Recently there was one cover article by The Star Biz caught my attention. Readers can read the article from the link below.
Two important points that catch my attention
a. 13 new developments JV between Prasarana and private developers
b. Financial performance of Prasarana
To recap up until today, Prasarana has awarded following project where Prasarana is the land owner
- RM1.04bil GDV Dang Wangi tower with Crest Builder Bhd and Detik Utuh Sdn Bhd awarded on . This project will be called The Bank. According to the source below , the project will consist of 4-in-1 mixed development; retail, office, SOHO suites and hotel. The first launch will be SOFO with Unit sizes from 430 sq ft onwards
An artist’s impression of the Crest Builder project (From http://www.skyscrapercity.com/showthread.php?t=1500692&page=6)
- RM134.5mill GDV 34-storey condominium tower in Taman Tun Dr Ismail with NAZA TTDI called TTDI Ascencia on 1.01acre. There are total unit 157 condominium units with sizes ranging from 500 square feet to 1,200 square feet. The price is launched from RM1000psf. Unlike other projects that already awarded, the site will be next to future TTDI MRT station.
An artist’s impression of the TTDI Ascencia project
- RM 687.6mill GDV mix commercial Ara Damansara second extension LRT station with Trans Resources Corp Sdn Bhd (TRC) awarded on 25.March.2013. The site is estimated at 12.3acre. which the preliminary plan is to develop it as a mixed development comprises of basement parking, retail podium with car parks, LRT users car parks, office units, hotel, residential apartments, retail and food court and SOHO.
The latest of its development in Brickfields, with a GDV of RM1.3bil, is awarded to Bina Puri Holdings Bhd. The site is estimated at 4.61acre which will bedeveloped into 1,660 units of small office versatile office, or SoVo, with three towers, 22 floors of service suites, a commercial podium, a sky bridge, restaurant and car park.
An artist’s impression of the Bina Puri project
According to Prasarana, the next sites to be developed are at Awan Besar (2.02ha) with GDV of RM600million and Puchong (adjacent to IOI mall, 2.83ha) with GDV RM500million. These projects are slated to be announced by mid-year.
Therefore by mid of the year, Prasarana will award in total project with GDV of RM4.28billion. In some of the references, Quoted from article below
“One average, we would get about 16% out of the GDV from the property sales and we plan to set up a joint-venture company to manage the commercial space leased, which is still under discussion,” he said.”
Being the landowner, the portion of money belong to Prasarana is to be worth of RM685million.
The other 11 sites that will be developed are located in Jelatek, Kelana Jaya, Putra Heights, Pandan Jaya, Pandan Indah, Cempaka, Titiwangsa, Glenmarie, Kinrara, Bandar Puteri and Sentul.
From the number of sites that made available to be developed, Prasarana is the largest land owner around LRT/ LRT extension stations.
For the past 5 years, properties that located within proximity of LRT station have increase by leap and bound. For example, Axis SOHU that was launched for RM110K is in market for RM300K. Similarly for older properties such as Millennium Place in PJ Seksyen 14 has enjoy hefty capital gain. In fact for property such as Goodyear Court in USJ has appreciated for last two years due to LRT factor expected to boost rental demand as well as owners that need to use public transport. Also unlike more developed countries such as Taiwan, Singapore and Hongkong (to certain extend compared with Bangkok as well), our cities have enjoyed very limited public transport connectivity and our traffic condition is not helping as well.
The limited public transport connectivity as well lack of planning from government has cause shortage of properties within LRT/monorail stations. Some of the private developers have taken advantage of the high demand and price their launches at record price. Please refer to table below for the example of the launching prices (before discount etc)
|Year||Property||PSF during launch||Current (psf)||Total units|
|2010||Pacific Place||RM380||RM620||Appr 1400|
All the projects above are almost sold out from the developers. However with Prasarana in the picture, all these are set to change. The lack of supplies will be addressed in coming years when Prasarana gradually release the land to market. It will be interesting to see how the developers price the units.
We will have more reviews solely discussing about developments with close proximity with stations along LRT extension. Stay tune.
Financial performance of Prasarana
“Shahril says to date Prasarana had issued about RM10bil bonds and sukuk over the past decade and is servicing about RM400mil interest per year.
Rail is making a yearly revenue of about RM240mil with earnings before interest, taxes, depreciation and amortisation of RM50mil.
Meanwhile, the business operations have a yearly revenue of about RM180mil but the operational cost is a staggering RM280mil and that reflects a loss of RM100mil.”
The current daily ridership stand at 467,000 and the numbers expected to be increased by 27% to 595,000 when the LRT extension is completed.
Now, we are doing simple backward calculation. The rail is make yearly RM240million revenue. Therefore average, daily riders are paying about RM2/ trip. In 2015, when LRT extension is completed, the expected revenue to be generated is RM310million. Assuming that operating cost is not increased, Prasarana will make operating loss at (RM400mill + RM280mill – RM310mill) of RM370million.
In other word assuming that daily ridership are estimated accurately, the revenue will face shortfall if the ticket fare is not increased. We also need to consider depreciation cost as well as debt repayment cost. By 2015 to cover the shortfall, the ticket fare will need to adjusted at least twice the fare now IF there is no subsidise from government.
The fare is very affordable for now. From Kelana Jaya to KLCC just cost RM2.40 one way. The carpark in KLCC for one hour cost much higher than this. Therefore you can see the attractiveness of staying in condo next to LRT station. Also for office, it is much accessible not only for your clients but attractive for workers as well.
However will the equation change in future when Prasarana raise the ticket fare to at least twice the current fare? Will the Prasarana JV projects causes oversupplies in the market? Then again the petrol price may increase in future… carpark rate never reduce especially in city where land is scarce… Or should we blindly invest in property just because it is next to the station with fully considering the fully valued price?