Those who have always wanted a waterfront and marina-facing condominium but feel they cannot afford the prices at Sentosa Cove now have an alternative option — Puteri Cove Residences at Puteri Harbour in Iskandar Malaysia.

Priced at an average of RM1,300 psf ($425 psf), Puteri Cove Residences is one-third to one-fourth the prices of condos in Sentosa Cove, which are $1,493 to $1,693 psf today. Even though prices in Sentosa Cove have softened, the Malaysian ringgit has depreciated even further against the Singapore dollar — by an estimated 20% since last year, according to property analysts.

Does this make Puteri Cove Residences a compelling buy? According to Glen Chan, president and CEO of Pacific Star, there has been a spike in enquiries from Malaysians, Singaporeans and other foreign investors. “Buyers are starting to see value and recognise that the ringgit will not remain at these levels forever,” he adds.

The weak ringgit against the Singapore dollar today is a double-edged sword: On the one hand, it could bounce back. On the other hand, some fear that it might sink lower. “Even at RM3 to $1, some Singaporean buyers, especially investors, are afraid to come in, as they are concerned that the ringgit could depreciate further,” says Ivan Hoh, managing director of PropNex International. “Those who are buying for their own use and taking a longerterm view are more likely to enter the market.”

Pacific Star and DB2 Group, a privately held boutique developer, purchased the 340,000 sq ft freehold site in Puteri Harbour in 2011. Construction is under way for the development of the mixed-use project, which contains three 33-storey towers that make up Puteri Cove Residences and Quayside, with a five-storey podium fronting the marina. The podium comprises 56 waterfront small office/home office units on the three upper levels and retail units on the lower two floors.

The marina will be developed by UEM Sunrise, the master plan developer of Nusajaya, and construction is expected to start in 2Q2016. There will be a total of 300 berths when the marina is completed, and it will be operated by ONE°15, the same operator for ONE°15 Marina Club in Sentosa Cove. “We are in talks with the marina operator to have 30 berths assigned exclusively for our residents’ use,” says Pacific Star’s Chan.

Forging ahead
On Oct 19, Pacific Star announced that it had secured Pan Pacific Hotels Group, UOL Group’s hospitality subsidiary, to operate its Pan Pacific Serviced Suites Puteri Harbour for 10 years. This marks the second collaboration between Pacific Star and Pan Pacific in Southeast Asia. The first was Pan Pacific Serviced Suites Bangkok, located at Pacific Star’s mixed-use development, Eight Thonglor, in the prime Sukhumvit area.

Pan Pacific Serviced Suites Puteri Harbour will occupy 205 units spanning 16 floors within the 340-unit Tower 3 of Puteri Cove Residences. It will have a mix of studio, and oneand two-bedroom apartments to cater for the needs of short- and extended-stay professionals and expatriates working in Iskandar Malaysia. The remaining 135 units within the tower will be fully furnished and leased out as apartments to longer-term tenants, according to Pacific Star’s Chan.

Towers 1 and 2 are twin towers containing 329 units each. Launched for sale two years ago, 400 units have been sold so far, comprising 70% of the units in Tower 1 and 30% of the units in Tower 2. The average price achieved was RM1,300 psf. According to Pacific Star, 50% of the buyers were Singaporeans, 20% were Malaysians and 10% were Indonesians. The rest came from 25 different countries.

To entice buyers, Pacific Star offered a 12% rental guarantee over two years for a selection of 50 residential units and a 19.5% rental return over three years for the 79 strata retail units in March. However, both offers were scrapped a month later. The developer said the residential scheme was not popular with buyers, as they were mainly buying for their own use. It also cancelled plans to sell the 79 retail units and is holding them as investment property for lease instead. There are plans to bring in anchor tenants, such as a high-end gourmet grocer, convenience stores, medical clinics, restaurants, cafés and bars that will complement the marina lifestyle, as well as services that will meet the needs of residents, says Chan.

As for the remaining 258 residential units, there are plans to launch the project at roadshows in China, Taiwan and Indonesia later this month and next month. There are also plans to launch the project in Japan in 1Q2016.

With the construction of Puteri Cove Residences and Quayside well under way, Pacific Star decided to divest its share in the project. Singapore-listed Chinese mobile solutions company Longcheer Holdings agreed to acquire Pacific Star’s 51% stake in Twin Prosperity Group and its subsidiaries. Twin Prosperity owns Pearl Discovery Development Sdn Bhd, the registered proprietor of the land and buildings of Puteri Cove Residences and Quayside. The purchase price amounted to $120 million to $150 million in a cash-cum-share transaction. The deal is expected to be concluded by Dec 31. Meanwhile, the remaining 49% stake in Twin Prosperity will still be held by Pacific Star’s joint-venture partner, DB2.

“It looks like we’re exiting, but we’re not,” says Chan. “Our ambition is to be listed and to position our company as a developer of premium mixed-use projects in major Asean cities such as Bangkok, Jakarta and Kuala Lumpur.”

The three towers of Puteri Cove Residences and Quayside with a five-storey podium fronting the marina

that features small office/home, office and retail units

Oversupply in Iskandar?
Many property consultants believe that there is a potential oversupply in Iskandar Malaysia, especially following the entry of Chinese developers such as Country Garden Holdings, China Vanke, Greenland Group and Guangzhou R&F Properties.

The upcoming supply numbers are staggering. As at end-December 2014, the housing stock in Johor stood at 719,421 units, according to the Malaysian Property Information Centre. About 142,570 units are in the pipeline for completion over the next few years. This figure excludes another “planned supply” of 193,271 units, which have been approved but have yet to be constructed.

Around 80,900 units of this planned supply have been approved for high-rise residences within Iskandar Malaysia alone, says Peter Lim, managing director of Pierre International Realty. The combined pipeline completion and planned supply figures total 335,838 units, or 46.7% of the total housing stock in Johor as at end-2014, he adds.

Singapore’s residential market is also facing an oversupply over the next few years, with the vacancy rate expected to hit 10% by year-end and rise further to 15% by 2017, estimates Ku Swee Yong, CEO of Century 21 Singapore. Therefore, he foresees no spillover of demand from Singapore into Iskandar Malaysia, especially with the total debt servicing ratio in place.

Meanwhile, oversupply in Iskandar has caused some developers to return to the drawing board to revise their development schemes. An example is Singapore-listed Rowsley, an investment vehicle controlled by billionaire Peter Lim. It had purchased a 27-acre site in Iskandar Malaysia for its Vantage Bay project, which was originally a mixed-use township with residential, commercial and lifestyle components. Rowsley announced in September that it was repositioning the development as Vantage Bay Healthcare City, with a mix of medical and wellness centres, as well as serviced apartments.

“We are beginning to see the market adjust and differentiate itself, instead of just developing high-end residential projects with a herd instinct,” says Donal d Han, managing director of Chesterton Singapore. “Some developers have started to scale down residential construction, while others have opted to defer their construction schedule. This adjustment may take two to three years before the oversupply of high-end residential reaches a realistic level that will meet real demand.”

Chan does not believe, however, that there is an oversupply in Iskandar Malaysia. In fact, he remains “optimistic of Iskandar Malaysia’s long-term prospects as its population grows”, he says. There is Gerbang Nusajaya, a massive area covering 4,551 acres that will be developed over 25 years. Some of the projects that are under development there are Ascendas- UEM Sunrise’s 210ha Nusajaya Tech Park and FASTrack Autosports, developed by billionaire Lim, the Sultan of Johor and UEM Sunrise.

The first phase of Nusajaya Tech Park is expected to be operationally ready by end- 1Q2016. There are a total of 43 freehold factories and 12 land plots for sale in Phase 1, of which Ascendas has reportedly sold 73%.

“When the factories are up and running at Nusajaya Tech Park, they will create jobs. This means more people will be moving to Iskandar Malaysia and in need of a place to stay,” reckons Pacific Star’s Chan.

The presence of 12 universities and colleges in Iskandar Malaysia’s EduCity, along with Pinewood Studios and Gleneagles Hospital, is also expected to provide demand for homes in Nusajaya. “The fact is that residential supply exceeds demand,” says Pierre International’s Lim. “Even if these industries take off, they may not have enough legs to support the housing market.” However, he sees Puteri Harbour as “the hidden jewel” in Nusajaya. “It’s the only freehold residential precinct where condo units have waterfront views and marina facilities.”

This article appeared in the City & Country of Issue 700 (Oct 26, 2015) of The Edge Singapore.