This is not an online get-rich-quick scam to invest in commercial property

It seems like the commercial property segment in Singapore is heating up.

Last week, GAW capital snapped up PoMo, a nine-storey office and retail development in Selegie Road with remaining leasehold of 64 years, for S$342 mil or S$1,900 psf NLA from Enviro-Hub and BS Capital. Oxley also confirmed its interest in buying Chevron House at a reported price of S$660 mil or S$2,526 psf NLA from Deka Immobilien and Oxley is currently doing due diligence on the property.

Today, it was reported that Nadathur Group, one of the co-founders of Infosys, is buying New Cape Inn, a 76-room freehold hotel in Tiong Bahru, for S$67 mil or S$881,579 per key. The price reflects about 2% gross yield.

Is the commercial property sector entering a new upcycle? How can I gain exposure to the multi-million commercial property sector? This are some questions that you might be thinking right now.

SPK is going to sell you an online get-rich-quick scam?

What if SPK tells you that there is an opportunity to:

  • Invest in a 929-year leasehold mixed-use development in River Valley at below S$1,500 psf?
  • Invest in a leasehold serviced apartment in River Valley at below S$1,200 psf?
  • Invest in a freehold office building in Tanjong Pagar at below S$2,200 psf?
  • Have some of the shrewdest businessmen in the property sector to take care of your investments?

Don’t worry. SPK is not running an online get-rich-quick scam.

If you think that the above opportunities are good enough to get you excited over, then you should look at investing in United Engineers Ltd.

16_UE_sq_04

Diversified exposure to commercial, retail and hospitality segments

United Engineers owns a diversified portfolio of prime commercial properties in Singapore. Most of its assets are either freehold or have long leasehold tenures, and they are strategically located either in prime districts or near transportation hubs or major thoroughfare. The flagship property of the group – UE Square is a familiar name among Singaporeans and you might be surprised to know that this property is valued at just S$1,482 psf NLA! Where can you find a commercial property at such price today?

UE also owns the freehold office building at 79 Anson Road, and the freehold office/industrial building at 450/452 Alexandra Road. It also operates the Park Avenue Rochester, a 351-room hotel and Rochester Mall in the One-North. Other smaller assets include Park Avenue Robertson (a 36-room serviced apartment in River Valley) and UE Bizhub Central at Ang Mo Kio (corporate HQ).

UEL

Valuation of these other assets is also undemanding. Just look at Park Avenue Robertson. It is valued at S$1,198 psf, almost half the price of what nearby new launch – Martin Modern is selling. Even though Park Avenue is an older property, such a big price gap might still be difficult to justify. The valuation of Park Avenue Robertson is probably the transaction price of a resale OCR condominium in today’s market.

Leave your investments in the good hands of Mr Zhong Sheng Jian and Mr Pua Seck Guan

With the recent change in controlling ownership at UE, the company is now being led by a consortium of experienced property developers – Yanlord and Perennial Real Estate. Yanlord is a very successful developer in China led by Mr Zhong Sheng Jian and Perennial Real Estate was established by Mr Pua Seck Guan and backed by Wilmar International.

With a strong team of businessmen behind UE, it will probably give you more confidence that your investments is being well-taken of!

So what do you get when you invest in United Engineers?

These are probably what you will get when you invest in United Engineers:

  • Diversified portfolio of commercial and hospitality assets in Singapore
  • Attractive property valuations that are probably below market transaction prices today
  • A hospitality business under Park Avenue Brand
  • A strong management team to manage your investments

Sounds like a good deal, isn’t it?

But readers should take note that investing in shares can be very different from investing in properties. Share price fluctuates daily and price movement could be a function of the general market sentiments or broad-based market movements that may not have anything to do with the fundamentals of the company, and it may take time for a company to realise its full value. Readers should consider their risk appetite, investment horizon, overall portfolio exposure before making an investment.

Happy investing!   

 

IMPORTANT NOTICE

The information and opinion contained in this blog posting above is based solely on the personal analysis of Singapore Property Kaki (“SPK”) and is for general information purposes only. SPK assumes no responsibility for errors or omissions in the contents of this blog posting. In no event shall SPK be liable for any special, direct, indirect, consequential, or incidental damages or any damages whatsoever, whether in an action of contract, negligence or other tort, arising out of or in connection with the use of the content in this blog posting. SPK reserves the right to make additions, deletions, or modification to the contents at any time without prior notice.

Happy reading!

 

 

Advertisements

Capitol Singapore Lands In Controversy Again

The Straits Times reported that Russian tycoon – Mr Sergey Vbornov is suing the developer of Eden Residences Capitol Singapore (a JV between Perennial and Pontiac) for the return of more than S$10 million that he paid for a 314 sqm unit in the project. He claims that the unit is “unfit for habitation and does not comply with the promised luxury standard”, nor did it live up to the idea of “paradise found”, as allegedly marketed.

singapore-capitol-sg

Capitol Singapore – A development marred by controversies and lawsuits

This lawsuit probably brings the level of controversy at Capital Singapore to another level. Things hadn’t been that smooth sailing for the consortium developers. Faced with internal fights between shareholders, delay in the opening of the 6-star Patina Hotel, weak shopper traffic, this lawsuit adds on to the list of issues that the developer is facing.

It is a pity that one of the most iconic places in the history of Singapore has turned into such a sorry state without fulling its fullest potential. This might have put a black mark on the sterling track records of industry veteran – Mr Pua Seck Guan, who is also the CEO of Perennial.

Probably not the best way to defend a case?

Lawyers from A&G, who were defending the developer, claimed that the unit was not sold under the agreement as a “luxurious apartment” and/or “paradise found”. Well, technically, A&G is correct as probably no developer would put in its SPA such ambiguous and open-end claims that could potentially result in liabilities in future. In addition, developers would have put a lot of disclaimers in fine prints in their sales brochures to disclaim against whatever that is being shown in the brochures.

Looks like it is a tough case for the buyer to fight using his argument. But if his intention is to damage the developer’s reputation, he might have succeeded. This would also serve as a good reminder to all buyers to take what you read or see on sales brochures with many pinches of salt.

Whilst A&G is probably correct in their argument, SPK thinks the argument could have a negative impact on the developer’s businesses and reputation in future. Are they telling people not to believe what they put in their marketing brochures? Are they telling people that a S$3,000 psf apartment is not necessarily a “luxurious apartment”? If a S$3,000 psf apartment isn’t a “luxurious apartment”, then what could it be? A mass market apartment?

They might succeed in winning the case, but what about the developer’s reputation? A case of winning the battle but losing the war?

Quality of Development is the heart of the issue

Without in-depth knowledge of this case, it is difficult to ascertain which party is right or wrong, or what kind of misunderstanding might have happened in between. Was it a case of poor workmanship? Is the buyer unreasonable? We will probably find out more when the case goes to trial next year.

But once again, this case highlights the critical issue of quality of developments, which is something that SPK brought up in his earlier post (“Are Singaporean property buyers discerning enough?”).

Let’s hope that Capitol Singapore can shed away all the negative publicities one day and return back to its former glory soon!

1950-1960-capitol-theatre