Some Developers May Turn Residential Projects Into Serviced Apartments

Source : Channel NewsAsia, 20 April 2009

Some private property developers are thinking of turning their residential projects into serviced apartments.

Ascott Hospitality said it has been approached by some developers recently, but declined to say which were considering such a move.

Experts, however, said such conversions are unlikely to gain popularity in Singapore anytime soon as there are many factors against it.

Private home sales may have been on the rebound over the past two months, but that has largely been restricted to the mass to mid-market segment where developers used various pricing strategies to attract buyers.

Many developers are grappling with a poor global economic outlook and tighter credit conditions.

Gerald Lee, chief executive officer, Ascott Hospitality, said: "Now at a time where it's more challenging for them to sell, they may want to do something about that.

"So one good solution is to convert them to serviced residences so it can be rented out for people relocating to the city. So there are more owners coming to... (ask) us to manage those properties for them."

Ascott Hospitality said it is still evaluating proposals as not all properties fit the bill. For example, location is extremely important as the target clientele tends to have specific needs. Proximity to areas like shopping centres, or business parks is almost essential.

Projects found in central locations like the business district with small units and good amenities could consider going the serviced apartment route.

The Urban Redevelopment Board also needs to approve the change in land use. And if some units in the development are already sold, the property's management committee must agree to the plan.

Some analysts said the numbers do not look good for such a conversion.

Karamjit Singh, managing director, Credo Real Estate, said: "It's really a question of the operating cost here in Singapore. They are quite high. At the same time property costs are very high to a point where the net revenue accrued from operations of a serviced apartment won't necessarily yield as much returns as an investor would be happy with.

"In the context of our capital values here, it is not very popular because yields for serviced apartments range from three to four per cent or so. So it is not very attractive unless they were designed right from scratch for serviced apartments and they were bought for that purpose, factored right from day one."

To date, Ascott Hospitality has already turned down one proposal in Singapore.

But it said that conditions in markets outside Singapore, such as China and the Middle East, look very attractive for this trend. - CNA/vm

Almost All Units Launched For Sale At The Arte At Thomson Sold

Source : Channel NewsAsia, 20 April 2009

Almost all of the 180 units for sale at The Arte at Thomson have been sold since the project's official launch earlier this month.

A total of 170 units has already changed hands, with 20 sold over the weekend for some S$30 million.

More than 1,000 visitors made their way to the 336-unit, freehold development's showroom last weekend.

Developer City Developments sees this as evidence that buyers have greater confidence in the property market now.

Private home sales in Singapore in the first three months of 2009 hit 2,660 units. That was about 62 per cent of total new home sales in 2008. - CNA/vm

20 Units Of The Arte Sold Over Weekend

Source : The Business Times, April 21, 2009

This takes total sales since the official launch to 170 units

CITY Developments Ltd (CDL) sold 20 units at The Arte at Thomson over the weekend. This takes total sales since the property's official launch to 170 units, with last weekend's sales fetching a total of $30 million.

'The sales volume indicates that buyers have greater confidence in the property market and in the future of their investment. This reinforces CDL's view that the current market is now attracting savvy but cautious investors,' said Chia Ngiang Hong, Group general manager of CDL.

Buyers' interest was also evidenced by the strong turnover of over 1,000 visitors at The Arte's showroom over the weekend.

Among other factors, these prospective buyers were drawn by the property's location and proximity to a MRT station, according to a CDL release.

The Arte is located within the Thomson area with convenient connections to the City and the expressways. It is also a short walk from Toa Payoh MRT station.

Priced at $880 psf on average, the freehold project comprises two 36-storey towers and will be completed in 2012. Most of the 336 units available are going for under $2 million.

Buyers can opt for CDL's interest absorption scheme (IAS), which allows them to defer the bulk of their purchase until The Arte's completion on the condition that they take up a housing loan at the point of sale.

A majority of buyers of The Arte have private home addresses and many say they want to invest in another property or to move into a new and upscale residence.

Singaporeans' renewed interest in private property saw the sales of 2,660 private homes in the first three months of 2009, which is about 62 per cent of total new home sales in 2008, according to the CDL release.

Recession Will Last At Least 24 Months, Says Economist

Source : The Business Times, April 21, 2009

(HONG KONG) Nouriel Roubini, the New York University professor who predicted the financial crisis, said that he was 'still bearish' and that an economic recovery is going to take 'longer than expected.'

Prof Roubini: 'The current rally is a bear-market rally... This is a dead-cat bounce, sucker's rally, whatever you want to call it.'

Corporate earnings will 'surprise on the downside,' Prof Roubini said in a speech in Hong Kong yesterday. 'Lots of banks, even the better ones, are going to be in trouble.'

Banks around the world have reported US$1.3 trillion in credit losses tied to the housing market collapse since 2007. The deficits, which spurred the first simultaneous recessions in the US, Europe and Japan since World War II, pushed the American government to pledge US$12.8 trillion to stabilise the banking system and revive economic growth.

The Standard & Poor's 500 Index, which tumbled 38 per cent in 2008, has rallied 29 per cent after sinking to a 12-year low on March 9. Prof Roubini said that day that the S&P 500 is likely to drop to 600 or lower this year as the global recession deepens.

George Soros, the billionaire hedge-fund manager who made money last year while most peers suffered losses, said on April 6 that US stocks weren't at the start of a bull market yet because the economy is still shrinking.

'The current rally is a bear-market rally,' Prof Roubini told reporters after his speech. 'I don't expect a 50 per cent adjustment that I expected two years ago, but this is a dead-cat bounce, sucker's rally, whatever you want to call it.'

Prof Roubini's view contradicts that of investor Marc Faber, who said on April 13 that the S&P 500 may rise to 1,000 in the next three months as government spending boosts bank profits.

Markets are 'way ahead' of real economic data and this recession will last at least 24 months, Prof Roubini said. He predicted China's economy will grow 5.5 per cent in 2009, which is slower than the 8 per cent expansion the Chinese government is targeting.

Prof Roubini has stayed away from 'risky assets' including equities, and 95 per cent of his savings have gone into cash.

'Reserving capital, compared with losing 50 per cent of it, is good,' he said. -- Bloomberg

DPS Buyer With 20 Units At The Fernhill Drags Feet On Payment

Source : The Business Times, April 21, 2009

Episode watched by developers that had sold multiple units to foreigners under DPS

A China investor that bought 20 units at MCL Land's The Fernhill condo has failed to pay roughly $30 million that became due when the project received Temporary Occupation Permit recently.

MCL sent the notice seeking payment to buyer Concordia Overseas Pte Ltd 14 days ago. By the due date yesterday, the payment had still not been made, BT understands.

This development on the deferred payment scheme (DPS) - which was scrapped in October 2007 - is being closely watched.

Under the Sale and Purchase Agreement (SPA), MCL will now wait for another 14 days and if the payment is still not made by then, the developer can serve a 21-day notice on Concordia to repudiate the SPA. After that, if there's no payment, MCL would be entitled to treat the 20 per cent paid so far by Concordia as forfeited and resell the units.

Concordia, controlled by Hong Kong resident Chan Ki, who has developed commercial buildings in Shanghai, had bought all 25 apartments in The Fernhill in January 2007 at $1,410 per square foot.

It flipped five of these units to foreigners at an average price of nearly $2,200 psf later the same year. JTResi brokered both sets of deals for the five-storey freehold project at the corner of Orange Grove and Fernhill roads.

Concordia bought the units from MCL on DPS, and paid an initial 20 per cent of purchase price in 2007. The 20 units it still holds were purchased for nearly $47 million and it was asked to pay another 65 per cent - around $30 million - after the project received TOP last month.

In case there is a hitch in receiving the payment, analysts say, MCL Land is pretty well covered, as it can walk away with the 20 per cent downpayment from Concordia. Its 'breakeven cost' so to speak on the 20 units would be $1,128 psf ($1,410 psf sale price to Concordia less the 20 per cent collected so far).

Based on recent transactions at Gallop Gables on Farrer Road and The Verdure on Holland Road, MCL should easily be able to sell the units individually for more than that sum. An average resale price of $1,250 or so could mean another round of profits.

BT understands that MCL did not extend DPS to the buyers of the five units who picked up their apartments from Concordia in the subsale market. They have been making normal progress payments to MCL.

While MCL is on a firm footing, other developers who sold their projects on DPS at peak prices in 2007 and early 2008, may have reason to worry in case buyers do not pay up once the projects are completed in the coming months.

This is because the values of many such units could be down more than the 20 per cent initial payment and the developer would be out of pocket if it were to treat the SPA as being repudiated. Such developers may have to sue buyers for specific performance - complete the SPA at the contracted price.

But some developers may agree to a payment extension or restructuring for local buyers in hardship.

Developers may find it tough to take legal action against foreign buyers domiciled offshore who walk away from purchases. 'The practical thing to do may be to treat the SPA as repudiated, take possession of the units and try to resell them or lease them out. Once you go down the route of suing defaulting buyers for specific performance, it will be some time before you can take possession of the units,' a developer said.

In case The Fernhill units end up being resold by MCL, the price could have implications for neighbouring projects. The price benchmark may hit DPS buyers in these projects who have yet to secure a loan. Even those that have secured loans may be affected as the bank may now assume a lower value for the properties and ask borrowers to top up more equity.

Some analysts said that the latest development at Fernhill may be a sign of things to come as more projects are completed. The situation of multiple unit buyers, especially if they are foreigners, will be keenly watched.