indepth

Sunway looking to take a bigger stake in JVs

Sophia Hills artist impression

BUSINESS partnerships, like marriages, require mutual trust and respect. They can be difficult to maintain and do not always stand the test of time. Sunway Bhd (through its wholly-owned subsidiary Sunway Developments Pte Ltd) and Hoi Hup Realty Pte Ltd, however, have managed to maintain a successful collaboration for nearly a decade, with seven completed and two ongoing developments in Singapore.

The two works in progress are the Sophia Hills condominium (with a gross development value of S$720 million) and Royal Square at Novena commercial development (GDV: S$776 million), which will comprise retail, hospital and hotel components. The leasehold developments are slated for completion in August 2021 and the second quarter of next year respectively.

TanTan Wee Bee, Sunway’s deputy managing director of the property development division for Malaysia and Singapore, tells City & Country how the business partnership with the Singapore-based property developer began.

“We (Sunway) have known Hoi Hup since 1998, when I used to run the precast factory in Singapore and it was our client. As the relationship progressed, we made our first foray into property development together in 2007 with City View @ Boon Keng — a design, build and sell scheme (DBSS) project,” he says.

Tan, a Singaporean, joined Sunway Concrete Products (S) Pte Ltd in 1997 as senior operating manager and subsequently took on an additional role at Sunway Developments to oversee and drive the property business in Singapore.

“We have completed DBSS apartments, freehold and leasehold private developments and executive condominiums. We have a very good long-term relationship with them, and we are still continuing to tender for land together,” says Tan.

The long-time partners’ completed joint-venture projects include The Peak @ Toa Payoh (a DBSS apartment with a GDV of S$680 million), Vacanza @ East in Jalan Senang (freehold private development; S$493 million), Miltonia Residences at Yishun (leasehold private development; S$381 million), Arc at Tampines (executive condominium; S$466 million), Lake Vista in Yuan Ching Road (DBSS apartment; S$366 million) and Sea Esta at Pasir Ris (leasehold private development; S$359 million). Tan says the completed projects have been fully taken up and handed over.

In all of the JV projects with Hoi Hup, Sunway takes a 30% stake. “But going forward, we may take a bigger stake,” he reveals.

‘A rare opportunity’

Sophia Hills, which sits on Mount Sophia in the prestigious District 9 area, is a low-rise condominium on over 2ha or 255,866 sq ft of elevated ground. It will comprise 493 residential units.

“The development is interesting due to its location. While it is minutes away from the busy Orchard Road shopping belt, as you turn into the development, you will see that it is quite tranquil,” remarks Tan.

“Also, it is a rare opportunity, as a sizeable land like this in such a location is quite hard to come by,” he says. The land was acquired by Sunway and Hoi Hup through a government land sales programme in September 2014 for S$1,157 psf.

The site is in a conservation area with three buildings — formerly the Olson Building of Methodist Girls’ School, Nan Hwa Girls’ School and Trinity Theo­logical College — which the joint developers have undertaken to conserve and convert into an exclusive residents-only clubhouse, integrated childcare facility and kindergarten, and restaurant respectively. Guarded entrances will secure access to the childcare facility or kindergarten.

A management corporation strata title body will undertake the leasing of the buildings to third-party operators.

Built-ups at Sophia Hills will range from 463 to 1,539 sq ft, with options of 1 to 4-bedroom units. They have an average selling price of about S$2,000 psf. The development will have facilities such as a 50m lap pool, sunning deck, playground and jogging path.

Surrounding amenities include educational institutions such as the St Margaret’s Primary School, School of the Arts Singapore, LaSalle College of the Arts, Singapore Management University and Nanyang Academy of Fine Arts, as well as leisure hot spots such as the National Library, National Museum and Marina Bay Financial Centre.

Sophia Hills enjoys direct access to Handy Road and the Dhoby Ghaut interchange station, and is a stone’s throw from Plaza Singapura.

According to Tan, the development is targeted at investors and those who prefer to live in the city centre. “Just like in most major cities, the city centre attracts more foreign investment due to its stability and prestige. There will also be locals who would want the convenience of staying in the city, with the shopping belt at their doorstep.

Sophia Hills

“We have dual-key units, which have garnered quite a lot of interest as investors can rent them out to students from the many schools around the area. Parents may want to buy a unit for their children who are studying there. Nonetheless, I think the main appeal is owning a piece of development in the District 9 area,” he says.

The developers held a preview of the project in Singapore at the end of last year and are planning an official launch by year-end.

A development targeted at medical professionals

Royal Square at Novena, their other ongoing project, is located in a well-known medical hub in the city-state. Among the medical institutions and facilities there are the Tan Tock Seng Hospital, Novena Medical Center, National Skin Centre, National Neuro­science Institute, Mount Elizabeth Novena Hospital and Health City Novena.

Royal Square will comprise 171 medical suites, a 250-room hotel, 25 shoplots and 26 units for restaurants. The shops and restaurants will be on the first, second and sixth floors while the medical suites will be on the seventh to 21st floors. Levels 22 and 23 will house the hotel.

According to Tan, the development is aimed at medical professionals who want to have their own practice. He says medical suites, which are usually located near large private hospitals, generally enjoy good demand and command high selling prices. “Most medical professionals are keen to buy the medical suites so they can operate their business immediately.”

He adds that groups of doctors can also set up a larger joint clinic at the development.

“Because doctors pay high rent in private hospitals, [so] many are always looking to have their own unit. Also, there is limited space in hospitals and there will always be competition for building space in good hospitals. So, that’s where medical suites come in,” Tan explains.

“Also, parents, whose children are studying to become doctors, buy these medical suites for their children to run their medical practice in future.”

The medical suites will have built-ups of 39 to 73 sq m, and are priced at about S$4,000 psf. Tan says the suites will be sold in several phases whereby the earlier purchasing opportunities will be given to practising doctors before investors.

Some complementary services that will be offered in the development are a day surgery centre, imaging centre and laboratory facilities.

The developer has started selling the medical suites and the retail component. Tan says the retail component is targeted at those who operate food and beverage businesses and is 60% taken up.

He is confident that the hotel component, which will be operated by Courtyard by Marriott, will perform well because of its good location, being one stop from the Orchard MRT Station. “Also, demand for hotels in the area and along the Orchard Road shopping belt is good.

Royal Square

“The hotel component will complement the medical suites. Patients, such as those who undergo cosmetic surgery, need a place to recuperate. It will also be convenient for the patients’ families when they visit.”

Facilities at Royal Square will include a fitness corner, reflective pools, multipurpose pavilion, look-out point, raised open lawn, disabled-friendly toilets and showers, bicycle parking lots, and bio-waste and refuse disposable systems.

The building, which is designed to meet the standards of the BCA Green Mark Platinum award, will have a green corner to display information on its energy and water consumption and green features.

Royal Square is directly linked to Orchard Road and the city via the Central Expressway (CTE) and Pan Island Expressway (PIE), and will have access to the future North-South Expressway (NSE). There is also a covered walkway between the development and the Novena MRT Station as well as the Velocity @ Novena Square and Square 2 shopping malls.

Steering through present challenges

The key to the strong and lasting partnership between Sunway and Hoi Hup is that they share the same philosophy and risk appetite, says Tan. “We are always looking for opportunities as they come. We continue to study the government land sales programme and are probably looking at one development a year, plus one or two more, depending on land availability.

“Nonetheless, both companies are not hard-pressed to acquire land, and we take a more measured risk in terms of how we go forward, such as factoring in the market situation and adjusting to the risks accordingly,” he explains.

“Anyway, it is also too expensive to keep landbank in Singapore, so we start developing the land as soon as we acquire it.”

Tan says the cooling measures imposed by the Singapore government are starting to show their effects on the market — property transactions and prices have been on a downward trend. “I think everyone is waiting with bated breath for the government to relax the cooling measures. For instance, foreign buyers are imposed an additional 15% foreign buyers stamp duty, which can be a deterrent.

“I believe the government is trying to ensure that the bubble doesn’t grow and burst, and is just scaling it down to genuine demand by imposing additional stamp duty on those who are buying more than one property, including Singaporeans and PRs (permanent residents), to discourage speculators from distorting the market. It does not disadvantage first-time homebuyers,” Tan remarks. He says the market is starting to stabilise and there are still buyers.

In Savills’ Singapore residential sales briefing for 1Q2016 published last month, Savills Research senior director Alan Cheong says, “Healthy take-up at recent launches signals that the pool of buyers is much deeper than previously thought.”

Despite fewer new projects launched in the slow economy, the report notes that sales volume for the primary private residential market improved 8.2% year on year to 1,419 units, while sales fell 11.5% on a quarter-on-quarter basis.

While the report says the outlook for the country’s economy is expected to remain lacklustre this year, with growth forecast to be in the range of 1% to 3%, it concluded that “the surprisingly healthy sales of late may give a hint that the bearish sentiment towards the residential market has been overhyped”.

Developers’ sales figures are anticipated to improve in 2Q2016 as more projects are launched. “The sales volume for 2Q registered positive quarterly growth in the past two years and we expect it to be repeated in 2016, with primary sales driven by a mix of new launches as well as projects previously launched and that are being completed,” the report says.

It notes that one reason could be that Singapore’s economic progress has increased the savings pool of multigenerational households, which will support and augment real estate values even during trying economic times.

Sunway’s Avant Parc

Meanwhile, Sunway handed over the last unit of its Avant Parc development last month, says Tan. Located minutes away from Yishun and Sembawang on a 0.77-acre parcel, Avant Parc is currently the group’s only fully owned development in Singapore. It has a GDV of S$35 million.

Completed in March 2014, it comprises 15 three-storey terraced houses (not including the roof and basement levels) with sizes ranging from 4,128 to 5,638 sq ft for the intermediate units and 5,298 to 7,427 sq ft for the corner units.

“We started construction in July 2011 after we acquired the land in October 2010 in a government land auction,” says Tan. The cost of the land was S$445 psf.

Avant Parc

Avant Parc uses precast concrete façades and its units come with a glass lift, garden courtyard and lap pool or Jacuzzi. It has views of the 37-acre Sembawang Park and beach, and overlooks the Johor Straits.

According to Tan, the project took many months to plan and design as the developer wanted to utilise its expertise in using precast concrete.

“We took our time to build as we were experimenting with our new precast concrete technology. We think the project worked out well and we are quite proud of it. Even the team who was involved in the project is in love with it,” he remarks.

The units are priced from S$2 million.

This article first appeared in City & Country, a pullout of The Edge Malaysia Weekly, on July 18, 2016. Subscribe here for your personal copy.

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