One World Medini

DRESSED in a monochromatic striped sweater and ensconced in one of the snug leather armchairs in his office, Kenny Tan, chairman and CEO of Link (THM) Group, says: “The property market is very challenging.”

For boutique developers such as Link (THM), the property cooling measure that has had the most bite is the one requiring them to complete a development and sell all the units within three years of acquiring a site. That is one of the conditions developers have to fulfil in order to be eligible for a remission on the additional buyer’s stamp duty (ABSD) of 10% for sites purchased from January 2011; and 15% for those bought from January 2013. The three-year time frame applies to development sites with fewer than five houses, and that is the market segment in which most niche developers such as Link (THM) are active.

The company was not spared the penalty in its most recent project: a pair of detached houses at 7 and 7A Namly View. No 7 sits on a 5,186 sq ft plot and has a built-up area of 7,084 sq ft, while No 7A sits on a 6,071 sq ft parcel and has a built-up of 7,395 sq ft. However, Tan had already factored in the ABSD in his initial project feasibility study. “This is a premium location, and we believe in building good-quality houses,” he says. “In a buyer’s market, we know it will take time to sell the homes.”

Both houses have an identical layout, with four levels including a basement and attic. As the site is elevated, the basement, which houses a lap pool and covered garage, is at street level. The garage has been designed to accommodate up to six cars. The house has five bedrooms, including a guest bedroom, on the first level; a master suite on the attic level; a roof terrace and a living room with double-volume ceiling height of 6.2m. There is also the added convenience of a home lift.

The two houses were completed in June and put on the market. No 7A was sold for S$12.68 million (S$2,091 psf), according to a caveat lodged in July. The buyer is believed to be a Singaporean couple living in the neighbourhood who are downsizing from a larger bungalow. The sale was brokered by K H Tan, managing director and founder of luxury home specialist Newsman Realty. “The attraction for many buyers is the fact that the basement carpark is big enough for six cars, compared with most small bungalows, which can only fit two cars in the garage,” he says.

According to Newsman’s Tan, the views from the roof terrace are “unparalleled” given the site’s elevation. A lot of attention has also been paid to the design and finishing of the house, for instance, the use of teak wood for the doors, staircase and bedroom floors; marble flooring for the living, dining and powder rooms and master bathroom; as well as a fully fitted kitchen with appliances including a dishwasher.

‘Very taxing for small developer’

The price tag on No 7 is S$14.5 million (S$2,796 psf). Link (THM)’s Tan says: “Land prices are not cheap. Still, all successful businessmen aspire to own a landed property so they can pass it down to their children. A freehold title is therefore very important.”

TanThe two houses sit on an 11,248 sq ft freehold site where a bungalow built 37 years ago once stood. The bungalow was demolished subsequent to its purchase by Link-THM, which paid S$16.28 million (S$1,447 psf) for the site, according to a caveat lodged in August 2013.

In order for the 15% ABSD to be remitted, Link (THM) would have had to complete the development and sell both houses at Namly View by August 2016, three years after the purchase of the site. “This requirement is very taxing for a small developer,” laments Tan.

For private condominiums, a developer can build a sales gallery and show flats, then launch the project for sale even prior to completion. When it comes to landed property, the developer has to complete at least one unit as a show house first so that buyers can visualise the space, says Tan. “But the construction period for both private condos and landed homes is about the same — three years,” he adds. “The government should reconsider this ABSD rule as it will provide relief for small developers.”

However, he is resigned to the fact that the ABSD is here to stay for the time being. “It’s already part and parcel of our business,” he says. “No doubt the market is challenging, and the ABSD is a constraint, but we are always finding innovative ways to grow our business.”

A consolation is that activity in the landed housing segment has picked up across all property types, says William Wong, managing director of landed housing specialist Realstar Premier Group. “This is because houses are more attractively priced today and those who have been searching for the past one or two years are now finding it worthwhile to purchase.” A large proportion of the houses on the market are brand new and offered by developers faced with the government-imposed time constraint, he adds.

Searching for suitable sites

Developers who have sold down their inventory are now back on the market looking for land, says Realstar’s Wong. The focus, however, is on old, landed sites for redevelopment rather than subdivision of a large piece of land. “Their concern is still the ABSD if they are not able to sell all the units within the three-year time frame,” he says.

 Link (THM)’s Tan continues to hunt for suitable development sites to purchase. His focus is in neighbourhoods he is familiar with and where he has developed projects in the past — Holland Road and Bukit Timah Road in prime Districts 10 and 11, and Goodman Road in the Mountbatten-Katong area in prime District 15. He will continue to focus on developing landed homes, particularly semi-detached and detached houses.

In August last year, Link (THM) purchased a partly completed Good Class Bungalow at 15 Binjai Rise for S$13 million at an auction by Colliers International. The GCB was a foreclosed property sitting on a freehold site of 17,035 sq ft. Tan’s purchase price translates to S$763 psf.

Most homebuyers would hesitate to buy a bungalow that is half built. Not Tan. He had no hesitation as a developer. “I have a passion for design,” he says. “And I see completing the GCB as an opportunity to not only enhance the property but also the neighbourhood.” The GCB at Binjai Rise will only be launched for sale when it is completed, he adds. That could be late this year or early next year.

Apart from the two houses at Namly View, Link (THM) also recently completed four semi-detached houses at 1 Dyson Road, just off Whitley Road in District 11; and 58 Ban Guan, a development with four bungalows on Greenleaf Road on which construction is well underway.

1 Dyson

Another residential project that was completed recently by Link (THM) is SeaSuites, a boutique 52-unit private condo on Pasir Panjang Road. The five-storey block is just a short walk from the Haw Par Villa MRT station on the Circle Line. The site was a redevelopment of a 16-unit walk-up apartment block that Link (THM) purchased en bloc for S$33 million in 2010. The project was launched for sale in 2013 and marked Tan’s first foray into condo development.

The majority of units at SeaSuites are one- and two-bedders of 517 to 1,410 sq ft. Units were sold at prices ranging from S$1,458 to S$1,784 psf, according to caveats lodged with URA
Realis from January to March 2013. According to Tan, only two units in the freehold condo are still available for sale.

Diversifying beyond residential

In recent years, Tan has also diversified beyond residential developments. He ventured into commercial property development when he bought a 66,583 sq ft transitional office site with a 15-year lease on Mohamed Sultan Road, just off Robertson Walk. Instead of developing a single 100,000 sq ft office block, he built six smaller blocks of 10,000 to 24,000 sq ft. The buildings, called Sultan Link, have been leased to tenants such as AXS Pte Ltd, the operator of AXS machines; furniture company HomesforLife; and high-end interior design firm Royal Living Singapore.

According to Tan, the space at Sultan Link appeals to small and medium-sized companies as they are able to have naming rights to the building. “If you take up a 15,000 sq ft office space in a Grade-A building in Raffles Place or Marina Bay, you may be occupying just half a floor or one floor,” says Tan. “Here, you occupy the whole building and you can put your name on the building. It’s a good branding opportunity for these companies.”

Tan also owns the two Business 1 industrial buildings at 8 and 10 Chang Charn Road, off Leng Kee Road, an area famous for its car showrooms. He had purchased the site at 8 Chang Charn Road in 2006 and developed it into Link (THM)’s headquarters. In 2012, he purchased the neighbouring 10 Chang Charn Road and has since redeveloped it into a six-storey building. The first floor of 8 Chang Charn Road is now the showroom for Munich Automobiles — BMW Alpina, while the showroom for RUF Automobile, which customises sports cars, is now at 10 Chang Charn Road.

Investing in Iskandar Malaysia

The biggest project in Link (THM)’s portfolio today, however, is its flagship project in Iskandar Malaysia, namely One World Medini, an integrated development with 1.1 million sq ft of retail space, three office blocks and four towers containing a mix of serviced apartments and residences.

One World Medini is located near Pinewood Iskandar Malaysia Studios and LegoLand Malaysia Resort, as well as the Sanrio Hello Kitty Town and Thomas Town at Puteri Harbour. According to Tan, the future Nusajaya station for the high-speed rail linking Singapore and Kuala Lumpur is located just a short distance from One World Medini.

Link (THM) had ventured into Medini in Iskandar Malaysia in February 2013, committing to develop a “mega residential and commercial project” with a gross development value of RM2.5 billion based on the prevailing exchange rate then.

SeaSuites

With the slowdown in Iskandar Malaysia following the property cooling measures by the Malaysian government and fears of a glut in high-rise condos there, some Singapore players have either put their projects on hold or gone back to the drawing board to reconfigure their mix. “We are not putting the project on hold,” says Tan. “Everything has already been finalised and we are not changing our plans.”

Tan says he is still confident of Medini’s prospects as a special economic zone, where companies that have invested there are given corporate tax exemption until at least 2020. With the rising cost of doing business in Singapore, it is just a matter of time before more companies relocate some of their operations to Iskandar Malaysia, he adds. He is considering moving some of his operations there in the future as well.

In Medini, property investors will also not be subject to a property gains tax, unlike elsewhere in Malaysia, and there is no minimum RM1 million requirement for foreign residential property purchases.

Readying for launch

Tan says he is close to securing a construction company to handle the building of One World Medini as well as to take an equity stake in the development. Positioned as a tourist attraction, it will feature seven different themes, with each a showcase of the architecture, culture and cuisine of a country. Seven architects will be involved in the project, each one focusing on the traditional architecture of their respective country.

The seven themes are Chinese, with architecture based on Zujiajiao, an ancient water town in the suburbs of Shanghai; Europe, with architecture inspired by the Italian Renaissance; India (historic architecture of Jaipur); Japan (streets of Kyoto); Korea (traditional architecture); and the US (American rodeo). There will also be traditional Malay kampong since the project is located in Malaysia.

“We have put a lot of money into Medini,” says Tan. “It’s a bit slower than usual, but we are proceeding with our project as everything has already been finalised. We are going to kick-off construction once we have secured a suitable contractor.”

Upon finalising the main contractor for the Medini project, Tan intends to launch the strata office units for sale within the next three months. The units are 530 to 630 sq ft. Buyers are given the flexibility of combining units to create a larger floor space. Investors in the office space at One World Medini should benefit from the project’s proximity to Pinewood Iskandar Malaysia Studios. “There are more than 2,000 SMEs — from computer graphics to design and other supporting services — catering to the needs of Pinewood Studios,” Tan says. These companies would want to be located near Pinewood Studios for convenience, he adds.

Pinewood Studios, from the UK, is associated with the Harry Potter, James Bond and Star Wars films among the many movie and television series over the decades. Pinewood Iskandar Malaysia Studios’ maiden production was the 12-episode Netflix original series Marco Polo.

Retail struggles

Link-THM is also in the retail business. “It’s in my blood,” says Tan. “I’m still continuing with that business.” He had started in the business by working at his father’s handbag shop in People’s Park Complex before striking out on his own in 1994. He set up a handbag distribution business, operating out of a shophouse on Smith Street.

Today, lifestyle brands represented by Link (THM) include adidas, Havaianas, KEDS, Nike, Puma and Sperry. Link (THM) operates six outlets and stores within stores in malls such as Bugis Plus, Wisma Atria, Tampines One, Jem and Westgate.

7 Namly View

Tan attributes the dismal retail scene in Singapore to the general global economic slowdown, labour issues, the limited size of the local market and the changing retail scene as more people shop online. The challenge for retailers is that marking down prices alone is not the solution. “As a retailer, you can’t keep marking down prices because your overheads are fixed,” explains Tan. “So, your bottom line will be squeezed.”

Having more factory outlets located away from the prime shopping districts of Singapore could be a solution, he says, giving the example of Johor Premium Outlets in Kulai, which is an hour’s drive from Singapore. Tan feels there is potential for more such factory outlets in Iskandar Malaysia, where rents will be much cheaper than in Singapore. This is similar in concept to Gotemba Premium Outlets, located outside Tokyo; and Bicester Village outside London, he says.

“Every business is tough, whether you are a developer or retailer,” he notes. “So, you must be innovative in marketing your products if you want to stand out from the crowd.”

Cecilia Chow is section editor for The Edge Property Singapore.

This article first appeared in The Edge Property Singapore, a pullout of The Edge Singapore, on Oct 17, 2016.

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