KepLand defers construction of Marina Bay Suites

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Published March 21, 2009

KepLand defers construction of Marina Bay Suites

Building of Madison Residences also delayed by current market conditions

By KALPANA RASHIWALA


KEPPEL Land is deferring construction of the highly touted Marina Bay Suites (in which it has one-third stake) as well as Madison Residences in Bukit Timah, citing 'current market conditions'. KepLand is developing the 221-unit Marina Bay Suites jointly with Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land.

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DELAYED
Worsening sentiment in the high-end residential sector

In a filing with the Singapore Exchange yesterday, KepLand announced construction deferral of the 56-unit Madison Residences on the former Naga Court site in Bukit Timah.

The group had earlier managed to sell just one unit in the project, at about $1,740 per square foot, in the second half of last year. However, a KepLand spokeswoman told BT yesterday that the sale of that unit has been cancelled by mutual agreement. 'We are unable to provide details due to confidentiality,' she added. When asked, she also revealed that 'a decision has been made to defer the commencement of the main construction of Marina Bay Suites'. However, construction of another of the group's residential projects in Singapore, The Promont, located in Cairnhill, will continue.

It has been one postponement after another for Marina Bay Suites because of deteriorating sentiment in the high-end residential sector. The tripartite partnership developing the condo had initially hoped to launch the project around end-January last year, but this was delayed to later the same quarter, and even then, that did not happen. The project has not been launched to date.

KepLand's spokeswoman did not say how long the construction deferments for Marina Bay Suites and Madison Residences will be.

In its release to SGX, KepLand said the construction deferment for Madison Residences is not expected to have any significant impact on the consolidated earnings per share and net tangible asset per share of the company for the current financial year ending Dec 31, 2009.

Separately, construction group KSH Holdings also said in a statutory filing with SGX yesterday that it has agreed to the request of Keppel Land Realty to defer the construction of Madison Residences. The delay is not expected to have any material effect on KSH for the financial year ending March 31, 2009. KSH announced in April last year that it had won a $53 million contract from Keppel Land Realty relating to the construction of Madison Residences.

In January, Keppel Land's group chief executive Kevin Wong said the group will conduct a review to see if it can delay building some of its projects. 'We are reviewing our operation costs as well as the project costs of all our development projects to trim fat and conserve cash, so that we can invest in any attractive opportunities that come along. 'This cost review exercise could include developing projects in phases to meet demand and even temporarily suspending the entire project if it does not add value to the company under current market conditions,' Mr Wong said then. Projects that are yet to be launched for sale are those that are most likely to be delayed both in Singapore and abroad, he added.

KepLand's earnings for the year ended Dec 31, 2008 fell 70.8 per cent to $227.7 million, from $779.7 million in FY 2007.

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March 21, 2009 Saturday

KepLand to defer luxury project

Madison joins others in weakening market that have been put on hold

By Jessica Cheam

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Construction of the 56-unit luxury development in Bukit Timah was originally scheduled to start last June and a preview had already been held. -- PHOTO: MADISON RESIDENCES

PROPERTY developer Keppel Land (KepLand) yesterday announced that it will defer the construction of its 56-unit development, Madison Residences, because of weak market conditions.

The project has not been launched.

Luxury condos such as the Madison have fallen out of favour in recent times as buyers turn to smaller, more affordable apartments.

Some earlier reports said 'some units' had been sold at the preview of the Bukit Timah condo for a median price of $1,801 per sq ft (psf).

However, KepLand said yesterday only one sale had been made, and that had been cancelled 'by mutual agreement'. It declined to give details.

Analysts that The Straits Times spoke to said it was not uncommon for developers to offer to buy back units sold at the preview of a project if there were changes to its development.

A search on the Urban Redevelopment Authority's website showed a single caveat lodged for a 1,776 sq ft unit at $3.1 million - or $1,745 psf - in September last year.

'Given current market conditions, there is no urgency to proceed with the construction of Madison Residences. The launch or when the construction will resume for the project will depend on market conditions,' KepLand told The Straits Times.

Construction was meant to start last June and take 21/2 years. Construction and property group KSH Holdings had won a $53 million contract from Keppel Land Realty to build Madison, it was reported.

The project consists of luxury three- and four-bedroom apartments that range in size from 1,460 sq ft to 4,000 sq ft.

Madison is the latest in a string of projects in the local property market that have been deferred in the wake of the global economic crisis.

Luxury units seem to have been hit harder, noted analysts, as buyers now prefer mass-market, lower-priced condos.

KepLand said in January that it would consider delaying the construction of some of its projects to save costs.

Some measures unveiled in January by the Government in the Budget also gave developers greater flexibility in terms of selling their residential units.

The measures include a one-year extension of the completion period for private residential projects. Also extended was the period in which developers with qualifying certificates need to dispose of all residential units, from two years to four. They can rent out unsold units during this time.

CB Richard Ellis executive director Joseph Tan said there had been examples in the past of developers offering to buy back units if there were changes to the development plans. He noted that it was also not unusual for a project to be deferred even after the preview.

In its statement to the Singapore Exchange, KepLand said the deferment is not expected to have any significant impact on the company's earnings per share for the current financial year.

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