Teo Hong Lim, executive chairman and CEO of Roxy-Pacific Holdings, was surveying a 14-storey, freehold commercial building at 117 Clarence Street in the CBD in Sydney, Australia, one day in late-2015, when he bumped into fellow Singaporean and developer Terence Teo, director of family-owned Tong Eng Group. Incidentally, the latter was also eyeing the same building.
Instead of going head-on with each other, they decided to join forces to purchase the property for A$81 million in a 50:50 split. That was in December 2015. Just 2½ years later, the joint-venture partners sold the property for A$153 million, or 89% higher, in August 2018. “This is a one-off thing; you can’t make that kind of return all the time,” says Teo Tong Lim, group managing director of Tong Eng Group and father of Terence Teo.
In November 2017, Roxy-Pacific and Tong Eng also purchased a freehold building at 312 St Kilda Road in Southbank, near Melbourne’s CBD, in a 45:55 joint venture. The purchase price of the building was A$74.1 million. The freehold building is mixed-use, and contains a conference centre, apartments, offices and basement carpark.
The latest joint purchase by the duo was the NSW Aboriginal Land Council’s building at 33 Argyle Street in Parramatta, Sydney, for A$40.8 million last November. Tong Eng Group holds a 60% stake in the property, with Roxy-Pacific holding the balance 40% stake.
“We feel we need to adopt a cautious approach when we venture overseas. So, we look for buildings that offer good yields,” says Roxy-Pacific’s Teo.
On top of yields, the property at 33 Argyle Street has potential for redevelopment in the future, adds Tong Eng’s Teo. The building is located across the road from the A$3.2 billion Parramatta Square development by Walker Corp. It will be the biggest commercial office development in Australia, with four office towers located on top of a shopping mall, transport hub and public spaces.
The two Singapore-based property groups have also been pursuing property investments in Australia independently. For instance, Roxy-Pacific’s maiden purchase was a 28-storey office building at 59 Goulburn Street in Sydney’s CBD. Bought in July 2014 for A$90.2 million, it was sold in 2017 for A$158 million.
Tong Eng Group’s first foray was the former Harley-Davidson building at 111-125 A’Beckett Street in the Melbourne CBD, purchased for A$38 million in early 2015. Tong Eng sold it for A$61 million in July 2017 to S P Setia. As the building came with a permit to build a 210m high tower designed by Elenberg Fraser, S P Setia announced early last year that it is developing a new project called UNO Melbourne, with 486 apartments and 256 hotel rooms on the site.
“In Australia, our strategy is to look for properties that provide yields and also offer an opportunistic twist,” says Roxy-Pacific’s Teo.
In Singapore, Roxy-Pacific and Tong Eng have also jointly purchased residential development sites, with two new launches later this month.