Abu Dhabi-based Aldar Properties and Mubadala Development, together with Kuwait Finance House and Millennium Development International, of Lebanon, have invested Dh800 million (US$217.8 million) in Medini, a Dh73.4bn urban development in Malaysia. The firms signed up to the project, which is being developed by Iskander Investment Berhad (IIB) in the southern Malaysian state of Johor, last year. Together they pledged a total investment of Dh4.4 billion over three to five years.
"The commitment indicates that it's a project we're serious about," said Arlida Ariff, the managing director of IIB. The Middle East partners will develop six of the nine clusters that make up Medini, including Iskander Financial District, South-east Asia's first Islamic and conventional finance centre. The rest of the development, which will be spread across nearly 970 hectares of land, includes a mix of leisure, residential and commercial sections. Construction work will be phased over 15 to 20 years.
Infrastructure work in zone A of Medini, where a Legoland theme park is due to open in 2012, is under way and earthworks and infrastructure contracts for the rest of the development are due to be awarded in May. Linking with developers in the Middle East had helped the development in terms of finance and gaining access to a larger network of investors, said Ms Ariff. The project was launched at the annual GCC property investment event Cityscape Dubai in October, where Ms Ariff said it attracted a "certain measure of success".
It will again be on show at the same exhibition in Abu Dhabi this month, where IIB will start selling residential units that surround Legoland, as well as look for retail and business tenants for commercial and office space. "In the early part of our planning phase, it was decided that we needed to go to the Middle East and bring in investors and developers who were used to doing developments at a very accelerated pace and to good quality," she said. "We don't want to do another run-of-the-mill development. We want to do something special."
While most UAE firms have curtailed overseas expansion plans, Ms Ariff said Malaysia's property sector would remain an attractive long-term proposition for low-cost, less risky investment. "Most UAE developers will go through the consolidation period first," she said. "We suspect that once the consolidation has been completed then everyone will start looking again at the opportunities available here.
"Contrary to our initial concerns, there are quite a few developers around the world who are looking for what we deem as lower-risk projects. Land prices are particularly low and so entry costs are fairly inexpensive, therefore the risk of losses is reduced." Property price declines have not been as marked in Malaysia as they have in Dubai or Singapore, mainly because they were low to start with and not artificially fuelled by speculation.
Meanwhile, construction costs have fallen by about 10 per cent, meaning developers can build for less and adjust their prices accordingly. "We're taking advantage of lower construction costs and we will be pricing ourselves slightly lower than we originally intended, but as the economy picks we hope to position our products appropriately," said Ms Ariff. "We still believe there is liquidity available, especially in Abu Dhabi. We feel that there are people who are now shopping, those who are cash-rich, and it is now timely for them to be looking for less costly investments." agiuffrida@thenational.ae
