Thursday, November 6, 2008

SoilBuild's Q3 Net Profit More Than Doubles

Source : The Business Times, November 6, 2008

Property group SoilBuild Group Holdings Ltd on Thursday reported net profit for the third quarter ended September 30, 2008 more than doubled to S$15.35 million from S$4.57 million a year ago.

Revenue for the quarter rose 159 per cent from a year ago to S$68.37 million, due to revenue recognition of some residential projects including Montebleu and Leonie Parc View.

Barring unforeseen circumstances, the group expects to perform better this year with the progressive recognition of revenue from the sold residential property units and the full-year rental contribution from the leased business space properties.

MCL Land's Q3 Net Profit Up On Mera Spring Project

Source : The Business Times, November 6, 2008

Property developer MCL Land Limited on Thursday reported net profit for the three months ended September 30, 2008 rose to US$13.28 million, from US$2.21 million.

Revenue for the period also grew 210 per cent from a year ago to US$78.07 million compared to US$25.18 million, due mainly to the completion of Mera Spring project.

Chairman YK Pang warns the financial crisis would put a downward pressure on short to medium term prices. He added MCL's performance may be affected by the down ward movements of the carrying values of its development properties.

No dividend was declared.

Chip Eng Seng's Q3 Net Profit Falls 46%

Source : The Business Times, November 6, 2008

Property Group Chip Eng Seng Corporation Ltd on Thursday reported net profits for the third quarter ended September 30, 2008 fell 46 per cent to S$11.37 million, down from S$21.11 million a year ago.

Revenue for the three months doubled to S$110.50 million. This was mainly due to a 93.7 per cent increase in revenue contribution from the group's construction projects to S$89.5 million and a 194.7 per cent increase in revenue contribution from its property development project to S$20.6 million.

It recognised revenue from on-going projects and also from projects awarded in FY2007. These include projects such as The Pinnacle@Duxton, The Suites@Central, The Parc Condominium, Sembawang N4C15, Queenstown RC25 and Woodlands Driving Centre.

Its outstanding order book for its construction contracts as at 30 September 2008 stood at S$786 million which will keep the group's construction activities busy up to 2011.

Property Transactions With Contract Dates Between Oct 20th - 25th, 2008

Property Slump Hits NY Commercial Market

Source : The Business Times, November 6, 2008

Market headed for worst year since 2004 as deals plunge 61% through Oct

(NEW YORK) New York City commercial real estate transactions plunged 61 per cent this year through October as the global credit crisis roiled lending and sidelined buyers.

About US$17 billion of transactions have closed so far and the market is headed for its worst year since 2004, according to data from Real Capital Analytics Inc of New York. Sellers have made 237 deals of US$5 million or more, a four-year low in a market that posted a record US$51 billion in sales last year.

'The banks are not lending, and most of them are saying we're done for the year,' said Scott Latham, executive vice-president for New York investment sales at Cushman & Wakefield Inc, the largest closely held commercial brokerage. 'In all likelihood, you will see next to no transactions between now and the end of the year.'

The property recession that began in housing during 2006 is spreading to the commercial market.

About 85 per cent of domestic banks tightened lending standards on commercial and industrial loans to large and mid-sized firms in the past three months, the highest since the Federal Reserve's Senior Loan Officer Survey began in 1991, the Fed said on Monday. Financial firms have recorded writedowns and losses of more than US$680 billion.

The office market will likely get worse next year and may not improve for at least another year, said Andrew Simon, executive managing director for the New York City office of NAI Global, a worldwide network of 325 independent commercial property brokerages.

The bankruptcy of Lehman Brothers Holdings Inc, the takeover of Merrill Lynch & Co and the city comptroller's forecast that New York may lose as many as 165,000 jobs are also weighing on the market. 'I don't think the first half of 2009 is going to be very rosy,' said Mr Simon. 'I believe you're talking about a year from now before you see more movement toward normalcy.'

Buyers and sellers are looking for a bottom, he said. 'People are going to be waiting on the sidelines until a floor is established,' said Mr Simon. 'People aren't going to sell unless they have to sell. Unless that floor is established you will not see significant sales.'

With no let-up in sight for the property industry, investors have dumped real estate investment trusts focusing on offices.

The 14-member Bloomberg Office Reit Index lost 43 per cent in the 12 months through October, led by Maguire Properties Inc and SL Green Realty Corp, which together control almost 50 million square feet of office space in the Los Angeles and New York metropolitan areas.

SL Green, the biggest owner of Manhattan office buildings, has dropped 65 per cent in the 12 months through October. Maguire, the largest owner of downtown Los Angeles office towers, has plunged 87 per cent and is the worst performer in the index.

Vornado Realty Trust said on Tuesday that the credit crisis and the slowing economy may lower profits in future quarters, while reducing the volume of real estate sales and property values.

'Our existing real estate portfolio may be affected by tenant bankruptcies, store closures, lower occupancy and effective rents', which may cut net income, Vornado said. Circuit City Stores Inc, the electronics retailer that announced 155 store closings this week, leases 12 locations from Vornado and pays US$8.1 million in annual rent, Vornado said in a regulatory filing.

Global commercial sales fell 57 per cent this year through August, Real Capital said in an Oct 9 report. In the third-quarter, they fell 64 per cent from the same period a year ago, according to preliminary data from the company.

In the US, sales have declined 72 per cent this year through October, the biggest drop since the firm's recordkeeping began in 2001, Real Capital said. Starting in 2004, property investors, fuelled by cheap and abundant debt, began an unprecedented run to US$514 billion of US deals last year, said Dan Fasulo, Real Capital's director of market analysis.

'I think it will be a while before we get to that figure again,' he said. 'We're going to do less than half of that in 2008.'

September was 'disastrous' for the financial and commercial property markets, Real Capital said. Office sales totalled US$13.4 billion in the third quarter in the US, the lowest since the first quarter of 2004. Sales for all this year are not likely to exceed the volume of the first quarter of last year.

'Until we have some kind of watershed transaction that gives people a sense of what the market is, you're not going to see a lot of transactions,' Lynne Sagalyn, director of the Paul Milstein Center for Real Estate at Columbia University, said in an interview.

Sales involving New York real estate investor Harry Macklowe, perhaps commercial real estate's most prominent casualty of the credit crisis, accounted for more than two- fifths of New York's year-to-date dollar figure through October.

Mr Macklowe paid US$6 billion last year for seven Midtown skyscrapers, primarily using short term debt. His lender, Deutsche Bank AG, took control of the towers in February and sold five of them for US$2.83 billion. Mr Macklowe also sold the General Motors Building and three other buildings for US$3.97 billion to Mortimer Zuckerman's Boston Properties Inc.

Second-quarter commercial and multi-family mortgage originations tumbled 63 per cent in the second quarter from the same period a year earlier, according to the Mortgage Bankers Association (MBA) in Washington.

Office property loans fell 65 per cent, retail property loans fell 63 per cent and industrial property loans slid 57 per cent, the MBA said. Loans slated for the commercial mortgage- backed securities market declined 98 per cent in the second quarter from a year earlier, the group said.

Financing of deals by so-called portfolio lenders, companies such as commercial banks and life insurers that originate loans and keep them on their books, was also down. Loans by banks fell 29 percent and 27 percent for insurers, the MBA said.

The few deals being made usually require sellers to either provide financing or allow buyers to take over their existing loans, said Howard Michaels, chairman of the New York-based Carlton Group LLC, a real estate investment banking firm, which arranged the recapitalisation of the GM Building for Mr Macklowe in 2004, and Chicago's Sears Tower last year.

At 1372 Broadway, a 20-storey pre-World War I office building in New York's Garment District, buyer Lloyd Goldman received financing for 86 per cent of the tower's cost from the seller, Wachovia Corp, the lender being acquired by Wells Fargo & Co.

Wachovia and partner SL Green sold the building for US$274 million, US$61 million less than what they paid a year before, according to city records. The price dropped US$20 million from the signing of the contract in July and last month's closing, said people familiar with the transaction.

A standoff between sellers and buyers over price appears to be stalling the market, said Mr Michaels, who arranged financing for the 1372 Broadway sale.

'Most people are waiting to see how 2009 shakes out. Until then, nobody's putting any buildings on the market unless they have to,' he said. 'I don't think that anybody would voluntarily sell into this market right now.'

Two properties remain on the market five months after they went up for sale. They are: Worldwide Plaza on Eighth Avenue, a 1.7 million square-foot tower, and 1540 Broadway in Times Square, the former Bertelsmann Building.

The seller of both buildings: Harry Macklowe's lender, Deutsche Bank. -- Bloomberg

Jakarta Property Sector Expects Slowdown

Source : The Business Times, November 6, 2008

(JAKARTA) Indonesia's property business in Jakarta and surrounding areas will see a slowdown next year due to increases in interest rates, inflation, prices of materials and rental costs, an official was yesterday quoted by The Jakarta Post as saying.

'The impacts of the global economic crisis will likely affect the domestic property sector and indications of a slowdown in supply and demand in Jakarta and its surrounding areas that have already been noted since October,' said Dini Priadi, head of marketing and communications at PT Procon Indah.

On the supply side, she said, high interest rates, inflation and prices of materials had discouraged developers from continuing their projects.

According to her, the low purchasing power of Indonesians - already affected by high interest rates, slower economic growth and high inflation - will hurt the sector on the demand side next year.

Indonesian central bank's interest rate currently stands at 9.5 per cent, with accumulative inflation already hitting double digits in the first 10 months of 2008. -- Xinhua

UOL Surprises With 14% Profit Gain

Source : The Straits Times, Nov 6, 2008

PROPERTY group UOL defied the gloom by posting surprisingly good third-quarter results yesterday, thanks to higher revenue from new launches.

Net profit for the third quarter rose 14 per cent to $73.5 million while revenue jumped 61 per cent to $267.9 million.

The launches of Panorama in Kuala Lumpur and Breeze by the East here earlier this year and Duchess Residences last year were the key drivers of the robust result.

They helped lift revenue from the property development segment by 229 per cent to $136.9 million - more than half of total revenue for the three months to Sept 30.

Revenue from property investments also improved 27 per cent. This was due largely to higher average rental rates at retail and office spaces in Novena Square, United Square and Odeon Towers, and the opening of the Pan Pacific Serviced Suites in April.

The share of profit of associated companies also gained 84 per cent to $15.1million for the quarter with the launches of One North Residences and Nassim Park Residences.

Earnings per share rose from 8.11 cents to 9.24 cents, while net asset value per share was $4.84 as at Sept 30, down from $4.96 as at Dec 31 last year.

For the nine months, revenue increased 24 per cent to $638.9 million but net profit fell 39 per cent to $261.4 million.

UOL's listed subsidiary Hotel Plaza posted a modest 2 per cent revenue rise for the third quarter to $77.7 million as gains from the group's Singapore hotels were offset by weaker performance from hotels in Malaysia and China.

Net profit for the quarter fell 4 per cent to $13.5 million. For the nine months, revenue rose 11 per cent to $243.3 million and net profit advanced 10 per cent to $44.3 million.

Despite UOL's surprising results, the global financial crisis and a weakening external environment will likely affect the property market.

UOL said that with the tightening of credit and a weak stock market, buyer sentiment in the residential property market here would be hit.

With firms looking to scale down their activities, demand for office space will also be affected and rental rates are likely to weaken.

The slowing global economy will also hit the hotel industry here and across the Asia-Pacific region as business and leisure travellers cut down on trips.

Hotel Plaza expects its hotel revenue to decline.

UOL Reports 14% Rise In Q3 Earnings

Source : The Business Times, November 6, 2008

Revenue jumps 61% to $268m; subsidiary Hotel Plaza's Q3 net down 4% to $13.5m

BUCKING the trend of falling profits at many Singapore-listed property developers, UOL Group yesterday reported that its third-quarter net profit rose 14 per cent to $73.5 million, from $64.5 million a year ago.

Slowdown effect: Hotel Plaza expects revenue for its hotels in Singapore and the region to decline in future

Group revenue for the third quarter ended Sept 30 jumped 61 per cent to $267.9 million - up from $166.7 million for the corresponding three months of 2007.

The increase was largely from the progressive recognition of revenues from the sale of homes, including those in Panorama and Breeze by the East which were launched earlier this year.

Revenue from property investments also improved due to higher average rental rates for the company's investment properties and contribution from the Pan Pacific Serviced Suites, which opened in April 2008. Since its opening, the five-star serviced suites had improved its occupancy to almost 85 per cent.

Earnings per share for Q3 2008 rose to 9.24 cents, from 8.11 cents a year ago.

For the first nine months of 2008, UOL's net profit fell 39 per cent to $261.4 million - from $426.8 million in 2007 - mainly due to lower fair-value gain on investment properties and absence of gain on sale of an investment property. Revenue for the first three quarters rose 24 per cent to $638.9 million, from $514.1 million for the same period in 2007.

UOL sounded a warning as it looked ahead. The tightening of credit and the weak share market will affect buying sentiment in the Singapore residential property market, UOL said.

Demand for office space will also be affected as companies scale down their activities and rental rates are expected to soften, the company added.

Separately, UOL's listed subsidiary Hotel Plaza said that its net profit decreased marginally by 4 per cent to $13.5 million, from Q3 2007's $14.1 million, as the company was hit by higher operating expenses, among other things.

Hotel Plaza's Q3 revenue rose slightly by 2 per cent to $77.7 million from $76.3 million for the year-ago period. The increase was due largely to better performance from the company's Singapore hotels but was offset by the weaker performance of hotels in Malaysia and China.

Earnings per share fell to 2.25 cents, from 3.52 cents a year ago.

For the nine months ended Sept 30, Hotel Plaza's net profit rose 10 per cent to $44.3 million, from $40.2 million a year ago. Revenue rose 11 per cent to $234.3 million, from $211.7 million in 2007.

Hotel Plaza expects revenue for its hotels in Singapore and the region to decline in future. 'The slowing global economy will likely lead to a decline in business and leisure travel which will in turn affect the hotel industry in Singapore and the Asia-Pacific region,' the company said.

UOL gained two cents to close at $1.92 yesterday. Hotel Plaza gained one cent to close at $1.30.

Property Ventures: Popular Has To Watch Its Books

Source : The Business Times, November 6, 2008

THE financial mayhem has affected almost every part of the economy but the pain has certainly been felt most strongly in the equity and property markets. Share values have plunged, real estate prices have dipped and most investors are keeping their feet dry from both fields.

It was therefore surprising to see Popular Holdings launch a rights issue last week. Not only is it trying to raise up to $22.2 million in a bearish stock market, most or even all of the net proceeds would go into property development.

While Popular is a household name when it comes to bookstores and education materials, it is a relatively new real estate player, having joined the scene in 2006 when the market was just beginning to pick up.

Popular's fundraising attempt at this juncture is likely to fuel speculation about its ability to support its property investments. The company has put up more than $71 million in four land purchases so far.

The tightening credit situation is certainly not working in Popular's favour. Banks have reportedly become more selective in extending loans, especially when the cooling property sector is involved. For small developers with no track record, loans are likely to come with more or tougher conditions.

Project financing

In fact, Popular's move reinforces concerns that emerged as early as a year ago - that non-core developers which jumped onto the property bandwagon might have trouble financing their projects should the market head south.

It does not help that Popular has two construction projects eating into its resources - One Robin and 18 Shelford. One Robin is already open for sale and could bring in cash as development progresses. This in turn would help fund the construction.

Unfortunately, 18 Shelford will not afford Popular such a breather. Construction is underway but the development has not been launched for sale and will not be receiving any proceeds. This is where funding could get a little tight and some extra cash may come in handy.

Few details

Popular's statement last week revealed few details on how proceeds from the rights issue would be used, save that they would 'strengthen the capital base', keep its property development business 'properly funded', and allow it to be 'selective in timing its property marketing and sales activities'.

For now, Popular's financials look sound. With cash and fixed deposits amounting to $45.3 million as at July 31, the group is more than able to settle the $13.7 million debt due within a year or on demand. Its net gearing ratio also rests at a comfortable 0.14 times.

Besides, Popular's investments in One Robin and 18 Shelford are far from dire. At the very least, both are situated in Districts 10 and 11, locations which tend to be fairly sought after by both locals and foreigners.

On the whole, Popular is nowhere near a solvency crisis. But the rights issue does still send out a warning signal on the short-term liquidity of its property business.

While the foray may bring huge returns, it is also exposing the latecomer to large risks, forcing it to shore up its cash position. Popular will need to watch its books closely to make sure that such risks do not spill over and affect its core retail and publishing business.

Prime Office Rents Falling Amid Turmoil

Source : The Straits Times, Nov 6, 2008

Rates are back to levels a year ago as landlords act to keep tenants

AFTER rising steeply for several years, prime office rents are on the way down as landlords move to retain good tenants in uncertain economic times.

In the wake of the global financial crisis, which erupted in mid-September, these prime rents are now back to levels seen about 12 months ago.

They fell 5 per cent last month and could fall another 10 to 20 per cent over the next six months, according to consultancy Cushman & Wakefield.

Office rents in general started falling in the third quarter ended Sept 30, given the weaker economic outlook.

But the fall in net effective prime office rents was even more pronounced last month as landlords became more flexible in negotiating rents, experts said.

'It is almost as if it was the landlords who blinked first,' said managing director Douglas Dunkerley of Corporate Locations, which helps firms find office space.

'The reason we saw such a swift change is that landlords have gone out of their way to retain their current tenants who have lease renewals coming up over the next six months.'

He said the search firm is not seeing many 'distressed' relocations by tenants as many had moved to take advantage of cost-saving opportunities.

'But now, more landlords are recognising the market has changed and are determined to keep their tenants,' he said.

Latest estimates from Cushman & Wakefield show that gross prime office rents dropped 5 per cent from September to reach $14.05 per sq ft last month. This cut prime office rents to levels of a year ago, said its head of research services, Asia-Pacific, Mr Ang Choon Beng.

'The difference though is that a year ago, rents were being adjusted upwards every month and now rates are being adjusted downwards at almost the same speed,' said Mr Dunkerley.

Cushman & Wakefield already noted a quarter-on-quarter fall in prime office rents in the three months ended Sept 30 - a reversal from straight quarterly gains for more than four years prior to that.

The rent rises - which reached nearly 95 per cent a year in Raffles Place last year - slowed this year. Rents peaked around late August.

Government data also showed that office rents fell in the third quarter, though by a smaller 0.8 per cent. Knight Frank said earlier those figures reflected growing resistance by some tenants to renew leases at higher costs, given that the current economic uncertainty will impact business profits.

DTZ executive director Cheng Siow Ying said landlords are prepared to look at creative lease packages with rent-free periods so the effective rental rates are lower. Landlords have not had to give rent-free holidays in over two years, said Mr Dunkerley, adding that nearly every landlord cut asking rents last month.

But the market is generally more subdued now, with tenants in a wait- and-see mood, experts said.

Supply-wise, there are more choices now than just a few months ago, but the bulk of the fresh office space supply will come onstream from 2010. So, while the downward slide in office rents is expected to continue, the speed should slow temporarily till nearer to 2010, said Mr Dunkerley.

Still, Cushman's projection is for prime office rents to fall by up to 20 per cent in the next six months. 'Given the sharp run-up in prime office rentals over the past two years, we are circumspect about the current downward trend of prime office rentals,' said Mr Ang.

The rental moderation is 'ultimately healthy' for Singapore's long-term prospects as it lowers the overall cost of doing business here. The slide is also a signal to firms that the office rental market is efficient and can adjust quickly in a changing market, he said.

Mr Dunkerley is looking at a fall of possibly 20 to 30 per cent over the next 18 months, which would ensure Singapore remains an attractive business location and in good shape to compete with other major regional centres.

Gloom For Gaming Sector ?

Source : The Straits Times, Nov 6, 2008

CREDIT ratings firm Moody's said on Thursday it has a 'negative' outlook for Asia's gaming sector in the next 12-18 months due to the economic uncertainty.

Casino operators in Asia's gaming haven of Macau will be the most affected, with the industry in Australia and Malaysia also expected to be hit, it said in a report.

'As in the US, the gaming sector in the Asia-Pacific is facing increasing operating pressures, which vary by company and country,' it said.

Cutbacks in discretionary spending, intense local competition and regulations on travel are expected to hurt the earnings of casino operators, Moody's said.

'In addition to these immediate concerns, gaming operators face the challenge of managing large acquisitions or capital expenditure in an uncertain environment,' it said.

The agency said the decline in revenues may worsen in Macau when new casinos open in the next six to 12 months.

The city's gaming revenues dropped 10 per cent in the third quarter, according to official figures, partly due to tougher visa restrictions on visitors from mainland China. It was the second consecutive quarter that gaming revenues fell there.

'In Australia, a slowing economy has darkened the outlook for the country's gaming sector because lower disposable incomes could lead to reduced spending at casinos,' Moody's said.

It said it recently revised its outlook for Australian casino operator Crown to negative 'on concerns over the company's ability to achieve its financial targets'.

Malaysia's gaming sector will also be impacted but a projected economic growth of 3.5 per cent in 2009 and the absence of local competition could support the industry, it said.

Moody's warned that 'aggressive expansion' by some casino firms amid the uncertain credit and economic environment contained risks and could result in project delays, but said the situation among its rated companies was manageable.

'No issuers have large maturing short-term debt and they have all secured financing for planned capex requirements or acquisitions.

'The challenge for some will be to ensure that planned capital expenditure remains within available funding,' it said. -- AFP