Property Sector - A landmark property deal with CapitaLand in Danga Bay OVERWEIGHT

- Iskandar Waterfront Holdings (IWH) – 60%-owned by Tan Sri Lim Kang Hoo and 40% by the Johor state government – is reportedly signing an agreement today to sell some 70 acres of prime reclaimed land in Danga Bay (adjacent to Johor Bahru city) to CapitaLand and Temasek for RM800mil. 

- IWH would also be a party to the development JV.  The said land would be developed into an integrated residential-cum-commercial precinct comprising premium residential units (likely to be priced above RM1,000psf), service apartments and retail mall. 

- This RM800mil land deal works out to be around RM262psf, which is significantly lower than the unprecedented RM376psf paid by China-based Country Gardens. The latter had earlier entered into an agreement to acquire 55 acres from IWH for RM900mil. We believe that the reason for the lower pricing is because IWH is a party to the JV with the Singaporeans. And, CapitaLand with its group of companies offer a complete value propositions to IWH in accelerating the maturity of Danga Bay.

- This latest land deal means that IWH would have sold about 600 acres of development land in its flagship Danga Bay. IWH had earlier sold some 202 acres to Walker Corp of Australia, 245 acres to Dijaya and 25 acres to Brunsfield Group. 

- Thus far,  Dijaya has successfully launched three blocks of condominiums at its development sites, with all the non-bumi units sold at an average of RM750psf. It recently acquired a parcel of land from IWH to construct a large retail mall.   

- Our channel checks with industry sources revealed that there are a few sizable land deals in the pipeline at Danga Bay because of its strategic location surrounded by prime neighbourhoods and accessibility to Singapore.  The coastal land in Danga Bay has a relatively high plot ratio of between 4x-6x, which means that we are likely to witness more land deals at unprecedented pricing particularly after the entry of the Singaporean group.

- We reckon that the incremental demand growth would be strong enough to support the new presales in the near to medium term. Two reasons: 

- (1) First, curbs on foreign purchases in other Asian countries driving investment flows here. (2) Second, Johor property is playing catch up compared to KL and Penang!! Note that Johor property market started to move from its trough two years ago.  Pricing, however, has accelerated in the last six months.  

Source: AmeSecurities