Singapore’s second-largest developer has a suggestion for the government: re-position the billionaire enclave of Sentosa as a tourism mecca like Bali.
Property values at Sentosa Cove, a residential area nestled on a tiny island off the south coast, have been hit particularly hard, with home prices down about 30 percent from the highs seen in 2010. Even as the rest of the nation’s residential market staged a recovery in the first half of last year, Sentosa remained stubbornly in the doldrums.
City Developments Ltd. Executive Chairman Kwek Leng Beng has had enough.
“Sentosa was touted when it first started for the rich and famous,” Kwek said Thursday at the release of the company’s fourth-quarter earnings. “Subsequently, her parents just forgot about this young lady. I would like to suggest that they should re-position it as the new Bali.”
What was previously Sentosa Cove’s main strength has become a liability.
The island is the only place in Singapore where foreigners can buy landed property. But with stamp duties doubling to 20 percent since 2011 for international buyers compared with just 3 percent for locals, the waterfront oasis is suffering. Multimillion-dollar homes sit empty, and along Quayside Isle, a stretch of restaurants near the marina, businesses have been shutting shop.
City Developments has good reason to want Sentosa to succeed.
In 2014, it struck a deal with Blackstone Group LP and CIMB Bank Bhd. to raise additional capital from a hotel, retail and residential project it had developed earlier. In exchange for S$469 million ($347 million), Blackstone and CIMB agreed to receive 5 percent fixed interest for five years, and a share of the project’s cash flows.
City Developments said Thursday the group is “working with its partners on a mutually favorable way to unwind the structure before its expiry in December 2019.” With many units in the residential part of the project still unsold, City Developments needs demand, and prices, to revive.
A spokesperson for Blackstone declined to comment.
While Sentosa and Bali both share a tropical climate, luxury hotels and restaurants and a waterslide park, there the similarities end. Sentosa, at about 5 square kilometers, is a fraction the size of Bali, which boasts a lush mountainous hinterland, renowned surf beaches and world-class diving. On Sentosa, the beaches are all man-made and it’s hard to escape the scores of container ships parked offshore.
Still, Kwek said the non-residential part of Sentosa could be better utilized for meetings and conferences. The island’s hotels meanwhile — and there are several new ones opening — could attract more visitors.
“You go to Bali now, it’s very congested. It’s got volcanoes, weather problems, flooding problems and traffic problems. Why is it so popular?” Kwek said.
©2019 Bloomberg L.P.