Thakral ramps up investment in retirement resorts, streamlines other businesses
By Cecilia Chow
/ EdgeProp Singapore |
SINGAPORE (EDGEPROP) - Inderbethal Singh Thakral, CEO of Singapore-listed conglomerate Thakral Corp, is of the view that the Covid-19 crisis is “absolutely the worst we have seen in my generation”. Even his father, Kartar Singh Thakral, 87, could not draw comparisons with any past crises except World War II, which he was too young to recall.
Lakefront clubhouse of GemLife Bribie Island resort-style, retirement community in Queensland (Photo: Chalon Lee, resident of GemLife Bribie Island)
Inderbethal is the third-generation leader of the storied Thakral family business with operations in China, Hong Kong, Japan, Singapore and Australia. The current global market turmoil may cloud short-term visibility, but Inderbethal believes the diversity of Thakral’s businesses will allow it to ride out the storm better than most over the longer term.
“Some years ago, we all sat down to brainstorm on all the sectors we wanted to look at,” he recalls. “At that time, my father was still the chairman.” Kartar stepped down as executive chairman of Thakral Corp in January 2012, but remains an executive director of the firm.
Thakral had always been swift in identifying new markets and new business opportunities over the decades. In the 1970s, Kartar led Thakral to venture into consumer electronics distribution and rode the Japanese boom all the way to the 1980s. When the Chinese market opened in the 1990s, the group was able to secure rights to distribute Japanese consumer electronic products in the country.
Rationalising lifestyle division
In recent years, the consumer electronics business has given way to lifestyle, beauty and wellness products. They include at-home beauty and wellness devices from Panasonic, Dermawand, Philips, Slendertone and T3; fragrances from Maison Margiela and Ralph Lauren; John Masters Organics hair and skin care products; and DJI drones, cameras and accessories. Thakral also operates an e-commerce retail platform for at-home beauty devices in China, in a joint venture with UK-based CurrentBody.com.
Inderbethal: The Covid-19 crisis is absolutely the worst we have seen in my generation (Photo: Albert Chua/EdgeProp Singapore)
The lifestyle business was affected by the US-China trade war last year, and sales fell to $73.4 million in FY2019 from $115.7 million a year ago. The group therefore spent late last year and early this year “rationalising” its cost structure. This was before the Covid-19 outbreak.
Even e-commerce was initially restricted to essential goods at the height of the outbreak, relates Inderberthal. It gradually opened up to include wellness and health-related products such as blood pressure equipment and thermometers. There was even a surge in demand for DJI drones in China in the first three months of the year when there was a jump in the number of infections, he adds. Sales of fragrances soared 200% but it was from a low base.
“The sales of some of these products compensated for the losses in others,” says Inderbethal. “Our product lines are at different stages of development. Overall, we are not worse off compared to last year. Hopefully, 2H2020 will be a lot better.”
Resilience of retirement resorts
The one sector that seems resilient in Thakral’s stable of businesses is the resort-style retirement developments in Australia. Thakral entered the business in 2015 through a joint venture with Living Gems, a family-owned business established by the Puljich family, with more than 30 years’ experience in managing retirement communities in Australia. The joint-venture partners launched GemLife, a series of resort-style retirement communities targeted at the over-50s.
The residents’ indoor lounge at GemLife Bribie Island, Queensland (Photo: GemLife)
Last December, the GemLife joint venture purchased a 46.4ha prime site in Queensland for A$20 million ($19.3 million) to build a master-planned retirement resort with 450 homes, called GemLife Gold Coast. This was followed by the purchase of 4.5ha of prime land in New South Wales, for A$6 million, in April this year. The new resort development, named Tweed Waters, will eventually have 97 houses when fully completed. Tweed Waters will bring GemLife’s portfolio to eight resorts with about 1,900 homes.
“We have another pipeline of six sites with 1,400 houses,” says Kevin Barry, joint managing director of Thakral Capital Australia (TCAP). “The eventual target is to have close to 4,000 houses under GemLife.”
The resilience of the retirement housing sector is due to its target audience, primarily wealthy baby-boomers who are downsizing, says Greggory Piercy, joint managing director of TCAP. “They are not stressed-out about needing a mortgage as they can either sell their existing property, or use their superannuation savings towards their purchase of a house at GemLife,” he adds.
Prices of houses at GemLife resorts have held up too, says Piercy. He attributes this to the desirable locations of the resorts. For instance, GemLife on Bribie Island, in Queensland, is located near the waterfront and is surrounded by national parkland as well as shopping amenities. The project is currently at stage four of construction, and recently achieved “a new high” in house prices, he adds.
The clubhouse of GemLife Bribie Island in Queensland (Photo: GemLife)
Apart from the Bribie Island resort, other existing GemLife resorts, such as Highfields in Queensland and Woodend in Victoria, have seen a steady stream of house sales for the past 24 months too. Overall, 290 houses at these projects are now occupied, with sales progressing well, says Barry.
Meanwhile, civic works at new GemLife resorts such as Pacific Paradise and Maroochy Quays at Maroochydore in the Sunshine Coast of Queensland, have already been completed. When house building begins at these two projects in 2H2020, sales are expected to come through, adds Barry.
Niche, high-end residential projects
Set up in 2011, TCAP was aimed at providing financing and other value-added services to real estate developers. The group focuses on niche high-end projects in gateway cities such as Sydney, Melbourne and Brisbane, and has completed 17 projects to date.
The 55-unit The Oxford Residences at Bondi Junction, Sydney, which is scheduled for completion in 3Q2020 (Photo: Thakral Corp)
Two such niche residential projects are the 55-unit The Oxford Residences at Bondi Junction, Sydney, which is scheduled for completion in 3Q2020; and the 138-unit Parkridge Noosa at Noosa Heads, Sunshine Coast, in Queensland, completed last year. These residential projects cater to a similar market as those of GemLife, which is the “over-50” crowd who are also downsizing. But these projects are at higher price points, notes Piercy. “With the slowdown in the general economy as a result of Covid-19, we believe that some good opportunities will come to light, allowing us to re-engage the residential market,” he adds.
No doubt, the Australian economy is headed for its first recession in three decades due to the Covid-19 pandemic. However, the fallout may be cushioned by government stimulus packages such as the homebuilder package introduced on June 4. It makes available grants of A$25,000 for singles and couples intending to build or renovate their home or residential unit. The homebuilder package is also aimed at supporting the one million workers in the construction sector, including builders, painters, plumbers and electricians.
“One of the reasons we decided to invest in GemLife was the fundamentals of the business, together with an ageing population seeking quality lifestyle and amenities,” says Barry.
Noosa Parkridge, a luxury residential development near Noosa Springs Golf Resort as well as shopping and dining amenities at Noosa Junction and Hastings Street (Photo: Thakral Corp)
Exiting hotels, retail
In Japan, Thakral has also been rationalising its investment property portfolio. In March, it sold the 6,588 sq ft, three-storey retail building, Nambanaka Thakral Building. The profit amounted to $6.1 million relative to the original acquisition and development cost of the building.
The net cash of $5.8 million from the sale will be used to pay the debt taken by Thakral Japan Properties to invest in Thakral Umeda Properties at the end of December. It saw the addition of Umeda Pacific Building, an 11-storey office building prominently located along Mido Suji in Osaka, to its portfolio last December. The building is fully tenanted.
Thakral’s investment property portfolio in Japan now has seven commercial buildings and three business hotels in Osaka. The three hotels — Best Western Osaka Tsukamoto Hotel, R Hotels Inn Osaka Kita Umeda and Hotel WBF Namba Motomachi — were purchased between late 2016 and 2018. All the three hotels are under master leases to three operators, with renewals due in 2022 and 2023.
In the latter half of 2019, the group had intended to sell the hotels individually or as a portfolio for JPY6.4 billion to JPY7 billion ($82.5 million to $90.2 million). “We missed the window by a month, before Covid-19 hit,” says Inderbethal. “But we have sold the retail property at Namba and were able to lock in a good price.”
Last December, Thakral purchased Umeda Pacific Building, an 11-storey office building prominently located along Mido Suji in Osaka, as part of its investment portfolio (Photo: Thakral Corp)
To contain the outbreak, the Japanese government had introduced a nationwide state of emergency from April 7 to the third week of May. During the emergency, the hotel operators were told to close the properties to save money on utilities. They did not pay rent during the period.
The operator of the 111-room Hotel WBF Namba Motomachi recently filed for bankruptcy. As the hotel building is brand-new and well-located near the the Namba shopping district, which is popular with tourists, “we should be able to find a new operator to take over the property”, says Inderbethal.
The R Hotels Inn Osaka Kita Umeda is located in the heart of the city. It had been an office building before it was refurbished and converted into a hotel. Thakral originally had plans to redevelop it into a 45- to 50-storey, high-end residential project. However, the group is now exploring whether it could renovate the building for alternative use. “We have had a couple of enquiries to operate the building as an exam training school,” says Inderbethal.
As for the Best Western Osaka Tsukamoto Hotel, the operator is currently engaged in talks with the owner about resuming operations. “We are compassionate landlords, we can see how the market has changed,” says Inderbethal. “We are working out how we can support them during this difficult period, and what better ways we can put the property to use.”
While the three hotel properties have been withdrawn from the market for now, Thakral is still open to different strategies. “We may end up selling one or two hotels, and converting a third for alternative use,” says Inderbethal.
The 10-storey River Point Katahama poffice building is located very close to the CBD in Osaka, and was purchased in December 2018 for Thakral's investment portfolio (Photo: Thakral Corp)
Focus on office properties
What’s clear is that Thakral intends to stay focused on commercial office buildings in Osaka. According to Interbethal, while big MNCs in Tokyo are already thinking about reducing their Grade-A office needs with most of their staff working from home, the small- and medium-
sized enterprises in Osaka prefer to return to office. “It’s more difficult for smaller teams to work from home as they need to be together,” he says.
Compact apartment sizes in Japan is also not conducive to working from home, points out Inderbethal. “A lot of my Zoom calls with staff in Japan over the past two months have been interrupted by children demanding their parent’s attention.”
In Osaka, office building vacancies remain low, says Inderbethal. “Our properties are completely leased out,” he adds. “Over the past five months, we have been able to secure rents at higher rates — 15% to 20% higher in some cases.”
In Singapore, Thakral’s investment property is the office unit at The Riverwalk on Upper Circular Road, near Clarke Quay, which was purchased for $30 million in 2018.
Inderbethal has been in Singapore since the Lunar New Year holidays. Last week, he was still waiting for his visa to be processed so he can return to Shanghai, China. It is where he has been based since the group’s operational headquarters relocated there from Hong Kong in 2005. “It’s the first time in 14 years I’ve been home for almost six months,” adds Inderbethal. “For me, it’s good because my dad is here.”
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