Thakral rides Covid boom through retirement resorts Down Under

By
/ EdgeProp Singapore
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March 12, 2021 6:00 AM SGT
SINGAPORE (EDGEPROP) - Having a well-diversified business has paid off for Singapore-listed conglomerate Thakral Corp. Its businesses range from real estate development and GemLife retirement resorts in Australia; to commercial buildings and hotels in Japan; marketing and distribution of at-home beauty devices in China and Asia; as well as distribution of tech toys such as DJI drones in China and Insta360 cameras in South Asia.
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The driveway of GemLife Gold Coast in Queensland, one of 10 live retirement resorts (Photo: GemLife Group)
The group posted earnings of $6.5 million for FY2020, down 28% from the previous year, and full-year revenue of $90.1 million, down 16% y-o-y. “The strategy we selected turned out to be in our favour at this particular time,” says Inderbethal Singh Thakral, the group’s CEO and executive director, who has been living in Shanghai since 2005 but whose corporate headquarters remains in Singapore.
The business that has done particularly well over the past year is GemLife, Thakral Corp’s 50:50 joint venture with the Puljich family, which has an established track record of more than three decades in the construction and management of retirement resorts in Australia. The joint venture was struck in 2015, and the maiden retirement resorts that the partners collaborated on were GemLife Bribie Island, with 404 homes on a 24.9ha site with a 9.5ha lake; and GemLife Highfields, with 233 homes on a 9ha site. Both resorts are located in Queensland.
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Last year, GemLife acquired four new resort sites and additional land to expand its resort portfolio to over 2,400 homes. It has also taken new options to acquire more sites that will take its pipeline to 4,500 homes. Today, the group has 10 “live projects”, says Kevin Charles Barry, joint managing director of Thakral Capital Australia. “GemLife’s business has grown significantly over the last 12 to 18 months.”
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The GemLife Gold Coast is one of the four retirement resorts coming onstream this year (Photo: GemLife Group)
Of the 10 projects, six are under construction. The remaining four projects are coming onstream later this year, namely, GemLife Tweed Waters and GemLife Gold Coast in Queensland, as well as GemLife Rainbow Beach at Lake Cathie and GemLife Lennox Head, in New South Wales.
Greggory John Piercy, joint managing director of Thakral Capital Australia, says that Covid had been “a catalyst” for GemLife’s business. He attributes the growth to “our lifestyle locations and great real estate”. It was partly driven by people’s desire to move from city centres to beach or country locations — as observed across major global cities since the pandemic struck.
Covid has accelerated the decisions of those who had hesitated on their plans to downsize or make lifestyle changes in moving to places such as Gold Coast, Sunshine Coast or Port Macquarie, notes Piercy. Another catalyst has been the returning expatriates from the rest of the world. “We’re getting the talent back,” he says. “They normally have money, and want to buy a home; and that is driving housing demand in the general market.”
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Aerial view of Parkridge Noosa, a master planned development with a mix of villas, apartments and townhouses (Photo: Altum Property Group)

‘Broad-based boom’

Despite the pandemic, Australia’s housing prices rose 3% last year. Housing values were 2.1% higher in February — the largest month-on-month change in CoreLogic’s national home value index since August 2003. “Spurred on by a combination of record low mortgage rates, improving economic conditions, government incentives and low advertised supply levels, Australia’s housing market is in the midst of a broad-based boom,” commented Tim Lawless, CoreLogic research director, in a March 1 report.
Another factor pushing prices higher is a mismatch between supply and demand. “Housing inventory is around record lows for this time of the year and buyer demand is well above average,” says Lawless. “These conditions favour sellers. Buyers are likely confronting a sense of FOMO [fear of missing out], which limits their ability to negotiate.”
A lot of the Covid-related government stimulus had been targeted at first-time home buyers, which resulted in house and land developments taking off, notes Piercy. “Our GemLife products are similar to these,” he says. Hence, they have likewise benefitted.
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View from the balcony of an apartment at Parkridge Noosa, a master planned residential development with 138 apartments and 28 townhouses and villas (Photo: Altum Property Group)
A year ago, the biggest worry for Thakral Corp was whether construction would be shut down as it had in Singapore. “In Australia, the government saw construction as an essential industry,” says Piercy. “And that was quite lucky for us because we could still continue to build, complete and sell our homes, and generate income as well as cash flow.”
By the end of March, over 607 houses would be completed, notes Barry. And when residents move in, the group will receive rental income of about A$185 ($191) per week per home. The target is to complete 30 to 40 new houses each month, bringing the total by end of the year to about 500 new homes. This would bring its inventory to 2,900 houses by the end of 2021.
Another 1,600 houses at various sites are at different stages of the development application process. Including this pipeline, the total portfolio of homes will be 4,500. “That’s a good inventory for pipeline growth,” says Barry. “There is a sweet spot in the market for such houses: We were selling 20 houses a month before, and that stepped up to 30 houses a month by mid-2020. It has now increased to about 40 houses a month.”
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The GemLife Bribie Island has 404 houses, on a 24.9ha site with a 9.5ha lake, that will be fully sold and completed by end-2021 (Photo: GemLife Group)

Record sales

At GemLife Bribie Island, the original target was to complete all 404 houses and have them occupied within 8½ years, Piercy relates. “We will be fully sold by end-2021,” he says. “So all 404 homes will be occupied and we’re 100% ahead of budget and time.” He expects the completion of the other GemLife projects at Maroochy Quays and Pacific Paradise to see robust sales and settlements as well.
“The GemLife business has been very positive with record figures in terms of the number of sale settlements and prices achieved,” says Piercy. “And we expect another record year in 2021.”
The group’s other Australian residential projects are also progressing well, says Thakral. Parkridge Noosa is a master planned residential development with 138 apartments and 28 townhouses and villas. Parkridge Noosa has gained from rising demand for properties away from capital cities to premium regional areas such as Noosa, he adds.
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Artist’s impression of an apartment at The Oxford Residences (Photo: Janco Developments)
Indeed, Parkridge Noosa has benefitted from those downsizing or moving interstate to Noosa for lifestyle reasons, notes Piercy. The third stage of construction, namely the Parkridge Townhomes, is expected to be completed sometime in 3Q2021. “We’re almost sold out at Parkridge,” he adds.
A high-end residential project at Bondi Beach, The Oxford Residences at Bondi Junction, however, did see construction delayed due to disruptions caused by Covid. However, it is scheduled for completion in 2Q2021, says Barry. The development has 48 apartments and three commercial suites. Prices at The Oxford Residences range from A$900,000 for a one-bedder to about A$4 million for a penthouse. “We have decided to wait until the project is finished before giving a big push for the balance stock of 12 to 13 homes,” he adds.

Office buildings in Osaka

In Japan, the group has a portfolio of seven office buildings and three business hotels in Osaka. Last year, it divested the Nambanaka Thakral Building, a 6,588 sq ft, three-storey retail building in Osaka’s retail district.
The office properties continue to see tenants renewing their leases at similar or higher rents, notes Thakral. “Rents for the group’s properties are continuing to catch up to market levels, enabling these properties to be re-leased with limited downtime,” he adds.
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Umeda Pacific Building, an 11-storey office building in Osaka acquired by Thakral Corp in December 2019. The plan is to redevelop the property in the future together with the neighbour, to enjoy a higher plot ratio (Photo: Thakral Corp)
Its latest acquisition in Osaka was the Umeda Pacific Building, an 11-storey office building, in December 2019. The tower has a gross floor area of about 98,803 sq ft, and net lettable area of 68,448 sq ft. The property was fully tenanted at the point of purchase.
It is strategically located along Mido Suji, with a broad street frontage. The dining hotspots are just one street away and the nearest train station is about 600m away, notes Thakral. “Initially, we purchased [Umeda Pacific Building] with the intention of vacating the property and redeveloping it,” he says. “We wanted to reposition it and hold it for rental income for the long term.”
Having vacated about 60% of the building, however, Thakral decided to defer redevelopment plans for the time being. This has enabled the firm to refill the vacated space with “better quality tenants”, notes Thakral. “We’ve seen keen interest in the space. We’ve got a tenant that signed up at slightly above our budget, and another tenant is considering taking up two floors at a rate substantially above our budget.”
Thakral continues to engage the owner of the neighbouring plot to explore the possibility of getting a higher plot ratio if their sites were redeveloped together. “The site is next to a temple, where businessmen and lovers go to pray for good luck and blessings,” he says. “And it’s considered very good luck to be located next to a temple. We acquired the property because we saw the potential of the location.”
He remains confident in the office sector in Osaka. “We’re starting to see more start-ups going there,” he says. “And the shared office space in Japan has not been that severely impacted [by Covid].”
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Thakral: The strategy we selected turned out to be in our favour at this particular time. We had to do different things for the different sectors, but we were lucky because we were at the right place at the right time (Photo: Albert Chua/EdgeProp Singapore)

‘Taking it in stride’ — hotel valuations

As for Thakral’s portfolio of three business hotels in Osaka, only one has resumed operations, and that is the Best Western Osaka Tsukamoto Hotel. For the second hotel, the 111-room Hotel WBF Namba Motomachi, Thakral is in negotiations with a new operator since the previous one filed for bankruptcy last year. He is confident of securing a new operator, given that the property is relatively new and located near the Namba shopping district, a popular area with tourists.
Thakral had considered finding an alternative use as a “cram school” for the third hotel, R Hotels Inn Osaka Kita Umeda, which is located in the heart of the city. “It only makes sense to convert into a cram school if you have an operator on hand looking to move in immediately,” he reasons. “Unfortunately, many of the schools haven’t gone back to full operations; most of them are still operating online.” And the best use for the property remains as a hotel, he adds.
Despite Covid, there has been a lot of interest in the hotel assets, notes Thakral. “We had a group who flew there with JLL, but they had to cut short their trip due to Covid [state of emergency] in Japan.”
While Covid has led to severe reductions in the valuation of the group’s hotel portfolio, Thakral is taking it in stride. “The valuations were done in 2020, and are likely to bounce back once the travel industry recovers,” says Thakral. “That’s the general feeling in the hotel industry in Japan and across all markets.”

At-home beauty gadgets, tech toys

When it comes to lifestyle offerings, Thakral’s biggest market for at-home beauty gadgets is China and Hong Kong. Sales had rebounded in 2H2020 after China emerged from a massive lockdown in 1H2020.
In January 2019, Thakral Corp had formed a joint venture with a Manchester-based online retailer of at-home beauty devices, CurrentBody, which will expand the latter’s presence in China. Last November, CurrentBody secured part of the global inventory of L’Oréal’s Clarisonic devices and brush heads. Clarisonic had announced in July last year that it was shutting down by end-September.
Thakral Corp, through its joint venture with CurrentBody, is now the exclusive retailer of Clarisonic products in China and the rest of Asia. The at-home beauty devices business saw steady growth last year as people started working from home, says Thakral.
“We used to be in the computer business. We now see interest in tech toys, such as DJI drones and Insta360 cameras, especially last year, when people were working from home and had more time for hobbies,” he says. Thakral Corp is a distributor of DJI drones in Hong Kong and China. And it was the top distributor for Insta360 cameras in South Asia last year. “We have the distributorship for Insta360 cameras in India, Sri Lanka, and we’re adding Bangladesh and Nepal,” says Thakral.
Last August, Thakral Corp, together with Malaysian conglomerate Sunway Group, co-led the pre-Series B round of funding for e-commerce enabler, Intrepid Group. The funding was to be used to help brands and small and medium enterprises (SMEs) “accelerate their growth” on e-commerce platforms such as Lazada or Shopee across South-east Asia, according to Intrepid in a joint statement with Thakral Corp and Sunway.
“We went in with a strategic view for the Southeast Asia market,” says Thakral.
The past year has not been easy, concedes Thakral. “We had to do different things for the different sectors,” he adds. “But we were lucky because we were at the right place at the right time.”