Published March 26, 2009

CapitaLand CEO Liew defends $6b war chest

It gives group enough cash to swoop on opportunities

By UMA SHANKARI

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CAPITALAND chief executive Liew Mun Leong says it may seem 'paranoid' and 'kiasu' for the company to have raised $1.84 billion when it already had $4.2 billion in its kitty.

'Nobody knows how long and how cold this winter is going to be.' - Mr Liew Mun Leong

So why do it? 'Nobody knows how long and how cold this winter is going to be,' he said. 'We thought the $4.2 billion we had might not last in the worst- case scenario.'

Speaking to reporters for the first time since CapitaLand's one-for-two rights issue closed fully subscribed on March 12, Mr Liew said CapitaLand's line of thinking may make it seem like 'we are very kiasu, we are very paranoid'.

But even a company the size of CapitaLand - Singapore's biggest property group - might face refinancing problems should banks decide to hold back loans. He said: 'Solvency could become a problem.'

He cited a 1996 book - Only the Paranoid Survive: How to Exploit the Crisis Points That Challenge Every Company by Andrew S Grove - to explain his philosophy.

But there is more to CapitaLand's move than 'paranoia'.

Building its war chest to $6 billion gives it enough cash to swoop on opportunities arising from the global recession.

'We have formed a study team to look at various geographies and various companies and to do some analysis,' Mr Liew said.

The focus is on Singapore, China and Japan for acquisitions - and specifically, distressed assets.

CapitaLand has a good track record of buying prime properties during downturns, Mr Liew said: 'A lot of our major investment assets were bought during the down-cycle.'

He cited Hitachi Tower and Caltex House in Singapore.

As for the residential market, he believes now is a good time for owner-occupiers to buy, as private home prices have already come significantly off their peak.

CapitaLand will launch several residential projects this year, including Gillman Heights, which it bought with Hotel Properties and two private funds in 2007 for $548 million, or $363 per square foot of potential gross floor area.

'If you like the location and you want to stay, then buy,' Mr Liew advised.

'So what if the price goes down another 5-10 per cent? You may suffer a paper loss. But if you don't buy, next time you won't get the property.'

However, for potential buyers looking to pick up homes for investment, 'it is a different story'.

Mr Liew also said CapitaLand will continue to focus on talent management and cut costs to ride out the economic downturn.