IOI Properties could be an under-the-radar JS-SEZ beneficiary

Malaysian developers are set to benefit from the Johor-Singapore Special EconomicZone (JS-SEZ), while Singapore devel opers are less likely to see much up side. A recentreport by UOB Kay Hian pointed out that IOI Properties Group is underperformingcompared to peers like Eco World Development Group, UEM Sunrise and SP Setia, whichhave emerged as the primary beneficiaries of the JS-SEZ.

In an email interview with IOI Properties, the group revealed that it has a remaininglandbank of 3,786.7 acres with an estimated gross devel opment value (GDV) of RM7.24billion ($2.2 billion) in Johor. This landbank consists of well-matured integrated townshipsand developments such as Bandar Putra Kulai, Bandar IOI Segamat, Taman KempasUtama, Taman Lagenda Putra Kulai, and The Plati no, in addition to its IOI IndustrialPark @ Iskandar Malaysia (formerly known as iSynergy).

“The group is well-positioned to capitalise on the wide range of socio-economic catalystsproposed and planned by the Federal and the local state government, especially theupcoming rail connectivity plans and the proposed JS-SEZ,” adds IOI Properties.

The group adds that all its town ships and developments, including IOI Mall Kulai and IOIIndustrial Park @ Iskandar Malaysia, except for Bandar IOI Segamat, are located in theproposed JS-SEZ, which will further boost the value propositions of its mall, residential,commercial and industrial products.

IOI Properties is a prime beneficiary of transport infrastructure that is about to becompleted for the Gemas-Johor Electrified Double Tracking Rail Project, also known asETS or Electric Train System.

Rail connectivity will be enhanced for all its townships and developments, especially forBandar IOI Segamat, which is one of the main stations of the Gemas-Johor ElectrifiedDouble Tracking Rail Project and will be located in Segamat. “This rail extension runsfrom Gemas to Johor Bahru Sentral in the city centre and is expected to be complet edthis year. It routes 947km right up north to Padang Besar KTMB station, near the borderof Thailand,” IOI Properties points out.

Once the Johor-Gemas section is completed this year (an April date was announced),travellers can take the train from JB Sentral to Ipoh, Taiping and beyond to PadangBesar.

“IOI Properties Group is optimistic [on the JS-SEZ] as it has already established itself inJohor with its integrated townships and developments,” the group says via email.

For FY2025 ending June, the group plans to introduce 12 new launches in Bandar PutraKulai, Taman Lagenda Putra Kulai, Taman Kempas Utama, and Bandar IOI Segamat,with a mix of over 1,700 units of residential and commercial products and an expectedGDV of RM700 million.

Bandar Puteri Puchong, Bandar Puchong Jaya and IOI Resort City — all within GreaterKlang Valley and Bandar Putra Kulai, Johor — are the group’s top-selling townships insales.

What’s in SEZ for developers

The JS-SEZ will encompass nine flag ship zones, including JB City Centre, IskandarPuteri, Tanjong Pelepas-Tan jong Bin, Pasir Gudang, Senai-Skudai and Sedenak, alongwith three new zones: Forest City, Pengerang Inte grated Petroleum Complex (PIPC) andDesaru.

A key issue in Johor that seems to have been overlooked during The Edge Singapore andEdgeProp Singapore’s visit to a site developed by UEM Sunrise is the lack of transportinfrastructure within the JS-SEZ.

During a recent visit to Johor, executives at the Johor unit of Bursa-listed Eco WorldDevelopment Group expressed hope that an Autonomous Rapid Transit (ART) systemwould be introduced to complement the Rapid Transit System (RTS) once it beginsoperating by the end of 2026.

“While public transportation (LRT/ ART) is not included under the infra structure fund, weunderstand it remains an ongoing effort to finalise decisions on traffic dispersionmethods and transportation within Johor, in view of the upcoming RTS commence mentin 2027,” UOB Kay Hian says.

The local broker reckons that Eco World, SP Setia, Mah Sing and UEM Sunrise would beable to capture spill over demand from three new flagship zones (Forest City, Pengerang,and Desaru). According to the UOBKH report, UEM Sunrise has a landbank of 199 acresunder its 51%-owned Maris Project in Desaru.

Mah Sing’s Meridin East, Eco World’s Eco Tropics, and SP Setia’s Taman Rinting township,located in Pasir Gudang, could also benefit from the official inclusion of PIPC and Desaru.

Singapore developers left out

Increasingly, Singapore developers face many challenges. Among them are less thansuccessful attempts at going overseas. They will likely face an uphill battle to lower theirinterest expense in the short term. During results briefings and investor days, localdevelopers such as City Developments (CDL) and real estate investment managers suchas CapitaLand Investment had looked to a turn in the interest rate cycle to boostearnings. That may not materialise.

On Jan 13, Bank of America said: “After a very strong December jobs report, we think thecutting cycle is over. In flation is stuck above target with up side risks. The conversationshould move to hikes, which could be in play if y-o-y core PCE (personal con sumptionexpenditure) exceeds 3%.”

The higher-for-longer rate environment is usually negative for developers, particularlyCDL. In 1H2024, CDL had acquired $1.1 billion of assets. This, together with its $846million (equivalent) share of a land site in Shanghai, could have caused gearing to risehigher than its 3Q2024 business update figure. As of Sept 30, CDL’s net gearing ratiostands at 70%, following the acquisitions including the Hilton Paris Opéra hotel and fourJapan (private rental scheme (PRS) properties, the group said in its 3Q2024 businessupdate.

Local developers have occasionally dipped their toes in Johor. In February 2013,CapitaLand Malaysia, Iskandar Waterfront, and Temasek signed a Heads of Agreementto acquire and develop land parcels in Danga Bay jointly.

In a press release in 2013, Capita Land had said the joint venture would acquire 71.4acres or 3.1 million square feet of freehold net land in A2 Island for RM811 million or $324million in February 2013 but would be valued at $245 million today. The press releaseadded that the purchase price will be paid over four and a half years, corresponding withthe infrastructure and development phases. CapitaLand Malaysia, Iskandar Waterfrontand Temasek will hold 51%, 40% and 9% stakes in the joint venture.

Hongkong Land and mid-cap developers, such as Ho Bee Land and UOL Group-Singapore Land, have limited exposure to Malaysia. Ho Bee Land has invested in the UKwhere it is nursing revaluation declines. Hongkong Land is exposed to the troubledcommercial real estate market in Hong Kong. UOL-SingLand recently completed theacquisition of a 50% stake in an office building in Sydney.