In a different league

By Chan Chao Peh

/ The Edge Singapore |

October 25, 2023 9:58 AM SGT

Lee: The government knows what it is doing. And it knows what business people want and need from the government / Photo: Albert Chua

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With IOI Central Boulevard Towers and the upcoming Marina View, IOI Properties’ CEO Lee Yeow Seng has shown his appetite to undertake multi-billion developments here

Lee Yeow Seng remembers clearly how, as a young boy, he often followed his father, Lee Shin Cheng, across remote Sabah to develop one tract of land after another into palm oil plantations. From such visits, the boy learnt to appreciate the effort needed to clear the land, build the infrastructure, plant the crops, and tend to the growing trees before the harvest some years later. By the time he passed away in 2019, Lee Shin Cheng had built up a palm oil empire that overtook those that used to dominate this industry.

Along the way, the founder of the IOI Group earned the nickname “The Tree Whisperer” for talking and singing to the palm oil trees, presumably to coax them to be more fruitful.

“My father went through this kind of effort, going through the most difficult path, because he didn’t have any opportunities,” says Lee Yeow Seng, the younger son of Lee Shin Cheng, in an interview with The Edge Singapore.

Today, Lee, tapping on the base built by his father, is seizing the market opportunities that have come his way. However, Lee readily confesses despite his experience in the plantations in his formative years, his passion today lies more in property, which is the other key business started by his father.

“That’s also another form of development. It is satisfying to see nice buildings coming up on previously empty land,” says Lee, who is CEO of IOI Properties. It is separately listed from IOI Corp, which is headed by his elder brother Yeow Chor.

Making bigger bets

While IOI Properties maintains a strong presence in its home market Malaysia, at least for this year, Singapore will be the market where Lee has been paying a lot more attention. Out of the estimated RM10.6 billion ($3.07 billion) in total gross development value (GDV) of projects to be launched in its FY2024 ended June 30, 2024, Malaysia-based projects compromise just over RM2 billion, whereas the GDV of its Singapore project, specifically, Marina View Residences, will have a GDV of RM8.56 billion.

Almost concurrently, the company is readying its key investment property here for business. On Aug 28, IOI Properties held the topping-out ceremony of IOI Central Boulevard Towers, a Grade-A office development. In November 2016, IOI Properties paid a then-record $2.57 billion or $1,689 psf per plot ratio (ppr) for the site. The development, slightly delayed by the pandemic, consists of two office towers of 16 and 48 storeys sitting on top of a seven-storey podium. It will have 1.26 million sq ft of office space and 30,000 sq ft of retail and F&B spaces.

IOI Central Boulevard Towers also marks IOI Properties’ largest wholly-owned development in Singapore, following the South Beach Development, a joint venture with City Developments (CDL).

IOI Central Boulevard Towers enters the market when the view of commercial properties as an asset class is not the most favourable. Lee agrees that many workers, following the pandemic, have gotten used to working from home because of the flexibility. However, he points out that most households are confined to relatively small apartments and “the living conditions are just not conducive” for work. As such, Lee sees the flight towards quality further firming up in the office sector, where an attractive location will naturally draw better demand.

Another reason for his optimism was that the big multinational tenants, which IOI Properties is already servicing with South Beach Tower, are all working towards certain environmental, social and governance (ESG) goals. One way they are doing so is to locate themselves in newer buildings with significant advantages in sustainability features over older properties.

Lee also notes that for the multinational tenants, once they relocate, they tend to stay put for years and commit to rental rates amounting to tens or even hundreds of millions of dollars over the lease period. Given the scale of their operations, they are not in the habit of changing offices frequently.

Specifically for IOI Central Boulevard Towers, IOI Properties reportedly has signed two anchor tenants: US e-commerce giant Amazon and leading US bank Morgan Stanley, which has been at its current location here for 30 years.

According to Lee, IOI Central Boulevard Towers has already signed a committed occupancy of 40%, with another 20% in advanced talks. He is confident that after this property receives its TOP sometime in 1Q2024, it can achieve more than 90% occupancy at around $14 psf to $15 psf per month, which is a significant premium above $11.33 for Grade-A space in 2Q2023, according to JLL.

Because there is hardly any vacant office space for now and no significant new supply in the next five years, Lee is upbeat that his office offerings can eventually command $18 psf or even closer to $20 psf.

Economies around the world are not exactly doing well and that Singapore’s open economy is prone to volatility. Even so, Lee is confident not just with his product but also with Singapore as a market, and that is why IOI Properties is increasing bigger bets here. “The government knows what it is doing. And it knows what business people want and need from the government,” he says.

Next stop: Marina View

IOI Properties is not a new property player here. In 1996, it won the bid for a land parcel along Prinsep Street, which was developed into the 12-storey IOI Plaza, and subsequently sold to Singapore Pools in 2010 and renamed.

More than a decade ago, IOI Properties ventured into a bigger project, teaming up with Ho Bee Land H13 0.00% to complete two landmark sea-facing residential projects at Sentosa Cove. This was when Resorts World Sentosa had transformed the laid-back, touristy island into a playground for the rich and famous.

The much bigger project, South Beach Development, came about in 2011 indirectly — after two of the original three partners fell out, opening the door for IOI Properties to partner with CDL instead.

Lee is happy to have gotten involved as South Beach put the company “on a different map”. In the past, IOI Properties was known for its low-cost township projects in Malaysia. “But when you come to Singapore, this is a project that is in a different class, and we made good money out of it,” adds Lee, noting how all 190 South Beach Residences units were sold at average prices of more than $3,000 psf.

In addition, South Beach Tower, the office portion, is delivering a steady income stream, thanks to tenants such as Facebook, Lego and management consultancy Bain & Company. JW Marriott Hotel Singapore South Beach, the hotel component, suffered during the pandemic like everyone in the hospitality business. But once travel restrictions were lifted, business has rebounded very strongly.

With South Beach and IOI Central Boulevard Towers, IOI Properties has created a bigger appetite for bigger projects here. “If I am already playing in the Champions League, why should I go back to the Premier League?” says Lee, when asked if he will still look at residential projects in the range of hundreds of units.

Two years ago, in September 2021, IOI Properties triggered the hotel-cum-residential white site at Marina View, minutes from Central Boulevard Towers. IOI Properties ended up as the only bidder, paying $1.5 billion. No other developers were in the mood to take such a big bet with varying pandemic restrictions still in place.

Yet, Lee believes his timing was right and that his upcoming product will be compelling. He points out that market talk has it that Skywaters Residences, the residential component of the ongoing redevelopment of 8 Shenton Way, a couple of hundred metres away from Marina View, is to be priced at $6,000 psf onwards.

As another yardstick for comparison, Lee notes that South Beach Residences was launched at around $3,000 psf. Since then, resale prices have risen. A record of $4,748 psf was seen in October 2021. The most recent transaction was done at $4,504 psf in February this year.

Although CBD living was never fashionable, this has changed with the government introducing more residential developments and as people’s attitudes and habits change. As such, the CBD no longer falls silent after 9pm on weekdays. Traditionally, residential properties fetch a premium in Singapore if they are located near reputable schools. Lee believes other attributes, such as the location within the CBD, where there are hardly any schools, have become more important. Borrowing the famous slogan from Singapore’s Ministry of Education, Lee, who was at St Patrick’s School here before qualifying as a lawyer after graduating from King’s College London, quips: “Every school is a good school.”

Of course, the extent of Singapore’s active management involves multiple aspects. Particularly for property developers, the regular rounds of cooling measures figure front and centre in their decision-making. Counterintuitively, Lee is viewing this policy stance positively. “I would rather see a situation where the government intervenes early than to let things blow out of proportion. China is a very good example. The market should be gradually trending up, not on a sharp curve,” he says.

Following the latest cooling measures announced in April, foreigners are to pay a hefty additional buyer’s stamp duty (ABSD) of 60%, double what they were obliged to pay earlier. According to the government, foreigners accounted for just 4% of buyers in the last three years.

Permanent residents, meanwhile, are to still pay just 5% for their first property — a yawning gap versus foreigners. Besides citizens, Lee suggests demand will come from newly minted PRs, estimated at tens of thousands a year. “The first thing PRs do when they receive their new status is to buy a property. So, in a way, I’m quite confident that the demand will still be there,” says Lee.

Furthermore, in Singapore, Lee points out that property prices in the Outside Central Region (OCR) and Rest of Central Region (RCR) have been gaining more rapidly than in the Core Central Region (CCR), where Marina View is located. “It is about time people appreciate the attractiveness and convenience of living in the CCR,” he says.

Lee also points out that even with the 60% ABSD, Singapore’s top-end property prices lag the global cities of London, Hong Kong and Shanghai. This is a set of buyers with a global perspective who know these markets well. Compared to these cities, Singapore has a certain level of appeal. “They are used to these kinds of numbers. It is not a shocking number to them. It is whether you can create the product, create something they want to have,” he maintains.

Complacent hospitality industry?

Lee believes that the Singapore hospitality scene can do better. He has seen how every September and October are full of global-level events drawing in private bankers, family offices and big corporations, bookending the weeks before and after the annual F1 night race. For example, Malaysia’s Prime Minister Anwar Ibrahim was willing to fly in just to speak for half an hour at the Milken Institute Asia Summit, notes Lee.

During this period, hotels here enjoy full occupancy and much higher rates. Yet, Lee feels that the incumbents have gotten somewhat complacent and that the Singapore hospitality industry has not upped its game enough to further capture the business potential from this kind of global crowd, with no new luxury hotel property launched for years to charge higher rates potentially.

For the upcoming hotel component of Marina View, IOI Properties has turned to its long-time hotel management partner, Marriott International, to introduce a new concept under its W Hotel brand.

Is IOI Properties already eyeing yet another project in Singapore? The immediate answer is “yes”, and this time round, it will be in retail. “I can’t talk too much about that, but it is going to be something that will transform Singapore,” says Lee.

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