Source : Business Times - 23 Oct 2008
WHEELOCK Properties (Singapore) CEO David Lawrence apologised to his shareholders at an annual general meeting in April this year for having bought a stake in fellow upscale residential developer SC Global Developments last year at the top of the market.
‘I knew the market was not going to do well. The only reason I bought into SC Global was in case my gut feel was wrong and the (property) market kept going up. It was a hedge really,’ Mr Lawrence told BT in a recent interview.
‘But SC Global is a well-managed, good company which will do well in the long-term,’ he added.
Wheelock purchased a 10 per cent stake in SC Global in June last year at $6 per share. SC Global has since done a two-for-one stock split and the counter closed at 39 cents yesterday. Wheelock’s stake in SC Global currently stands at 15 per cent following open market purchases this year and a reduction in SC Global shares on issue after a recent buy-back exercise.
‘Every cycle, I make one mistake. The last cycle, I bought Ardmore View. And then I had to write it down, but then I did make good money.
‘This cycle I bought SC Global. It was a mistake. But it is a good company, so I’ll just have to hold it longer and make money.’
Wheelock bought Ardmore View in 1999 (after the Asian financial crisis) but had to write down the site’s value when property values fell again. The group has since amalgamated the Ardmore View site with the former Habitat II plot next door and redeveloped it into the 118-unit Ardmore II condo, which is fully sold.
Wheelock also owns a stake of about 20 per cent in Hotel Properties Ltd (HPL), which it bought in March 2006 for $1.80 per share. HPL has since made a renounceable rights issue of one rights share for every 10 shares. HPL closed at $1.01 on the stock market yesterday.
Wheelock itself is in a strong position to weather the current slump. ‘At the moment, we have in excess of $800 million cash for the company - some free cash, some in (residential) project accounts.’
According to a recent study by DMG & Partners of over 30 Singapore-listed property developers, Wheelock was the only one with negative net gearing as at June 30, 2008.
Says Mr Lawrence: ‘What I try and do for my shareholders is that when things are good, they make money on the share price. But when things are down, I try and keep enough cashflow, (so) I can pay them a decent dividend. I don’t always guarantee it but that’s what I try and do.’
The last Singapore residential site Wheelock bought was Habitat One, in July 2006 - at least a full year before the high-end market peaked. The group’s purchase price of around $2,000 psf per plot ratio is considered a viable land price for the upmarket residential sector even in today’s market. Construction of an 84-unit condo on the prime site has yet to begin and Mr Lawrence says the plan is to keep the site till the market improves.
Another project Wheelock has yet to launch is the 30-unit Orchard View, which is being built on the former Angullia View site that the group bought in late 2004. This was just before the start of the recovery in high-end residential prices, at a land price of just $643 psf per plot ratio, again testimony to Mr Lawrence’s skills in buying land at competitive prices.
However, he prides himself in selling, and not buying. ‘Any idiot can buy things. So you have to be careful when you have cash. Developers like the glamour of buying buildings or sites. It’s glamorous buying things. You’re in the papers. I’d rather be in the papers for selling things for a profit.’
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