Where have all the theme parks gone?
V Sanjugtha | 17 Mar 2017 00:30
It was once the rave for developers to incorporate theme parks into their massive integrated development masterplans in a bid to catalyse demand for the project. However, as the real estate bull run grinds to a halt, many have either dispensed with their plans or deferred them indefinitely.
A property analyst says many developers announced the inclusion of a theme park component in their integrated development project as a key attraction to boost demand following the overwhelming success of Sunway’s theme park in catalysing growth in that area.
With so many developers jumping on the theme park bandwagon, at one time it was announced that Malaysia will be home to about 50 theme parks by 2020, many were water theme parks.
However, a check by FocusM revealed that most of these plans have now been put on hold, citing “postponed indefinitely” or “no plans at the moment” as reasons.
Among these proposed theme park projects that have been put on hold or cancelled include Malaysian Resources Corp Bhd’s indoor theme park in Kwasa Damansara in Sungai Buloh, Selangor. “At the moment, there is nothing confirmed yet for this project,” says the company executive.
Similarly, DA Land Sdn Bhd’s RM5 bil indoor and outdoor theme park on 20.4ha in Rawang is also put on hold. “Theme park development is on hold until further notice,” says its company executive. The RM200 mil Jurassic Park & Sea World in Melaka, a project which was to be undertaken by state-owned Yayasan Melaka and Edenzil Sdn Bhd, has been cancelled.
What are the repercussions to stakeholders when the theme parks, which are the key attraction of a development, get scrapped? What are the implications to the value of the property? Was the expensive theme park attraction factored into the gross development value (GDV), raising price per sq ft?
Also, what will happen to the designated land for the theme park, which is of significant size?
“The cost of building a theme park can run into hundreds of millions, and if it has been factored into the entire project, chances are the price per sq ft reflects these costs. So when the theme park element has been scrapped, the question is what will replace it?” the analyst says.
She also questions if the plans will be re-submitted to the respective municipal councils for approval, and if so, what control mechanisms are in place to safeguard the investment interest of the affected stakeholders.
HC Chan, CEO of Sunway Shopping Malls and Theme Parks, believes that there are many intricacies and challenges to running a theme park business.
“But if you are nestled within an integrated development, then harnessing the synergy between different components will go a long way,” he tells FocusM.
He notes that theme parks are very capital-intensive, and as with any business venture its sustainability must be proven via feasibility studies before banks would agree to finance it.
“If a developer has merely used the theme park for the purpose of creating a catalytic effect to the integrated development, it warrants a misrepresentation and consumers have the right to take it up,” he says.
However, he believes the location of the development is also an important factor, as a good location does not necessarily need a catalyst such as a theme park to add value to the development.
“Whenever it’s feasible, we incorporate it [theme parks] as a component in our integrated development.
From a tourism perspective, it has strong crowd-pulling power. This works well with greenfield developments which need a catalyst to attract investors and spur demand,” Sunway’s Chan explains.
Beneton Properties CEO Chan Kin-Meng stresses that responsible developers will always feasibly plan for an alteration. He acknowledges that when micro and macroeconomic factors change, there is a need to re-look at the viability of large-scale components within a project.
“Buyers will appreciate that they [developers] are not just ramming features down and making their homes too expensive to maintain,” he elaborates.
He adds that the implications resulting from changes to the GDV from an alteration or scrapping of a key attraction like theme parks is very case-specific and a responsible developer will not short-change investors.
“That’s why you must be as selective of the developer as you are of the location,” he quips.
The impact of alterations
When changes are made and key attractions such as theme parks, private schools or shopping malls are affected, stakeholders tend to raise questions, incurring the scrutiny of the developer’s intention.
It is believed that the development order for integrated development is usually approved in phases.
This accords the flexibility to a developer to make changes to the masterplan depending on investor demand, balance sheet strength, market conditions or feedback from market surveys.
A spokesperson from the Ministry of Urban Wellbeing, Housing and Local Government explains that all integrated development projects are monitored at the state level. He reveals that the respective local government within the state will analyse the masterplan components before approving the development order.
This control mechanism allows for monitoring the type of development and suitability to surrounding areas, as the state authority decides the direction of real estate development since land is under the jurisdiction of each respective state.
“At the planning stage, developers usually seek out a catalyst to attract demand such as a shopping mall or a theme park, however, as the project progresses, unpredictable variables and unforeseen circumstances determine the feasibility of carrying out some of the components planned in the project,” he explains.
Adding that in such situations, the developer will be required to formally request for the change at the municipal council, he informs that the local government has the right to refuse the changes if the repercussions on stakeholders are too severe.
He opines that these ambitious elements that are added into an integrated project to spur demand create speculative activities and raise the prices of the commercial and residential units within the development.
He calls on buyers to be cautious when investing in flamboyant projects which boast of key attractions that are “large-scale” and require high investments.
CBRE WTW managing director Foo Gee Jen concurs that the theme park business is usually added to a development merely to bring in activity and drive foot traffic. On its own, he opines that theme parks rarely make money.
“Genting theme park for instance attracts visitors to come in and this supports the main casino business,” he notes.
When asked about the impact of scrapping a planned theme park from the masterplan of an integrated project, Foo cites a possible impact on the commercial units as a theme park’s sole intention is to drive traffic.
He does not see a whiplash on the residential market as demand for homes is “always there”.
Big money, small returns
There is an industry “rule of thumb” that when planning for the construction of a theme park, developers should anticipate investing US$100 (RM444.70) per expected first-year guest. This translates into a multimillion ringgit investment that takes up at least 25ha of space, notwithstanding the exorbitant costs to equip and maintain the park.
According to Sunway’s Chan, it invested RM100 mil to create the Nickelodeon theme park, which is expected to help draw in its targeted 1.8 million visitors to Sunway Lagoon this year. The park saw an average of 1.5 million visitors per year over the past three years, of which 60% were foreign tourists. The Lost World of Tambun in Ipoh is expected to draw in 1.2 million visitors this year.
Chan reveals that millions have been spent on numerous additional rides and attractions such as the Hippo Valley enclosure with flamingos, crocodiles and hyenas that have been added to its Ipoh theme park.
Sunway is finalising planning of its third water theme park in Sunway Iskandar, Johor to cash in on the Singapore market. With 800ha, as opposed to Sunway Lagoon’s 35.2ha, market observers are waiting excitedly for this new product.
Leeza Foo, international business development executive, Group International Business at Sanderson Group Operational headquarters, points out that the mild climate makes it an ideal all-year-round destination. However, she warns that while the number of theme parks may grow, there isn’t the local population density that Japan, Korea and especially China have to sustain them.
“We expect theme park attendance to respond to seasonal fluctuations and major economic changes, especially with our economy geared to the world cost of oil, palm oil pricing and the impact from political elections,” she says.
Foo adds that Sanderson has received many queries from landowners who would like to transform their oil palm land into other uses. A major stumbling block she observes is funding.
“The best examples of a successful park, is the partnering between landowners, designers and local governments,” she notes.
Reviving abandoned projects
The STG Group, which owns and operates the Gold Coast Morib International Resort and Gold Coast Malacca International Resort, built these water theme parks by reviving abandoned projects.
The Morib theme park was built on the site of an abandoned resort previously under Jeram Kuantan, while in Melaka, STG revived the Water City project, converting it into the water theme park it is today.
Its director, Datuk Dr Alex Tan, informs that both resorts are operated on a leaseback model, with Morib having sold 90% of its rooms and the Melaka resort, 70%. He adds that both have an 80% local ownership distribution. Of the remaining portion, ownership is largely nationals of China, Japan, Taiwan and Hong Kong, while Morib has some Middle Eastern owners.
The Morib theme park, which was launched in 2012, has been delivering a guaranteed rate of return 7% over the first five years, reviewed to 5% this year. At launch in 2012, units were sold from RM99,000 onwards, but today command about RM250,000.
Tan agrees that running a water theme park is very challenging and expensive.
“The maintenance issues are complex and expensive and human resource issues are very challenging,” he elaborates.
Tan says profits are largely derived from room sales. He says Morib’s 1,000 rooms see an average occupancy rate of over 50%, while Melaka is often fully booked over the weekends, largely driven by Singaporean tourists.
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