CITY Developments executive chairman Kwek Leng Beng showed at his property company's latest results briefing why he sees himself as a trend-setter.
Trend-setter: Mr Kwek indicated at CityDev's results briefing that the company may launch a new business model for its residential business Mr Kwek revealed at the group's second-quarter results briefing last week that the group was considering retaining two blocks of apartments of its Cliveden development at Grange Road for rental purposes and long-term investment instead of selling them off in a rush.
The 66-year-old tycoon - who is known to pride himself on not aping the competition's business model - indicated that this could be the start of a new business model for the group's residential business. The idea would be for the group to retain some units in selected high-end residential projects for lease to ride on strong rental demand.
It can then sell these units later at much higher prices - if current trends continue - and who knows, in the longer term, if a collective sale were to materialise, CityDev could then buy out its fellow owners in such condo developments and redevelop these sites into new projects instead of having to go to the market and look for land all the time, as most developers have to.
Or if CityDev doesn't like some of these sites by then, it could also consider selling the apartments it has retained in such condos through a collective sale to other parties.
That seems like a good model. But it does tie up a lot of money. This could put the property giant at a disadvantage relative to its peers, for instance, when making acquisitions.
But Mr Kwek could get around the problem by spinning off these apartments held for investment into a separate vehicle and perhaps listing it, with CityDev still possibly retaining a stake, some market watchers suggest.
Such an entity - holding units in selected residential projects developed by CityDev - could be structured as a real estate investment trust (Reit), business trust or some hybrid security, depending on tax and other considerations.
Retail investors would be keen on investing in such a vehicle. To the average mom-and-pop investor, the prospect of buying an investment home for rental income may seem daunting. It involves a huge outlay, the hassle of finding a tenant, negotiating rentals and lease terms, agreeing and signing a lease, and other potential problems.
The risk would be so much more manageable for such investors if they could have exposure to income from a whole pool of such rental properties by buying any amount of shares/units they are comfortable with in a listed vehicle that owns these apartments, manages them, rents them out and, at the right time, sells them to crystallise capital appreciation.
And CityDev, if it continues to hold a stake in such a listed vehicle, could still eventually get its hands on the land on which these condos stand, possibly by securing at the outset a right-of-first-refusal to buy back the apartments it had earlier sold to the vehicle.
This would facilitate CityDev gaining full control of sites when en bloc sales come up - of course after satisfying Strata Title Board requirements that the transaction is priced on arm's-length basis and done in good faith.
Mr Kwek has been a relative latecomer to the Singapore Reit market but when his CDL Hospitality Trusts was floated on the Singapore Exchange last year, it was a novel instrument in the local market, involving units in Singapore's first hotel Reit stapled to units in a business trust.
Mr Kwek also said in last week's Q2 results briefing that he was not in any hurry to set up a Reit holding some of the group's office blocks, something that has been on the table for quite a while now.
Who knows if, instead of following in the footsteps of others who have floated office Reits here, Mr Kwek might pleasantly surprise investors by offering them an opportunity to invest in Singapore's first residential Reit or some such hybrid vehicle?
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