Enter Four Seasons Hotel, exit Grand Seasons
Knight Frank Malaysia capital markets executive director Allan Sim anticipates higher level of land banking activities among industrial property developers in 2019.
“This is because strong latent demand continues to be omnipresent especially for industrial properties with high specifications, as occupiers understand the need to jump onto the Industry 4.0 band wagon in order to future-proof their businesses.
“This presents a unique opportunity for developers and investors alike to gain attractive monetary returns by providing end-users with the right products.”
Industry 4.0 refers to the paradigm that machines are now able to autonomously adapt and coordinate their tasks to meet human needs.
Moving forward, Sim says he expects to see new large-scale industrial developments taking shape in strategic locations due to robust demand for warehouses.
“For example, the proposed Free Trade Zone in Pulau Indah, which was recently unveiled by the government, is expected to generate interest from manufacturers and logistics operators alike.
“As for established industrial parks, we continue to see redevelopment of debilitated factories into multi-storey facilities as a mean to mitigate high land costs.
“All in all, Malaysia’s industrial property sector, which has been the silver lining for Malaysia’s subdued property market in recent years, is set to continue its resilience,” he says.
Knight Frank Malaysia says the prospects for the Klang Valley’s industrial and logistics property market remain positive this year, as more clarity in the policies of the newly elected government unfolds.
“Several measures announced under the recently tabled Budget 2019 will support growth of the industrial sector, especially high-technology industries. The National Policy on Industry 4.0 strives to catalyse growth of key sectors in the realm of electrical and electronics, machinery and equipment, chemicals, aerospace and medical devices.
“It will pave the way for enhanced productivity, job creation and high skilled talent pool in the manufacturing sector.” AS owners and guests sit down to a grand dinner at the official opening of the new Four Seasons Hotel Kuala Lumpur in November 2018, the Grand Seasons Hotel prepares to close.
Location matters, among other factors. The Four Seasons is located at Jalan Ampang, adjacent to the gleaming and glamorous Petronas Twin Towers. Grand Seasons shares the same street as the Kuala Lumpur Hospital on Jalan Pahang, near Chow Kit area.
Built around the time of the Asian financial crisis in 1997, the 678-room Grand Seasons Hotel will be closing at the end of February, about 20 years since it opened its doors.
Two phone calls to the hotel on Jan 4 produced varying answers. The first said they are closing for renovation. The second said they are closing. Period.
Attempts to reach the owner at press time was unsuccessful. An English weekly obtained an internal memo dated Dec 21, 2018 regarding its closure.
The closure of Grand Seasons comes at a time when there is a clutch of hotels up for sale, involving budget to upscale hotels, some of them having just recently opened for business.
Tropicana Corp Bhd is said to have put the recently operational W Hotel in Jalan Ampang for sale at RM2.4mil a room. W has 150 rooms, bringing that to RM360mil.
Two industry sources say the RM2.4mil price tag per room seems a bit high but there may be potential Chinese buyers who may be comfortable with the price because of the Twin Towers factor, located less than 400 metres away on the former Le Coq D’or land.
Today, that site is occupied by a 55-storey building, with the hotel on the eighth to the 24th floor and the serviced apartments Tropicana Residences from the 25th to the 55th.
About 90% of the 353 serviced apartments have been sold and with price currently going at RM2,600 per sq ft (psf ).
“It makes sense for Tropicana to let W go, to reduce gearing and move to an asset-light strategy,” an industry source says.
Tropicana group corporate communications senior manager Joshua Chan declined to comment. Two industry sources confirmed they have been appointed, probably among others, they reckon. Tan Sri Danny Tan Chee Sing is the younger brother of Berjaya Group’s Tan Sri Vincent Tan. Danny has a wide spectrum of businesses like property development, property investment, resort management, restaurants and leisure through his investments in public and private limited corporations. Danny has already sold his Sky Hotels, which he used to hold privately, say a source.
The other hotel that is up for sale is 253-room Sheraton PJ on the opposite of the Federal Highway across from PJ Hilton. According to press reports in May 2018, the Sheraton is for sale for an indicative price of RM350mil, which works out to RM1.38mil a room.
The hotel is part of the Pinnacle Petaling Jaya Pinnacle PJ, a 1.73acre development in Jalan Utara, Section 52, Petaling Jaya. J&C Homes Holdings Sdn Bhd developed the Pinnacle offices and hotel.
Other smaller hotels are also up for sale, among them the Sentral group’s portfolio of 10 hotels, which range from budget to three-star developments and scattered across the country from the east coast to Penang to Malacca. The portfolio includes three hotels in the Klang Valley, among them Sentral Hotel in Brickfields, Kuala Lumpur.
According to industry sources, and which was confirmed by a company staff, the family-run Sentral Group has a price tag of RM625mil for the 10 hotels.
Tourism is among Malaysia’s top revenue earner but of late, there seems to be issues. According to Tourism Malaysia website, tourist arrivals dipped to 19.39 million in 2018 from 25.95 million in 2017. Tourism contributed RM82.2bil to revenue in 2017, a marginal drop of 0.1% from 2016, according to Tourism Malaysia.
According to Leong PK, president of Malaysia Budget Hotel Associations connectivity is an issue. The lack of investment to strengthen the sector is also lacking.
Malaysia has sun, sea, hills and mountains but these are not promoted well. Getting to Pangkor, Frasers Hill and these off-city locations are lacking, which explains why, despite all its natural attractions, the average length of stay in 2017 for foreign tourists decreased to 5.7 nights from 5.9 nights in 2016.
Leong, who represents 2,000 budget hotels, says hotels as an asset class offers a range of yield for their owners. Our peak years were from 2008 to 2012, Leong says. Since 2012, the golden years have gradually lost its shine. “Today, if we breakeven we are lucky,” Leong, who has his own budget hotel, says. Some of his member hotels are losing money. There are about 6,000 budget hotels in the country.
Leong says Malaysia lacked budget hotels several years back. Tourist dollar prompted many to go into the sector.Now budget hotels are on sale.
CBRE|WTW managing director Foo Gee Jen says budget and one to two-star hotels have mushroomed in Malacca. Some are doing well, others just get by.
“Penang hotels have a higher room rates and are generally doing better those in the Klang Valley. So this sub-segment of the commercial property sector is very location specific, in terms of how well they are doing, their rates and overall yield,” he says. Yields are not fantastic, he says.
Its profitability is dependent on other products or activities around it, for example how attractive are the tourist products, healthcare services around a particular hotel.
Kuching hotels are not doing well but those in Kota Kinabalu are doing well because there are a lot more tourism attractions there to attract the Chinese, Japanese and Koreans, says Foo.
It is a mixture of business and tourism in the Klang Valley, he says.
Hotel occupancy is between 65% and 70% for the country, Foo says.
He suggests examining the real estate investment trusts like Sunway Reit and YTL Reit.
Sunway is a mixed Reit comprising retail, hotel and offices.
YTL Reit is primarily hospitality but not doing as well.
Zerin Properties chief executive officer Previn Singhe has different views. He thinks the 5.5% to 6.5% yield is worthwhile, considering today’s low interest rate regime, the flood of office and mall space which is putting pressure on rental.
“There is no one yield for the hotel business. It depends on how the owner manages it, its target audience and its location,” says Previn.
A third quarter 2018 Jones Lang Wootton research reported that the Klang Valley room supply is 55,221 compared to 34,058 3Q2008, with an average annual growth over the decade of 2,116 rooms, a compound annual growth rate of 6%. Projected supply is expected to be 62,114 by 2020.
In a table of 29 hotels ranging from international brands to budget hotels, 10 of them saw their promotional room rates excluding tax decreasing over a four-year period between 2014 and 2018.
By THEAN LEE CHENG Imposing image: The Four Seasons Hotel Kuala Lumpur which had its official opening in November.