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YTL Corp redefines luxury

Yeoh: To preserve nature as much as possible and create a lifestyle that people treasure instead of expediently just developing and creating a social slump in the future.

The Edge Singapore, December 3, 2007

By Cecilia Chow


Often describe as “a flamboyant businessman”, Francis Yeoh, 53, group managing director of YTL Corp Bhd, one of the largest listed conglomerate in Malaysia, prefers to call himself a “connoisseur of luxury products”.


Yeoh has a private art gallery and a wine cellar, is a watch aficionado and friends with the world’s greatest architect like Cladio Silvestrin and David Rockwell, as well as fashion designer Giorgio Armani.


He is a patron of the arts, especially opera, and hands out DVDs of the live performance by the Three Tenors (Jose Carreras, Placido Domingo and the late Luciano Pavarotti) in Bath in 2003 with a gentle admonishment to the recipient not to sell it on eBay as it is a collector’s item.


Among the prized real estate that he owns private island Pangkor Laut; a six-star hotel in St Tropez; properties in London; and an apartment in Singapore.


However, even the Malaysian tycoon has been caught up in the en bloc frency sweeping across many parts of Singapore. “The Estoril, has gone en bloc”, he says. Located along Holland Road, the 30-year-old Estoril, with 40 three-bedroom apartments and four penthouses, was put up for collective sale in mid-October by CB Richard Ellis for $208 million.


This means that the owners of the three-bedroom apartments will walk away with about $4.3 million each, while the penthouse owners will pocket $8.7 million apiece. The size is still available for sale.


Shunning what he defines as “a commoditization of luxury”, Yeoh has decided to build his own luxury properties. In Singapore, he is taking advantage of the collective sale wave to put his personal stamp on the map to build something of timeless beauty on Orchard Road, the most prestigious residential district.


Last week, YTL announced the purchased of Westwood Apartments at Orchard Boulevard in an en bloc deal worth $435 million, or $2, 525 psf per plot ratio (ppr), inclusive of development charge.


The sale was the most significant collective sale transaction since the new en bloc rules were introduced on Oct 4 and also set a new record in terms of price psf achieved. It beats the previous record of $2, 337 psf ppr, or a total of $262 million, that Simon Cheong’s SC Global Developments paid for The Ardmore collective-sale site in June.


YTL’s bid has put a measure of confidence back in a property market spooked by the fallout from the US subprime crisis and swooning stock markets.


Is Yeoh worried that YTL might be getting into the market just when the top end is speaking? “In history, look at everybody who didn’t buy a piece of Orchard Road because it was expensive at the point in time,” he says. “Try 20 years from now and look back at today’s prices, and probably you will say, “We should have bought then.”


According to property consultant Savills, which brokered the deal, The Westwood Apartments can be redeveloped into a 43-unit luxury condominium with units averaging 4, 000 sq ft each. The break-even prices is estimated at $3, 500 to $3, 600 psf, which translates into a selling price of $4, 000 to $5, 000 psf.


Yeoh is confident that there will be a discerning group of wealthy individuals around the world who will recognize the value of what he is going to create on the Orchard Road corridor and who will be willing to pay top dollar for it. “It will be a masterpiece resigned by the Michaelangelos and Leonardo da Vincis of today,” he says.


There will always be people at the top of the social pyramid who want a part of a city that’s prime. That’s the nature of human beings.


Built to last

To Yeoh, “long term” is not just 15 to 20 years into the future. He is talking about building something that will last at least 100 years and is unlikely to become a victim a future collective-sale wave. It is probably the nature of YTL’s business that gives Yeoh a long-term perspective that I am different from that of conventional property developer.


His father, Yeoh Tiong Lay, started the company in 1955, largely a construction firm. When Yeoh took over the firm in 1986, he grew the company, with a net profit of US$300, 000 (about RM1 million or $430, 000) then, to RM2.2 billion today, which he points out in a compounded annual growth rate of 55%.


The company expanded beyond construction into cement, power, utilities and real estate. Today, it has five listed entities and a combined market capitalization of RM28.5 billion. In FY ended June 30, YTL reported total revenue of RM6 billion and profit before tax of RM1.55 billion.


The real estate arm is developing new life-style residential concepts with its Lake Edge gated development and Pantai Hillpark. But it’s most significant development in its property portfolio today is the urban renewal of Sentul a residential development with designer homes built around a 35-acre park in the heart of Kuala Lumpur.


The company was propelled into the global arena when it bought UK utility company, Wessex Water, for £1.2 billion pounds ($3.6 billion) five years ago. Today, it is the top water and sewerage company in the UK. YTL also owns the ElectraNet, a national electrical power grid in South Australia.


Many of this business are regulated with concessions from governments. For instance, Yeoh says, the concession for Wessex Water is in perpetuity, that for the South Australian national power grid is 200 years, and the one for its power plant in Indonesia in for 35 years.


Meanwhile, the concession for the KLIA Express train traveling from the Kuala Lumpur International Airport to KL Sentral is for 60 years.  He laments that many developers in Asia today have an “expedient attitude” towards real estate. Maybe it’s the nature of the business people don’t like to have long holding costs, he observes. They buy, build and sell properties quite quickly. They don’t build anything indulgent to last. That’s why, in Singapore there’s a lot of en bloc sales.


Mediterranean of the east
Yeoh’s visions is that in 20 years, China and India will be like the US and Europe today, where millionaires and billionaires buy luxury beach front homes or sprawling estates in the Caribbean and Mediterranean respectively. He believes that Phuket in Thailand, Bali and Bintan in Indonesia, Langkawi and Pangkor islands in Malaysia, and Singapore and Sentosa Island will be the Caribbean and Mediterranean of the east for wealthy Chinese and Indians. It’s already like that now but in small footprints, he says. “But I’ve thought of this since 1987.”


While it took 25 years for the beachfront properties in the Mediterranean and the Caribbean to appreciate 15, 000%, he believes that it will take Asia only 15 years for property prices to achieve a similar growth rate. “The speed of wealth creation and soaring property prices in Singapore, Sentosa and Phuket has already (outpace) the Caribbean and Mediterranean in its time in history, says Yeoh.


To ensure that Asia will have the pristine and powder-white beaches that will command top dollar from discerning and well-heeled buyers of beachfront homes, Yeoh is leveraging Wessex Water’s skillset to  clean up the rivers in Malaysia and other parts of Asia. He plans to build water treatment plants in China and India as well.


Apart from cleaning up rivers, the active conservationists believe in buying huge tracts of forest and jungles “bigger the size of Singapore” to preserve nature as much as possible and create a lifestyle that people treasure instead of expediently just developing and creating a social slump in the future, he says.


It’s a very expensive cause. I think it’s very silly if, 25 years from now, Asians are the wealthiest people in the world, but we have to wear masks every day and go to Africa for holidays because it’s the only place left where you can breathe clean air. In line with Yeoh’s ambition to create a string of “indulgent properties” in the coveted destinations in Asia, he is also putting his money where his mouth is. Besides the resort island in Pangkor Laut Resort off the coast of Perak, YTL also owns the Tanjong Jara Resort on the coast of Terengganu and the Cameron Highlands Resort.


The group also opened a Spa Village Resort, Tembok in Bali, Indonesia and has acquired two villa parcels in Sentosa Cove on Sentosa Island. The Sentosa Cove sites were acquired through his joint-venture company, Genesis-Alliance Group, with a privately held Malaysians developer, LP Worlds Sdn Bhd. YTL is the majority shareholder in the JV, which also includes retail operation with lifestyle brands like Giorgio Armani’s home collection, Armani/Casa which opened its flagship store in Southeast Asia at the Raffles Hotel Arcade in June.


In September last year, YTL acquired its first site at Sentosa Cove, The Lakefront Collections with 132, 688 sq ft, for $50 million and will turn it into 12 luxury villas that will be branded “Armani Casa”, designed by Giorgio Armani. The second site is Sandy Island, a man-made island that Genesis-Alliance acquired for $89.7 million in March.


There will be 18 luxury villas on the island designed by Italian architect, Claudio Silvestrine, renowned for designs of the Giorgio Armani boutique in Hong Kong, Shanghai and Tokyo as well as the Museum of Contemporary Art in Turin. Jamie Durie, Australian landscape architect and Oprah Winfrey’s gardening guru on The Oprah Winfrey Show, will be doing the landscaping for Sandy Island and the villas there.


I want to build homes that are relevant for today’s generation but using classic passion and care of craftmanship, says Yeoh. So I’m not saying that all my buildings will look like Raffles Hotel or Fullerton Hotel. It can be very modern design like Claudio Silvestrin’s but it will have a classic element of timelessness about it.


Taking Starhill Gallery global

YTL also launched a real estate investment trust (REIT) listed on Bursa Malaysia two years ago. The portion contains YTL’s properties in Bukit Bintang: Lot 10 Shopping Centre, Starhill Gallery shopping mall and the adjoining JW Marriott Hotel Kuala Lumpur. Last December, Starhill REIT paid RM 125 million to acquire the Residences at The Ritz-Carlton Kuala Lumpur, a mixed development with 60 serviced apartments, a commercial podium and basement car parks.


When it comes to real estate, there’s a permanency about what I do, he says. That’s why there’s a REIT waiting to take properties that I own. If nobody wants to buy them, it doesn’t matter; I’m going to do them very well anyway. YTL had acquired Lot 10, Starhill and the adjacent JW Marriott Hotel in 1999. He engaged acclaimed New York architect David Rockwell to do a makeover of Starhill Shopping Centre and repositions it as Starhill Gallery, which features the flagship and concept stores of top-end brands like Louis Vuitton, Fendi, Roger Dubuis and Van Cleef and Arpels.


Yeoh is credited for turning the Bukit Bintang area into KL’s “Orchard Road” shopping district, which has in turn boosted real estate prices in the area. Across the street from Starhill Gallery, new shopping mall The Pavillion was opened sa few months ago. With 1.37 million sq ft of shopping space and 450 stores, it’s  KL’s biggest and larger than Singapores’ VivoCity.


Not only is Starhill making money, it has influenced and turned around the whole district, says Yeoh. If you benchmark yourself and position yourself at the top end, you influence your neighbours to be prime. And when that whole district becomes prime, I benefit as well.


His plan is to plant a Starhill Gallery in major cities around the world. In April, he opened the second Starhill Gallery in Dubai and plans to open one in Singapore, Abu Dhabi, Oman, Moscow, Shnaghai and Jakarta. Eventually, the Starhill REIT will own all the chichi iconic properties in the world under the Starhill brand, says Yeoh.


Multiplier effect on real estate values
Another YTL project that has analysts, property investors and other developers in Malaysia excited is the proposed bullet train linking KL to Singapore, which will dramatically reduce traveling time from a three to four hour drive on the North-South highway to a 90 minutes train ride.


Aside benefit is that it will reduce the number of cars on the road by a million, according to Yeoh’s estimate and that means less pollution. The bullet train is expected to play a pivotal role in shorting up investments in the development of the Iskandar Development Region (IDR) in South Johor, as it means only a 50-minute train ride from the IDR to KL, compared with a three-hour drive.


That means real estate prices between the two cities are also likely to converge, just as the Eurostar narrowed the gap in property prices between London and Paris, according to JPMorgan in a November report.


Similarly, the property price gap between KL and Singapore, which has widened in recent years, would also narrow. If property prices in KL and Singapore were to converge by 50%, the wealth effect in KL will probably be RM500 billion, says Yeoh.


He says that when he gets the go-ahead from the government, it would take four years to complete the physical construction. When that happens he could also take the bullet train from KL to Singapore to visit his new properties at the Westwood Apartments, and the Armani Casa and Sandy Island at Sentosa Cove, where he will own homes.

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