CDL may turn condos into serviced homes
PROPERTY giant City Developments (CDL) says it might consider turning some of its upcoming high-end condominium projects into serviced residences.
This drastic move is being contemplated as thinner profits from property development in a rapidly slowing market weighed down the company’s earnings released yesterday.
CDL executive chairman Kwek Leng Beng also said yesterday that property prices could fall by up to 10 per cent this year.
But he added that it depended on the world economy.
“I used to make a forecast, 10 per cent. It hasn’t reached 10 per cent yet… the worst worldwide scenario is over, but we are still facing a lot of uncertainty.”
CDL group general manager Chia Ngiang Hong told reporters after the briefing that converting some of its unlaunched high-end residential projects into serviced apartments “may be difficult but we won’t rule it out… if we have not sold the project yet”.
Other developers of luxury condos have also contemplated such a conversion recently. Developer OUE was said last year to be planning to convert part of its Twin Peaks condo at Leonie Hill into serviced apartments, though that has not happened.
Mr Chia said CDL’s Nouvel 18 at Anderson Road, which is still unsold, was on track to be completed by the end of this year.
CDL also successfully applied last year to extend the qualifying certificate (QC) construction deadlines for its Gramercy Park condo on the former Lucky Tower site at Grange Road and its New Futura condo on Leonie Hill Road to until the end of next year, he added.
He said CDL plans to open the whole South Beach complex by next year, before the project’s 2016 completion deadline.
Mr Chia said CDL plans to launch a 944-unit condo at Pasir Ris Grove in March or April and then an 845-unit condo at Commonwealth Avenue in the second quarter of this year.
Mr Kwek also called on the Government to modify its QC rules this year, saying that these rules were driving up land tender bids.
“If they will not tweak it or will not do anything about it, we have other plans,” he added, but decline to elaborate.
Mr Kwek noted that “with QC in place, there is competition for every site… Without any sites, business comes to a standstill. They (developers) have no choice but to bid higher and higher”.
The QC rules effectively mean developers cannot hold onto sites very long, since a QC gives them up to five years to finish building a project and two more years to sell all the units. They are not allowed to rent out unsold units.
Developers whose shareholders and directors are not all Singaporeans have to get a QC to buy residential property for development. This is imposed to control foreign ownership of land here.
To ensure compliance, the developer has to put up a banker’s guarantee of 10 per cent of the purchase price of the property, which may be forfeited if it fails to fulfil the QC’s conditions.
Mr Kwek was speaking at CDL’s full-year results briefing yesterday, which also happened to be new chief executive Grant Kelley’s first at CDL.
Mr Kelley, who spoke little yesterday, took the reins on Feb 17 this year.
Mr Kwek said CDL chose Mr Kelley because “we can promote from within – we have also third generation, they are very good – but we want to build an international, external wing”.
The group yesterday posted an 11.4 per cent drop in fourth-quarter net profit to $221 million. Revenue for the three months to Dec 31 dropped 12.6 per cent to $774.4 million from the preceding year.
For the full year, net profit inched up 0.7 per cent to $683 million while revenue slipped 5.7 per cent to $3.2 billion.
Earnings per share fell 11.6 per cent to 23.6 cents for the quarter from the year before.
Net asset value per share was $8.63 as at Dec 31 last year, up from $8.03 as at Dec 31, 2012.
CDL proposed an ordinary dividend of eight cents per share.