Chip Eng Seng

Chip Eng Seng to flip major Melbourne residential site

Listed Singaporean developer Chip Eng Seng is selling a major Melbourne residential development site after winning approval for more than 1000 apartments last year.
It gained approval for the 78-level skyscraper in the final weeks before state planning minister Matthew Guy lost office in the November election.
Through its Australian subsidiary, the Singaporean developer acquired the 2927 square metre site, a corner parcel of the former CUB brewery on the northern edge of the CBD, from private developer Grocon two years ago for $32 million.
Grocon sold two other parcels, totalling more than 6000 sq m, on the brewery site for $60 million last year with planning approval in place.
Chip Eng Seng is looking to book an early profit by selling the property at 8 Bouverie Street, Carlton.
While Mr Guy pushed through approval for dozens of towers during his term, it is yet to be seen how the new Labor government will tackle sensitive CBD planning decisions.

Chip Eng Seng will hope that uncertainty and the approval it has in hand will add a premium to the project.

"It's rare to be able to buy a site of this magnitude that is ready to be developed," said Colliers International's Trent Hobart, who is handling the property with colleague Bryson Cameron. "The location is prime, the timing is right with almost no competition with other large scale projects in the Melbourne CBD, and the residential market is strong."
In approving the Chip Eng Seng development, Mr Guy brushed aside Town Hall's objection against the tower's casting of some shadow over the state library forecourt nearby.

Chip Eng Seng's parcel will be one of the largest approved projects to transact in central Melbourne since super fund developer ISPT sold The Age newspaper's former site, in Spencer Street, to Far East Consortium for $76 million in 2013.

In 2014, Lorenz Grollo doubled his money on a prize Collins Street site, which he sold to private developer Jeff Xu for $25 million.
Also in 2014, AXF Group's Richard Gu sold the Kinnears rope factory site in Melbourne's inner west that he had acquired for about $20 million to listed Chinese developer R&F Properties for $60 million.

The gap between CES current market price and its RNAV will close up as it builds up its investment portfolio to transform itself into a pseudo REIT

CES is really at a sweet spot now with its Alex Hotel ready to commission soon and ride on the hospitality wave Smile


***********
(source - UOB Kiay Hian)

Maintain MARKET WEIGHT; top picks are CCT, CDREIT and ART. We believe the tax
incentives for REITs will largely be extended in the upcoming budget. We continue to prefer
REITs exposed to the office and hotel segments with CCT, CDREIT and ART as our top
picks.
• High-beta office and hotel REITs to outperform as S-REITs transition from being
viewed as yield vehicles to growth vehicles led by the rental growth pick-up in the office
segment. Regional yield spreads remain the most attractive for S-REITs with yield
spreads of 4.0%. Though this is in line with the historical spread of 3.9%, yield spreads
have previously shrunk to 2.8% during periods of growth (eg 2004-07), implying over 45%
upside potential still.
• Office gaining from strength to strength. While office REITs are up 0.3% ytd, upcycle
yield spreads suggest another 60% upside potential. Occupancies hit new 5-year highs at
96.2%, sparking a 14% rise in rentals last year. As earlier anticipated, demolitions and
redevelopments caused a ~1m sf fall in the net supply of office in 2014. While office
demand is expected to remain stable in the light of the moderate GDP growth momentum,
we anticipate that the supply shortfall, together with high pre-commitments for upcoming
space, could support 10-15% rental growth in 2015.
• Hotel segment will be the next to move after office. We see attractive investment
opportunities in the hotel segment presented by the yield gap of 300-400bp between hotel
REITs (6.0-7.9%) and physical hotel transactions (3-4% unlevered yields). We expect the
yield gap to narrow as hotel RevPARs start turning around this year (3-5% pa in 2015-17)
after bottoming out in 2014. The modest growth will be driven by sustained high
occupancy levels driven by a demand pick-up from the recently-opened Sports Hub
(particularly SEA Games 2015) and opening of new attractions (eg National Gallery).

A little bird said Raymond's going to start his own property development business, riding on his knowledge/experience in Australia. True?

roxypacific.listedcompany.com/new...3VYM.1.pdf

Roxy Pacific RNAV = 72.1 cents (as of 31 Dec 2014)
Trading at market price of 55 cents (as of 23 Feb 2015)
Discount to RNAV = 24%.

CES RNAV = $1.70 (conservative)
Applying discount of 24%, CES should easily trade at ~$1.30

Joes wrote:

CES, having recovered from the shock resignation of the CEO, is now a whisker from its all-time high price of 94.5 cents (achieved in Sept 2014). I hope a bumper dividend (exceeding the usual 4 cents/sh) will be proposed in order to sustain/reward investor interest.

-- OK! CES delivered strong profits and, more important, answered my prayer for a higher dividend. CES giving 4 cents usual dividend + 2 cents special div.

Huat ah!