This article first appeared in City & Country, The Edge Malaysia Weekly on April 22, 2024 - April 28, 2024

Housing affordability remains a key concern among Malaysians, and property development and construction industries have been addressing the issue to make homes affordable for more people.

In providing affordable homes, Sabah-based contractor and property developer KTI Landmark Bhd does not equate affordable with low quality, as proven by its completed products. While its products’ highest Industrialised Building System (IBS) and Quality Assessment System for Building Construction scores are 94% and 77% respectively, they are mostly sold at 20% to 25% below the average market price, according to founder, group managing director and CEO Gordon Loke.

“There are a few reasons for that — we have our own construction team and IBS casting yards; our team is good at being efficient; and we plan and develop a new project as if it was our own house. We always think from the customer’s perspective,” he tells City & Country in an exclusive interview.

Gordon and his wife founded the company in 1984, and it is now among the key developers appointed by the Sabah Housing and Urban Development Board (LPPB) to build affordable housing for the general public and civil servants in the state.

So far, the company has completed RM1.6 billion worth of properties initiated by LPPB, which is equivalent to 29% of all of LPPB’s projects, in the five years to 2023. The state government has also recognised KTI as a significant contributor to Sabah’s urbanisation development.

“We have been providing the A to Z of design and build construction services to LPPB since 2010, focusing on residential property projects for the general public and PPAM (Malaysia Civil Servants Housing Programme) projects in Sabah. One of the key projects that we did was Puncak Gloxinia, which is Malaysia’s second-largest PPAM project [in terms of number of units] after the one in Putrajaya,” Gordon says.

Located in Kinarut, which is 17km from Kota Kinabalu, Puncak Gloxinia offers 1,296 apartments in six blocks, which were completed and handed over to the local authority in 2020. It is part of the 50-acre master plan that consists of 17 shoplots (Gloxinia Avenue) and 478 two-storey terraced houses (Taman La Gloxinia). Both projects were fully sold on the open market. The entire development has a gross development value (GDV) of RM709.2 million.

“This 50-acre project is not our first project with LPPB, but it is a significant one for many reasons … one of which is that Puncak Gloxinia is most probably the first project in Kinarut fully built with IBS. No columns or beams were used in the six 18-storey blocks. This project has also justified our RM10 million investment in setting up our own two IBS casting yards,” says KTI executive director Wilson Loke, who is Gordon’s son.

KTI is the first CIDB-certified IBS manufacturer in Sabah, and it has 24 years’ experience in the use of the IBS construction technique. Starting only with simple aerated concrete and steel formworks in the early days, it subsequently expanded to two fully mobilised casting yards in 2014. The entire yard set-up and machinery can be dismantled, transferred and reassembled to produce IBS components at the construction site.

“IBS enables us to optimise project efficiencies and manage construction costs better so that we can pass on the savings to our customers without compromising on our product quality. Most importantly, IBS hedges against construction, building material and manpower risks. It is also why we were able to deliver all projects without delay and record growing revenue even during the pandemic,” Wilson says.

KTI recorded revenue of RM112.9 million in the financial year ended Dec 31, 2022, a jump of 12.75% from FY2021 while FY2022 unbilled sales stood at RM638.9 million, representing 6½ times FY2021 revenue.

To further expand the business, KTI is seeking a listing on the ACE Market of Bursa Securities in June. It aims to issue 160 million new shares and 45 million existing shares, representing 20% and 5.6% of the enlarged share capital of the company respectively.

“We will be the first Sabah-based developer to be listed in the property sector on the ACE Market. We are looking to raise funds for land purchases, working capital and the expansion of IBS manufacturing,” Gordon says.

While KTI has been a partner of LPPB since their first partnership in 2010, and this joint-venture business model has contributed substantial revenue to the company since then, Gordon and Wilson continued to explore opportunities to expand the company’s footprint in Sabah. The initial public offering (IPO) is one way to do so.

“Our market share in Sabah’s residential property market is only 4.7% and we are eager to grow. One way to further unlock our financial and building capabilities is to go for IPO because, as much as we want to do more, there is a limit to what a Sdn Bhd company can do,” says Wilson.

He adds that a big part of the funds raised from the IPO will be allocated for land bank expansion across Malaysia, especially in its home ground of Sabah and the highly populated Klang Valley.

“We have about 90 acres of undeveloped land bank across Sabah, which can easily keep us busy for the next five years if we were to launch them now. As at FY2022, our gearing ratio was 0.4 times; so, we are quite ready to buy more land,” Wilson says.

The company is actively looking to acquire prime land that is not less than five acres per parcel in the Klang Valley, as well as large tracts on the fringe of the Klang Valley for township developments.

“I would prefer something like 300 to 500 acres of land, even though it is a bit farther out [of the Klang Valley]. I want to build nice affordable homes for Klang Valley residents like we did in Sabah … We are also looking for land that is not less than five acres within the Klang Valley for high-rise developments.

“We are not too worried about the highly competitive market in the Klang Valley because we have 40 years of experience in this industry. Our team is well established and we are very hands on. We know what we are doing, and we are good at doing it,” Gordon says.

Emphasising that efficient management and building system are not only the strengths of KTI, but also crucial in keeping property prices affordable, the company is ready to set up an IBS casting yard in Peninsular Malaysia once a development plan is confirmed.

“Of course, it depends on the location of the project. If the land is in a congested area and the development land is small, setting up a casting yard on site is not viable. We can set up one in Kuala Lumpur if needed, however, as we already did two back in Sabah, and we have broken even,” Wilson says.

He adds that the company has also allocated a portion of the funds raised from the IPO to produce hollow core slabs to supplement the existing range of IBS components manufactured, such as floor slabs, beams and exterior and interior wall panels.

Currently, KTI has ongoing and upcoming projects with a total GDV of RM2.3 billion across Kota Kinabalu, Tuaran, Sandakan and Papar in Sabah, of which 30% are projects awarded by LPPB and the remaining are joint ventures and its own projects.

“The ratio of LPPB’s project was higher in the past because, being a business, it is natural to pick the proposal that benefits us the most … and LPPB’s terms and conditions have always been the best among the rest. LPPB loves to work with us because we always deliver on what we promise, and we are grateful for all the opportunities from it. For now, we are happy with this 30:70 ratio.

“It does not mean, however, that we intend to work less with LPPB. In fact, we have a different way of partnering with LPPB, such as our ongoing landmark project called The Logg in Luyang, Kota Kinabalu,” Gordon says.

The five-acre, RM1 billion mixed-use development is poised to be a landmark in Luyang. It is a joint-venture development between LPPB and KTI. Unlike previous projects where LPPB provides land and KTI provides design and build construction services, KTI has invited LPPB to co-acquire and co-own The Logg, once an abandoned project site, under a 60:40 arrangement.

“LPPB is one of the state’s GLCs (government-linked companies) that has the Section 3 compulsory acquisition clause [under the Land Acquisition Ordinance Sabah] within their mandate. This five-acre land used to be an abandoned project site. We partnered with LPPB to acquire the land, and now we are the landowners,” Wilson explains.

The Logg features two condominium towers called Shorea and Astoria, an apartment tower called Parkhill, a four-star hotel called Avani Luyang and a five-storey commercial podium. This ongoing project is slated for completion by December 2025.

The 39-storey Shorea and Astoria offer 542 condominiums with built-ups ranging from 681 to 1,313 sq ft and selling prices from RM717,000. Shorea is 48% sold since its launch in 2023 and Astoria is set to be launched at year’s end.

Meanwhile, the 28-storey Parkhill offers 250 apartments with two built-up sizes of 620 and 850 sq ft and selling prices from RM333,000. All units have been fully sold.

The commercial podium, The Logg Mall, features 2-storey retail spaces with 45 shops, 12 kiosks and four outdoor retail lots, all of which will be retained and leased out by the developer. Three levels of 32 commercial units sit above the retail mall with built-ups ranging from 556 sq ft and selling prices from RM445,000. The take-up rate was 56% as at April.

The 38-storey Avani Luyang is a purpose-built four-star hotel with a total of 370 guest rooms and will be operated by Avani Hotels & Resorts.

“Avani Luyang will be our first hotel venture. Tourism is a big thing in Sabah and we believe there is more room to grow in the future. It is not our first commercial development, but it is our first retail mall in The Logg. We do not expect the hotel and retail mall to contribute significant revenue anytime soon, but it is a very good training ground for us to diversify our business in the future,” says Wilson.

KTI is also working on its latest residential project, called Ayuria Place, in Alamesra, Kota Kinabalu. The 20-acre development has a total GDV of RM873 million and comprises five condominium blocks, 42 two- and three-storey terraced houses and 12 two-storey shophouses. It will be retained and leased out by the developer.

Kayana Heights is the first project to be launched at Ayuria Place. It features a total of 866 condominiums across 39-storey twin towers, with built-up sizes ranging from 650 to 900 sq ft and selling prices from RM316,000. The developer recently soft-launched the first tower in end-March and about 20% of the units have been booked so far.

“Ayuria Place is located in the education hub of Sabah. Universiti Malaysia Sabah is nearby, and accommodation has always been in demand in Alamesra. Thus, we are targeting students, investors and homebuyers for this project,” Wilson says.

With KTI entering the next chapter as a public-listed company, Gordon and Wilson are ready to take the business to new heights through internal reinvestment for organic growth and business diversification.

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