Resurrections (Case Study on Kong Heng Ipoh & Pheonix Plaza)

Early Bird by Johnni Wong | July 12, 2012


http://www.starproperty.my/PropertyGuide/Finance/23181/0/0


Compared to Kuala Lumpur and George Town, the city of Ipoh hasn’t quite caught the imagination of property investors and entrepreneurs despite having an equally rich architectural heritage and building resources.


Perhaps, the lack of critical mass is one of the fundamental factors that deter investments. Sure, one or two fairly successful developments have come up but one swallow does not make a summer.
Nevertheless, one eccentric architect and his gang of friends hope to draw interest to a quaint section of the city that they think has potential for re-development.


Labour of love
KL-based landscape architect and ardent art collector Ng Sek San and his friends have set up a fund to purchase several property lots in Ipoh Old Town centred around the Kong Heng coffeeshop.


“A lot of Malaysian towns have been left in decay in the last three decades,” points out Ng in an e-mail response.


“We have been seduced with the new utopia of Americanised suburban living. Unfortunately, our local town authorities are not creative in re-branding old cities and reversing the decay. There is a lot of hidden value in old cities like Ipoh.

The triple-storey building housing the Kong Heng coffee shop will remain "in perpetuity", says Ng Sek San, one of the co-owners

“We hope like-minded people will join us to develop a critical mass to jazz up and rejuvenate the city.”


So, when Ng heard about the sale of the triple-storey, pre-war building housing the well-known Kong Heng coffee-shop at Jalan Bandar Bijih Timah, he swung into action.


The “consortium” of four individuals, not only bought that building but purchased several other units linked to it. They plan to revitalise the neighbourhood especially at night, when the area is practically deserted.
“We have eight buildings and they vary from one to three storeys, with a built-up space of about 30,000sq ft,” says Ng.


“It is all in one title with six buildings on it. The previous owner amalgamated the three (land) titles with the intention of demolishing all the buildings to build a high-rise development.”
When asked how much has been spent to acquire the properties, Ng says, “I really don’t know, I am not the money guy.”


And why are they doing this?


“Three of our partners are originally from Ipoh and one is from Kuala Lumpur.
This is purely a commercial undertaking. However, we are appreciative of history and old heritage buildings.
“What we did was just to add value to them and give them a longer lifespan and hopefully, also contribute a bit to the revitalisation of an abandoned and forgotten part of Ipoh Old Town.

The back section of Sekeping Kong Heng showcases the alternative way of "redeveloping" the property. Note the rooming facility upstairs



An old building can be modernised without losing its character

 Sentimental reason
Obviously, sentiment plays a large part in undertaking the project, as Ipoh is Ng’s hometown.


“I have a sentimental attachment to it even though I don’t live there now,” explains Ng, “We hope to get some life back into the old quarter especially at night. Most Ipoh residents prefer to live in the suburbs now.”


Phase 1 includes a rooming facility for short-term accommodation known as Sekeping Kong Heng with modern plumbing and amenities. The room rates offered on Agoda.com range from RM172 to RM690 per night.


Despite being a commercial undertaking, there are certain aspects of the project that transcend profit-making.

Guest rooms

“We are the landlord for the Kong Heng coffee shop downstairs,” says Ng, “The premises will remain Kong Heng coffee shop for perpetuity as it is the heart and soul of the larger development. “The first floor has been converted into guest rooms and the second floor

is a guest suite cum multi-function space for wedding events, meetings, product launches, dance floor, etc.,” added the landscape architect who teamed up with his former assistant, Farah Azizan, to re-configure the premises.

“We are only providing flexible space but we do not plan activities. We hope the users will be creative to adapt the space for their own use.”

Phase 2 will involve the opening a few food and beverage outlets. The plan for Phase 3 is still undecided.
The space at the back of Sekeping Kong Heng includes a derelict structure with a modern roof put in place. Further behind is a row of old shophouses.

“We intend to put in a specialty craft shop here,” says Ng referring to the derelict structure which has been spruced up yet retains the patina of age.

“The intention is to marry designers and communities to make local craft and products with outlets here. This building might also house a heritage tour centre or biking shop.
“Some of the shophouses on Jalan Belfield will be converted into food and beverage outlets on the ground floor.

“We intend to turn the upstairs of the six shop lots into guest villas. We also intend to turn the back of the shops to shoplets to activate the quaint back lanes.”

Stakeholders
As for the other adjoining lots next to the Kong Heng building, certain names of successful entrepreneurs have been mentioned as being interested.

“We are working with Julie Song from Indulgence Restaurant and Benjamin Yong of the BIG Group to open outlets in the adjoining properties. They are all Ipoh stakeholders.

“We are also planning a cooking school in the (former) Benco warehouse.”

A suspended "bedroom" on the top level of Sekeping Kong Heng

Any forseeable impact on shophouse property in the old quarter of Ipoh in terms of revival of interest?
“We are more into architecture, heritage and design and are less interested in property play. This question is really outside our expertise,” answers Ng.

Uncertain
But does Ng and his partners think that new business ventures in this part of town or in Ipoh in general, can be sustained?

“I honestly don’t know,” says Ng, “It has worked in other cities. Ipoh Old Town has interesting buildings and architectural space. It has history, good food, soul and it has interesting shops during the day time. And is it close to mass transportation hubs like railway and bus stations.

“From the business point of view, it has a lot more to offer than those new suburbs.

It does not make sense that suburban property values are equal if not higher than downtown properties. I hope this will work.”

The courtyard (left) between the main building and the derelict structure is lined with left-over paving stones. The derelict structure at the back (right) has been given a new roof with corrugated acrylic sheets

Phoenix no more
Speaking of calculated risks, a landmark shopping complex in Kuala Lumpur is being revived. The Plaza Phoenix is being transformed into Cheras Sentral by Malaysia Land Properties Sdn Bhd (Mayland) at the cost of RM125mil.

Mayland owns 85% of the strata-titled property. It bought the mall from Danaharta a couple of years ago and by 2011, Mayland acquired the rest of the available lots.

To be completed by the end of the year, the re-development project has a gross floor space of 1mil square feet (search this portal for the report on “Plaza Phoenix becomes Cheras Sentral”).

According to Mayland retail general manager Michael Chee the mall has about 500,000 sq ft of nett lettable space with an average rental rate of between RM5-RM6 psf. At the signing ceremony with anchor tenants on Monday, Chee cited three factors why this time around, Cheras Sentral can succeed where Plaza Phoenix failed. The mall originally opened in 1994 and closed in 2005.

Tenant-mix
Firstly, the notorious traffic problem in Cheras - with the bottleneck right next to the mall leading to Taman Len Seng and all the other housing estates - has been resolved with better infrastructure. Accessibility to the mall will also be enhanced with the proposed MRT station sited across the road and linked by a pedestrian bridge.

Secondly, due to the nature of the old mall with individually-held strata titles, the tenant-mix was not conducive to the overall attraction of the mall. But with new anchor tenants such as TGV Cinemas, Jaya Grocer, Celebrity Fitness, CYC World Mega Leisure World, Moon Palace Chinese Restaurant, K-Box Karaoke and Dynamic Trial Sdn Bhd, there is greater variety and more attractions. There will even be a 300-room hotel under the Silka or Dorsett brand.

Thirdly, Cheras in the mid-90s wasn’t as rich a catchment area as it is now. Greater affluence is seen in the surrounding areas with more upscale housing developed and sold.

Cheras Sentral will cost RM125mil to be ready for business

Feng shui
On whether Mayland founder Tan Sri David Chiu, a Hong Kong-based property developer and hotelier, ever consulted any feng shui master about re-developing the mall, Chee replied, “Tan Sri always says that he uses feng shui if it suits him.”

Our cars are costing us our homes

Food for thought
By DATUK ALAN TONG

http://biz.thestar.com.my/news/story.asp?file=/2012/7/14/business/11647266&sec=business

WHEN I first started my job as an architect in the 1960s, I was on a three-year contract with a monthly salary of RM628. I bought my first car, a Peugeot which cost RM7,724, equivalent to approximately one year of my salary. The car became my reliable companion for 14 years. Those were the good old days, when a car could be bought with just one year of a fresh graduate's salary.

Circumstances have since changed. Today, for a fresh graduate to own a car in Malaysia, it will easily cost him four years of his salary to purchase a foreign car, and even a local car costs around two years of his salary. If we take into consideration his living expenses and other commitments, it may take him even longer to settle his car loan. Hence, it has left him with very little option but to take the maximum car loan financing tenure of nine years.

In the table illustration below, a fresh graduate in the Washington D.C. earning about RM11,000 (about US$3,500) per month can easily buy a Japanese Honda Civic or Toyota Corolla worth RM50,000 as it is only 0.4 times of his yearly salary.

On the other hand, a fresh graduate in Malaysia earning about RM2,500 per month needs to pay RM120,000 if he would like to buy the same type of car. It costs him four times his gross yearly salary. This ratio is 10 times higher than his US counterpart.

For youths in Malaysia, buying a car is more expensive both in real terms, and in terms of debt-to-income ratio. In reality, it means they have to either purchase a car with lower price tag or commit to a longer term loan to own a car, which cost them the opportunity of owning a home.
This situation requires our youth to choose between buying a car or a house first, and many have committed to own a car first, considering our public transportation system is still in the process of being improved.

Many fresh graduates in Malaysia who start to serve their car loan tend to delay their plan of purchasing a home.

Unfortunately by the time they can afford to purchase a home, be it three, five or nine years later, the price of a property would have escalated due to among other things, inflation, higher construction cost and higher land prices.

While it may be safe to say that their salary would also increase, generally speaking the increment may not aligned to the rate of inflation. In most cases, owning a home will be a huge debt lasting 30 to 40 years of housing loan repayment.
What can be done differently to change the circumstances? Is there a better way for them to financially plan their future? These are questions that Malaysian youths ought to consider before purchasing any big-ticket items.

Let's look at the table again. It also lists the median price for three-bedroom apartments in the suburbs of these cities. The median price of an apartment in the Klang Valley is around RM300,000, equivalent to 10-year gross income of our fresh graduates. The affordability level is more favourable compared to other Asian countries, such as Indonesia and Thailand. The prices of same size apartments in Jakarta and Bangkok range from RM350,000 to RM400,000, and costing their fresh graduates 13 to 18 years of gross yearly income to purchase a house.

Therefore, when it comes to the question of home affordability in Malaysia, we are blessed compared to our regional peers.

However, there are many factors that contribute to the challenge for our youths to own a house. Two primary factors are the additional financial commitment of purchasing a car, and the relatively lower income level in our country compared to our Western counterparts.

When fresh graduates spend a substantial amount of their salary paying for a car, they are left with little savings to own a house, and their house affordability level decreases over the years as prices rise due to inflation.

Clearly the income level of our graduates has to rise, to enable better quality of living and higher affordability level, which is the current government's focus to make Malaysia a high income nation by 2020.

Perhaps it is also time to re-look at our national car policy and how it has affected the house affordability level in Malaysia. From the numbers above, it is clear that our cars are costing us our home