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Analysts see it building land bank, looking for more marquee projects

AMBERVILLE, a privatised HUDC estate in Katong that property heavyweight Far East Organization bought for $183 million last month, may turn out to be the group’s first private sector residential purchase in Singapore for almost 10 years.

The lengthy absence from the market was not for want of trying, though.

Privately held Far East has been putting in bids at other developments in the past year - including the Sentosa Cove sites, and a commercial/residential site next to Yew Tee MRT Station at Choa Chu Kang, but in each case Far East was outbid by other developers.

But the purchase of Amberville and Far East’s clinching of the former Glutton’s Square site at Orchard Road signal a change of tack.

Property consultants believe that Far East’s sense that the property market is picking up is guiding its actions, but internal factors are also in play.

‘They are replenishing their land bank,’ said Knight Frank’s director of research and consultancy, Nicholas Mak. ‘If the market is picking up, most developers who have substantial inventory on hand will want to clear that first. When they have come to a certain level where they think that they need to have more inventory to sustain their activities, then they’ll go in and bid,’ he added.

DTZ Debenham Tie Leung’s executive director of consulting and research Ong Choon Fah feels that Far East is being astute, moving in as and when a project suits it. ‘As a developer, they are always looking out for opportunities, and they will zoom in when good opportunities arise.’

>From traditionally competing with the Hong Leong group of companies as the developer that moves the most number of residential properties, Far East fell behind last year.

It sold 900 units, taking the fourth spot behind the Hong Leong Group’s companies, Centrepoint Properties and Keppel Land.

But in other areas - retail and commercial projects - Far East has been making more progress.

It has done well with its SoHo (small office, home office) project at Clarke Quay, with 95 per cent of the 227 units sold. Far East is also busy with the Novena Medical Centre, selling the suites to doctors in private practice.

And it is moving ahead with converting the office building NatWest Centre on McCallum Street into apartments.

Jones Lang LaSalle’s regional director and head of investments Lui Seng Fatt said that Far East’s approach on the residential front is a strategic one, as the company is shifting to sectors with higher capital yield.

‘In the 1990s, they capitalised on the buoyancy of the residential market, so the focus was a lot on residential land,’ Mr Lui explained. ‘The shift of strategy, from residential -driven in the ’90s, back to being commercial-driven, is probably the natural trend, with tourism and retail leading the recovery.’

Mr Lui said retail is looking especially attractive, with more room to grow, as retail rentals are still low here, compared with rates charged by other Asian markets. Far East has also traditionally being retail-centred, at one point being dubbed the ‘King of Orchard Road’ for its multiple properties along the retail stretch.

Mr Lui pointed out that Far East’s retail focus was signalled through its purchase of Pacific Plaza last year. He expects it to be ‘one of the front-runners’ for the other Somerset site - a reserve-list site - part of which is currently used as a carpark. It will be made available for application by developers in March and could be launched for tender in June.

Now that Far East is back, analysts are expecting it to be on the prowl for more marquee projects.

DTZ’s Ms Ong reckons that Far East will ‘cherry-pick’, choosing to go into projects that will fit their overall portfolio, be it residential, office or retail.

‘My guess is that they may look for one or two more projects to acquire, then after that they will turn their attention to developing and selling those projects,’ said Knight Frank’s Mr Mak.

JLL’s Mr Lui added: ‘Far East is a big organisation. There’s still a lot of capacity for them to go for residential sites and other retail sites that might come up.’

Source : Straits Times - 3 Feb 2006