reporter2
05-06-12, 02:43
http://www.straitstimes.com/Money/Story/STIStory_806742.html
Smaller firms join hands to battle big developers
They pool capital and expertise to develop large sites, spreading risk
Published on Jun 4, 2012
By Esther Teo, Property Reporter
SMALLER firms are taking on the big boys in the battle to buy development land plots.
By joining hands and pooling funds, these upstarts have secured various prime sites around town despite stiff competition in a robust property market.
At least three out of the 11 residential sites sold under the Government Land Sales (GLS) programme this year have been snapped up by consortiums of smaller investors. Smaller firms have also done well in the private land sale market. They are redeveloping sites including McDonald's Place at King Albert Park and Seletar Garden.
For instance, a group of investors comprising SingXpress, Creative Investments and Kay Lim Realty secured an executive condominium (EC) site in Tampines for $234 million last month, outbidding others like Sim Lian Group and MCL Land.
A consortium called Unique Rezi also picked up the mixed-use McDonald's Place plot for $150 million in April.
Unique Rezi is led by Oxley Holdings, with a 55 per cent stake in the joint venture. Its fellow investors are Kim Seng Heng Realty, Heeton Homes, Zap Piling and Luxe, a unit of Lian Beng Group.
Experts say that smaller firms are banding together as it helps them spread the risk involved in the development of larger sites.
This is especially vital amid market uncertainties such as the possibility of a fresh round of cooling measures here and global concerns over the euro zone crisis, they added.
Mr Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group, said that smaller firms are also leveraging on each other's strength. Some contractors, for example, are also venturing into property development joint ventures in order to diversify their business, since it is a natural progression up the value chain.
'Contractors are able to control their costs better and they might be able to translate the savings from the lower costs into a higher bid instead,' he noted.
Credo Real Estate executive director Ong Teck Hui said that larger sites may be too costly for smaller developers individually, so banding together helps them to pool capital in order to compete.
It is also a form of risk management since a developer limits his exposure to a particular project bysharing risks with other consortium members, he added.
'In the current buoyant market, when a good number of government as well as collective sale sites are available for sale, there are numerous opportunities for developers to consider.
'However, it would be risky for a developer to secure too many sites on his own, so forming consortiums with others enables him to participate in numerous projects without being over-exposed. While diversifying the risks, it also allows him to reap rewards from a wider spread of investments,' Mr Ong noted.
Recently, Huge Development - a joint venture of mostly smaller players such as Ho Lee Group, UE E&C, GPS Alliance Development & Investment and Evia Real Estate - launched the Watercolours EC project in Pasir Ris.
GPS Alliance chief executive Jeffrey Hong said the collaboration allowed each partner to contribute its own expertise to the development process.
GPS, for instance, also has a sales agency arm that helped to market the project when it was launched. The third segment of its business will also see it installing kitchen cabinets and wardrobes when the units are completed.
'UE E&C's expertise is in building so it is the main contractor for the EC project, Ho Lee is good with project management, while Evia can help us do analysis work. This gives us an advantage,' Mr Hong said.
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Smaller firms join hands to battle big developers
They pool capital and expertise to develop large sites, spreading risk
Published on Jun 4, 2012
By Esther Teo, Property Reporter
SMALLER firms are taking on the big boys in the battle to buy development land plots.
By joining hands and pooling funds, these upstarts have secured various prime sites around town despite stiff competition in a robust property market.
At least three out of the 11 residential sites sold under the Government Land Sales (GLS) programme this year have been snapped up by consortiums of smaller investors. Smaller firms have also done well in the private land sale market. They are redeveloping sites including McDonald's Place at King Albert Park and Seletar Garden.
For instance, a group of investors comprising SingXpress, Creative Investments and Kay Lim Realty secured an executive condominium (EC) site in Tampines for $234 million last month, outbidding others like Sim Lian Group and MCL Land.
A consortium called Unique Rezi also picked up the mixed-use McDonald's Place plot for $150 million in April.
Unique Rezi is led by Oxley Holdings, with a 55 per cent stake in the joint venture. Its fellow investors are Kim Seng Heng Realty, Heeton Homes, Zap Piling and Luxe, a unit of Lian Beng Group.
Experts say that smaller firms are banding together as it helps them spread the risk involved in the development of larger sites.
This is especially vital amid market uncertainties such as the possibility of a fresh round of cooling measures here and global concerns over the euro zone crisis, they added.
Mr Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group, said that smaller firms are also leveraging on each other's strength. Some contractors, for example, are also venturing into property development joint ventures in order to diversify their business, since it is a natural progression up the value chain.
'Contractors are able to control their costs better and they might be able to translate the savings from the lower costs into a higher bid instead,' he noted.
Credo Real Estate executive director Ong Teck Hui said that larger sites may be too costly for smaller developers individually, so banding together helps them to pool capital in order to compete.
It is also a form of risk management since a developer limits his exposure to a particular project bysharing risks with other consortium members, he added.
'In the current buoyant market, when a good number of government as well as collective sale sites are available for sale, there are numerous opportunities for developers to consider.
'However, it would be risky for a developer to secure too many sites on his own, so forming consortiums with others enables him to participate in numerous projects without being over-exposed. While diversifying the risks, it also allows him to reap rewards from a wider spread of investments,' Mr Ong noted.
Recently, Huge Development - a joint venture of mostly smaller players such as Ho Lee Group, UE E&C, GPS Alliance Development & Investment and Evia Real Estate - launched the Watercolours EC project in Pasir Ris.
GPS Alliance chief executive Jeffrey Hong said the collaboration allowed each partner to contribute its own expertise to the development process.
GPS, for instance, also has a sales agency arm that helped to market the project when it was launched. The third segment of its business will also see it installing kitchen cabinets and wardrobes when the units are completed.
'UE E&C's expertise is in building so it is the main contractor for the EC project, Ho Lee is good with project management, while Evia can help us do analysis work. This gives us an advantage,' Mr Hong said.
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