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MCO lull after immediately and the during after department, by agency concluded our deals more of secured saw couple past an weeks the jobs and saw group the valuation by also in quarter increase second The data, information and advice which we we which advice and information data, property and useful contain articles The professionals. developers financiers buyers owners, property and property investors, they and be industry, property the in involved stakeholders all to interest current of articles carries newsletter the publication quarterly, a as monthly now and a as off 2012. Started since us by produced been has Herald, called currently newsletter, This of start group. tocomeforthe things better the is this hope We possible. achievement this making to contributed group. who people the the and teams the to Kudos for a night it memorable making very silver, one home and gold took one (Selangor) Property Management Butcher Henry whilst bronze (HBMK), one and slivers Kiara two golds, four bagged Mont’ Butcher Henry management, property and facilities for unit business main our round, time This awards. ofthe edition each ofthe have nevergonehomeemptyhandedin we which for awards the in participating awards, the highest so far in our history of 2021 where we took home a total of nine Managed & Sustainable Property Awards dedication at EdgeProp’s ’s Best was and work hard their arm for rewarded richly management property Our Expectations, Again! Sales Exceeds the Sub-Levels? Is Retail Awarded. HBMPM’s UnsungHeroes Seven. HBMK’s Magnificent PLUS pg 1 (Still) pg 4 Lingeringin pg 11 pg 6 REBRAND EDITION 2021 April - June 2021 hope will be of some use and benefit office environment as well as refresh our to our readers. To better reflect the role corporate image to charge forward with that we see our newsletter play, we have confidence in the year ahead. also decided to change its name to HB Advisor. As you would have noticed, I would also like to take this opportunity the current issue comes with a new to wish all our Muslim friends a good look to go along with our new name. Ramadan month and a Selamat Hari Incidentally we have also capitalised on Raya Aidilfitri. the current less active business period to carry out some renovations to our head Long Tian Chek Publisher Henry Butcher Malaysia Sdn Bhd office to spruce up and upgrade our Director 25, Jalan Yap Ah Shak, Off Jalan , 50300 HENRY BUTCHER REAL ESTATE SDN. BHD. T: 603-2694 2212 No.199201004957 (236461-w) E: [email protected] W: www.henrybutcher.com.my LAND FOR SALE OUR SERVICES Valuation Prime Land For Sale, Jalan Ampang T: 603-2694 2212 F 603-2694 3484 In close proximity to KLCC are two contiguous lots of freehold commercial land with a wide E: [email protected] frontage fronting the thriving Jalan Ampang. The individual-owned property measures 2.05 acres in total and each land title is provided with a plot ratio of 6. Project Marketing T: 603-2694 2212 F 603-2692 5771 Among some of the highlights within the vicinity is the upmarket appeal of the foreign E: [email protected] embassies, International School of Kuala Lumpur (ISKL), Gleneagles Hospital and HSC Medical Centre. The locality is also supported by a host of commercial conveniences such as the Great Real Estate Agency Eastern Mall, hipster cafes and classic restaurants in Persiaran Ampang. T: 603-2694 2212 F 603-2694 1261 E: [email protected]

Location is strategic here as it is connected to a myriad of road access such as Jalan Tun Razak, Market Research & Development Ampang-Kuala Lumpur Elevated Highway (AKLEH) and Maju Expressway (MEX), which makes Consultancy travelling to KLIA a breeze. T: 603-4270 2072 F 603-4270 2082 E: [email protected]

Highlights Retail Consultancy ● Freehold; commercial; individual ownership. T: 603-9130 5550 F 603-9130 4003 ● 2 contiguous plots, total land size approx. 2.05 acres (89,487.88sf); 3,799sqm (approx. E: [email protected] 40,892.44sf) & 4,514.626sqm (48,595.44sf) ● Currently, a 2 storey bungalow approximately 7,000sf in built-up sits on one plot of the lands Facilities & Asset Management T: 603-6205 3330 F 603-6206 2543 and another 2 storey building with an approximate built-up of 12,000sf sits on another plot of E: admin.assetmgmt@henrybutcher. land. com.my ● 10-mins to KLCC, 5-mins to Gleneagles Hospital &HSC Medical Centre, 35-mins to Subang Airport, 45-mins to KLIA. Plant & Machinery Consultancy ● Approx. 0.3km to Institut Pengurusan MIM-Inti, SMK Puteri Ampang & SMK Seri Ampang. T: 603-2694 2212 F 603-2694 3484 E: hbmalaysia_pnm@henrybutcher. ● Fronts Jalan Ampang with easy access to Jalan Tun Razak, Ampang-Kuala Lumpur Elevated com.my Highway (AKLEH), Duta-Ulu Kelang Highway (DUKE), Maju Expressway (MEX) and Middle Ring Road 2 (MRR2). Auctions & Tender Sales ● Accessible by buses, taxis and LRT (Damai (KJ8), Dato’ Keramat (KJ7), Jelatek (KJ6); all within T: 603-2694 2212 F 603-2694 1292 1km radius). E: [email protected] Art Consultancy Exclusive Lots For Sale, Seputeh Heights T: 603-2691 3089 F 603-2602 1523 In the strategic location tucked between Kuala Lumpur and PJ is a high end gated & guarded E: [email protected] residential development featuring 103 bungalow lots for sale. Seputeh Heights is beautifully landscaped, adorned with decorative street lighting and equipped with jogging tracks and a OUR OFFICES children’s playground. | Mont Kiara • | KEDAH | Alor Setar • Kulim | PENANG | Convenience is a real plus being so easily accessible via Federal Highway, connecting to the Penang Island • Seberang Perai | PERAK KL city centre, Mid Valley Megamall, , PJ, Old Klang Road and Cheras. North-South | Ipoh | NEGERI SEMBILAN | Seremban | Highway is only less than 10 minutes away and the NKVE is no more than 20 minutes drive. MALACCA | Melaka | JOHOR | Johor Bahru • Muar • Kluang • Pontian | PAHANG | Kuantan | TERENGGANU | Kuala Terengganu Highlights | KELANTAN I Kota Bharu | SABAH | Kota ● 41 acres, 103 Bungalow Lots, Gated & Guarded. Kinabalu • Tawau • Sandakan | SARAWAK | ● Freehold; Land and Encumbrances: Nil Kuching • Miri ● Land size range from 8,000sf to 23,000sf. Publishing Agency ● 24-hour security, perimeter fencing, drive through access gate system. Rightwiz Sdn Bhd ● For sale at RM700psf negotiable. ● Maintenance charges, RM0.065psf. Printed by ● Accessibility via Jalan Syed Putra, KL-Seremban Highway, Bangsar-Federal Highway. Percetakan CL Wong Sdn Bhd ● Beautifully landscaped, decorative street lighting, jogging tracks & children’s playground. AS-84, Jalan Hang Tuah 4, Taman Salak Selatan, Cheras, ● Nearby amenities include established schools & colleges, Mid Valley Megamall, business 57100 Kuala Lumpur. centers, financial institutions, hotels, restaurants, kindergartens, police station, fire station, private hospital & clinics. ● Developer: Berjaya Tagar Sdn Bhd, a wholly-owned subsidiary of Berjaya Land Bhd.

For enquiries, contact: Linda Ooi (REN09433), 012-2363065 | Christine Chua (REN09437), 012-3142864 AWARDS

HBMK’S MAGNIFICENT SEVEN Teamwork. Mindset. Clients. Images courtesy of Edgeprop Malaysia.

confessed Hon Keong, pointing out also that there was one video that upon review the night before the presentation had to be reworked entirely. Suffice to say, the sacrifice paid off.

Where each Award winner has its own distinctive character, the common denominator is the concept, mindset and expectation of quality. Further, with affluence, comes also awareness among the clients of what’s paramount Gold winner for Below 10 Years Multi-Owned Strata Residential, (from left) EdgeProp Malaysia for longevity and sustenance, such as Editor-in-Chief and Managing Director Au Foong Yee and Housing and Local Government the importance of deploying materials Minister Datuk Zuraida Kamaruddin presented the award to Serai Bukit Bandaraya JMB Honorary Chairman Dato’ Teo Chiang Quan and HBMK Managing Director Low Hon Keong. that are kind to the planet instead of just washing down the drainage he word “unprecedented” has “Instead of outsourcing the production, spotless but with corrosive chemicals been used relentlessly in 2020 as we are fortunate to have team members harmful to the environment. These and the attention grabbing headline who have the skills to undertake these more meticulous demands have been Tfor the impact Covid-19 brought on to tasks. That brought the team even the bread and butter of what makes the world. But in Malaysia’s world of closer as they worked at it almost a winning property tick and with the property management this year, the everyday en-route to the awards,” HBMK team well inculcated having same word can also be used to describe Henry Butcher Malaysia (Mont Kiara) Sdn Bhd’s big haul of seven coveted prizes at the EdgeProp Malaysia’s Best Managed & Sustainable Property Awards 2021. The company has done so this time with exemplary residential properties that were firstly approved and supported by the clients to participate in the annual Awards. Gold winner for Below 10 Years Multi-Owned Strata Residential, (from left) EdgeProp’s Au and So what contributed to the victory Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award to Westside 3 JMB Honorary Chairman Kenneth Yeo Kian Ing and HBMK Executive Director Ronny this round? Managing Director of Yong. HBMK Low Hon Keong expressed that there are a few factors at play such as team effort, a client’s trust and HBMK personnel’s responsible and committed service. This included the self-produced videos from start to finish that encapsulated the finer details of the shortlisted properties for the awards, interviews with the residents, 360 drone recordings, photography, scripting and on to the final editing for the judges to Silver winner for Below 10 Years Multi-Owned Strata Residential, (from left) EdgeProp’s Au review virtually. and Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award to The Greens TTDI JMB Committee Member Kevin Kuok Khoon Jay and HBMK Associate Director Lee Siang Ling.

APRIL - JUNE 2021 | HB ADVISOR 1 AWARDS

have submitted our entries before but didn’t make the cut although we were shortlisted. But we took it in stride and learnt from the shortcomings. With the JMB’s support to re-submit our entry, we are certainly very happy to have won the award this year.”

Westside 3 Desa ParkCity, Gold, Below 10 Years Multi-own Strata Residential “This is our second award in Desa ParkCity after the first with The Gold winner for 10 Years & Above Multi-Owned Strata Residential, (from left) EdgeProp’s Au Mansions @ ParkCity Heights as a and Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award to Kiara Park Management Corporation Committee Member Lawrence Loh Meng Lum and Bronze winner in the same category HBMK General Manager Norhayati Bt. Bonah. last year. We submitted this time because we wanted to test our been Award winners before, the So what does every Award mean standards. The Award is also a result benchmark to deliver is set higher and to Hon Keong and his solid team of of our close relationship with our higher, more so with Covid-19 putting capable building experts at HBMK? client.” everyone to the test in 2020. Serai Bukit Bandaraya, Gold, Below 10 The Greens, TTDI, Silver, Below 10 “We would always remind ourselves Years Multi-own Strata Residential Years Multi-own Strata Residential that this is as much a property upkeep “Of course we are very proud to have “We have a good working relationship business as it is a human relations won for Serai as it is one of the finest with the developer and it is pleasant business. We must assimilate as part of properties out there. Admittedly we to have understanding owners where the stakeholders of the premises and ask if we could live in the environment that we manage. If we can’t, then we must find solutions for it.”

Setting the benchmark higher has also been the case with the Awards organiser at EdgeProp as the judging criteria has been made more stringent with each passing year. This is consistent with the maintenance discipline that with every successful upgrade in the building, a Silver winner for 10 Years & Above Multi-Owned Strata Residential, (from left) EdgeProp’s Au more regular monitoring must also be and Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award worked into the SOP lest it deteriorates to Seni Mont’Kiara Management Corporation Honorary Chairlady Shereen Abdullah and HBMK faster than its intended lifespan. Executive Director Ho Kim Heung.

“Ultimately, our job is to minimise the discomfort of the residents in the premises and more so when premium class clients would have a higher expectation of our service. We must therefore be quick to understand the issue at hand, be proactive to attend to problems and have an open feedback mechanism that allows the community to communicate. The gap with our Bronze winner for 10 Years & Above Multi-Owned Strata Residential, (from left) EdgeProp’s Au clients reduces when we are able to and Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award to Hampshire Residences Management Corporation Committee Member Matthew Choo Chin facilitate all these.” Keong and HBMK Operations Director Albert Tan.

2 HB ADVISOR | APRIL - JUNE 2021 they appreciate the rationale behind Hampshire Residences, Bronze, Above adoption. And so to a question about good property management. We’ve 10 Years Multi-own Strata Residential how technologically ready HBMK is for managed this property for about two “It remains as one of the earlier luxury their property management practice, years now and we are happy about condos around KLCC and we have been he is adamant about the prospects of how the early teething problems have managing it since 2012. Safety, security making it even more convenient for the now been resolved.” and ensuring everything works have clients having already onboarded about been the top most priority because of six to seven property management Kiara Park Condominium, Gold, its tenant mix where not only are there apps across its portfolio and bridging Above 10 Years Multi-own Strata more tenants than owner-occupiers, as many payment channels as possible. Residential there are also more expatriates living This includes direct debit, auto-debit, “This is a sentimental project for us here.” contactless, QR codes and e-Wallets. because we have been managing it for This he said is a matter of preference 18 years, out of the 20-odd years that Irama Wangsa, Gold, ILAM Malaysia’s but the more options HBMK is able the property has been around. We Sustainable Landscape Awards to provide (as opposed to exclusivity have gone through the ups and downs “We have been managing it since arrangements with a provider), the together, from the soft to the hard vacant possession and we’ve seen more convenience it is able to extend problems and also undergone major how the signature hillside that makes to the clients. capital expenditure upgrades. We’ve up about half of its total land space is learnt so much from managing this enjoyed fully by the residents for their But before the era of all these fancy one building alone that we are able to exercise and recreational activities such apps and gizmos, the HBMK team had bring the knowledge to other projects as zumba and planting. The younger already initiated to go paperless and that we manage. residents’ profile of 20’s to 30’s also encouraged residents of the managed means they are more tech savvy having properties to also pay online. Not just “For example, because of Kiara Park’s set up their own Telegram group, a fad of its time, the well-thought out cost efficient design, the maintenance newsletters and so on. It is something measures have helped clients from expense is mitigated due to the we as property managers have to adapt spending more than it is necessary. adequate ventilation and lighting. to with the changing style of our clients Two of the owners here, of which and this is likely to be the trend in the As to where the future holds, Hon one is a professional engineer and coming future.” Keong said he has set his sights another an architect, have also helped overseas with the first few projects draw up a building plan for us many The Tech Factor being closer to home in Thailand and years ago that contributed so much With the younger breed of owners Indonesia before expanding to the rest to our progressive maintenance of coming into the market, Hon Keong of Southeast Asia. This shall ride on the project. Without their voluntary was also quick to point out that it the back of its domestic success having help, we would not have been able to is inevitable that the technological established HBMK’s presence around carry out our job so efficiently and at advancements will only speed things Peninsular Malaysia, managing a the same time help save our client’s up after seeing how Covid-19 has diverse range of assets from residential, maintenance expenses all through the stepped on the pedal of progress and commercial, industrial to universities. years.”

Seni Mont Kiara, Silver, Above 10 Years Multi-own Strata Residential “Unbeknownst to many, the two Olympic-sized swimming pools are very sought after here. We were hoping the judges could inspect the premises first hand but this was not possible due to MCO. We wanted the judges to come and experience Seni’s jungle-resort atmosphere that is also accompanied by music, which soothes the ambiance and mood of the Gold winner for EdgeProp-ILAM Malaysia’s Sustainable Landscape Awards 2021 - Landscape residents here. This is not something Design Category, (from left) EdgeProp’s Au and Housing and Local Government Minister Datuk Zuraida Kamaruddin presented the award to Irama Wangsa JMB Honorary Chairman Zack Zauri that can be replicated virtually.” and HBMK Senior Property Manager Katherine Yong Kai Yee.

APRIL - JUNE 2021 | HB ADVISOR 3 AWARDS

HBMPM’S UNSUNG HEROES AWARDED The target was only a bronze trophy. Images courtesy of Edgeprop Malaysia.

HBMPM are often in communication with the teams so important matters can be escalated in a timely manner.

Complexity of course increases as the size of the school grounds differs by a magnitude of 12 acres in land area with 589,033 sq ft in built-up at SKS and 131,696 sq ft in land area with 260,977 sq ft in built-up at ISP. The distinction is because there are the primary, secondary and an international school at SKS whereas at ISP, it is only one (From left) EdgeProp Malaysia Editor-in-Chief and Managing Director Au Foong Yee and school occupying the entire premises. Housing and Local Government Minister Datuk Zuraida Kamaruddin presenting the Gold award for Sri KDU Schools to Sri KDU Schools CEO Eugene Yeoh, Alpha REIT Managers CEO and Henceforth, expectations from the Executive Director Shireen Iqbal Mohamed Iqbal and HBMPM Director Grace Goh in the 10 client are critically to ensure the Years and Above Specialised Category. schools are kept in its best conditions throughout the year given that it is ith a business in this practice (ISP), HBMPM joined the ranks of The part of a REITs instrument. Other that only began in 2004, the Arc at Bandar Rimbayu (Bronze, 2020) factors that influence the demands modest target of attaining and AirAsia RedQ (Special Mention, of the job are the school calendar, Wone prize may be fitting for the ambition 2020). size of the student population and of Henry Butcher Malaysia Property the inquisitive minds of the younger Management (Sel) Sdn Bhd (HBMPM), “We are definitely very happy and students. after all it’s her maiden entry into my team is overjoyed because we set the fifth installment of the EdgeProp out with only hoping to try and win “Yes because children will always be Malaysia’s Best Managed & Sustainable a bronze. This has certainly boosted children,” Grace pointed out, adding Property Awards. Perhaps being humble our team’s confidence, in fact they are that signages with forbidden notes has its merits because when the stars looking to achieve more now,” shared would just trigger their curiosity but aligned on the evening of 4 April 2021, Grace Goh, Director of HBMPM. thankfully nothing untoward has ever the company was awarded with two occured. It is however through the shining trophies. The difference between managing the management of these educational schools purely rests on the size of the properties that the HBMPM team is The Awards clinched by the company school grounds because the client now well acquainted with the rising has placed it among the signature they serve is one and the same, Alpha standards of safety and security. landmarks of the country where REIT (Alpha), who happens to be the Another is the requirement to juggle for the Above 10 Years Specialised owner of both the institutions. To around the academic calendar so major Category, it won Gold for managing elaborate, under the triple net lease upgrades can be carried out during the Sri KDU Schools (SKS). Past winners arrangements between Alpha, the school holidays or after school hours. in this category included The Central schools and HBMPM, the role of the Park at Desa ParkCity (Gold, 2020), latter is to act on behalf of the owner “This is why we plan our calendars KL Convention Centre (Gold, 2019) to inspect and monitor the schools on ahead so we’ll know exactly what to and KLCC Park (Gold, 2018). a monthly basis so it could plan and expect over the course of the year,” mobilise major structural works as they citing a current project where HBMPM’s For the Silver in the Below 10 Years fall due. As for the daily maintenance personnel are on-site to monitor the Specialised Category for managing affairs, the schools have its respective construction of a link bridge connecting the International School @ ParkCity in-house team to manage that and the blocks at ISP.

4 HB ADVISOR | APRIL - JUNE 2021 Fundamentally speaking... portfolios for a long time and knowing specialised properties. But we will expand But not to be mistaken for HBMPM’s the importance of always prioritising at the pace that we are comfortable conservative objectives at the awards, value preservation and accretion, Grace with.” the teams assigned to manage the was not wrong when she said the properties are a dedicated lot, giving responsibility of property management Thus far, HBMPM’s footprint can be found their all when situations call for it. Case is also akin to looking after the well- in conventional residences including in point, when Covid-19 landed in being of the clients. To this, she was gated and guarded bungalows and Malaysia with uncertainty swirling in the comfortable to share that the company semi-detached homes, and commercial market, staff would still ask if they were is often roped in for its consulting offices in Kuala Lumpur, Selangor, required to head to the office after the acumen by property developers Putrajaya as well as right smack in the first MCO was announced. Although embarking on new projects and most city centre managing the medical suites property management personnel times as early as the blueprint stage so of Gleneagles Hospital in Jalan Ampang. were not listed as part of the official that issues such as parcel subdivision But judging from the clientele profile frontliners by the government, Grace and allocation will not succumb to future and how long some engagements have admitted to signing countless letters so remedial works. “Prevention is of course been, one can find it hardly believable her dedicated professionals could brave better than cure, always.” that it is a lady helming the hot seat of the pandemic and get back to work. this property management company. This is on the premise of making sure Recalling how it all began with the What was the draw then for Grace to look everything within the client’s complex schools, Grace revealed that she into the typically masculine industry as an would operate without a hitch. In that received an invitation from Alpha to attractive proposition? regard, some have also gone as far as participate in a tender exercise and after ensuring the regulations and policies are deliberating about the possibilities, she “It was around the late 1990’s when fully adhered to, which called for further and her team worked on the proposal. demand for property management was explanations over email and messenger How HBMPM displayed their tenacious picking up and we began looking at apps like WhatsApp with the clients dedication to the job in the proposal will setting up the property management when demands to use the facilities were never be known but if the tenure of its business. Of course the guys in the raised during the lockdown. stable of clients are anything to go by, industry were skeptical, asking if a lady they may have struck the right chords ‘boleh ke?’, or whether I could get into “Our team is already trained in seeing that more than half of her clients the genset room, the pump room and managing residential properties and have stayed on for more than 10 years, dirtying our hands. But more than 15 the fundamentals are basically the with some returning after testing the years later and we are still here.” same. It is only in the application that is waters with other parties. different such as the priorities and the As the pandemic of Covid-19 has expectations for the different types of But will the two “educational” victories also shifted the paradigm of most buildings,” said Grace. become part of HBMPM’s core brand businesses, so will the presumption of a identity? “Let’s wait and see. I am sure male-dominant property management Having been in the real estate some opportunities may open up or industry. Grace shared that because consulting business of managing client’s that we may be asked to manage some the ladies can oftentimes be more meticulous and better also in managing “aggressive” clients due to their dynamic temperament, they are in fact quite suited for the job. If not, no one would say, “If Grace can do it, so can any lady out there.”

With two prestigious awards now comfortably tucked under her belt, she is surprisingly not as adamant as her colleagues to quickly scale the mountains or fly to the moon. Working and adapting at the right pace remains key so every project that comes on board has an HBMPM Director Desmond Tew (4th from left), HBMPM Director Grace Goh (5th from left) and opportunity to sample its dedicated the HBMPM team celebrating the Awards. attention, care and diligence.

APRIL - JUNE 2021 | HB ADVISOR 5 ART AUCTION

Sim Polenn, Director of Henry Butcher Art Sales Exceeds Auctioneers, a very big thank you to all our art collectors Expectations, Again! for making this Henry Butcher Malaysian and Southeast Asian Art Auction March event a successful one. 2021 achieved RM4 million.

enry Butcher Art Auctioneers Malaysian and Southeast Asian Art Auction March 2021 edition Hrecorded RM4 million sales of artworks, with a high successful selling rate of 74% with 115 Lots sold out of the 155 Lots on offer.

“The result is encouraging and surprisingly pleasant, considering the current sluggish economic atmosphere. The last time we achieved RM4 million sales, it was way back in 2012, where the art market was at its peak. The clients know it is a Buyer’s Market now, thus taking the opportunity to buy quality artworks at reasonable and attractive prices; good decision!

Untitled, 2006 by Datuk Ibrahim Hussein (Lot 131) was sold pre-auction within the “We sincerely appreciate the continuous estimate range of RM1.3 to RM1.8 million. support from the buyers and art collectors,” said Sim Polenn, the Director of Henry Butcher Art Auctioneers.

The sale’s top lots were led by Datuk Ibrahim Hussein’s 2006 masterpiece (sold pre-auction, within the estimate range of RM1.3-RM1.8 million), Latiff Mohidin’s Voyage Rimbaud II (painted during 2003- 2004) which was sold for RM320,000, and Awang Damit Ahmad’s 1992 masterpiece Apa Khabar Ledang (from the most sought-after Essence Of Culture (EOC) series) sold for RM224,000. The auction sale reflects sustained interest in high quality masterpieces.

A beautiful work by Noor Mahnun Mohamed titled A Song For Two, sparked a prolonged bidding battle in the sale room, with the first bid starting at RM90,000, and was eventually sold at RM156,800. A 1999 masterpiece from Yusof Ghani’s Wayang series was also Abdul Latiff Mohidin’s Voyage Rimbaud II, 2003-2004 (Lot 132) was among the top sold at a higher price of RM145,600, lots sold for RM320,000.

6 HB ADVISOR | APRIL - JUNE 2021 almost three times the starting bid of RM50,000.

Senior artist Yeoh Jin Leng’s rare 1966 masterpiece featuring a soothing blue hue titled Storm Clouds was sold for RM100,800; while a bold work by the late Khalil Ibrahim titled Reflections (IX) (painted in 1980) was sold for RM106,400.

Collectors took the opportunity to grab important batik works by Dato’ Chuah Thean Teng (widely recognised as the Father of Batik Art), Dato’ Tay Mo Leong, Lee Kian Seng, and M. Sukri Derahman. Dato’ Chuah Thean Teng’s masterpiece Bestowment achieved RM47,040 while another piece by the same artist titled Kampung Life achieved RM17,920.

Contemporary artists such as Ahmad Zakii Anwar, Nadiah Bamadhaj and Zulkifli Yusoff were well represented in the sale. A fascinating piece by Ahmad Lot 133 of Awang Damit Ahmad’s Apa Khabar Ledang (Essence Of Culture EOC Zakii Anwar titled Incognito was sold Series), 1992, fetched RM224,000. for RM50,400. An interesting piece by Nadiah Bamadhaj, No Really I’m Fine was sold for RM47,040, while Zulkifli Yusoff 1995 masterpiece was sold for RM44,800.

“In the span of 11 years, Henry Butcher Art Auctioneers recorded art auction sales of RM62 million, selling more than 2,600 pieces of artworks, in which 90% are Malaysian Art. We are glad that this auction reflects a widening of interest for works from the region, and participation of new and young collectors,” said Sim.

“The collectors pool is growing, and there is still much room to further expand the community. This is the first auction of the year and it has given the company a good start. This is made possible with the tremendous and continuous support from the art lovers.

“We hope to achieve greater heights (in sales) by year end.” Noor Mahnun Mohamed’s A Song For Two, 2000 (Lot 77) sparked a bidding battle and went home at RM156,800.

APRIL - JUNE 2021 | HB ADVISOR 7 MARKET UPDATE

Raindrops Falling on MY A quick review of NAPIC’s data for 2020.

n the whole, Malaysia had number of transactions. In terms of agriculture sub-sector experienced a 295,968 transactions worth percentage growth, only 2016 and positive growth albeit a marginal one RM119.08 billion exchanging 2013 had a larger drop than 2020 at at 0.6%. Ohands throughout the pandemic year of 11.5% and 10.9% declines respectively. 2020. When compared to the figures of But the biggest plunge was in 1998 As the fright of Covid-19 has affected 2019, this is a 9.9% drop in transactions with -32.3% caused mainly by the the business sector badly, it is not (328,647) and 15.8% decline in shocks of the Asian Financial Crisis. By surprising that the demand for shops, value (RM141.4 billion). Whilst the value of transactions, 2010’s RM107.44 retail and office space in 2020 came percentage decline in volume was billion and the years prior with less down significantly compared to the below 10%, the decline in value was than RM100 billion annually were the residential sub-sector which was higher at 15.8%. This means that the only years that registered lower values supported by those buying for personal value of the transactions dropped more compared to 2020’s. occupation. Further, the primary market than the volume and translates to a was aided by the Home Ownership 6.5% decline in the average value of NAPIC’s data also reported a sharp Campaign (HOC) 2020/2021 with each transaction ie. from RM430,000 in drop across the sub-sectors in 2020 discounts and incentives which boosted 2019 to RM402,000 in 2020. with residential declining 8.6%, demand especially in the affordable commercial 21%, industrial 24%, segment. There is no surprise hence The last time Malaysia had transactions agriculture 10.7% and development that the volume of commercial and lower than 2020’s figure was in 2006 land 2.6%. In terms of value of industrial transactions dropped more with approximately 283,900 properties transactions, residential declined by than double that of the residential sub- exchanging hands. The years preceding 9%, commercial 32.6%, industrial 14% sector and 8 to 9 times more than the 2006 also had less than 2020’s total and development land 34.0%. Only the development land sub-sector.

8 HB ADVISOR | APRIL - JUNE 2021 Whilst the volume of commercial register a decline, it is the third highest 12.5% share and a sales performance transactions eroded by more than two contributor to the residential property of 29.3%. times that of residential transactions, overhang in the country after Johor the value of the commercial and Selangor. The poorer sales performance transactions declined by more than across the country in 2020 was not three times. This implies that for the Selangor: Highest Residential unexpected as developers’ sales period under review, there is a higher Volume galleries had to close during the proportion of lower priced commercial Selangor contributed the highest Movement Control Order (MCO) properties transacted compared to the volume of residences at 23% or 44,034 for about 3½ months. The adverse corresponding period the year before. transactions and 33% in value or impact of the pandemic on businesses RM21.72 billion. Although next door resulted in pay cuts and an increase in Interestingly though, the industrial Kuala Lumpur recorded only 10,606 layoffs. The ensuing poor sentiments sub-sector was the best performing of transactions or about a quarter (24%) also caused buyers and investors all the sub-sectors amid the transaction of Selangor’s, its value of transactions to stay on the side lines. It goes volume and value declines. It is also was the second highest at RM8.24 without saying that the drop in worth noting that while the value of billion contributing 12.5% of the sales performance would obviously development land transactions slid market share or about 38% that of compelled developers to defer new marginally by only 2.6%, the value Selangor’s. In this regard, the average launches, particularly during the of the transactions registered the value per transaction in Kuala Lumpur first half of 2020 and concentrate largest drop across all sub-sectors at is about 1.6 times higher than that of on clearing existing stock to reduce 34%. This implies that the focus of Selangor (RM777,000 vs RM493,000). inventory and improve cash flow. the development land transactions for the period under review would be According to NAPIC, the downward Type: Terraced Trumps those which were less prime and of trend in the major states of Kuala Terraced houses continued to be the lower values, presumably suitable for Lumpur (-4.5%), Selangor (-15.3%), preferred residential type as it made development of affordable homes. Johor (-19.9%) and Penang (-7.7%) led up 41% of the total transactions, to the overall decline in the residential followed by vacant plots (16.2%), Residential: Led 2020 sub-sector as it commanded 46.8% of high-rise units (14.4%) and low-cost In terms of market share, the the total national residential volume. houses/flats (11.6%). Terraced houses residential sub-sector led the Southern state Johor poses the highest also dominated the new launches overall property market with 64.7% concern as the decline in performance at 43.1% with single storey at 9,409 contribution in volume, followed by (both volume and value) is amongst units and 2-3 storey with 10,944 units. agriculture at 20.7%, commercial the worst of all states and it also led in This is followed by condominium/ 6.8%, development land and others terms of residential property overhang apartment units at 39.7% share or 6.2%, and industrial 1.6%. In terms of (both volume and value). 18,717 units. Developers with township value, residential also led the market developments were able to launch with 55.3% market share, followed by New Launches: Declined terrace house projects which enjoyed commercial at 16.4%, industrial 10.7%, As most developers had deferred new stronger demand than high rise strata agriculture 10.5% and development launches in light of the pandemic-hit developments and therefore had an land and others 7.1%. economy, the primary market saw advantage over developers whose a reduction of new launches with existing landbank were focussed on In total, there were 191,354 47,178 units launched in 2020 against high end condominiums/serviced transactions worth RM65.87 billion nearly 60,000 units in 2019. Sales apartments in the urban centres. recorded in 2020, a decrease of performance was modest at 28.7% in 8.6% in volume and 9% in value 2020, lower than the 40.4% in 2019. By price range, demand continued as compared with 2019 (209,295 in the below RM300,000 segment transactions worth RM72.41 billion). Kuala Lumpur recorded the highest which accounted for 61.7% of the total number of new launches in the country, residential transactions, followed by Consistent with the overall decline, capturing nearly 21.8% (10,295 RM300,001 to RM500,000 (21.9%), performance of the residential sub- units) of the national total with sales RM501,000 to RM1 million (12.7%) and sector dipped across the states performance at 18.6%. This is followed more than RM1 million (3.7%). except in Perak and Terengganu. It is by Selangor with 7,330 units or 15.5% interesting to note that while Perak market share with sales performance Overhang: Slight Improvement is one of two states which did not at 39.1% and Johor with 5,913 units, Despite the enforced MCOs, the

APRIL - JUNE 2021 | HB ADVISOR 9 MARKET UPDATE

of the local market dynamics and preferences.

Of the total national overhang, condominium/apartment formed the majority at 51.9% (15,354 units), followed by terraced houses (28.1%; 8,306 units). From the perspective of price, 34.5% or 10,199 units are priced between RM500,001 to RM1 million (higher than 2019’s 28.3%), followed by 29.6% or 8,758 units below RM300,000, 24.3% or 7,185 units between RM300,001 and RM500,000 and 11.6% or 3,423 units exceeding RM1 million.

Price Index: Marginal Uptick While residential led the market in 2020, terraced houses continue to be the favourite. Enveloped almost by an overall market setback in 2020 and also in the preceding few years from 2015, the residential overhang situation improved acquiring land and rebalancing their Malaysian House Price Index (MHPI) by 3.6% to 29,565 units worth RM18.92 landbank portfolio to refocus on these still showed a growth trend albeit a billion while its value of transactions segments of the market. low one. On the ground, developers also increased by 0.5% against Q4 have been offering discounts/rebates 2019 (30,664 units worth RM18.82 After Johor, Selangor has the second of a minimum of 10% besides other billion). It is therefore gratifying to note highest volume (4,889 units) and value freebies to be eligible to participate the improvement over two consecutive (RM4.29 billion) of overhang units, in the two HOCs. Auction sales years of 2019 and 2020. This is clearly followed by Perak (3,637 units, RM1.16 prices have also been going lower the result of the boost provided by the billion) and Kuala Lumpur (3,023 units, whilst owners have lowered their two HOC campaigns which reported RM2.92 billion). price expectations in the secondary sales achievements of 57,000 units market. By right this should translate worth RM37 billion for HOC 2019 and The biggest chunk of overhang to a decline in the MHPI. A possible 34,000 units worth RM25.65 billion as residences are those priced under explanation for this seeming anomaly at end February 2021 for HOC 2020. RM300,000 and between RM300,001 would be that the basket of properties It is also not a surprise that property to RM500,000 which made up a used by NAPIC to measure the HPI developers have clamoured for and combined 53.9% of the total residential did not show any declines but an appealed to the government to extend overhang. It would have been natural increase instead. HOC 2020/2021 until the end of 2021. to assume that the overhang homes within the affordable categories is low NAPIC’s data for MHPI in 2020 stood Johor retained the highest volume as they would be within the reach of at 199.3 points with a low annual and value of overhang in the country the lower to middle income groups. It growth of 0.6%, the lowest recorded with 7,030 units worth RM5.48 billion, is also believed that the high overhang since 2010 with all states recording accounting for 23.8% and 29% numbers in these affordable homes positive annual growth except for respectively of the national total. This categories could be due to projects Kuala Lumpur (-1.0%), Selangor is due to the large number of units in unpopular locations, insufficient (-0.7%), Penang (-0.1%) and Sabah launched in recent years by foreign take-up of units under the Bumiputera (-1.3%). Johor however bucked the controlled developers in the state. quota, wrong products for that trend to register a moderate 2.5% The preponderance of units sold particular target market eg. apartments annual growth while the Terraced in the affordable categories (under instead of the preferred landed House Price Index also went up by RM300,000 and between RM300,001 properties and non-affordability of 2% although it was the lowest in the to RM500,000) which contributed about the houses in relation to the targeted decade. On the flip side, high-rise 83% of residential units sold in 2020 buyers. All these call for more detailed declined by 0.8%, semi-detached will inevitably lead to more developers research to get a better understanding 0.6% and detached houses by 1.1%.

10 HB ADVISOR | APRIL - JUNE 2021 Is Retail (Still) Lingering in the Sub-Levels? NAPIC’s 2020 data and insights from Tan Hai Hsin, Managing Director of Retail Group Malaysia.

Major malls have found some balance with the return of shoppers after the MCOs.

APIC’s data for 2020 showed coming one to two years, the lacklustre their retail therapy, dining, recreational that the retail sub-sector malls will continue to face the same and entertainment activities. But due to was hit with a lesser drop in problem, worsened by the rapid the reduced take-home pay, purchasing Noccupancy than expected from 79.2% growth of online shopping. power has been compromised and as in 2019 to 77.5% in 2020. Although the such, Retail Group Malaysia projects a marginal decrease is not reflective of Despite the drop in business and a lower growth of 4.1% in the Malaysian the frightening headlines in the news stuttering construction pace in 2020, retail market for 2021 compared of its last year, it could be attributed to the NAPIC’s data reported the completion earlier projection of 4.9%. various compensating measures offered of 13 shopping complexes or close by the landlords to sustain its tenants. to 0.38 million sqm on the back of The growth projection took into This could also be the reason why 556 buildings (12.61 million sqm) account the first two months of the occupancy rates in Klang Valley held up in existing stock. The market also Movement Control Order (MCO) above the national overall, recording continued seeing 42 other shopping in 2021, the foreseeable persisting 82% in Kuala Lumpur and 80% in malls (1.81 million sqm) in incoming interstate travel ban, the slower Selangor. The same however cannot be supply with 12 more (0.51 million sqm) than expected mass vaccination said for Johor and Penang with 74.9% in the planned supply stage. and lower consumer spending than and 72.8% respectively. 2019’s level. It is anticipated that the Return of the Shoppers market will only return to 2019’s level Managing Director of Retail Group With bated breath, shopping traffic some time in 2024 conservatively or Malaysia Tan Hai Hsin shared that many of major malls in Malaysian cities has at the earliest 2023, provided the shopping centres in Klang Valley with finally returned to pre-Covid-19 level country’s economy can attain high relatively low occupancy rates during since the lifting of the second MCO in annual growth rates in 2022 and 2023, the Covid-19 period have actually 2021 but sales in all retail categories disclosed Hai Hsin. been suffering from the same fate even have still some way to go according in 2019 as they struggled to secure to Hai Hsin. The rush to return to Just like the rising footfalls of major tenants due to the serious oversupply the malls was mainly caused by the malls in KL city centres, he observed of retail space. He opined that should lengthy lockdowns that have stifled that suburban malls in Klang Valley the country recover quickly in the Malaysians from their mall visits for have also enjoyed higher visits

APRIL - JUNE 2021 | HB ADVISOR 11 and after more than a year of consolidation, retailers will only look into expansion in 2022. Nevertheless, some retailers with financial resources will take this current opportunity to expand their businesses with two advantages - cheaper rent and lower costs of renovation. In fact, they have been doing that since the middle of last year. Some tenants, especially the F&B operators may move out of the Will the parking lots ever get to the stage of pre-Covid-19 levels? shopping centres after their leases expire. compared to the first two months of When shopping centres face low the year. The latter have in fact enjoyed occupancy rates, they tend to During this pandemic, some better patronage because of the high lower their rental rates in order to operators found out that they can reliance of tourists (about 15-20%) in attract non-retail occupants such as generate good business online or the city centre malls in offices and schools. Some rented to via drive-through, take-away and and the KLCC shopping districts. With government agencies, some even delivery. If they are located at the border closures and interstate travel leased out their units as storage upper level or tucked in one corner ban since MCO 2.0, avid Malaysian space. of a shopping centre, their customers shoppers have been prevented from or deliverymen will find it hard to visiting the higher quality malls in Suppose the travel borders are shut access their outlets. Kuala Lumpur that are absent in their for the rest of the year to foreign hometowns. tourists, is domestic consumption “The worst hit segments are the sufficient to sustain these malls? entertainment-related outlets Consistent with the rising mall visits, Foreign tourists spending accounts (cineplex, video arcade, VR centre, cafes and restaurants have equally for not more than 10% of the total escape room etc), recreational- been enjoying a good number of retail market. Thus, the lack of related outlets (children play centre, dine-in customers but have still some foreign tourists does not have a rock climbing, badminton court, way to go before matching 2019’s significant impact on Malaysia’s retail children swim school, theme park performance due to the standard market. etc), bars and nightclubs, shops operating procedures on physical located in airports and bus terminals, distancing. But good news has Will the market witness some form and those that are highly dependent however finally streamed in from the of consolidation or mergers & on tourists such as Central Market in cineplexes as eager movie fans wasted acquisitions in the near horizon? Kuala Lumpur and the Singaporean no time getting back into the theaters Consolidation and mergers & tourists-reliant Johor and Melaka from 5 March 2021, the day the curtain acquisitions have started since the malls. A longer period of recovery is raises after the pandemic shuttered first MCO was lifted in May 2020 hence needed.” their doors. But like the F&B outlets, as we witnessed a high number of sales are still sub-2019 level due to closures immediately after. A second Business for the factory outlets physical distancing measures. round of major closures took place or outlet malls such as the Mitsui after the bank moratorium ended in Outlet Park, Johor Premium Outlet, Due to very poor performance, October 2020. The third round was Genting Highlands Premium Outlet, is there a strategy that can be during the second MCO in 2021. Freeport A’Famosa Outlet (Melaka) adopted so mall owners do not have and Design Village (Penang) have to resort to closing down? Will we see more tenants moving also been unilaterally affected due to In the past, very few shopping centres back to the malls or will there be a the lack of foreign tourists said Hai in Malaysia have shut down due to flight of tenants to the shop lots to Hsin. Nevertheless, they have been poor occupancy rate. As compared to sustain business given the cheaper surviving with the ardent support of the United States, we have relatively rent? brand-conscious Malaysians scouring few abandoned shopping centres in The retail market will not be for great bargains on branded Malaysia. stabilised until early next year goods.

12 HB ADVISOR | APRIL - JUNE 2021 NEW LAUNCHES

perhaps an indicator of developers New Year, New Beginnings already used to the “new normal” and the various opportunities that accompany it such as leveraging on digital technology etc. ● Q1 2021 saw an even distribution in terms of property type with 6 xxxxxxxxxxx landed and 6 high rise projects. The corresponding period in the previous KUALA LUMPUR year had 5 landed and 4 high rise launches. ● Although there were 2 more high rises launched in Q1 2021, the number of units offered is lesser at Kuala Lumpur 1 2,391 units or 61.5% against 3,885 units in Q1 2020. 1) KL City = 1 Project ● There are more landed units in Q1 Highrise = RM800 - RM900psf 2021 with 639 homes offered from 2) = 1 Project 6 projects compared to 835 from 5 Highrise = RM600 - RM700psf projects in Q1 2020. ● Terraces and superlinks seem to be getting the attention with all 6 2 landed projects launched in Q1 2021 within this category. In Q1 2020, terraces and superlinks had slightly less with 4 launches. Number of Units Launched ● Serviced residences or serviced Number of New Project Launches in New Projects apartments were also popular over 2020 2021 2020 2021 the 2 corresponding quarters with 4 Projects 9 12 Units 4,720 3,030 projects in Q1 2021, which is 1 more than Q1 2020’s 3 projects. The fight against Covid-19 continues ● In terms of the total number of units ● Unit configurations are relatively in 2021, however launch activity in launched, Kuala Lumpur edged well-distributed across both time Q1 2021 bears resemblance to pre- ahead in Q1 2020 with 70% at 3,317 periods but it is interesting to see pandemic levels, perhaps a good sign units but Selangor raced ahead with that there were 5 projects offering that it’s business-as-usual in the industry, 75% or 2,258 units in Q1 2021. units exceeding 2,000 sq ft over the having endured the worst disruption in ● Q1 2021 looked to be a livelier two quarters, catering to a possible recent history. period for launches with 3 in January, shifting trend of buyers looking for 4 in February, and 5 in March, larger homes. ● Based on our compiled data, we see a slight increase in the number Types of Projects of launches for Q1 2021, with 12 6 launches across KL and Selangor, compared to 9 for Q1 2020. 2020 2021 ● The total number of units launched 4 4 in Q1 2021 was however less than Q1 2020, with 3,030 units on offer or 3 about 64% compared to 4,720 units 2 the previous year. ● Selangor saw more launches 1 1 throughout both periods where in Q1 2020, it commanded a slight edge at 67% share but totally dominated with Condominium Semi-D Serviced Residence / Terrace / 83% in Q1 2021. Serviced Apartment Super Link

APRIL - JUNE 2021 | HB ADVISOR 13 UNIT SIZES BY PROJECTS

NEW LAUNCHES 2020 2021 0% Below 600sf 8%

● Bulk of the projects (10) in Q1 for money with 6 projects (out of 12) 33% 601sf - 800sf 25% 2021 offered units priced between offering units priced below RM500 RM601,000 to RM800,000, followed per sq ft compared to the 7 projects 33% 801sf - 1,000sf 33% by 9 in the affordable range of (out of 9) offered units in Q1 2020 RM401,000 to RM600,000. Not far priced between RM501 to RM750 33% 1,001sf - 1,200sf 25% behind are the pricier ones between per sq ft. 1,201sf - 1,500sf RM801,000 to RM1 million with 7 ● KL’s two launches were located in 22% 33% projects and 5 more projects with the city proper (high rise, RM800 to 1,501sf - 1,800sf units beyond RM1 million. RM900 per sq ft) and in Bukit Jalil 11% 25% ● Before the Covid-19 pandemic, (high rise, RM600 to RM700 per sq ft) 1,801sf - 2,000sf Q1 2020 was more catered to the with both featuring great accessibility 22% 17% affluent with 7 (out of 9) projects yet at times overwhelmed by high Above 2,000sf priced above RM1 million, followed traffic due to its popularity. 56% 42% by 10 projects altogether between ● Value landed buys continue to RM601,000 to RM1 million price feature prominently in Selangor, in PRICING BY PROJECTS brackets. particular Sungai Buloh, Dengkil, 2020 2021 ● Perhaps influenced also by the Sepang (each with projects offering Below RM400,000 Covid-19 aftermath, Q1 2021 units priced between RM300 to 11% 17% launches look to emphasise value RM400 per sq ft), Setia Alam (RM350 RM401,000 - RM600,000 to RM500 per sq ft), and Semenyih 33% 75% (RM300 to RM500 per sq ft). RM601,000 - Selangor 56% RM800,000 83% 1) Sungai Buloh = 1 Project RM801,000 - Landed = RM300 - RM400psf 56% RM1,000,000 58% 2) = 1 Project Above 78% RM1,000,000 42% Highrise = RM800 - RM1,000psf SELANGOR 3) Setia Alam = 1 Project PRICE PER SQUARE FEET (PSF) Landed = RM350 - RM500psf 2020 2021 4) Subang Jaya = 1 Project Below Highrise = RM500 - RM700psf 56% RM500 50% 5) Seri Kembangan = 1 Project 1 RM501- 78% RM750 Highrise = RM550 - RM700psf 33% 2 RM751- 6) Dengkil = 1 Project 11% RM1,000 17% Landed = RM300 - RM400psf 3 4 9 RM1,001- 7) Sepang = 1 Project 5 11% RM1,500 0% 8 Landed = RM300 - RM400psf Above RM1,500 8) Semenyih = 2 Projects 0% 0% 6 Landed = RM300 - RM500psf NB: The percentages shown in the table are based on 7 our analysis of the projects that we surveyed but they 9) Kajang = 1 Project are not computed based on the number of units within those projects. The way to read this table is as follows eg. based on the projects that we analysed, 56% of Highrise = RM550 - RM600psf them included units of above 2,000 sq ft in size. It however does not mean that 56% of all the units are above 2,000 sq ft. Each project will probably only have very few units of above 2,000 sq ft in size.

3 Location 2 Location 2020 2021

2

1 1 1 1 1 1 1 1 1 1

1 1 1 1 Kajang KL City Sepang Dengkil Semenyih Bukit Jalil Setia Alam Subang Jaya Petaling Jaya Sungai Buloh Seri Kembangan Setia Alam Puchong Mont Kiara Sungai Buloh

14 HB ADVISOR | APRIL - JUNE 2021 STOCK OPTIONS

A BRIEF INTRODUCTION TO STOCK OPTIONS AND EMPLOYEE STOCK OPTIONS By Nai Siu Loon and Adie Gupta

Depending on the situation, one of these could be used.

In addition to the stock options, companies may also issue stock options to their employees known as the ESOPs. ESOPs allow the employees of a company the right to purchase the employer’s shares at a predetermined strike price and period. As per a paper “Determining the Value of Employee Stock Options” by John Hull and Alan White (August 2002), there are several common features in which the ESOPs differ from a regular stock option: ● There is usually a vesting period during which the ESOPs cannot be exercised. This vesting period can be as long as four years; ● When the employees leave their jobs et’s begin with understanding what The most common type of options in they typically lose unvested ESOPs stock options and employee stock the market are: and any vested ESOPs that are out options (“ESOPs”) are. ● American option: an option that may of the money. They have to exercise L be exercised on any trading day on vested ESOPs that are in the money An option is a contract that allows or before expiration. immediately; a buyer the right to buy or sell an ● European option: an option that may ● Employees are not permitted to sell underlying asset or financial instrument only be exercised on expiry. their ESOPs. They must exercise the at a specified strike price on or before ESOPs and sell the underlying shares a specified date, depending on the These are often described as vanilla in order to realise a cash benefit or form of the option. The strike price may options. Other types of options include diversify their portfolios. This tends to be set by reference to the spot price Bermudan option, Asian option, Barrier lead to ESOPs being exercised earlier (market price) of the underlying security option, Binary option, Exotic option than similar regular options; and or commodity on the day an option etc. ● There is some dilution when ESOPs are is taken out or it may be fixed at a exercised. discount or at a premium. The seller has The classification of options is the corresponding obligation to fulfil the important because, for example, In general, below are the common inputs transaction (to sell or to buy) if the buyer choosing between American or required in valuing the stock options and (option holder) exercises the option. An European options will affect the choice ESOPs: option that conveys to the option holder for the option pricing model. There ● The stock price is the current market the right to buy at a specific price is are in general three ways in valuing price of the asset. The exercise price referred to as a call; and an option that the stock options and ESOPs. These (or the strike price) is the price at conveys the right of the option holder are the Black-Scholes option pricing which an option can be exercised and to sell at a specific price is referred to as model, the Binomial tree approach is usually pre-fixed upon entering into a put. and the Monte Carlo simulation. the contract.

APRIL - JUNE 2021 | HB ADVISOR 15 STOCK OPTIONS

● The life (or expected life) of the PS and ordinary shares are identical, Consideration #3 Maintain Historical option. which is often not the case. Exercise and Forfeiture Records ● The expected dividend yield: Company A would maintain historical Although this does not have a Consideration #2 Work Out Various exercise and forfeiture records. direct impact on the value of Estimates and Assumptions Over time, for example, the use of options, but it does have an In allocating the value across different a “simplified” method may not be indirect impact through the stock classes of shares, certain features of appropriate when more relevant price. When the dividend is paid, each class of shares and company detailed exercise and forfeiture records the stock becomes ex-dividend specific matters/potential events information becomes available. A therefore the stock price will go would need to be considered and more sophisticated method such down which would result in an modelled, for example: as the Binomial tree approach and increase in the put premium and ● What are the likely exit and Monte Carlo simulation may be more decrease in the call premium. fundraising scenarios? Examples of appropriate in valuing Company A’s ● The risk-free rate of interest. exit scenarios are IPO, sale to a PE, future ESOPs grant. ● The expected stock price volatility. trade sale etc. ● In the case of ESOPs, some ● What are the probabilities for such Conclusion additional consideration may be scenarios eventuating? Companies should pay attention to required, for example the exercise ● When are the scenarios expected the details of the ESOP plan and its behaviour of the ESOP holder, to occur? value implications when drafting the vesting periods and criteria of the ● What are the payoffs to each type plan itself. A number of aspects need ESOP plan and forfeiture record of of shareholder in such scenarios? to be juggled including, employee the ESOPs. ● How is the liquidation preference incentives/retention, compliance (ranking in the case of liquidation) costs and implications (ie. to fulfil the Case Study in such scenarios? requirements of financial reporting Company A is a start-up private standards and/or the tax regime). The company which has completed its Series Next, in valuing an ESOPs, examples ESOPs in the hands of the employee B preference share (“Series B PS”) of some estimates or assumptions that may be taxable depending on the tax fundraising at $2 per Series B PS on 1 need to be considered are as follows: status and the jurisdiction. Valuation of April 2020. During FY2020, Company ● What is the expected stock price the ESOPs can be complicated many A also granted ESOPs to its eligible volatility? Should Company A refer times particularly if the implications are employees at the end of each quarter to its comparable companies’ stock not thought through enough before in year 2020. Underlying the ESOPs are price history or benchmark against finalising the ESOP plan. the ordinary shares of Company A with the relevant stock market index? an exercise price of $1 and expiring at ● What is the life or expected life of This article is written by Nai Siu Loon, the tenth anniversary from the grant the ESOPs? It is rather common Associate Director of Spring Galaxy dates. The ESOPs can only be exercised to use a “simplified” method in and Adie Gupta, Managing Director on the next fund-raising or exit event. estimating the expected life of of Spring Galaxy, an Associate firm of Company A is required to value its ESOPs as an input for the Black Henry Butcher Malaysia. Siu Loon and ESOPs at the grant dates for financial Scholes option pricing model. Adie provide valuation and related reporting purposes (and let us assume However, the “simplified” method advisory services to the corporate these are equity settled ESOPs). may not be appropriate in this sector in Singapore, Malaysia and the case as the ESOPs can only be wider AsiaPac region. Siu Loon and Consideration #1 Understand the exercised on the next fundraising Adie have relevant experience of more Underlying Shares or exit event. Company A needs than 10 years and 20 years respectively. In this instance where the capital to consider and estimate the Adie is a regular speaker and trainer structure involves, the ordinary shares, appropriate time frame and for many accounting bodies and Series A preference share, Series B PS probabilities of those events (as organisations in the region including in and ESOPs, an equity allocation model such the exercisability of the Malaysia. needs to be developed to allocate the ESOPs) eventuating. Readers may value across different classes of equity refer to the “Staff Accounting Spring Galaxy is a transaction advisory before valuing the ESOPs. Here one Bulletin No. 110” by U.S. Securities firm specialising in business valuations should not use the Series B PS price of and Exchange Commission for and transaction support services. For $2 as a price input to value the ESOPs further details on the use of the more information, please visit https:// unless the characteristics of Series B “simplified” method. springgalaxy.com

16 HB ADVISOR | APRIL - JUNE 2021 HENRY BUTCHER REAL ESTATE SDN. BHD. No.199201004957 (236461-w)

Bungalows and Service Residences For Sale and Rent

RM6,500,000.00 (nego) From RM4,200,000.00 (nego) RM2,800,000.00 (nego) Sierramas, Sungai Buloh Nadayu, Taman Melawati Bandar Mahkota Cheras Type Bungalow Tenure Freehold Type Bungalow Tenure Freehold Type Bungalow Tenure Freehold Built-Up 8,000sf Land Area 9,990sf Built-Up 7,900sf Land Area 8,100sf Built-Up 6,000sf Land Area 7,700sf Bedroom 5+2 Bathroom 6 Bedroom 5+2 Bathroom 8 Bedroom 7 Bathroom 7 Furnishing Partly Furnished Furnishing Partly/Fully Furnished Furnishing Fully Furnished Linda Ooi (REN09433), 012-2363065 Christine Chua (REN09437), CK Lum (REN09439), 016-3028936 Nigel (REN09436), 012-3960307 012-3142864

RM6,000,000.00 From RM1,700 to RM2,110 per sq ft From RM3,000 per sq ft Sierramas East, Sungai Buloh Le Nouvel, KLCC Four Seasons, KLCC Type Bungalow Tenure Freehold Type Service Residence Type Private Residences Built-Up 6,332sf Land Area 8,330sf Tenure Freehold Tenure Freehold Bedroom 6 Bathroom 6 Built-Up from 1,700sf Built-Up from 1,098sf Furnishing Partly Furnished Bedroom 2/3 Bathroom 2 Bedroom 1/2/3 Bathroom 2 / 3 CK Lum (REN09439), 016-3028936 Furnishing Partly/Fully Furnished Furnishing Partly/Fully Furnished Christine Chua (REN09437), Christine Chua (REN09437), 012-3142864 012-3142864

From RM3,800,000.00 From RM2,155,000.00 (before rebates) From RM1,600,000.00 Oval, KLCC Retail @Cantara Residences, Ara Tropicana Residence KLCC Type Service Residence Damansara Type Service Residence Tenure Freehold Type Retail Lots (12 units only) Tenure Freehold Built-Up 3,700sf Tenure Freehold Built-Up from 700sf Bedroom 3+1 Bathroom 4 Built-Up From 1,841sf to 4,682sf Bedroom 1/2/3 Bathroom 1/2/3 Furnishing Partly/Fully Furnished Facing East Furnishing Bare unit Furnishing Partly/Fully Furnished Christine Chua (REN09437), Nigel Chin (REN09436),012-3960307 Christine Chua (REN09437), 012-3142864 **Attractive rebates & special promo 012-3142864 given by developer Nigel (REN09436), 012-3960307

From RM1,900,000.00 For sale from RM550.00 per sq ft (nego) From RM5,570,000.00 (nego) Ruma Residences KLCC For rent from RM5,000.00 per month Jalan U-Thant Kuala Lumpur Type Service Residence (nego) Type Condominium (Simplex, Duplex, Tenure Freehold Taman Hevea Kemensah Triplex) Built-Up from 900sf Type Semi-D Tenure Leasehold Tenure Freehold Bedroom 2, 3 Bathroom 2 / 3 Built-Up 3,600sf Land Area 2,960sf Built-Up 3,568sf to 6,601sf Furnishing Partly/Fully Furnished Bedroom 5 Bathroom 6 Bedroom 4+1 Christine Chua (REN09437), Furnishing Unfurnished /Partly Furnished Furnishing Partly /Fully furnished 012-3142864 CK Lum (REN09439), 016-3028936 Christine Chua (REN09437), 012-3142864 Nigel (REN09436), 012-3960307 Carolyn (REN09438), 017-8722781