Key points from focus group meeting.

Vanue: Hotel Istana, K.LumpurDate : 11 September 2014Attendance:

1. Jolene Wong, Shell Malaysia (Portfolio Manager) – Industrial product2. Tn Hj. Kamaludin, Tabung Haji, Manager (Land Matters and property group) – Trading

and services3. Muhammad Azan Omar, Axiata Group Berhad (Property Executive, Engineering Property

Department) – Trading and services4. Mr. Roy Irwan Muhammad, Maybank (Head of Corporate Real Estate 1) – Trading and

services5. Mr. Zulkifli Che Ahmad, Affin Bank Group (Head of Contract and Finance) – Trading and

services6. En Ahmad Kaseri Ramin, Telekom Malaysia – Trading and services

Key points Points/explaination ReferencesManage property Assets value …if you have checked with some bankers, there is

no such department yang betul betul manage the real estate lah, the most yang kita ada, adalah property development and also property maintenance that falls under the same division (Zul-Affin)

The function is basically to manage, satu, adalah, our own property, our own building that includes branches, because we have got branches all over the country, kita ada kita punya business loan centre, so anything to do with these branches, business loan centre, maintenance ke even we need to build a new building for our branches or business loan centre, falls under this property division. (Zul-Affin)

..whenever you give out loans, there are certain-certain pinjaman that you take property as the collateral. Property in the form of building, okay, land, it could be, you know, any types of land, Malay-reserved land ke, apa jenis tanah, leasehold ke freehold ke as long as kita tengok the value of that particular assets tu commensurate dengan the loan amount yang kita nak bagi, we take it as collateral. (zul-Affin)

…sebab bila kita give out loans and we take all these assets as collateral we need to make sure that these assets are in a good shape..(Zul-Affin)

For example, a building, though it is located in the prime area, tapi kalau you tak betul-betul manage

or tak betul-betul maintain, in the event that you nak liquidate, so it will affect the value. (Zul-Affin)

.. , kita manage, kita maintain all the tower and then kita lease kita punya tower. So, normally kita lease to kita punya pesaing lah, such as Maxis, DiGi, P1… It’s the rental issue la… (Azan-Axiata)

.. kita ambik the highest la, the highest rental sekarang kita bayar to our landlords ea. Kita ada jugak ambik some parts of Tabung Haji punya tanah bangunan, tanah JAIS, tanah wakaf, tanah Shell, Petronas pun ada lah..(Azan-Axiata)

Strategy ..so, sekarang ni kita tengah come up dengan kita punya research lah. Kita nak submit kepada semua kita punya landlord untuk sedarkan diorang lah. Maknanya, kita nak revise on kita punya rental agreement.. Memang kita generate income memang okay lah. Maybe triple or double lah. Tapi kita rasa agak tidak berbaloi lah sebab kita just pakai rooftop. And then, access pun agak limited. So, kita rasa itu bukan fair value lah.. (Azan-Axiata)

..so far, kita punya rental tu memang agak jaga lah, untuk kita punya capping tu kita memang tengok, kita memang betul-betul jaga. Tapi, kita punya, sepatutnya DiGi lah, DiGi, Maxis semua, diorang ni yang, apa orang kata, break up. So, once kita dah propose seribu, semua landlord akan ikut seribu. Kita takde kita punya standard.(Azan-Axiata)

.. how much dia punya rental from the ground, kita subdivide by dia punya floor, and then kita add up dengan dia punya access factor and safety..(Azan-Axiata)

..we have an internal department. In fact, in downstream, I mean, the retail side, we have three departments. One is called the retail network, which they have a retail planner to do all the feasible studies and see which are suitable lands for stations and then they pass on to the real estate department to do acquisitions. So, all the licensing, acquisition. So, they focus on that. As well as disposal..(Jolene-Shell)

difficulty ..kadang kadang ni yang kita punya most problem ni outdoor lah. Outdoor sites. And then sometimes untuk indoor sites pun kita punya problem tu agak

tinggi lah sebab kita as a Celcom, kita provide apa, coverage, based on complaints, based on you punya client request you as...(Azan-Axiata)

..kita dah keluarkan cost and then kita terpaksa tanggung kita punya capex, opex tu terlalu tinggi. So, kita untuk future, long term tu kita nampak tak bagus lah untuk kita punya sector lah..(Azan-Axiata)

Workplace Difference background

Unsructured management

Work load

Secara jujurnya, in Celcom, dia punya background in property dia, normally lah, in property tu sendiri dia punya staff dia lah ea, bukan daripada kita punya bidang lah. So, saya nampak dia punya problem, dia, apa, daripada situ. Maksudnya kalau bukan daripada kita punya sector, so kita nak tackle on this issue, susah. So, normally boleh saya kata 8/10 lah, apa, daripada total volume staff kita tu, normally campur lah, daripada civil, mechanical, electrical, ya betul. So, bila when comes to the issue on property, value, so diorang tak boleh tackle part tu..(Azan-Axiata)

I currently am with the department for 5 years. The department already set up more than that, it’s maybe 8 to 10 years ago. But, it’s during the time it’s still not so structured. It’s a bit fluffy between retail and corporate real estate..(Cheng Ni-Shell)

We actually leveraged a lot on agent. So, I mean, basically, service providers …. for myself, I manage projects in Brunei, I manage project, used to be in Hong Kong, Macau. So, we don’t base there, but we have to kind of, do some remote control through the service providers..(Cheng Ni-Shell)

Portfolio manager here, meaning that we were given certain portfolios, say, take care of Malaysia, just for an example. So, you have this certain portfolio that you need to handle. So anything that happen in Malaysia, maybe you need to be involved in _________ like that. Not in terms of funding, but in terms of the project-wise and the area that you cover.. (Jolene-Shell)

Operational A little bit on the background on how the team is structured. So there are actually three teams in Corporate Real Estate itself. So, the first team is the strategy team where they will look at which places that they should strategise the location and things like that. And then, we, both of us in the transaction

and the projects team. Any transaction method, say, acquisition and disposal and things like that, it falls under us or any new projects, any buildings that we need to build, under us. And then subsequently, in the operation sect, then the managing sect which is the operation sect will be facilities management bit. So there’s these three core teams in real estate that we manage. So, from starting the strategy, we move on to transaction and project and after that the operation which is in facilities management.. (Jolene-Shell)

..cuma bahagian Pemasaran dengan bahagian/badan Penyewaan. Kita ada separate, hartanah, dah pecah dua lah dengan Pemasaran, Penyewaan.. (Faizal-Tabung haji)

.. Dulu, Bahagian Pengurusan Hartanah. Dia jaga semua, pemasaran semua. Lepas tu, bila dia pecah dua, Bahagian Pengurusan Hartanah satu, kemudian, Bahagian Penyewaan dan Pemasaran satu..(Faizal-Tabung haji)

Asset yg merosot Macam last year kan, macam building building yang tak boleh bagi income kan, so kita jual lah… Itu memang target hartanah tu memang target pengurusan hartanah..(Faizal-Tabung haji)

Customers satisfaction

Macam saya, saya jaga bangunan yang relate dengan pemasaran. Yang banyak income. Tu yang kata jaga tenant. Haa. Saya punya KPI, tenant puas hati. FM (facility management) yang kami, yang contractor buat, atau yang kami bagi, maknanya capai lah. Takdak complaint, jadik pengguna selesa. Kami focus kat situ. Kalau hat yang ni, yang bahagian pengurusan, pemasaran ni, marketing ni, dia carik lepas tu collect.. (faizal-Tabung haji)

Market performance Macam saya, saya jaga bangunan yang relate dengan pemasaran. Yang banyak income. Tu yang kata jaga tenant. Haa. Saya punya KPI, tenant puas hati. FM (facility management) yang kami, yang contractor buat, atau yang kami bagi, maknanya capai lah. Takdak complaint, jadik pengguna selesa. Kami focus kat situ. Kalau hat yang ni, yang bahagian pengurusan, pemasaran ni, marketing ni, dia carik lepas tu collect… (Azan-Axiata)

Tapi selalunya kalau bangunan Tabung Haji ni dia mintak melampau kenaikannya. Tabung Haji saya ingat, dia mintak dalam 15%.. (Azan-Axiata)

Sekarang ni, kebanyakan landlord dah pandai. Dia check on contract tu, dia tak benarkan kita sublet. So, selalunya terms terms of sublet tu kita akan cuba sorokkan, hide hide kan. Suruh cepat sign, cepat sign lah… (Azan Axiata)

Challenging most of kita punya challenge bukan kawasan sub-urban lah. Challenge kita kawasan urban. Contohnya, saya bagi contoh, kawasan Putrajaya. Kita tak dibenarkan erect sebarang tower on land..(Azan-Axiata)

Property system For the Celcom aa, you look at our office, we are using our own system prism, that called, Prism. That one is the Property System. So, in the Prism, we have all the database sites for all the ten thousand sites, we know which site is active, which site you have to renew. So, from there, they will pop up the notice. This site is going to terminate in two days lah, expired..(Azan-Axiata)

We have yearly, half-yearly and also months. Sort of like, three months before. The system will prompt the portfolio managers, so, the portfolio managers need to plan when they need to start doing that.. (Jolene-Shell)

KPI Saya punya KPI, tenant puas hati. FM (facility management) yang kami, yang contractor buat, atau yang kami bagi, maknanya capai lah. Takdak complaint, jadik pengguna selesa. Kami focus kat situ..(Faizal-Tabung haji)

So, kalau dia suruh kita keluar by petang ni, sebelum petang ni kita dah kena ada _________? So, benda ni is one of our KPI. And then, to maintain the rental is one of our KPI. And then, the third one, kita punya others business lah, kita punya sublet..(Azan-Axiata)

You have a time to catch to open a new station or something like that. Usually, they have a target of time. But for us will be different. Our first KPI will be safety.. . Yes, we have KPIs on safety as well. So, it’s a whole list of KPIs for safety. So, that’s the first thing. Zero, goal zero. We call them goal zero. No fatality, no leakage…(Jolene-Shell)

Basically, KPI kita manage asset yang __________________ dekat Maybank.. (Roy-Maybank)

Limited staff Dalam Property Management Maybank kita ada 19 staff. Tapi because of sekarang ni, dia dah grow.

Dia expect income pun grow. So, we try to cut the number of staff, so you try to optimise, satu orang buat more than, katakan lah sekarang you buat lima ke apa, kan. So, maybe dia expect, seven to nine. The expected 10 to 20% deduction...(Roy-Maybank)

Property problem (tak untung)

Kita perlukan ramai sales people lah sebenarnya. Because these people, at the end of the day, generate income lah. Macam property ni, just support je, just to support business… So, cost to us. Takde generate income pun.. (Roy-Maybank)

So, saya tengok dia punya knowledge lah situ. Kita punya main core business kita on the property, normally saya punya top leader tu, bukanlah dalam property, so bila datang issue macam ni, diorang tak berapa nampak lah. So, maksudnya dalam kita sibuk setiap hari ni, kita nak manage site, kita nak carik site-site yang baru, kita nak apa, kita nak maintain the rental semua.. (Azan-Axiata)

Kos operasi Sebab sewa tak mahal lah. Ada setengah tu, between five to one thousand lah. Tempat tu lah. Rental untuk because landlord akan absorb cost electricity and everything, alright. But, maintenance tu mahal. Sebab kena employ untuk outsource company to reload money and everything. Itu yang cost us easily, six thousand to seven thousand per month… So, because of that, operation cost, banyak lah untuk that portion..(Roy-Maybank)

Bank restriction Tapi, bank dia ada restriction lah. Maknanya, you tak boleh beli for the purpose of investment. As long as you ada bukak branch... So those yang excess place upper floor tu, dia kena rent out lah. .(Roy-Maybank)

So, maknanya, kita akan buy back lah, purchase. So, dia akan pass to my team, so that kita akan revalue balik, then kita akan market kan lah.. (Roy-Maybank)

Actually, set up sebelum ni, team ni cuma unit je. So, tahun 2010, masa tu, dalam 10 orang lah tapi takde sorang pun yang background property. Bila kita recruit untuk, tak salah INSPEN ea, start recruit, condition nya semua sekali, kena ada background real estate lah.. (Roy-Maybank)

Lease shoplots

Broker issue

So, sekaran ni, moving forward lah ea, we try to own especially shoplots. Kita mula dari six. Ada option lah. Plus three plus three.. (Roy-Maybank)

Outsources

Misunderstanding about real estate

New strategy

Management push

There are cases yang macam tu lah. Kalau kita tak boleh nak dapat direct owner, kan. Perhaps you go for third party, but the location itself, macam tadi lah, the justification is the bank yang…(Zul-Affin)

You go to any banks, nak identify the new site for you to open the branch ataupun business loan center ke, it is actually your call. You tak boleh outsource. It is your own decision, why you want to open up a new branch, a new business loan center, your own justification lah perhaps the market, the surrounding, nampak ada potential business coming within this area. Those are the justifications..(Zul-Affin)

make sure all these people understand the requirement on this real estate. Kalau orang paham, they see the potential, then I believe that everybody will do that. You private sector ke, even government sector pun, nothing wrong for them to set up this real estate unit under the government… If you’re talking about real estate ni, my understanding ada dua tadi. Satu, is our own property. The other one is the gross property that kita pegang as cagaran kepada kita..(Zul-Affin)

saya punya pendapat lah, even saya ni baru dalam ni, tapi kita boleh nampak the whole lah, the whole kita punya culture, culture business.. Kita punya main core business kita on the property, normally saya punya top leader tu, bukanlah dalam property, so bila datang issue macam ni, diorang tak berapa nampak lah. So, maksudnya dalam kita sibuk setiap hari ni, kita nak manage site, kita nak carik site-site yang baru, kita nak apa, kita nak maintain the rental semua, saya nampak issue dia.. (Azan-Axiata)

Maksudnya, untuk long term punya problem tu, diorang nampak dan faham. Tapi, sebabkan bila diorang ni memang bukan pure dalam bidang ni, so, untuk dia nak tackle tu, dia perlukan dia punya step tu, A to Z…

golongan-golongan muda dalam bahagian property kita tengah come up untuk tunjukkan pada kita punya top higher management untuk tunjukkan pada dia yang, sebenarnya apa yang kita beri ni, dah terlalu rendah berbanding apa yang ada di market sekarang. Itu the first dia punya problem

lah. So, benda-benda tu lah antara salah satu problem yang saya nampak, diorang sebenarnya tahu, tapi atas dasar untung, dan atas dasar mungkin dia tak tahu macam mana cara...(Azan-Axiata)

Push daripada department head. Tapi, basically for the support sahaja. Sebab real estate bukannya core business, kan? Kita focus kalau katakan you nak ____________ dengan bank tu, you kena pergi service level lah. Why numbers kita besar because branches kita banyak. Ada berapa orang kat property?.. (Roy-maybank)

1. Increase value of assets

i. Conducts valuation of assets each year

ii. Selects suitable locations for properties

iii. Manage risks associated with properties

iv. Ignore obsolete properties

v. Has the proper IT system for managing properties

Main properties is office, quarters and workplace (all are leased). The company has own system to conduct a valuation of assets using software (develop internally). The company is not really concerned about the value of assets. The business unit will decide whether to keep or dispose a property. Mostly company will dispose underutilise assets. The company allocates space to the employee base on functions. They allocated in several places. Some of them allocated in refinery sites. (Jolene-Shell)

The main properties that we manage in our company are office and land (Non-hydrocarbon assets). The most important/ valuable asset for this company are Hydrocarbon sites and buildings/land. Our company will dispose or sub-lease for underutilise assets. (Ann-Shell)

Basically, our company has a property development and property maintenance units for managing our property and asset value. We have a building, lands, branches and overseas assets as business activities. In a local, some of the assets involved in leasing and rental activities. One of the strategy that used by the company is wise and brilliant in rental agreement. Our company can get extra profit using negotiating with a client. Some department has a research team to making strategy and propose to top management. (Zul-Affin)

Increase value of asset

Companies in Malaysia mainly owned properties is office, staff accomodation (quarters) and workplace. Common features for this ownership for this properties are in the form of leasing. The companies use system to conduct valuation of assets through software that normally developed internally. Even though the companies own many assets but these companies is not really concerned about the value of assets

(SHELL).

The business unit will decide whether to keep or dispose a property. Mostly company will dispose underutilise assets. The company allocates space to the employee base on functions. They allocated in several places. Some of them allocated in refinery sites. (Jolene-Shell). The main properties that we manage in our company are office and land (Non-hydrocarbon assets). The most important/ valuable asset for this company are Hydrocarbon sites and buildings/land. Our company will dispose or sub-lease for underutilise assets. (Ann-Shell).

Basically, our company has a property development and property maintenance units for managing our property and asset value. We have a building, lands, branches and overseas assets as business activities. In a local, some of the assets involved in leasing and rental activities. One of the strategy that used by the company is wise and brilliant in rental agreement. Our company can get extra profit using negotiating with a client. Some department has a research team to making strategy and propose to top management. (Zul-Affin)

2. Promote marketing and sale

i. Choose a property location that can attract customers

ii. Provides space that attracts customers

iii. Considers symbolic statement through design of the property

iv. Creates workplaces that support the company's brand

v. Provides an environment that supports the sale

There is another team involve in marketing. The company is doing promoting, marketing using internal space branding (by corporate office). The corporate office will responsible to developed sense of belonging. Shell Tower (head quarters) represented as iconic building. Our team provides a conducive meeting environment to support the sale. (Jolene-Shell)

Real estate helps promote marketing and sale of the company by making our in-house rental valuation in order to balance the cost expenses and profit return. Our company iconic symbol is based on our own main system. (Azan-Axiata)

Real estate helps promote marketing and sale of the company through creating workplaces that support the board and provide an environment that support the staff. Menara shell is one iconic building for our company. We provide an environment to support sales through image and branding. (Ann-Shell)

Some complaints and request come from outdoor client. The company should take a risk depend on business activity. (Zul-Affin)

3. Increase innovations

i. Develops workplace based on usability

ii. Designs facilities to allow innovative processes

iii. Emphasizes knowledge in a work setting

iv. Allows employees to

From management view, collaborative workplace environment will support work culture. Management also provides good facilities to support staff innovation. The company already provides a new headquarters as itself initiated. The company has also requested input from the employee during planning stages (workplaces design). (Jolene-Shell)

participate in workplace design

Innovation is very important to our company. Our company applied a Flexi working style as an initiated of innovative changes. (Azan-Axiata)

Innovation is very important. We have design standard to support innovative workplace culture. Our company allows working environment and desk sharing in order to encourage changes in the company. (Ann-Shell)

In Shell, there are three teams in corporate real estate itself, such as the strategic team, the transaction team and the project team. In Tabung Haji, there are two units in corporate real estate, namely marketing and rental properties.

4. Increase employee satisfaction

i. Make efforts to seek locations that are convenient to employees

ii. Ensures pleasant working environment

iii. Provides a functional workplace

iv. Provides enough facilities for employees

v. Responses quickly to real estate requirements

The company provides food place for employee around the workplaces. (Jolene-Shell)

Our company provides gym, cafeteria, war room and other ills as a facility around the workplaces (for conducive environment). Our company very concern about the responses from employee. (Azan-Axiata).

There are some facilities available around workplace like a public transport, gymnasium, public health ailments and others. The management also provides extra necessities to increase employee satisfaction such as games room, yoga room, mother room, cafes and shop. In Shell, we have a ticketing system to receive any respond or employee requirements being handled by facility management. After a major project completion, we will conduct workplace satisfaction level of the employee. (Ann-Shell)

The top management level has different background. Most of them doesn’t have property background. There are several challenging and weeks when the management team is trying to fix some issues because they cannot understand behind that issue. Some company does not have a structured organization led to their employees receive high workloads or conflict in their job task. Some companies face a challenge when they are involved with business activities in urban areas. (Roy-Maybank)

5. Increase productivity

i. Maintain facilities to accommodate optimal operations

The workplace is really important for optimal productivity, depending on the functions. Oil and gas exploration requires (more the engineering

ii. Provides an environment that enhances productivity

iii. Chooses convenient layouts for contractors/suppliers

iv. Designs facilities that improve the creation and delivery of products

v. Choose a location that is convenient for employee accessibility

side). Conducive workplaces very important to employee productivity. The main complaints of employee are about workplace satisfaction and facilities provided. Company decisions have previously been increased company productivity (new office helps to provide new environment). (Jolene-Shell)

The workplace is much important for the operation, while I do think that medium of working is very important for real estate. We measured the employees' needs in different workplace by recognizing the aim of producing. The main complaint from employee happened when the landlord tries to ask about rental which is higher than market value. The company made the decision to limit the maximum and minimum rate of rental caused changing employee productivity. (Azan-Axiata).

IT connectivity and safe working environment are important to employee productivity. Our company has measured employee needs using survey report and business requirement. The main complaints, mostly received by a management site which is needed, extra facilities like a parking, coffee machine and sensitivity at security access systems. Our company has introduced different types of working and meeting space for changing employee productivity. (Ann-Shell)

Corporate real estate is seriously maintaining their customer satisfaction and protect consumer rights. It’s one of their keep performance indices (KPI) for jobs task. (Faizal-Tabung Haji)

6. Increase flexibility

i. Chooses leasing instead of owning property

ii. Prefers short-term leases compared to long-term leases

iii. Creates fix and standard workplace solutions

iv. Favours multi-purpose facilities

v. Selects fully serviced offices

Company more prefer leasing compare owning because there is not a core business to own real estate. A company creates a flexible working environment through share space and multipurpose facilities (meeting room can transfer classroom for training) to save costs. (Jolene-Shell)

The company prefers on leasing, as our culture of business is base of tenancy contracts and leasing of the tower. Our company creates a Flexi working hours and working station as flexible working environment. Our own office had all facilities inside for practicing multiple use facilities. We practice an open working station and open room space. (Azan-Axiata)

Our company is preparing leasing because it’s more flexible than owning. There are flexible working environment in Shell like a flexible spaces and height adjustable workspace. Our company was practicing multiple usage facilities such as collaboration area and rest area can be used by other employees. Shell has implemented open workplace area. The only senior executive level has personal rooms. (Ann-Shell)

7. reduce cost i. Minimizes acquisition and financing costs

ii. Maximize operating expenses

iii. Creates economies of scale in purchasing (eg. Buying furniture, facilities, etc.)

iv. Avoid routine maintenance

v. Balances between out-source and in-house services

vi. Avoid real estate reduction strategies as a financial control mechanism

vii. Utilizes government property incentives

viii. Establishes workplace standards

The company has proper planning to minimizes operating expenses. The facilities management team will conduct routine maintenance (proper inspection) and also implement company’s rules and regulation. Among activities done by a real estate team such as renovation- by contractor, finding new space/land (outsources external parties) and arrange management portfolio (in-house). Unused/underutilise asset being sold by business unit. The company saves real estate cost due to negotiating new lease term. (Jolene-Shell)

Our company minimizes operating expenses by using our own system called Property Information System (PRISM). The company creates economies of scale by making furniture and workplaces as multipurpose usage. Among real estate activities being outsourced to external parties such as negotiating the existing rental, searching for new sites and tenancy agreement stamping. We are in progress to come out with our own commercial proposal on all the existing site. (Azan – Axiata)

The company has minimized operating expenses with prefer sustainable building such as LEED certified buildings. Our company has global contract furniture as a created economy of scale. The company also conducts a routine maintenance depends on assets. Among activities were done in-house by real estate included a stakeholder management and service providers. There are several rules are being implemented in the workplace, such as clear desk policy, dynamic desk sharing, reduce waste policy and HSSE. Also, our company makes a transition between different team in real estate must be done efficiently to ensure a smooth handover and operations. (Ann-Shell)