SINGAPORE (Sept 24): Ching Chiat Kwong, executive chairman and CEO of Oxley Holdings was in a jovial mood when journalists from The Edge Singapore caught up with him on a rainy Friday evening recently. From a larger-than-average figure, Ching has slimmed down somewhat. He attributes his new-found fitness to planks, which help greatly in building core muscle strength. “I do the sideways plank as recommended by Eric,” he says, referring to his long-time business partner Eric Low, who is Oxley’s deputy CEO.

Oxley’s shareholders will lean on both men’s market astuteness and financial muscle to keep driving the company forward. Following a buying spree last year, Oxley had planned a 2018 rollout of eight to 10 projects with a total of 3,900 units by year-end with a total attributable gross development value (GDV) of $5 billion. The company has been on track, launching a new project just about every other month.

The most recent launch by Oxley was Mayfair Gardens. The 208,480 sq ft site was acquired in an en bloc sale for $311 million, or $1,244 psf per plot ratio. The deal was announced last November and completed in June. The old Mayfair Gardens comprised 124 units and will be developed into two new developments.

The 224-unit Mayfair Gardens will be situated on an 116,130 sq ft plot and will have a British colonial theme. The 171-unit Mayfair Modern will sit on the remaining smaller plot.

In April this year, Oxley launched The Verandah Residences, the first in a slew of Singapore projects in the pipeline. It was sold out within three months. The Affinity @ Serangoon and Riverfront Residences were launched in June and July. More than 60% of launched units — 180 out of 300 in phase 1 of The Affinity — have been sold. Around 600 out of the 860 units that were launched for Riverfront Residences have been sold.

According to its FY2018 presentation (the company has a June year-end), Oxley sold 1,089 units in the first six months of the year, valued at $1.189 billion. Ching says this rose to around 1,150 units as at end-August. By comparison, City Developments has sold 691 units, valued at $1.146 billion, in 1HFY2018 (CDL has a December year-end).

“By the time we’ve launched our remaining units, we would have sold about 2,000 units, which is quite a big chunk of our inventory,” Low says. “With those numbers this year, we would have sold the most number of units.”

Despite Oxley’s relatively strong residential sales, it is unlikely to book any revenue from its local launches in the next 18 months. Most of the current launches are in their initial stages of construction, and will only start contributing meaningfully in FY2020. Work on Mayfair Gardens itself will only start in December or January.

Overseas projects continue to contribute

For FY2019, a large percentage of Oxley’s earnings are likely to be from overseas projects. This is also true for FY2018. “FY2018’s revenue and profit were more or less all from overseas, at 90% plus. We only had a few units to clear here in Singapore such as Rise @ Oxley. FY2019’s revenue and profit are also likely to be from overseas,” Low explains.

For FY2018, overseas properties contributed revenue of $1.15 billion to total revenue of $1.19 billion. Rentals from investment properties and hotels contributed $20.81 million and $22.45 million, respectively.

One of Oxley’s largest contributors, Royal Wharf will be fully completed in 2020, and continues to be a showcase for Oxley’s accomplishments in a foreign market. In 2013, as a mid-sized developer known for building shoebox units in Singapore, the company acquired a 15.2ha site in a distressed sale from Ballymore Group, which, at the time, had to repay Ireland’s National Assets Management Agency. The total GDV (land cost plus construction and possible margin) of Royal Wharf is estimated at $2.7 billion.

By June last year, Oxley had launched all the 3,082 units of Royal Wharf, and as at June 30 this year, it had secured sales of $2.39 billion, out of which $1.43 billion has been recognised. Future billings of $956.1 million have yet to be recognised.

In Cambodia, The Bridge, in which Oxley has a 50% stake, has achieved completion and realised a significant share of profit for the company. The Peak, 79%-owned by Oxley and also in Cambodia, is an integrated development comprising an office tower, the country’s first Shangri-La Hotel with 300 guest rooms, and two luxury residential towers with 1,014 apartment units sitting atop a mall. CapitaLand Retail will be managing the five-storey mall when it is completed in 2020. Oxley has secured sales of $340.7 million, of which just $95.7 million has been recognised.

Oxley plans to launch Deanston Wharf in London this year. It is about a quarter the size of Royal Wharf, with a GDV of $647 million.

In Ireland, the construction of Dublin Landings, the largest mixed-use development in Dublin’s business district, is well underway. In April this year, Oxley announced the sale of Block D1 for €164.2 million ($263 million). WeWork, the shared workspace provider, has also recently committed to leasing around 100,000 sq ft of office space. Oxley is currently in negotiations with a buyer and Block D2 is expected to be sold shortly after FY2018, generating positive cash inflow.

In May, the Irish government appointed Oxley as a partner for the redevelopment of the 1.96ha Connolly Station site in Dublin. The expected GDV is $1.3 billion.

Together, Dublin Landings and Connolly Station are sizeable. “They are going be as big as Royal Wharf. We have two parcels in Dublin and in terms of our exposure, it will surpass that of Royal Wharf in terms of revenue and size,” Ching says.

Chevron House gets revalued

The acquisition of Chevron House in Raffles Place, announced late last year, was completed in March. The office and retail space are 98% and 100% rented out, respectively, providing a recurring income stream. An asset enhancement initiative (AEI) is expected to increase the net lettable area by at least 20%, raising yields and recurring income.

AEI also contributed to a fair value gain of $106.7 million out of a total of $111.2 million as at June 30. The remaining fair value gain was due to the reversal of a fair value loss of $24.2 million last year. The company also recorded a gain of $20.2 million from the sale of a property in Ireland.

The company’s $1.19 billion revenue for FY2018 was 11% lower y-o-y, owing mainly to lower completion and handover of development projects in Singapore, which were partially offset by higher revenue contribution from Royal Wharf in the UK and revenue from the hotels at Stevens Road, Novotel Singapore on Stevens and Mercure Singapore on Stevens, as well as Chevron House.

In a results statement, the company announced that gross profit margins for 4QFY2018 and FY2018 were 12% and 16%, respectively, compared with 20% and 29% in the prior periods, owing mainly to the timing of the completion of the Singapore and overseas development projects of varying margins. Overall though, Oxley’s net profit rose 27% y-o-y to $282.1 million for FY2018.

Investment income versus property development

When asked if the developer plans to hold a certain percentage of investment property, given the volatility of the residential property market in Singapore, Low says he prefers to stay flexible. “The flow depends on how the market is moving. Let’s say if there are so many constraints on residential development, we may go into property investment for recurring income.” However, yields on investment property in Singapore are relatively low. “Of course, if the residential market is good, and you get margins of 10% to 15%, that’s more worth it than getting a 3% yield on an investment property,” he points out.

In the meantime, Low is enthusiastic about the architecture of Mayfair Gardens. “We impute the three portions — the pedestal, the torso and the crown — into the building and give it a modern touch. This is how some architecture looks like in London. There is a lot of thought put into it; Mayfair Gardens is not just another building in the market.”

Ching too believes that Mayfair Gardens is different. “Do you know how much art is worth? We think this [development] will hold its value for a long, long time.” Pleased with his new development and despite initial aches from exercise, Ching goes for yet another plank.