Desmond Lim Siew Choon became a
billionaire developing a high-end retail mall and an office
tower in Kuala Lumpur, wooing Middle Eastern investors and
listing the properties as a real estate investment trust.
The 52-year-old chairman of Pavilion Real Estate Investment
Trust (PREIT), Malaysia’s second-biggest property trust by market value,
is worth at least $1 billion, according to the Bloomberg
Billionaires Index. Lim and his wife, Tan Kewi Yong, own 38
percent of the Kuala Lumpur-based trust, whose shares have
outpaced other companies that raised at least $50 million in an
initial public offering in Malaysia in the past 12 months.
Rising consumption and increased tourism in Malaysia have
bolstered Pavilion REIT, which has surged almost 60 percent
since trading on Dec. 7. Malaysia’s gross domestic product
exceeded 5 percent for at least a fifth quarter as the
government raised spending and unveiled infrastructure projects
before a general election that must be held by early 2013.
“While the general masses have benefited from this wealth
effect, I would say that the upper crust would have seen the
largest gains from the recent run up,” said William Chan, chief
executive officer of Singapore-based family office Stamford
Privee. “Connections matter, both locally and globally.”
Lim, who has never appeared on an international wealth
ranking, declined to be interviewed as he’s traveling for
business, said Philip Ho, CEO of Pavilion REIT Management Sdn,
which manages the property trust.
Oklahoma Education
Lim majored in finance at the University of Central
Oklahoma, and started building houses, condominiums and office
towers with developer Khuan Choo Group in the 1980s. As Malaysia
prodded banks to merge, Lim took over the listing status of
Gadek Capital Bhd. after the latter sold its finance business to
Hong Leong Bank Bhd. in 2000. Lim injected Khuan Choo into
Gadek, renamed it Malton Bhd. (MALT) and relisted it in 2002.
The billionaire made the bulk of his fortune from
developing the mixed-use Pavilion project — a mall, two luxury
apartment towers and an office building — on the former site of
a girls’ school in Kuala Lumpur, one of the last pieces of prime
real estate in the capital.
Malton was the contractor of the Pavilion, located in the
main shopping street of Jalan Bukit Bintang, Kuala Lumpur’s
version of Fifth Avenue in New York and Orchard Road in
Singapore. In the heart of the city’s Golden Triangle
entertainment and commercial district, the mall, which drives
the property trust’s earnings, is surrounded by hotels including
the Westin Kuala Lumpur and JW Marriott Hotel. Tourists account
for more than 30 percent of Pavilion’s shoppers. Malaysia
attracted 24.7 million tourists last year, almost double the
12.7 million in 2001.
Showing Luxury
The mall, which has total net lettable retail area of more
than 1.3 million square feet, houses boutiques including Prada
and Hermes alongside luxury-car showrooms offering the latest
Jaguar and Bentley models. Other tenants include The Loaf, a
Japanese-style gourmet bakery and bistro part-owned by former
Malaysian prime minister Mahathir Mohamad, as well as an art
gallery promoting the works of American pop artist Robert
Indiana and contemporary painters.
When Lim embarked on the project around 2002, his entry
cost was low with commercial and residential properties in
downtown Kuala Lumpur transacting at less than 500 ringgit
($164) per square foot, the Edge newspaper reported on Sept. 27,
2010. Prices had risen more than three times to about 1,800
ringgit per square foot by the time it was completed in 2008,
according to the newspaper.
Golden Triangle
There is an “increasing scarcity of prime land” in the
capital’s city center, particularly in the Golden Triangle area,
the research unit of Kuala Lumpur-based Alliance Investment Bank
Bhd. said in a report dated July 25.
Kuwait Finance House (KFIN), the Persian Gulf state’s biggest
Islamic lender, helped to finance the development cost when it
took a 49 percent stake in the Pavilion project in 2006 and
bought both the residential towers. Qatar Investment Authority
has since bought the stake from Kuwait Finance House and owns
about 36 percent of Pavilion REIT.
Lim and his wife received about 703 million ringgit in cash
from selling their stakes in the Pavilion Kuala Lumpur Mall and
the office tower to the trust before its initial share sale,
according to Bloomberg calculations. They were also paid in
equity and are the biggest shareholders in Pavilion REIT, along
with Qatar’s sovereign wealth fund.
“The turning point for him is through this development
project,” said Ang Kok Heng, chief investment officer at
Phillip Capital Management Sdn. in Kuala Lumpur. “He’s been
keeping a very low profile; not many people know much about
him.”
Meeting Adjourned
In December 2006, Lim and his wife angered minority
shareholders of Malton when they were absent from the company’s
annual general meeting for the second consecutive time, Bernama
reported then. The gathering was adjourned to a later date after
the investors demanded that Lim, the company’s executive
chairman, and his wife, its executive director, attend the next
meeting, according to the Malaysian state news service.
Six out of nine analysts who cover Pavilion REIT have a
“buy” or “outperform” recommendation on the trust, according
to data compiled by Bloomberg.
Pavilion REIT closed at a record high of 1.46 ringgit on
Nov. 14. The property trust’s total return of 62 percent since
it started trading to yesterday outpaced the 13 percent return
by the benchmark FTSE Bursa Malaysia KLCI Index in the same time
period.
“Pavilion has been a success story among Malaysian
REITs,” said Philippe Espinasse, former co-head of Asian equity
capital markets at Nomura Holdings Ltd. The “scale of the
properties” and its high-end positioning contributed to its
gains, said the author of “IPO: A Global Guide.”
Retail Advantages
Pavilion REIT will probably climb to 1.60 ringgit per share
as consumer spending remains resilient and the mall, the “crown
jewel” of the trust, attracts more visitors once a subway is
completed in as early as 2016, said Loong Kok Wen, an analyst at
RHB Research Institute in Kuala Lumpur.
The property trust plans to acquire other malls including
Fahrenheit88, located opposite the Pavilion.
Lim’s closely-held Urusharta Cemerlang, which developed the
Pavilion project, bought a piece of land in Jalan Bukit Bintang
for a record 7,209.80 ringgit per square foot in 2010 from
Millennium Copthorne Hotels Plc. Lim’s Urusharta Cemerlang
Development owns 51 percent of Urusharta Cemerlang and Qatar
Investment Authority holds the remaining equity.
Stake Valuation
Lim’s stake in the property venture with the sovereign
wealth fund is valued at $60 million based on the average price-
to-book of four publicly traded peers: IGB Corp., KLCC Property
Holdings Bhd., Eastern Oriental Bhd. and Overseas Union
Enterprise Ltd.
The billionaire and his wife once owned about 24 percent
Paracorp Bhd., a Kuala Lumpur-based maker of electronic
components, before it was delisted from Bursa Malaysia in 2007,
according to company filings. Lim also owns almost 13 percent of
Hong Kong-listed Nan Hai Corp. (680), which focuses on property
development in China. He sold a 4.8 percent stake in Nan Hai in
2007 for HK$957 million ($123 million).
Lim’s wife is the sister of businessman Robert Tan Hua
Choon, according to the Edge. The billionaire’s brother-in-law
controls at least half a dozen Malaysian listed companies
including ceramic ware maker Goh Ban Huat Bhd. and investment
holding firm FCW Holdings Bhd., data compiled by Bloomberg show.
“In Malaysia, connections are necessary especially if you
are in property development,” Ang said. “Connections help to
speed up things and you get more favorable terms when you submit
your proposals to the right authorities.”
Less Vulnerable
Pavilion REIT posted better-than-expected net property
income of 61 million ringgit in the third quarter because of
higher rental and advertising earnings. Southeast Asia’s third-
largest economy is projected by the central bank to expand at
least 5 percent or better in 2012.
“Being less vulnerable to potential external shocks,
economies like Malaysia have been able to dig down and create
its own momentum,” said Chan of Stamford Privee. “It won’t be
surprising that Malaysia will be able to mint out its own fair
share of Asian billionaires.”
To contact the reporter on this story:
Netty Ismail in Singapore at
nismail3@bloomberg.net
To contact the editor responsible for this story:
Matthew G. Miller at
mmiller144@bloomberg.net
Pavilion Shopping Mall in Kuala Lumpur
Andrea Pistolesi/Getty Images
The Pavilion shopping mall in Kuala Lumpur, Malaysia.
The Pavilion shopping mall in Kuala Lumpur, Malaysia. Photographer: Andrea Pistolesi/Getty Images
The Pavillion Shopping Complex in Kuala Lumpur. Photographer: Stanley Chou/Getty Images