ingapore-listed Figtree to develop maiden project in Melbourne, eyes China
Danny Siaw, executive chairman and managing director of design-and-build company Figtree, is looking forward to the launch of its first property development project in Melbourne. Last year, the company established wholly-owned subsidiary Figtree Real Estate in Australia to explore property development opportunities in the nation’s major cities. Figtree boosted this business with two site purchases in Melbourne in August and November 2014.
Siaw: Many high-rise apartments in Melbourne are targeted as Asian investors, and not locals
Occupying the prime address of 293 to 303 La Trobe Street, the adjoining plots have a combined land area of 7,211 sq ft and builtup area of 350,000 sq ft. The aggregate purchase price for both sites therefore amounts to A$17.43 million ($23.4 million). The acquisitions were funded by internal resources and completed on Feb 16.
The plots are located in “Capital City Zone 1”, in close proximity to the Melbourne Central Railway Station, Melbourne Central Mall, as well as universities such as the Royal Melbourne Institute of Technology and University of Melbourne. Other landmarks nearby include Queen Victoria Market, Chinatown and Flagstaff Gardens.
Now, Siaw wants to develop a 67-storey, freehold mixed-use development on the site. According to him, the first two storeys of the project will be reserved for retail and F&B outlets, while the remaining floors will be reserved for 370 to 440 residential units, ranging from one- to three-bedroom apartments, and penthouses. Unit sizes will start at approximately 484 sq ft for a one-bedroom apartment. The total development cost for the project is A$120 million.
Figtree has submitted its planning application to the Victoria Department of Land Water and Planning and hopes to obtain approval by 4Q2015. “We are most likely to get the planning permit by October and will launch the project off the plan,” he says.
Appealing to Asian investors
Siaw declines to reveal the indicative pricing for the project, but says he is targeting foreign investors. “Many high-rise apartments in Melbourne are targeted at Asian investors, and not locals. Buyers from China, Hong Kong and Singapore are the most active investors there.”
He cites the example of UEM Sunrise’s 92-storey Aurora Melbourne Central, located just a few metres from Figtree’s upcoming development. The integrated project offers 941 residential apartments, a potential hotel or serviced apartment, retail units and strata offices. “They sold out their residential units within a month, [mostly] to Asian investors,” he says.
Despite concerns about a property bubble in Australia, Siaw believes the situation varies from city to city. He notes that Melbourne is vibrant and conducive for residential developments. The decision to develop property in the city was also partially informed by his experience studying and working there.
Siaw graduated from the University of Melbourne in 1990 with a bachelor of planning and design, as well as a bachelor of building. While much of Melbourne has changed since his student days, he points out that its large student population remains and this will drive demand for apartments in the city. He cannot wait for his project to be launched for sale so he can purchase a three-bedroom apartment there.
In January this year, Yarra Trams, which operates Melbourne’s tram network, announced that travel on trams within the CBD and Docklands would be free. “This is ideal for residents in our project because they won’t have to pay for transport to get to work or the university,” Siaw says. “Location is everything when it comes to property development. Now that we have secured the La Trobe Street site, we are taking our time to look around for another right site.”
Generating recurring income
Besides Australia, Figtree is also involved in two property development projects in China through its 40%-owned associate company, Vibrant Properties. The first project, which started in March, involves a 957,103 sq ft, prime high-tech industrial park development site in Changshu High Tech Industrial Park in Jiangsu.
To be named Changshu Fervent Industrial Park, it will have a gross floor area of about 725,500 sq ft, consisting of six blocks of standard light industrial factory and a five-storey multi-purpose facility. Construction of this project is on schedule and it will be completed by end-June, to the tune of RMB150 million ($32.47 million).
Figtree will then lease out the industrial space for recurring income. “Last year, we did road shows for this project in Stuttgart, Frankfurt and Hamburg in Germany and the response was pretty good. We have a list of potential tenants interested in leasing the space. We hope to get more than 60% of the project leased out within six months of completion,” says Siaw. The rental rate for the project will be RMB2.04 per sq ft per day, he adds.
Chery Jaguar Land Rover — a 50:50 joint venture (JV) between Chinese auto manufacturer Chery Automotive and UK auto manufacturer Jaguar Land Rover — has set up an assembly plant in Changshu. Siaw believes Chery Jaguar Land Rover’s presence will encourage more downstream suppliers to set up shop there and lease the space at Changshu Fervent Industrial Park.
Bidding for government projects in China
Meanwhile, Figtree announced last month that it has been awarded a second governmentapproved settlement housing development project in China through its JV company, Master Real Estate, which is 60%- owned by Vibrant Properties. Located in Jiangyin province, the build-and-transfer project will comprise five blocks each of 11- and 18-storey residential flats, with a total of 928 units and an estimated built-up area of 1.34 million sq ft. Under the build-and-transfer model, the project has a government- guaranteed buy-back upon its completion, by end-2016.
In May 2014, Figtree was awarded its first Jiangyin project for a 384,296 sq ft government- approved resettlement housing development site by way of public auction. The project consists of two residential blocks, of 14 and 33 storeys. Construction commenced last June and the buildings were completed ahead of schedule, in November 2014, and February this year.
Siaw is looking to clinch more of such projects to boost Figtree’s property development business in China. While it has to bid for them, he believes the company’s efficiency in completing the first project stands it in good stead to win more projects.
“The good thing about such projects is that the government will buy them back in the end. We don’t need to sell them in the market and worry about unsold units. We’re looking for at least a 10% return for such projects,” he says.
Boosting design-and-build pipeline
While Figtree has been expanding into property development, Siaw highlights that the company’s core business is still design-and-build. In 2014, it commenced work on two new major projects in Singapore — LF Logistics Distribution Centre for Development 8, in April and the Chemical Warehouse at Gul Circle for Crystal Freight Services Distripark, in Septem ber. The former has a contract value of $178 million and is expected to be completed in 4Q2015. The latter is valued at $63 million and will be completed in 1Q2016.
As at end-March, Figtree’s order book for design-and-build projects stands at $76.9 million. As part of its growth plans, Siaw says the company will continue to explore and negotiate new, potential industrial design-and-build projects in Singapore, China and the surrounding region.
This segment of the business is also driven by repeat clients who approach Figtree whenever they have a new project. “They want to use us because they know how we operate and they can rest assured that we can deliver,” says Siaw.
He observes that there is still plenty of opportunity for Figtree in the industrial space here. “A lot of JTC factories are approaching the end of their 30-year lease. Companies can either renew the lease and redevelop the existing property to a new one with a maximum plot ratio of 2.5, or they can request for a lease extension from JTC and upgrade the existing premises,” he says. “And that’s where we come in.”
This article appeared in the City & Country of Issue 681 (June 15) of The Edge Singapore.
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