Property investments can benefit non-property groups

I REFER to “Should non-property groups avoid buying property?” published in The Business Times, Apr 11, 2023.

Property investments by non-property groups could be of great help to the core businesses. Metro Holdings and the former Singapore Press Holdings are two examples. Contributions from property investments underpinned the bottom-line performance of these groups, when their core businesses – in retail and media publishing, respectively – faced stiff competition and squeezed margins.

In another example, DBS took an equity stake in Marina Bay Financial Centre Tower 3, where its global corporate headquarters is housed, to better manage its occupancy costs.

Nevertheless, properties are illiquid assets. Enterprises must be well informed of the risk exposure and be aware of their risk tolerance. Financially, they must be capable of holding the investments for the long term, and be able to withstand forced liquidation in depressed conditions.

In assessing property investments, it would be insufficient just to count the numbers on yields. Perhaps investors should apprise themselves of additional metrics – such as the internal rate of returns or compound annual growth rate – which would take into account the valuation of the property, including its growth potential.

Ong Kim Bock