Oxley’s impeccable timing helps it reap rewards from projects
executive chairman and CEO Ching Chiat Kwong continues to display the verve and derring-do in the local property market that catapulted him into Singapore’s Top 50 Richest list. And his timing remains impeccable. In 2013, he acquired the site that became Royal Wharf in London, and by the Brexit referendum in 2016, he had sold most of the 3,385 units. Similarly, Ching swooped in on Singapore residential development sites in late 2016 and 2017. And he has sold most of Oxley’s inventory. Now his focus is on some developments in Dublin, a beneficiary of Brexit.
“We pride ourselves on being agile and strategic investors and are always ready and on the lookout for good opportunities locally and abroad. If we feel that the timing and market situation are right, we will enter the market,” Ching says.
Oxley cut its teeth on the larger units at Royal Wharf. Situated on the banks of the River Thames, the freehold project comprises a 363,000 sq m waterfront development. There are 3,385 apartments and townhouses, as well as about 15,000 sq m of office space and 5,000 sq m of retail and F&B space. Now, with 3,170 units, or 94% of the development, sold, Oxley has just $225 million in revenue left to collect out of a gross development value of $2.7 billion. However, it holds a 50% stake in nearby Deanston Wharf in London, a smaller residential project whose launch date has yet to be confirmed.
For overseas projects, revenue and profit can be booked only when the units are handed over to the customers. “Oxley maintains a diversified portfolio with a presence in 11 countries. We have been active in the overseas market. Being diversified helps us balance the risk of change in local government measures,” an Oxley spokesman says.
In 2017, market watchers were concerned that Ching had overexposed Oxley to the residential sector in Singapore after the company purchased several sites in quick succession. These purchases came after a number of years when Oxley had been focused on overseas projects such as Royal Wharf and Dublin Landings in Dublin.
Investors need not have worried. Since April 2018, all the sites have been launched. According to Oxley, more than 2,410 units, or 61% of the launched units, have been sold and the total sales secured amounted to $2.7 billion. Three of the group’s projects — The Verandah Residences, Sixteen35 Residences and Sea Pavilion Residences — are 100% sold and Phase One of Kent Ridge Hill Residences is 88% sold.
“Oxley’s local projects [have been] enjoying a healthy sales rate ever since the introduction of the property measures, as our units are priced sensitively and the product offering is attractive. We have only 30% of unsold inventory from our total stock of around 3,800 units,” an Oxley spokesman says. FORAY INTO BUKIT TIMAH
Oxley acquired Mayfair Gardens in the upscale Bukit Timah district through a collective sale in 2017. The company has developed two projects on the site — Mayfair Gardens and Mayfair Modern. The former is 73% sold, and Phase One of the adjoining Mayfair Modern is 74% sold. Mayfair Gardens is unlike Oxley’s other local developments because it is designed in the colonial style, with elements of the Georgian architecture of Mayfair in London. At the time of its launch a year ago, Ching said he was bringing London to Singapore.
The new Mayfair Gardens and Mayfair Modern are proving popular with locals because of their proximity to good schools and nature reserves. “Singapore residential property buyers nowadays are tech-savvy and well informed, so they will look at all aspects when buying a property. For instance, pricing, capital appreciation, future surrounding developments, finishes and quality and developer’s track record,” Ching says.
Thus, despite their 99- year leasehold tenures, both Mayfair Gardens and Mayfair Modern have sold well. “Historically, Singapore buyers favour freehold over 99 years. However, we observe that this preference gap has narrowed in recent years and buyers are no longer overly fixated on freehold properties. Buyers now assess projects holistically, that is, location as well as internal attributes of the development,” Ching adds.
For its Singapore portfolio, Oxley expects sales to reach 70% of the total units by end2019 and for the portfolio to be fully sold within the next 12 to 15 months. Projects sold within five years of land acquisition escape developer’s additional buyer’s stamp duty charges. “Oxley remains on track to clearing Singapore inventory by CY2020,” says a recent Soochow CSSD Capital Markets report.
Altogether, Oxley has some $3.9 billion of unbilled contract value for properties that have been sold. Of these, $2.2 billion is attributable to projects in Singapore and about $1.7 billion to overseas projects.
In Cambodia, The Peak Project comprising residential, retail and SoHo units have achieved 87% sales so far and is expected to achieve 100% sales on completion of the project. Completion will be in phases starting from 4QCY2019. Oxley has a 50% stake in The Peak. Revenue achieved from sales so far at The Peak is $560 million.
“With regard to our overseas inventory, The Peak is almost fully sold for the residential component and 100% sold for its office component. As such, we are optimistic and feel that overseas markets are still very attractive,” the Oxley spokesman says. BET ON EMERALD ISLE PAYS OFF
On July 24, Oxley announced it had agreed to sell 300-year leasehold properties — Blocks B and E of Dublin Landings at North Wall Quay, Dublin 1, Ireland — to Greystar Europe Holdings for €154.6 million ($235.2 million), excluding value-added tax. Oxley will be entitled to 84% of the proceeds, and its partner National Asset North Quays 16%.
According to Oxley’s announcement, completion of the sale of the property will take place progressively from November 2019 to June 2020 when the blocks achieve practical completion. In the event that any block has not achieved practical completion on or prior to June 29, 2021, then the purchaser may terminate the contract of sale for the blocks that have not achieved practical completion. The sale will contribute to earnings for FY2020, Oxley says.
Dublin Landings is a mixed-use development comprising residential units in which Oxley holds an 84% stake and office space in which it holds a 79.5% stake. Oxley secured the development rights to Dublin Landings in 2015, before Brexit. Dublin has become an attractive venue for MNCs looking to exit London post-Brexit. The estimated gross development value (GDV) of the entire Dublin Landings project is $1.2 billion. So far, including Blocks B and E, Oxley has sold portions of office blocks Nos 1 to 5 for a total of $1 billion.
In May last year, Oxley was appointed by the Irish government to develop a 1.98ha parcel at Connolly Station, Dublin. Oxley holds a 90% stake in the 300-year leasehold site, which will comprise 1,358 accommodation-related units, along with commercial and community space. The estimated GDV is $1.3 billion.
Elsewhere, Oxley has made a foray into Vietnam, a country that is viewed as a major beneficiary of the US-China trade war. “We recently ventured into Vietnam and obtained a land parcel in the prime district of Ho Chi Minh City. We have a portfolio of both local and overseas projects that allows us to strategise effectively when the local and global markets change,” Ching says. IMPROVING FINANCIALS
One of Ching’s biggest bets in Singapore was the acquisition of Chevron House for $660 million in 2017. In April, Oxley announced the sale of Chevron House to a US-based real estate fund for $1.025 billion, subject to certain conditions. Oxley has started asset enhancement initiatives on the property, which is to be completed before the final completion of the sale.
As at June 30, Oxley had cash and cash equivalents of $474.4 million and a gearing ratio of 2.05 times, compared with cash and cash equivalents of $255 million and a gearing ratio of 2.17 times a year ago, and 2.49 times in 3QFY2019.
“We acted swiftly when opportunities came to reduce our gearing when we saw uncertainties in the global market last year. The disposal of Chevron House and part of Dublin Landings will boost our profitability and cash flow,” Ching says.
Soochow CSSD says the company’s sales progress is within its expectations. “Margins [are being] maintained around 10%, and Oxley’s Singapore sales progress continues to be in line with our expectations, with 50% to 60% [of inventory] sold by FY2019. Residual Singapore sales currently account for 45% of the portfolio by GDV,” Soochow CSSD says.
In FY2020 — Oxley has a June year-end — the company is likely to recognise revenue from overseas projects such as Dublin Landings, Royal Wharf and The Peak, as well as residential projects in Singapore.
Soochow CSSD has estimated a revalued net asset value of 73 cents a share, and values Oxley stock at 44 cents a share. It currently trades at 0.84 times its book value.
Oxley reported a 42% decline in revenue to $686.1 million in FY2019, and a 49% decline in net profit to $144.2 million, as revenue recognition from Dublin Landings and the sale of Chevron House will only be recognised in FY2020. “We remain cautiously optimistic of sustainable future growth,” Ching says.