Tuan Sing gunning for bigger presence in hotel market

Business Times: Wed, Jun 27

TUAN Sing Holdings - which has a 50 per cent stake in two Australian hotels - is looking to spread its wings in the hotel sector in Australia and beyond. "We're open to acquisitions of existing hotels as well as developing new ones," Tuan Sing CEO William Liem told BT in an interview. Besides eyeing expansion Down Under, the group is looking at this sector in Singapore, China and possibly Indonesia. And to grow its size and transform itself into what Mr Liem calls "a real property developer", Tuan Sing - which already has property projects in Singapore and China - is also eyeing real estate development and investment opportunities in the residential, retail and office sectors not just in these two countries but in Indonesia as well. The group's hotel interest in Australia is held through its half stake in Grand Hotel Group (GHG), which owns Grand Hyatt Melbourne and Hyatt Regency Perth. The two hotels have undergone refurbishment in the past few years. "In addition, the Perth property has significant redevelopment opportunity with potential for more than 500,000 sq ft of additional gross floor area (GFA) that can be built," Mr Liem said. Since late 2010, Tuan Sing has been making bids at state tenders in Singapore, clinching two 99-year leasehold private housing sites thus far - in Seletar and near Potong Pasir MRT Station. It has also bagged the plum freehold Serene House site at Cluny Park Road opposite Botanic Gardens MRT Station through a collective sale. "I think Tuan Sing is well known for building good homes, but there were several years when there was not much activity within the group. The key challenge is to find a way to expand our activities and grow the company to become a real property developer," said Mr Liem. "When you're growing the company from a relatively smaller scale, you need to have the right team in place. But it's a chicken-and-egg situation," he added. "In order to find the right team, you need to have good projects in place, which is why we have become more active in bidding for land over the past two years." Last month, the group's Mont Timah cluster housing development at Hindhede Drive next to Bukit Timah Nature Reserve clinched Singapore Institute of Architects' Architectural Design Award 2012. The group's Botanika along Holland Road earned the same accolade last year. Tuan Sing is currently developing the Seletar plot into a five-storey condo, Seletar Park Residence. Since sales began in March, about 55 per cent of the condo's 276 units have been sold. For "standard units", excluding penthouses and units with roof terrace and private enclosed space, prices average around $1,100-1,250 per square foot (psf). Seletar Park Residence's architectural design, interior design and landscaping are handled by SCDA. "The project has attracted even buyers living in Singapore's prime districts who have picked up units for their children as they feel the development is nestled in a nice landed environment and quality-wise is as good as any in District 9 or 10," said Mr Liem. The group's next project - dubbed The Sennett, next to Potong Pasir MRT Station - is slated for launch later this year. It will have 338 units comprising one to five-bedroom units and penthouses, and will have three 18-storey towers and a five-storey block with an Olympic-sized pool at the top. This project is being designed by MKPL Architects. The five-storey Cluny Park project - being designed by SCDA - will have a rooftop swimming pool overlooking the Singapore Botanic Gardens a stone's throw away. This project, which could go on the market later this year or in the first half of 2013, will have about 60 units, mostly two bedders. "All three projects will have underground carparks, which are more expensive to build, but we think it's worth it as we want the maximum area for people to live in so that they can enjoy the gardens and landscaping," said Tuan Sing's CFO Chong Chou Yuen. Said Mr Liem: "We're quite used to doing high-end projects. So we definitely want to have our project specifications one level above others, be it Seletar or Sennett. We aim to create something that is architecturally very interesting and inspiring but at the same time usable and practical." The projects should create a nice income stream for the group. BT's back-of-the-envelope calculation suggests that Seletar Park Residence could generate a pretax profit of about $56 million - assuming a breakeven cost of about $900 psf (Tuan Sing paid $468 per square foot per plot ratio or psf ppr for the land), average selling price of $1,100 psf and saleable area of about 280,000 sq ft. For The Sennett, pretax profit could be about $66 million based on an average launch price of $1,300 psf, saleable area of around 330,000 sq ft and a breakeven cost of about $1,100 psf. Tuan Sing paid $567 psf ppr for the site. Assuming the proposed condo on the Cluny Park Road site commands $3,000 psf on average, it could yield a profit of about $67.5 million, using a breakeven cost of about $2,100 psf and saleable area of around 75,000 sq ft. Tuan Sing officials confirmed that the total unit land price for the Cluny Park Road project is close to $1,430 psf ppr, inclusive of 10 per cent additional GFA for balconies and taking into account a sum of about $11 million Tuan Sing paid to Singapore Land Authority for the adjoining state land. In the CBD, Tuan Sing plans to redevelop Robinson Towers, its Annexe building and International Factors Building into a 23-storey office project with 257,334 sq ft GFA including about 12,500 sq ft of retail space. However, the group has yet to decide when to begin work. The annexe is on a plot with 99-year leasehold tenure (starting 1981) while the two other buildings have 999-year tenure. Market watchers reckon it would make sense for Tuan Sing to seek a lease upgrade for the annexe site to 999 years before commencing construction. Mr Liem estimated that it would cost Tuan Sing about $165 million to build the new project, including development charges to tap additional GFA but not counting the premium payable for any lease upgrade for the annex. "Our valuation of the land is $230 million or nearly $900 psf ppr," said Mr Liem. Comparing this to the $872 psf ppr at which the government last year sold the 99-year Paya Lebar Square site, Mr Liem said: "Our cost for a prime, 999-year CBD location is very competitive." Source: Business Times