14 July 2012
Interview with Glomac group MD and CEO Datuk FD Iskandar on current major projects and property sector outlook in Malaysia
Featuring Glomac group MD and CEO Datuk FD Iskandar.
Based on your recent acquisitions, is Glomac on a land buying spree?
I would not call it a buying spree as we have been a property developer for 24 years so obviously we have to replenish our landbank.
All this while, our future gross development value (GDV) hovered around RM3bil to RM3.5bil and while we are sitting on a pile of cash, we saw many opportunities in the last 12 months or so. We have bought four parcels of land in the last 18 months and we spent over RM240mil. This has doubled our future GDV to RM7bil.
For a property company, it is not important what's happening today but be in the right places to be developed into spectacular projects.
Going forward, if the price is right and reasonable and within the areas of our focus namely the Klang Valley and the Greater Kuala Lumpur, we will consider acquiring more.
What are the strategies behind your focus on the Greater Kuala Lumpur area?
There are several reasons behind our focus; the first is we are more familiar with the area and we foresee an increase in the trend of urban migration.
Last year, residential sales for the country went above RM107bil for the first time where majority of it, about RM70bil was in Klang Valley.
By 2020, if 70% of development within the Greater KL kicks off, the population here is expected to swell to about 10 million from the current 5.5 million.
As we have about eight years to go to 2020, we need about 120,000 houses per year assuming the household average consists of four people.
Can you give a brief rundown on your current major projects?
We are working on 14 to 15 projects currently but I will highlight a few of our current flagship projects.
As middle-size property developer in Malaysia with a market cap RM550mil to RM600mil, we can still manage to react to what the market wants.
I always tell my staff that property development is the only business we do and we had better be very good at it. I want to develop value for money properties.
About two years ago, the hottest selling property was commercial and last year was shop houses. Today, the demand is more for landed properties; everybody is looking for landed houses. Condominiums are still selling but only in very specific areas within the matured community.
Because of that, in the last 18 months we have bought a 200-acre land to expand our Bandar Saujana Utama. The expected GDV for this 200-acre is RM800mil. Bandar Saujana Utama is currently sitting on about 1,000 acres with a GDV of RM1.4bil out of which we have developed about RM1.1bil.
We are also working on Glomac Damansara, where our new office is located. This project is developed on a seven-acre freehold land with a GDV of RM900mil. Currently we are in the fourth stage, out of a total of six phases, of the development. The mix-development project includes eight-storey shop offices, a 17-storey tower, another 25-storey tower that we already sold en bloc, 272 units of apartments and a mall. The development is next to a MRT station.
In middle of last year, we bought a 200-acre piece in Puchong where the sale has been recently completed. The land that is strategically located just behind Tesco, Puchong is 150m away from LRT extension and has a lake of almost 40 acres. We are planning to do a proper landed property township with jogging tracks and a clubhouse. We plan to launch this by year-end.
Also, in April we launched our Reflection in Mutiara Damansara, which consists 299 apartment units of which 97% has been sold.
What are some of your other interesting future projects?
We have 192 arces in Sepang, which is about 3.5km from Cyberjaya and 4.5km from the airport. We are planning for a landed project here. We have a project in Rawang on 350 acres with a total GDV of RM800mil.
Can you comment on speculation that you are a candidate for the post of Menteri Besar of Selangor?
Put it this way; I am a realist and I think there is no perfect political party. I think there is a lot more to be done to take Malaysia from being a good place to live in to that of a great one and this is my personal view.
It has been shown that a corporate figure doesn't necessarily make a good administrator. At the end of the day, you have to do what its right for the country.
But today, under the current Prime Minister, we are working towards what the country needs. We have been caught in the middle income trap for a long time and we need to get out of this. As the most developed state in the country, Selangor has a lot more to do to make it an investment friendly state. One person cannot make the change. I think Barisan Nasional will find the right candidate for Selangor but they have to win first.
What are the three most important lessons you learnt from your father as a developer?
Well, I think the family values taught to us not only by my father but also by my elders are important. My father specifically instilled the culture of working hard in me.
Something that I would like to instill in our team is the habit of putting ourselves in our customers' shoes. This is because property is most probably the single largest investment that a person makes in his life, so we must deliver our products well.
Thirdly be sincere. Sometimes we can be a bit aggressive and blunt but if you realise you are wrong, you must apologise.
When you were in university, did you have the idea that one day you will be required to step in your father's shoes for the company?
Well, I am a lawyer by training and I used to be a barrister. But when I came back, even the company that I worked for was involved in property. Most of my portfolio involves property. I think it is something that was already inborn. Fortunately, I am very passionate about property and I love what I am doing.
What is Glomac's view on affordable housing?
First, we have to define what is affordable housing. When low-cost housing was introduced in Malaysia in 1983, it was selling at RM23,000 each. Then in 1993, due to inflation and I am talking about Selangor and the Klang Valley, the pricing was revised. In the municipality of city areas, it was RM42,000. But since then, after almost 20 years, there has never been a revision in the pricing of low-cost houses.
For every low cost unit, a developer loses anything between RM15,000 and RM50,000 per unit depending on the location, soil condition and capital contribution. This has been going on for too long and we are losing money. But I think most developers are not trying to run away from social responsibilities but we need a better system.
What are your suggestions on affordable housing?
Instead of asking developers to build, why don't we have this fund where for every low cost unit that a developer does not build, it can be contributed to this fund. It has been done in the UK and Australia where the fund is used by the Government to build affordable homes on government land in specific areas where affordable housing is most needed.
And for the pricing, I think people on average basically earn between RM1,500 and RM2,000 per month (at entry level). With this kind of salary, they can afford a RM150,000 house.
What is your outlook on the property market?
I expect the property market to remain stable for the rest of the year. There will be growth but the increase will not be as fast as in 2010 when Klang Valley property prices went up between 20% and 30%. Prices rose last year too, but not as much as in 2010. It is expected to continue to grow this year.