There's gold in Johor's waterfront

Lim Kang Hoo is passionate about the southern-most Malaysian state's potential
Pauline Ng Business Times 3 Mar 12;

DRIVING in Johor city and along its new six-lane Coastal Highway, the state's waterfront potential is obvious to most, particularly since land costs are only a fraction of Singapore's.

Having accumulated substantial portions of it over the past 15 years, starting at about the time when the Asian financial crisis hit, Lim Kang Hoo must think he is sitting on a gold mine.

The Selangor-born businessman continues patiently to 'prospect' the land, having received reclamation rights in exchange for his assumption during the Asian financial crisis of RM200 million worth of debts by state investment agency Kumpulan Prasarana Rakyat Johor (KPRJ).

Now a substantial owner of 3,000 acres of prime waterfront land, he has worked tirelessly to convince the authorities and investors of Johor's potential.

Former Prime Minister Abdullah Ahmad Badawi agreed and, in November 2006, launched Iskandar Malaysia - an enormous 2,217 sq km area - as a special economic zone. The initiative has continued under Mr Abdullah's successor, Najib Razak, who officiated at Mr Lim's Iskandar Waterfront Holdings' (IWH) 15th anniversary last week.

Of Iskandar, the zones facing Singapore, including IWH's Danga Bay, are considered the most likely to take off.

Even then, it will need huge investments.

IWH has indicated the estimated gross development value (GDV) for a planned integrated waterfront city encompassing the three key areas of Danga Bay, JB-city centre and the Tebrau Coast, to be in the region of RM80 billion, and that it will take 25 years to develop the 25 km stretch.

IWH is a special purpose vehicle (SPV) 60 per cent owned by Mr Lim through privately-held Credence Resources Sdn Bhd, with the remaining 40 per cent owned by KPRJ. The SPV recently made a mandatory offer of 76 sen per share for shares of Bursa Malaysia-listed Tebrau Teguh.

Land owned by Mr Lim, KPRJ and Khazanah Nasional unit Iskandar Investment Bhd (IIB) will be consolidated under IWH. Mr Lim maintains that the corporate exercise is necessary to delineate the interests and zone drivers better, but emphasised that all initiatives remain a private-public partnership with the state government.

IWH, which currently owns 33 per cent of Tebrau Teguh, will fully own Danga Bay Sdn Bhd (DBSB), 72 per cent of Iskandar Waterfront Sdn Bhd (IWSB), and 20 per cent of Iskandar Coast Sdn Bhd (ICSB).

IIB will hold 28 per cent of IWSB and, because of its 80 per cent stake in ICSB, be in charge of driving the latter which owns about 2,000 acres of land, mostly in Nusajaya.

But in the Danga and Tebrau areas, Mr Lim is the undisputed driver and promoter. More recently, the transformation and redevelopment of the JB central business district (CBD) was also put under his purview.

Starting out as an underwear salesman, the self-made 57-year old tycoon remains indefatigable, especially now that he sees 'light at the end of the tunnel.'

Mr Lim, who also controls listed infrastructure and highway concessionaire Ekovest Bhd, maintains that his other private concerns have helped him pump money into Danga Bay's expensive reclamation works.

Since the settling of a long-outstanding Points of Agreement between Malaysia and Singapore last year, ties between both countries have warmed sufficiently to encourage businessmen on both sides that Iskandar is worth a second look.

Malaysian builders have been flocking to the state, while foreign investors such as Singapore's Azea group and Australia's Lang Walker are already in, while others continue to nibble. How quickly IWH can land bigger names such as CapitaLand remains to be seen.

At the moment, pricing appears to be the main issue. For IWH, Mr Lim points to reclamation costs and risks. Only about 300 acres of Danga Bay is on solid ground and, in the interim, about RM600 million has been spent reclaiming 500-600 acres of waterfront land. Another 1,000 acres remains to be reclaimed (IWH's also has landbanks along the state's rivers).

But funding IWH's grandiose plans - different parcels have been earmarked to function as distinct zones, including finance, entertainment, a marina, commercial and mixed development - will require huge investments.

Consider the proposed Venice@Danga Bay.

The federal government has promised RM200 million in facilitation funds since it believes the concept will appeal to tourists, especially Singaporeans. Located adjacent to Taman Sutera and Taman Putra, the precinct will be developed in two phases over the next 10 years, at an estimated GDV of RM1.5 billion. About 4.5 million sq ft will be built under the first phase and the masterplan includes a canal network, street mall, hotel, soho and service apartments. IWH hopes private equity funds will sign up.

There are not a few Iskandar and Danga Bay disbelievers. After five years, most say only a few highways and buildings have been completed and that the Johor skyline remains much the same.

PA International Property Consultants executive director V Sivadas is of the view that Iskandar's transformation will take 50 years or double the projected time to realise. He warns of a property glut if developers are not careful.

Mr Lim's mother is also unconvinced. She had questioned the wisdom of reclaiming so much land and using a Hokkien proverb, pointed to the futility of dumping sand into the sea given the enormous effort required to make a difference.

Mr Lim jokes that his fate is linked with Danga Bay because of his name jiang he (river), but willingly concedes he might not be a good businessman given the measly returns on investment to date.

However, he is quick to add: 'But sometimes businessmen are gamblers.' Left unspoken is the conviction that if not he, his heirs will have the last laugh.

But regardless of whether he lives to see his vision achieved, he believes it is crucial for Johor to have a masterplan.

'If nobody does this, it will forever be like this!' he said.