Property News & Market Trends

Is there anything we can learn from Capitaland?

CapitaLand posts record profit of S$1.018 billion for FY2006 and got the record for being the very first listed Singapore Developer to cross the $1billion mark!  Congrats, Capitaland, you made us proud.

So, is there any lessons or wisdom we can learn from the leading developer?
Many of us may not be developers, but if you are buying or investing in properties, take a lesson or two.

Let's study deeper into how Capitaland did it.  It's definitely not achieved by selling off assets, like in 2005, but rather an increase in margins from the Singapore residential operations; stronger fee-based and interest income, higher portfolio gains.  What do all these mean to us?

We know being a landlord works and building a strategic portfolio can have a good effect. However, managing properties will increase in cost.  Frankly, as individuals, our dear bankers may not see very strong potential businesses from us, compared to Capitaland.  But if we're banded, as spoken by wise men; 10 sticks is harder to break than one, our situation will look better, don't you agree?

Hmm... ya, right... yes, I can hear murmurs. "..easier said than done..", "they are partly gov... of 'cos it's easy..", "$1B! Where the h**l can we get that for the banks to respect us!".

I know where you guys are coming from, it's tough. I've been in the real estate business for the past 10 years, and I've seen & heard more than I ought to know.  But, is it impossible?

Look at Simon Cheong.  He wasn't a developer before he established SC Global?  Sure, he is already wealthy when he first started, but few can achieve what he had done in that short span of time.  Maybe, we can have a personal interview with him to get more inspiration.  Simon, when can we catch up?

Anyway, what I'm saying is - property investors should band together to form an alliance to invest in more lucrative projects.  In fact, small developers should also look at the possibility of jointly developing a big project, 'cos that's where the margin is.  Making 20% off a residential project is no longer in the minds of developers.  I know some are aiming as high as 35%!  Incredible? Sand cost? Just you wait & see.

However, not all Capitaland's revenue come from Singapore. 71.2% of total revenue are contributions from overseas.
And what are they doing now?  They have projects in high-growth cities, penetrating new markets and embarking on new businesses. They have listed three REITs and launched four property funds.

We can't do that? Of course, we can't.  But we can simulate.  Let's work it out.  How do REITs work? How do you set up a Property Fund?  One main reason for Capitaland's high margin is its debt ratio.  They borrow less as they unload they asset intensive projects, and give themselves another revenue generator - managing these assets for a fee. Get it?

It's the same theory as the banks.  Use OPM(other people's money); like depositors.  Give them loans on their money and collect 300% interest over what you pay them!  For REIT, it's similar.  You unload the assets at an increased market value, collect the money, pay out a nice dividend, get your own management(previously on payroll) and charge the REIT a fee for managing it back.  Damn, these guys are smart.  No wonder, the rich gets richer!  And that's ok.  We have only ourselves to blame if we don't learn from the smarties.

But how can we do what these big fellas can do?  That's all the more reason of banding together.  More of than in days to come.  It's something I call - the Property Barons Organisation.  Cool?  You bet!

Let's analyse further.  Capitaland is set to double their REIT portfolio to 10 by 2010. That means acquire land, build, rent then sell.  Collect money and repeat all over again.  This is a fantastic multiplication process.  If all goes well, Capitaland will be amongst the world's biggest developer in less than 10 years!  They will continue to go deeper into integrated developments like the Raffles City development in China and doubled their residential landbank.  Seek out strong partners in new markets like Vietnam and the Middle-East countries, exploring opportunities in Moscow and St Petersburg.

 So, what's that to us. We'll do the same. Build the same multiplication engine and develop our very own revenue generator.  And we're not talking about millions, we're looking at hundreds of millions!  We are going to be Barons! Join me, anyone? - DannyBingo

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