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Keeping nimble to stay the course
KEEPING nimble via constant review of the sectors and geographies it is in is how Soilbuild Group intends to stay the course through real estate's inevitable ups and downs, says director Lim Han Qin.
This is especially so with signs that the Singapore economy could be headed for a recession. "Singapore is our home ground and we are definitely, and will always be, exposed to the economic well-being of our country. It is critical for Soilbuild to stay nimble and on course with our multi-sectoral strategies to ensure that we will be able to recalibrate ourselves quickly in response to any market changes, and to shorten our investment to sales cycle," says Mr Lim.
His father is Soilbuild Group's executive chairman Lim Chap Huat, one of the three entrepreneurs who started the company back in 1976. Then a small contractor, Soilbuild grew quickly on the back of Singapore's rapid industrialisation, building workshops and warehouses.
Since then, it has moved into property development and investment and expanded its portfolio. Properties that Soilbuild constructs, develops and manages today range from flatted factories and hi-tech business spaces that have won awards for green design, to public housing projects and luxury condominiums.
2012 was when Soilbuild first stepped out of Singapore, into Myanmar. The next year, 2013, two of its core arms of business were listed on the Singapore Exchange - Soilbuild Construction Group and Soilbuild Business Space Reit. This, after the elder Mr Lim decided to privatise Soilbuild Group Holdings in 2010, five years after first listing it in 2005.
Diversification of sectors and geographies is a strategy Soilbuild continues to fine-tune today, says Lim Han Qin. For the property development and investment division, for instance, a "multi-sectoral and multi-disciplinary strategy" is what the group is building on.
"We constantly review our capital allocation strategies on the various property segments and geographical spread. The last 10 years or so saw us putting a heavier allocation on the industrial front, as a result of those reviews," says Mr Lim. This year alone, Soilbuild has completed two business developments at Kallang Way, with five other business space projects still under development.
OCBC Bank's managing director, head of Real Estate and Construction, Global Enterprise Banking, Jazmine Chua, says that this is how the company has managed "to be a trailblazer in the industry".
"Soilbuild is pioneering in many ways. They went into industrial buildings before others and sustainability has been at the heart of their agenda for many years, even before it became widely talked about," she says.
Rising competition and costs first pushed Soilbuild to head overseas in 2012. By then, winning project bids meant facing down competition from a growing pool of local contractors-turned-developers and foreign entrants. Meanwhile, costs - from manpower to construction materials to rent - continued to climb.
Choosing Myanmar as a first stop came with its own challenges - interpreting local laws and regulations, the higher costs of project financing due to the risks, and a shortage of skilled construction manpower. But it has been worth it. Seven years on, Soilbuild's construction group now has three wholly-owned subsidiaries in Myanmar, providing a range of construction services to both local and foreign clients.
And while the decline in Singapore's construction market persists - seen in the second straight full-year net loss of S$3.3 million that Soilbuild Construction reported in FY2018 - revenue contributions from its Myanmar operations are rising. In FY2018, its Myanmar division raked in S$50.8 million in revenue, an 85.1 per cent jump from the year before, contributing close to a quarter of Soilbuild Construction's total revenue of S$208.6 million.
In 2017, Soilbuild entered Vietnam. The maiden project there, a 1,500-unit residential development with a retail podium linked to an upcoming metro station, reflects the reasons Soilbuild chose to enter the market.
"Both Vietnam and Myanmar share similar demographics in terms of its large population, high literacy rates and a growing middle-income group. reflect their long-term growth potential, although macro socio-political dynamics may continue to have an impact [in the short term]," says Mr Lim.
And the group is on the lookout for other South-east Asian opportunities. "We like the growth potential and proximity of the South-east Asian countries, and are looking to broaden our regional push to other emerging or growing economies in this region," says Mr Lim.
That, by no means, limits its overseas ventures to this neighbourhood. Soilbuild Reit has expanded its investment mandate to cover opportunities in Australia, acquiring its first properties there - an office space in Canberra City and a poultry processing plant - in 2018.
"Venturing beyond Singapore helps increase the Reit's pool of investment targets, provide access to assets with longer land tenures and allow diversification of the tenant base, thereby strengthening our portfolio for long-term growth," says Mr Lim.
And earlier this year, Soilbuild took on its first project in the United Kingdom - a forward funding investment into a purpose-built student accommodation project in Devon Street, Liverpool.
The eventual hope is to replicate what Soilbuild has achieved in Singapore in the various markets it has set foot in. But that is not a goal to rush towards, says Mr Lim. "We believe that property is a 'local' business and we need to deepen our understanding of the market and the various stakeholders within, before we can deepen our roots and widen the reach of our branches."
Back home in Singapore, various challenges highlight the wisdom of prioritising innovation.
On top of slowing demand, manpower constraints and productivity growth remain perennial concerns for the construction sector. Soilbuild's construction arm is addressing this by investing in new construction methods, precast and prefabrication technologies and materials research, while incorporating digitisation and robotics into its operations.
The company scored the third "integrated construction and prefabrication hub" (ICPH) public tender that the Building and Construction Authority awarded back in 2016, and has invested in highly automated manufacturing processes. "This will further reduce our reliance on foreign workers and improve overall construction productivity," says Mr Lim. In 2016, Soilbuild had about 650 foreign site workers. Today, that number is 330.
"The group has always been a believer of innovation," says Mr Lim. "With technologies disrupting various industries, we believe in focusing and seeding the potential that these could bring, instead of lamenting the impact and changes that are inevitable."
It is in that light that Soilbuild is working with B2B platforms to support real estate and construction players that have difficulty securing funding through traditional sources. Last year, it joined a US$5 million early-stage funding round for Helicap, a Singapore-based platform offering funding to alternative lenders such as peer-to-peer platforms.
As a group that has "long adopted sustainability as its operational agenda" with award-winning green projects such as Solaris@one-north, Soilbuild also recently adopted green financing - lending that is conditional on environmental criteria.
Last month, it secured its first green loan of S$248 million - co-issued by HSBC and OCBC - to build its third Green Mark Platinum business space. Mr Lim sees this as an example of how the group seeks to "better tap available capital market platforms to be more capital efficient", particularly for its property development arm which remains private, unlike its other two listed core businesses.
In all dealings, equity
If diversification and innovation mark the group's strategy, equity is what distinguishes its Soilbuild's corporate culture, Mr Lim says. Being equitable underpins the group's interactions with shareholders, joint venture partners, customers, service providers and employees.
"For instance, during the global financial crisis, we understood the banks' concerns and voluntarily did a stress test on all our projects. We initiated a bankers' briefing, where we got all our bankers together to share with them the results. Not one bank withdrew a line then. It reinforced the mutual trust between us and the banks," says Mr Lim.
It could also mean forfeiting profit. He recounts how a prospective buyer recently placed a cheque with them for a sale unit, an offer that the sales team verbally accepted. So, when another higher offer came in before the issuance of the option, Soilbuild turned it down to honour its word to the first.
When it comes to the group's 86 employees (its listed construction arm has another 326 staff, excluding daily rated workers), to be equitable is to "demand fairly, reward fairly, supplemented by targeted training and soft dosages of a family culture".
"As Mr Lim's son, I am equally an employee in his eyes the moment I step into the office. Many a times, colleagues look up uneasily as I stand at the receiving end of "boss to employee" conversations on deemed performance gaps," says the younger Mr Lim.
And being held to high standards is needed as the family-controlled business - Mr Lim's brother Lim Han Feng is another of the group's directors - aims to be quick and nimble, as it builds on its foundations in pursuit of growth.