Tuesday, April 30, 2013

The Problem With UMLand's Seri Bukit Ceylon

Earlier I wrote about some issues in Seri Bukit Ceylon, at one time, the star of the Bukit Ceylon expat enclave. It wasn't until I attended the AGM on the 20th of March recently I learnt more about the depth of the problem.

To prevent myself from being sued, I will just present as much facts as I can as what I am about to write implicates certain individuals, the former building manager, Henry Butcher and also the developer, UM Residences, a subsidiary of UMLand.

As we all know, Seri Bukit Ceylon was built by UMLand in a JV with Singapore's Capital Land. I actually attended the 1st AGM by the Joint Management Body (JMB). I was really impressed by that meeting and the positive gestures given by UMLand, at that time helmed by CEO Andrew Wong. When he handed over the management of the building to the JMB, he very generously wrote off the deficits from the accounts so the JMB can start at par and also provided the JMB an office at a nominal rent of RM1.

This office is to become one of the center of dispute between UMLand today and the management body. Much has changed...

UMLand or their subsidiary UM Residences actually owns the office, and other properties in the building which includes the former Somerset's lobby, an empty hall on the 4th floor facilities deck, a shop currently tenanted by a popular restaurant, Neroteca and they used to own a small but prominent shop on the ground floor which has since been sold. 

Let me talk about the shop 1st of all, as I used to have an interest in it. This shop is located at the front of the building and it was initially occupied by Kiosk. When Kiosk went belly up, the shop became vacant and I immediately approached UM Residences for an opportunity to rent it as I was then interested to run a little juice bar. I understood then the rent was only RM1,200/month. However, I was told I will not be able to rent it because the city council (DBKL) will never allow plumbing to be installed in that shop. So, I dropped the idea and the shop was eventually taken up by Neroteca as an annex. I was upset later to find out that Neroteca was allowed to build plumbing to supply water to a sink in the shop.

After a couple of years, Neroteca gave up the shop and it became vacant again. That time, I again approached UM Residences (UMR). I was told the developer might be interested to sell the shop. When I enquired for more details, the UMR manager said I should make an offer and write in. So, I did write in my proposal to rent the shop at RM1,800/month, to turn the shop into a trendy juice bar in a joint venture with one of the largest retail outlet in Malaysia. I thought by this offer, UMR would be interested as the business will add value to Seri Bukit Ceylon, at that time one of their flagship development. But to my dismay, UMR was not interested in this at all... 

At that same time, I also approached UMR to make an offer to purchase the shop through an agent. Later I was told, the shop has been rented to a sundry shop operator who is doing this....

I think immediately, the value of Seri Bukit Ceylon, or at least the perception that it is a high end condo dropped several notches. Recently, I found out that the estate agent whom I engaged to negotiate with UMR apparently bought the shop and rented it to this sundry shop operator for RM2,000/month.

A lot of other things are happening. As we know Somerset are now just operating their 48 units remotely. Well, UMR who owns the lobby sold it - yes, they sold the lobby! And the new owner of the lobby, we don't know who, has already begun to renovate it.

This now suddenly reminds me of a case recently in Petaling Jaya where the apartment's car park was sold off leaving the apartment dwellers nowhere to park their cars.

UMR is really on a selling spree... because now they have given the Seri Bukit Ceylon management body till end of April (today) to vacate the office as they want to sell it too. On paper, I think UMR, since they own that office and are renting it to the management body at a nominal RM1 have all the rights to sell the office. However, morally I think this is wrong... UMR have the obligation to provide the management body a suitable space to operate as an office. The space they have now offered to provide is a small, dark store room at the back of the building.

This is what UMR call a suitable office for the management body! This is, in UMLand's opinion, suitable for a high-end serviced apartment... I am utterly dismayed and awed by their class!

Then Henry Butcher left. This got all the owners concerned. But there are a lot going on which nobody knows what is really going on as there are 2 sides of the story. From what I know, this is the 1st building management AGM I attended where the audited accounts was not tabled. Apparently the accounts till today has not been properly audited. I approached the Management Body's Treasurer about this. He explaint that the reason was because Henry Butcher has not been able to explain and account for all the figures to his satisfaction. To be fair to Henry, I asked why was this not explaint to the owners during the AGM? At least the un-audited accounts could have been presented and all the disputed figures highlighted to the attention of all the owners. 

There are also a lot discussed about the role of Henry Butcher, as a professional building management company but I will not write here as I have not been able to verify them. 

With all these troubles, some owners actually approached me and asked me is this the time to sell and cash out from Seri Bukit Ceylon? My answer is pretty simple... NO... especially after what I have highlighted in this blog. Haha... 

But honestly speaking... I say NO, don't sell because Seri Bukit Ceylon is still an attractive building to tenants and owners' alike. There are a lot of potentials ahead especially after the completion of the MRT  and One Ceylon just minutes walk away. Menara PMI next door has also been sold and the new owner is expected to make the place into a nice office building. Plus where else can you find such a location at this price? I say there are no perfect properties. The density of Seri Bukit Ceylon is still small enough for the group of owners to do something and get the building in shape again. And this is exactly what we have done in the AGM. The market value for a 1br unit here is about RM600k today. Where else in Bukit Bintang can you buy a 640sf 1br unit for this price? All the new launches are smaller in size and priced no less than RM900k so what are we afraid of? No new competitor can come down to the rent level of Seri Bukit Ceylon today and no existing competitor in the vicinity can also go up to the same standard and size of this property. 

So, let's just keep it for now. We are after all, long term investors :)   

Tuesday, April 16, 2013

Rescuing Seri Bukit Ceylon

Seri Bukit Ceylon was once a success story in Kuala Lumpur when it was completed almost 10 years ago.  The Ascott group own 48 out of the total 200+ units and they run the whole block as their Somerset brand with 96 units inventory. The occupancy since then was fantastic as I tried to book apartments for my friends in the past, they used to be running at almost full capacity.

Ascott still owns the 48 units in Seri Bukit Ceylon Residences and they are now run as corporate leasing units. There were a further 22 units in Seri Bukit Ceylon leased back from individual owners which were operated as corporate leasing from year 2006 till management contract ends 31 May 2011. The units since then were returned to owners and subsequently, we saw rentals affected and many have to drop their rent by more than 10% in order to secure tenants.

I was fortunate back then as I had a long term tenant occupying my unit. However, I am not so lucky this time as my unit was recently vacated. The rentals board set up downstairs by the management is now plastered with vacancies. 

I turned to vacation booking websites such as airbnb and ibilik. With these, I managed to secure sporadic short term bookings from 2 nights all the way up to 3 months from January till September and I expect more to come in. On average, with an occupancy rate of just 20%, I am getting about RM2,500/month gross for my 1 bed-room unit, a far cry from the RM3,500/month I used to earn. And this is very tiring, having to check-in and check-out guests, do maintenance, cleaning and changing the bed sheets. However, it is extremely rewarding and has good potentials too. 

1st of all, I see potentials because as I book more guests in these websites, I get more reviews (all of them good) and I get even more bookings. I expect my average earning to exceed RM3,000 and may even get higher than RM4,000/month towards the end of this year. However, the biggest problem is the overlapping dates which means I have to reject bookings i.e. sometimes, I have already received a booking for a 1 week stay. Then later someone else wants to come in and book a 1 month stay resulting in me having to reject it because it overlaps the 1 week booking by 1 day. If I have more than 1 unit to play with, it will be possible to accept more bookings. 

Secondly, it's very rewarding because so far I have met so many nice travelers from all over the world. We have become friends and some made it into my facebook so we can keep in touch.

Thursday, April 11, 2013

The Mews By E&O

The Mews is located at Jalan Yap Kwan Seng, behind the Stadium Negara steamboat restaurant. This restaurant is one of those old businesses. Once located at the iconic stadium, it has since relocated here. The food unfortunately has gone downhill too with the commercialization. 

The Mews address is not quite KLCC but close enough. My concern about this location is Jalan Yap Kwan Seng itself, which gets clogged up every weekday and weekends alike due to the crowd going to party at a not-so-straight club in the area. 

But then again, which part of KL is not jam during peak hours? However, the experience of driving almost 2 hours from Bukit Bintang to have dinner at the Stadium Restaurant one rainy night is still haunting me...

E&O is building 2 blocks of 38-storeys, with over 250 units ranging from 1-bedroom to 3-bedrooms apartments. There is no showroom to look at now but the scale model available at the E&O sales office seems to suggest that the set up and landscape will be similar to their flagship St Mary Residences, and with a bit of retro tinge. One wonders if in 3 years time, this concept will still be in fashion.

The 2 towers are arranged in 2 V-shapes forming a W, strangely... (unless I have my orientation wrong), they face away from the favourite KLCC Twin Towers view.

The 1-bedroom units appear to be quite hot, despite the over RM1.2million price tag. They are selling very fast. In fact, the best units are the corner type-A as compared to the intermediate type-A1. Of course, pay more for the type A. 

Unlike St Mary's, E&O has not announced that there will be any hospitality partner occupying part of the building. Perhaps there are no plans for this, and the Mews will purely be residential. Therefore, in my opinion, since 70% of the units are 1-bedroom and 2-bedroom apartments, this might make it a bit challenging to find tenants willing to pay the premium RM5psf rental in order to make this investment interesting.

So, it makes me wonder if the larger units are actually more viable here for own-stay or for rich people to keep as their play houses. E&O is partnering a well-established Japanese Developer, Mitsui to develop this project and it is understood that there has been a lot of interests from Japanese buyers.

Unfortunately, there is a massive glut of larger unit condominiums in the KLCC area resulting in price dumping for rentals. But this only affects the less popular projects like Glomac's Suria Stonor. Well executed projects such as Binjai-on-the-Park and Park Seven still commands good occupancy and rentals. So it is essential, for The Mews to be successful, it has to be done up to the standards of the other iconic projects such as the 2 mentioned, St Mary's Residences and the Troika. 

E&O is also cleverly marketing The Mews overseas before a proper launch in Malaysia to attract foreign buy-ins. With a large and strong foreign investment, it is likely most buyers will have the holding power to ward of any price dumps.  And holding-power is the all important word - since this is a commercial plot of land, the utility and city-hall rates are going to be an absolute killer, coupled with the hefty maintenance fee of RM0.60psf making even the smallest 1-bedroom unit costing over RM600 to keep.