An eye on growing its landbank

'We will be interested to participate to buy commercial assets, particularly suburban malls, offices and even business parks.' - Lim Ee Seng, group CEO of Frasers Centrepoint Limited

Lynette Khoo

The Business Times

Wednesday, May 28, 2014

SINGAPORE - Singapore's property market has cooled somewhat but Frasers Centrepoint Limited (FCL) remains fired up. The global property player is looking to grow its landbank albeit through moderate bids, tap its strength in mixed-use development and scale up its hospitality arm.

In fact, given the speed at which its hospitality business is growing, it is starting to consider having a fund to manage those acquired assets.

"If we have a hospitality fund that can work with us, that will be an attractive proposition," said group chief executive officer Lim Ee Seng. "Nothing has been confirmed, but this is worth exploring."

As part of its buying spree, FCL snapped up Spanish company Teycotel BCN for 948,000 euros (S$1.6 million) last month; the company owns Hotel Porta Marina in Barcelona and the hotel's operator. In Germany, FCL has acquired three greenfield sites that are being developed for serviced residences.

The group is now looking at a fourth site in Germany and one or two more hotels in Spain, Mr Lim said.

The planned listing of Frasers Hospitality Trust (FHT) next month shows that the group's hospitality business has come of age. For a start, FHT will have an initial portfolio of six serviced residences and six hotels.

The six serviced apartments will come from FCL at a price tag of at least $651.7 million, while the other six hotels will be injected by FCL's major shareholder TCC Group, controlled by Thai billionaire Charoen Sirivadhanabhakdi.

This spin-off of the trust is also coming at a time when FCL wants to beef up its investment properties - that now make up 30 per cent of group revenue - to be on par with the contribution from its development properties in the long run.

Higher yielding development projects still accounts for 70 per cent of group revenue. But given the slowdown in the residential market here, FCL has been trying to raise recurring income from investment properties.

"We will be interested to participate to buy commercial assets, particularly suburban malls, offices and even business parks," Mr Lim said. "Our strength is in mixed-use development," he added, in reference to Changi City Point, Watertown in Punggol and a soon-to-be-launched mixed-use project in Yishun.

Still, FCL will carry on replenishing its residential landbank in the mass market and mid-tier segments, albeit with moderate bids.

Noting that there have been instances where developers threw in aggressive bids, only to yield a return of less than 10 per cent from their developments, Mr Lim said: "This is not a situation we want to be in. Whenever we win the site, we don't want to end up losing sleep over it."

To date, its Sengkang condo project Rivertrees Residences has sold more than half of its 496 units; its 632-unit QBay Residences at Tampines is almost fully sold.

Both projects have achieved median prices of slightly above $1,000 per sq ft (psf). The Sengkang plot was bought at $533 psf per plot ratio (psf ppr) and the Tampines site at $417.86 psf ppr with partners Far East Orchard and Sekisui House.

FCL also wants to shorten the so-called "time-to-market" - from the day it acquires the plot to the project's launch date - to six months from the current eight months.

But the mixed-use site in Yishun is taking a longer than usual time, given that it is sitting on top of a new bus interchange, which renders the need for certain regulatory approvals.

The group had earlier stunned the market with its $1.43 billion bid for the Yishun site last September, 47 per cent above the next highest offer.

"We had to protect our position" in the retail segment in Yishun, Mr Lim explained. But the pricing of residential units in the project is expected to be "affordable and attractive enough to invite buyers and investors", he said. FCL is shooting for a launch by the end of this year.

While Singapore remains its core market, the group is on the lookout for opportunities in Australia and China, where it is targeting annual residential sales of over 1,000 units collectively over the medium term.

The group's prudent assessment of options, however, means that there are times it has to hold back or be prepared to let some opportunities pass.

"Last two years, we have had some opportunities to acquire - both landbank and companies - in Vietnam. But we made a definite decision not to go in and that proved to be correct," Mr Lim said.

"If we had gone in two years ago, we would have made massive write-downs in the assets. Buying had ground to a halt, the interest rate at that time was very high and the Dong was very volatile," Mr Lim added.

"Now, the landbank is good and the pricing has been pared down, we are open to opportunities. We have been approached, but we are studying all this and are monitoring very closely the impact from the aftermath of the anti-Chinese riots."

This article was first published on May 26, 2014.
Get The Business Times for more stories.