HOMEGROWN but Australia-listed real estate developer Kingsland Global wants to accomplish more with its development business in emerging markets. Perhaps, when it has amassed more scale, it will explore a secondary listing on the Singapore bourse, managing director Jeremiah Lee told The Business Times in an interview.
The 38-year-old former army regular describes Kingsland Global’s business model as a straightforward build-to-sell one. That said, like several other property developers, it is also eyeing an entrance into the fund management space for acquiring third-party assets, in order to scale up more quickly.
Kingsland Global is more than 50 per cent owned by established local developer Kingsland Development, which was founded by real estate veteran Sok Hang Chaw.
Kingsland Global was spun off from the parent and listed on the Australian bourse in December 2015. It focuses on developing overseas projects with local partners. So far, it has hospitality projects in Cambodia and an industrial park in Nusajaya in Iskandar Malaysia.
The company posted revenue of S$4.6 million from the time it was incorporated in May 2015 to its fiscal year close in March 2016. Profit for the period totalled S$1.5 million; earnings per share came to 0.58 Singapore cent.
The developer is so quick to offload what it builds that it has already signed a binding deal to sell its Oknha Peich boutique hotel in Phnom Penh while it is still under construction – to Vivaz Holdings, a Thai-Singapore joint venture, for US$13.4 million or a final valuation by CBRE, depending on which is higher.
This represents a whopping 47 per cent yield compared to the investment cost. The hotel will only be completed in the first quarter of 2017.
Mr Lee said: “That is the beauty of emerging countries… It’s actually very profitable. That explains why Oxley is in it (Cambodia), Teho is in it. You start to see the big boys looking at expanding into this market.”
Even for the 82 units in its serviced apartment project, One18 Residences, in Phnom Penh, Kingsland is also looking to sell the units. It has already conducted one round of previews to its closed network.
Mr Lee said that building to sell cuts its risk exposure and increases its profit margin. “Because being a developer, the strategy is to build and go on to the next one. If we hold on to the property itself, that’s another business model and with more cash flow coming in, we can do more projects and we will constantly increase our revenue model bottom line.”
Listing was an important step to its growth and expansion into frontier and emerging markets, because no one there knows the brand name of Kingsland, Mr Lee said. “Being publicly listed give us the credentials, accountability, transparency.”
Kingsland chose to list Down Under instead of in Singapore because Australia was one of the target markets that it identified at the start.
The company is now looking for more land acquisition and entry project opportunities in emerging markets such as Vietnam, Thailand and Laos.
Mr Lee said that he does not rule out Myanmar, but noted that since the country opened up to foreign investment five years ago, many developers have already swarmed in to begin building mega-developments.
Meanwhile, the company is still seeking regulatory approval to set up an Asia-Pacific real estate fund, which would enable it to scale up quickly and undertake significantly larger projects while minimising debt exposure.
The fund, when launched, will target institutional and high net worth investors, drawing them with the possibility of investing in properties in emerging countries. It also allows the developer to hold onto assets for recurring income during periods of property downturn. Kingsland Group will be the sponsor and key cornerstone investor in the fund.
As it is, the company’s gearing – which measures its debt to equity – stands at zero per cent. Mr Lee said that this is possible precisely because of the group’s build-to-sell model. The group has also paid down all its debt, and working in joint ventures also reduces its capital outlay per project.
Besides, the group is also still drawing from its equity pot raised at its initial public offering. So it has sufficient funds to continue with its development projects – for now at least, he said.