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PROPERTY
Singapore fund looks for bargains
KANANA KATHARANGSIPORN
The global financial meltdown has opened up a buyers' market for property and turned competitive buyers into forced sellers, says Suchad Chiaranussati, managing director of Real Estate Capital Asia Partners (Recap), an investment fund based in Singapore.
As a result, he said, investment in property projects would become more attractive in the next 12 months.
"Now it's buyers' market with five sellers to a buyer," he said yesterday. "We've had no new investment in the past 18 months as there were a lot of competitors striving to acquire potential projects by offering higher prices. But now they have been defeated."
He said the global crisis represented a 180-degree turn, as big-name banks in dire straits changed from investors to sellers with the need to raise quick cash, and discounts of 15-20% on offer.
At the same time, property project owners have been facing pressure on three fronts, starting with higher construction costs.
If construction prices were not locked in, project owners might lose. If prices were locked in, contractors might face increasing costs and face losses themselves. In some cases, construction was suspended.
Another pressure involves financial support, as wary financial institutions reduced project funding from 70% to 55% in many cases.
Meanwhile, interest rates for project loans may be higher as banks are more cautious. In the end, many property projects may be slowed down or frozen.
"We're evaluating three or four projects right now," said Mr Suchad, adding that some had stopped development as they could not find funding sources. They are residential projects and hotels in Bangkok, Phuket and Samui.
Mr Suchad forecast hotel owners would sell both completed and unfinished properties over the next two years due to an oversupply and difficulty in obtaining financing.
"Many hotels on Sukhumvit Road [in Bangkok] and in Phuket have been suspended while some hotels that were temporally closed for renovation needed to freeze the renovation," he added.
Recap generally spends 2-3 billion baht per deal with a targeted return rate of between 20% and 30%.
Locally, it has invested in MR Sukhumvit Ltd, the developer of the 10- billion-baht Millennium Residence luxury condominium on Sukhumvit Soi 20. Singapore-listed City Developments Ltd is a consultant on the project.
The complex has 604 units in four towers. In towers A and B, more than 70% of the units have been sold since the launch in July 2006, while 10% of those in Tower C have been sold since the launch in August 2008. Unit prices range from 10 million to 121 million baht or 130,000 baht per square metre.
The developer will also spend 250 million baht to create 9,200 sq m of retail space in front of the complex. Rents would start at 1,000 to 1,500 baht per sq m for retail space and 500 to 700 baht a sq m for office space.
Founded in late 2004, Recap has invested in excess of US$220 million in real estate opportunities throughout Asia. Mr Suchad participates in acquisition, value enhancement and realisation activities and serves as chairman of the investment committee.
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