Ready to come home By theedgeproperty.com May 8, 2013 2:30 PM MYT AFTER over two decades of promoting Penang and Peranakan food in the US, Datuk Stanley Cheah and his wife Datin June Khoo are ready to spend more time here. Instead of evenly dividing their time between the US and Malaysia, they will now spend nine months at home in Malaysia, only going back to check on their children and businesses. The entrepreneurs, best known to locals for their Asia Café food court in Subang Jaya (Cheah heartily recommends the assam laksa there made by the daughter of the people running the famous stall in Air Itam, Penang) are taking baby steps in real estate development in Malaysia. They have developed two apartment projects and one boutique hotel in the US, all under 'The Grand' brand name, and are making their local debut with The Grand Sofo, a mixed-use commercial development on a 1.61-acre freehold plot next to the Kelana Jaya Giant hypermarket. MediaRaya Sdn Bhd, the holding company of the Asia Café food courts in Subang Jaya and Puchong, is undertaking the project. The development mirrors the trend of smaller units, not only in Kelana Jaya, but also in more mature markets like Kuala Lumpur and Petaling Jaya. "New York ka Penang bo siang! [New York and Penang are not the same!] We have our friends and family here and the people are warmer," Cheah, who hails from Penang, tells City & Country. Khoo says they have an able team comprising their three children and employees to handle their affairs abroad, leaving them free to concentrate on their projects in Malaysia. The Cheahs have two daughters a doctor and an accountant and a son, who is in charge of one of their real estate projects in New York. The timing of their return was quite intentional. They returned for the annual Cheng Beng ancestral remembrance festival the Cheahs sped off to Penang after the interview to conduct prayers and for the country's 13th general election on May 5. "Doesn't matter who you vote for, but you must vote!" stresses Cheah. So, why have the restaurateurs entered real estate? Cheah cites three reasons: it allows them to diversify from the food and beverage industry; it is lucrative; and it will help him fulfil his childhood dream of running a chain of boutique hotels. There was a time when the Cheahs ran more than 17 restaurants in the US. Apart from the two restaurants that served Japanese and Vietnamese food each and the snack bar, the rest offered Peranakan and Penang cuisine. However, the couple sold over half their restaurant business because of two things a shortage of qualified staff and landlords refusing to renew their leases. So by 2007, the Cheahs had only seven outlets.
"Most of our staff, especially the cooks, comprised Chinese Malaysians who had retired from work back home. Soon, few of them were interested in coming over, so there was a shortage," Khoo explains. Labour shortage was also an issue in their local operations, although the problem here was cost related. The Asia Café food court at Sunsuria Avenue in Kota Damansara was sold to Bali Hai for this reason. The same problem is affecting the operations of their flagship Asia Café food court in Subang Jaya's "lao juak" (lively) SS15 commercial area, which is home to a number of schools and higher-education institutions such as Taylor's University College and Inti International University. "It is hard to get more staff because of stricter immigration rules. Then the cost of bringing them in, housing and other things comes up to about RM1,500 per head, which has resulted in our staff strength dropping from 120 to 80. So, we have had to cut down to two shifts from three at our two food courts," says Mark Choo, MediaRaya's general manager. He adds that it is difficult to hire local workers because the long hours demanded by the F&B industry turn off the younger set. Dealing with some of the hawkers is another source of stress because they tend not to follow rules, he points out. "It's hard for educated people to manage them because they are quite 'choh lor' [crude]. You cannot tell them politely to stop doing whatever they like because they won't listen. They don't understand that this is for their own good. You need to be choh lor to deal with choh lor people!" However, the Cheahs still see potential in the F&B industry and are exploring a new type of dining experience that will minimise the pesky problems. "We want to go into seafood. In the US, they have these huge warehouses that can fit 500 tables and they serve really fresh seafood there, like Alaskan king crabs this big," says Khoo, spreading out her hands about 2ft for emphasis. "We will cook the food like how the fishermen do it simple. We just need someone to boil the seafood. Most of the staff will be waiters. You don't need cooks specialising in any cuisine to run this. We expect to earn revenue of at least US$1 million a month." The Grand Sofo Marking MediaRaya's property foray in Malaysia, The Grand Sofo will feature 430 SoFos (small offices/flexible offices) in a 24-storey tower and a 12-storey tower above a retail podium with nine shop lots. The first tower will have 262 units with built-ups of 332 to 1,100 sq ft and the second 168 units (built-up: 347 to 755 sq ft). The 25ft by 75ft and 28ft by 95ft shop lots are priced from RM2.4 million to RM3 million.
The land for the project, which has a gross development value of RM189 million, was bought in 2009 for RM16.8 million or RM240 psf. To date, only the units in the first tower priced at RM214,2000 to RM683,700 have been released to the public. Since their launch a month ago, about 85% of the SoFos have been taken up. Some may baulk at how tiny the smallest units are, but the take-up rates show there is a market for these products. "Most of the buyers are investors. Initially, we targeted out-of-town businesses that needed a small space for their staff. As for facilities, we have about eight banks within walking distance of our site," remarks Choo. "We planned to launch the second tower as soon as over 80% of the first tower was sold, but then Parliament was dissolved. So we will wait until after the general election." MediaRaya has not determined the premium of the second tower to the first one. Meanwhile, earthworks have begun and the project is expected to be completed is 2016. Over in Kuantan, Pahang, Cheah, via Pembangunan Pekan Utama Sdn Bhd, is involved in a joint venture on a 500-acre leasehold residential development next to Sentoria Bhd's Taman Sentoria. This project will comprise 1 and 2-storey terraced houses, although the details have not been firmed up. Redevelopment MediaRaya has also earmarked the site of Asia Café's flagship Subang Jaya outlet for redevelopment. The decade-old two-acre food court and entertainment centre will be transformed into a mixed-use development with the food court on the ground floor, more commercial space and two towers of serviced suites for students. The company estimates the student population in the area at 14,000 to 16,000 because of the presence of Taylor's University College and Inti International University. "We see real demand for student housing. Right now, the students are living even in the shophouses near Asia Café," Choo says. MediaRaya plans to sell one of the towers and keep the other for recurring income. The towers will feature 600 to 700 serviced suites. According to Choo, the project is on the drawing board and will be undertaken only after The Grand Sofo is completed. Penang plans Over in Penang, MediaRaya owns a half-acre tract in Macalister Road, opposite the Umno building, that is tenanted by a steamboat restaurant. The company plans to build a 180-key boutique hotel there in the next few years. Cheah envisions a "contemporary-style" interior with lavish bathrooms because he believes the bathroom can make or break a guest's overall experience of a boutique hotel.
The decision is also spurred by economics. "Boutique hotels are the trend now. They can actually charge more than five-star hotels! Even without a gym and a swimming pool, they can charge US$240 to US$450 per night [in New York]," marvels Cheah. In Seberang Perai, Cheah is involved in a joint venture with Boon Koon Group Bhd's executive chairman Datuk Goh Boon Koon to develop 10 terraced and 11 semi-detached shophouses in Nibong Tebal. The terraced units are priced at RM800,000 and the semi-detached units RM1 million onwards. Currently, the project is about 65% completed. All these projects might seem ambitious for the restaurateurs, but the Cheahs are confident of seeing the developments through with the help of staff with experience in the real estate industry. For instance, Choo, who was previously with Dijaya Corp Bhd, is handling the group's land and property acquisitions, and investment and property development while project head Karven Ung was involved in project management when he was with Sunsuria Development Sdn Bhd. Cheah is undeterred by the challenges and is eager to learn the trade. After all, he and Khoo designed his first restaurant and the Subang Jaya food court, although he was not educated in architecture or interior designer. He jokes that he played truant all the time in secondary school, but, as the Mark Twain quote goes, he never let school interfere with his education. 'Supply moving faster than demand' A number of commercial properties have come up in Kelana Jaya in the past few years. On the same side as The Grand Sofo along Lebuhraya Damansara-Puchong are a number of office buildings that have just been completed or are still in progress. SoFos (small offices/flexible offices) are just one version of the mixed-use/hybrid commercial offerings that developers have come up with to take advantage of small pockets of land and add another dimension to office properties, says LaurelCap Sdn Bhd director Stanley Toh. The local authorities do not allow land under two acres to be developed into condominiums, serviced apartments and small offices/home offices (SoHos). Thus, developers are offering other types, such as SoFos, that can be positioned as suitable for habitation while using a commercial title. Moreover, the small unit sizes allow absolute values to be brought down, Toh adds. He notes that there are now about 1,162 SoFos and similar hybrid office properties that have been completed or launched in Kelana Jaya. One of the more recent launches is Ideal City Development Sdn Bhd's Infinity Tower, which offers 183 SoFos with built-ups of 412 to 1,412 sq ft and priced from RM290,700. Further down the road is Mah Sing Group Bhd's Icon City i-sovos, where unit sizes range from 745 to 1,094 sq ft and prices were RM599,000 to RM745,676 when they were launched in July 2011. Ong Chong Realty Sdn Bhd launched its PJ5 SoHo in 2009, offering 138 units with built-ups of
350 to 1,254 sq ft and prices starting at RM400 psf. Some of the units are partly furnished with air-conditioning units and a pantry. In terms of more traditional office space, there is Blackstone Seven Sdn Bhd's Taragon Kelana. The office-retail property features 60 office suites with built-ups of 1,054 to 1,388 sq ft and a 7,061 sq ft penthouse. At the launch in March 2011, the average selling price was RM435 psf. In the pipeline is Datum Sports City by Perbadanan Kemajuan Negeri Selangor and Gamuda Bhd's RM600 million proposed mixed-use development coming up behind The Grand Sofo. "The development of these two massive commercial projects will create traffic congestion. The LDP is currently unable to handle the traffic volume and these new projects may encourage owners of landed properties in Kelana Jaya to cash out and move somewhere more conducive to live," says Toh. With similar development products in the pipeline, it seems supply is moving faster than demand, he says, adding that there is no catalyst to boost demand for such products in the area. Toh notes that yields are very competitive for office suites, serviced apartments and SoHos with rents averaging RM1.50 to RM2 psf per month, which translates into an annual gross yield of 4.5% to 5%. Hence, investors are expecting more returns on capital appreciation. He adds that there is potential for prices to hit RM1,000. "It will take some time for demand to catch up with supply. Even if there is demand, credit tightening in the foreseeable future by Bank Negara Malaysia and financial institutions will affect sales," says Toh. Under Bank Negara's current strict loan guidelines, banks grant 75% to 80% financing instead of the maximum loan margin of 85%, he adds. Click here to redirect to original article in The Edge Property.