Staying in the moment with his landbank

Published 12 April 2011
The Business Times
By Kalpana Rashiwala

SC Global has a considerable inventory of about one million square feet gross of saleable floor area in various luxury residential projects in Singapore, but chairman and CEO Simon Cheong is in no hurry to sell it off, mindful of the difficulty of finding replacement landbank in Singapore’s top-end segment, which is his company’s niche.

Seven Plams by SC Global

Seven Plams by SC Global

In fact, replenishing the landbank will be the biggest challenge facing Singapore’s luxury residential market this year, he argues.

The one million sq ft gross floor area of space available for sale comprises units which have yet to be sold in existing projects such as The Marq on Paterson Hill, Hilltops, Martin No 38 and Seven Palms, Sentosa Cove, as well as a project that the group has yet to develop on the site of The Ardmore.

‘For SC Global, we decided that we shouldn’t sell ourselves short by selling out too early, prematurely, when to replace our kind of high-end landbank literally a few minutes away from the Orchard Road area is going to be tough.

‘So normally we don’t price our projects to sell ourselves short. The way we price is (based on) my replacement cost. I have to make a qualification because I have to be very careful here not to go into other people’s turf because we’re just high-end players. We play in the 9, 10 and 11 districts.’

The situation is unlike the case for the mass-market where government is always there to supply land, he adds.

Mr Cheong suggests that in five to 10 years’ time, finding land in Singapore’s choicest districts near Orchard Road could become as difficult as finding development land today in New York’s Central Park and London’s Hyde Park locations.

He also stresses that SC Global’s concept of launching a project is not of the run-of-the-mill variety. ‘We do put limited units for sale but we don’t have launches with big fanfare, balloons outside, like a carnival. It is very different, because this is high end. And the ticket item we are talking about is huge. So we have to adapt the whole marketing.

SC Global’s gearing (net debt to equity) – stripping out AVJennings’ borrowings and cash – has fallen from 2.7 times at end-2009 to 2.2 times at end-2010, according to Nomura Singapore’s calculation.

At end-2010, the group had $831.8 million of current financial liabilities, mostly land loans tied to its development projects The Marq, Hilltops and Martin No 38. The Marq received Temporary Occupation Permit (TOP) in January this year and Hilltops is expected to be completed soon. Martin No 38’s residential component will also receive TOP later this year.

Nomura analyst Sai Min Chow expects the company to roll over the debt, securing it against unsold completed units in the development.

‘Because the banks typically give a higher loan-to-value for completed units and for SC Global the value is typically quite high, I don’t think they will have an issue getting the debt rolled over. Moreover, it is clear the banks have been very supportive of the company so far,’ says Mr Sai.

Mr Cheong says that Singapore has all the elements that will make for a ‘very positive outlook for the luxury market this year’. He readily gives credit to the government for reinventing Singapore over the past five years by paving the way for the two integrated resorts, upgrading Changi Airport and positioning Singapore as a wealth management hub.

‘Singapore is already beginning to be an oasis for well-heeled individuals who want to put their funds (here) or diversify their funds to other countries, and Asia is a growth area. The removal of the estate duty completely removes any doubt for family trusts that want to put money in Singapore. I think our fund management and private banking structure also speaks volumes for us and for rich individuals who want to diversify their funds to a safe-haven city, Singapore is well positioned.’

Mr Cheong also argues that Singapore’s luxury residential prices are still reasonable compared with other markets such as New York, London, Paris, Hong Kong and Shanghai.

‘No property play in any country will succeed without the right infrastructure, environment and transparency that we have.’

The 54-year-old, formerly a real estate banker before venturing into property investment and development, is married with two daughters aged 22 and 21 and a nine-year-old son.

The experience of building up SC Global into a formidable brandname in Singapore’s high-end sector over the past 10 years has left him more convinced that ‘if we work hard and stay true to our passion, values and vision, in the long run we can achieve something truly unique and special’.

‘The value of having good relationships and friends is so very important in every way imaginable in life.’

Mr Cheong developed an appreciation for Chinese tea about 10 years ago. ‘Sometimes I brew tea in the office while waiting to solve the next problem. It can be rather therapeutic. Of course, tea has many health benefits too. Some people really drink tea, they gulp it like beer; but tea has to be sipped to be enjoyed.’

His favourites include Pu Er, Da Hong Pau and Long Jing – ‘depending on the time and mood of the day’. He visits tea houses in Chinatown during weekends, appreciating his passion anonymously with fellow tea connoisseurs, as he goes unrecognised clad casually in jeans.

Mr Cheong gives some tips on tea brewing: ‘Always ‘rinse’ tea leaves, so the first two servings should be discarded. Good tea should not be ‘cooked’; there’s a difference between brewing and cooking. Selecting the right tea pot is also important; it’s similar to using the right wine glasses for different wines.

There’s nothing quite like sipping Chinese tea to the strains of the Chinese erhu or guzheng and watching the smoke dance from sandalwood incense – to stay in the moment.

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