How Malaysia’s IOI Properties Quietly Became One Of Singapore’s Biggest Landlords

Company—owned by billionaire brothers Lee Yeow Chor and Lee Yeow Seng—has built its presence in the Lion City, where it now has properties valued at about $5 billion.

The IOI group in Malaysia has long focused on two businesses: palm oil and property. Of the two, palm oil, held under listed IOI Corp., is the larger, with a market cap of 25 billion ringgit ($5.3 billion), compared to just 12 billion ringgit valuation for the also public IOI Properties Group. While the group’s late founder, Lee Shin Cheng, established the property business first in 1975, a string of strategic acquisitions in the 1980s through the 1990s helped Lee transform IOI Corp., into the third-biggest palm oil producer by revenue in Malaysia.

The two businesses are split along familial lines as well. Yeow Chor, the elder son of the late IOI founder, has run the palm oil side for the last decade, while younger brother Yeow Seng looks after the real estate portfolio.

“Our father had the passion for both businesses,” Yeow Chor, 57, says in a phone interview. “The cycle of property returns is much faster compared to plantation, which has a longer gestation period. It will take 5 to 6 years for the plantation to make good profits.” Lee Shin Cheng ran both businesses until he relinquished his CEO roles in IOI Corp. and IOI Properties in 2014 and appointed his two sons to lead each company. The founder remained executive chairman of both until his death in 2019.

The division of labor a decade ago was meant to allow the two brothers to each have a chance to grow their own companies by themselves. “Our father wanted to give his two sons room to develop their own businesses,” Yeow Chor says.

The palm oil business still accounts for the bulk of the Lee family’s $5.35 billion net worth. Yet the property side is growing in importance as a counterbalance to the volatile palm oil business. IOI Corp.’s revenue slumped 26% to 11.6 billion ringgit in the year ended June 2023 as crude palm oil prices retreated from historic highs in the previous year. In contrast, IOI Properties’s revenue was steady at 2.6 billion ringgit in the same period, bolstered by robust contributions from office buildings, shopping malls and hotels.

IOI Properties currently owns 36.1 billion ringgit of assets across China, Malaysia and Singapore, with the Lion City accounting for about 64% of the properties by market value.

“We’re very bullish on the Singapore economy,” Lee Yeow Seng, 45, CEO of IOI Properties, says in an interview at IOI City Resort in Putrajaya, the Malaysian government’s administrative capital 25 kilometers south of Kuala Lumpur. Built on the site of Dunlop Estates’ plantations, the office building serves as the headquarters of the Lee family’s IOI business empire.

Lee’s bet on Central Boulevard Towers looks promising, as about 50% of office space is already leased.

The IOI name, however, may soon be better known as the company is set to open its flagship development and its biggest Singapore project—IOI Central Boulevard Towers—across the street from the iconic Lau Pa Sat hawker center in the middle of the financial district. The project was a long time coming, when in 2016 IOI Properties stunned seasoned developers such as Mapletree Investments (owned by Temasek) and a joint venture of Hongkong Land and billionaire Li Ka-shing’s Cheung Kong Holdings to outbid them with a S$2.6 billion offer that landed the prime site. The office complex, costing about S$4 billion (including the land cost), comprises about 1.3 million square feet of net leasable space spread across a seven-story podium, a 16-story tower and a 48-story skyscraper.

Lee’s bet on Central Boulevard looks promising, as about 50% of office space is already leased, including tenants such as Amazon and Morgan Stanley at rents above S$11 a square foot a month, at the upper end of prevailing financial district rents. Once fully tenanted, he estimates the property would contribute at least S$180 million in annual rental income, that would have made up about 20% of the group’s revenue in the year ended June 2023. “Singapore’s appeal to the international business community has remained intact as multinational corporations continued to locate their regional headquarters to the city-state, with many citing the wide pool of talent, tax incentives, a diversified economy and modern infrastructure,” Calvin Yeo, managing director at property consultant Knight Frank, says by email. Occupancy levels at prime office buildings in the CBD stood at about 95% as of March.

IOI Properties’ history of investing in Singapore stretches back to 1996 when it purchased a commercial building in the Bugis area on the edge of the central business district. IOI then invested in Sentosa in 2007, 11 years after its first foray in Singapore, in a residential venture with Singapore billionaire Chua Thian Poh's Ho Bee Land. In recent years, Lee has doubled down on Singapore, jacking up investments with partners and doing solo developments. Lee explains that Singapore’s allure is in its evolution from a local to regional and now global city. “Singapore has positioned itself not just as a pure financial center,” he says. “It has evolved into a private banking center of the world, with a lot of family offices relocating in the city. It’s a well-planned and livable global city.” All those family offices need…well, offices, and typically willing to pay top dollar for premium addresses that befit their client’s wealthy image.

In 2011, IOI Properties invested in South Beach—a hotel, office and residential complex jointly developed and owned with billionaire Kwek Leng Beng’s City Developments. It is continuing to expand its Singapore footprint. Last November, Lee through his private company, Shenton 101, submitted the top bid for Shenton House—one of the oldest office buildings in the Raffles Place on the edge of Marina Bay—for S$538 million. The property will eventually be injected into IOI Properties and redeveloped into an office and service apartment complex with a combined net leasable space of about 500,000 square feet, Lee says, adding that the entire project would entail investment of as much as S$2 billion. “You can’t go wrong with Marina Bay,” Lee says. “There’s not much land available in the area. There’s pent-up demand and shortage of supply going forward.”

Of course, developers take on debt for a project like the Marina Bay ones, and loan repayments are increased by higher interest rates. At the end of December, IOI Properties’ debt level was 18 billion ringgit, 20% more than six months earlier, and the highest among listed Malaysian developers, according to Bloomberg. But Lee isn’t worried. He says the high gearing is temporary as he plans to sell some of its office and hotel assets into real estate investment trusts to be listed on the Singapore Exchange in two to three years.

As IOI Properties completes its flagship office building, it is gearing up to market the nearby Marina View Residences, which when completed in 2028 would house the 350-room W Hotel and the 683-unit W Residences. “It’s almost time to reap the benefits of these investments, with IOI Central Boulevard expected to start contributing to income in 2025 and Marina View in 2026,” says Hong Leong Investment Bank analyst Tan Kai Shuen by email.

Despite the softening demand for luxury properties due to cooling measures the government took last year, Tan believes W Residences will sell well due to the scarcity of such projects in the CBD. “Even an incremental sale will make a large and lumpy contribution to the group’s financials,” he says.

“You can’t go wrong with Marina Bay.”

IOI Properties’ net profit tumbled 72% to 296 million ringgit in the six months ended December 2023 from the previous year, while revenue slipped 8% to 1.25 billion ringgit, due to weaker contributions from its property projects in China and Malaysia. Despite those results, the share price has surged; on April 2, it was nearly double a year earlier, at about 2.16 ringgit. And analyst Tan sees more upside, maintaining a buy rating and a price target of 2.95 ringgit.

While IOI Properties has been building up in Singapore, it hasn’t stopped expanding at home. In recent years, IOI Properties has been converting vast tracts of agricultural land amassed by IOI Corp. into townships. Its crown jewel, the IOI Resort City in Putrajaya, comprises two 31-story towers (one of which houses the group’s headquarters), IOI Square (home to several government offices), four hotels, an 18-hole golf course, residential condominiums and IOI City Mall, the largest shopping complex in Malaysia with a gross floor area of 2.5 million square feet. According to Lee Yeow Seng, the company is spending 1 billion ringgit to add 1 million square feet to the complex, which attracts about 30 million visitors a year.

The company is also bullish on its residential and hotel project in Singapore. Behind Shenton House, IOI Properties is developing Marina View Residences which is rising on a 7,817-square-meter site it bought from the government in 2021 at the height of the Covid-19 pandemic. It paid S$1.5 billion for the land and will spend another S$1 billion to build the luxury hotel and apartment tower. “It’s a rare piece of land,” Lee says. “The government hardly sells hotel plots in Marina Bay.”

While demand for luxury residential properties in Singapore has softened since the government imposed a hefty 60% tax on foreign buyers last year to temper housing prices, Lee is confident there will be strong buying interest for W Residences when IOI Properties starts marketing the project by the mid-2024. “There are quite a number of Singaporeans who can afford to invest in this project,” Lee says, adding he hopes to sell the apartments at between S$5,000 to S$6,000 a square foot with the smallest one-bedroom units selling at S$3 million. The entire project is expected to generate sales of 8.6 billion ringgit.

Despite high interest rates and the property curbs, the prospects of Singapore’s property market remain promising due to the city’s position as a business and entertainment hub, hosting marquee events such as Taylor Swift concerts. “Supported by resilient local demand and upgrading aspirations, private residential prices are still expected to trend higher in 2024,” says Xian Yang Wong, head of property research at consultancy Cushman & Wakefield.

The W Marina Bay project excites Lee as hotel revenues in Singapore have recovered to pre-pandemic levels, with average room rates rising to all-time highs during the Formula One Grand Prix in September 2023. Overall revenue of the hospitality sector should climb to a record $1.5 billion in 2028, up 40% from last year’s level, according to Statista estimates. By the time W Hotel opens in Marina Bay, Lee says he expects rooms to be S$800 per night. With all the events held in Singapore, Lee says, “there’s been an upward structural change in the room rates for Singapore hotels.”

IOI Properties has also aggressively expanded its hotel footprint in Malaysia to tap the post-pandemic travel boom. In December, it bought the 150-room W Hotel in Kuala Lumpur for 270 million ringgit from Malaysian real estate tycoon Danny Tan’s Tropicana Corp. The following month, it acquired Tropicana’s 199-room Courtyard by Marriott in Penang for 165 million ringgit, expanding its Malaysia portfolio to seven hotels with more than 2,000 rooms.

Lee says IOI Properties is investing 500 million ringgit to build a resort across 12 hectares of beachfront property in Malaysia’s Langkawi Island. When completed in about four years, it will have a 200-room W Hotel, a convention center and a shopping mall. The company also plans to invest another 300 million ringgit to build another Penang hotel.

IOI Properties is also tapping the convention market for the 380-room Sheraton Grand Hotel in Xiamen in southeastern China. The property, slated to open this year, can accommodate 1,500 people in its ballroom. The company is also completing this year its office and shopping mall in Xiamen. “The contributions from these investment properties in China will be quite significant,” Lee says.

The IOI founder’s two sons are on the board of the other one’s company. Lee Yeow Chor, the CEO of the palm oil business, says that among the lessons the two sons learned from their father were to be “very hands-on” and visit their company workplaces—plantations or construction sites—often. “Our vision is we want to be a leading player in both palm oil and property,” the older son says. “There’s room to grow in both.”

NATURAL ENTREPRENEUR

Lee Shin Cheng was raised on a Malaysian rubber estate, and he spoke Tamil, the language of many rubber-tappers. At age 11, he quit school for a time to sell ice cream from a bicycle to help support his family. At 17, he became a supervisor of a rubber estate and, before turning 30, estate manager. The IOI founder was a natural entrepreneur. In 1975, at age 36, he started a housing project south of Kuala Lumpur and seven years later he went into palm oil, with the acquisition of Industrial Oxygen Inc, which was later renamed as IOI Corp. In 1990, Lee bought Dunlop Estates, a major palm oil producer, for 500 million ringgit (about $185 million at the time) and used it as a springboard to transform IOI into a major palm oil player with more than 200,000 hectares of plantations in Indonesia and Malaysia, along with refineries, and specialty oil and oleochemical manufacturing facilities across Asia, Europe and the U.S.