Source : Straits Times - 25 Mar 2009
PROPERTY giant CapitaLand’s president and chief executive Liew Mun Leong said the group is bracing itself for a long, cold winter ahead.
His bleak assessment follows South-east Asia’s largest property developer reporting an 88.4 per cent fourth-quarter net profit plunge to $78 million, due to revaluation losses on its investment property portfolio, a lack of write-backs for provisions and weak sales.
‘Going forward, it’s going to be a long, cold winter…Is it going to be one year, two years, three years? Nobody knows,’ Mr Liew told reporters on Tuesday.
The group’s recently completed one-for-two $1.84 billion rights issue - increasing its war chest from $4.2 billion to $6 billion - initially fuelled concern about the total amount being raised in such a depressed market.
But Mr Liew defended the move as an astute pre-emptive one.
‘In the worst scenario…what happens if banks refuse to lend? You will start to use up your cash, your $4.2 billion…How do we remain solvent during the cold winter?’
He said the rights issue would also provide ‘enough dry powder’ to enable the company to take advantage of the economic situation over the next few years.
‘I always ask my colleagues to read the book, Only The Paranoid Survive - and we are truly paranoid… At the same time, we are also ambitious. What about companies that are doing very well…but may have refinancing problems?
‘If they cannot solve the solvency question, then they will be up for grabs.’
With the cash windfall from the rights issue, CapitaLand is in a stronger position to buy assets on the cheap.
Mr Liew said many countries in Asia, including Singapore, China and Japan, would present such opportunities. And CapitaLand has formed study teams to target various geographies and companies.
Closer to home, the CEO disclosed that CapitaLand will soon be launching ‘a few projects’ here.
It has in the pipeline the residential project on the Farrer Court site designed by renowned architect Zaha Hadid, the Silver Tower and Char Yong Garden project, and the Gillman Heights site designed by Pritzker Prize winner Rem Koolhaas.
Right now, however, with many buyers staying away, there is lack of confidence in the residential market.
Mr Liew recalled Pidemco Land’s aggressive launch of Clearwater in Bedok Reservoir during the Asian financial crisis, which attracted a long queue and helped turn the market.
A sign was put up every day to show the current price and the number of units sold, and to warn people that prices will rise the next day.
‘And the next day, the price went up. It frightened people, so they started to buy. (It’s a) play on sentiments,’ said Mr Liew.
His advice to owner-occupiers is to re-enter the market if they can afford it. Buyers may suffer a paper loss, but will secure a property that may not be available to them in the future.
However, it is a different story if you are buying for investment where buyers have to ensure sufficient leasing income.
Referring to the retail market, Mr Liew reiterated CapitaLand’s stance that it will try its best to help tenants only on a case-by-case basis, and will not make any blanket cuts - no matter how small.
‘We are trying to exhaust ourselves to help them, but they can’t behave irrationally,’ he said.
Yesterday, CapitaLand shares closed four cents lower at $2.25 - down from a peak of $7 in 2007.
AT THE READY
‘We are truly paranoid…At the same time, we are also ambitious.’ - Mr Liew, who says the rights issue would allow the company to take advantage of the economic situation over the next few years
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