http://www.businesstimes.com.sg/comp...property-sales

Jump in recurring revenue cushions drop in property sales

FEO's recurring revenue last year was S$772m, about 3.7 times the S$207m in 2005

By Kalpana Rashiwala

[email protected]

@KalpanaBT

Aug 22, 2016


LIKE other property groups here, Far East Organization (FEO) has seen its property sales in Singapore ease significantly in the past few years due to the property cooling measures.

The group's annual recurring revenue, however, has risen to S$772 million in 2015 - about 3.7 times the S$207 million in 2005.

This near quadrupling of recurring revenue has provided some cushion against the ups and downs of property cycles.

Recurring revenue includes rental income from the group's portfolio of leasing properties (comprising homes, office, retail and industrial space, and medical suites); revenue from serviced apartments and hotels; and takings from a string of food and beverage (F&B) outlets operated by the group. For example, FEO operates the Fat Cow, The Marmalade Pantry and Kinki restaurants. Under a franchise agreement, it runs the Cold Stone Creamery and Dean & DeLuca outlets.

The group's executive director of property sales and corporate affairs Augustine Tan, attributes the substantial rise in FEO's recurring revenue to acquisitions of income-generating assets in Singapore and Australia, the opening of new malls and hotels in Singapore as well as new businesses such as the F&B outlets.

In 2005, FEO acquired Pacific Plaza along Scotts Road. In 2007, it opened the Clarke Quay Central and Square 2 malls, followed by Orchard Central in 2009. In 2011, the Oasia Hotel Novena opened its doors.

Since 2013, the group has sought to geographically diversify its sources of recurring revenue by making a number of acquisitions in Australia. These included The Westin Sydney, Watertown Brand Outlet Centre in Perth and Clocktower Square at The Rocks in Sydney.

In a recent interview with The Business Times, Mr Tan revealed that prior to the Singapore property market downturn, the group had enjoyed a strong run in property sales here between 2009 and 2013, totalling S$17.5 billion over the five-year period. This figure includes its partners' shares of joint-venture projects and comprises sales of not only apartments and condo units but also medical suites, strata offices and industrial space.

"Property sales have come down significantly in the last two years," Mr Tan added, declining to give numbers. FEO would also not reveal any profit figures.

Over the next few years, the focus will be on completing and delivering a suite of real estate products to the market. "Our products are physical representations of our brand and values. As we complete and deliver our projects, we have the opportunity to fulfil what we have promised to our customers," said the group's executive director of property services division Lee Shee Koeng.

From 2015 to 2019, the group will complete 28 developments (including joint-venture projects) yielding more than 10,000 units comprising homes, office, medical and industrial units, hotel rooms and serviced residences - predominantly in Singapore.

"While we cannot control the property market, we can rely on our values and the way we serve our customers."

FEO was set up in 1960 by the late Ng Teng Fong. Today the Singapore-based group is helmed by his younger son Philip, 57. The late Mr Ng's elder son Robert helms the Hong Kong and China business under Sino Group.

In Singapore, the group has developed 770 property projects across the residential, hospitality, retail, office, healthcare and industrial sectors - including 50,000 or about one-in-six private homes here. Its hospitality portfolio includes 19 hotels and serviced apartment properties on the island.

In Australia the group has acquired about A$1.5 billion (S$1.54 billion) of properties since 2013. Through partnerships between the group's listed vehicle Far East Orchard, The Straits Trading Company and Toga Group of Australia, a further investment of A$500 million has been made in Australia.