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Builders venture abroad for new income streams, to diversify

06 December 18 | The Business Times


SINGAPORE property developers have been diversifying into new markets and business segments in recent years after several rounds of property cooling measures, which have contributed to a tougher operating environment.

Following the most recent measures, developers that The Business Times spoke to nonetheless still see Singapore as a core market and will continue to look for opportunities here, in addition to overseas.

In July, the government announced a hike in the additional buyer's stamp duty rates and tightened loan-to-value limits on residential property purchases. Meanwhile, the Urban Redevelopment Authority (URA) has revised the guidelines for the maximum allowable dwelling units in private residential developments outside the Central Area to curb the number of shoebox units in new projects. The guidelines kick in from Jan 17, 2019.

Group chief executive officer of KOP, Leny Suparman, said: "Recognising that the local real estate market has been challenging in recent years, we did tread with caution for awhile but recently re-entered with the acquisition of the Dalvey Road site. Going forward, we will continue to explore development opportunities outside of Singapore, while selectively seeking development sites in Singapore." In May, it won the freehold Villa D'Este site in Dalvey Road via a collective sale for S$93 million, which will be redeveloped into a high-end, resort-style condominium.

Looking ahead, the Catalist-listed property developer is banking on experiential retailing and entertainment replacing the role of traditional malls, which is prompting it to build an integrated indoor ski resort in China. In August, it broke ground on the six billion yuan (S$1.2 billion) Wintastar Shanghai, which it is developing together with its partners. The project, slated to open in 2022, will also feature hotels operated by its luxury hotel arm, Montigo Resorts.

Ms Suparman added: "We've identified the potential of entertainment real estate, which we plan to incorporate into our development projects moving forward, starting with Wintastar Shanghai, which will not only optimise yields of the property, but could also potentially create new revenue streams."

Outside of China, it is expanding its two Montigo hotel properties in Bali and Nongsa respectively to enhance recurring income. KOP is also keen to take its Montigo brands to new markets.

Koh Brothers Group, which made its maiden foray into South Korea last year, is looking to scale up its presence there as well as in other markets. While previously more focused on development projects in Singapore, "we've been open to explore viable opportunities overseas, especially in recent years given the challenging real estate market in Singapore brought about by several rounds of cooling measures," said group chief executive officer of Koh Brothers, Francis Koh.

In May 2017, it took a calculated risk and scooped up a prime, mixed-development site in Seoul together with a joint-venture partner. The project is progressing well, it says, while in Singapore it has three freehold sites in the Holland Village area - Toho Mansion, and 20 per cent-owned joint-venture development sites, Hollandia and Estoril.

Mr Koh added: "While we continue to seek opportunities to extend our footprint in South Korea, we are concurrently looking at development opportunities in other markets abroad that offer healthy yields. Meanwhile, Singapore is still a key market and we will continue to seek opportunities to replenish our land bank."

The group takes a prudent stance on site acquisitions, given the "current record site acquisition prices", and will also manage projects carefully to optimise margins, he stressed.

In response to queries from BT, property giant CapitaLand emphasised that it has always had a portfolio that is diversified geographically as well as by various asset classes, with a presence today that spans over 150 cities and over 30 countries. In Singapore, in addition to the residential sector, it is also active in asset classes such as malls, serviced residences and offices.

A CapitaLand spokeswoman said: "With a target 80:20 optimal mix of investment and trading properties, CapitaLand is well-positioned for sustained growth across geographies and sectors. We will continue to monitor market conditions and tailor the marketing and sales strategies accordingly for our pipeline of homes under development."

As at Sept 30, Singapore, Malaysia and Indonesia collectively accounted for 45 per cent of CapitaLand's total assets. Of this, exposure to the residential sector stood at just 3 per cent. Its exposure to trading properties - across both residential and commercial stratas - accounted for about 21 per cent of its total assets as at 3Q 2018. The remaining exposure comes from investment properties, such as integrated developments, shopping malls, office buildings and serviced residences, which deliver recurring steady income.

Meanwhile, Roxy-Pacific Holdings has been active in overseas markets such as Australia, Malaysia, Japan and New Zealand over the last five years. These include income-generating projects such as office investments in Australia and New Zealand, as well as hotels in Japan, the Maldives, and Phuket. Revenue from overseas is expected to contribute to more than 40 per cent of total group revenue in FY2018, and climb to over 50 per cent in FY19. Prior to 2014, it derived all its revenue from Singapore.

Chief executive Teo Hong Lim said: "While we have made headways - especially in Australia, New Zealand and Japan - we recognise that good opportunities are getting harder to secure in this era of borderless capital flows. We continue to evaluate interesting opportunities in Singapore and our key overseas markets regularly when they are presented to us."

In Singapore, while the increase in ABSD and the more stringent LTV could have some impact, he expects demand for property will remain, with Singaporeans aspiring to upgrade to private homes.

Mr Teo added: "Our ability to secure freehold sites at unique locations (in Singapore) differentiate us from the general market supply of leasehold properties. The new rules from URA will not affect our current land holdings and (in the) future, we need to identify locations to provide the most suitable homes in terms of budget and sizes for the buyers."