Started from the bottom up
Dato’ Sri Dr. Vincent Tiew is revealing the sustainability secret of Andaman Property Management Sdn Bhd in the industry
As a prominent personality in the property industry, Dato’ Sri Dr. Vincent Tiew, with a background in the retail industry, has built a few successful property developments, under Andaman Property Management Sdn Bhd.
Having an education background from accounting, business, and also marketing, he started working at the age of 19 in the education industry. Tiew’s first job was with an education consultancy company, that provides services for local colleges, to bring in foreign university programmes, and then collaborate with each other.
“I was in the education consultancy for over a year after then, I moved on to work in a group of colleges. During that tenure, I was in business development as well as student recruitment for the private colleges. Today, these colleges, together with many others, have gathered and come together, as a consortium of group of colleges, under the umbrella of SEGi University Group. After serving there for a couple of years, I was transferred by the owner of the college, to serve in their shopping mall industry,” said Tiew.
At the age of 25 years old, Tiew was already being appointed as the general manager for a public-listed company for property development and management, as well as shopping mall management. He was managing four shopping malls during that time before he left and joined Berjaya Times Square as one of its youngest general managers, under the Berjaya Group. Thereafter, Tiew went back to manage a shopping mall named Summit USJ.
EARLY DAYS WITH ANDAMAN GROUP
“I eventually joined Andaman Group on its 4th year of operation. This year, Andaman is celebrating its 10th year anniversary. I myself have led Andaman Group for a solid six years. For those six years, under my management, together with my board of directors, and my whole team, that consists of less than 100 people today, we have successfully achieved total accumulated sales to the tune of RM3 billion. The unique part is that we are not a public-listed company and 90% of our projects are without any loans from banks.”
Tiew elaborated his point by saying, “We have many divisions under the Andaman Group. We have travels and tours, hospitality, mining, security services, etc., all headed by different CEOs, while I take charge of the property section. In the past three years, we are known to be quite a caring employer, simply because the company has done more than 14 company departmental trips and vacations in the last 36 months. That’s like an average of a trip every four months. These trips are overseas trips, vacations not business trips. Those major trips consistently include office boy, tea lady and receptionist. That is one thing that I can stand (and say) proudly on stage, each and every time, challenging all the 99.9% developers throughout all Malaysia, (and ask) can you do it? Can you match what I have done for my employees? Can you match what I’ve done for my colleagues?”
He also claimed that his employees gain an average of 36 to 60 months bonus / incentives / profit sharing each year for the past three years. “Andaman’s employees are given very big discount and unlimited options to buy any products developed and launched by Andaman Group. So you know, staff discount is like giving money to your pocket right? It’s as good as that. We want to ensure the staff stays on. We want to ensure they take pride in the projects we develop, even if they are in the construction team. This is an ideology by Andaman.”
“On the surface, for a non-property developer, you cannot feel us. You cannot feel our threat. You cannot feel our strength, power, and dynamism. If you’re in the property line, joining the Andaman Group is only via a word of mouth and referral. We don’t advertise to get our staff. So we feel more comfortable having colleagues who already know or are familiar with the character of the person that has been recommended to join us. With less than 100 staff, we generate sales turnover of an average 500 million to 600 million a year. Most of the developer companies in Malaysia, would probably have hired 300 to 400 staff. So this is the difference about Andaman.”
According to Tiew, Andaman Property Management has three groups of stakeholders. “First, not in any priority in listing, are the employees. The second one are actually the shareholders.”
“For every project that Andaman does, we go for optimum returns, not maximum returns. Optimum means that if you want to achieve a sales turnover, let’s say RM600 million a year, we would rather work hard in three different projects in order to accumulate RM600 million GDV, instead of going all out, doing one township, and trying to get the RM600 million in one single project. For us, we would rather sell cheaper, go solid consistently, confidently low-risk, and work harder in three different projects. Accumulating it together, we can still make up a RM600 million GDV each year. So our philosophy is different. Work harder, spread it out, work the extra mile. We don’t talk about maximising, we talk about optimising. Optimum returns on investment is already good for us.”
“The third one are actually the buyers – our buyers that buy our property. After nine years, Andaman has finally adopted a tagline, ‘Generating Value, Creating Wealth’ in July 2014. The reason we created our tagline is because we finally are confidently and comfortably able to stand by the point and say, whoever buys the property or invests in properties built, developed, launched and sold by Andaman, (that) at the point of purchase, we want the buyers to make money,” he stated.
Andaman is well-known for its strategic development in proven matured locations. “Let’s say we have a development in Subang Jaya, and there are ten developers doing similar project at the same time. Let’s say, with an apple-to-apple comparison, in terms of freehold title, same size, same type of furnishers, almost the same location, etc., almost all factors the same. On average, let’s say, they sell at RM500k to RM650k, if Andaman goes in, we will launch at RM400k. We want a clear cut profit, we want a clear cut savings, and we want a clear cut value for money for the buyers. That means when you buy, you are already buying cheaper by at least 50% compared to other developers. So that’s the different mind-set that we adopt. People ask ‘why do you need to do that? Can you still make money after doing that?’ Of course we can.”
“There are really good profits to be made in property development. If in every project that you make, even if you made a return of let’s say 12%, and let’s say your project is RM500 million, your 12% is already a clean clear cut nice RM60 million. It’s better if you push yourself to make RM60 million or you try to push yourself to make RM160 million from the same project. Of course no businessman will do development and want to lose money. So does my pricing mean we will lose money? Of course not. So imagine, if, with my pricing, I still make money, what about those who sold 20% above us?” he questioned.
“90% of the developers are selling at that kind of price and everyone is happy with that kind of ROI. We are happy that if our buyers can be our followers, from one project to the other. It seems that is the strength of loyalty (and we can) save on our marketing budget. We have a lot of repeated buyers, so this is one of the strengths we have. The thought of making money at the point of purchase – we want our buyers to be able to do that.”
“So the comfort is this, you have bought your property at a fair price. So you have low-risk, you’re not subject to any economic or any extraordinary circumstances. What if, three years to come, the economy turns to a state of depression? The buyers for the 90% of other developments will face great difficulties . For every project that you bought with Andaman, your bought it at Low price. You are enjoying two things. First is your capital gain. With a lower selling price compared to other developments, it means you’re buying lower than other buyers. Therefore you can let go (sell) the properties easily. Number two, if your acquisition cost is so much lower per square foot, it means that even a low rental can give you a high yield.”
Tiew advised people not to buy property speculatively. “That’s why people get into trouble, because they went for a speculative purchase. They bought high not because of absolute value, (but because they) bought high, based on price per square foot. That’s the key word about property development.”
“So my whole ideology is this, it’s about the fundamentals. Buy from a good location good products, but with a fair price. A fair price is so easy for me to determine for Andaman. When I checked everybody’s price, it is considered the market’s price, and I sell it 20% below that price. To me, that is fair price and that becomes a good buy.”
Andaman has been facing challenges and circumstances that are also faced by other developers. What is different about the company, as believed by Tiew, is the way Andaman handles those challenges. “Let me give you three examples of why, today, Andaman can reward its staff like that. Why Andaman does not become a listed company? In whatever geographical area that we go, in most locations and places we go, we are the leader. For example, four years ago, we went into Cyberjaya. We built the project called The Arc @ Cyberjaya, consisting of 1000 units of condominium. Our starting price was over RM300 psf. I launched it in 2011, completed in 2014.”
“At that juncture, there were less than five developers in Cyberjaya. My land acquisition cost was a fraction of whoever that follows us 12 months after that. How could you compete with me if your land acquisition cost is already double my cost? Or even higher than that? So when we went in, the competition were like five parties including Setia Haruman, the original master developer. When we went in, we acquired very cheap land on a prime location. With this kind of land price that we have, with the right infrastructure on the main road, we don’t have to do wonders. With the reasonable pricing that we set, it was a home-run sale.”
“When we completed and handed over the keys in 2014, there were already 32 developers in Cyberjaya, each with different land acquisition cost. The level of competition was so intense. Assuming I bought my land at RM50 psf, those people might have bought it at RM120 psf. How would you compare to my price or my product? Due to averaging when I developed out my units, my land cost over each unit is very minimal. I have the advantage of cost and being a leader.”
“Example number two – we went in to central Bangi, about 24 months ago. There were no developers in Bangi, except two or three, that were building a limited number of landed houses. So we went in. Obviously we had a super low-land price. 24 months ago, who were looking at Bangi? But when we went in, within nine months after that, a giant developer went to Bangi as well. Many more that came in in recent months. From the last quarter of 2014 to first quarter of 2015, you can see many big developers buying hundreds of acres of land, and announcing hundreds of acres of developments in Bangi.”
“Let me just share with you one thing. This is the centre of Bangi, and in a two-minutes radius, the entire Bangi banking community is within our vicinity. There are many big developments that are called XYZ in Bangi, ABC in Bangi. For your information, each one of them is more than 10km away from Bangi town centre. But it’s still call Bangi. How can you compete with me if my project is so prime? I went there so early and I’m selling it so cheap, but having a very high-end development, to the people? You can’t.”
“Now I already sold almost all of my apartments. My construction of the shopping mall is midway. I have nothing more to sell there. By the time I wrap up my sale, those developers are still struggling trying to finish their stage two, (or) stage three projects. However, the economy is probably changing here and there. When the timing is about there, we break-through the market without waiting for others.”
“In 2012, what Andaman did was, we went and bought strategic land banks outside of Klang Valley. For example, we bought a parcel of land, a 10-over acres of freehold land, in places that no top 50 developers in Malaysia will go, such as Slim River. We went in, we bought land which is only a fraction of the cost, freehold but commercial, only a few million ringgit. We generated RM100-over millions in sales. Let me ask you, what is my ROI? This is even more profitable than building two blocks of condominiums.”
“The game is this. Do you take a hundred million ringgit put into property development to make another hundred million ringgit? It’s all about how much cash you take out of your pocket. So, do I need to do a project that I have to come up with RM150 million cash, in order to make another RM150 million? To come up with RM150 million cash, I think 90% of the developers really need to go for loan. You see the difference between developer vs developer? RM1 can make how much? My RM1 vs your RM1? So do you know why for some developers, they make RM600 million in sales turnover, they only make RM60 million profits?”
“There’s no continuity. If you brag about having 28 projects on-going, and the next 24 months, you don’t have another project lined up for launch, I guarantee you, the developer will cut the staff numbers faster than you can react. It’s very simple. Look at the annual report of the public-listed developer companies, look at how much sales they do a year, and look at the bottom line, how much profit they declare. Who makes more money in percentage?”exclaimed Tiew.
THE ARC @ AUSTIN HILLS
“My upcoming launch, call The Arc @ Austin Hills JB (Johor Bahru). This freehold project is located in Mount Austin, which is a very stable and matured area, and is competing against 12 different strong developers. We are going to launch it in August. This unique project is a joint-venture with Majlis Bandaraya Johor Bahru (MBJB). Who is the land owner? Majlis Bandaraya Johor Bahru. What is my land cost? Reasonably low. How can you compete with me? You can’t. Where am I located? The only condominium overlooking and adjoining the golf course, you can see the golfers playing golf. Whereas the other 12 high-rise buildings, totally don’t have golf course view. Nearby, adjacent, but not overview. What we do now is, we take all the 12 developers prices,we take the cheapest one, less 20% and we launch it.”
THE ‘GUARANTEED RENTAL RETURNS KING’
“When Andaman first started, we started with RM1 million of capital. When you have very little capital, you have to complete the first project entirely. Then only you can see your profits and cash at the tail-end. Whatever cash you collect also has to go to the contractors. So that’s why, the first four years for Andaman are very quiet years. A lot of staff left because there’s no bonus. When a small company is trying to grow, you have to wait for your money to eventually return.”
However, Tiew said, “Once we’re in the 5th or 6th year, we grew quite fast. How did we ride through that period? In most media, most developers in Malaysia acknowledge Andaman as the ‘GRR King’. That means, when Andaman launched a project, we lease back the property immediately on the day we sign S&P. We lease it back from you, using the same developer company. So from that time we started our GRR project, our sales are very consistent, because we give confidence to the buyers. Whatever you buy, at the point of purchase, you will sign the rental tenancy agreement to lease it back to the developer.”
“It seems that at that time, until today, Andaman has successfully constructed, launched, sold, completed, and handed over keys for more than 2000 apartments and condominiums on GRR scheme. So that means until today, Andaman is still managing more than 2000 units of properties built by Andaman, and every three months, paying by telegraphic transfer or by cheque regularly, as per the agreement into the bank account of these 2000-over buyers until today. How could Andaman do that? The philosophy Andaman has is, whatever project that was launched, we must first secure the master tenancy agreement with the universities or colleges in advance, way before we launched. We already ascertained the sub-tenants before we even launched this project.”
“Starting from 2014, there are a few projects that are already abandoned in Klang Valley, because these developers tried to do GRR, without having a tenant in hand, and trying to cost in the future rental of three to six years into the selling price and trick the buyers like a stupid fool. What happened? The buyers actually take their own money, give it to the developers, and slowly let the developers pay them back in three to five years. Is that what you want? But that’s what happened,” he added.
“You see the differentiation of strategy of what Andaman did since six years ago until today? The philosophy is, if there’s no confirmed and signed master tenancy, we will not launch a project with the package of GRR. We will launch it like a normal property development instead. Can you imagine? In the worst economic condition, you continue receiving GRR constantly, you will say thank you and you will hug Andaman. People cannot rent out but you can, because you rent out to the developer.”
Why people call us the GRR King? Tiew explained, “Because there are three things. One is because of the 8% return per annum that we do. Not many people can do it. Number two, because of the quantity. We do 2000. A lot of developers tried to do GRR but after doing one to two projects, after 200 units, they stopped. For the new project, they do not dare to do GRR already. Number three is because of our flexibility and legality of this GRR. That means, we don’t use an associate company, we use the developer company itself. The location that we go, must be among the cheapest psf of selling price. Then furthermore, it’s always fully furnished. We have GRR up to six years, ten years, and the one in Cyberjaya up to 25 years.”
“GRR works and is most appreciated at the worst time of economy. So in the years of great boom or great appreciation, a lot of people don’t like GRR because of it is slow money. GRR is only 40% of our total project. Only when we have contracts, we do that. Those years, were the years that we grew. Those buyers or investors who stayed with us appreciate us, and they will appreciate us even more in the coming years.”
MALAYSIAN PROPERTY MARKET
“I actually have a few observations. My prediction from 2015 to 2016 is that you’ll see a lot of prime land banks being available throughout Malaysia. That means prime locations in Johor Bahru, Petaling Jaya, Subang Jaya, Cheras, or KLCC surroundings or Penang surroundings, we never thought there will be a project being launched there. Another point is, surprisingly, the price will become fairly realistic. I foresee, in terms of the property market itself, it’s about finding the right positioning for all developers. They need to do much more, in order to cover their interest and all that,” concluded Tiew.
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