IOI’s Lee Yeow Seng could be vindicated in going big on prime Singapore city-centre properties

[SINGAPORE] Increased borrowing to go on an acquisition binge or to fund the development of mega projects can bring once-mighty property groups to their knees when things go awry. In recent times, China Evergrande Group and Hong Kong’s New World Development, for example, have encountered major problems because of over-indebtedness.

With interest rates possibly rising and a hazy economic outlook, perhaps property groups in general would be wise to pare gearing and go slow on acquisitions. 

That hardly appears to be the playbook of Malaysia’s IOI Properties Group, which is led by group CEO Lee Yeow Seng.

While the group performed strongly in its last financial year, its gearing could be a cause of concern among investors.

As at end-June, the group had total borrowings of RM25.4 billion (US$6.2 billion), and net gearing of 0.85 times. Unsurprisingly, Singapore accounted for 84 per cent of IOI Properties’ total borrowings.

For any vendor of a chunky prime commercial building in the city-state, getting Lee’s attention could make plenty of sense.

Recently, he has been one of the most aggressive buyers of commercial real estate in Singapore, and he may not be done yet.

In 2025, IOI Properties took full control of mixed-use development South Beach after acquiring City Developments Ltd’s 50.1 per cent share in the development.

More recently, the group bought premier office building Asia Square Tower 2. 

IOI Properties is acquiring Shenton House, which is located in the Central Business District (CBD) and is slated for redevelopment.

According to the Malaysian tycoon, the group is in exclusive talks and due diligence to purchase Chijmes, a retail venue in the Civic District, and the nearby Capitol Kempinski Hotel. 

In addition, Lee said that IOI Properties together with CapitaLand Investment are in exclusive due diligence for the acquisition of One Raffles Place.

In Singapore’s commercial property space, IOI Properties also owns IOI Central Boulevard Towers, which comprises Grade A office space and supporting retail spaces, in the Marina Bay area.

Funds initiatives

Certainly, the group’s plans to list IOIPG Malaysia Real Estate Investment Trust (Reit), which will comprise nine Malaysian properties including IOI City Mall, will help address concerns over gearing.

Lee also has plans to reduce IOI Properties’ net debt to equity by injecting selected Singapore assets into a private fund.

Still, any plans to list a Reit or set up a private fund are invariably subject to uncertainty, especially if interest rates rise.

Perhaps, investors’ appetite for real estate funds may wane because of economic uncertainties and higher cost of capital. 

Is Lee, with his apparently insatiable appetite for juicy Singapore deals, foolhardy in aggressively expanding IOI Properties’ presence in the Republic’s city-centre? I think not.

Rationale

One, diversifying IOI Properties’ business – which has traditionally been Malaysia-centric – to include Singapore as a substantial contributor is sensible, given the growing safe-haven premium that the city-state’s properties command among many investors.

Because of the geographic proximity and close ties between Malaysia and Singapore, Malaysian groups can access and evaluate investment opportunities as well as manage investments in the Republic easily.

And any strengthening of the Singapore dollar versus the ringgit over the long term can boost the returns that a Malaysian investor gets from Singapore assets.

Furthermore, growing the property business might help in the diversification of family wealth for Lee Yeow Seng and his elder brother Lee Yeow Chor, who are ranked among Malaysia’s richest by Forbes. The brothers are the sons of the late self-made billionaire Lee Shin Cheng.

Lee Yeow Chor is the group managing director and CEO of IOI Group, which touts itself as the leading integrated global palm oil player.

Two, rental demand for Grade A office space in Singapore’s city-centre is resilient. Many businesses from diverse sectors and geographies are drawn to set up high-value operations in the Republic because of the ease of doing business, political stability, good infrastructure, rule of law, great connectivity and high quality of life.

Businesses in the artificial intelligence field are opening up offices in the city-state. Recently, Anthropic, which develops the Claude models, opened its Singapore office.

Even as efforts are made to grow decentralised office locations, the CBD remains the top address for many businesses. With limited new office supply in the CBD, owners of premier office spaces in Singapore’s city-centre can enjoy firm leasing demand.

In addition, solid demand for office space in Singapore’s city-centre will also benefit IOI Properties’ hotels in the area. The group owns JW Marriott Hotel Singapore South Beach and has W Singapore Marina View in the pipeline.  

Three, IOI Properties can gain a competitive edge by having scale in the Singapore commercial property space.  

With scale, the group can better attract and retain talent, have a stronger bargaining position with marketing agents, invest more in technology and so forth.

Also, an owner of a portfolio of prime Singapore commercial properties can better understand the needs of workspace users and leading businesses.  

Might IOI Properties be uniquely placed to offer workspace solutions to businesses who want to have a presence in both Singapore and Malaysia?

Four, IOI Properties may be prescient in growing its investments in prime Singapore city-centre properties.

Sure, net yields on premier commercial properties here are low because of the Republic’s safe-haven status.

However, the safe-haven premium which investors attach to hard assets in Singapore may grow in a world where geopolitical conflicts are rising, and social cohesion is fraying in numerous countries.

Moreover, demand for real estate backed by a strong Singapore dollar could rise among investors who might be getting increasingly jittery over traditionally safe assets such as government bonds of advanced economies due to rising debt in said countries.

Getting the balance right between aggressively growing and managing risks matters in the property business, especially as physical property can be relatively illiquid.

Doubtless, Lee Yeow Seng’s IOI Properties’ active shopping for chunky Singapore assets comes with substantial risks.

Nonetheless, going long on prime Singapore city-centre commercial properties and hotels could be the right call. Ultimately, Lee Yeow Seng’s bold bets in the Lion City may yield rich rewards.