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27-02-14, 20:52
http://www.straitstimes.com/archive/tuesday/premium/money/story/wheelock-takes-110m-hit-condo-project-20140225
Wheelock takes $110m hit on condo project
Provision for The Panorama made due to weakening market, slow sales
Published on Feb 25, 2014
By Mok Fei Fei
SALES of The Panorama began only last month, but the poor take-up has prompted developer Wheelock Properties to take a huge hit on its condominium project in Ang Mo Kio in its financial statement for last year.
The firm said yesterday that it will make an accounting provision of $110 million for the 99-year leasehold estate for the year ended Dec 31, 2013.
It noted that challenging conditions in the property development business, including stringent government policies and tighter mortgage lending practices, meant sales and margins would suffer.
"An allowance for diminution in value of $110 million was made on the Ang Mo Kio project due to the weakening market conditions and the slow take-up rate of the property," it said in the statement.
The provision for The Panorama left Wheelock with a $91.3 million loss for the fourth quarter - much worse than the $30.8 million loss in the same period a year ago. The red ink for the three months to Dec 31 comes despite revenue rising 3 per cent to $29 million.
Wheelock had high hopes for The Panorama when it launched last month, but sales at the 99-year leasehold project have not met expectations.
Urban Redevelopment Authority data shows that 58 of the 120 units released at the 698-unit project have been sold. The units went for a median price of $1,343 per square foot (psf).
Wheelock paid $550 million for the land in Ang Mo Kio Avenue 2, which works out to $790 psf per plot ratio (ppr) for the nearly 1.85ha site. Analysts had expected a top bid of between $560 and $650 psf ppr.
Industry experts noted that Wheelock's high bid could be one reason for the provision given that the property market is softening.
Chesterton Singapore managing director Donald Han said: "Making provisions is nothing new, especially when the market starts to turn. Over the last 12 months, developers have been operating on thin margins when bidding for land. When costs escalate due to higher labour or construction issues, such things cannot be foreseen and would add more pressure to margins."
SLP International research director Nicholas Mak added that the government land sale system encourages aggressive bidding since developers need to compete for limited supply.
"When demand and prices start to cool, developers could start taking precautionary measures like making provisions," Mr Mak said.
"This is not unusual and is a repeat of what we've seen during the previous downturns. There could be more such provisions to come."
Despite the provision, Wheelock made a full-year profit of $40 million, a 37 per cent drop from the previous year's earnings of $63.3 million.
Revenue fell by 44 per cent to $117.1 million as sales at Scotts Square were much lower than the previous year.
Earnings per share for the year was 3.35 cents, lower than the previous year's 5.29 cents, while the net asset value per share was $2.51 as of Dec 31, down from $2.61 previously.
Wheelock shares closed up half a cent to $1.565 yesterday. It reported its earnings after markets closed.
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Wheelock takes $110m hit on condo project
Provision for The Panorama made due to weakening market, slow sales
Published on Feb 25, 2014
By Mok Fei Fei
SALES of The Panorama began only last month, but the poor take-up has prompted developer Wheelock Properties to take a huge hit on its condominium project in Ang Mo Kio in its financial statement for last year.
The firm said yesterday that it will make an accounting provision of $110 million for the 99-year leasehold estate for the year ended Dec 31, 2013.
It noted that challenging conditions in the property development business, including stringent government policies and tighter mortgage lending practices, meant sales and margins would suffer.
"An allowance for diminution in value of $110 million was made on the Ang Mo Kio project due to the weakening market conditions and the slow take-up rate of the property," it said in the statement.
The provision for The Panorama left Wheelock with a $91.3 million loss for the fourth quarter - much worse than the $30.8 million loss in the same period a year ago. The red ink for the three months to Dec 31 comes despite revenue rising 3 per cent to $29 million.
Wheelock had high hopes for The Panorama when it launched last month, but sales at the 99-year leasehold project have not met expectations.
Urban Redevelopment Authority data shows that 58 of the 120 units released at the 698-unit project have been sold. The units went for a median price of $1,343 per square foot (psf).
Wheelock paid $550 million for the land in Ang Mo Kio Avenue 2, which works out to $790 psf per plot ratio (ppr) for the nearly 1.85ha site. Analysts had expected a top bid of between $560 and $650 psf ppr.
Industry experts noted that Wheelock's high bid could be one reason for the provision given that the property market is softening.
Chesterton Singapore managing director Donald Han said: "Making provisions is nothing new, especially when the market starts to turn. Over the last 12 months, developers have been operating on thin margins when bidding for land. When costs escalate due to higher labour or construction issues, such things cannot be foreseen and would add more pressure to margins."
SLP International research director Nicholas Mak added that the government land sale system encourages aggressive bidding since developers need to compete for limited supply.
"When demand and prices start to cool, developers could start taking precautionary measures like making provisions," Mr Mak said.
"This is not unusual and is a repeat of what we've seen during the previous downturns. There could be more such provisions to come."
Despite the provision, Wheelock made a full-year profit of $40 million, a 37 per cent drop from the previous year's earnings of $63.3 million.
Revenue fell by 44 per cent to $117.1 million as sales at Scotts Square were much lower than the previous year.
Earnings per share for the year was 3.35 cents, lower than the previous year's 5.29 cents, while the net asset value per share was $2.51 as of Dec 31, down from $2.61 previously.
Wheelock shares closed up half a cent to $1.565 yesterday. It reported its earnings after markets closed.
[email protected]