Aiming to almost triple the value of its real estate portfolio by 2030, Malaysia’s Islamic property investment and management group Pelaburan Hartanah has outlined two business strategies to underpin this ambitious plan over the next six years.
Group Managing Director and CEO Mohamad Damshal Awang Damit said the group’s total assets are currently worth about RM11 billion (US$2.46 billion), with almost half or RM5 billion (US$1.12 billion) vested with the Amanah Hartanah Bumiputera (AHB) Shariah compliant unit trust fund.
“The AHB fund will be having at least RM20 billion (US$4.47 billion) worth of income-generating properties by 2030. It is also critical to nurture other property investments for future AHB fund needs, meaning we will need up to another RM10 billion (US$2.23 billion) worth in reserve by then.”
Acknowledging stiff competition from others vying for commercially viable properties, Damshal said Pelaburan Hartanah will pivot its acquisition strategy away from the present focus of acquiring completed buildings – to ensure future returns from leasing income would be optimized.
“We will partner with developers at the proposal stage, before any development takes place, using a concept we call ‘forward commit’. That means we will advance up to 10% of the project cost, which provides a developer with the confidence to proceed plus lending our financial credibility to support them in raising the remainder 90%.”
Damshal said this proposal tactic by Pelaburan Hartanah is not familiar to many Malaysia-based developers and it has taken time for the concept to be persuasive. “Responses have eventually come from those with strong balance sheets, who make sure they are able to fund the project from beginning till the end. In a way, we weed out the weak opportunities.”
Another advantage for such projects would be anchor tenants already identified by the partner developer and initial contracts forged. In securing properties before construction even begins, with this ‘forward commit’ deals, Pelaburan Hartanah has a pipeline of three years ahead.
The second growth strategy is to approach existing building owners with a expense analysis where Pelaburan Hartanah is able to manage and maintain certain premises at a far lower cost – by tapping into its experience in operating as Malaysia’s largest Islamic property investment manager.
“The proposal essentially is for the owner to sell that property to us,” explained Damshal. “This unlocks the funds invested in that building and provides cashflow for expansion and operations. The building is leased back and that cost becomes an operational tax deduction, a win-win all round.”
While giving up the building title can be tough, especially in private and legacy ownership situations, Damshal said Malaysia nevertheless offers a lot of potential to be tapped for such scenarios.
“Many commercial properties in (the capital city of) Kuala Lumpur are owned by GLCs (government-linked companies) and Pelaburan Hartanah can provide them with an exit strategy to better use their capital funds. A rough estimate would be over RM100 billion worth of buildings could be optimized for GLCs with this strategy.”
Damshal is optimistic of these strategies becoming practical runways to drive growth for Pelaburan Hartanah and also the AHB unit trust fund in the long run, as the group had recently sealed two major deals in the heart of Kuala Lumpur.
“We recently signed up with Gleneagles Hospital and the National Heart Institute for expansion of their health facilities, which means we are making clear headway. There are more opportunities we are eyeing across Malaysia.”
