Developers target on Damansara Heights

An artist's impression of Damansara City at Pusat Bandar Damansara by GuocoLand (Malaysia) Bhd

WITH various developments in Damansara Town Centre or Pusat Bandar Damansara (PBD) by private developers and the MRT line, things are heating up.

There is Tan Sri Desmond Lim Siew Choon’s 15-odd acres and GuocoLand (Malaysia) Bhd’s 8.5 acres. Both developments will benefit from the public rail transport and the offices moving from city to suburbs.

One new aspect to the growth of office space in the leafy and quiet neighbourhood of Damansara Heights is the likelihood of Hong Leong Bank moving its corporate headquarters to the area.

“If this happens, GuocoLand’s Damansara City and the overall PBD area will benefit from the Hong Leong shift,” says a source.

Its corporate headquarters is currently in Wisma Hong Leong, Jalan Perak, Kuala Lumpur, an 11-storey building owned by Hong Leong Assurance Bhd, a wholly-owned subsidiary of Hong Leong Financial Group.

Located in the heart of the city, Wisma Hong Leong was built about 20 years ago, a source says. “It makes sense for Hong Leong Financial Group to demolish the building and rebuild it to its permissible plot ratio of 8. This will provide for a gross floor area of 808,000 sq ft for the new building,” he says.

The plan by the group, he says, is to redevelop the Wisma Hong Leong site. Damansara City is expected to be completed in late 2015. 

The potential re-location of the headquarters of Hong Leong Bank to Damansara Heights comes as the surrounding area is set to undergo major cosmetic and structural changes.

Land prices in the area have shot up and have benefited Guocoland somewhat.

On Aug 25, 2014, GuocoLand which has 8.5 acres in PBD, announced a 694% jump in its fourth quarter net profit for June 30, 2014 to RM112.32mil from RM14.14mil in the corresponding period last year.

The jump came about as a result of the company conducting a valuation exercise – based on FRS 140 Investment Property – of its investment assets in Damansara City. The exercise involved two office blocks, a retail mall and an elevated car park but not its two residential blocks which it is selling at RM1,700 per sq ft, according to a RHB Research report (Sept 2, 2014) and a hotel. 

The valuation involved its investment assets, not land. Hence, GuocoLand’s valuation should not be linked to land prices, sources say.

Nevertheless, that huge jump in profit in GuocoLand’s books started the ball rolling and coupled with an earlier land purchase by Lim of Malton at a whopping RM1,628 per sq ft, when it was valued for RM1,086 per sq ft, the stage was set. Something is surely happening.

Sources say Lim’s land purchases do not set the benchmark for that area simply because they are not normal market deals. Therefore, the prices he paid should not be viewed as benchmark prices because “they are not an outright market sale”.

“They are not a suitable benchmark for market value per se (for that area),” a source says.

However, the overall story, the source says, is: Will other property companies embark on annual valuation, just to book higher profits?

Sources say it may be well and good for property companies to undertake annual valuation during the good times. But what if the property market turns? Will they book losses? Already, the property market is showing signs of a slowdown, sources say.

That aside, the Damansara City land, according to sources, may have been purchased at less than RM500 per sq ft many years ago. By all measures, it should be a profitable venture for GuocoLand. 

However, with Desmond Lim entering the fray with his 15.84 acres, GuocoLand’s vision may be somewhat dimmed, sources say.

GuocoLand’s mall may suffer because Lim holds the “entrance and exit” to his mall via the Pusat Bandar Damansara MRT station. Two malls and two hotels are being planned there, besides some serviced apartments. – By Thean Lee Cheng - The Star