Ho Bee Land (formerly: Ho Bee Investment)

[opmi]

^^ both H companies made good money buying during crisis.
Ho Bee - Metropoltian
Hiap Hoe - Zhongshan Park

[CCUV]

Something brewing?....

http://www.cityam.com/233770/singapores-...e-for-100m

[vested]

good run this year so far, yet with such a huge portfolio in the UK - the upcoming Brexit vote on 23 June, remain or leave?

Polls seem hard to call, could be a sizeable, almost immediate, impact if Britain votes leave...

[Behappyalways]

not vested



Sterling falls to new low against the dollar in Asia trade
http://www.bbc.com/news/business-36721016

[bardsmanship]

Correct me if I'm wrong, but I think Ho Bee will have to recognize significant fair value losses for its London properties in Q4. The GBP-SGD exchange rate was 2.1 at the end of last year and 1.8 now, and the London assets were valued at $620m (GBP) in last year's annual report, so 620 * (0.3) = S$186m. I think this will be recorded as a line item in its FY 2016 income statement.

As a comparison, last year's profit attributable to owners was $242m of which $186m was fair value gains, so I think the impact on the bottom line is going to be significant. However, profit before fair value changes will have improved compared to last year owing to revenue recognition on the sales of its development properties in China and Australia, and full year rental contributions from the London assets.

Or am I wrong, and the $186m will be deducted from the translation reserve & only affect the statement of comprehensive income rather than the basic income statement?

[bardsmanship]

Just called Investor Relations, who confirmed that changes will be reflected as fair value gains / losses in the income statement. So other things equal, I expect Ho Bee will take a S$186m hit to their 4Q and FY 2016 profits.

[vested]

With general market slowing down, the coming year might see much slower gains or / reversals of the fair value gains enjoyed in past 2 years which was the main driver of their bottom line - furthermore, taking away one off development sales effects - the P&L for the next 12 months might look much worse than the last 12 months, tending towards an asset-heavy, forex-exposed, rental model.

Value unlocks are obvious, but not so obvious is the time-frame, and it might become costly to wait.

Any buddy with a different view?

[bardsmanship]

Just called Investor Relations, who confirmed that changes will be reflected as fair value gains / losses in the income statement. So other things equal, I expect Ho Bee will take a S$186m hit to their 4Q and FY 2016 profits.

As it turns out, I was wrong about Ho Bee's profits being affected by the drop in the GBP:SGD exchange rate.

Ho Bee did record a $188 mil decrease in the value of their freehold properties (which includes all of their UK properties save 1) due to movement in exchange rate, which is close to the $186 mil I predicted, but this is not considered a fair value change and so did not affect the income statement.

The impact was however seen on the balance sheet as it reduced the value of the investment properties.

From the 2016 Annual Report:

Note 5: Investment properties

Freehold properties (thousands of SGD)
At 1st January - 1,304,708
Reclassification - (159,885)
Changes in fair value - (52,843)
Movement in exchange rate - (188,561)
At 31st December - 903,419

In fact, Ho Bee was able to record fair value gains of $104 mil because of gains from the revaluation of their leasehold property The Metropolis, which at $162 mil was enough to offset all of the fair value losses on the freehold properties.

[bardsmanship]

With general market slowing down, the coming year might see much slower gains or / reversals of the fair value gains enjoyed in past 2 years which was the main driver of their bottom line - furthermore, taking away one off development sales effects - the P&L for the next 12 months might look much worse than the last 12 months, tending towards an asset-heavy, forex-exposed, rental model.

Value unlocks are obvious, but not so obvious is the time-frame, and it might become costly to wait.

Any buddy with a different view?

The P&L for FY 2017 is likely to be supported by more sales of overseas residential projects.

1. Yanlord Western Garden was completed last year and could be close to fully sold this year. This is quite possible because 68% of the units were sold in the past 2 years (revenue and profit for the JV were booked starting FY 2015) so the remaining 32% could be sold this year. Ho Bee has recognized profits of ~S$74 mil from FY 2015 through to Q1 2017 for this Shanghai Yanlord Hongqiao JV, so if all the remaining units are sold this year I would expect additional profit contribution of S$30-35 mil assuming similar ASPs.

2. Yanlord Marina Peninsula and Yanlord HuBinCheng will also contribute profit. Though these are still under construction for Phase 2, so it depends on how many units are launched. Sales momentum appears to be good so far, with 95% and 86% of launched units sold respectively.

3. Eporo Tower in Melbourne, a 44-storey residential development with 307 units, has also just been completed in Q1 2017 and settlement with purchasers is expected to commence in 2Q. I do not believe Ho Bee has recognized any sales or earnings at all from Eporo Tower, so this could provide a big bump to revenue and profit this year.

4. The Rhapsody and Pearl residential developments, again in Australia, were huge contributors to revenue in FY 2016 (about 50%!) and will continue to contribute, though I think their impact this year will be more muted.

5. Rose Court was sold recently, but I estimate the loss of rental revenue to be in the ballpark of GBP 2.4 mil, so quite negligible. The remaining London properties all have long multi-year leases which should support their valuations, so I doubt their fair values will be negatively affected all that much even if the Brexit negotiations don't go well.

6. The Metropolis was singlehandedly responsible for all of the fair value gains recorded last year (and in fact offset fair value losses elsewhere). With rental revenue of S$78.9 mil last year and a valuation of S$1,782 mil, my guess is that there's still some room for the cap rate to compress further leading to additional fair value gains, but probably not much more. Like you I wouldn't rule out the possibility of a reversal either.

And then there are the wildcards:

1. There are 4 properties held-for-sale: Changyuan, Parliament View, Goodmans Fields and Canaletto. The first is in Shanghai and the rest are London properties. If deals for any of these materialize they could contribute gains or losses on disposal.

2. Sales visibility for the Sentosa Cove properties is still poor, but with valuations having declined significantly we might see new sales of the unsold units.

3. Broadbeach and Ferny Avenue in the Gold Coast. These are undeveloped and my base case is that they will remain undeveloped this year, but who knows what could happen.

4. Ho Bee could inject its London properties and The Metropolis into a new commercial REIT spin-off, which could lead to revaluation gains. Last October, they made amendments to the terms of their debt covenants to make this possible.

[cyclone]

Ho Bee Land acquires Ropemaker Place in London for £650 million

Highlights :
1. Multi-let trophy office building provides net yield of 4.68%
2. Ropemaker Place occupies a substantial freehold island site of about 1.37 acres in the City of London, uncommon in the city core.
3. Total investment in London increased to S$2.4 billion

Ho Bee Land Limited announced that its wholly-owned subsidiary, Grandeur Property Investments Ltd has successfully completed the acquisition of Frasia Properties S.à.r.l ("FPS") for £650 million (approximately S$1.16 billion). AXA Investment Managers – Real Assets is the manager of FPS.

Ropemaker Place occupies a substantial freehold island site of about 1.37 acres in the City of London, uncommon in the city core. The 21-storey Grade A office tower with three basements was developed by British Land. It was completed in May 2009 to best-in-class standards and comprises a rentable area of about 602,000 square feet. The Property has a BREEAM Excellent sustainability rating and was the first building in the City of London to achieve a LEED Platinum pre-certification for sustainability.

More details in :
1. http://infopub.sgx.com/FileOpen/HBL_Annt...eID=511000
2. http://infopub.sgx.com/FileOpen/HBL_Pres...eID=511001