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Thread: Property market picking up: CDL's Kwek

  1. #1
    Join Date
    Oct 2011

    Default Property market picking up: CDL's Kwek

    Property market picking up: CDL's Kwek

    AUG 12, 2017

    Executive chairman encouraged by moving sales but urges review of govt regulations

    Rachael Boon

    In recent weeks, property veteran Kwek Leng Beng has seen positive signs in the property market.

    They have come in the form of text messages about rising unit sales from City Developments (CDL) group general manager Chia Ngiang Hong.

    Mr Kwek, CDL executive chairman, said: "It shows that the market is moving. Every week, Mr Chia sends messages where I see sales move up from five to 10 to 30, 50 units. It's a good indication. I've also noticed the high-end sales have been moving quite steadily, and at the low-end showrooms, people have been crowding around."

    Mr Kwek was speaking at CDL's second-quarter results briefing held at M Hotel Singapore yesterday.

    Despite his growing confidence in the Singapore market, he noted that developers are constrained by Qualifying Certificate penalties for unsold homes, "especially foreign developers, and even developers listed on the stock exchange with only one foreign shareholder".

    Mr Kwek said: "Such penalties are heavy and erode all profit. I hope the Government reviews them again to steady the rate of growth in terms of price increase.

    "If not, you can see every bid (for land) now is higher and higher than ever. Land is akin to raw material for a factory, and if we don't have that, the factory will be doing nothing. Therefore, there's no choice but to bid for the land. If you put in a cheaper bid because you think it's the right price, you'll get nothing."

    He noted CDL managed only one successful bid in Singapore last year and urged for a closer look at rules to prevent a bubble.

    CDL also announced that chief executive Grant Kelley, 52, resigned on Thursday and will return to Australia, where he will be chief executive of a Melbourne-based listed firm. He oversaw CDL's diversification strategy which started in 2014. That includes investing in five key overseas markets and raising funds under management through the group's profit participation securities initiatives or traditional private equity structures.

    Mr Kelly's last day is Dec 31, and deputy chief executive Sherman Kwek, 41 - son of the executive chairman - now CEO-designate, will take over on Jan 1 next year.

    CDL's second-quarter net profit fell 17.9 per cent to $109.9 million for the three months ended June 30, while quarterly revenue fell 21.8 per cent to $854.1 million.

    The firm said this was owing to the absence of contribution from Lush Acres executive condominium, which was completed in the quarter last year.

    Its residential developments here, such as upmarket freehold condominium Gramercy Park, as well as joint-venture projects like The Venue Residences - which has been fully sold - contributed to earnings.

    The occupancy rate for CDL's office portfolio was healthy at 96.4 per cent as at June 30, and the firm is working on a $60 million enhancement of its office property Republic Plaza.

    Mr Kelley said the firm has made acquisitions of about $1 billion so far this year, and $3.5 billion in investments since 2014, including taking an equity stake in Distrii, a Chinese co-working space operator - which will also open in Singapore by the second half of next year - and buying a site in Tampines Avenue 10.

    Quarterly earnings per share was 11.4 cents, compared with 14 cents a year ago. Net asset value per share was $10.25 as at June 30, compared with $10.22 as at Dec 31.

    The firm declared a special interim dividend of 4 cents per share to be paid on Sept 13.

    CDL shares closed 53 cents down at $11.14 yesterday, after the earnings were announced.

  2. #2
    Join Date
    Oct 2011


    Leng Beng again calls for review of Qualifying Certificate policy

    CDL's group Q2 profit down 17.9% to S$109.9 million due to absence of contribution from Lush Acres EC

    August 12, 2017


    CITY Developments (CDL) executive chairman Kwek Leng Beng once again called for the government to ease land-banking measures for property developers, in the belief that this will help to regulate land and property prices, a view not shared by some industry players.

    Asked at the group's results briefing for his thoughts on the recent aggressive prices paid in government land tenders, he reiterated his stance in the media release, where he had said: "We remain hopeful that the Qualifying Certificate (QC) policy can be reviewed in due course, so that developers can look towards both government land sales and private sales for land replenishment, and avoid a dangerous upward spiral in land cost and property prices that is not in line with the growth of the economy."

    Under the QC conditions, foreign and listed developers are given five years to complete construction of a project and two years to finish selling the units, failing which they have to pay extension charges - set at per annum rates of 8, 16 and 24 per cent of the site's purchase price for the first, second and third/subsequent years of extension, respectively.

    The rule is aimed at preventing developers from hoarding or speculating in residential land.

    Mr Kwek said a review is needed "in order to steady the rate of growth" in price increases. He likened land to raw materials for manufacturers, and said that developers need land to keep their businesses going.

    "You have no choice but to bid for the land. Yet, if you bid lower because you think it's the right price, you'll get nothing.

    "We have to watch out. If the prices keep going up, this is not good. What we want and what we have been told correctly so is that prices need to be growing in accordance with the economic growth.

    "It is my hope that the government will look into this again."

    He also believes that if the QC policy is removed, prices may rise in a knee-jerk reaction, but rationality will soon take over and developers will become less aggressive in their land bidding behaviour, knowing they can extract from their land bank at the appropriate time to launch and have the flexibility to pace their launches.

    Some analysts see Mr Kwek's push as an a bid to ease CDL's development business if it does not have to build and launch projects within a tight time frame. CDL is not affected by much QC charges in the near term.

    The property group on Friday posted a 17.9 per cent drop in net profit to S$109.9 million for the second quarter, due to the absence of contribution from Lush Acres executive condominium which was fully recognised a year ago. Its revenue also fell 21.8 per cent to S$854.1 million for the same reason. Its board declared a special interim dividend of 4 Singapore cents a share - unchanged from a year ago.

    OCBC Investment Research analyst Eli Lee said CDL's Q2 results were in line with expectations. "We like that the group remains one of the best positioned to ride the potential residential upturn, and note that CDL's first-half domestic home sales clocked in at a healthy clip of 691 units - up more than 10 per cent year-on-year."

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