Finance

Billionaire Property Developer Chua Thian Poh’s Long-Term Bets Are Paying Off In Singapore And Beyond

09/07/2022
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This story is part of Forbes’ coverage of Singapore’s Richest 2022. See the full list here.

After establishing Ho Bee Land as a niche developer of luxury homes for the uber-rich in the Sentosa waterfront enclave, Chua is doubling down overseas with the acquisition of The Scalpel, London’s iconic office tower.

Many property developers pay lip service to taking a long-term view on their projects, and then there’s Chua Thian Poh, founder and executive chairman of Singapore-based real estate firm Ho Bee Land. He waited nine years for the right opportunity to start sales of condos in his 302-unit Cape Royale project, which was jointly developed by Ho Bee and Malaysia’s IOI Properties in 2013 in the posh neighborhood of Sentosa Cove.

In July, he began taking offers and with some 25 units sold right off the bat, sales since then have so far been good with an additional 10 units sold. The three-bedroom apartments are fetching a median price of S$4 million ($2.85 million) and four-bedroom units going for at least S$5.5 million. Even by the elevated standards of Sentosa Cove, one of Singapore’s most exclusive districts, Cape Royale’s location at its far end gives it some of the best views available, while also abutting a marina where condo owners can berth their yachts and chill out at a private club.

“We thought it’s a unique property,” says Nicholas Chua, Ho Bee Land CEO and eldest son of the company founder, while seated beside his father in one of Cape Royale’s apartments. “We just needed to wait for the right time.” The pair decided to lift the long ban on sales as Singapore enjoys a post-Covid boom, with GDP growth of 8% last year and a forecast for nearly 4% growth this year. Real estate prices across the city-state as a result are soaring, including those in Sentosa Cove.

Back in 2013, Ho Bee deferred sales of Cape Royale and remaining unsold units at two other projects after prices tumbled more than 30% from their peak in 2010. Properties in the area had sold above S$2,300 per square foot but the slump came after the government introduced a series of measures from 2010 to curb runaway property values. Rather than settle for depressed prices, Ho Bee turned Cape Royale into a rental property, which generated income that more than offset the cost of holding the development in the past decade, according to Nicholas.

Yet the father and son duo say they are in no hurry to sell the condos now since most are leased out, with occupancy at Cape Royale above 90%. Nearly 30% of the buyers of Cape Royale are existing tenants who opted to purchase the properties they live in, while other buyers are waiting for the leases to expire, adds Nicholas.

While prices at Sentosa Cove aren’t back up to the 2010 peak—at least not yet—residences in this neighborhood currently sell at an average price of almost S$1,900 a square foot, up from less than S$1,500 at the height of the pandemic in 2020, according to data compiled by the Urban Redevelopment Authority. Some Cape Royale units are fetching above S$2,200, according to Ho Bee, just below previous peak prices.

It’s worth paying attention to what the Chuas do in Sentosa Cove. Their Ho Bee—the Chinese characters for harmony and beauty—transformed itself into a major player in the luxury residential market in Singapore after the government reclaimed the land on the southernmost tip of Sentosa island in the early 1990s for high-end development. While others were wary about investing there, the elder Chua took a calculated bet and pioneered projects in Sentosa Cove nearly two decades ago. While others were wary about investing there, the elder Chua took a calculated bet and pioneered projects in Sentosa Cove nearly two decades ago.

“We thought it’s a unique property.”

Ho Bee built a total of eight projects, accounting for more than half of all the homes in the neighborhood, which now has 2,150 residences in both villas and condos. “Our investments in the waterfront housing in Sentosa Cove have yielded us exceptionally good returns,” said Chua in his chairman’s message in the 2006 Ho Bee annual report. In part because of the success of the Sentosa gambit, Ho Bee’s market capitalization on the Singapore exchange that year passed S$1 billion, a fourfold increase from when the company went public in 1999.

Sentosa Cove retains its appeal today, with buyers looking for more spacious apartments and wide open spaces, adding work-from-home offices to the list of must-haves, says Song Seng Wun, Singapore-based chief economist at CIMB Private Banking. “Singapore is not going to be the cheapest place to do business from,” he adds. “But people are attracted to work and live here because Singapore remains relevant as a global business hub.” Last month, Prime Minister Lee Hsien Loong said Singapore aims to attract top caliber international executives to the Lion City, asserting the city-state cannot afford to be left behind in the competition for talent.

The Sentosa strategy is one example of steps the elder Chua has taken in the past decade to strengthen Ho Bee from a respected but locally focused property outfit into one with a strong cash-flow generating commercial portfolio and a growing presence in overseas markets. While rising mortgage rates could dent demand for luxury properties, Nicholas says he is optimistic that the sales momentum at Sentosa Cove would be sustained because potential buyers are “well-heeled” and less sensitive to higher rates. “We actually feel more confident over the prospects of Sentosa Cove,” he says. “Singapore has weathered the pandemic very well. With a stable political climate, we continue to attract many global citizens.”

“We decided not to purely depend on residential development profits since
the income was very lumpy.”

His optimism extends to China despite slumping housing sales there amid a deepening debt crisis among major developers in the country. As of December 2021, China accounted for about 7% of Ho Bee’s total real estate portfolio valued at S$6.6 billion. The China projects—developed in partnership with billionaire Zhong Sheng Jian’s Yanlord Land Group—are substantially sold, which means a slump in the mainland shouldn’t have a significant impact on Ho Bee, Nicholas says. Similarly, he downplays softening housing demand in Australia, which accounts for 3% of the group’s portfolio. “We expect demand to improve eventually,” he says.

Snapping Back

Average prices of waterfront luxury homes in Sentosa Cove are rebounding amid a recent surge in demand.

For now, Ho Bee profits are being bolstered by its twin engines of growth: the resumption of Sentosa Cove sales and rising rental income from the group’s expanding office assets in London and Singapore. Net profit jumped 42% to S$150 million in the first half compared to the previous year, after more than doubling to S$331 million during 2021, the company said in a regulatory filing last month. Revenue increased 13% to S$178 million in the six months to June, reflecting maiden rental income from The Scalpel, a prime office tower in London it recently acquired, and sales of Sentosa Cove apartments.

Despite inflationary pressures and geopolitical headwinds from the war in Ukraine, Ho Bee’s recurring income from its commercial properties is expected to cushion the blow from any new slump. “During the 2010 housing downturn, we decided not to purely depend on residential development profits since the income was very lumpy,” the company executive chairman recalls. “We thought we should build up a sustainable recurring income. That’s why we went into office properties.” Despite forecasts that work-from-home trends would permanently dent the commercial market, the company’s Singapore vacancy rate remains “very low,” as in the case in London, he says.

The company in March acquired The Scalpel—a 36-story skyscraper in London’s financial district—for £718 million ($850 million). The acquisition, completed in just four months after the company viewed the property in November, appears well timed. London office rents will increase about 3% a year in the next five years due to a limited supply of prime office space in the city, according to a research note published by property consultant JLL in July.

With commercial properties in London and Singapore now accounting for 77% of the group’s assets, Ho Bee’s rental income has grown more than twenty-fold in the past decade to S$224 million in 2021. In Singapore, the company is developing its second office complex, the Elementum, in Biopolis—a life sciences hub in the western Singapore district of Buona Vista—slated to be completed in 2023 and situated next to its existing The Metropolis office block that’s home to multinationals such as Shell and General Electric. “With limited new office supplies in Singapore and still positive economic growth, office rents should continue to grow in 2023 and beyond,” says Tricia Song, Singapore-based head of research in Southeast Asia for CBRE.

While Chua, 74, still reports to the office every day, he has been gradually handing the reins to his eldest son, who was appointed CEO in January. “Nicholas has been groomed to take over,” Chua says with a smile. “He has been with the company for 20 years already. He’d gone through a few cycles of ups and downs in the [global] property market.”

Chua quit vocational school at 16 and, with S$15,000 borrowed from his mother, started a business making hooks and spikes for logging companies. Later he went to Indonesia to trade commodities, which eventually gave him the capital to start a Singapore real estate business in 1987. Chua owns the majority of listed Ho Bee, and this stake plus other private assets, moved him up six spots to No. 28 on Singapore’s 50 Richest list with a net worth of $1.5 billion.

The younger Chua, 46, has had a smoother ride. After earning a degree in finance and marketing from the University of Oregon, he worked at DBS Group, before joining Ho Bee in 2002 and became deputy CEO in 2018. Nicholas spearheaded the expansion overseas, securing projects in Australia and China, while deepening the U.K. investments, which account for nearly 40% of the group’s total assets. As he mulls Ho Bee’s future, Nicholas notes the value of his father’s advice. “He’s able to see a little bit further,” Nicholas says. “He has a vision to move forward and see things where other people can’t.”

Shifting Growth

Ho Bee Land has built up rental income over the past decade to cushion a lumpy revenue stream from residential projects.

Source: https://www.forbes.com/sites/jonathanburgos/2022/09/07/billionaire-property-developer-chua-thian-pohs-long-term-bets-are-paying-off-in-singapore-and-beyond/