China-backed Malaysia megacity project struggles to gain momentum

Malaysia is pushing to reopen its economy to the world after two years of closing Corona-related borders, but a $ 100 billion mega-city headed by a Chinese key off the coast of Singapore near Singapore remains largely stuck in neutral.

The combined Forest City, which includes four islands in the state of Johor in Malaysia, is struggling to market a property to core investors in China and Singapore. The project is expected to be fully developed by 2035.

Two-thirds of the project is owned by its main developer, Country Garden Holdings Properties of Guangdong, while the rest is held by a local company controlled by Sultan Ibrahim Ismail, the ruler of Johor.

“As the epidemic lengthens[ed]”Changes have been made in the direction of corporate investment, tourism and vacations, as well as project directions and other development ideas, which are definitely affecting our business,” said Country Garden in an email response to questions from Nikkei Asia.

Built near the southern tip of Johor, Forest City totals 1,740 acres – about three times the size of Santosa Resort Island in Singapore. Mixed development that includes residential, leisure, commercial and industrial areas, plans that Forest City will also include its own customs and immigration checkpoint, which will allow its residents to travel easily to Singapore.

Visitors look at a model of Forest City development in a showroom in Johor Bahru, Malaysia in 2016 © Ore Huiying / Bloomberg

But the epidemic has slowed the process of improving the sea and overall development, which is divided into eight stages, the Chinese developer said. Only the first island has been developed so far.

The closure of international borders has also hurt businesses on the first island, which includes residences, an international school, commercial and commercial areas, luxury hotels and two 18-hole golf courses.

“Our current businesses are also affected during the plague,” Country Garden said. “For example, the occupancy rate in hotels has dropped significantly while the average daily number of people towering on the golf course of course [fell] turned off [a] cliff.”

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Still, Country Garden said sales for various projects in the city of Forest were stable, without giving any data.

“Despite this, it has not changed our company’s determination and belief in local market research,” it read. “We also provide digital services such as online sales, virtual tours and live viewing to customers who are unable to physically visit Forest City.”

Malaysia, like many countries in Southeast Asia, has imposed a variety of quarantine and travel measures to combat corona virus outbreaks, but is keen to bring them back with an eye on strengthening its economy and business. Prime Minister Ismail Sabri Yaakov announced on March 8 that the country would reopen its international borders on April 1, and allow travel and tourism without closure as it progresses to coexistence and management of Cubid-19.

Forrest City has handed over keys to more than 20,000 housing units – well below the 700,000 planned residents expected to live in it by the completion of the fourth island in 2035.

Its property owners come mainly from China, Malaysia and Singapore. Forest City has also attracted buyers from Vietnam, Indonesia, Taiwan, Hong Kong, South Korea and Japan.

Country Garden, China’s largest residential developer in sales, is considered one of the most resilient private developers in a country where the entire sector has been suffering from a severe liquidity crisis since last summer.

While many of its peers, including the China Evergrande Group, missed out on debt obligations and some declared repayment, Country Garden kept its promises to creditors, as noted in the full $ 425 million redemption of foreign bonds at the end of January.

The company is also able to receive external financing from the market. Following the launch of a Hong Kong $ 3.9 billion ($ 498.15 million) convertible bond with a four-year validity period in January, its local subsidiary was allowed to register a Rmb5bn ($ 788.62 million) quota for the issuance of medium-term banknotes over the next two years by the local regulatory body. Last month.

In addition, China Merchants Bank, a medium-sized government-owned lender, provided the company with $ 15 billion in credit to fund potential mergers and acquisitions this month. Encouraging mergers and acquisitions in the sector is part of the Chinese government’s initiative to deal with the current crisis, but Country Garden is perhaps the first case where a state lender has granted a credit window for the purpose of acquiring a private entrepreneur.

Still, Fitch and Moody’s Investors Service ratings give the company very few “investable” ratings in the sector, while S&P Global Ratings maintains its junk rating.

S&P recognizes that Country Garden has “stronger funding ability than peers” given its recent record. But analyst Ricky Chang wrote in his latest note that he expects entrepreneurial sales “will be under pressure in light of the company’s high exposure to lower-income cities, where housing demand is generally weaker, especially when the sector is in recession.”

Indeed, its declining sales in February reached 32.76 billion yuan, or 30 percent lower than the same month last year, and declined rapidly from a 10 percent drop in January and a 2 percent drop last year. Although its liquidity position appears relatively solid to peers, Hong Kong country garden stocks traded have lost nearly 50% of their value in the past year.

The company issued a statement on March 13 accusing the latest “baseless” comments made online about its land and water financing in the accelerated fall in its share price in previous days, from which it has since recovered largely. She stressed that her operation was “normal and could continue to run its business as usual.”

Real estate consulting firm Rahim & Co International reported in the latest report in Malaysia 201,065 real estate transactions with a total value of 98 billion ringits ($ 23.37 billion) in the first nine months of 2021, representing a 1.8% decrease in volume over the same period last year.

The report also highlighted a surplus – or unsold properties – of 56,734 housing units, including serviced apartments and small home office units, worth 41.59 billion ringit in Malaysia as of September 2021. Most of these units were in high-rise complexes.

Johor had the most excess with 23,224 units worth 19.29 billion ringgit, according to the consultation.

However, the Country Garden said it remains confident in developing Johor, thanks to its unique geographical advantage near Singapore and a well-developed local economic base.

“Country Garden has been in the Malaysian market for nine years, and we will continue our business here for long-term development,” it read.

“We hope the government will remain proactive in managing the epidemic situation as well as invent policies and incentives to stimulate economic recovery,” it read. “We will do our part and make our contribution to economic development accordingly.”

A version of this article First published by Nikkei Asia on March 14, 2022. © 2022 Nikkei Inc. All rights reserved.

China-backed Malaysia megacity project struggles to gain momentum Source link China-backed Malaysia megacity project struggles to gain momentum

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