Yesterday, Mah Sing Group Bhd announced that they had secured a project to develop part of the former Pekeliling flats area into serviced residences and retail units with an estimated gross development value (GDV) of RM900mil. To be known as M Sentral, the project will comprise serviced residences and retail units along Jalan Tun Razak-Jalan Pahang and forms part of a privatised urban regeneration project in Kuala Lumpur.
The Jalan Pekeliling flats.
As per their JV agreement, they will get the sole rights to develop the land for RM106.6 million, of which 60% of it to be paid in cash, and the remaining is 40% in the JV company for the land owner. If you look at the size of the plot of 4.08 acres - RM106.6 million translates to RM600psf - which is considerably a damn good deal. Furthermore, based on that, 60% cash - is about RM 64 million - and that means Mah Sing pays RM360 psf upfront only to develop the land.
In comparison, land plots further inside - say Sentul and Jalan Ipoh are going at RM450++ psf and much more - so this deal, right on Jalan Tun Razak at RM600 psf is an awesome deal. Taking into consideration of the land cost vs GDV - thats less than 12%, making it the perfect deal. Lets say the construction costs, authority fees, financing costs and consultant fees as well as marketing costs come up to about 60-65% of the GDV, they would still make a very handsome 23-25% profit margin on GDV (about RM 225 million)... and that, does not include the potential upside that is expected for the development. I believe that the prices in the area would appreciate say, at least 15-20% in the next 4-5 years - and that would translate into additional profits for Mah Sing.
Now I am curious and excited to see what Mah Sing does to the land. Serviced residences and retail units sounds too vague. I wonder if they will bring in their successful ICON series into this - those SOHO/SOVO units have been receiving tremendous response, and I reckon that they might just bring that in here. =)
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