The Edge, 31 March 2014 - Golf course land in their sights

The Edge, 31 March 2014

Go course land in the hts THEZGDE BY AFIQ ISA Golf course land has suddenly become much sought after as property developers aggressively seek to increase their strategic landbank to heighten their value proposition to potential customers, interest in such land has intensified recently as real estate in the vicinity of exclusive clubs commands premium prices ?an enticing prospect since upscale properties are sold at high margins.

Mah Sing Group Bhd's recent RM327 million acquisition of 85.43 acres of prime land at Kelab Golf Sultan Abdul Aziz Shah (KGSAAS) in Shah Alam is the latest such deal and industry insiders expect more of them-They see the RM88 psf Mah Sing paid for its prize as the general willingness of developers to pay a premium for prime land.

Kelab Rahman Putra Malaysia (KRPM) in Sungai Buloh is already being courted, the Edge Financial Daily reported on March 18 that Perfect Eagle Development Sdn Bhd is looking to acquire 279 acres in the golf course for RM296 million, which puts the land's value at RM2436 psf.The intention is to keep 18 of the golf course's 36 holes- KRPM's members had rebuffed a RM130 miUion offer for its land two years ago.

Sources tell The Edge that numerous property developers have begun "putting out feelers'' to golf clubs around the Klang Valley to garner feedback vdth a view to propose a deal later. "The intention is to find out whether or not the golf clubs, especially the ones owned by the members, will take the offer seriously. We want to convince them that this is a synergistic opportunity/' says a high-ranking executive of a niche property developer, which aspires to build an integrated golf resort.

Meanwhile, the guessing game has begun on which golf course is next in line. Likely candidates include Kelab Golf Negara Subang (KGNS) and even the historic Royal Selangor Golf Club in downtown Kuala Lumpur, industry observers say.

Property prices in the vicinity of these clubs have surged in the past fewyears,leaving developers salivating over the prospect of launching new projects in a pristine parcel of golf course nterest in golf course land has intensified recently as real estate in the vicinity of exclusive clubs commands premium prices land. However, offers to these clubs may be quickly rejected because their members include prominent politicians and well-connected businessmen.

Getting the approval of the majority of the club members would probably be the biggest hurdle to a land sale, given that a typical club charter requires majority vote on any deal. The members would be entitled to a portion of the payout, should a deal go through.

In Mah Sing's case, the KGSAAS land was acquired directly from the landowner, bypassing this hurdle.

Success stories of such developments include theTropicana Golf and Country Resort in Petaling Jaya,Selangor,and Horizon Hills Golf and Country Club in Nusajaya,Johor,both of which have become highly sought-after addresses.

"For any developer, the chance to acquire golf coiu^ land is a fantastic opportunity.The atmosphere and country club lifestyle offered by an integrated luxury development is highly desirable for homeowners' says Malaysian Institute of Estate Agents (MIEA) president Siva Shanker

He adds that developers have been "vciy clever" about locking in promising tracts of land with a view to launch projects sometime in the future when property market sentiments improve. "Bear in mind that the bad times will not last forever. 1 see a rebound in property transactions as soon as next year.'

Mah Sing is already looking years into the future. In a March 13 filing with Bursa Malaysia, the company states that it only intends to launch its golf course development in 2016, That the developer was able to get a deferred bullet payment for 90% of the purchase price has helped ensure that it can hold the asset while focusing on delivering other projects in the immediate term.

Mah Sing is not the first developer to go after prime land that was used for other purposes, such as golf and turf club land. In 2011, Tan Sri Vincent Tan's Berjaya Land Bhd entered into a conditional agreement with the Penang Turf Club to buy 5Z3 acres of the club's 270 acres for RM459 million. In July 2004, the Selangor Turf Club agreed to sell its 244,79 acres in Sungai Besi for RM640 million to Se-lat Makmur Sdn Bhd, a unit of Berjaya Land. The payment was supposed to be in the form of RM35 million cash and 750 acres in Bukit Tagar for the relocation of the turf club. Both deals did not materialise.

Still, the courtship of property developers may just be what some small golf clubs need. They may be more than willing to sell part of their land to fill their coffers because their margins are likely to be low as membership feeSj which make up the bulk of their revenue, are mostly directed towards the maintenance and operations of the club- Increasing membership fees would certainly raise the ire of the members, so a partial asset disposal might bring in much-needed cash to spruce up the facilities.

It would be interesting to see what other such deals take place and which clubs have to contend with a smaller play area or relocate to a cheaper site to make way for development..