Dijaya changing direction

By THE EDGE

Dijaya Corp Bhd, long known for its flagship 625-acre Tropicana Golf & Country Resort in Petaling Jaya, has a busy schedule ahead. Besides looking for land in the Klang Valley for niche developments, it is eyeing India and Vietnam for its future earnings base and will be boosted by recurrent income from some of its commercial developments.

Dijaya’s presence in Tropicana and another of its developments, the neighbouring 409-acre leasehold Damansara Indah Resort Homes, is winding down. In total, there are now less than 60 acres, comprising residential and commercial land left undeveloped. Over in Damansara Intan in the vicinity of PJ’s SS2, the group has only a small freehold plot left.

To be specific, Dijaya’s undeveloped landbank in PJ comprises over 20 acres in Tropicana and 37 acres in Damansara Indah. There is another freehold plot in Damansara Intan reserved for a condo development (Casa Damansara 3) neighbouring the group’s Casa Damansara 1 and 2 condominium developments.

Tong Kien Onn, appointed managing director of Dijaya on May 10, tells City & Country that on the local front, the remaining landbank of the group in Petaling Jaya will be fully developed in seven years. “Over the next two to three years, a lot more things will be happening for us on the local front. Based on current pricing we’ve over RM1.3 billion in GDV [gross development value] coming up,” he says.

Together with Dijaya executive director Quek Cham Hong, Tong have been busy sourcing for new developments since the retirement of P K Poh, Dijaya’s managing director of 15 years, in late March. Poh spearheaded the group’s development of Tropicana Golf & Country Resort and Damansara Indah Resort Homes.

Tong acknowledges that Dijaya does not appear on the radar screen of analysts. “Whatever we’re doing both locally and abroad, including retaining portions of commercial developments, is part of the plan to add to the earnings base of the group, going forward,” he says.

“Give me time. Maybe in two years, when we’ve built up our landbank in more strategic locations in the Klang Valley and maybe Penang, we’ll call for an analysts’ briefing. If not, there’s not much to talk about,” he adds.

Land acquisition and recurring income priority

“We’ve to change direction… we’ve been concentrating primarily on our existing developments since Tan Sri Danny Tan Chee Sing acquired the land in a privatisation scheme more than 15 years ago,” Tong notes.

Tan is Dijaya’s group CEO and largest shareholder.

Clearly, the priority going forward is land acquisition, joint ventures and recurring income from retained portions of developments, such as the ongoing Tropicana Mall (part of the nine-acre freehold Tropicana City project in SS2). From a back-of-the-envelope calculation, Tong says Tropicana Mall will provide a recurring income of RM20 million to RM30 million yearly.

The RM600 million Tropicana City comprises the 3-storey Tropicana Mall, a 24-storey block of serviced apartments (The Tropics designer suites) and a 12-storey office tower with 100,000 sq ft of net lettable area. The mall and office tower will be ready in the third quarter of next year and the serviced apartment tower in 2009.

“For Dijaya, the focus remains in the Klang Valley where we hope to acquire land of a few acres for smaller developments in which we can achieve a fast turnaround time,” Tong says.
In Tropicana Golf & Country Resort, the group will unveil Tropicana Grande on the last seven-acre parcel of residential land later this year. This phase comprises 400 low-rise condo units with an average built-up of 2,500 sq ft and an indicative pricing of RM300 psf. The GDV of this project is RM500 million.

A recent completed phase within the resort is Merchant Square, comprising two blocks of 5-storey shopoffices, all which have been sold since its 2005 launch.

Tong says the remainder of the land in Damansara Indah will be developed over the next two years while the group is still finalising the plans for the last 20 acres of commercial land by the Sri Selangor lake opposite Sunway Damansara. There are plans to launch a commercial centre with serviced residences on an 11-acre site.

The most recent launch in Damansara Indah comprised 88 units of 3-storey semidees known as Villa Green with typical built-ups of 6,146 and 6,206 sq ft and priced from RM2.06 million to RM2.70 million. It is over 50% sold since the launch earlier in the year.

An upcoming launch is Casa Indah 2’s two 5-storey low-rise blocks. The earlier two 26-storey highrise blocks with 352 units are over 50% sold. Neighbouring Casa Indah 1, comprising two 19-storey blocks and two 5-storey blocks, is almost all sold.

Over in Sungei Besi, the group is developing Fortune Park, a serviced apartment phase, comprising two 22-storey blocks on a 24-acre leasehold parcel. Since the launch last year, sales have hit 60%. The group is also planning medium and low-cost apartments as well as 4-storey shopoffices for the parcel.

The developer may venture into Penang where the group is now the project manager for Ivory Properties Group’s Island Resort in Batu Feringgi, a 20-acre RM234 million development comprising landed properties and serviced residences. Besides that, the group has an 11-acre freehold parcel in Bukit Mertajam.

Tong says Dijaya also owns 517 acres of freehold land in Ulu Behrang near Proton City that will take some time to develop, as demand there is limited.

Going overseas

India and Vietnam have lots of potential while China is a bit risky, Tong says.

“Our concern is more on the GDV and the profitability,” Quek chips in.
Dijaya will mostly enter joint ventures with landowners due to their connections with the authorities and the land cost, which may be prohibitive.

Land is not cheap in either country. Although they’re comparatively less well off , land prices are higher there than in Malaysia, Tong points out.

“Malaysian developers have a good reputation in India; our aim is to build our reputation over there and instill confidence in the market,” he says. “They’re comfortable with us and reputable foreign partners bring a 20% to 25% premium to the price of properties. It’s a developer’s market over there.”

Late last year, Dijaya signed a development agreement with landowner Telangana Spinning & Weaving Mills Ltd, with Dijaya holding a 72% stake in the joint venture, Dijaya-Malind JV (Mauritius) Ltd. Its maiden foreign property venture involves the development of a 25-acre parcel in Hyderabad, India.

Tong says this will be launched by the first half of next year. With a GDV of RM800 million, the currently unnamed mixed development will comprise six to eight 15 to 18-storey medium-cost condominium blocks and shopoffices.

There may be a shopping mall, depending on the final plans, Tong adds. The condominium units will be priced from 2,500 rupees psf.

The entire development will take six years to complete, depending on the market, and will bring in revenue of RM400 million to the group based on the share of the joint venture, Tong says.
Other cities the group is interested in are Chennai and Bangalooru. “There is nothing concrete yet; we’ve been studying several offers for developments in these cities,” Tong says.

“We’ve also explored Vietnam in the last two months, hopefully in the next few months something will come up. It’s a hot market over there and property prices are not cheap,” he says.

Dijaya is eyeing the more vibrant Ho Chi Minh City for its venture although there will also be a future trip to Hanoi to scout around. “It’ll be something similar to Tropicana City but with a hotel component included,” Tong says.

Vietnam is at least a decade behind China but where real estate is concerned the guidelines are very clear cut. There’s no restraint on foreign participation except that foreigners are not allowed to own freehold land, so freehold land that is sold to foreigners will become leasehold until they’re resold to locals, he says.

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