This article first appeared in The Edge Malaysia Weekly on May 8, 2023 - May 14, 2023
A 63-year-old office building owned by the Employees Provident Fund (EPF) in Jalan Gasing, Petaling Jaya, which has been left vacant since a fire broke out in February 2018, is scheduled to reopen in late 2024 after an extreme makeover. The asset is set to be repurposed into a state-of-the-art senior living facility by Pacific Senior Living Sdn Bhd, which has inked a 30-year lease with the EPF.
Pacific Senior Living — part of the Seattle, US-based Columbia Pacific Group — is a global investor, developer and operator of modern healthcare and senior living facilities. The Columbia Asia hospital chain was also part of the group until 2019.
When contacted, Pacific Senior Living CEO Carl Isaac confirmed that his firm will be leasing the asset from the EPF and transforming it. In a brief email, he tells The Edge that the renovation cost of the asset, which will be repurposed to have 212 keys, will be fully borne by Pacific Senior Living.
However, Isaac was unable to share how much would be spent to renovate and refurbish the place as the “amount is yet to be tabulated”.
“We are still in the initial stage of demolition (in the interior), then [we will] survey the building,” he says. It is worth noting that only a part of the main EPF office building was razed by the fire.
A check on Pacific Senior Living’s website shows that the facility will be named Mahogany by Pacific Senior Living. “Mahogany is our largest project yet and is set to become the pinnacle of superior senior living that you can call home,” the website says. “Mahogany is currently still in the works and will be opening its doors to you in the third quarter of 2024.”
The Jalan Gasing property will be the group’s second facility in Malaysia. In July, it will open Acacia by Pacific Senior Living in Klang, which will offer 136 rooms, a day-care facility, swimming pool, bistro (it will be open to the public), mini theatre and physiotherapy/gym facility. “We have also leased the property for 30 years,” Isaac says.
The Edge had yet to receive a response from the EPF at press time.
According to a source, the EPF has been trying to find solutions for the property since the fire. “Investor interest in a purchase was limited given market dynamics, the property’s age and current condition, and EPF’s expectations of pricing,” a source says, adding that a long-term lease allows EPF to retain ownership of the property while ensuring that the continued operating and maintenance costs are someone else’s burden.
Built in 1960, the landmark six-storey building, which is visible from the Federal Highway, sits on 3.62 acres of leasehold land. It served as the EPF’s headquarters for 35 years until 1995 before the provident fund moved to a new location in Jalan Raja Laut in Kuala Lumpur. The office in Petaling Jaya then became a branch office. Following the blaze, the Petaling Jaya office was relocated to PJX-HM Shah Tower, Persiaran Barat, in December 2019.
“Senior living, as a product, has become increasingly relevant as the Malaysian population ages. While Malaysia still lags behind other more advanced countries in terms of the legal framework and regulation to extract the maximum benefit from it, it is encouraging to see this commitment from the Columbia Pacific Group, who we understand has taken on a long-term lease on the property as well as renovation/ repurposing costs,” Savills Malaysia deputy managing director Nabeel Hussain tells The Edge. “Additionally, Savills has had requests from two other significant clients keen to learn more about this sector in the past month or so.”
He points out that the site ticks most boxes in terms of being centrally located and its proximity to necessary daily conveniences and medical services. The senior living facility is a stone’s throw from the University Malaya Medical Centre and University Malaya Specialist Centre.
“The site itself, at over 3 acres, is reasonably sized and the surrounding neighbourhood is generally residential in nature, although the Federal Highway remains one of the most congested [roads] in the country,” Nabeel points out.
“The move to reposition the property from office use to senior living facility will help to reduce the overhang in office space,” ExaStrata Solutions Sdn Bhd CEO/chief real estate consultant Adzman Shah Mohd Ariffin tells The Edge.
The repositioning of the building, he explains, will provide a use that has better potential returns in view of the growing aged population, especially in the Klang Valley. “With 7.9% of the population in 2022 being 65 years old and above, the commercial opportunity arises to cater for the profile of customers. For the landlord, EPF, by leasing out the property, it will still have ownership of a prime location fronting the highway and earn recurring income for the long term.”
He adds that the rent should be based on market rental value with an incremental rate increase every three to five years, which then provides an upside for EPF’s revenue. “It will have the opportunity to unlock the value of this land bank after the lease term ends for a more profitable development in the future.”
On the costs that may be involved, Adzman says the retrofitting cost may be higher due to constraints if the as-built structure is retained. Nevertheless, he notes that when the contract is on a long-lease basis, this cost is normally borne by the lessee.
It is worth noting that this lease arrangement is a shift from recent news of the EPF divesting its office buildings as well as other assets. In 2022, the EPF sold Bangunan KWSP in Changkat Raja Chulan, Kuala Lumpur, to Time dotcom Bhd for RM62 million, and Bangunan KWSP Damansara Fairway, Petaling Jaya, to LKL International Bhd for RM24 million. It had also placed its old headquarters in Jalan Raja Laut, Kuala Lumpur, up for sale, but sources say it is yet to be sold.
Apart from the office buildings, the EPF has also sold eight retail assets that are or were occupied by grocery retailer Giant. This year, it sold six assets — Giant Superstore Ulu Klang, Giant Hypermarket Bandar Kinrara, Giant Hypermarket Putra Heights, Giant Hypermarket Bukit Tinggi Klang, Giant Hypermarket Plentong and Giant Hypermarket Subang Jaya, USJ — to Sunway Real Estate Investment Trust for a total of RM520 million. The EPF also sold Giant Klang Sentral to grocer NSK for RM60 million this year. In 2020, it sold Giant Hypermarket in Section 18, Shah Alam, to CS Grocer for RM15 million.
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