remains strong.

For example, Malaysian property and infrastructure developer Malaysian Resources Corp Bhd (MRCB) purchased the German Embassy site on Jalan Kia Peng for RM259.16 million ($95.8 million), and plans to develop a RM1.2 billion to RM1.6 billion mixed-use scheme with residential and commercial components.

MRCB also submitted a bid to acquire the French Embassy land on Jalan Ampang in KL.

The RM8 billion Bukit Bintang City Centre project, which is a regeneration of the former Pudu jail site, has started with the original developer, UDA Holdings Bhd, forming a joint venture with Ecoworld and the Employees Provident Fund Board.

The KL city skyline will be transformed with upcoming skyscrapers such as the 118-storey Tower 118, mixed-use scheme LGT Green and Plaza Rakyat, adds DTZ.

Meanwhile, Singaporeans were once again cautioned against the threat of oversupply in Iskandar Malaysia in southern Johor.

This time, it came from Singapore’s Minister for Culture, Community and Youth Lawrence Wong in parliament on May 11.

“There is indeed a real concern about future oversupply in the property market there, hence the potential decline in the value of homes [in Iskandar Malaysia],” he warned.

“Based on data from Malaysia’s National Property Information Centre, there are around 336,000 new private residential units in the pipeline — more than the total number of private homes in Singapore.”

Regional expansion
GSH’s Ee has therefore steered clear of Iskandar Malaysia and focused on KL and KK.

Admittedly, the Singapore residential market has also been “quite difficult”, says Ee, and is likewise haunted by oversupply fears.

Thus, in Singapore, GSH has invested in the commercial sector instead and purchased the former Equity Plaza for $550 million in April last year.

The price tag translated into $2,177 to $2,217 psf based on existing net lettable area.

GSH is investing at least $300 to $400 psf in refurbishing and upgrading the 28-storey building, which has been rebranded GSH Plaza.

A new lobby and drop-off point will also be built.

GSH has launched the 99-year leasehold strata office units in the tower for sale, with prices ranging from $2,800 to $3,500 psf.

So far, more than 70% of the 100 units released have been sold.

The group prefers to sell whole-floor units to buyers, who tend to be a mix of long-term investors and owner-occupiers, says Ee.

Beyond Singapore and Malaysia, GSH is exploring key cities in China, Hong Kong and Thailand, with the possibility of developments in Bangkok and Phuket.

The developer has also been approached by various property groups in Cambodia to form joint ventures.

“We have received a few proposals,” says Ee.

GSH was formerly JEL Corp, a listed company focused on the trading and distribution of fast-moving consumer electronic goods including Apple products as well as photo-imaging products.

“We have actually been in Cambodia a long time with our distribution business,” explains Ee, former CEO of JEL Corp.

“When we were in Cambodia and the other markets that we had business in under JEL, we had always looked at the real estate opportunities there as well.” The transformation into GSH Corp and as a property player was not such a dramatic shift, reckons Ee, given that the group has already had a foretaste of real estate.

Now, in the markets that the group is exploring today, the focus is on “residential, office and retail sectors, with interest in hospitality only if it’s part of a bigger mixed-use scheme”, he says.

This article appeared in the City & Country of Issue 677 (May 18) of The Edge Singapore.