City&Country: Hotwer has big plans for Klang

Hotwer Development Sdn Bhd’s maiden project, The Boss Service Suites in Klang, is only part of a bigger business plan, one that goes beyond the bricks-and-mortar aspects of the development. It will comprise 28 storeys of serviced suites atop a podium housing retail units, food and beverage (F&B) outlets, function rooms and recreational facilities.

“We hope to establish The Boss brand as a chain of hotels around Malaysia,” managing director Edmond Chew Kar Chong tells City & Country.

Hotwer intends to turn its project into the hotel of choice for corporate executives who come to town on business. This target market is reflected in the project’s strange or — as Edmond calls it — “catchy” moniker.

“It will also make people curious about our project,” he adds.

In fact, the entire building — its name, its height (its proposed height of 132m will make it the tallest building in Klang) and its façade, a curved rectangular shell with circles of various sizes arranged like bubbles — is designed to stand out, says Edmond. And to make it stand out further, the company plans to add blue, red and green LED lights to the façade of the building.

The tallest building in Klang at the moment is Centro, a 28-storey strata-titled office block that sits atop a 3-storey retail podium. The project, which had been abandoned, was revived by Centro Properties Group Sdn Bhd, controlled by Datuk Teo Chiang Kok of See Hoy Chan Sdn Bhd.

The specifics
The Boss Service Suites, which will sit on 2.15 acres of freehold land and have a gross development value of RM118 million, is located along the Federal Highway near Centro and the Klang Hokkien Association building. General manager Ong Bee Khoon says a slip road will eventually be built to facilitate entry to the premises.

The project will comprise 377 units of serviced suites and a 4-storey retail and F&B podium, with 40 lots on the ground and first floors. The third floor will be for the function rooms.

The serviced suites, with sizes of 356 to 480 sq ft and designed like hotel rooms, are basically fully furnished bedrooms with an attached bathroom. They are priced from RM195,000 to RM307,800.
The suites will have individual strata titles, and Hotwer will have the first option to purchase units from owners.

The retail units of 167 to 2,449 sq ft in size are priced from RM200,000 to RM2.93 million. Facilities will include outdoor decks and a spa on the fourth floor and a pool on the roof, covered by the building shell.

Business model
As it will be run like a hotel, The Boss’ units  are actually sold under a sale and leaseback scheme, says Ong.

The serviced suites have a 6.5% nett guaranteed return and a 7.5% gross guaranteed return. The shops have an 8% gross guaranteed return, with 0.5% to be paid to Hotwer for maintenance, he explains.

“For each purchase, the owner of a suite is entitled to a free night’s stay per year at the serviced suites,” says Edmond.

CEO Chew Yem Sing says the guarantee on returns is valid for 18 years, with adjustments every three years.

Hotwer is targeting corporate businessmen looking for premium accommodation during  their visits to the multinational corporations in Port Klang as well as leisure tourists, says Edmond, adding that the company sees potential in the hotel business as there is a lack of hotels which are usually preferred by business travellers.

This is in addition to the company’s findings — three-star hotels in Klang have an average occupancy rate of over 70%, which it feels reflects demand for quality accommodation.

Hotwer is eyeing retail tenants that provide exotic fine dining and the obligatory proper Chinese restaurant. The latter is significant as the company sees potential in the Chinese restaurant market given the high demand, especially for weddings.

Ong observes that during wedding seasons, up to five restaurants a night in the Klang area will see a full house. This translates to about 1,000 tables a night, he says.

The company also aims to cater for civil servants looking for a place to hold seminars, with its nearest pool of clients from the Selangor government, although it plans to target both state and federal government staff, says Ong.

The project was soft-launched in November and, according to Edmond, has achieved a 50% take-up rate. Yem Sing adds that the piling works are almost done, with the building scheduled for completion by 2013.

Management team
Hotwer, incorporated in 2008, was founded by Edmond, his nephew Yem Sing and Quah Chee Hui, a director of the company.

Edmond, 47, has spent over two decades in the furnishing industry. He is also the managing director of mattress and bedding manufacturers Goodnite Sdn Bhd and Goodnite Enterprise (M) Sdn Bhd and a director of foam manufacturers Good Foam Industries Sdn Bhd and Casanova Industries (M) Sdn Bhd.

In 2005, 24-year-old Yem Sing spent a year working with another uncle, Datuk Sean Ng, managing director of Mammoth Empire Holdings Sdn Bhd, which is known for its Empire Subang development, which includes the Empire Shopping Gallery mall.

The freehold Empire Subang also features the 10-storey Empire SoHo, 12-storey office block Empire Tower and 13-storey boutique hotel Empire Suites Hotel.

That year, Yem Sing also joined Earth Mover Industry Sdn Bhd, a manufacturer and exporter of plastic products, as a director to develop his business savvy and build connections, given his limited experience. He remains a minor shareholder of the company although he has already resigned from his post.

Quah, 39, has spent the past 14 years in property development with a number of private limited companies. Most of his projects — some small industrial parks and larger commercial and residential developments — are located within Klang, with the more recent ones in Shah Alam.
The 44-year-old Ong has over two decades of property development experience. Before joining the company, he was general manager of NPO Development Sdn Bhd and later, its parent Titijaya Group.

Hotwer decided to make its first foray into property development in Klang as the directors, being Klang natives, are comfortable with the market. “We feel that it’s time for an iconic development in our home district,” says Edmond.

Challenges ahead
The developer is well aware of the challenges of offering such a product in a conservative market like Klang. It also has to contend with critics and sceptics.

A Klang-based real estate agent says buyers should be careful when it comes to sale and leaseback schemes. “From my experience, these [guaranteed returns] are usually gimmicks. How strong is the developer? How are they going to guarantee the returns?” he asks.

He adds that the occupancy rates of hotels in Klang have traditionally been low, given the lack of attractions there. This is coupled with the dearth of activity at its ports such as Westport and the Port Klang Free Zone.

He says this kind of development would not appeal to Klang investors because of the availability of landed properties in Klang, as well as the market’s preference for the latter. “Serviced suites have simply not caught on with Klang people.”

A valuer based in Klang also holds a less than optimistic view of the prospects for serviced suites here. “It is quite an ambitious project for Klang, so the question is, can the developer deliver?”

He notes that the location is rather quiet, and even ordinary condominiums are not seeing much interest. “What is the attraction there? Except for Centro, there is not much vibrancy in Klang.”

However, Yem Sing begs to differ. “On the contrary, Klang is not a quiet place but is bustling with commercial, banking, port, manufacturing and other retail businesses. The population in Klang, together with the outskirts, has exceeded one million. The location of The Boss is at the main gateway to Klang town. We have heavy traffic passing this location at any time of the day and particularly during peak hours,” he says.

Countering criticisms about Hotwer’s status as a newcomer in the hospitality industry, he says the company has already begun to assemble a comprehensive and professional hotel management team of experienced staff. “We have in fact signed qualified personnel locally and abroad with experience in managing five-star hotels.”

“We are bent on working towards a credible hotel rating for The Boss,” he adds.

It looks like Hotwer has its work cut out as it tries to prove its critics wrong.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 849, Mar 14-20, 2011