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All Things For All People

PKNS Managing Director Haji Azlan Md Alifiah’s insight on assets management and property outlook.

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Coming from the accountancy background with proven expertise in assets management, Haji Azlan Md Alifiah is now getting busy in the property industry as the General Manager of Perbadanan Kemajuan Negeri Selangor (PKNS).

His accumulated wealth of experience started in 1992 when he worked at Petronas, Celcom, A&W, TDM Berhad, Malaysia National Insurance Berhad (MNIB), PruBSN Takaful Berhad and Kumpulan Darul Ehsan Berhad (KDEB).

“So basically I have a varied experience in terms of industries, ranging from oil and gas to healthcare to the fast food business, to telecommunication,” he reminisces in an exclusive interview with Property Insight.

“Telecommunication has a direct bearing with what I’m doing now in PKNS because I was the head of infrastructure group,” Haji Azlan relates. “We were managing close to about RM5bil worth of assets, capex yearly close about 1.5bil, and opex close about RM900m to RM1bil…so I’m quite familiar with civil, mechanical, works, project management. I was also doing project management, project accounting, so I’m quite familiar in regards to managing project and also dealing with technical matters and also with engineers and consultants.”

Regardless of the different industries he has been involved in, Haji Azlan views them through the same lens. “If you look at the context where you must analyse where the revenue comes, what are its assets, and what are the cost components,” he says. “Because I’m a chartered accountant by background, cost management is one of my specialisation.”

At KDEB, Haji Azlan as the CFO was tasked to turn around the company and addressed the lack of performance of KDEB’s property subsidiary Kumpulan Hartanah, which Haji Azlan saw the need for the company to take private some of the undervalued assets due the markets not pricing it correctly.

“So I was the one entrusted to take Kumpulan Hartanah private, and we managed to do that in the late 2013,” he says. “We have done the listing, we have now got 95% of the shareholdings with the state, or with KDEB, and now we are finalising to take the remainder of 5% so it would become 100% on our own within the next few months. So that creation of value I think would have, created about additional RM500mil or RM600mil of value.”

PROPERTY INDUSTRY

“By doing the turnaround in Kumpulan Hartanah, taking it private, looking at the pitfalls and the problem we had, that really piqued my interest in the property business,” Haji Azlan says.

He adds, “Property, if you compared to other type of business, is something that is a need of everyone. There are three things that you need: the clothes that you wear, the food that you eat, and also the roof for your head. So property is very close to people’s heart,” he said.

“And when we look at the property business, there are things that we can bring in. I’ve been in the financial industry, I’ve been in the civil, mechanical, electrical industry, and I find that there is always an element where we can use the best in all these industries to bring to PKNS as a property developer.”

Haji Azlan manages PKNS by not looking at the company as a property player per se, but rather as an asset manager instead. “Assets have certain maturity, some have longer term durations, some medium term, some shorter term, and some have different complexity,” but while some constraints are different, the goal remains.

“When we are assets manager we have to make sure that our assets perform accordingly,” Haji Azlan says. “For example, in telcos, six months to one year after you roll up the network, immediately you can get the income,” he explains. “Whereas in the property business, it’s only slightly different. You have the planning stage, you can take one year. And then the constructions stage, you’ll take three years; and you can only start billing when 60% have been built.”

In addition, PKNS business model appeals to Haji Azlan because it is a property development company that is not looking for profits only but also at its social responsibilities. “I’m at a certain age where I do believe that everybody needs to return something to the public, to the people at large. And when you look at PKNS, since day one when we have embarked in 1964, we have close to about 150,000 units of property houses built. And close to about 85% of those houses are in the affordable housing and medium cost housing range.”

In Haji Azlan’s belief, PKNS’s reason of existence is also to ensure it provides the necessary housing for the people of Selangor, more necessarily so for the middle to lower income group. He himself has grown to love PKNS because of this aspect. “Because we do have this social obligation, and this social obligation at the end of the day gives benefits to the whole strata of people of the state of Selangor,” he adds.

“There are also other developers around, but they are mostly concentrating on the middle or upper classes of the public. So there is a need for developer that will be able to reach into those urban poor or middle income groups. This is where PKNS comes in. So we have created township in Keramat, Ampang Ulu Kelang, Bangi, Shah Alam, and so on…These gave a very good quality of living for the people living in our townships. That’s PKNS,” he emphasises.

PKNS is transforming to be more effective and efficient, according to Haji Azlan, but the company will never forget its root. “We’re still going to go forward. The make-up of our development will still be 85% low to affordable housing and middle income housing,” he says. “That’s still our target. We’ll deliver the expectation of the public.”

IN SEARCH OF EXCELLENCE

The vision Haji Azlan has for PKNS is to create a sustainable organisation. He wants PKNS to be a sustainable company, sustainable developer, and sustainable group of companies. Hence, he aims to nuture a company that has good recurring income, and be sustainable for at least another 50 years.

“If you look at historical data, close to about 90% of the companies were not able to sustain more than 50 or 60 years,” he says. A renewal process is hence needed, according to Haji Azlan, for a company to remain competitive. “You always need to do renewal – of the people, of the way you do business. By doing that, you can renew the organisation, and you can push forward. Clear new ground, get new directions, achieve new targets and design it to go beyond certain terminal life,” he says.

Another mantra of his in managing a company is to always believe in the S curve. According to Haji Azlan, “When the curves are high, typically there are not many changes there, and everybody is very happy,” he notes, “but when you are declining, you need to put it to the right trajectory again. So this is where transformation and reformation needs to be done.”

 

PKNS’S DEVELOPMENT PROJECTS

PKNS is targeting to develop within the next five years of 750k 7,500 units of affordable housings within five years starting this year, and the projects are in northern region, central region, and some in the southern region. “For example, our affordable housings that we are targeted to construct next year is in Selangor Science Park 2 (in Cyberjaya) with 500 units,” he says. In 2017, according to Haji Azlan, PKNS aims to build about 1,000 units and ultimately it would have 2,000 units of affordable housings in Selangor Science Park 2.

Other than PKNS itself, it subsidiary companies like Worldwide Holdings Bhd (Worldwide WHB) and Selaman Sdn Bhd (Selaman) are also developing affordable housings. “Worldwide is also developing between 200-300 units of affordable housing in Puncak Bestari, and this year Selaman is also undertaking affordable housing in Padang Jawa.”

Apart from that, PKNS is also focusing on the high-end development. However, Haji Azlan stresses, “What high-end brings to the picture is actually profits for us to do the affordable housings.” In developing affordable housings, he explains PKNS has to subsidise the cost of the affordable housings to the tune of between RM30k to RM100k per house. “So in total, from now until 2021 2030, we’re looking between RM1bil to RM3bil, depending on the make-up of our units. So it is very difficult if you do not make profits from the high-end one to do that.”

Haji Azlan notes that it is very seldom for other developers to be able to do what PKNS is doing for its social agenda. “This is something that I hope people understand: we have to make profit because we have to subsidise affordable housings.”

PKNS LANDBANKS

PKNS has two big landbanks, especially in Selangor Science Park 2 in Cyberjaya that is nearly 130 1,500 acres which it is targeting to start major development by this year. The company is now in detail discussion to ink a joint venture agreement with Raudhah City. “Our idea is actually to create a catalyst,” he says. “We’re looking to develop about 500 acres, and the concept is on the educational side – having an educational centre from the pre-school to the primary and secondary and going forward to tertiary, and that would allow us to be able to attract the necessary community.”

The rest of the land in Cyberjaya that is nearly 700 acres is going to be developed by PKNS itself, a departure from its ‘zero-landbank’ strategy that previously focused more on JVs. The planning of Selangor Science Park 2 is interesting, according to Haji Azlan, as the company is set to build its new Selatan office there, along with shopping malls, 2,000 units of affordable housings, and also three plots of interconnected lakes.

Its second landbank is PKNS land in Bernam Jaya, what Haji Azlan describes as the “higher hanging fruit,” which he thinks is going to mature within the next five to 15 years. According to him, aside from residential properties to be built there, PKNS is also focusing on creating more avenues for business in Bernam Jaya. “This is where we are in discussion with PLUS Malaysia Berhad one of the largest highway concessionaries to create a big R&R area which will bring business opportunities  ultimately, we are looking at developing universities, and potential MRO (maintenance, repair and operations). So if you want to extend there to become an airport or MRO facilities, it’s possible,” he explains.

Transportation-wise, Bernam Jaya has the North-South Expressway and komuter train already running across the development. According to Haji Azlan, “We are in discussion within the next few years to build a station there. This will allow for the population in Bernam Jaya, whether they work in Proton City, or whether they work in KL, to use that kind of transportation.”

He adds, “This is already in the pipeline. We are just waiting for the right moment to be able to do it. But, like I said, I’m an asset manager and when I look at assets, I have to put it into their maturity profile and also their yielding profile.

“As far as we are concern, these landbanks can last us for another 20 years. Therefore, on our strategy, we also need to look further at our landbanks, and we are actively in discussion with the state and also with private land owners to acquire or to buy land. Even our biggest subsidiary company Worldwide is also in the midst of getting more landbanks. So this is our strategy to become sustainable developer, to be able to sustain and give recurring income to the state.”

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URBAN REGENERATION

Urban regeneration project is also one of the areas that PKNS has been embarking upon, and one of them is Datum Jelatek. It is “part and parcel of social obligation” to the people, according to Haji Azlan, “because most of the time, in certain matured neighbourhood, industry should not be there any longer. It should be moved to new area because those areas are now full of neighbourhood of people. Urban regeneration is something that needs to be done. Otherwise you create ghettos social problems and also decays.”

DatumCorp International (DCI) a fully owned subsidiary of PKNS will be in charged on all Datum series projects. DCI also has other Datum series that it is working on, and one of them is Datum In City whose Phase One is already under construction and set to be delivered by end of 2016, and it is among the biggest project in Petaling Jaya with a GDV close to RM3.5bil.

“We also have other Datum series in Bangi, in Shah Alam, in Kota Damansara. So we’re looking at developing all of these in phases. We do have a lot in our plate so we are actively looking at adding new landbanks for sure, but we are very much attune to the market and market outlook. Most definitely, especially on the residential projects developments, we are progressing,” he says.

“We’ll be looking closely at the market whether market condition is improving,” Haji Azlan says. “So we’re looking the next nine months to give us the signals, especially on our Datum series. But our high-end development that we are embarking without stopping now is actually PJ Sentral. That one is going to be the iconic development in PJ, it would be the highest tower in PJ at 57-storey high, and would be the main entrance to the PJ Sentral project. So these are some of the things we are embarking upon, something we are waiting for the main developer to complete the infrastructure. Once that’s done, we will take over and build our towers there. We are basically now in the planning stage for that.”

Another strategy of PKNS is that it is designed to not only reap profits, but returns it back to the public. “As far as the financial goes, since day one, we managed to create a value of close to about RM5bil NTA (net tangible assets), as of 31st Dec 2014, and this NTA is created from the returns we get from the project, and basically close to about 70% of this return, we cycle back into acquiring land like Selangor Science Park 2, and also Bernam Jaya. Selangor Science Park 2 and Bernam Jaya have close to about 730k 9,500 acres in total which were bought not only from the state but other land owners at market price. So close to about 70% of the fund we created was used to create wealth for the state,” Haji Azlan justifies.

He furthers his point by adding, “If you look at that perspective, PKNS is holding the wealth for the people in that context, and we are then able to deliver for future generation. So as far as PKNS is concerned, it has been designed that way. And what we’re trying to do now is trying to reap this, in an orderly manner, in a sustainable manner.”

PKNS is also known for its industrial zones, and one of the ways PKNS is competing differently with other developers is that it also attracts investment into industries. Haji Azlan exemplifies, “We attract that kind of manufacturing concerns: they will need the workers. So when they need the workers, then the migration happens. I don’t think we compete so much on the same arena, because on one side, we also do the high-end development, we also do affordable developments, we also do industrial developments, and we attract the industrial developments in the most developed state in Malaysia. One of the key criteria we look at, when we design our master plan for development, is that we design it in such a way it has a balance. It has the opportunity for people to live, work, play, exercise, enjoy. Because we like to create community and we have this motto: ‘Building communities, enriching life, realizing dream’.”

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MARKET OUTLOOK

“The market outlook in terms of the offering is actually slowing down except for landed properties,” says Haji Azlan. He also thinks that there will be a situation of oversupply for the commercial units. Nonetheless, he views that Malaysian property outlook as being cautious.

For the affordable level, he says, “between RM160k – RM250k, or slightly higher to RM300k, the rejection rate on the borrowing, the lending to this group of people of the population, is close to about 70% being rejected. So on one part, the monetary policy has managed to reduce certain level of this speculation.”

Haji Azlan’s personal opinion is that this situation has to be relooked by Bank Negara, to encourage “the population, especially the newly graduate and the newlyweds to buy their first house.” He adds, “I do understand that the data in regards to household debts is very scary, close to 84% our household debt to GDP ratio, but we have to find ways. This is something we are always in discussion with the state; to find ways how to be able to fulfil the needs. What we are afraid of, when the borrowing is too restrictive, then it is this market that will face the consequences, not the people who have it.”

PKNS is currently being circumspect regarding the market outlook for Malaysian property. Although some of PKNS’s future developments are already in its pipeline, it has plans to curtail some of these investments and wait for the upside. According to Haji Azlan, PKNS as a property player in the market is keeping its radar on but, regardless of obstacles, PKNS will move forward and continue in their responsibility to develop properties for the people.

“So this is where, come our 50th anniversary last year something that we need to be able to articulate, able to plan, able to execute, so that we are able to sustain ourselves beyond the next 10, 15, or 50 years. So this is where we also want to create new business. Like I said, I’m not a property man per se from background, but I’m an asset manager, when I look at asset, I need to be able to make it more efficient, more effective, lengthening the life of those assets,” he said. “That’s what I’m doing.”

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