With projects held back, firms lease out units bought in collective sales
PROPERTY developers such as Koh Brothers and GuocoLand, which bought collective sale sites during boom times, are now becoming landlords as they wait out the market slowdown.
STAYING ON: The consortium that bought Lincoln Lodge has allowed occupants to keep renting homes for six months from the sale completion date of July 8. -- PHOTO: NEWMAN & GOHThey are leasing out apartments they bought to existing occupants as a way to generate some income instead of simply leaving them vacant.
If the property upswing had continued, these developers might well have moved quickly to tear down the older homes to put up new developments.
But the sharp slowdown in home sales has put paid to such thoughts for now.
Market observers say renting is a nimble move given present market conditions.
For sellers of units in collective deals who have yet to buy a new home, it is a win- win situation as they would have collected their sale proceeds.
Take, for example, the consortium that bought freehold Lincoln Lodge for $243 million in June last year.
It has decided to allow occupants to keep renting homes for six months from the sale completion date of July 8, and thereafter on a monthly extension basis.
'Upon requests by some of the sellers to stay on, and while waiting for approvals, we have decided to grant them this request by extending a lease,' said Mr Francis Koh, Koh Brothers' managing director and chief executive.
Rents at Lincoln Lodge range from $2,700 to about $4,500 for larger units.
In the middle of last year, at the height of the collective sale frenzy, Koh Brothers bought the Newton site with Heeton Holdings, KSH Holdings and Lian Beng Group for a record $1,449.30 per sq ft (psf) per plot ratio.
A Lincoln Lodge seller, who wished to be known only as Mr Tan, welcomed the rental move as sellers had collected sale proceeds in January, and those who had not bought a home could take their time.
'It's an option...I know someone who negotiated the rent down to $2,500,' he said.
GuocoLand seems to be the early rental front runner.
It offered residents short-term leases at Sophia Court in Adis Road last year, followed by Leedon Heights off Holland Road earlier this year. The leases started in March at Sophia Court and yesterday at Leedon Heights. Both last till Jan 31 next year.
A three-bedroom unit at Leedon Heights costs $2,850 a month, while rents at Sophia Court range from $800 to more than $4,000 a month.
GuocoLand bought Leedon Heights in April last year for $835 million and Sophia Court in late 2006 for $230 million.
Renting out units is a way to 'wait out the current quiet in the market', said Knight Frank's director of research and consultancy, Mr Nicholas Mak.
'If developers were to launch their projects now, it may be challenging for them to reach their target price for some of the projects.'
Frasers Centrepoint said it may offer short-term leases to the former owners of the 185-unit Flamingo Valley, a freehold site in Siglap Road that it bought for $194 million in February last year.
'We had 50 owners who wrote to ask us to extend their lease...They haven't found anything suitable,' said the firm's general manager of development and property, Mr Cheang Kok Kheong.
He said the firm was likely to extend a lease of six months to a year. This would 'give us more time to think about our plans'.
City Developments (CDL) has said it is still exploring the renting option.
Renting out apartments bought in collective sales is not new. CDL did so a few years back, when it rented out all 124 apartments in Kim Lin Mansion in Grange Road.
It had bought it in late 1999 for $251 million, or $996 psf of potential built-up area, but pushed it out for sale only at the height of the property boom last year. It fetched prices of $3,600 psf.
Win-win deal
# Developers lease out units to generate income instead of leaving them empty as they sit out the market slowdown.
# Sellers of collective sale projects who have yet to buy new homes can stay on in their existing units as tenants.
TOUGH TARGET
'If developers were to launch their projects now, it may be challenging for them to reach their target price for some of the projects.'
MR MAK of Knight Frank, on companies holding out for better prices
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