HOTELIER Millennium & Copthorne (M&C), a unit of Singapore’s City Developments, says it is planning a project to convert the Copthorne Orchid Hotel Singapore into condominiums.

‘This is expected to generate cash and profit from an alternative use of an asset and save an estimated £10 million (S$22 million) of maintenance expenditure required to retain the property in its current use,’ the UK-based group said yesterday, in announcing its 2009 results.

It reported that trading had improved towards the end of 2009 and into 2010 as it reported full-year pretax profit at the top end of expectations.

M&C, which operates 120 hotels in 19 countries, said pretax profit fell 20 per cent to £81.9 million. Forecasts had ranged between £68 million and £81 million, with the consensus at £77 million, according to a Reuters Estimates poll of six analysts.

Revenue per available room (RevPAR), a key industry measure, dropped 6.2 per cent to £53.62 but the rate of decline slowed in the third and fourth quarters. In the fourth quarter, RevPAR increased in London, compared with the previous year, while the rate of decline slowed in New York and Singapore.

‘We were anticipating stronger demand towards the end of the year and the actual results for the fourth quarter have exceeded our expectations,’ said chairman Kwek Leng Beng. The improvement has continued into the current year, with group RevPAR up 3.5 per cent in the first five weeks. He said, however, it was too early to predict the trading performance for 2010. ‘We are encouraged by the signs of stability in some of our markets, while conditions remain challenging in others.’

On Tuesday, InterContinental Hotels, the world’s biggest hotelier, warned trading will stay tough until business travellers return in greater numbers, putting pressure on its shares after 2009 profit fell 34 per cent. US rivals expect bookings to improve, with Sheraton owner Starwood Hotels & Resorts looking for flat to 5 per cent RevPAR growth in 2010 and Marriott seeing RevPAR up 2 per cent to down 2 per cent. M&C shares closed on Thursday at 376.5 pence, valuing the business at £1.17 billion.

Source: Business Times, 20 Feb 2010

But agents’ association criticises Office for Fair Trading report, says stricter rules are needed to protect customers

BRITAIN’S housing market needs a shake-up to give the public a better deal but there is no requirement for better regulation of estate agents, the Office for Fair Trading (OFT) said on Thursday.

A year-long OFT study into the housing market concluded that a lack of competition for traditional estate agents was an issue, but said existing measures to govern their activities were sufficient.

However, it advised customers to shop around and haggle over agents’ fees, estimating that a failure to do so could be costing house sellers up to £pounds;570 million (S$1.24 billion) a year.

A body which represents estate agents said the OFT report was disappointing and that tighter rules were needed to protect customers.

The OFT study said the law should be changed to make it easier for other providers to enter the housing market, in particular through online services. This would have a ‘dramatic’ impact on the cost of buying or selling a home, it said. But there should only be regulation where it was necessary to protect consumers.

‘In the present economic climate, it is more important than ever that people get a good deal when buying or selling a home,’ said John Fingleton, the OFT’s chief executive. ‘Encouraging new business models, online estate agents and private seller platforms could put useful competitive pressure on traditional models and lead to better value for buyers and sellers.’

It rejected tighter controls of estate agents, saying overall satisfaction with them had risen in recent years. A recent OFT survey found 88 per cent of buyers and sellers were happy with agents, up from just over 70 per cent in 2004.

While a third of those who used traditional estate agents thought the fees they paid represented poor value for money, 64 per cent did not negotiate a lower commission rate.

However, the OFT did say that there was need for more regulation governing fees received by agents for referring customers to companies providing extra services such as mortgage advice and surveys.

‘The OFT believes this could cause an estate agent to favour one buyer over another, to the seller’s disadvantage,’ it said.

Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA) which has around 10,000 members, said the OFT had ‘categorically failed to see that better regulation’ of the market was required.

‘Buying a home is often the largest single transaction of a person’s life and it is disappointing that the OFT has not thought it appropriate to acknowledge that a robust and appropriate level of consumer protection is needed,’ he said.

‘The NAEA would like to see a greater level of regulation to ensure that professional, qualified estate agents are not confused with agents that, all too often, fail to meet the basic professional standards we would expect from our members.’

Source: Business Times, 20 Feb 2010

CAPITALAND yesterday announced a $5 million donation to children’s charities both in Singapore and overseas this year to kick-start a year-long series of activities as part of its 10th anniversary celebrations.

The donation, which will be distributed through the CapitaLand Hope Foundation (CHF), is also to celebrate its philanthropic arm’s fifth anniversary. This sum alone is equal to the entire amount CHF has contributed to 40 charities in Asia over the past five years.

CHF’s main focus is helping underprivileged children with shelter, education and healthcare needs.

Some other activities that will take place during the real estate conglomerate’s celebrations include a photography competition of any CapitaLand property in collaboration with the National Geographic Channel, a 10th Anniversary Commemorative Book, and an art exhibition by renowned Chinese artist Wang Shuping at the end of this month.

The 350 guests and staff who turned up to join in a lo hei-dinner at ION Orchard last night, hosted by group president and CEO Liew Mun Leong, were treated to a medley of cultural performances.

CapitaLand Group chairman Richard Hu said: ‘Despite a difficult decade for the global economy, CapitaLand has emerged ahead of the curve as a stronger company.

‘The strategy of exporting our real estate value chain overseas has paid off tremendously and the group has been recognised as a trailblazer for Singapore companies expanding abroad. Overseas markets now account for approximately half of our profits.

‘Over the past 10 years, we have generated total shareholder returns of $17 billion for our loyal shareholders.’

Mr Liew said: ‘Since CapitaLand’s formation from the merger of Pidemco Land and DBS Land in November 2000, the company has grown exponentially over the past 10 years into an international real estate company with a presence in over 20 countries.

‘From a $9 billion company at inception, the CapitaLand Group now comprises eight listed companies with a total market capitalisation of $40.3 billion as at end-2009.’

Source: Business Times, 20 Feb 2010

THE new rules mean a homebuyer will now have to fork out more of his own money to buy a property, and will reap a smaller profit if he sells it within a year.

Take, for example, a buyer who pays $1million for a home today and sells it in less than a year for $1.1million.

BEFORE THE NEW MEASURES

The buyer could take out a loan of 90per cent of the price – so he could purchase the property with as little as $100,000 as a downpayment.

By selling, he would have made a fast $100,000, less the stamp duty he paid when he bought the property – $24,600 under the stamp duty formula.

That means he would pocket a profit of $75,400.

His return on capital: 75,400/100,000 = 75.4%

AFTER THE NEW MEASURES

The buyer can take out a loan for only 80per cent of the price which means a downpayment of $200,000.

He would have made $100,000 minus his original buyers’ stamp duty ($24,600), and now minus an additional sellers’ stamp duty, of $27,600.

This means a greatly reduced profit of $47,800.

His return on capital: 47,800/200,000 = 23.9%

Source: Straits Times, 20 Feb 2010

TOUGHER rules on bank loans and measures to rein in speculators take effect today, as the Government steps up moves to cool the sizzling property market.

First, anyone who sells a property within a year of buying it will have to pay stamp duty of around 3 per cent. That means from today, if you buy a home and sell it at $500,000 within 12 months, you will have to fork out $9,600 in stamp duty. This is on top of the stamp duty you had to pay on the purchase.

Second, lending institutions will now be allowed to lend only up to 80 per cent of the purchase price, not 90 per cent. Buyers will have to come up with at least 20 per cent themselves.

Housing Board loans are not affected by this change in what is called the loan-to-value (LTV) limit.

The sellers’ stamp duty will hit short-term speculators, observers said, while the change in the bank loan limit is likely to weed out marginalised buyers.

The measures will affect only a limited number of buyers but experts feel they could have a psychological effect on the market. There is also concern that tougher steps are in the pipeline.

In its surprise announcement yesterday evening, the Government made clear why it was acting: ‘There is a risk that the market could overheat in the next few months, fuelled by low global interest rates and positive sentiments associated with the economic recovery.’

The joint statement from the National Development and Finance ministries and the Monetary Authority of Singapore said: ‘Any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy.’

If the market were to correct, property buyers and speculators could face capital losses, it added.

The Government also pointed to the sharp spike in sales of new private homes last month and rising prices.

It said that prices rose sharply in the second half of last year and at a faster rate than in previous rebounds. Mortgage lending is also up, hence its ‘calibrated measures now to… pre-empt a property bubble from forming’.

It added that it ‘prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed’.

The Government, which introduced market-cooling measures last September, also said that there is adequate supply and it will inject more sites on to its land sales list this year if needed.

Cushman & Wakefield Singapore managing director Donald Han said: ‘If the Government can come out with something so fast and without warning, it means they can do something faster and more painful if prices continue to rise rapidly. Investors won’t like it.’

Credo Real Estate managing director Karamjit Singh said the measures introduced last September and these new moves ’seem to be focused on preventing problems that aren’t here just yet’.

But he added: ‘The question that may unnerve developers and investors is, what’s next?’

The Real Estate Developers’ Association of Singapore did not think the sellers’ stamp duty would have an adverse impact on property market activity.

The reduced mortgage cap was also unlikely to have a significant impact on genuine buyers and investors, it said.

Under 10 per cent of home loans cover more than 80 per cent of the property’s valuation, but there are signs that more buyers are getting loans close to the maximum allowed.

OCBC chief executive David Conner told The Straits Times: ‘The banks have been pretty disciplined… because we’ve to put that much more capital against a 90 per cent loan than for an 80 per cent loan, the pricing has been significantly higher… and customers have declined to take that 90 per cent loan.’

PropNex chief executive Mohamed Ismail did not think the new measures would kill the market, but expected a knee-jerk reaction. ‘It may dampen speculators’ buying interest… in the next few months,’ he said.

Source: Straits Times, 20 Feb 2010

Seller’s stamp duty and tighter loan limits reintroduced in bid to discourage speculation

THE government yesterday administered another measured dose to cool the resurgent property fever. While mild by themselves, the latest steps could foreshadow more severe therapy if the fever refuses to subside, said industry watchers. And this could plant seeds of uncertainty in an investor’s mind.

It was announced that a seller’s stamp duty (SSD) will be levied on those who buy a residential property from today and sell it within a year. This is aimed at curbing short-term speculation. Also, the Loan-to-Value (LTV) limit on housing loans will be lowered from 90 per cent to 80 per cent.

The SSD applies to all residential properties and residential lands, except for HDB flats. The date of purchase for the purpose of computing the one-year holding period shall be the option exercise date. This raises the possibility that some speculators who have been granted options to purchase residential properties recently but have yet to exercise them may allow their options to lapse – and lose typically 1.25 per cent of the purchase price – rather than face the rule change.

‘True-blue speculators or flippers may fall out and return their options to developers,’ said a market watcher. ‘But specuvestors with the means of raising funding to make progress payments and who see prospects beyond a one-year horizon will likely continue with the purchase,’ he added.

Currently, stamp duty is levied only for the purchase of property, not its sale. SSD will be applied at the same rate as the buyer’s stamp duty – one per cent for the first $180,000 of the consideration, 2 per cent for the next $180,000 and 3 per cent for the balance.

The Inland Revenue Authority of Singapore released an e-tax guide, listing more details including exceptions on the payment of SSD – for instance housing developers when they sell residential properties within a year of purchase, or for an estate of a deceased person when interest in residential property is passed to the beneficiary.

The Real Estate Developers’ Association of Singapore (Redas) said: ‘The introduction of the SSD should not impact adversely activities in the property market. The reduced mortgage cap is also unlikely to have significant impact on genuine buyers and investors. Lending institutions have already been more prudent especially in the aftermath of the global financial crisis.’

The lower LTV ratio on housing loans applies to home buyers granted options to purchase from today and covers all housing loans given by financial institutions for private homes, executive condos, HUDC flats and HDB flats. However, loans granted by the Housing Board for HDB flats will still have a 90 per cent cap as such flats are already subject to other criteria to prevent speculation and encourage financial prudence, the government said.

Redas CEO Steven Choo says the lowering of the LTV ratio is not unexpected. ‘What was unexpected was when the limit was previously raised from 80 per cent to 90 per cent in July 2005.’

Currently, less than 10 per cent of housing loans are granted an LTVs greater than 80 per cent, ‘although there are signs that more housing loans are originating at higher LTV bands’, a joint statement by the Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore (MAS) said. Besides instilling financial prudence among property buyers, the move is aimed at sending a ‘clear signal to financial institutions to maintain credit standards’, the statement added.

Banks’ total outstanding housing loans increased from $79.6 billion at end-2008 to $91.4 billion at end-2009, according to preliminary estimates released yesterday by MAS.

Market watchers note the latest two cooling measures bear some resemblance to tools used by the government in the historic May 1996 anti-speculation measures, which, compounded by the Asian crisis, led to a long property slump. However, the government’s approach now is to administer smaller doses, rather than to prescribe a massive dose that may prove lethal to the market. Previous cooling measures were announced on Sept 14 last year.

‘The government will continue to monitor the property market closely and will introduce additional measures, if required later, to promote a stable and sustainable property market,’ the joint statement read.

Credo Real Estate managing director Karamjit Singh said: ‘We suspect the market would have preferred the latest measures to have been part of last September’s package so that all the measures came out at one go rather than in instalments, as this creates uncertainty about what further measures could be in store. That can be unsettling in the minds of investors and developers.’

Mr Singh also argues while the latest measures may seek to address speculation and overgearing, these are not the real reasons driving up prices. ‘The real reason is a physical supply crunch in the lower end of the housing market – HDB as well as entry-level private.’

Last September, the government scrapped the interest absorption scheme and interest-only housing loans which had been blamed for fuelling speculation, and announced the resumption of confirmed list land sales in the first half 2010.

While those measures had some effect, developers’ private home sales resurged last month. Prices of private homes also continued to increase after the sharp hike in H2 2009, the government noted. ‘Mortgage lending has also increased steadily by around 12 per cent year on year through 2009,’ it added.

Source: Business Times, 20 Feb 2010

DEMAND for Housing Board (HDB) resale flats may ease in the wake of yesterday’s measures to toughen up rules on home lending.

The new regulations have lowered the maximum loan amount a bank can lend – this is known as loan-to-value (LTV) limit – from 90per cent to 80per cent.

That means buyers of private homes and HDB resale flats will now have to stump up a deposit of at least 20per cent of the purchase price, up from 10per cent.

The LTV for those eligible for HDB loans, such as first-time buyers and second-timers who are upgrading, is already at 90per cent and remains unchanged.

This is because there are already HDB measures in place to curb speculation and encourage financial prudence, said the Government yesterday.

For example, there is a minimum owner occupation period of three to five years and a restriction on ownership to one flat per household.

Housing analysts told The Straits Times yesterday that the new rules – they come into effect today – will hit the private property market more than the HDB resale sector, but there will be some impact.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said higher interest rates tended to deter most HDB buyers from borrowing up to 90per cent of the purchase price.

HDB resale homes are also cheaper than private property and there are fewer short-term speculators in the market.

But analysts say the demand for resale flats – which has been red hot and pushing prices to record levels recently – is likely to be tempered.

PropNex chief executive Mohamed Ismail said the segment of buyers that will be most affected are private property owners and permanent residents (PRs) who are not eligible for HDB loans.

The bulk of homeseekers – mostly first-timers and second-time upgraders – qualify for HDB loans and will not be affected.

But for those PRs who have not worked for a long period of time and accumulated enough CPF savings, the new rules may delay their home purchases, said Mr Ismail.

The amount of money paid upfront to a seller over a flat’s valuation – called cash-over-valuation (COV) – may also come down if buyers are less-cash rich and unable to afford high premiums, he added.

The median COV amount paid for HDB resale flats soared to a record $24,000 in the fourth quarter last year.

Resale flat prices have surged about 40per cent in the past three years.

Anxious buyers priced out of the market have pointed to private property owner-speculators and PR buyers as possible factors contributing to the sky-high demand, although the Government maintains that these buyers are a minority and not a significant market force.

A joint statement from the Ministries of National Development and Finance and the Monetary Authority of Singapore said the rules to tighten credit to the housing market were aimed at encouraging greater financial prudence among buyers.

Source: Straits Times, 20 Feb 2010

PROPERTY booms, crashes, fads… you name it, real estate tycoon Kwek Leng Beng has seen them all in his 68 years.

Yet even one as experienced and savvy as he could not have predicted the way the market has roared back to life after being knocked flat on its back by the financial crisis.

‘The recovery was expected but not its intensity and swiftness. I was quite surprised at how strong it was,’ said the executive chairman of Hong Leong Group Singapore.

‘The world took swift action and came up with stimulus packages which we have never heard of in our lifetime.’

Yet, ‘no one can time to sell at the highest price, so like many developers, Hong Leong Group decided to sell on the way up’, he said.

That was how Hong Leong ignited the property market in late 2004: Its launch of the huge The Sail @ Marina Bay galvanised buyers and developers across the island.

‘We knew the market would turn around soon but we didn’t know when… So we knew we would have a hard task selling 1,111 units but we bought the land cheap. So we priced to sell,’ Mr Kwek told The Straits Times.

‘We could try to hold on until we thought the price and time was right, but we didn’t because there was no way to get the exact time.’

Its motivation was to lock in profits for its listed development arm City Developments (CDL) as soon as possible but the firm also wanted its buyers to make some money, said Mr Kwek. At The Sail @ Marina Bay, the initial launch price of $900 per sq ft on average rose to about $950 psf on strong demand back in late 2004.

The second tower was launched a year later in a slightly improved market at an average of $1,080 psf.

The Sail strategy hints at the firm’s overarching gameplan – remain flexible in all things.

‘When the market is really bad, you have to accept it. You sort of improve, think of new designs, think of what you can do, further revise your old plans so that when the market turns, you are most up to date,’ said Mr Kwek.

Last year, the Hong Leong Group showed its flexibility by cutting prices, albeit slightly, as the downturn rolled in.

The market had tanked by the time it launched the later phases of the 724-unit Livia in Pasir Ris. Earlier units went for $650 psf, later for $620 psf.

But while some developers took deep cuts, it reduced prices by only 5 per cent. ‘We do not undercut or slash our prices to the bone,’ said Mr Kwek.

‘If you cut as much as other developers do, they will cut again, and you cut again. To some extent, we are financially strong so we can hold.

‘The other reason is if this project is 50 per cent sold, so what? I still have 50 per cent. I can take another piece out of my land bank that is cheap and launch it.

‘But people without a land bank do not have such flexibility.’

Hong Leong’s substantial land bank has given it a lot more flexibility – that word again – in timing its launches and when it comes to replenishing its stock of sites. ‘Otherwise, you have got nothing to do, all your people sit down, fold their arms and wait for the market to go up,’ said Mr Kwek.

But those developers with little or no land left will have to replenish their land banks urgently but the equation has became harder.

Mr Kwek pointed out that in bad times, land prices do not fall as much as condo prices.

In late 2008, he shelved the $2.5 billion high-profile South Beach project in Beach Road until building costs fall to ‘reasonable levels’.

Last year, when construction prices were slipping, it re-negotiated contracts with its contractors. It also went ahead to build developments like The Arte in Jalan Datoh before the launch as it could.

The Arte was then released in April. More projects followed. Optima@Tanah Merah hit the market in July and sold out within three days at $810 psf. Hundred Trees in West Coast Drive also sold well, achieving $910 psf on average last September. Hong Leong said it was the top seller last year with more than 2,100 units shifted.

But like other developers, the Hong Leong Group had to face a potentially big problem last year – defaults arising from property bought on the deferred payment scheme (DPS).

But that turned out to be a ‘non-event’, said Mr Kwek.

‘That was a genuine concern… But you cannot assume that everybody who buys on DPS is going to default,’ he said. ‘In practice, you can sue them.

‘Developers also understand hard times. So why do you go after them? Let them slowly pay. As long as they can pay, allow them the chance.’

The Hong Leong group had ‘a few cases’ where the buyers could not pay but there were only two defaults last year. They took back the units.

‘Theoretically, there should be more, but there weren’t as we were sympathetic,’ Mr Kwek said.

Apart from being flexible on the payment deadline, what they did was to alert the buyers on getting a loan early.

Early last year, consumers found it tough to get sufficient loans as the banks turned very cautious and valuations fell.

Said CDL group general manager Chia Ngiang Hong: ‘Two months before our projects obtained TOP (temporary occupation permit), we wrote to the buyers to say: ‘Hey, your payment is coming up soon’, and we told them we have spoken to some banks willing to arrange their applications, and they dealt with the banks themselves.’

‘Bankers are bankers. They have to be cautious,’ said Mr Kwek.

Still, Mr Kwek added: ‘The banks shouldn’t be looking at the loan quantum alone. They should look at how many years you have been working, etc, and then restructure the loan.’

‘Property moves in cycles… The majority do not understand what investing in property is about. They buy property one day and hope to sell it the next so as to make a quick and big profit,’ said Mr Kwek.

‘The key problem is that many of us lack confidence, we rush when prices are rising and then stay away frightened when prices are at rock bottom.’

ON WHEN TO SELL

‘No one can time to sell at the highest price, so like many developers, Hong Leong Group decided to sell on the way up.’

ON BEING ADAPTABLE

‘When the market is really bad, you have to accept it. You sort of improve, think of new designs, think of what you can do, further revise your old plans so that when the market turns, you are most up to date.’

ON SLASHING PRICES

‘We do not undercut or slash our prices to the bone. If you cut as much as other developers do, they will cut again, and you cut again. To some extent, we are financially strong so we can hold.’

Source: Straits Times, 20 Feb 2010

IT WOULD take a huge leap of imagination to come up with a more incompatible business mix than the one Heeton Holdings had been wrestling with since 2003.

The firm’s chalk and cheese make-up had the glamour, prestige – and risk – of prime property development on one hand and oh-so-last-century but oh-so-safe heartland wet markets on the other.

Irreconcilable business differences of that magnitude led to the inevitable divorce last year when Heeton sold off the wet markets.

The move also marked the completion of the firm’s makeover from old school market landlord to real estate player.

It has been a long time coming. Heeton listed in September 2003, branding itself largely as the first wet market operator on the Singapore Exchange. Its property business was seen as a side line.

While the wet markets contributed just 10 per cent of annual revenue, that became the firm’s defining characteristic.

‘Analysts always asked us about our wet market business,’ said chief operating officer Danny Low.

That distraction was removed last year when the firm sold its five wet markets to supermarket chain Sheng Siong, leaving it free to focus on its growing property business.

‘We knew it (wet markets) was a sunset industry. Our store operators are old. When they retire or pass away, our stores will be empty,’ said Mr Low.

He said Heeton intended to sell the markets as early as two years ago and there were offers but it was all or nothing. ‘There is no point selling one market. If we sell one, we’ll still be a wet market operator.’

Heeton chairman and founder Toh Khai Cheng, who led the firm into the wet market business in the 1990s, said Sheng Siong came knocking last year and they decided to sell.

‘The wet markets offer us a stable yield but they can never take the firm to a new high the way property development can,’ he told The Straits Times in Mandarin.

Mr Toh started out in property development more than 30 years ago and earned the nickname the ‘Sembawang King’ as he was behind numerous projects in that area, including Hong Lim Mansions and Hong Heng Garden.

Heeton’s focus now is mostly on prime, boutique projects. Its latest launch was the 175-unit Lincoln Suites near the Novena MRT station which it is developing with three other developers.

It bought the former Mitre Hotel site in Killiney Road late last year and is preparing to launch a Grange Road project.

‘In prime areas, you can try out new ideas,’ said Mr Low.

‘Otherwise, we’ll end up doing just run-of-the-mill projects. Nobody will remember us.’

Until three years ago, its aim was to focus on just selling. Little thought was put into product differentiation, branding and so on.

But now it is thinking long term, acknowledging that to be a trusted developer you need to show the buyers that you intend to be around for a while.

‘You want your project to not only be able to sell, but also at a premium,’ Mr Low said.

This is why it roped in an Italian architect as well as yoo, the design firm co-founded by popular designer Philippe Starck and developer John Hitchcock, to design its 29-unit Grange Road project.

‘You have to differentiate yourself when you build a brand. For instance, developers used to dangle branded appliances as carrots, but that’s now outdated,’ said Mr Low.

Grappling with changing tastes is one thing, coping with the financial crisis is another. The downturn made it clear that there was no sure way to the bank, although Heeton had recurring income from its investment properties and wet markets to fall back on.

Its Grange Road project has been one victim. The launch has been delayed for more than a year and Heeton may have to lower its price expectations slightly when it finally does hit the market sometime in April to June if the high-end market has yet to truly pick up.

Heeton and its partners also had to delay the launch of Lincoln Suites. They bought the site during the 2007 boom at a record price of $1,449 per sq ft of potential gross floor area for the Newton area.

The downturn forced them to alter their plans for the prime project, including ensuring there were several small units – they comprise 75 per cent of the block – to keep the price quantum low.

Heeton also plans to build mostly small units on the old Mitre Hotel site.

‘These few years, the risks in the market have increased,’ said founder Toh. ‘Land is so expensive now.’

To mitigate the risks, they will continue to venture into the region where markets require a ‘lower investment’ and yet come with ‘lower risk and greater potential,’ said Mr Toh.

Heeton is also building a hospitality arm to give it a new stream of recurring income. It is starting by converting its 39-unit El Centro project in Tanjong Pagar into high-end serviced apartments or a boutique hotel.

Whatever the project, Heeton acknowledges that it needs to provide an edge. If it is building suburban projects, then it wants to offer good quality.

Prime projects mean giving buyers ’something different’, said Mr Low.

‘I didn’t say I will give you a Porsche but I will give you a Mercedes, as we don’t want to shortchange people.’

Source: Straits Times, 20 Feb 2010

WHEN the boss of the Popular bookstore chain answered the seductive call of property development some four years ago, his shareholders were horrified.

‘They probably thought I was drunk… I was already 70, why would I do something like a flash in the pan?’ says Mr Chou Cheng Ngok.

‘My shareholders gave me hell. ‘What if you flop? What are you doing?’ they asked.’

But Mr Chou, now 73, the firm’s chairman and managing director, decided to pursue his enduring interest in property.

When he first landed in Hong Kong from Singapore at the age of 27, he caught the real estate bug.

He has since handled several property developments there, a place he has called home for the past 45 years.

He told The Straits Times last week: ‘I came to realise that the book business is a high capital investment with a fixed profit margin. From the 100th to the 110th shop, can the profits still be phenomenal?’

‘Property is cyclical. The book business is not cyclical… You’ve got to be very sensitive about when you jump in and in which part of the cycle you are ready to sell.

‘Cycles are shorter and shorter but it is still about four to five years apart, so you can’t overstretch in case you have to hold.’

Popular’s first project here began in 2006 when it bought 15,070 sq ft of land in Robin Road in Bukit Timah for $12.5 million.

The firm sold all 14 units at the One Robin project from April last year for more than $1,310 per sq ft.

While it was a sell-out, the ride was not exactly smooth.

Popular held back the launch when the market weakened in 2008 but opted to sell last April when things got brighter. But as it turned out, ‘we actually sold it a bit early’, admitted Mr Chou, as prices started to pick up around May.

He hopes his timing will be better for his second project, the 19-unit 18 Shelford.

Mr Chou started building work in mid-2008 and will launch soon.

The firm has taken a hit from its property dealings. It reported a net loss of $17.6 million for the year ended April 30, instead of the previous year’s $13.6 million profit, due to the fall in fair value of 18 Shelford and another project, 8 Raja.

‘For a smaller player, the timing is even more crucial as you don’t have a name to rely on. You have to ride the wave,’ says Mr Chou.

Big projects are also out of the question. ‘We don’t have much capital. We don’t want or dare to try big developments.’

Fortunately, small projects give smaller firms like Popular the chance to showcase their design ideas and quality, as buyers warm up to them as developers.

That is why Popular insisted on building a full-sized show unit for its first two projects. ‘If you see the quality, you wouldn’t mind the name so much,’ says Mr Chou.

The margins could have been higher if they had cut corners, he says, but they are in it for the long haul.

Mr Chou sees his projects as places that he too would enjoy living in. ‘It’s more the thrill of building something that you think is nice and comfortable, nothing ostentatious.’

Property looks set to become one of Popular’s core businesses although for now it is playing it slow and steady.

Buying land is tricky for small players now. If Popular thinks a site is overpriced, it will walk away.

‘You need experience and discipline. You can get carried away because the profit is so phenomenal,’ says Mr Chou.

‘You cannot foresee everything. You must hope for the best and prepare for the worst.’

TRACKING THE CYCLES

‘Property is cyclical. The book business is not cyclical… You’ve got to be very sensitive about when you jump in and in which part of the cycle you are ready to sell.’

BEING CAUTIOUS

‘We don’t have much capital. We don’t want or dare to try big developments.’

BEING PRUDENT

‘Cycles are shorter and shorter but it is still about four to five years apart, so you don’t overstretch just in case you have to hold.’

TIMING IS CRUCIAL

‘For a smaller player, the timing is even more crucial as you don’t have a name to rely on. You have to ride the wave.’

Source: Straits Times, 20 Feb 2010