www.shaproperty.com

Major developers less prominent in en bloc rally
By Matthias Chan, Channel NewsAsia | Posted: 18 July 2006 1924 hrs

SINGAPORE : There has been a surge in residential en bloc sales recently but major local developers have been conspicuously quiet amid the frenzy.

Some analysts say it could be due to the many unlaunched sites in their landbank from the massive investments during the previous rally in 1999.

And these developers are seen as unlikely to invest as much again, because of the change in their investment strategies.

For the first six months of this year, some $4 billion worth of en bloc sales were transacted.

And in recent days, some high-end deals have taken place, including Wheelock Properties' purchase of Habitat One along Ardmore Park.

Though en bloc sales have reached a feverish pitch, major property developers have stayed by the sidelines.

Senior investment analyst Winston Liew from OCBC Investment Research said: "They are still suffering from indigestion from the last round. As you recall in 1999-2000, each of the big boys - CityDev, CapitaLand and Keppel Land - bought approximately about a billion dollars worth of landbank during that time frame. And they are only currently clearing the landbank they bought previously.

"So I think they are partly suffering from indigestion from the previous round and also because prices are fairly expensive on en bloc sales."

But there has also been a change in the business focus of major developers in Singapore which may lead them to stay out of the en bloc bandwagon.

Analysts say that while major local developers will continue to participate in en bloc deals, they are unlikely to devote as much resources as they did in the past.

This is because many of them, most notably CapitaLand and Keppel Land, are shifting their focus to China and other emerging Asian countries.

But while some are staying away, others, including foreign funds, are joining the fray.

Chip Eng Seng will be teaming with private equity fund Lehman Brothers Real Estate Partners to co-develop its Cairnhill en-bloc site which was acquired in April 2006.

"We met a year ago and it took us some time to understand each other as well as to negotiate the minute details of the joint venture. So through this process, we have a better understanding of how funds work. It definitely gives us a better opportunity and understanding as to how we can explore similar partnerships with others if the opportunity arises," said Chip Eng Seng's MD Raymond Chia.

"Part of the reason we are here is because of the transparency of the Singapore market, and we expect that to continue. We like the stable currency and we expect GDP growth to be one of the highest in the region, about 6-7 percent for 2006," said Keith Greengrove, MD of Lehman Brothers Asia.

"And looking at things like foreign exchange reserve, current account balance, these are all positive signs of recovery in Singapore," he said.

Chip Eng Seng intends to launch its Cairnhill development in the second quarter of 2007.

And to reflect its attempt to focus more on Singapore's property sector, Chip Eng Seng has changed the name of its property development arm from Chip Eng Leong Enterprises to CEL Development.

- CNA /ls