Waiting for the right time

Source : Business Times – 20 Jun 2009

BUYERS may be rushing back to the private housing market, but CapitaLand is in no rush to release new projects. ‘If we think there is potential in a piece of land when the market recovers, there is really no need for us to rush to launch it,’ CapitaLand Residential Singapore’s chief executive Patricia Chia told BT in an interview.

CapitaLand has sold more than 150 residential units in Singapore so far this year, versus less than 100 it sold last year. Most recent sales were at The Wharf Residence, one of several properties in the mid- and high-end sectors to benefit from a recent rise in optimism. Last month, buyers took up 1,668 apartments, setting a year-high.

While CapitaLand’s sales have picked up, they are still far behind those clocked up in 2006 and 2007 when it sold some 2,400 units. Robust take-up in those two years has relieved pressure to sell today, Ms Chia said.

CapitaLand has more than 2,700 units in the works – from the Silver Tower, Char Yong Gardens, Gillman Heights and Farrer Court sites it acquired some years back. It plans to start launching them after the third quarter of 2009 at the earliest.

The units represent some 4.5 million sq ft of space. CapitaLand’s effective stake is close to two million sq ft while its partners in some of the projects hold the rest.

According to Ms Chia, the Silver Tower site – renamed Urban Resort Condominium – and the Char Yong Gardens site will hit the market first, towards the end of the year when the new malls in Orchard Road are up and running.

‘That period will enable us to really maximise the value for these two developments,’ she said.

The Urban Resort Condominium will have 64 units and the Char Yong Gardens plot will yield around 150. The freehold parcels, next to each other, will feature complementary resort-style designs, courtesy of Kerry Hill Architects.

In a June 10 report, Kim Eng analyst Wilson Liew estimated the projects will sell for an average of $2,000 psf.

The 99-year leasehold Gillman Heights plot is next in line for release, and some 1,000 units should be ready for launch at the start of 2010. CapitaLand and its consortium partners took more than two years to close the $548 million deal last month and will begin redevelopment after November, when all residents have left.

The group has appointed OMA – known for the CCTV headquarters project in Beijing – to design the project. There will be ‘a lot of attention to space’, to tie in with the site’s proximity to the southern ridges, said Ms Chia.

Kim Eng’s Mr Liew has estimated a breakeven cost of $753 psf for the site, with an average selling price of $900 psf.

Among the last to come on-stream will be the Farrer Court site near Farrer Road, which CapitaLand bought with partners for more than $1.33 billion in 2007. The project, near the popular Nanyang Primary School, will comprise seven 36-storey blocks with around 1,500 units, offering residents a good view of the area, Ms Chia said.

‘If we were to launch it today, we would not be doing justice to the site,’ she said. The launch will happen ‘when the market is ready to accept that location with the kind of pricing that we want’.

According to Urban Redevelopment Authority caveats, units at the 12-year-old Gallop Gables nearby sold for up to $1,312 psf last month. Reports last year suggested the breakeven cost for the Farrer Court project could range from $1,350 – $1,450 psf. But Ms Chia said that this should have fallen as construction and other costs have eased about 20 per cent since.

‘We have a very strong financial position,’ she said. ‘It gives us quite a lot of flexibility to plan our launches.’

According to her, CapitaLand Residential Singapore typically has a market share of 8-10 per cent on a three-year moving average basis.

Ms Chia remains fairly upbeat on the property market here. The general consensus points to Asia as the economic growth leader, and Singapore is one of the few cosmopolitan cities in the region where asset values have corrected to ‘reasonable’ levels, she said.