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SINGAPORE — Singapore asset manager Keppel is looking deeper into emerging markets like India to drive investments even as China, long a source of business, struggles with a property crisis that threatens to dampen growth for the country.

Keppel, which counts Singapore state investor Temasek as a major shareholder, will send a management team to India in November to “examine the market more closely” in order to establish a foothold.

Louis Lim, chief executive officer for Keppel’s real estate division, told Nikkei Asia in an interview that this is being done as the company aims to balance its portfolio across the region, with India “looking attractive.”

“This is a good time for India,” he said. “There’s a lot of impetus for growth across sectors, not just real estate. … We see opportunities there to grow our infrastructure and our connectivity businesses.”

In Mumbai, Keppel and Indian real estate developer Rustomjee Group in May jointly launched high-rise apartments in a project named Lavie. The condos form part of the Uptown Urbania integrated township in the city’s Thane West.

Uptown Urbania sprawls over 100 acres (40 hectares), with the Lavie project spread over 8.5 acres with eight high-rise towers. It offers amenities for residents such as a swimming pool, gymnasium, business center, yoga deck and whirlpool baths.

In China, Keppel in early October announced an agreement to divest a 35% equity stake in Chengdu Taixin Real Estate Development. This joint venture between Keppel and mainland real estate developer Vanke Enterprise owns V City, a 16.7-hectare residential project in Chengdu.

Vanke is paying out about 94 million Singapore dollars ($69 million) for Keppel’s divested stake. Keppel said the V City development was completed in 2020, and all 5,399 residential units and 356 street-front shops have been fully sold.

“In the case of the more recent Chengdu divestment, that is an amount of money that we can deploy because actually the project is almost completed,” Lim said. “In terms of the value that we’ve been able to capture, the profits have already been banked and we felt it was time to take those monies and deploy them elsewhere.”

In China, Lim noted that the property sector has been through a rout and assessed that it is unlikely that the real estate space will experience a fast recovery.

The world’s second-largest economy, after the U.S., has of late been pressured by troubles from beleaguered property developers.

For instance, China Evergrande Group, once the largest developer in the country, is struggling under heavy debts accumulated over a number of years, and a sales slump has hit its cash position following a government crackdown on the sector.

In August, Evergrande filed for bankruptcy protection in America. At the same time, Country Garden Holdings, the mainland’s largest property developer by revenue, experienced a worrying cash crunch.

The World Bank in October cut its growth forecast for China into next year as Asia’s largest economy struggles with the brewing property crisis, which has spelled bad news for its gross domestic product.

Growth is now pegged at 4.4% for 2024, down from the 4.8% figure the institution forecast in April. Oxford Economics, in an August report, noted that property-related debt accounts for at least 43% of China’s GDP by estimates.

Keppel’s Lim noted that industry watchers do not believe China will see a turnaround from its property troubles next year, with his company “hunkered down” to focus on spaces that are a priority.

“We do have a residential program for China that we will continue to invest in,” he said. “We work with the local partners to buy into attractive micro-market real estate opportunities in residential.”

Keppel has a China Urban Development Investment Programme that backs residential developments in Chinese gateway cities alongside co-investors. In 2022, through this program, Keppel invested in a residential site in Shanghai with another partner.

Lim said that Keppel has been in the Chinese market for over 30 years, and it will continue to be an important place for his company in the future, even though the real estate sector is currently laden with uncertainty.

Apart from this, the company is also eyeing opportunities in ASEAN members, including countries like Vietnam, Indonesia and Malaysia.

Diving into sustainable developments is a key aspect of Keppel’s approach, Lim highlighted, and this has been seen in a few projects that the company has within its portfolio.

International Financial Centre, located in Jakarta’s central business district, is a Keppel-developed project that comprises office space and retail outlets. The development uses energy-efficient technologies and has management systems to minimize power consumption.

Over in Vietnam, the company has a stake in Saigon Centre, a mixed-used development located along Le Loi Boulevard in Ho Chi Minh City’s central business district. The project uses energy generated from solar panels to reduce carbon emissions.

“We have demonstrated that sustainability produces financial results,” Lim said. “You may be paying more in rent, but you may be paying less in energy … [if] we are able to provide technology to help your office space run more efficiently.”

Source : NikkeiAsia

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There are many examples of resilience and outperformance in the global property industry. In residential markets, house prices in the United States hit a record high last month amid a rise in mortgage rates to their highest level since 2000. In commercial markets, industrial and logistics assets accounted for 37 per cent of global cross-border investment in the first half of this year, the highest half-year share on record, according to CBRE.

Yet, the ones that stand out are those that have stood the test of time or involve markets that are defying major trends in the global economy. Three of the biggest trend-defiers are in Asia, one of the reasons parts of the region’s real estate industry – particularly the office sector – have fared better than in the US and Europe.

The first trend-defier is Singapore’s remarkably resilient housing market. Although cross-country comparisons should be treated with caution, given that 80 per cent of Singaporeans live in public housing – 90 per cent of whom own their apartments – the city state has bucked the downturn in residential real estate in spectacular fashion. Last year, private property prices rose 8.6 per cent, compared with 10.6 per cent in 2021.

According to Knight Frank’s Global Residential Cities Index, home values in Singapore grew 7.5 per cent on an annualised basis in the second quarter of this year, the second-fastest rate among global gateway cities after Dubai. Singapore’s performance is all the more striking given that one-third of the 100 cities tracked by Knight Frank were still experiencing price declines.

While a number of factors are at work – the city state’s safe-haven appeal, pandemic-induced delays in construction and strong demand from Singaporeans – the one that is the most compelling is often viewed as the biggest threat to prices.

Successive rounds of cooling measures implemented over a 14-year period prevented excessive speculation, ensuring that the growth in prices never got out of hand. While increasingly draconian, the restrictions have targeted second-home buyers and foreigners alike. “If it wasn’t for the cooling measures, prices would have been far more volatile, causing a boom-and-bust cycle,” said Nicholas Mak, chief research officer at property portal MOGUL.sg.

A man waves from a bridge in front of the skyline of the Yeouido business district in Seoul, South Korea, in April 2020. The fundamentals of the capital’s grade A office market are the envy of landlords in the West. Photo: AFP

The second trend-defier is Seoul’s exceptionally strong office market. At a time when offices have been hit hard by the Covid-19-induced shift to hybrid working and the dramatic rise in interest rates, South Korea has emerged as the poster child for the traditional workplace.

A survey conducted by Nicholas Bloom of Stanford University earlier this year revealed that South Koreans worked from home an average of just 0.4 days a week, the lowest among 35 economies surveyed. Even in office-oriented Asia, the office occupancy rate in Seoul is the highest along with Beijing and Shanghai, having reached “normal” levels (90 per cent or more) in mid-2022, data from JLL shows.

The fundamentals of Seoul’s grade A office market are the envy of landlords in the West. The vacancy rate stood at a negligible 1.1 per cent in the second quarter of this year due to persistent undersupply, net take-up has remained in positive territory for the past three years while rents continue to rise at a brisk pace. “There is no Covid discount,” said Rob Wilkinson, deputy managing director at CBRE in Seoul. “Quite the opposite. Landlords are increasing rents.”

Investment in Seoul’s office market has soared. According to data from MSCI, transaction volumes reached US$3.4 billion in the second quarter, 15 per cent higher than the average for a second quarter during 2015-19. The sharp fall in office deals in the US, Europe and the rest of Asia in the second quarter meant that South Korea was the world’s second most actively traded office market.

The third trend-defier is Japan, and in particular what sets its economy apart from the rest of the world. For starters, Japan is not China, which matters significantly to global investors seeking a large and liquid market in Asia without the economic and geopolitical risks that China presents.

Second, Japan is the odd man out in global monetary policy. Despite a long-awaited rise in inflation and the dramatic increase in borrowing costs in almost all other major economies, the Bank of Japan (BOJ) has kept its ultra-loose policy firmly in place.

Super-low interest rates and higher loan-to-value ratios compensate for lower rental yields on commercial properties, allowing investors to generate positive cash-on-cash returns. Furthermore, Japan is stable and predictable, a rarity today. “It’s the place to ride out the storm [and] the only real investible market in Asia with depth and liquidity,” said John Howald, head of international capital, Asia-Pacific, at Colliers.

Efforts to reshape global supply chains away from China are benefiting Japan. In August, ESR, Asia’s largest real asset manager, began construction on what is expected to be the largest logistics park in Japan, partly to capitalise on “an increase in manufacturing activities spurred by reshoring from Asia back to Japan”.

To be sure, an abrupt tightening in policy by the BOJ – or sharper falls in property values in the US and Europe that make Japanese assets look expensive – could undermine sentiment. Singapore’s housing market, meanwhile, is slowing significantly while competition for prime office space in Seoul is fierce.

Yet, these are risks that either may not materialise or are relatively inconsequential given the much bigger threats faced by the property industry. Asia’s sources of resilience are likely to remain resilient for some time yet.

Source : SCMP

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Residential rental growth could slow to less than 5% in the second half, with an overall annual increase of between 10% and 15%, said Bloomberg Intelligence analyst Ken Foong. This comes after an almost 30% jump in 2022 and a 7.2% increase in the first quarter. The market remains underpinned by the city-state’s economic recovery and resilient job market, he said.

Rents and home prices in the financial hub have surged since the Covid-19 pandemic on an influx of wealth, creating a headache for the government to quell discontent among residents. Authorities raised taxes on property purchases in late April, mainly targeting foreign and second-home buyers in a bid to maintain affordability.

The government said earlier this month that it expects signs of easing in the rental market and already sees indications that demand is “abating”. It expects 40,000 home completions this year – the highest in the last five years – and about 100,000 by 2025. Households temporarily renting while waiting for their new homes to be finished will move out of their units, it said.

“While there is still robust demand for rental properties, there are telltale signs that tenants are becoming more resistant to rental price increases,” according to a report by real estate marketplace PropertyGuru. “With supply being slowly restored and the increase in the number of rental listings, rental prices are expected to gradually stabilise.”

Foreigners, who now have to pay an additional 60% tax on a property purchase, would have to turn to renting, said Colliers’ head of research Catherine He. However, this too will be negated by the deluge of new homes coming onto the market, she said.

Source: Bangkok Post

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On the other hand, CDL has rescheduled the preview for Newport Residences, initially slated for April 29. The freehold, 246-unit Newport Residences is part of a mixed-use development that includes offices, serviced apartments and F&B and retail. It’s a redevelopment of the former Fuji Xerox Towers commercial building on Anson Road in Tanjong Pagar in District 2 of the Core Central Region (CCR).

CDL deferred the preview following the rollout of the latest round of property cooling measures that came into effect on April 27, 2003. The additional buyer’s stamp duty (ABSD) for foreigners buying residential property doubled from 30% to 60%. The ABSD for Singapore citizens buying their second and third or subsequent residential property increased to 20% and 30%, respectively, while that of Singapore Permanent Residents (PRs) increased to 30% and 35%, respectively.

“The Group will monitor the market conditions closely and launch the project [Newport Residences] at the appropriate time,” says CDL.

‘Minimal impact’ on mass and mid-tier segments

In the near term, CDL expects the latest property cooling measures to impact projects with a higher proportion of foreign demand, typically high-end/luxury properties in prime districts or CCR.

The group expects “minimal impact” on the mass and mid-tier segments where most buyers are locals and PRs, as evidenced by the launch of EL Development’s Blossoms By The Park at one-north, where 75% of 275 units sold on the first day of launch on April 29 at an average price of $2,423 psf. The launch of the 816-unit, freehold The Continuum by Hoi Hup and Sunway Property the following weekend saw 211 units sold (26%) at an average price of $2,730 psf. Meanwhile, the 732-unit The Reserve Residences at Jalan Anak Bukit, by a joint venture between Far East Organization and Sino Group, will launch on May 27.

Analyst at RHB, Vijay Natarajan, notes in his report on May 19 that the impact of the cooling measures on CDL’s residential portfolio “is manageable”, as the group has sold 88% of its launched inventory in Singapore as of April.

Natarajan estimates the group could recognise about $5 billion in unbilled residential sales over the next three years. CDL has four projects with about 1,500 units ($2 billion in gross development value) in the launch pipeline. He says that 80% of the unsold units are in the mid-tier and mass-market segments, less impacted by the latest cooling measures aimed mainly at foreigners and investors.

“While we expect a slight moderation in new launch prices post measures, margins are unlikely to see significant compressions and remain in an 8-20% range,” says Natarajan in his report.

The group has residential developments in Australia too. As of 1Q2023, construction of the 198-unit The Marker in West Melbourne has been completed. To date, it is 92% sold. The 60-unit apartment project, Fitzroy Fitzroy, in Melbourne, is 40% presold ahead of its completion in 1Q2024. In Brisbane, its 215-unit Brickworks Park is 49% presold. The 97-unit Treetops at Kenmore, a JV project in Brisbane, is also 49% presold.

Palais Renaissance is 100% occupied as at end March 2023 (Photo: CDL)

Commercial portfolio – strong occupancy

CDL reported that its office portfolio had a committed occupancy of 94.3% as at 1Q2023 – above the island-wide occupancy of 88.8%. Republic Plaza, the group’s flagship Grade-A office building, is 93.2% occupied, with a positive rental reversion of 8.9% in 1Q2023. CDL’s other office assets, City House and King’s Centre, registered committed occupancies of 96.7% and 100%, respectively.

The group’s retail portfolio had a committed occupancy of 97.6%, higher than the island-wide occupancy of 92.4%. City Square Mall’s occupancy was 95% in 1Q2023, while Palais Renaissance, Waterfront Plaza and The Venue Shoppes are 100% leased. Rental reversions at City Square Mall and Palais Renaissance increased 7.9% and 7.5% in 1Q2023, respectively.

Increased shopper traffic and the return of tourists are helping the recovery of the retail sector. However, retailers remain cautious due to inflation challenges, utility costs and rising interest rates, CDL comments.

In March, the group completed its acquisition of St. Katharine Docks, a landmark 23-acre freehold mixed-use marina estate in Central London, for £395 million (about $636 million) [Photo: CDL]

Overseas acquisitions

In March, the group completed its acquisition of St. Katharine Docks, a landmark 23-acre freehold mixed-use marina estate in Central London, for £395 million (about $636 million) or £751 psf ($1,209 psf) on the existing net lettable area. The estate comprises over 500,000 sq ft of Grade A office, F&B, retail and residential arranged across four main buildings and supporting ancillary spaces, including a marina with berths for up to 185 yachts. The office component currently enjoys a strong occupancy rate of 90% with a well-diversified tenant base across sectors such as consulting, shipping, education and co-working spaces.

The acquisition of St. Katharine Docks adds to the group’s portfolio of prime commercial assets in the UK, boosting its total value to over £1 billion. Besides enhancing the group’s recurring income stream, the acquisition complements its fund management strategy, allowing the group to inject its UK assets into listed or unlisted platforms at an opportune time, says CDL.

The group, through its wholly-owned hotel subsidiary Millennium & Copthorne Hotels (M&C) and in a 50:50 joint venture with its New Zealand-listed subsidiary M&C Hotels New Zealand, agreed to acquire the 416-room Sofitel Brisbane Central hotel for A$177.7 million (about $159.2 million), or A$427,000 ($383,000) per key in March. Following the completion of the acquisition in 2H2023, CDL will benefit from this five-star hotel with the most extensive conference facilities in the heart of Brisbane CBD, the group’s third hotel in Australia.

The acquisitions of St. Katharine Docks and Sofitel Brisbane increase CDL’s fund management’s assets under management to US$4 billion, notes RHB’s Natarajan. CDL has a target of US$5 billion by the end of 2023. “The fund management’s business growth has been one of its key strategies to improve its weak core ROE [return on equity],” he comments.

The 48-unit Pregio Joto Chuo in Osaka (left) and the 78-unit City Lux Yokohama in Yokohama (right), are among the freehold residential buildings in CDL’s Japan PRS portfolio, which has 714 units to date and occupancy above 95% (Hong Leong Hi Life website)

PRS, PBSA portfolio boost

In April, CDL acquired two assets in Osaka’s private rented sector (PRS) for ¥31.5 billion ($314.1 million). With 201 units, they bring the total number of PRS units in Japan to 714. The average occupancy of its Japanese assets is above 95%. CDL states that strong demand from residents and corporates will drive leasing momentum in 1H2023 as border restrictions ease and foreigners return.

According to CDL, the group’s UK PRS portfolio continues to be “a counter-cyclical asset class” post-pandemic. Leasing is ongoing for The Junction, the Group’s PRS development in Leeds, which obtained practical completion for three out of five blocks (307 out of 665 units).

In the UK, the group has a purpose-built student accommodation (PBSA) portfolio of 2,400 beds across five cities, with committed occupancy of 98% for the academic year 2022/2023. With high demand and post-pandemic recovery, CDL expects “significant rental growth” in the next academic year.

Source: CDL 1Q2023 business update

Hotel portfolio RevPAR rebounds

CDL’s hotels registered global revenue per available room (RevPAR) growth of 65.4% to $13.2 for 1Q2023, up from $79.3 y-o-y, fuelled by the strong recovery from Asia and Australasia.

In 1Q2023, Singapore hotels recorded an 88.9% y-o-y increase in RevPAR, mainly due to higher average room rates. As travel restrictions have gradually lifted for the rest of Asia, these hotels recorded 150.2% y-o-y RevPAR growth propelled by the strong performance in Taipei and Beijing.

The group opened the 294-room M Social Suzhou hotel in April, marking its first M Social property in China. The M Social Suzhou is within Hong Leong City Center, the group’s integrated development next to Jinji Lake in Suzhou Industrial Park.

According to CDL, the hotels in Australasia achieved strong RevPAR growth of 126.8% to $112.5 in 1Q2023 due to higher occupancy and room rates.

In Europe, CDL’s hotels recorded a 40.9% increase in RevPAR in 1Q2023 to $138.9. London hotels achieved an average room rate of $248.7, 22.3% higher than last year, resulting in a 39.7% growth in RevPAR.

The US hotels recorded a 38.4% y-o-y increase in RevPAR in 1Q2023, driven primarily by the New York hotels. The higher average room rate and the continued focus on cost management enabled the New York hotels to achieve a lower gross operating loss than Q1 2022.

The group opened the 294-room M Social Suzhou hotel in April, marking its first M Social property in China (Photo: CDL)

Net gearing ratio at 55%, cash reserves at $1.9 bil

The group’s net gearing ratio stood at 55% as of March 31, 2023, following the acquisition of St. Katharine Docks. Interest cover is 3.1 times, with cash reserves of $1.9 billion. CDL maintains a “liquid position” comprising cash and available undrawn committed bank facilities totalling $3.6 billion. According to the group, its debt expiry profile “remains healthy”.

“The recent property cooling measures in April serve as a continued reminder that the group should not be overly reliant on a specific country or asset class,” says CDL. “The Group’s geographically diversified portfolio across its various business segments enables it to maintain stability while embracing growth.”

Source: Edge Prop

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The sale of a townhouse unit at Yong An Park, a freehold development on River Valley Road in District 9, was the most profitable condo resale transaction recorded during the week of May 2 to 9. A caveat was lodged on May 5 for the sale of the 7,718 sq ft property for $14.08 million ($1,824 psf). The unit had changed hands previously for $9.58 million ($1,241 psf) in February 2008. As such, the seller raked in a gain of $4.5 million on the transaction, or a 47% capital gain after holding the property for over 15 years.

The sale comes a month after the last resale transaction at Yong An Park. A four-bedroom unit measuring 3,434 sq ft on the 10th floor changed hands for $8.1 million, or $2,359 psf, on April 6. The seller bought the unit for $6.02 million ($1,753 psf) in March 2012. Thus, they clocked a gain of $2.08 million (35%) over a holding period of 11 years.

The 7,718 sq ft townhouse at Yong An Park was sold for $14.08 million on May 5 (Picture: Samuel Isaac Chua/The Edge Singapore)

Completed in 1986, Yong An Park has a total of 288 residences. Typical units comprise one- to four-bedders between 1,023 sq ft and 3,778 sq ft. There are three- to five-bedroom penthouses with sizes from 3,466 sq ft and 6,878 sq ft respectively, as well as a collection of six-bedroom, strata-titled townhouses from 7,718 sq ft. The development is a five-minute walk to the Great World MRT Station on the Thomson-East Coast Line.

New Futura, another freehold development in District 9, saw the second-most profitable condo resale transaction during the period in review. A caveat was lodged for the sale of the 2,691 sq ft unit, located on the 24th floor, on May 3 for $12.5 million. At $4,645 psf, it marked a new psf-price high for the 124-unit, freehold development by City Developments that was completed in 2017. The seller bought the unit from the developer in January 2018 for $9.1 million ($3,395 psf). Hence, they made a gain $3.37 million (37%) after holding the unit for over five years.

This is the most profitable resale transaction to occur at New Futura to date. It beats the previous record set in December 2022, when a 2,691 sq ft unit was sold for $12 million ($4,459 psf), with the seller reaping a gain of $2.96 million. It is also the second unit to change hands at the development to date this year. In February, a 1,098 sq ft unit fetched $4.4 million ($4,008 psf), with the seller netting a gain of about $314,000.

A 2,691 sq ft unit at New Futura was sold for $12.5 million, netting the seller a $3.37 million gain (Picture: Samuel Isaac Chua/The Edge Singapore)

New Futura, located along Leonie Hill Road, is a twin 36-storey tower residential development designed by American architecture firm Skidmore, Owings and Merrill, the design architect for luxury developments Wallich Residence and Skywaters Residences in Tanjong Pagar. Units at New Futura comprise a mix of two-bedroom apartments of 1,098 sq ft to four-bedroom apartments of 2,691 sq ft with double-volume ceilings. There are also two 7,836 sq ft penthouses — one at the top of each tower.

Meanwhile, a one-bedroom unit sold at V On Shenton was the most unprofitable transaction during the period in review. The 484 sq ft unit was sold for $1.13 million ($2,333 psf) on May 2. The seller purchased it for $1.33 million ($2,738 psf) from the developer in November 2012. Hence, they made a loss of $196,000 or 15% over a 10½-year holding period.

Based on caveats lodged, V On Shenton has seen three other transactions this year that have occurred below their respective purchase prices. On Jan 16, a 484 sq ft unit fetched $1.04 million ($2,143 psf), with the seller making a $250,000 loss. On March 1, a 1,098 sq ft unit was sold for $1.94 million ($1,767 psf), with the seller making a $35,000 loss. On March 10, a 1,528 sq ft unit changed hands for $3.09 million, with the seller making a $254,000 loss.

A one-bedder at V On Shenton was sold for $1.13 million, with the seller making a loss of $196,000 (Picture: Samuel Isaac Chua/The Edge Singapore)

V On Shenton is a 99-year leasehold condo on Shenton Way in District 1 developed by Singapore Land Group. The 510-unit condo in the CBD is the residential component of a mixed-use development that comprises a 54-storey residential tower and a 23-story office tower. The entire development was completed in 2017.

Source: Edge Prop

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