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Monday, 7 April 2014

The money in golf clubs land in the Klang Valley, Malaysia

Price of residential development land nearby chart
Golf course land has been in the spotlight after three golf clubs became the target of developers in Klang Valley.

The three are Kelab Rahman Putra Malaysia, Sultan Salahuddin Abdul Aziz Shah (KGSSAAS) Golf Course and Perangsang Templer Golf Club in Templer Park.

The last to join the fray is Perfect Eagle Development Sdn Bhd, which has submitted a proposal to acquire 279 acres of land, which Kelab Rahman Putra Malaysia sits on, for a cash consideration of RM296mil.

Perfect Eagle, which made the offer two weeks ago, plans to convert a portion of the golf course for property development.

The deal is still pending approval from its members. But if the offer is accepted by the members, each of the 4,230 members would receive RM70,000 cash each, which is not too bad considering that the golf club membership cost less than RM15,000 when it was started in the mid-1990s.

In 2012, Kelab Rahman Putra also received an offer to buy the club for RM130mil, however it was rejected by the members.

Golf land deals

As for KGSSAAS, the owner - Great Doctrine (M) Sdn Bhd - sold a portion of its golf course - 34.6ha - to Mah Sing Group Bhd last week for RM327.4mil.

To facilitate the deal, KGSSAAS, which currently has a 27-hole golf course facility, would shrink the size of the course to an 18-hole course.

Mah Sing expects the project to have a gross development value (GDV) of RM2.5bil.

In February, Perangsang Templer Golf Club in Templer Park was reportedly to be closed down to make way for a high-end residential and commercial property project that could worth RM1.24bil.

SP Setia Bhd has signed a joint-venture deal with Kumpulan Perangsang Selangor Bhd (KPS).

KPS, via its unit Cash Band (M) Bhd, is the owner of three parcels of 194.65 acres of leasehold land. SP Setia’s role under the agreement is to develop the land as well as to market and sell the commercial and residential units.

It has been reported that KPS had done a study to evaluate the redevelopment potential of the 18-hole golf course, and said that it was “not-fully optimised in its current form and utilisation”.

It notes that the conversion of the land to mixed development status could unlock the true value of the land.
There is no doubting that golf courses in the Klang Valley are highly attractive to developers.

A quick check indicates that there are over 15 golf courses scattered around Klang Valley, and Petaling Jaya alone has almost six golf courses.

With land scarcity in the Klang Valley and the rising demand for homes, golf land has become hot property.

“As land become scarcer, golf land may become more viable for development as they are generally well located.

“In fact, much of golf land are located in matured locations with established amenities,” says Mah Sing group managing director Tan Sri Leong Hoy Kum.

Nonetheless, he notes that the recent golf land acquisitions was mainly due to the location, land price, payment terms and development potential.

“We do not set out to acquire golf land per se, but we continuously look at landbanks that fit our business model,” he adds.

Traditionally, golf courses in Malaysia are surrounded by lavish bungalow units in a pristine neighborhood. Homeowners would enjoy a tranquil park built within the area, giving them a peaceful environment away from the concrete jungle.

Experts say developers that are targeting golf clubs are actually looking for landbanks for future high-end development.

“Most of the golf courses in the Klang Valley were planned to be part of a comprehensive development with luxury housing and sometimes, commercial components like resort hotel and office park.

“But as time goes by when the development matures and the land and house prices increase in the area, it makes better sense financially for the golf course land to be used for higher value developments such as luxury housing,” says Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng.

He says the factors that drive property developers to buy over golf courses are location, matured neighbourhood, nice environment and large land size.

When asked if there would be more golf land to be gobbled by property developers, he says it would depend on the property market, land prices, consumer preferences and development trends.

An analyst says that the scenario of having golf land being scrapped to make way for property development is not only unique in Malaysia, but also seen in other countries such as in the United States, UK and Singapore.

“It’s a natural evolution as long as the state government approves it,” he says.

“The shortage of suitable development land in the city area has resulted in developers targeting other types of land, and this includes golf courses,” he adds.

He says acquiring golf land at the moment is timely, considering the maturity of the Klang Valley area.

“It would be the right time to develop such land especially if the golf courses are underutilised,” an analyst says.

While Mah Sing scores a hole-in-one with the acquisition of a parcel of land in KGSSAAS, some developers may not find it easy to acquire golf courses.

A major obstacle is getting approval from members.

One of the reasons why Mah Sing was successful with the KGSSAAS deal was because the transaction did not need the approval of members.

That the land was up for sale was also known in the market.

KGSSAAS, located near Stadium Shah Alam’s Section 13, was sold for RM88 per sq ft to Mah Sing.

For Perfect Eagle Development, the acquisition could be tricky, as the consent of members is required.

When contacted, a member of Kelab Rahman Putra Malaysia says he would prefer to reject any offer to buy the club land due to the embedded value of the land.

While golf clubs have attracted interest of late, it is not a new phenomenon.

In 2011, Dijaya Corp, now known as Tropicana Corp Bhd, bought over the Japanese-owned Kajang Hill Golf Country Club for a reported RM228mil for 80.33ha freehold land.

The land was then be transformed into Tropicana Heights Kajang, a mixed development project, comprising landed homes, condominiums, apartments, and shop offices with an expected gross development value of RM2bil.

One of the pioneers in developing golf courses is YTL Land & Development Bhd.

The group had scrapped what used to be a nine-hole golf course in Sentul, and converted it into a private gated park for residents in the Sentul West development.

The park, also known as Sentul Park, was formerly the 85-year-old Sentul Raya Golf Club.

In 2001, YTL acquired Taiping Consolidated Sdn Bhd and inherited the whole Sentul Raya project, which spanned over 294 acres of land, including the golf course.

Contributed by  Intan Farhana Zainul The Star/Asia News Network

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