Renaissance for branded residences

/ EdgeProp Singapore |
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The project that truly encapsulates luxury hotel-branded residence in Singapore is St Regis Residences, which is considered the first such offering in the city-state. The 173-unit branded residence on Cuscaden Road is adjacent to the 299-unit St Regis Singapore fronting Tanglin Road, a short drive from the Orchard Road shopping strip.
Even before the Hollywood hit movie Crazy Rich Asians debuted in cinemas across Singapore last August, the person that thrust St Regis Singapore into the spotlight was North Korean leader Kim Jong Un – when he chose to stay there during his visit for the North Korea-US Summit last June.
A motorcade carrying North Korean leader Kim Jong Un arrives outside the St. Regis hotel in Singapore, on Sunday, June 10, 2018 (Credit: Bloomberg)
Kim stayed in the 3,606 sq ft presidential suite situated on the top floor of the 20-storey hotel tower. The presidential suite comes with a palatial master bedroom and bathroom, a living room furnished with artworks and a baby grand piano, as well as a formal dining room with a table that seats 12. Kim’s hotel bill, which was footed by the Singapore government, is said to have rung up to the ballpark of $10,000 a night – more than double the median income of the average Singaporean full-time employee who earns $4,400 a month, according to data released by the Ministry of Manpower in late November.
The luxury residential development St Regis Residences and the adjacent six-star hotel, St Regis Singapore, were developed jointly by Singapore-listed City Developments Ltd (CDL), privately held Hong Leong Holdings and TID Pte Ltd (a joint venture between Hong Leong and Mitsui Fudosan). Both were completed in 2008.

‘Good long-term investment’

CDL is said to have received purchase enquiries for units at St Regis Residences in recent months and is considering releasing for sale the 12 apartments currently held for rental income. According to Kwek Leng Beng, executive chairman of Hong Leong Group and CDL, St Regis Residences represents “the mark of luxury and quality service buyers have come to recognise and cherish”. As such, “it also makes a good long-term investment,” adds Kwek.
St Regis Residences - Singapore's first luxury branded residential development (Credit: Samuel Isaac Chua/EdgeProp Singapore)
Per sq ft transaction prices at St Regis Residences have been rising steadily over the past year, based on caveats lodged with URA Realis: from $3.68 million ($2,442 psf) for a 1,507 sq ft, three-bedroom unit on the 13th floor in March, to $5.68 million ($2,636 psf) for a 2,153 sq ft, four-bedroom unit on the 17th floor in November.
It is no coincidence that branded residences are seeing renewed interest, says Knight Frank in its “Branded Residences Report 2019” released in October. According to Knight Frank’s Wealth Report in 2018, the global ultra-wealthy population (those with net assets of at least $50 million) grew by 18% from 2012 to 2017 and was forecast to increase further by 40% over the next five years.
“The branded residence sector is experiencing a renaissance as developers attempt to reinvent the concept of the residential development by marrying the best of hotel and other services into a residential project,” says Han Huan Mei, director of research at List Sotheby’s International Realty (List SIR) in her January report, “Live Branded: The Rise of Branded Residences”.
There are over 400 branded residence developments around the world with a total of 55,000 units, and the majority are hotel branded, according to List SIR.
In Asia, the branded residence concept took off in 1988 when the first Aman resort, Amanpuri in Phuket, was launched (Credit: List SIR)

Asia – fastest growing market

The concept of branded residences may have originated in the US in the 1920s, but Asia is the fastest growing market. The bulk of branded residences under construction ­– estimated at around 27% – are located in the Asia Pacific, according to List SIR in its report.
In Asia, the branded residence concept took off in 1988 when the first Aman resort, Amanpuri in Phuket, was launched. Private residential villas originally launched below US$1 million ($1.36 million) at Amanpuri are valued in excess of US10 million today, notes List SIR. The Aman brand itself has also expanded internationally, with 33 properties worldwide today.
Following the success of Amanpuri was the launch of Four Seasons Chiang Mai in 1995, which introduced Thailand’s first branded residences in collaboration with an international hotel chain.
YOO8 serviced by Kempinski at 8 Conlay, an upcoming development with branded residences that will transform the skyline of Kuala Lumpur City Centre (Credit: List SIR)
Over the past two decades, branded hotel chains continued to develop and they have remained the most dominant form of branded residences in the region. These include The Residences Mandarin Oriental, Bali; Four Seasons Private Residences in Bangkok; YOO8 serviced by Kempinski at 8 Conlay in Kuala Lumpur; Armani brand Century Spire in Manila; and Banyan Tree Residences Brisbane.
“The premium of branded residences is optimised in less mature or emerging property markets where the local supply cannot sufficiently meet the needs of the ultra-high net worth buyers,” says Leong Boon Hoe, List SIR chief operating officer. “In more matured markets like Singapore, the luxury stock is already of a high quality, and they could fetch similar or sometimes even higher prices than branded residences because of newness, updated design and facilities.”

Beyond luxury hotel brands

With a crowded market providing the impetus to differentiate, developers are also aligning with renowned brands for more and more aspects of any residential project, observes Knight Frank. The model originated with hotels lending their name to developments. This was followed by the arrival of designers such as Philippe Starck, who co-founded YOO. The next trend was “starchitects” with the likes of Daniel Libeskind, Frank Gehry, Jean Nouvel and Norman Foster. In some cases, there are two or three brands on a single development.
Partnerships with fashion brands soon caught on, with the likes of Armani, Bvlgari, Hermès and Versace. In the past decade, real estate developers have also been collaborating with elite car marques, notes List SIR. Examples include The Porsche Design Tower in Miami with a specially-designed lift that whisks the luxury car to where the apartment is and doubles as a glass display case for the owner’s prized automobiles. The development also offers a “car concierge service” for residents’ fleet of luxury cars.
Other than the collaborations with fashion and car brands, there is a growing reception towards spa and wellness resorts, observes List SIR. Examples include Canyon Ranch and The Golden Door in the US, and Thailand’s Chiva Som. Wellness resort brands like Aman, Banyan Tree and Six Senses are also well known for their spa treatments.
Chiva Som is currently developing Chiva-Som Residences Bintan in Indonesia, which offers investors an opportunity to invest in health with its uniquely designed longevity programmes and customised packages including consultations with wellness experts.
“The branded residences of tomorrow look set to provide more than luxury living in style,” says Han of List SIR. “They are becoming a true destination with a defined purpose, where time and money are invested in one’s own health and well-being.”
Four Seasons Resort - The Nam Hai was the first Four Seasons property in Vietnam (Credit: List SIR)

Potential pitfalls

The growth of the sector will not be without potential pitfalls, cautions Knight Frank. In democratising the concept of branded residences, developers also risk devaluing it. The concept has always been aspirational. Now hotel companies are also offering brands at a four-star level.
Some hotel residences offer guaranteed rental returns (GRRs), says List SIR’s Leong. “There is a distinction as hotel residences are usually hotel rooms for sale with a GRR.” Developers usually sell these hotel residences off plan, and the GRRs offered are based on their projections of occupancy/rates achievable at that point in time, he notes. After the GRRs expire, the actual achieved returns will be dependent on economic conditions, tourist arrivals, how actively the property is being marketed to new tourists, and how well they are able to keep operating costs in check, he says. These in turn have a direct impact on average daily rate (ADR), and affect returns.
On the other hand, “branded residences usually come in different apartment configurations and sizes that suit the needs of a select group of prospective buyers, unlike hotel rooms”, says Leong.
The Residences at Mandarin Oriental Bangkok is the first Mandarin Oriental Residence in Southeast Asia (Credit: List SIR)
Part of the appeal of branded residences is the ability to garner greater capital appreciation compared to a regular luxury residential project, due to the brand name affiliated to it. “However, with more branded residences mushrooming, competition will escalate,” adds List SIR’s Han.
New projects will have to set higher standards in order to keep abreast of these challenges and remain relevant, continues Han. The absorption rate of a branded residence will depend on the developer’s sales, marketing and pricing strategies and the number of units it releases to the market.
“For older branded residences to maintain premium pricing in the secondary market, the responsibility falls on the developer/brand operator and the investor/owner,” says List SIR’s report. The developer/operator is responsible for the upkeep and maintenance of the building and facilities, as well as the high-quality services. The investor/owner has the responsibility to ensure that the interior of the residences is also in keeping with the brand standards. “With these in place, a branded residence will be less susceptible to wear and tear over time compared to a regular luxury residence,” adds List SIR in its report.

Market cycles

Another important factor to bear in mind is market cycles, notes List SIR’s Leong. For instance, St Regis Residences was launched in 2006 when the market was approaching its peak in mid-2007. Ritz-Carlton Residences, which was the second branded residence in Singapore, was launched in 4Q2007.
Prices for St Regis Residences hit a high $3,600 psf at the peak of the market in 2007, with a penthouse sold for $28 million or a record-smashing $4,653 psf.
Meanwhile, apartments at Ritz-Carlton Residences were sold for prices above $4,000 psf. An all-time-high of $5,146 psf was hit for a 3,057 sq ft, four-bedroom unit on the 31st floor of the 36-storey tower.
The Ritz-Carlton Residences, the second branded residence in Singapore, was launched in 4Q2007, where prices crossed $4,000 psf (Credit: List SIR)
However, “between 2008 and 2018, the residential market went through two downcycles”, notes List SIR’s Leong. The first was brought about by the sub-prime mortgage crisis which started in 2008, and prices bottomed out in 2009. The second downcycle was the result of severe cooling measures introduced by the Singapore government in 2013 which led to the market trough in mid-2017. Like all luxury developments, prices of the two branded residences declined by between 25% and 30%, according to List SIR Research. “Currently, they are around 8% to 10% below their initial launch prices but are on a par with luxury apartments in the same neighbourhood,” says Leong.
Since last year, per sq ft prices at Ritz-Carlton Residences in Singapore have been on an upward trend. In January 2018, a 2,831 sq ft, three-bedroom unit on the 19th floor fetched $9 million ($3,179 psf). In December, a similar-sized unit on the 12th floor changed hands for $10.4 million ($3,673 psf).
“Wealthy individuals buy hotel branded residences as a lifestyle option but also with an eye on capital appreciation,” says Knight Frank’s report. The lifestyle component of hotel branded residences is also key to buyers’ decisions. Services include butler service, a seamstress, translation services, personal shopping, flower delivery, catering and childcare.
Adds List SIR’s Leong: “Branded residences have an appeal for the well-heeled community who are willing to pay a premium because they know and trust the brand. For them, to own a branded residence is to bear a mark of distinction which many will aspire to have but only a very limited number can attain.”

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