Tuesday, March 24, 2009

KepLand Defers Construction Of Marina Bay Suites

Source : The Business Times, March 21, 2009

Building of Madison Residences also delayed by current market conditions

KEPPEL Land is deferring construction of the highly touted Marina Bay Suites (in which it has one-third stake) as well as Madison Residences in Bukit Timah, citing 'current market conditions'. KepLand is developing the 221-unit Marina Bay Suites jointly with Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land.

Worsening sentiment in the high-end residential sector

In a filing with the Singapore Exchange yesterday, KepLand announced construction deferral of the 56-unit Madison Residences on the former Naga Court site in Bukit Timah.

The group had earlier managed to sell just one unit in the project, at about $1,740 per square foot, in the second half of last year. However, a KepLand spokeswoman told BT yesterday that the sale of that unit has been cancelled by mutual agreement. 'We are unable to provide details due to confidentiality,' she added. When asked, she also revealed that 'a decision has been made to defer the commencement of the main construction of Marina Bay Suites'. However, construction of another of the group's residential projects in Singapore, The Promont, located in Cairnhill, will continue.

It has been one postponement after another for Marina Bay Suites because of deteriorating sentiment in the high-end residential sector. The tripartite partnership developing the condo had initially hoped to launch the project around end-January last year, but this was delayed to later the same quarter, and even then, that did not happen. The project has not been launched to date.

KepLand's spokeswoman did not say how long the construction deferments for Marina Bay Suites and Madison Residences will be.

In its release to SGX, KepLand said the construction deferment for Madison Residences is not expected to have any significant impact on the consolidated earnings per share and net tangible asset per share of the company for the current financial year ending Dec 31, 2009.

Separately, construction group KSH Holdings also said in a statutory filing with SGX yesterday that it has agreed to the request of Keppel Land Realty to defer the construction of Madison Residences. The delay is not expected to have any material effect on KSH for the financial year ending March 31, 2009. KSH announced in April last year that it had won a $53 million contract from Keppel Land Realty relating to the construction of Madison Residences.

In January, Keppel Land's group chief executive Kevin Wong said the group will conduct a review to see if it can delay building some of its projects. 'We are reviewing our operation costs as well as the project costs of all our development projects to trim fat and conserve cash, so that we can invest in any attractive opportunities that come along. 'This cost review exercise could include developing projects in phases to meet demand and even temporarily suspending the entire project if it does not add value to the company under current market conditions,' Mr Wong said then. Projects that are yet to be launched for sale are those that are most likely to be delayed both in Singapore and abroad, he added.

KepLand's earnings for the year ended Dec 31, 2008 fell 70.8 per cent to $227.7 million, from $779.7 million in FY 2007.

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