Luxury property developer Ho Bee Group is not ruling out launching a real estate investment trust (REIT) in the next two years.
These are for its commercial properties, including its latest mixed development The Metropolis.
Ho Bee’s chairman Chua Thian Poh said this on Thursday on the sidelines of the ceremony to mark the completion of structural works for The Metropolis.
Even before the two towers are completed by end-September, some 60 per cent of the 1.1 million square feet of lettable space at The Metropolis has been taken up.
One of its key corporate tenants is Shell, which will converge its offices in Singapore.
The oil giant is leasing some 130,000 square feet of space to house its 1,000-strong office staff in Buona Vista.
Lee Tzu Yang, chairman of Shell Companies in Singapore, said: “We are really looking for a modern Grade A office building that has flexible floor plates that will allow us to be flexible in how we arrange our offices.”
Ho Bee expects The Metropolis to be fully occupied with offices, food and beverage outlets and a gym by the end of 2014, with a steady income stream to be reached by 2015.
Some analysts estimate this steady income to be about S$70 million a year. And this will translate to some S$50 million in profit annually for Ho Bee.
Mr Chua said: “The strategic decision to develop a commercial development for long-term investment is part of our overall plan to grow our recurring income. The Metropolis offers us this opportunity when the towers are fully occupied.”
The Metropolis, together with four other commercial properties owned by Ho Bee, could potentially be converted into a REIT in two years.
Market watchers said that going into commercial properties can help mitigate business risks for the group.
Experts said the leading developer in Sentosa Cove is already seeing dwindling demand for its luxury properties since the introduction of cooling measures in recent years.
Wilson Liew, an analyst at Maybank-Kim Eng, said: “Currently, their residential landbank is confined largely to residential Sentosa Cove. We see that demand has not really picked up compared to 2008, 2009. That may take some time to resume. We think that it may take one or two years before demand picks up again.”
Foreign investors, which typically make up a third of buyers in the luxury property market, have largely stayed away due to the Additional Buyers Stamp Duty (ABSD).
The ABSD for foreigners has been raised from 10 per cent to 15 per cent in the latest round of measures.
Source : Channel NewsAsia – 21 Mar 2013