Developers target recurring income growth in tough times

By FARA AISYAH / Pic By TMR File

SOME developers are targeting growth in their recurring income to mitigate the slow sales during the challenging period.

Recurring income will provide them with revenues that are predictable as they occur at regular intervals.

Paramount Corp Bhd’s recurring income — which is contributed mainly by its Co-labs Coworking space — currently contributes less than 5% to group revenue.

Paramount Corp group CEO and director Jeffery Chew (picture) said the company aims a higher contribution of 10% to 15% from the recurring income in the future.

“We hope this business (Co-labs Coworking) can get RM20 million to RM30 million in terms of revenue for the next three to five years. We have secured a turnover of RM1.3 million for the first half of this year. For the full year, the number will double to RM3 million to RM4 million as we have more locations.

“Next year, we are looking to further grow the number to RM12 million to RM15 million,” Chew said.

He added that the group is targeting to double its co-working space to 200,000 sq ft in the coming 18 months.

Paramount Corp is also expected to have five co-working space centres with a combined space of 100,000 sq ft by the end of this year.

A new Co-labs Coworking is expected to be opened in The Starling Mall, Petaling Jaya, by year end, in addition to the one established in the mall.

Other co-working spaces owned by Paramount Corp are located in Glenmarie and Sekitar 26 in Shah Alam, Selangor, and Naza Tower in Kuala Lumpur.

The group is planning to open between three and four co-working spaces each year for the next two years.

It has allocated a capital spending of between RM3 million and RM4 million for each Co-labs Coworking, based on an average size of 20,000 sg ft to 25,000 sq ft per unit, and a capital expenditure of about RM150 per sq ft.

Meanwhile, Sime Darby Property Bhd targets to grow its recurring income base to 10% of total revenue — from the current 6% — over the next five years.

The developer is embarking on its transformation to expand into the key growth sectors of industrial and logistics development.

Sime Darby Property chief transformation officer Mohammad Fairuz Mohd Radi said the group expects its industrial and logistics development to start contributing to its revenue from 2021 onwards.

“We want to focus on really developing our industrial and logistics development capabilities within our business units, so that we can grow it as a key business segment for us moving forward.

“This will help future recurring income for the company because we will build to suit, and lease industrial assets to attract local and also MNC (multinational corporation) tenants to then grow our recurring income,” he said.

Mohammad Fairuz said Sime Darby Property is currently developing the assets, before renting them out for monthly income.

In addition, the group would like to venture into logistics and warehouse facilities which require last-mile distribution.

Mohammad Fairuz said the properties could be leased to become a central kitchen with cold rooms that can be utilised for delivery of food items to restaurants.

He added that the properties could also be used as special purpose buildings for data centres, which Mohammad Fairuz said are in demand.