http://www.straitstimes.com/archive/...-unit-20150328

News Analysis

How much did tycoon lose on St Regis unit?

Weaker yen may have shaved $3m from Katsumi Tada's $15.8m loss

Published on Mar 28, 2015 2:08 AM

By Cheryl Ong


THE eye-popping loss of $15.8 million suffered by Japanese billionaire Katsumi Tada when he sold a St Regis penthouse might have stunned the market but the hit might not have been as devastating as it seems.

Experts say the wild swings in the yen against the Singdollar over the years may have reduced some of the red ink.

Mr Tada, president of real estate firm Daisho Group, made headlines when he sold the luxurious 6,017 sq ft unit in Tanglin Road for just $12.2 million last month, after shelling out a record-smashing $28 million for it in May 2007.

Industry watchers have pointed out that the price, in per sq ft (psf) terms, was indeed a "bargain" for luxury projects in the area. The Tada unit went for $2,028 psf, well under the $2,500 to $3,000 psf typically paid.

It was so low, in fact, that the loss was the biggest suffered for an apartment sale here.

But the devil is in the details.

"There are a lot of things that can happen which we don't see on paper," said Mr Samuel Eyo, managing director of Singapore Christine's Homes.

If Mr Tada had taken his yen and converted it to Singdollars to buy the penthouse in 2007, and then converted the Singdollar sale proceeds back into yen last month, his real losses could have been significantly lower than the paper losses recorded - although they would still be stunning.

When Mr Tada picked up the apartment in 2007, one Singdollar bought 78 yen, Bloomberg filings showed.

Since then, the yen has been on a roller coaster, dipping to a low of 58.33 against the Singdollar in October 2011 and soaring to 91.73 in August last year.

That purchase price of $28 million would have translated to 2.184 billion yen back in 2007.

In theory, the selling price of $12.2 million, without any foreign exchange fluctuations, would then have worked out to 952 million yen - or a loss of 1.232 billion yen.

But the Singdollar was trading at 87 yen when Mr Tada sold the unit to Mr Andy Chua, owner of Yun Nam Hair Care and a chain of beauty firms.

So the $12.2 million selling price would have worked out to 1.061 billion yen, translating to a smaller loss of 1.123 billion yen - or $12.9 million.

In that scenario, currency fluctuations would have saved Mr Tada $3 million compared with the $15.8 million loss recorded on paper.

The depreciation of the yen against the Singdollar could have ameliorated Mr Tada's loss, said Mr Saktiandi Supaat, head of foreign exchange research at Maybank here.

For most investors, Mr Supaat added, investing in higher-yielding assets such as property would make sense only in markets where the currency is expected to appreciate against their home currencies, and where volatility is low.

"Losses on the foreign exchange front would erode the returns from the appreciating asset," said Mr Supaat.

Such investments, added Mr Eyo, are common among wealthy individuals here.

"Don't mistake that they're losing so much.

"There's a difference between the HDB owners with limited cash and very wealthy investors who have plans for everything they want to do."

That might come as no surprise, perhaps, given the mounting number of loss-making transactions surfacing in the property market.

And as any number of observers have pointed out, there is no doubt over Mr Tada's ability to hold on to the luxury unit - which was left vacant throughout his ownership - with a fortune estimated at US$1.7 billion (S$2.3 billion).

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