A passion for real estate

A passion for real estate

Macly Group founder Herman Chang decided in his teens to make money out of real estate.

Mon, Feb 11, 2019


HERMAN Chang, founder and managing director of property development and hospitality group Macly, decided in his teenage years that he wanted to make money out of real estate.

At a sleepover in a classmate's home in his upper secondary school days at The Chinese High School, the young Mr Chang noticed that his classmate's dad was a developer/construction contractor and "making a lot of money". "So I concluded that I can do the same."

That decision influenced Mr Chang in his choice of subjects for higher studies. At Hwa Chong Junior College, he studied Physical Science, General Mathematics, Further Mathematics and Economics as his 'A' level subjects.

After national service, he proceeded to the National University of Singapore, graduating with a Bachelor of Civil Engineering degree (second upper class honours) around the mid-1980s. For the next two and a half years, he worked as a financial futures trader in Singapore before heading to the University of Michigan in Ann Arbor for his MBA.

Before he left Singapore, he asked his father for an "iron spoon" of S$300,000 to buy his first plot of land in 1987. This was along Tembeling Road in the Joo Chiat area which he developed into three terrace houses. In late1989, he returned to Singapore with an MBA.

In the past three decades, Macly has developed 40 projects in Singapore, mostly on its own but also a few through joint ventures, totalling slightly over 1,700 units (Macly's attributable share).

In Kuala Lumpur, Macly has a 48 per cent share in a joint venture company that is developing Infinitum, which will have 723 small office home office (SoHo) units and 31 shop units. Macly's partners in this project include Roxy-Pacific Holdings. The project is slated for completion in 2020.

In Singapore, Macly is currently developing seven projects - five on its own, and two via joint ventures.

The solo developments include four apartment projects - FiveNine in Lorong K Telok Kurau, 33 Residences in Lorong 30 Geylang, Seraya Residences off Haig Road, and a development in the Guillemard Road/Lorong 28 Geylang locale - as well as Tedge, a residential project with ground-floor commercial space at the corner of Changi Road and Telok Kurau Road.

At 27 Moulmein Rise, Macly has joined forces with Roxy-Pacific and construction group Lim Wen Heng to develop an 87-unit apartment project.

The Iveria, on the Riviera Point site along Kim Yam Road in the Robertson Quay area, is expected to be an 18-storey development with 51 three-bedroom apartments. Macly will be developing this project with Lim Wen Heng.

Except for FiveNine and 33 Residences which have been sold out, the other five projects are slated for launch this year. Macly's attributable share in the seven projects adds up to 227 units with a gross development value (GDV) of S$364 million.

Macly's attributable share in the Infinitum in KL is about 362 units and a GDV of RM260 million (S$87 million).

The group got off to a good start in the late 1980s, reaping modest profits from developing projects such as landed developments in Tembeling Road and Glasgow Road.

In 1990, the group bought a hotel in Lloyd Road, which it refurbished, thereafter generating strong returns. The cashflow which the hotel continued to generate in the following years helped to cushion the blow from a loss that the group incurred from two residential projects when the Asian Financial Crisis struck in 1997.

"I had bought two plots of land - in the Hillview and Toh Crescent areas - at very high prices in 1995, before the market peaked in 1996, and had to sell the landed homes we developed on these plots at a combined loss of S$3.5 million in 1997. I asked myself: 'What went wrong?' I kept following the market until the last minute and bought those two sites when the market had become too bullish. That was the mistake I made."

"When people tell you things like: 'If you don't buy now, you'll miss the boat', then that is usually the time not to buy. This is the lesson I learnt and applied it to the following two cycles."

"Although I had made a loss, I could sleep soundly because it was within my means. I knew I would not go bankrupt because I still had the hotel, which had very low leverage; its cashflow helped to save the day. I had also learnt from my army days that we must always have reserves."

When Lehman Brothers collapsed in 2008, Macly was not affected. "After I finished selling projects around 2007, I did not go and buy some more land because things were too bullish." It was only after the Lehman collapse, when things appeared pessimistic that Macly started buying land again.

"So we adopted a more counter-cyclical kind of mindset. When things appear to be too good, it is too good. Similarly when people tell you not to buy, it may actually be a good time to buy."

Post-Lehman to around 2012, Macly rode on the improvement in Singapore property market sentiment, fuelled by the relaxation in immigration policy, said Mr Chang.

"At the same time, we could sense the saturation in terms of the growth of the Singapore economy - amid a tightening in immigration, and the rollout of property cooling measures. Therefore I started to looking outwards. In fact, a lot of Singapore property groups actively went overseas in search of opportunities around 2013-2014."

Around this time, Macly through a joint venture clinched the Kuala Lumpur site on which Infinitum is being built. Beyond that, Mr Chang made a strategic decision to step up the group's exposure to the hotels business.

In 2013, he roped in his eldest daughter, Joan, to revamp the hotel along Lloyd Road. The revamp, done in 2014, has won several accolades.

Despite not having had any prior experience in the hospitality business, Ms Chang, a finance and marketing graduate, has been very hands-on in marketing the 34-room Lloyd's Inn Singapore as well as the group's other hospitality assets.

She also handles the branding and marketing of Macly's property developments.

The group began acquiring overseas hotels from 2014. In Indonesia, it tied up with Marsar Group (controlled by a husband-and-wife team). Cara Cara Inn, a "hostetel" or hybrid of hotel and hostel, for flashpackers, opened near Kuta Beach in Bali in 2017. This was followed by the opening late last year of the Lloyd's Inn Bali, in the Seminyak locale near Double Six Beach. The group also owns Cititel hotel in Pekanbaru. All three hotels have 101 rooms each.

A hotel has also been acquired in Yogyakarta. The intention is to pull it down and redevelop the site into two towers - a Lloyd's Inn hotel and a condotel.

"The Cititel hotel in Pekanbaru is too nice to tear down. There is some undeveloped land on this site and we'll explore what to do with the site after we've implemented our project in Yogyakarta," said Mr Chang.

The group recently bought a site with an old building on it near Blok M mall in South Jakarta. "We're exploring the possibility of redeveloping this into a chic hotel for local businessmen," said Mr Chang.

The Pekanbaru, Yogyakarta and South Jakarta properties are owned by a 49:49:2 joint venture between Macly, Marsar and a mutual friend. The two Bali hotels are owned 75:25 by Macly and Marsar Group.

Lloyd's Inn Kuala Lumpur, fully owned by Macly, is slated to open towards end-2019.

Mr Chang describes himself as a "born optimist". Even in the face of problems such as the announcement of property cooling measures, he is able to sleep well. "You had better sleep well, so that the next day you can have a clear mind to think and solve problems."

Perhaps another reason for the 58-year-old's calm demeanour is his decision not to list Macly. "I wish to lead a balanced life, instead of having to face shareholders yearly and feeling compelled to do something that I may not believe in."

He shares another secret to happiness: "I believe money is a means, not the end. We must feel happy when we make money.

"I am blessed because I enjoy what I am doing. This is my passion. And it happens that this passion has financial reward. Hence I am doubly blessed."