Johor Baru's largest mall is being built by Capital City Group, which is listing on the Singapore Exchange (SGX) via a reverse takeover of marble producer Terratech Group.
Slated to open early next year, the Capital 21 mall will have a gross floor area of one million sq ft.
It will be part of Project Capital City, which includes a hotel and residential component, in the heart of Johor Baru near the Inland Revenue Board building.
More than 60 per cent of the retail units have been sold, which Capital City chief executive Siow Chien Fu said "was very encouraging".
He is bullish about prospects despite perceptions about the real estate situation in Johor Baru.
Foreign buyers have been reportedly snapping up units in Johor Baru but, without real occupiers, retail sales could be affected.
"Johor Baru is the second largest city in Malaysia and it still lacks this type of large shopping centres.
"When it is completed, it will cater not only to people in the area but also customers from further afield," he added.
Capital City will have 690 serviced apartments and 630 hotel-style serviced suites. Though the serviced suites have not been launched, buyers have snapped up 28.6 per cent of the units.
Mr Siow is unperturbed by the perception of oversupply in the housing market.
He noted that the company's number of units is relatively small.
"People have been talking about an oversupply of housing in Kuala Lumpur for years but there has still been good take-up. I'm not worried, JB is big enough and the state is doing a lot of development, like industrial parks," he said.
Capital City is the company's first development and Mr Siow, a veteran architect-turned-developer, is confident of its asset-light business strategy.
Terratech Group lodged a circular with the Singapore Exchange on Wednesday about the proposed acquisition of Capital City Group for about $300 million.
The deal, set to be completed after an extraordinary general meeting on April 21 and a proposed compliance placement and share consolidation, will see Terratech Group issuing new shares, with the enlarged group to be renamed Capital World.
Unlike traditional property developers, Capital World will not own land. Instead, it identifies landowners and works with them in joint ventures to develop assets.
For instance, the company worked with Malaysia-listed developer Gadang Holdings, which owns the land on which Capital City is sited. As a result, the company has less cashflow burden, as it pays less for the land cost upfront and pays instalments to the owner.
Typically, developers have to pay 40 per cent of the land cost upfront in Malaysia. Bank loans and interest payments come into the picture.
Mr Siow said the company is paying "a premium for the land" but its business model helps to ensure it is largely free of bank borrowings and interest payments.
"It's worth it, as my entry cost is very low. With the low upfront outlay, we can generate better value."
The company's pipeline of projects includes another integrated development of retail, office, hotel and residential apartments in Johor Baru and a wellness hub in Perak.
Lee Xin En