INDEED, it has been an eventful week for the YTL Group. Early in the week, it was reported that foreign research house JP Morgan shot out a report to clients that YTL Corp Bhd's proposal to build a bullet train has been cleared of most of the regulatory hurdles and that its clients may want to “bet on” the project taking off.
This was followed a day later by an announcement that it has entered into the largest residential collective sale transaction in Singapore since the new en bloc legislations came into force on Oct 4.
YTL Corp was awarded the tender for the en bloc purchase of Westwood Apartments, located on Singapore's famed Orchard Boulevard, for S$435mil cash (or R1bil).
It is YTL’s third property purchase across the causeway in two years. His previous two purchases are high-end Lakefront and Sandy Island residential development projects in Sentosa Cove.
Sentosa Cove is residential enclave in the east of Sentosa Island in Singapore. Eventually it will house about 2,500 units when fully developed. Largely made-up of reclaimed land, it is being marketed as an “exclusive oceanfront residential community” and the “only true seafront residential property” in Singapore. It fetches some of the highest prices in the city state.
YTL Group MD Tan Sri Francis Yeoh in a statement said “the acquisition is in line with our wider strategy, focusing on upscale real estate in well-established markets, which enables us to employ our branding to enhance the value of these properties.”
The more than 30-year-old, 50-unit condominium block is located on about 62,179 sq ft (or 1.5 acres) of prime freehold land.
A report from Affin (Nov 28) states that based on a minimum plot ratio of 2.8 times, the land cost per gross development area translates to S$2,499 psf.
“This appears reasonable given the property’s prime business location in the city. Assuming land costs were to account for 50% of sales value, we estimate that YTL would need to achieve a top-tier selling price of S$5,000 psf for the redeveloped condominiums. This is realistic based on the recent transactions achieved by The Marq on Paterson Hill and the upcoming Ritz Carlton Residences on the former Horizon View site in Cairnhill Road.”
Since 2004, property prices in Singapore have been moving up. The past year saw the greatest gain. The en-block sale, where developers buy the entire bloc for re-development, have made many Singaporeans very rich. There are also sad stories, some of which have to do with timing.
Apart from geographical diversification and increase in its property development land-bank portfolio in Singapore, the acquisition would enable the group to enhance its earnings potential from the high sale and rental rates expected from the renewed interest in the city-state's property sector, Yeoh said.
The Singapore economy and property prices have completely turned around since the 1997/98 Asian financial crisis. Singapore has risen leaner and meaner and today, a decade later, it has become the hub for nearly everything in the region – education, tourism, services, financial and now property.
Says a Singapore developer: “The Singapore government has done a fantastic job of rebranding Singapore.”
Over in Malaysia, the government is trying to build an education centre of excellence. It is also trying to attract foreigners to buy Malaysian properties and it has also created several regional developments to pump prime the economy. The Iskandar Development Region (IDR) in Johor is one of them. It is hoped that foreigners, especially Singaporeans, will invest in the 2,200sq km area.
Says an analyst: “So far, they have not come in droves. We have the Middle Easterners coming in but they want to see some infrastructures laid down over a certain time frame before they actually put money into it. They don’t want to see another Port Klang Free Trade Zone in IDR, given the magnitude of the project.”
Eight years ago, when the concept of the Port Klang FTZ was first mooted, Jafza International was given the concession to manage and operate the project. Jafza was credited with turning Dubai's Jebel Ali Free Zone into a commercial success. But in July this year, Jafza walked out of the project, frustrated by red tape and various political obstacles it encountered.
Costs for the project had also ballooned from an estimated RM1.08bil to RM4.6bil. Jafza exited the project leaving the government with debts totalling more than RM4.6bil.
In September, Prime Minister Abdullah Badawi said in Singapore that the government would not prevent the private sector from building the line for the bullet train but warned it would not rescue the project if it later proved to be unviable.
As an example of what he meant, he said his government will not build a bullet train track between Singapore and Kuala Lumpur, but will not stop the private sector from taking on such a project.
“If you are going to spend your money on this, I will allow you to do it,” he said. “You spend the money, you build the train, you decide on the fares.”
The Singapore-Kuala Lumpur fast train idea was mooted by YTL in 1998 and again last year. But, for various reasons, YTL's proposal ran into delays while awaiting the official go-ahead.
Of the RM11bil estimated building costs, RM3bil would be spent on civil infrastructure works, JPMorgan said, adding that by minimising the estimated RM8bil land acquisition costs – if it were handled by the government or bundled with a soft loan, for example – it would be possible to keep train fares competitive and “make the 90-year concession bankable”.
Says an analyst: “The bullet train is a political thing. Another issue is the pricing. Because it is only for passengers, how much is a ticket? Will the ordinary people be able to afford it?
“If it really gets off the ground, it will benefit both countries. Clearly, it will benefit IDR and Klang Valley property prices. It will also benefit the business community.”