David Loh, Han Seng Juan pay $60m for Westlite in Jurong
Morgan Stanley is not the only one investing in foreign-workers dormitories in Singapore. David Loh and Han Seng Juan - two star stockbrokers at UOB Kay Hian, who in October surprised the market when they snapped up a 99-year condo site at Kovan - recently signed a deal to buy Westlite Dormitory near IMM Building in Jurong.
The $60 million they are paying for the dormitory in Toh Guan Road East works out to about $13,300 a bed based on the 4,500 beds at the facility, which is on a site with a remaining lease of about 50 years.
The acquisition is expected to be completed in early 2008.
'Yields are attractive and we have a diverse range of more than 100 tenants - companies in the shipbuilding, marine engineering, construction and engineering industries, minimising risks,' said Tony Bin, CEO of Duchess Development, the majority shareholder of Duchess Dormitory Pte Ltd, which is buying Westlite Dormitory from Westlite Development.
Duchess Development is owned by Mr Loh and Mr Han, who are dubbed the 'David and Han Team' in stockbroking circles.
Mr Bin said: 'Rental is paid by the companies who lease space for their foreign workers in the dormitory. The facility is now 100 per cent occupied, with leases signed on either one or two-year terms, which means there is upside.
' The outlook for the dormitory market is pretty strong for the next few years, with the large number of construction projects going on in Singapore and continued growth in the marine industry.'
Market watchers say that dormitory rents have shot up at least 30 per cent in the past 12 months and the trend is expected to continue into 2008 at least, given the shortage of such facilities.
Of course, dorm rents could cool if the authorities were to step up the supply of such accommodation, which industry observers reckon could be done relatively quickly.
Mr Bin would not say what returns Duchess Dormitory would make on its investment in Westlite Dormitory. But a market watcher, making back-of-the-envelope calculations, suggests that 'by the end of the next two years, when all the leases would have been renewed, the net yield would be in the low teens'.
BT reported recently that Morgan Stanley unit Avery Strategic Investments had invested $153 million in three dormitories it bought from JTC Corp. Morgan Stanley controls 97 per cent of Avery. The rest is held by local company Averic Capital Management, which is owned by Vernon Chua and Eric Tan, Singaporeans with local property experience. The three dorms - Kian Teck at Jurong), Woodlands and Tampines are on sites with remaining leases of about 20 to 30 years. The three facilities can house a total of more than 15,000 workers.
In October, Mr Han and Mr Loh made headlines when Duchess Development subsidiary Duke Development emerged as top bidder for a 99-year leasehold condo site next to Kovan MRT Station at a state tender. Their winning bid of $290.02 million reflected a unit land price of $436.55 per square foot per plot ratio.
Duke Development's other shareholders are construction group Lian Beng and a private equity fund managed by Centurion Investment Management, which is also controlled by Mr Han and Mr Loh.
The Kovan site is expected to be developed into a 17-storey condo with about 520 units and is slated for launch in mid-2008.
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