02 Jun Investing in Singapore Luxury Properties at Bargain Prices
This week I talked to Mr Ong Kang Lin, who is the CEO of SiS Asset Management.
I know that Asians have a preference for prop but given this current bearish climate, it seems like investors are apprehensive to part their money for more properties.
However, crises may present opportunities. And this is exactly what the SiS Real Estate Opportunity Fund (“the Real Estate Fund” or “Fund”) is trying to capitalise on.
Kang Lin tells us more.
Before we discuss about the Read Estate Fund, would you be able to share something about SiS Asset Management.
SiS Asset Management aims to provide customized private equity investment opportunities to individual accredited investors, at smaller investment denominations. Such investment opportunities may be unavailable to these investors given that they require huge capital outlay and investment amounts – and are usually offered to institutional investors or ultra high net-worth individuals or family offices.
What made you start this Real Estate Fund?
We see an opportunity in the high end residential segment particularly given that the cooling measures have caused pricing in this segment to gradually become more attractive.
This is also given the fact that supply of property units in District 9 and 10 (Orchard and Tanglin respectively) remains scarce which offers long term investment potential. Afterall, this segment is widely sought after by ultra high net-worth investors across the globe. However, the current cooling measures are also pricing many people out since the investment outlay is huge, given the Loan-To-Value (LTV) restrictions on second and subsequent mortgage loans for residential properties.
Just to give an example, assuming 50% LTV restriction, a luxurious high end residential unit (at a hypothetical distressed price of S$1500 psf very attractive but with a size of 2,000 sq ft) in District 9 could cost $3m and requires $1.5m equity!
So, we feel that investing in high end residential remains a rich man’s game who can afford the capital outlay, while the rest remains priced out. Without a registered fund like ours, many investors simply will not be able to capitalize or gain any opportunity to invest into this exclusive property segment, and the Fund gives these accredited investors an opportunity to invest in a portfolio of properties, not just one.
What is the Fund’s objective and how does the Fund make money for the investors?
The fund’s primarily objective is to invest in distressed and undervalued luxury residential units and commercial properties in Singapore. We are targeting mainly capital gains, while any rental income will only help to bolster the fund’s overall returns.
What is a reasonable expectation of returns?
As we are only investing in properties at distressed levels (not unlike levels seen in past financial crises), the potential return we hope to achieve would be at least 40-50% over the fund’s life span. This is even before factoring in any leverage.
Who should invest in the Fund?
This Fund is suitable for avid property investors who feel that the Singapore high end residential property market will provide excellent investment opportunities in the near future. At the same time, they feel that they are priced out of this segment due to the current property cooling measures, or that they do not wish to invest such a big quantum in this segment (i.e. prefer to diversify).
How does the Real Estate Fund compare to REITs?
A REIT typically focuses on recurring stable yield and low-moderate returns. Our real estate fund focuses on capitalizing on distressed investments which potentially offer higher opportunistic returns.
The Real Estate Fund provides the unique exposure to Singapore’s high end luxury residential property market which no REIT is currently offering.
The Real Estate Fund is only activated when property prices are low or distressed enough. We do not charge investors any management fee before activating the fund. For an instance, our participating investors only pay a 20% deposit and remaining 80% will only be triggered later. No fee payable when fund is not activated. if nothing happens in 12 mths, we return deposit intact to investors.
How does the Fund go about looking for distressed properties?
We typically rely on our off-market channels and business network to generate leads and shortlist potential distressed assets in the market. We will monitor these properties closely and await the right time to acquire them. Currently, even though property prices are declining, we do not find them at a distressed level, yet.
How should potential investors contact you and find out more about the Fund?
Potential investors who are keen to find out more can email us at [email protected]
Photo credit: Erwin Soo