http://www.businesstimes.com.sg/real...rcial-property

CityDev CEO says it's a good time to buy commercial property

May 26, 2016


CITY Developments Ltd, Singapore's second-largest developer, may seek to buy offices this year as rising interest rates makes such assets cheaper worldwide.

"We are coming into a very good time for acquisitions," said Grant Kelley, chief executive officer of City Developments, in an interview in Singapore. "The long-term trend line for assets for the next 12-24 months could be deflationary because I believe as interest rates go up, fixed income will become more attractive and maybe liquidity will drain from real estate assets a little bit."

City Developments, has been diversifying outside Singapore after government curbs crimped demand at home. The firm has invested more in residential and hotel properties over the last couple of years, although that may change if commercial assets come up for sale at discounted prices this year or in early 2017, Mr Kelley said.

Market volatility has increased the appeal of property as an investment, even as an uncertain global economic outlook crimps the price buyers are willing to shell out.

City Developments will focus on five markets as part of its diversification - China, Australia, Japan, the US and the UK, the CEO said. The company has said that it would meet its target of investing S$5 billion in overseas markets by 2018.

The developer reported a 14 per cent decline in profit to S$105.3 million for the quarter ended March 31, while revenue slid 11 per cent to S$723.3 million. The company said that it was expanding its fund-management platform and has completed two deals valued at S$2.6 billion since December 2014. It is on target to grow fund assets under management to S$5 billion by 2018, Mr Kelley said, reiterating the company's goal.

He also said that the developer was "aggressively" working on two joint venture deals. They are similar to ones it undertook in the last couple of years, where it packaged some properties and sold stakes to help it free up cash, but will only seal them if the pricing is right. "We want to do more, but the asset market is coming down."

Even though income-yielding assets such as offices grew expensive after being sought by sovereign wealth funds as bond yields tumbled, they are expected to become cheaper when rates rise and funds divert money back to government debt for better risk-free returns, Mr Kelley said.

"This is a market to be an asset acquirer not an asset disposer," he said. BLOOMBERG