Oxley: All about timing

cecilia.chow@bizedge.com

With eight to 10 Singapore projects slated for launch this year and overseas projects being completed as well as brought to market, the property group is turning around sites at record speed

 

Last year, Oxley Holdings’ outsized appetitefor development sites in Singapore led to a $2 billion buying spree, including en bloc sites purchased jointly with partners. The transaction value is equivalent to Oxley’s market capitalisation of $2.08 billion at the close of trading on Feb 7, and about 23% of the $8.7 billion worth of en bloc deals for the whole of 2017.

 

Low: We understand cash flow very well. We do not take unnecessary risks that will jeopardise the
group’s standing in the investment community (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

As at end-December, Oxley’s landbank of nine sites amounted to 3,800 units with a gross development value (GDV) estimated at $5 billion. Contrary to market opinion, Eric Low, deputy CEO of Oxley Holdings, says, “We’re actually very selective in buying our sites. Based on what was available on the market, we have picked the best in terms of price and location.”

In the event that the Singapore residential market rebound is less spectacular than predicted, Oxley is confident that its projects will still sell well, given its purchase prices, which are at a “10% to 15% price advantage”, Low reckons.

He points to Oxley’s purchase of Rio Casa on Hougang Avenue 7 for $575 million ($669 psf per plot ratio) at end-May last year as part of a consortium. As a comparison, last October, Logan Property bagged Florence Regency at Hougang Avenue 2 for $629 million ($842 psf ppr).

Likewise, Oxley and its partners purchased Serangoon Ville on Serangoon North Avenue 1 for $499 million ($835 psf ppr) on July 26. The following day the tender for the Serangoon North Avenue 1 Government Land Sales (GLS) site nearby closed. The site was won by Keppel Land and Wing Tai with a bid of $446.28 million ($964.8 psf ppr).

Oxley won the tender for Mayfair Gardens off Dunearn Road and Bukit Timah Road with a bid of $311 million ($1,244 psf ppr) on Nov 19. Meanwhile, Allgreen Properties snapped up three sites in the Bukit Timah area in early December at higher psf ppr prices: two en bloc sites, Royalville and Crystal Tower, for $477.94 million ($1,960 psf ppr) and $180.65 million ($1,840 psf ppr) respectively, as well as the Fourth Avenue site in a GLS programme for $533 million ($1,540 psf ppr).

 

Oxley and its partners purchased Serangoon Ville on Serangoon North Avenue 1 for $499 million ($835 psf ppr) on July 26 (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

Banking on quick turnaround time

Oxley is turning around the sites just as quickly as it is buying them. The developer intends to launch between eight and 10 projects this year — at an unprecedented rate of one new launch every other month from March.

The first project slated for launch is Verandah Residences at 231 Pasir Panjang Road. Oxley had purchased the former Lotus @ Pasir Panjang last June for $121 million. The proposed 150-unit Verandah Residences condominium sits on a freehold site of 89,620 sq ft and has a gross floor area (GFA) of 125,468 sq ft. Verandah Residences’ launch is likely to be followed by that of the redevelopment of Rio Casa and Serangoon Ville, both slated for 1H2018. Incidentally, Oxley has a 35% stake in Rio Casa, which has a GDV of $1.44 billion and a 40% stake in Serangoon Ville, which has a GDV of $1.35 billion.

Meanwhile, Mayfair Gardens and Vista Park were purchased wholly by Oxley. Vista Park was purchased in December for $418 million ($1,096 psf ppr). “These sites are more manageable, so Oxley is developing them ourselves,” says Low. “For bigger sites such as Rio Casa and Serangoon Ville, we do it as part of a consortium of partners to spread our risk.”

While the redevelopment of Mayfair Gardens is likely to be launched in phases in 1H2018 and 2H2018, Vista Park is slated for launch in 2H2018.

 

The Vista Park site was purchased in December for $418 million ($1,096 psf per plot ratio) [Credit: TH Real Estate]

 

Bounding over regulatory hurdles

Putting a damper on developers’ appetite for huge collective sale sites was the Pre-Application Feasibility Study (PAFS) on the traffic impact in an area, particularly for proposed redevelopments of collective sale sites with significantly more units than the existing ones. This requirement came into effect on Nov 13.

Due to the increase in the number of PAFS applications last year as a result of the surge in collective sale deals, some developers are still waiting for approval from the Land Transport Authority (LTA) and URA.

Oxley, however, announced on Nov 17 that it had already received in-principle approval from LTA for the redevelopment of the two biggest en bloc sites in its portfolio — Rio Casa, and Serangoon Ville, which will be redeveloped into condos comprising 1,472 and 1,052 units, respectively.

In addition to the PAFS, another key requirement to being launch-ready is obtaining a Temporary Occupation Licence for state land in the vicinity of the new development to build the sales gallery and show flats. Oxley has already secured a TOL for a site near Rio Casa, and is close to getting one for a site near Serangoon Ville.

 

Oxley purchased Rio Casa on Hougang Avenue 7 for $575 million ($669 psf ppr) at end-May last year as part of a consortium (Credit: Knight Frank)

 

Shoebox developer no more

Oxley is shaking off its reputation as a developer of shoebox units. “During the 2010 to 2012 period, we managed 25 projects and we built and successfully sold thousands of shoebox units even when others doubted their viability,” recounts Low. Nowadays, Oxley is developing “family-sized units”, says Low. “The market has changed.”

What’s more, URA also introduced guidelines such as a minimum unit size of 40 sq m, and an average size of 70 sq m for mass-market developments towards the end of 2012.

Low predicts that the suburbs and mature residential estates in the city-fringe and prime neighbourhoods will be sought after. “The projects in our portfolio sit comfortably in the mass-market segment because we feel that this year, demand will come from a combination of home upgraders and investors,” he says. While the indication is that the high end of the residential market is recovering, Low deems it to be “more speculative”.

 

The first project slated for launch is Verandah Residences at 231 Pasir Panjang Road. Oxley had purchased the former Lotus @ Pasir Panjang last June for $121 million (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

Overseas projects being completed this year

According to Low, Oxley’s acquisitions are secured by bank loans and this year, many of its overseas projects are being completed, which means it will be able to recognise sales and replenish its coffers.

Royal Wharf in east London, the group’s maiden development in the UK, is its largest development project so far, with a GDV of $2.97 billion. The 3.9 million sq ft waterfront township development will have 3,385 residential units upon completion. About 90% of the units at Royal Wharf have been sold.

More than 1,000 units at Royal Wharf were handed over to homeowners last year, with the developer raking in £500 million ($916.4 million) in proceeds. Another 400 units will be handed over by June, with a target of 1,000 units by end-2018. This will mean it can book in the proceeds from these units.

 

More than 1,000 units at Royal Wharf, Oxley’s township development in the UK, were handed over to owners last year, with another 1,000 units to be delivered by end-2018 (Credit: Albert Chua/EdgeProp Singapore)

 

In Cambodia, Oxley’s maiden development in the capital of Phnom Penh is The Bridge, which is slated for completion soon. The mixed-use development comprises 2,352 units of residences, SOHOs (small office/home office), F&B outlets and strata shops in twin 45-storey towers. About 95% of the units have been sold so far. In fact, more than 300 strata office units were sold last year. The Bridge has a GDV of $564.6 million and Oxley holds a 50% stake in the project.

Upon completion of The Bridge, the developer will be able to hand over the strata units to the respective owners, who will pay the remaining 50% on their purchase price.

It all boils down to timing, says Low. “Had the London and Cambodia projects been completed one year later and the Singapore property market turnaround happened a year earlier, I don’t think we would have been able to enjoy this one-year window period,” he continues. “The Singapore market turnaround [dovetailed] with the completion of our overseas projects and income recognition. The timing was perfect.”

He adds, “It’s because of the completion of these overseas properties that we dare to buy all these sites [in Singapore]. We understand cash flow very well. We do not take unnecessary risks that will jeopardise the group’s standing in the investment community.”

 

The Bridge, a mixed-use development in the CBD of Phnom Penh, is targeted for completion soon (Credit: Albert Chua/EdgeProp Singapore)

 

Recurring income from investment properties

Oxley is also beefing up its investment portfolio for recurring income. In Singapore, its biggest investment property is the former The Pines Country Club site at 28 Stevens Road. The site was purchased on a 103-year lease in 2013 for $318 million. It has since been redeveloped into two hotel towers anchored by Accor Group — the 254-room Novotel and 518-room Mercure.

Since the soft opening of the two hotels on Dec 8, their occupancy rates have been hovering around 95%, says Low. The average room rate is between $185 and $188 a night. For now, about 300 rooms at Mercure are in operation, with the remaining rooms on the top three levels to be opened progressively.

“With four-star hotels such as Novotel and Mercure, we are able to secure a good mix of corporate clients and leisure travellers,” says Low. “We have the Emirates cabin crew staying with us.”

The 10 F&B “pods” have been taken up by F&B outlets such as Blue Lotus Chinese Grill House, Long Beach Seafood, In Piazza Italian Restaurant and Pizzeria, and PappaRich, which serves popular Malaysian fare. The commercial units are expected to yield an annual income of $2.1 million and have an indicative valuation of $94 million.

The entire development on Stevens Road was valued at $980 million as at end-December. The indicative value of the hotels is $886 million, with estimated recurring profit of $46 million based on an occupancy rate of 88%.

 

Oxley’s Stevens Road development, which comprises two hotel towers anchored by the Accor Group — the 254-room Novotel (pictured) and 518-room Mercure — as well as 10 F&B outlets and Oxley’s sales gallery (Credit: Albert Chua/EdgeProp Singapore)

 

In Ireland, Oxley has a mixed-use development called Dublin Landings on a 2.35ha site at Dublin’s financial and technology district in the CBD. Oxley has secured a 300- year lease on the site, which will have more than a million sq ft of offices apartments, and shops.

The five office buildings at Dublin Landings will have a GFA of close to 700,000 sq ft with a GDV of $970 million. When completed in 2020, the buildings are expected to yield recurring income of about $40 million a year. The first office tower at Dublin Landings has been completed, with the National Treasury Management Agency as the anchor tenant and taking up 13,300 sq m (143,161 sq ft).

Oxley is just as active overseas as it is in Singapore. “As a company, we have to demonstrate profit stability,” says Low. “Even though the Singapore market was soft for the last three to four years, as a result of diversification, we still had profits from overseas projects.”

Its aggressive shopping spree last year created a buzz. The most notable transactions were its pre-Christmas acquisition of more than $1 billion worth of property over two consecutive days on Dec 13 and 14, when it bought Chevron House for $660 million and Vista Park for $418 million.

Oxley has already embarked on plans for asset enhancement work at Chevron House, which was built in 1993 and comprises a 32-storey tower with 27 floors of office space and a five-storey retail podium. The building sits on a 29,901 sq ft plot with a 99-year lease from 1989 and has an existing net lettable area of 261,275 sq ft. However, Chevron House has 15,000 sq ft of excess GFA that can be built up, says Low. “We believe the yield can be enhanced after the asset enhancement exercise, including increasing the efficiency and NLA of the building.”

Chevron House has an indicative valuation of $750 million, with recurring income projected to be $41 million a year.

 

Chevron House has 15,000 sq ft of excess GFA that can be built up, says Low (Credit: Samuel Isaac Chua/EdgeProp Singapore)

 

Overseas projects for launch

Apart from the eight to 10 projects in Singapore, Oxley has a pipeline of overseas projects as well. In Cambodia, besides The Bridge, the developer has a project called The Peak. The mixed-use development comprises strata Grade-A office units, a mall, residences and a Shangri-La hotel. It is targeted for completion by end-2019. So far, all the 250 strata office units have been sold, while 50% of the residential units have been taken up.

Oxley will be launching its third project in Phnom Penh, The Palms, a luxury residential development at the Mekong Riverside, as well as the remaining units at The Bridge and The Peak.

In Kuala Lumpur City Centre, Oxley has a mixed-use development that will be anchored by two five-star hotels — Jumeirah and So Sofitel. The development will also contain offices and retail and residential units. The project is slated for launch in March or April this year.

Meanwhile, in Limassol, Cyprus, Oxley has purchased a prime beachfront site. It intends to build a low-rise residential development with a five-star hotel. The project is scheduled for launch in the middle of this year.

In the UK, Oxley is planning to launch its second project, Deanston Wharf, located next to Royal Wharf. The developer has planning approval for 762 residential units on the site and hopes to launch the project in 3Q2018.

Oxley has already opened its international sales gallery on Stevens Road. It will be able to target the affluent residents who live in the vicinity, given the prime District 9 location, as well as hotel guests and visitors. The Stevens Road property “is a showcase for Oxley’s projects”, says Low.

Related Articles From EdgeProp.sg
Oxley buys Geylang property from Huang Clan Association for $13 mil
KSH, Oxley, Heeton and Lian Beng invest $30 mil in Gaobeidian project developer
Oxley buys Vista Park for $418 million, 19.4% above asking price
Oxley clinches stake in Vietnam residential project through $16.2 mil acquisition