Geylang King

Author: Jessica Tan

Twenty minutes from downtown Singapore's business district is bustling Geylang, home to its red-light district, low-rise buildings, foreign workers' quarters and some of the city's best cheap eateries. It is in this somewhat seedy neighborhood, largely ignored by big developers, that Koh Wee Meng has built at least 10 residential projects and six budget hotels in the last 16 years. Some deride the latter as "love hotels," but Koh, 46, shrugs it off. "You can't change the place."

Koh, who has a tanned complexion likely from long hours spent at construction sites, insists it is not the neighborhood but his decision to stick with small, affordable plots that distinguishes him from other developers. "I do a lot of small projects. I churn a lot of small plots of land. Here one plot, there one plot," explains Koh, speaking in a mix of English, Mandarin and Hokkien, a Chinese dialect.

That small focus has paid off big. Koh, 46, is worth $360 million, $130 million more than a year ago, enough to rank him No. 20 among Singapore's richest. Net profits of his Fragrance Group climbed 83% to $39 million on sales of $150 million in 2008. Earnings slipped 9% in the first half of the year because of lower selling prices but are up 11% in the second quarter. (Private residential prices in Singapore dropped 21% in the first quarter and 25% in the second.)

The stock has tripled since its March low, rallying along with a pick-up in housing demand and helped by a recent announcement by the Ministry of Finance that it won't levy a tax on individuals who sold more than one property within four years. As of June 2009, the company had $18 million in cash, up from $10 million in December 2008. Its total borrowings decreased $23 million to $124 million in that time.

It's not the glamorous end of real estate, but it is a "sweet spot," says Ng Wee Siang, head of research at BNP Paribas in Singapore. Fragrance's residential property business, which accounts for at least 80% of profits, specializes in low- to mid-rise buildings, usually with fewer than 100 units. The residences are typically pitched to some of the 2.8 million Singapore residents (of 3.5 million total) who live in Housing Development Board flats and are looking to upgrade. The 20 budget hotels have a similar strategy of being small and affordable, typically with 100 rooms or fewer priced at $60 a night. Despite the downturn, the hotels expect a boost from an influx of tourists coming to gamble at Singapore's first two mega-casino resorts opening next year.

The son of a jeweler and a primary-school teacher, Koh developed his passion for real estate during long walks back and forth to school past construction sites. Unlike his three siblings, Koh didn't make it to college and, after completing his national service, joined his father's struggling jewelry shop, Lee Hwa Goldsmiths&Jewelry. He soon mastered the craft of making and selling gold jewelry, like bangles and pendants, but was bored.

Koh gave real estate a try in 1992. He found a 5,000-square-foot plot of land in eastern Singapore for $490,000. He went to a bank for a loan but was told he didn't have the experience or education to be successful. He was eventually given a loan of $310,000 and paid for the rest with proceeds from selling his home the previous year, when he had moved in with his parents. He built a bungalow on the land and flipped it for $1.2 million within a year.

Encouraged, he took over his family's small investment firm and began buying land and buildings, mostly in Geylang. By 1996 he had built and sold 20 projects and decided to try budget hotels, taking advantage of favorable zoning laws in Geylang. He built three hotels, each with about 30 rooms. He sold off the first almost immediately but operated the other two. Koh soon realized his small hotels were inefficient, and he got rid of them, building two others, each with about 100 rooms. At first he named his hotels after precious stones, such as Ruby, Sapphire and Emerald, inspired by his days as a jeweler, but he soon ran out of gems. He started naming them all Fragrance, followed by their street locations.

The hotels temporarily diverted his attention from residential building, which turned out to be a stroke of luck. "We scaled back on our residential projects just before the [1997 Asian economic] crisis," he recalls. "We consider ourselves lucky." In early 1999, when prices were still soft, Fragrance re-focused on residential and bought seven parcels of land, this time throughout the city.

He has proved to be lucky, or smart, again in recent months. Fragrance sold a majority of its projects during the property boom of 2007 and early 2008 and held back on buying land for a while, leaving it with little excess inventory during the downturn. "Unlike other boutique developers, Fragrance exercised great discipline by not participating in the land-banking frenzy seen at the peak of the property cycle," says BNP Paribas' Ng Wee Siang. "[Koh is] very nimble and shrewd." Koh puts it this way: "Only buy and hold what you are able to afford.

Since the start of 2009, as prices fell, Fragrance has paid $141 million in cash and debt for 11 plots across the city. He plans to open three new hotels, possibly under a new brand, by 2011. One of the new hotels will be built on land Koh just bought for $11 million, outbidding his rival Regal Land, which owns the Hotel 81 budget chain.Prices will be capped at $70 a night, 15% above today's rates, but Koh will offer such amenities as a gym, sauna and library.

Koh is also looking for more opportunities. "I have the bullets ready as we're not overcommitted," he says. One place he won't go is overseas, saying the risks are too great in an unfamiliar market. "There are plenty of opportunities in Singapore," he insists. Plenty of competition, too. At least 15 of the nation's 40 richest make all or part of their money in real estate.

Even Koh's siblings are sometime rivals. His family's small jewelry business has become Aspial, Singapore's largest jewelry retailer with more than 50 stores, but it also has a property-development arm. Koh was on its board until Fragrance went public, and he still owns a small stake in Aspial, which had a recent market cap less than one-third of Fragrance's. The brothers declined to comment on each other's businesses and Koh says they don't discuss work.

Despite his rising fortune, Koh, who some say works "25 hours a day," insists his only indulgence is his Rolls-Royce. He has invested almost all of his time and earnings in Fragrance, buying more shares last October and in June. When asked if he has time for hobbies, Koh says: "I don't play golf. I don't swim. My interest is my business."