At Throwaway Prices
Neil Bush, the brother of former U.S. President George W. Bush, is using Singapore as a springboard to bankroll his real estate ambitions. Early this week, he announced that Singapore-listed SingHaiyi Group of which he is a non-executive chairman, had outbid contenders at a trustee’s auction to bag a San Jose commercial condominium project called “Vietnam Town” at what some would call a dirt cheap price of $33 million.
The move is in keeping with the core strategy of SingHaiyi Group to scoop up distressed real estate in the U.S. in state auctions, refurbish the properties and then hawk them out for profits in a market that is showing signs of recovery.
Vietnam Town is one of the many projects that went into receivership in the aftermath of the financial crisis. Its earlier owner, the well-known American-Vietnamese developer TWM Investments, and lender, United Commercial, had pumped more than $50 million into the project before it failed in 2009. Unsecured creditors had also put in deposits that could not be recovered as the funds eventually dried up.
SingHaiyi paid $29.8 million towards an outstanding loan and $3.25 million to acquire the 20-acre freehold project. The project, a mixed retail-cum-commercial development, comprises 115 ready-to-move-in units of which 64 have already been sold. The remaining 51 could be sold to finance phase II of the project that offers an additional 141 units, which were sanctioned but never saw the light of the day.
The purchase appears well timed. San Jose is witnessing a rise in investor appetite for commercial projects on the back of a boom in the tech sector. Developers like San Franciso-based Simeon Residential Properties, Cupertino-based KT Properties and Essen Property Trust are breathing new life into the area that has so long been a laggard in Silicon Valley. Given its bargain price, Vietnam Town looks well poised to tap into the market’s new buoyancy.
Early this year, SingHaiyi (then called SingXpress), controlled by low-profile Singapore couple Gordon Tang and Serena Chen announced it was looking to expand beyond real estate in the city state to tap opportunities in the distressed U.S. market. Through a rights issue and a private share placement, SingXpress raised $180 million to fund its new strategy. It was renamed SingHyaiyi Group and Bush emerged as its new non-executive chairman.
Bush and the Tangs have been longtime business partners in Oregon-basedAmerican Pacific International Capital (APIC), which owns and runs a number of hotels including Hotel Metropolis and Hotel Vertigo in California. It has other real assets in China, the U.S. (Oregon), Hong Kong and Singapore.
Their new venture is wasting no time in the U.S. market. In less than two months, Vietnam Town is actually SingHaiyi’s second big purchase of distressed real estate in less than two months. On September 19, in a court–ordered auction, it bought an operational shopping mall in Cincinnati at a 77% discount to its unaudited net book value of $45 million as on June 30 through a foreclosure auction. Purchased free of any debt or encumbrances, the acquisition is already making money for the group!
Last week, SingaHaiyi announced that its net profit after tax rose to $6.7 million for the six months ended September 30. And those earnings included a gain on the bargain purchase of S$12.8 million from the acquisition of the Tri-County Mall, as well as one month of rental income.
Investors too seem to be loving the momentum in SingHaiyi. Its stock has rocketed more than 90% in less than a year, giving it a market capitalization of $520 million and securing it a place in the MSCI Singapore Small Cap Index.