"We came in second last," E&O Property Development Bhd (E&O Prop) managing director Datuk Terry Tham Ka Hon quips. He was referring to the company coming in ninth in the Top 10 of The Edge Top Property Developers Awards 2007. In reality, coming in ninth in its very first appearance at the awards last year was not something to be scoffed at, but rather motivation to improve for Tham, who is also managing director of Eastern & Oriental Bhd (E&O).
"I always tell my staff that we came in second last, meaning that we have to work harder to move up the ladder." Though the company retains its ninth placing in the 2008 edition of the awards, Tham and his team have reason to cheer — the developer's improved financials, stronger profile in the property market, particularly Penang, and more importantly, the gains to be reaped following its merger with E&O.
With the completion of the merger in August, E&O Prop is now a wholly-owned subsidiary of E&O. (As of Aug 8, E&O Prop was delisted from Bursa Malaysia.) "As a larger single-listed entity, we [the E&O Group] are able to pool our resources together, strengthen our base and venture into new locations," says Tham of the group's plans to better seize growth opportunities in the Malaysian property market. Tham is the managing director of the E&O Group.
To this end, the group's focus will be on three core business activities — hospitality and lifestyle, property investment, and property development. Its property development division is expected to contribute 60% of its revenue over the next five years. The other divisions, meanwhile, are expected to contribute 20% each to the group's earnings. Tham says the group's property development focus will be on upmarket housing properties in prime locations in Penang, Johor and the Klang Valley. To date, the group already has a few high-end housing projects to its name — the Dua Residency condo project, within the KLCC address, Idamansara and Seventy Damansara (both gated and guarded enclaves) in Damansara Heights, as well as the seafront development Seri Tanjung Pinang in Penang.
Launched in 2005, the Seri Tanjung Pinang development is seen as a landmark development of sorts for the group, which prior to this was known in the state for its famed Eastern & Oriental Hotel. Today, with 65% of Phase One (covering 240 acres) already completed or under construction), Tham and his team are pleased that not only has the developer gained a foothold in Penang, Seri Tanjung Pinang has also raised the bar in the state's property scene. "There has been greater awareness over the last few years. We have broken the old, conservative thinking of Penang investors and buyers… we've made them accept benchmark prices, which have been brought about by innovative design, so much so buyers today are starting to expect higher standards in the finished products. But it's been a tough job," says Tham. E&O Prop marketing and sales director KC Chong concurs, pointing out that when the first housing units at Seri Tanjung Pinang were offered, the developer opted to finish the master bathroom in marble. "It was in the style of hotels, and never done before in Penang… it was tough in the early days, so we used the show units to our advantage to win buyers," he recalls. That approach paid off and the group hasn't looked back since.
More aggressive marketing
In April this year, the developer put on the market 36 semidees (Acacia) in Seri Tanjung Pinang. Boasting a built-up of 4,000 sq ft, the units start from RM1.6 million each. To date, 50% of the units have been sold, with 80% of the buyers hailing from Penang. The developer notes that the serviced suites at the Waterside (the 850- to 1,800-sq ft units, priced at about RM650 psf, were launched in July 2007) have notched a take-up of 90%. "The units facing the marina were sold within two months," adds Chong. However the 3-storey villas-by-the-sea have not received overwhelming response, with only 30% of the 40 units sold to date. "The response has been slow, people are more cautious," concedes Tham. To address this, he says the company is being more creative and aggressive in its marketing. "Our launches are being extended to more locations, not just Penang," he says, adding that in October last year, the company set up an office in Singapore, and at the same time has marketed its properties via road shows in Hong Kong, Shanghai, Medan, Surabaya and even the UK.
Tham acknowledges that the opening of its office in Singapore has been a plus. "With the exposure to potential buyers, we've also been able to obtain feedback on their preferences. This is useful for future launches, and we've already started tweaking the design of our products," he says. One example, is changing the number of bedrooms from three to two to accommodate more spacious rooms. "We're also including more features and furnishings such as lighting and built-ins to a lot of the properties."
Besides the softer market response, the property market is also faced with rising construction costs, brought about by the rise in materials cost. Tham, however, says the group has been fortunate in this respect. "We commit on the selling price once the development is at an advanced stage of construction. For those units that have not been launched, we will not set the pricing yet, so to a reasonable extent, we can adjust prices based on current conditions. As a result, we don't have the case of contractors asking for variations," he adds.
Raising its game
As a larger listed single-entity, Tham and his team also expect to up the ante where new developments are concerned. The team is especially excited about Seri Tanjung Pinang's Waterside retail development. The 250,000 sq ft development will boast retail as well as food and beverage outlets, which will be leased by E&O. While the retail space is not extensive, the developer expects it to be unique, especially the proposed water taxi service linking the waterfront development to its hotel properties, E&O Hotel and Lone Pine Hotel in Batu Ferringhi. "We hope that once completed, the Waterside will attract both local and foreign tourists," says Chong adding that the 75-berth marina within the Waterside development will also attract vessels en route to Phuket, Thailand.
In the Klang Valley, the group plans to develop serviced suites and a retail podium at the former St Mary's school site on Jalan Tengah in KL's Golden Triangle. The joint venture with Lion Group will see the development of three high-rise towers boasting 657 serviced apartments with built-ups ranging from 1,000 sq ft to 3,500 sq ft. Of the 657 units, 200 units will be retained by the landowner (the Synod of the Diocese of West Malaysia) but managed by E&O. The remaining units will be sold at the end of the year. Adjacent to the St Mary's serviced apartments project, E&O is building a 35-storey Grade A office tower with a gross floor area of about 400,000 sq ft. Substructure works are already underway, says Tham.
Earlier this year, the group also inked a memorandum of understanding with Kuwait Finance House to form a joint-venture company for the development of a 195-acre Heritage District within Node One in Nusajaya, part of Iskandar Malaysia. The development is in the planning stage, discloses Tham.
Besides development, the group has recently set up a property investment division that will acquire select landbanks and properties to provide E&O with steady recurring income. Hence, once completed the Waterside retail development and the 35-storey office tower in KL will be contributors to this division.
Equally important to the group is its hospitality division. The E&O Hotel is slated for expansion with the construction of the annexe scheduled to start soon. Scheduled for completion in two years, the expansion plan will add 150 suites to the present 101. The group will also be expanding Penang's oldest beach hotel (established in 1948) — the Lone Pine Hotel — increasing the number of rooms from its present 50 to 90. Besides hotels, the hospitality arm will also manage the group's serviced residences, such as the 200 units at the St Mary development project.
By Sreerema Banoo (The Edge Daily)
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