Size matters: Hefty extension charges dwarf smaller property developers

The giants escaped relatively unscathed.

Small to mid-cap property developers have been caught in the wrong place in the wrong time, as unforgiving extension charges seem to have been more gracious to their gigantic counterparts.

According to analysts from UOB Kay Hian, relatively smaller developers face a potential greater risk at 13-21% of their books, while big developers have a worst-case impact limited to 2-7% of their book value.

“CapitaLand and City Developments, for example, saw up to a 5% hit on book values. Most were able to stomach the potential losses with sizeable cash. In contrast, smaller players like Heeton Holdings (20.7%) and Sing Holdings (20.5%) bore the brunt of the severe impact on book value,” UOB Kay Hian said.

Meanwhile, developers are swaying with the wind instead of contradicting it, employing novel strategies to get by.

“These include bulk sales of unsold inventory to parent companies, contractor companies, or even related parties. City Developments’ (CDL) inspired approach in securitising its Sentosa properties could well pave the way for others to do likewise, noting that Wing Tai also happens to be CDL’s Nouvel 18 joint venture partner,” UOB Kay Hian said.

“Other options available to developers, including delisting and canceling Qualifying Certificate (QC) charges, setting up special purpose vehicles (SPV) and leasing out injected projects and appealing for waivers, after the exhaustion of all possible avenues of project sales,” they added.