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Thread: Wheelock takes $110m hit on condo project

  1. #1
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    Default Wheelock takes $110m hit on condo project

    http://www.straitstimes.com/archive/...oject-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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  2. #2
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    Default Wheelock Q4 loss trebles on project provision

    http://www.businesstimes.com.sg/arch...ision-20140225

    Published February 25, 2014

    Wheelock Q4 loss trebles on project provision

    Poor take-up rate for The Panorama development

    By Nisha Ramchandani [email protected]


    MAINBOARD-listed Wheelock Properties sank deeper into the red with a loss of $91.3 million for the fourth quarter ended Dec 31, 2013, versus a loss of $30.8 million in the corresponding period a year earlier. This was due to a $110 million provision for a project.

    Revenue for the quarter under review edged up 3 per cent year-on-year to $29 million while loss per share worked out to 7.63 cents, from a loss per share of 2.57 cents previously.

    For the full year, the group turned in a profit of $40 million, down nearly 37 per cent from FY2012. Revenue was down nearly 44 per cent to $117 million largely due to the lower sales from Scotts Square compared to the revenue recognised from the sales of Orchard View and Scotts Square in the last financial year.

    The group has proposed a first and final dividend of six cents per share.

    As at Dec 31, 2013, 79 per cent or 268 units of Scotts Square had been sold at an average of $4,004 per square foot (psf) while a full sales launch at Ardmore Three "is being reviewed" in light of current market conditions, Wheelock said in an update yesterday.

    And given "challenging circumstances", the board has decided to make an accounting provision of $110 million for diminution in value for The Panorama, its upcoming development at Ang Mo Kio Avenue 2. The project faced slow take-up rate.

    Meanwhile, the overall occupancy for Wheelock Place was 96 per cent, achieving an overall average rent of above $13 psf per month as at Dec 31, 2013.

    Scotts Square Retail - which will undergo a revamp to its trade and tenancy mix due to increased competition, softening retail sales and changing consumer preferences - registered an occupancy rate of 95 per cent at an average rent of $23 psf per month.

    In China, construction for Phase 1 of its residential development project in Fuyang is in progress, with the launch of the project slated for H1 2014.

    "The property development business will continue to face challenges arising from stringent government policies in the markets where the group operates as well as tightened mortgage lending practices. We expect these to impact sales and margins," the group warned.

    The group had cash and cash equivalents of $457.28 million as at Dec 31, 2013 and said it will continue to seek investment and development opportunities both here and abroad.

    Shares in Wheelock closed at $1.565, up half a cent.

  3. #3
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    With this provision of $110m, Wheelock's land price for Panorama is reduced to about $620 psf ppr. We should expect Wheelock to relaunch The Panorama in the region of $950 t0 $1100 psf if the company wants to clear its inventories.

    We should also expect other listed companies like CapitaLand who pay high prices for their lands to make such provisions and sell at much lower prices if they need to clear inventories.

    As for non-listed companies, they may just quietly reduce prices in the months ahead.

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    i must say that wheelock is very conservative. 110m is exactly 20% off its land cost.

    breakeven is 1000psf. prob will sell from 10xx to 11xxpsf with an average of 1100psf?

    Quote Originally Posted by Amber Woods View Post
    With this provision of $110m, Wheelock's land price for Panorama is reduced to about $620 psf ppr. We should expect Wheelock to relaunch The Panorama in the region of $950 t0 $1100 psf if the company wants to clear its inventories.

    We should also expect other listed companies like CapitaLand who pay high prices for their lands to make such provisions and sell at much lower prices if they need to clear inventories.

    As for non-listed companies, they may just quietly reduce prices in the months ahead.

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    Quote Originally Posted by bargain hunter View Post
    i must say that wheelock is very conservative. 110m is exactly 20% off its land cost.

    breakeven is 1000psf. prob will sell from 10xx to 11xxpsf with an average of 1100psf?
    then those 60 sold units jialat jialat?
    Ong lai ah!

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    60 jia lat better than the balance, how many? to exaggerate the contrast, 600 units jia lat?

    Quote Originally Posted by onglai View Post
    then those 60 sold units jialat jialat?

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    Quote Originally Posted by bargain hunter View Post
    60 jia lat better than the balance, how many? to exaggerate the contrast, 600 units jia lat?
    maybe panorama will become the first piece of domino...
    Ong lai ah!

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