Tuesday, October 14, 2008

CapitaLand And Units Raised $5b This Year

Source : The Business Times, October 14, 2008

Good access to capital markets, with $2b devt loan secured in July

CAPITALAND and its various listed entities have raised more than $5 billion of debt year-to-date, the developer said yesterday.

Paris purchase: CapitaLand's Ascott Group serviced residence unit has acquired the historic 51-unit Citadines Paris Louvre building for 21.5 million euros from Predica

CapitaLand, Singapore's largest developer by market capitalisation, reported the figures in slides that it posted on the Singapore Exchange (SGX) website. The company intends to present the slides to investors at Macquarie's International Real Estate Conference in London and New York from Oct 13-17.

The developer added that it has good access to capital markets. In July, the company secured a $2 billion development loan for its upcoming Farrer Road condo.

Developer stocks have taken a beating this year on concerns about their ability to raise funds. OCBC Investment Research analyst Foo Sze Ming said earlier this month that the current pullback in property prices could see banks continue to reduce their exposure to the property sector and therefore compound the credit crunch on those developers in need of funding.

CapitaLand shares have lost 56.5 per cent so far this year as several analysts downgraded the stock to a 'sell'. In H1, the developer had a net debt of $8.2 billion. Cash reserves stood at $3.4 billion and the debt-to-equity ratio was 0.68 - but the two numbers exclude recent recycled capital of some $2.9 billion from projects such as 1 George Street and Somerset Orchard.

Separately, CapitaLand announced yesterday that its wholly-owned serviced residence unit The Ascott Group has acquired a historic building in Paris for 21.5 million euros (S$42.9 million) in cash.

Ascott has held a lease on the 51-unit Citadines Paris Louvre from Predica since it first acquired the Citadines chain in 2002. Predica is the insurance arm of Credit Agricole, one of France's major banks.

The purchase price was determined after taking into account the property's market value, among other factors, CapitaLand said. The property, which was constructed in 1908, is gazetted as a preservation building.

Ascott has held a profitable lease on Citadines Paris Louvre since 2002, said Chong Kee Hiong, Ascott's deputy chief executive for finance and investment. The property is now one of Ascott's best performing in Paris, with an 85 per cent occupancy.

Said Ascott chief executive Jennie Chua: 'We will continue to seek high-yielding acquisition opportunities in key cities that enhance the overall yield of our properties.'

Ascott currently has a total portfolio of 5,620 units in 49 properties in Europe. Sixteen of these properties are in Paris. Globally, the group has 16,000 operating serviced residence units as well as more than 6,000 units under development.

CapitaLand took Ascott private earlier this year. Its stock gained 22 cents to close at $2.73 yesterday.

Property Can Still Bruise Asia's Banks, Economy

Source : The Business Times, October 14, 2008

Half the wealth of Malaysia, Singapore, South Korea, India tied to property

(HONG KONG) Asian banks have largely escaped the worst of the global debt crisis but housing market downturns, especially in China and India, still threaten to pile up bad loans and slow the region's economy.

Bright lights dim in the big cities: A pedestrian walking past a billboard promoting a new property development under construction in Shanghai; Chinese developers are slashing prices to stem a sales slump that is dragging the whole market

After property crashes burnt Japanese and South-east Asian lenders in the 1990s, they have been more cautious. So falling home prices are much less of a risk than in the United States, where the sub-prime mortgage meltdown brought down several leading banks.

Asian banks tend to limit loans to 70 per cent of home prices, compared to between 80 per cent and full value in the West. And few mortgages are securitised, let alone twisted into the kind of complex investment packages that went toxic as US homeowners defaulted.

But just as in the US and Europe, property booms in Asia are turning to slowdowns, and even busts. With half the wealth of Malaysia, Singapore, South Korea and India tied to property, according to CLSA, the potential impact on banks and economies is wide.

'There'll be a drag on economies,' said Leland Sun, founder of Hong Kong-based Pan Asian Mortgage Company Ltd.

The Asian Development Bank (ADB) cut its 2009 economic growth forecast for Asia to 7.8 per cent in mid-September from 7.2 per cent, but the global financial crisis has deepened since.

After strong run-ups, Hong Kong and Singapore home prices are widely tipped to fall 15 per cent next year as job cuts hit Asia's main financial centres.

In South Korea, unsold homes are at a record high, prices are falling and small construction firms are vulnerable. India's property boom fizzled into a price drop of a third this year in some cities, and analysts expect the same in 2009.

But the biggest risk of property loan defaults is in China. Developers are slashing prices to stem a sales slump, and dragging the whole market. As in the US, homeowners could flee if they owe banks more than their property is worth.

'People are very mobile and hard to find,' said Mr Sun, whose firm sponsors mortgage securitisation. 'It'll be a real issue.'

Ironically, many of the property industry's woes stem from Beijing's efforts to cool the market and fend off a crash, by a clampdown on loans to developers and rules to deter speculation.

A perfect storm swelled up. Home sales plummeted, first in overheated Guangzhou and Shenzhen in the south, then elsewhere.

In response, China's biggest property firm, China Vanke, dropped prices by a fifth at projects in Hangzhou and Shanghai and other developers have gone further.

Reflecting the problems, bonds from firms including Shimao Property have slumped on concerns over possible default, as credit ratings agencies downgraded them. Chinese developers sold over US$3.6 billion worth of bonds to international investors in 2006 and 2007, according to Thomson Reuters data.

In India, similar events are unfolding, with local media reports saying that banks are tightening lending for property after total credit grew 26 per cent this year.

Axis Bank, Yes Bank and HDFC Bank have the biggest exposure to developers, at around 12 per cent of loans. And just over a quarter of loans at ICICI Bank are residential mortgages.

'Developers are in trouble in India and China because they took on high gearing to expand land banks,' said Aaron Fischer, Asia property analyst at CLSA. 'You'll see some bankcruptcies.'

The situation is so dire in China that economists expect the government to back pedal, and fast, fearing the ruin of a property industry that accounts for a quarter of total investment and 10 per cent of gross domestic product (GDP).

Local authorities have already stepped in, with Nanjing promising homebuyers a subsidy and letting developers delay payments for land.

The Chinese government needs to bolster public confidence that after a correction of say 30 per cent, property prices will fall no further, said Ting Lu, China economist at Merrill Lynch.

'It's a serious risk to China's economic growth,' he said. 'A year ago, China needed to tighten policies to ensure safety of the banking system and to bring down inflation. But who could have expected a global financial crisis like this?'

But as long as mortgages are new to Asia, around for only a decade in some countries, they present less of a risk than in the West.

Home loans represented only 19 per cent of GDP in Japan, 12 per cent in China and 5 per cent in India, according to CLSA figures for 2007. In the US, the ratio is 105 per cent.

Developers in China and Vietnam described how homebuyers will turn up at sales offices with sacks of dog-eared bank notes.

In China, for example, new mortgage lending accounted for only a third of the US$300 million of new home sales in 2007.

But Chinese banks have been slip-shod in their lending practices, said Pan Asian's Mr Sun.

At nearly US$800 billion, loans to homebuyers and developers have jumped to 18.3 per cent of the total at Chinese commercial banks from 13.5 per cent in 2005.

Bad loans in the banking system stand at 5.6 per cent of the total, but economists cited anecdotal evidence that defaults on property loans are creeping up. -- Reuters

Johnny Depp's Pied-A-Terre Won't Save Paris From Property Slump

Source : The Business Times, October 14, 2008

Tougher lending norms and rising interest rates expected to depress prices

(PARIS) Faycal Fouad, a real estate agent at Century 21 Chaumont in Paris, says the global credit shortage has finally wound its way to his doorstep.

'Clients are seeing loan applications refused by banks,' said Mr Fouad, who sells apartments in the 19th arrondissement, the French capital's least-expensive district. 'I've never seen that before. There's difficulty obtaining credit.'

Paris has avoided price declines that hammered property markets in capitals such as London, which had a 9.4 per cent drop this year, thanks to fewer available apartments and demand for pieds-a-terre, lodgings used only for part of the time.

Buyers of apartments that go for as much as 11,010 euros a square metre ranged from French teachers and doctors to actor Johnny Depp and US singer Lenny Kravitz.

Now, tougher lending criteria and higher interest rates may start eating into the city's property prices, economists say.

While the national statistics institute Insee on Oct 7 said prices rose 2.4 per cent in the second quarter, a shrinking number of transactions will throw the market into reverse, said Bruno Cavalier, an economist at Oddo & Cie in Paris.

'Prices will decline in the third or fourth quarter,' said Mr Cavalier. 'Demand might still be there, but the solvency of households has diminished and banks are making fewer new loans.'

Growth in property loans slowed at the end of the second quarter to 8.9 per cent from 11 per cent a year ago, according to the Paris-based French Banking Federation. For the third quarter, more than half of the banks in a survey by the central bank, Banque de France, said they will tighten lending criteria.

'In 2007, asking for a loan was just a formality,' said Christophe Cremer, chief executive of Meilleurtaux, an online lending company based in Levallois-Perret, on the outskirts of Paris. 'Fifteen per cent of buyers who would have got a loan then are refused today. That's contributing to the slowdown.'

A steady rise in prices in Paris helped chalk up average annual gains of about 12 per cent in the past five years.

While London has had similar gains, prices there have had wilder swings. They fell 6 per cent in the second quarter, according to Edinburgh-based mortgage lender HBOS plc. Prices slid 2.1 per cent in Madrid, said Idealista.com, the biggest drop since the website began tracking Spanish property in 2000.

Paris's urban development rules restrict high-rises, making the city a metropolis of seven-storied buildings along tree-lined boulevards designed by Baron Haussmann in the 1800s.

'Paris is small and there can't be much new construction,' said Lilian Cellier, an agent at the Laforet Immobilier agency in Paris. 'There will always be a lot of demand.'

Still, that demand might not be enough to maintain Paris property prices. The French economy likely slipped into recession for the first time in more than 15 years in the third quarter and consumer confidence is at a record low, according to Insee.

The average interest rate for property loans increased to 5.5 per cent in the second quarter, from 4.8 per cent in the same period a year before, the Banking Federation said.

'Banks are now much more restrictive,' said Mr Cavalier. 'The price is the last thing to go, but when it does, it can be strong.'

The volume of apartments sold fell 20 per cent in the year to May, according to statistics from Chambre des Notaires de Paris, an association of notaries.

The city's most expensive district, the fashionable 6th arrondissement known for cafes where Ernest Hemingway wrote and a magnet for foreign buyers, might feel the pain more. The average price for a 185 sq m apartment in the 6th arrondissement is about 1.8 million euros (S$3.6 million).

'The problem with the 6th is that a lot of Americans bought there and now they can't,' said Century 21's Mr Fouad. 'Parisians can't afford to buy there so prices may stagnate.'

Pedro Pereira, director of the Orpi Luxembourg agency in the 6th, said 30 per cent of his clients are foreign, and fewer and fewer of them are American. Property prices in US cities tumbled amid bank writedowns and credit losses of about US$600 billion spurred by defaults on sub-prime mortgages.

'Life is getting more difficult there,' said Mr Pereira. Some sellers are cutting prices by five to 10 per cent, he said.

Robert Price, a Texas lawyer who owns a pied-a-terre in central Paris's Marais area, says desirable apartments are still too expensive.

'I thought things were going to sour and apartments would go on sale,' Mr Price, 60, said. The market for choice apartments remains 'tight', he said.

Prices in the 19th and 20th districts, on the northern and eastern fringes of the city, may gain as buyers look for bargains farther from the centre, said Jean-Marie Montazeaud, president of the Chambre des Notaires statistics commission.

Alexandre Malige, 32, a trader at Natixis Securities in Paris, says although he expects prices to drop about 5 per cent, it might not be enough to draw people like him to the market. 'Buyers aren't getting credit,' he said. 'So deals aren't being done.' - Bloomberg

Looking High And Low For Space

Source : The Business Times, October 14, 2008

JTC is exploring new underground, aerial methods of raising industrial space

INNOVATION knows no boundaries. And at JTC Corporation, it is literally scaling heights and breaking new ground.

Going up: An artist's impression of aerial driveways which would be built above public roads, allowing vehicles to reach second-storey units of stack-up factories directly. JTC is working with various agencies such as the Land Transport Authority to explore the concept, which has reached an advanced stage of study and could be piloted in Tuas

In its continuing bid to overcome Singapore's space constraints on industrial growth, the agency is exploring concepts for an underground science city, an underground warehouse and factories linked to aerial driveways.

The first two projects are in the preliminary stages of study, and driving them is a motivation to free up surface land for other uses.

'Besides using the surface as a resource to build on, we are trying to use the underground as an additional resource,' said JTC assistant CEO Ong Geok Soo.

Catering to research and development activities, the underground science city could take shape near the existing Science Park at Kent Ridge. The city would house laboratories and other facilities in estimated cavern space of 290,000 square metres. This would free about 12 hectares of surface land with a plot ratio of 2.5.

The underground science city could complement the Biopolis and support a range of industries, including digital media, computer engineering and biochemistry, Mr Ong told BT. But, 'we will need at least another 11/2 years for more detailed analyses', he said.

JTC's other project is an underground warehouse in Tanjong Kling. Located within the Jurong Industrial Estate, this would provide storage space for manufactured products.

The warehouse could have cavern space of 1,137,500 sq m, freeing 46 ha of surface land with a plot ratio of 2.5.

Beyond subterranean ventures, JTC is also looking above ground. The agency is studying how it can construct aerial driveways to stack-up factories. These driveways would be built above public roads, allowing vehicles to reach second-storey units directly.

'This is part of a land optimisation move for more operations to move into high-density stack-up factories,' said Mr Ong. The aerial driveways would provide ground-floor convenience to these operations, even though they are situated above ground.

JTC is working with various agencies such as the Land Transport Authority to explore the concept, which has reached an advanced stage of study and could be piloted in Tuas.

As the planner and developer of Singapore's industrial landscape, JTC is no stranger to undertaking large and innovative projects. Jurong Island, for instance, was formed by joining seven offshore islands and has become a hub for petroleum, petrochemical and chemical companies.

Such exciting ventures are not without risks. 'We often plan ahead for industry needs and that will always involve a bit of uncertainty,' said Mr Ong.

'But we minimise the risks by working very closely with the Economic Development Board to find out the needs of the industries they are bringing in.'

Using in-house statistics and information from EDB, JTC projects industrial demands and plans for them. Nevertheless, 'there will be some factors which are out of our control,' Mr Ong said. 'Construction costs, for instance, are determined by the market.'

JTC's role is crucial when it comes to strategic projects involving certain scale, risks or technical complexity.

'We maximise the private sector's participation whenever possible,' he said. 'But if the risks or investments involved are too high, JTC will undertake the projects as the development agency.'

Hotel 81 Developer To Start New Brand At Kallang Road Site

Source : The Business Times, October 14, 2008

HOTEL 81-linked Citywide Land has been awarded a hotel site at Kallang/Jellicoe roads and has a new brand in the works.

Caroline Choo, a director at Citywide Land and Hotel 81 Management said: 'We will be creating a new hotel brand for the site, to be completed in two-and-a-half to three years.'

While Ms Choo would not give details of the brand, she said that the new hotel at Kallang/Jellicoe roads is already in the 'development stage' and will be a three-and-a-half to four-star tourist class establishment.

The Urban Redevelopment Authority closed the tender for the site on Oct 9, with only one bid of $51 million from Citywide Land.

Based on the site of 45,415 sq ft and a maximum permissible gross floor area of 204,363 sq ft, the unit land price works out to $249.56 per sq ft per plot ratio (psf ppr).

Citywide Land's bid was the same as the committed bid received by URA in August that led to the reserve list site being put up for public tender.

When the tender was closed last week, market watchers were uncertain if the site would be awarded as only one bid came in.

According to Cushman & Wakefield managing director Donald Han: 'Technically speaking, the bid does reflect the market price.'

He noted that as the committed bid was made in August, several months before the recent meltdown in the global financial markets, it is not unreasonable to expect that the market price could be even lower today.

He also believes the site may have been awarded because of a shortage of hotel rooms here and to 'jumpstart' the rejuvenation of the Kallang area.

Based on the bid price of $51 million and a projected yield of 8 per cent, Mr Han reckons room rates could be in the vicinity of $100-$120 a night.

Knight Frank director (research and consultancy) Nicholas Mak said that it is rare for a development site to be awarded at the trigger price, but the business environment does look challenging.

Despite the credit crunch, he reckons Citywide should not find it too difficult to get funding for the project. Lenders are likely to see potential value in the site because Citywide Land's winning bid is 60-80 per cent lower than some earlier estimated prices in August.

Also in August, a hotel site at Balestier was awarded even though the top bid was below market expectations at $172.09 psf ppr.


Source :《联合早报》October 14, 2008

雅诗阁(Ascott)已经以2150万欧元(约合4550万新元),向法国最大零售业银行——农业信贷银行(Credit Agricole)旗下的保险支部Predica,买下法国巴黎名胜罗浮宫对面的一栋百年历史建筑物。