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Two serviced apartment projects in KL resuscitated

Two abandoned serviced apartment projects in Kuala Lumpur (KL) that were initiated in the mid-1990s are being revived, offering a ray of hope to their investors, while expanding the supply of such buildings in the city centre.

One of them, formerly undertaken by Instangreen Corp Bhd, sits on a 1.5-acre freehold site on Jalan Tun Razak. Known as Tristar previously, the project, which is only about 30% built, is now is in the hands of LBS Bina Group Bhd (which has taken over the listing status of Instangreen) and has been renamed Golden Avenue.

The second project, formerly known as CN Gallery, is on Jalan Imbi. It was developed by Metro Jelita Sdn Bhd, which had gone into receivership following the 1997/98 financial crisis. Urban Shift Sdn Bhd is reviving the project, which has been renamed Nas Pavilion.

Both developers tell City & Country they are confident of strong demand for the respective serviced residences, citing the city address as the main lure. They also see young professionals and corporate figures being drawn by the convenient location as well as potential good returns on investment.

Golden Avenue

While Tristar was to comprise serviced apartments in one block and offices in the other, Golden Avenue will instead feature 739 freehold serviced apartment units in two high-rise tower blocks.

The units are available in varying sizes and designs. There are 212 studio-type units with sizes starting from 305 sq ft, 506 1-bedroom-type units from 391 sq ft, 12 2-bedroom-type units from 766 sq ft and nine 3-bedroom-type units that measure 1,332 sq ft. The units are pegged from RM153,000 to RM727,000 each or an average of RM500 psf.

At the end of May, the developer opened up 367 serviced apartments in the 23-storey Tower B for a sales preview. To date, about 10% of the units have been booked.

"A few of the buyers are previous Tristar unit owners. The rest are new purchasers comprising working singles and companies that are investing in the place to house clients and business partners visiting KL," offers LBS Bina Group Bhd managing director Datuk Lim Hock San.

Close to 70% of the 300-odd planned serviced apartment units had been sold by the previous developer before the project stalled in 1996. When the units were launched in the mid-1990s, the apartments were pegged from RM500 psf.

To attract buyers, the LBS Bina Group is offering a guaranteed rental return based on 5% on the selling price for the first two years. For those wishing to lease out their units for a longer term, they can apply to extend the leaseback option.

While details are pending on a tie-up between LBS Bina and a hotel operator to run part of the serviced apartments as a hotel, the developer has worked out a minimum of 6% rental return annually for the third and fourth years and a minimum 7% for the subsequent two years. The project is expected to be ready in 21/2 years.

Through its subsidiary Maju Kepunyaan Sdn Bhd that is developing the project, LBS Bina is working to woo those who had bought Tristar units. These buyers, however, have to first abort the previous sale and purchase agreement before they can buy a "fresh" unit from Maju Kepunyaan.

For Tristar buyers who want out, they will be compensated based on a plan drawn by Pengurusan Danaharta Nasional Bhd. They will get LBS Bina shares, irredeemable convertible unsecured loan stocks and cash.

As half of the Tristar buyers were from East Malaysia, the developer went on a two-day roadshow early this month to Kuching and Kota Kinabalu to promote Golden Avenue. Lim says a number of previous buyers registered their interest to take up units in the revived project.

"We have not really started marketing these units yet. We are sort of just reintroducing the development to the market. We are still working out some strategies and are looking at selling to corporate clients as well. All this will be finalised in a month or so, and will be followed by an official launch in about two months," he explains.

Besides the serviced apartment units, there are also 16 retail units and space for a restaurant and a food court. Occupying over five floors of podium, this space is for lease only.

Lim is confident that Golden Avenue will do well. He sees the project's appeal in its city location, guaranteed rental return offer and the fact that the units come fully furnished.

Located along the main Jalan Tun Razak thoroughfare and close to Putra World Trade Centre, the project is near the monorail and Putra light rail transit stations in Titiwangsa.

"We are talking to hotel operators to run the place as serviced apartments. Levels 16 to 18 have been reserved for owner-occupiers to ensure privacy for them," says Lim.

Nas Pavilion

Originally planned to comprise two office towers and a block of hotel atop a retail podium, the site of the former CN Gallery at the junction of Jalan Imbi and Jalan Sultan Ismail will now feature three serviced-residence blocks. The retail element, however, has been retained.

The change in plans for the 1.35-acre freehold tract by first-time developer Urban Shift Sdn Bhd, has been prompted by the glut in office space.

In January, the developer put on the market some 428 serviced residences in its 29-storey North Tower and 31-storey South Tower. At press time, 85% have been sold. The units not taken up are sized from 615 to 1,371 sq ft, pegged from RM221,700 to RM550,060, based on an average of RM350 psf.

Last month, the developer opened up the final and 21-storey block comprising 68 units of duplex serviced residences. At press time, 30% of these have been sold. Units priced between RM501,744 (1,288 sq ft) and RM786,760 (1,828 sq ft), or about RM400 psf, are still available.

Of the buyers, 15% are from Singapore, Indonesia and Australia, says Vincent Ng, chief executive officer of sole marketing agent Kim Realty. Most of the foreign buyers are investors, with the rest intending to stay there or want a place for their children studying here.

Unlike Golden Avenue, Nas Pavilion does not offer guaranteed rental return. Ng reasons: "We feel we don't have to. As it is, we are pricing the units below what we think the market here can take."

Ng expects leased units to fetch 10% to 12% in returns annually: he calculates that a fully furnished RM198,800 unit with 608 sq ft in built-up will be able to command a minimum rent of RM2,500 while the 3-bedroom unit, costing RM555,060, will be able to secure between RM4,000 and RM5,000 in rent.

According to Ng, 500-sq-ft serviced units in a nearby development is commanding monthly rents ranging between RM2,500 and RM3,000. The bigger 3-bedroom units of projects in the fringes of the city are said to be commanding about RM5,000 in rents.

The developer opened up 317 retail units for sale last month and to date, half of the units have been taken up by a mix of investor-type purchasers and business owners for personal use. Ranging from 129 to 868 sq ft, half of these units, pegged from RM137,000 to RM2.4 million, have been sold.

The revived project is expected to be completed by early 2006, Ng says.

Sitting in the commercial hub of KL, Nas Pavilion's neighbours include Berjaya Times Square, Sungei Wang Plaza, Lot 10 Shopping Centre and Grand Plaza Parkroyal Hotel.


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