There is a growing trend that smaller property related firms are synergizing in buying development land plots jointly.
By combining their funds and expertise, these firms have procured numerous land site in the current competitive land bidding environment.
For this year’s Government Land Sales programme, 3 out of 11 residential land parcel was sold to such consortiums. These joint firms have also acquire quite a number of private land parcels.
Last month, an executive condominium site at Tampines was sold to a group consisting of SingXpress, Creative Investments and Kay Lim at $234 million.
In April 2012, another joint venture known as Unique Rezi, led by public listed Oxley Holdings and other partners comprising Kim Seng Heng Realty, Heeton Homes, Zap Piling and Lian Beng Group purchased McDonald's Place site for $150 million.
These companies may had decided to purchase land jointly to minimise their individual business risk when bidding for larger plot of development land in view of market uncertainties. It would be better for these smaller developers to diversify their risks by acquiring more land sites and be rewarded from a bigger number of development sites.
Furthermore, these firms can also tap into their partner’s strength. Some are main contractors venturing into property development. These contractors can manage their costs and coming from a lower cost base can assist the joint venture to bid higher to secure desired land site. Other partners might specialise in installing fixtures like kitchen cabinets, wardrobes while other partners might be good in project management, piling or architectural works.
4 June 2012