From Pepsi to property

October 13, 2014 12:07 PM SGT

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SINGAPORE: Vincent Ong, the managing partner of Evia Real Estate, started out marketing beer, soft drinks and chocolates.

These days, he balances catering to upgraders’ aspirations in the executive condo segment and pursuing his REIT ambition in South Korea.

Gunshots rang out day and night as crocodiles that infested the mangrove swamps were shot.

Big trucks rumbled in, carrying away mud and silt to clear the way for the building of the Chinese Garden and Japanese Garden.

Vincent Ong grew up on Yuan Ching Road in Jurong West when it was still very much a swamp.

His family moved to Singapore after the May 13, 1969 riots in Malaysia.

They were among the pioneer batch of residents in Jurong’s first maisonette development by JTC called Park View Mansions, which was completed in 1971.

Next door were Lakeside Apartments and Lakeside Towers, both built by JTC in 1970.

These three residential developments were subsequently converted to strata- titled properties.

The highlight for Ong was that his flat overlooked Jurong Drive-in, Singapore’s only open air drive-in cinema, which opened in July 1971.

Now 53 years old and the managing partner of Evia Real Estate, Ong vividly recalls his childhood in the early 1970s, when Singapore underwent massive urbanisation and industrialisation, particularly in Jurong.

“I’m an old Jurong boy,” he says.

“I’ve a lot of fond memories of the place.” Naturally he was interested in bidding for the Yuan Ching Road executive condominium (EC) site when it was put up for tender in June last year.

The consortium he put together won the site with a bid of $418 psf per plot ratio (psf ppr), just $7 psf ppr more than the second highest bid of $410.95 psf ppr.

The site was hotly contested with 16 bids.

The consortium partners comprise BBR Development, a wholly-owned subsidiary of listed construction company BBR Holdings, with a 35% stake; Evia Real Estate with a 30% stake; CNH Investment, which is a joint venture between two privately held construction companies (15%); OKP Land, a wholly-owned subsidiary of listed construction company OKP Holdings (10%); and Ho Lee Group (10%).

The project on Yuan Ching Road, called Lake Life, comprises 546 units in five 20-storey blocks, most of which are orientated to have views of Jurong Lake, Fairways Country Club’s golf course or the upcoming Jurong Lake Gardens, announced by Prime Minister Lee Hsien Loong during the National Day Rally Speech on Aug 17.

The Jurong Lake Gardens will be an integration of the existing Chinese Garden and Japanese Garden, which will be redeveloped, as well as the upcoming Jurong Lake Park, which will be ready in 2017.

The new Science Centre, which is adjacent to the Chinese Garden MRT station, will also sit within the new Jurong Lake Gardens.

The high-speed rail station linking Singapore to Malaysia could also be located in the Jurong Lake District.

First to market E-applications for Lake Life is scheduled to start on Oct 4 and end on Oct 12, with bookings to commence from Nov 8.

However, property agents from PropNex, the marketing agent for Lake Life, have gathered about 500 pre-registrations over the past two weeks.

“Interest has been very strong in spite of the property cooling measures,” says a property agent who declined to be named.

The consortium developing Lake Life won the site in August last year, the same time that two other EC sites in Punggol Central were awarded — The Amore at Punggol Central to a joint venture between Master Contract Services and Keong Hong Construction; and The Terrace at Punggol Drive at Peak Square.

Yet, the consortium behind Lake Life has been able to launch several months ahead of the other EC developers, including Qingjian Realty, which won two EC sites in May; one in Sengkang, and the other in Woodlands.

This is because the Evia-led consortium decided to go ahead with its foundation works and complete it within 12 months of acquiring the site.

The other developers opted to wait for 15 months before launching.

This is in line with the restrictions introduced in January 2013, which stipulated that developers that purchase EC sites can only launch their projects 15 months after the acquisition date, or upon completion of the project’s foundation works, whichever is earlier.

Other property cooling measures that were introduced in the EC market include the cap of 160 sq m (1,722 sq ft) on unit sizes; dual-key units restricted to just multi-generational families; the mortgage servicing ratio (MSR) capped at 30% and the total debt servicing ratio (TDSR) limit of 60% of gross household income that came into effect at end-June last year.

“The MSR of 30% limits the loan size and a buyer’s ability to purchase larger flats with higher price quantum attached,” says Eugene Lim, key executive officer of ERA Realty Network.

“For ECs, buyers are affected by both MSR and TDSR.

If they are not already overly geared with other loans, the loan instalment for the EC should be able to meet the TDSR cap.” Based on a $12,000 monthly household income ceiling, Lim reckons EC buyers would generally be able to afford units of up to $1 million.

Likewise, developers will also be cautious in pricing EC units in accordance with the income ceiling, he adds.

EC projects such as Lake Life, which are being launched this year are exempted from the resale levy as they were won before December 2013.

EC buyers who are second-time HDB purchasers will be subjected to a resale levy for sites sold to developers from December 2013.

‘Pent-up demand’ According to property agents from PropNex, there hasn’t been an EC launched in Jurong in the last 17 years, not since the launch of Summerdale in May 1997.

Therefore, there is significant pent-up demand for ECs in that area, says a property agent.

Current market indicative price for Lake Life is $880 to $890 psf, which is still a good 32% below the median price of a recently launched 99-year leasehold private condo in the vicinity, says Mohamed Ismail, CEO of PropNex.

Hence, Jurong has the biggest price gap between an EC and a private condo in Singapore, he adds.

Overall resale HDB prices sank for the seventh consecutive quarter, and most areas saw a general softening from 2Q2014 to 3Q2014, according to data compiled by ERA’s Lim.

However, areas such as Bishan, Clementi, Jurong East and Jurong West, as well as Pasir Ris saw overall median resale HDB prices trend up q-o-q from 2Q2014 to 3Q2014 to date.

For instance in Jurong East, overall median price in 2Q2014 was $353,500, and in 3Q2014 it was $361,000.

Meanwhile, in Jurong West, in 2Q2014, median price was $412,000 and in 3Q2014 to date, it is $420,000.

“In general, there’s definitely pent-up demand for ECs since there hasn’t been an EC launch since last October,” says Tony Koe, executive director of SLP International.

Evia’s Ong wants to continue developing EC projects despite the property cooling measures.

“It’s the only segment I know,” he says.

Lake Life is his third EC project to date, following the launch of Watercolours in Pasir Ris and Heron Bay in Upper Serangoon View.

Policy risks a market leveller Current market conditions provide a level playing field as the policy risks apply to everyone, he says.

“The property giants are established, well-oiled machines with a set modus operandi and they do very well when markets are normal and stable,” observes Ong.

“In the current market, where there’s turbulence, it’s harder for them to change course.

We’re no better or worse off than the big boys.

But like little sampans, we are more nimble.” Ong had spent the first 17 years of his career in the fast moving consumer goods (FMCG) industry.

Armed with a business degree in 1983, he joined Asia Pacific Breweries (formerly known as Malayan Breweries), working with the international sales and marketing team for Tiger Beer.

“It was considered the coolest job in town,” he says.

“At 23, I could bring friends out to pubs, and buy drinks for everyone.

It was like getting paid for drinking.” After seven years there, he spent the next decade with Pepsi-Cola International, where he headed the business in Indochina, and spent years living in Thailand, Cambodia and Vietnam.

He returned to Singapore sometime in 1997/98 during the Asian financial crisis, and was appointed managing director for PepsiCo in Southeast Asia.

In 2000, he left to become an angel investor in several dotcom ventures during the dotcom fever.

After 2½ years in the dotcom business, he returned to the FMCG business, this time as president for Mars Food, a leading chocolate and candy manufacturer.

“And so, from a soft drinks salesman I became a chocolate salesman,” says Ong.

And then, he joined Auric Pacific Group headed by Stephen Riady, and oversaw the food business in China.

In 2006, he returned to Singapore when his son was born, and quit his job to become a “stay home dad”.

He spent time at home being a full-time caregiver and companion to his son, or driving him to play dates and enrichment classes.

“During the first six months, I was quite shy when people asked me if I had a name card, and I said I didn’t have one,” he recalls.

“I remember at Gymboree or Julia Gabriel classes, I was the only dad surrounded by all the mothers.” By the time his son was ready to enter kindergarten, Ong started investing again, and also thought about working again.

Industrial-residential switch It was in 2010 when he and his business partners bought the Seagate building in Ang Mo Kio Avenue 5 for $91.5 million.

It had a built-up area of a million sq ft, and at one time, it had up to 12,000 people working there.

Ong’s business partner, Ho Lee Group, was also involved in the sale of Liang Huat Industrial building to Mapletree Logistics Trust for $55 million that year.

Ong subsequently tried to bid for several industrial sites in land tenders in one-north, but lost to the likes of Ascendas and Mapletree Investments.

In early 2011, he decided to bid for residential development sites instead.

He triggered the tender of the site at Bishan Street 14, which is now Sky Habitat.

“I triggered the site and CapitaLand came in and won it at a record price,” he says.

A few months later, he triggered the tender for a site at Bartley Road, which is now Bartley Residences by Hong Leong Group, and a site at Ang Mo Kio Avenue 2, which is now Wheelock’s Panorama.

“I triggered plenty of residential sites, but kept losing,” Ong recounts.

However, he didn’t give up.

In November 2011, he joined forces with UE E&C to bid for an EC site at Pasir Ris Drive 3 and won with a winning bid of $122.2 million.

It’s known as Watercolours, and the owners are expected to receive their keys early next year.

UE E&C took a 30% stake in the project, while Evia took a 34% stake, and brought in GPS Alliance Development as well as Ho Lee Group to form a consortium.

“The barriers to entry in the EC market are actually higher than for private condos, and I learnt a lot of lessons,” says Ong.

On March 1, 2012, Evia and its partners including Ho Lee Group, See Hup Seng and CNH Investment, emerged the winner of the EC site at Upper Serangoon View with a bid of $141.48 million ($303 psf ppr).

There were seven bids for the site.

The following day, the Minister for National Development Khaw Boon Wan announced in parliament that the authorities were going to increase the allocation of ECs for HDB second-timers from 5% to 30%.

That increased demand for ECs, and even more developers entered the fray.

The site became the 394-unit Heron Bay, which was launched as the first “deluxe executive condo” offering en suite Jacuzzi for units on the ground floor.

It even sold a 2,845 sq ft penthouse for $1.774 million.

The project was launched at end-October, and was fully sold by December.

Even all the 416 units in Watercolours were sold before the end of 2012.

Ski vacation turns into business opportunity The business partners then decided to go on a vacation at end-2012, as they had no more EC units to sell.

While skiing at a resort in South Korea over the Christmas holidays, Ong and some of his business partners came across three industrial properties that Prologis was looking to sell.

One was AMB Incheon Logistics’ facility at the airport logistics park, another was AMB Icheon DC1 Warehouse at Gyeonggi-do and the third was a cold storage at Suwon City called Suwon Ice Logistics Centre.

The three industrial properties combined were valued at $130 million as at December 2013.

They even purchased a shopping centre called Apple Plaza located in Bundang-gu in the city of Seongnam, in Gyeonggi-do province.

With a gross floor area of some 1.8 million sq ft, it is the size of Ngee Ann City, says Ong.

The asset is valued at US$176 million, and was purchased from LaSalle Investments.

Instead of doing a quick flip, Ong injected the South Korean assets into a fund called Evia Real Estate Fund III, which has an asset size worth $800 million today.

It is positioned as an enhanced-tier master feeder fund for real estate investment trusts.

“We are now in the midst of talking to several REITs,” says Ong.

Beyond selling to existing REITs, he’s now exploring the possibility of building up a significant portfolio to list an Evia REIT.

“We have $300 million worth of industrial properties, and another $200 million worth of shopping centre properties in South Korea,” he reckons.

“It’s small now, but I’m able to aggregate more assets.” Even as he continues to mull over acquiring more industrial and retail properties in South Korea, Ong remains fervent about developing EC projects in Singapore.

“To me, it’s more than just building four walls; I’m developing a home for people to bring up their families and creating a community within the development,” he adds.

Over the last two weekends, while the property agents are out drumming interest for Lake Life, Ong and his staff at Evia Real Estate are also on the road, driving around to talk to the property agents, and supply them with drinks and curry puffs.

“The agents are standing out there in the sun, as they are sometimes chased away by the security guards if they stand outside the shopping centre,” he says.

However, he enjoys pounding the pavement and getting feedback from the agents about his project.

“I think it’s got to do with my past life, where I deal with consumers, not customers,” he says.

This article first appeared in the City & Country section of Issue 643 (Sept 15) of The Edge Singapore.

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