Local developers looking abroad for more opportunities

A growing number of local property developers are seeking opportunities abroad. Frasers Centrepoint is the latest to enter the fray after submitting a proposal for a takeover of Australian developer Australand.

Industry experts said that is because local players have accumulated strong cash balances and are looking for opportunities abroad as cooling measures weigh on the local property scene.

Frasers Centrepoint has submitted a conditional proposal, offering some S$3 billion to acquire Australand. The move appears in line with the group’s strategy to diversify across geographies and property segments.

The acquisition would give Frasers Centrepoint control of Australand’s A$2.4 billion of commercial property and A$9.3 billion of developments in Australia.

The proposed offer of A$4.48 per share is a premium of about 15 per cent over the volume weighted average price for the three months up to March 18.

Yet, some analysts said there is significant potential to generate higher returns.

Roger Tan, CEO of Voyage Research, said: “If you look at the assets of Australand, there are quite a few industrial and commercial assets on top of brand name.

“If I am the buyer and I am paying this sort of premium, I must have some idea in terms of strategy to tear the assets apart and then list them as REITs and use brand names to build residential properties, or maybe sell some of the not-so-profitable parts to focus on certain industries that they may find value in.”

Donald Han, managing director of Chesterton Singapore, said: “The yields which typically comes up from Australian commercial properties would be in excess of 7 per cent, which is already more than the yield accretive compared to the kind of returns we get in Singapore, which is just about 4 to 4.5 per cent.”

The move is part of a broader industry trend of local developers venturing abroad.

This week, local developer Hiap Hoe received regulatory approval to plan the development of a hotel in Melbourne. Earlier this year, Sim Lian acquired five shopping centres in eastern Australia for some S$152 million.

Mr Han added: “A lot of big players in the market, strong balance sheets being created over the last two to three years as we saw values coming up and again the stifling environment — especially because of the measures, have forced a lot of developers to looking into new growth areas.

“We’ll see more listed companies in particular going abroad to diversify income sources.”

Ho Bee recently acquired prime office property in London, while CapitaLand has said it is focused on growing its core market in China, which accounts for almost half of its portfolio.

Source : Channel NewsAsia – 5 Jun 2014

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