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WHETHER it is steering the company through the cycles of the Singapore residential market or navigating the tough terrain in overseas markets, Frasers Centrepoint Limited (FCL) CEO Lim Ee Seng has demonstrated his dexterity in managing risks and uncertainties.
To move massive unsold residential units, the quickest way to move stock is to reduce prices. But that could result in a ripple effect in the industry if other players follow suit.
Instead of taking the easiest way out to move more than 1,300 unsold units in 2004, FCL adopted a more calibrated approach by offering moderate price discounts, and providing interior design, deferred payment scheme and minor adjustments to layout. All unsold units were successfully disposed of within two years.
"There is nothing like pricing at a level that's comfortable with buyers at end of the day," Mr Lim said.
In this market stalemate where there is a residential oversupply and poor buying demand, many developers are "holding their breath", Mr Lim said. If one of them cannot hold up anymore and decides to slash prices, there will be a ripple effect as others will follow suit.
While there have already been discounts being dangled by developers for some high-end projects in the range of 10 to 20 per cent, Mr Lim is referring to steeper price cuts of 30 per cent or more. "Unless the government does something, I dread to think of the consequences down the road," he said. "In the worst case scenario, we are talking about minimising losses."
Mr Lim expects the current over-supply of residential units to persist since many potential buyers are not sinking their teeth in unless cooling measures are tweaked or removed. "The longer the government withholds the easing of measures, the longer it takes for the market to correct and recover," he argued.
With the increased uncertainties in the global economy, there may come such a time when even a removal of cooling measures will not be enough to move the market, Mr Lim warned.
Though some new launches this year such as GEM Residences and Cairnhill Nine have reported strong take-up during their launch, the units sold are mainly the smaller ones. "Everything slowed to just a snail's pace after the first weekend."
Ironically, land tender prices have not come down significantly in tandem with weak buying demand. Mr Lim attributed this to the aggressive bidding by foreign players. He believes that relaxing the additional buyer's stamp duty (ABSD) for residential purchases may help to improve buying sentiment.
Apart from this, Mr Lim felt that there should be some calibration for the ABSD levied on developers if they fail to finish selling a residential project within five years of purchasing the plot. A 1,000-unit project should be given a longer deadline compared to a project with only 100 units, he said.
But for the Singapore commercial market, Mr Lim is a tad more optimistic given Singapore's cost-competitiveness in office rentals among global business hubs. While office supply may peak in 2016 and 2017, FCL's Frasers Tower in Cecil Street is scheduled to be completed in 2018 after which a dearth of supply is expected.
FCL had diversified into overseas markets some 15 years ago, with overseas contributions now making up more than half of operating profit. Some other developers were less fortunate - having entered into overseas markets only in the last three to five years, which means they have yet to collect the full payment for sales clocked in their work-in-progress projects.
Mr Lim said the group minimises its overseas risks by setting a wider margin buffer in case the foreign exchange rate swings against it. It also makes sure it caters to the local buyers.
In markets such as China, where it does not have a large operational team, FCL works with local partners with strong connections and market knowledge.
A case in point is Songjiang Mega City in China, where Gemdale Corporation's entry as a joint venture partner has since helped to resolve several bottlenecks in the project.
In any overseas venture, one must know the market and not enter blindly, Mr Lim said.
Elsewhere, FCL raised its shareholding in Golden Land Property Development Public Company Limited in March this year from 29.5 per cent to 35.6 per cent for S$36 million.
Thai-listed Univentures Public Company Limited (PCL), a firm controlled by two of Mr Charoen's sons, is the majority shareholder of Golden Land. Mr Panote, one of the sons, will relinquish his current role as CEO of Univentures as he becomes FCL's new CEO in October. FCL had bought a stake in Golden Land following its divestment of interests in two other Thai property companies to TCC Group and Golden Land respectively in December 2014.
Mr Lim described FCL's partnership with Golden Land as "a win-win". While Golden Land is able to learn from FCL's way of governance and management practice, FCL is gaining a growth platform in Thailand, he said.