Property
Paramount Property aims for the big league
Joseph Wong 
The serviced apartments and small-office-home-offices at Utropolis Glenmarie comes with full amenities
advertisement[x]

PARAMOUNT Property Development Sdn Bhd, the property division of Paramount Corp Bhd, is seeking to shed its mid-tier label with its target to breach the elusive RM1 bil mark this year, both for its product launches and sales target.

The property developer has been undergoing a slow and steady restructuring process over the last four years with the aim of becoming one of the “big boys”.

To achieve this, it has been reorganising itself and its landbanking plans, searching for strategic partnerships and going for more joint ventures (JVs), says Paramount Corp group CEO Jeffrey Chew.

Over the years, we have been regarded as a mid-tier developer but we are working on breaking out of that image, says Chew

“Over the years, we have been regarded as a mid-tier developer but we are working on breaking out of that image. Our brand has been growing and our status as a reputable developer is strengthening,” he says.

“Our growth has been tremendous and we have exceeded our sales target year-on-year,” he tells FocusM in an interview.

In 2015, Paramount Property surpassed its sale target of RM300 mil to hit RM379.4 mil while in 2016, it again surpassed the sales target of RM400 mil with RM420.5 mil.

The group’s new property sales in Q4 last year touched RM183 mil including the RM47 mil sale of the Mercure Hotel in Utropolis Glenmarie, Selangor, against RM213 mil the previous quarter. Nevertheless, full-year sales reached RM816 mil, surpassing the management’s target of RM700 mil.

RHB Research Institute Sdn Bhd analyst Loong Kok Wen says the key sales drivers are Sejati Residences (RM188 mil), Utropolis Glenmarie (RM196 mil), and Utropolis Batu Kawan (RM237 mil).

“Also, the take-up rate for Sejati Residences in Cyberjaya picked up more significantly, as the earlier phases were already completed – which helped to enhance the project’s prospects, and the township is now maturing,” says Loong.

 

Lofty target

Backed by RM1.2 bil worth of projects to be launched this year, Chew says the launches will facilitate the sales target of RM1 bil.

The company’s property division CEO Beh Chun Chong is confident of achieving the challenging goal despite it being nearly double that of last year’s target.

In addition to the RM778.3 mil Atwater condo project in Section 13, Petaling Jaya, Paramount Property has several ongoing developments that will be releasing their new phases this year, he says.

These include Sejati Residences which has a gross development value (GDV) of RM740 mil, Utropolis Glenmarie (RM920 mil), Sekitar26 Business (RM220 mil) and Greenwoods Salak Perdana (RM1.06 bil) in the Klang Valley; and Bukit Banyan in Sungai Petani (RM1 bil), Kedah as well as Utropolis Batu Kawan in Penang (RM1.8 bil).

Sejati Residences is Paramount Property’s first high-end landed residential development in Cyberjaya comprising three-storey superlinks, semi-detached units, courtyard villas and bungalows with prices ranging between RM1.9 mil and RM3.5 mil.

The next phase will see 249 units of landed residential bungalows, semi-detached and superlink homes on 16.2ha, with another 4ha for which development plans are being finalised. Chew says the remaining phases have an estimated GDV of RM513 mil.

Greenwoods Salak Perdana, located in a new growth area in Salak Tinggi, Sepang, offers affordably-priced homes for the mass market.

“Phase two will comprise 204 houses. This area has proven to be popular due to its proximity to Xiamen University Malaysia, Nilai University and Mitsui Outlet Park,” he says.

Launched in 2015, the first phase involved 96 units of landed residential homes. The GDV for the remaining phases is RM1 bil.

The mixed township development on 96ha of freehold land will hold 970 units of landed residential houses, 140 units of townhouses, 244 shops and 2,659 units of apartments once it is fully developed.

Paramount Utropolis Glenmarie, the company’s first integrated development combining its property development and education businesses together in one location, is in its final stage with Urbano and a four-star Mercure hotel in the final parcel of land, says Chew. The final phase has a GDV of RM330 mil.

As for the 12.1ha integrated development Sekitar26, it is complete with only three unsold industrial units left.

In Kedah, Paramount Property’s 210.4ha Bukit Banyan will ride on the success of Bandar Laguna Merbok and Taman Patani Jaya townships, with the developer’s first hilltop development in the northern region.

Chew adds that Penang’s first university metropolis – Utropolis Batu Kawan – which mirrors the award-winning university metropolis concept of Utropolis Glenmarie in Shah Alam is also garnering good response.

“The vision of the development is to support Penang’s aim of making Batu Kawan its third satellite city, and the central business district and lifestyle hub of the northern region,” he says.

 

Leveraging JVs

While Paramount Corp’s priority for now will be looking at the market that it already has a presence, it is not forgoing other future possibilities, he says.

“We are always looking out for opportunities to expand our business portfolio that’ll benefit the group as a whole,” says Chew.

“Paramount is always open to exploring JV partnerships, especially with landowners or like-minded who share the same brand ethos with us, and will complement our strength through synergy strategy via both our core businesses – Paramount Property and Paramount Education,” he says.

Chew says he has been revamping and strengthening both the property and education divisions’ sales and marketing activities.

The impact of the increase in property sales and increase in student enrolment has an escalating effect, he says.

In addition, Paramount Property is broadening its portfolio to offer more products as well as expanding to more locations, he says.

As for the education division, which carries the KDU (Kolej Damansara Utama) brand, the group will provide more affordable education, he says. 

An artist’s impression of the RM778.3 mil Atwater project

Asset-light strategy

Brand-building is thrown into the mix to grow the company’s core businesses. The efforts focus on building an innovative, progressive and energetic brand through the media and stakeholders.

“We have to drive efficiency in our operations and maximising profitability. We are also adopting an asset-light strategy for the efficient utilisation of capital and channel the investment back to new investment,” he says.

This is where Chew’s past expertise, especially as a banker, comes into play to propel the group forward. “From my prior exposure in both the industries, education and property, it helps me to quickly drive the business without relearning and understanding the industry again.

“Also, my experience in helming the CEO position of an RM80 bil asset company in a large organisation with more than 5,000 staff gives me the capacity to drive a mid-tier company business and grow into a larger business rapidly,” he says.

Prior to his appointment as Paramount’s group CEO in July 2014, Chew had been helming OCBC Bank (Malaysia) Bhd as its CEO for six years. The accountant had started his career at PricewaterhouseCoopers, and later joined Citibank Bhd where he held various roles over a 12-year period.

Chew says JVs makes good business sense for Paramount Property as it would reduce the cost and allows the company to build more affordable homes for buyers.

“Imagine if we were to buy a parcel of land that is financed through bank loans. If we were to develop it immediately, the cost from interest would be lower.

“But if the development plans were slated for five or 10 years down the track, the land acquisition cost would be much higher due to the interest payments,” he says.

Working with landowners will reduce interest cost as all parties concerned could find amicable solutions –  landowners can unlock the value of their land, developers can build more properties to sell and buyers will benefit from a more affordable home, he explains.

Creating more strategic partnerships also goes beyond looking for JVs. Chew adds these partnerships involve financial institutions to back a project or corporations which would be part of the development either by taking up leases for office or retail space.

Given the current economic environment and sluggish property sector, Chew believes it is an excellent time to build up strategic partnerships.

A property consultant concurs, reasoning that during such times, companies and individuals are more willing to work out deals to ensure their own survival.

“During the good times,
companies are far too busy, so seeking strategic alliances becomes a secondary priority,” he says.

 

Signs of improvement

While the group has a healthy cash flow, it will have to be used prudently to ensure the company lasts the distance rather than reinvesting entirely on landbanking activities, the consultant says.

In addition, Paramount Property has unbilled sales which currently stand at RM611 mil, which includes the sale of the hotel in Utropolis Glenmarie, says Loong.

On a whole, the group’s higher revenue was driven by stronger billings from the existing projects, as well as a new stream of income from Real Education Group Sdn Bhd that contributed RM79.1 mil since April last year, she says.

Paramount Corp acquired 66% of Real Education for RM183 mil last year. The amount was derived from the disposal of its private and international schools, Sekolah Sri KDU and Sri KDU International School.

On a brighter note, Chew believes that the property sentiment is starting to improve although the market growth has remained slow and steady.

“Smaller disposable incomes and the pressure of rising living costs are the norm in Malaysia today, and will remain so for the immediate future,” he says.

That’s why Paramount Property has shifted its gears into affordable houses, particularly in Greenwoods Salak Perdana.

“The market continues to be driven by the affordable home sectors, as evidenced by steady demand for Paramount Property’s Bukit Banyan in Sg Petani, Utropolis Batu Kawan in Penang and Greenwoods Salak Perdana in Sepang.

“There are signs that customer sentiments are improving judging from the improved sales of our existing projects,” he says.

It is no doubt that the public are demanding for more affordable properties and for consumers what they are looking at are quality products at a reasonable price, says Chew.

“One opportunity that we have been focusing on and has proven successful is offering affordably-priced properties. The majority of our properties are priced RM800,000 and below.

“We will continue to focus on offering a wide range of products, at different price points and locations, namely the Klang Valley and the northern [region], to meet the diverse needs of Malaysians,” he says.

More property launches on the cards

FOLLOWING its recent land acquisitions, property and education player Paramount Corp Bhd is planning to launch several new projects next year or sooner.

Landbank currently stands at over 600ha with an estimated gross development value of RM8.7 bil, says Beh

Paramount Property Sdn Bhd CEO Beh Chun Chong says their landbank currently stands at over 600ha with an estimated gross development value of RM8.7 bil.

“We are planning to develop these over the next five to 10 years,” he says.

Apart from the seven projects slated for this year, Paramount Property may launch at least two other projects, although their names have not yet been finalised.

The first, which involves its recent acquisition of a 16.7ha parcel of freehold land in Cyberjaya, may proceed earlier than planned as the development order has already been obtained, according to RHB Investment Research.

“The new land is just about 1km away from the existing Sejati Residences. It is planned for a gated and guarded landed residential property project, replicating the success of Sejati Residences that has achieved a take-up rate of 90%,” it says.

The parcel of land was acquired for RM149.7 mil and according to Beh, it was to replenish the landbank in the same area, given the strong brand positioning, existing marketing network and relationship with the local authorities already established there.

Another project that may see a faster roll-out is in Section 14, Petaling Jaya. This will be the first project by Paramount Property that will be positioned as a light rail transit-related (LRT) property.

“Up until now, we have not tapped into the LRT or MRT [mass rapid transit] market,” says Beh.

However, the research firm says it is somewhat concerned with the rising net gearing trend given the company’s funding commitments.

“Given its initial funding commitment of RM80 mil, as well as the acquisition cost of RM150 mil for this land in Cyberjaya, the company still needs RM138 mil in bank borrowings after offsetting by the RM92 mil sale proceeds of the land in Kota Damansara.

“We estimate that its net gearing could rise to about 0.8x from 0.71x currently,” it says.

For this reason, the two projects may be added to this year’s list of launches, faster than anticipated.



This article first appeared in Focus Malaysia Issue 277.