KUALA LUMPUR (June 13): Property developer I-Bhd plans to focus on its leisure arm and residential property development this year in a bid to boost its earnings, said group CEO Datuk Eu Hong Chew.
"The leisure business has been an under-rated aspect of I-Bhds business as it has been overshadowed by news regarding the development projects. However, I think the leisure revenue and profits are growing at a pace that will lead to a re-rating of I-Bhd," Eu said in a statement on Tuesday.
To date, the group has invested some RM30 million in its leisure business with a further RM25 million to develop a 10,000 sq ft childrens gymnasium and 1.6ha water theme park, due to open in August and November respectively.
Eu hopes the success of its leisure business will not only improve the groups bottom line but will also enhance the value of the i-City development. He expects to achieve RM100 million of investments in the next five years in this sector.
To develop its hospitality business, the group will start construction of a budget hotel in i-City this year, for long-term investment.
Eu noted a significant change is the expansion of its residential development plan — to launch about RM500 million projects in gross development value (GDV) every year — resulting in some RM500 million in annual billable residential sales by 2015.
When i-City was first conceived, the focus was on retail and offices with only 500,000 sq ft dedicated to residential development.
"It signifies the transformation of i-City from a mainly office and hospitality project into one with a significant residential component. Under the latest enhanced master plan, i-City would have about eight million sq ft allocated for residential units," Eu said, adding that I-Bhd plans to launch one million sq ft of residential units annually.
i-City launched the 500,000 sq ft i-Residence development in May and is slated to launch the remainder units comprising small office versatile office (SoVo) and small office home office (SoHo) units by year-end.
In the past, i-Citys business model was based on en bloc sales of its office developments on a completion basis to its institutional investors. However, with its residential development, the developer will follow a conventional "sale before completion" to individual buyers.
This model will allow the group to recognise revenue on a progressive basis, Eu added.
Hence, apart from development profits, once i-City is fully developed, it will have some three million sq ft of investment properties with a GDV of RM1.5 billion that will generate a recurring rental income, including earnings from its leisure business.
This story appeared in The Edge Financial Daily on June 13, 2012.