Private Home Sales Dip

Source : The Straits Times, Jan 15, 2009

ONLY 131 new private homes were sold last month, down from 193 in November, but up from 118 in October, according to data released by the Urban Redevelopment Authority on Thursday.

Developers launched just 157 units last month, down from 382 in November and from 174 in October when the property sales sank to lows last seen in 2003 Sars period. - ST PHOTO

Developers launched just 157 units last month, down from 382 in November and from 174 in October when the property sales sank to lows last seen in 2003 Sars period.

A total of 442 units were sold in the fourth quarter of last year, just a tad above the 427 units sold in the first quarter of 2003 when the Sars outbreak crippled economic activity.

The top-seller in December was the 104-unit Newton Edge in Makeway Avenue. Developer Macly Capital sold 43 units in December at a median price of $1,200 per square foot.

The 88-unit development Nova 88 in Balestier did relatively well, with 10 units sold at a median price of $988 psf.

Most of the other projects managed to sell less than three units each.

Buyers, Sellers At Impasse

Source : TODAY, Thursday, January 15, 2009

Owners still asking for sky-high prices while bank valuations fall

A DOWNTURN is usually the time for bargain-hunters to snap up properties on the cheap. But for now at least, the reality could not be more different, as prospective buyers discover.

Said Ms K Chan, a HDB dweller looking to upgrade to a condo: “I thought this would be a good time to pick up a good bargain. But owners are still asking for sky-high prices.”















According to industry players, the volume of transactions in the last month or so has dropped to a level only witnessed during the Sars outbreak when the market was practically frozen.

The reason? A growing gap between falling bank valuations — which determine how large a bank loan buyers can take — and high asking prices by highly-geared sellers needing to pay off their outstanding loans.

A random check by Today on 15 homes for sale — condos and various landed property types spread across the island — found stark differences between what owners are asking for and preliminary valuations by independent professionals.

While it is normal for initial asking prices to be higher than the conservative value banks attach to a property, in six cases that Today found, the valuations were less than two-thirds of the asking price.

For instance, while an owner of a four-storey bungalow in Holland Grove Drive was asking for $ 7.2 million, his property was valued at just $3.3m. Likewise, a Caribbean at Keppel Bay unit valued at about $700,000 was being touted for sale for $1.1m.

‘Better for sellers to cut losses now’

Property agent Michael Leong lamented: “It’s very difficult to negotiate deals these days. Both sellers and buyers would hesitate for really long and in the end, they still cannot agree on the price.”

Chesterton Suntec International director Colin Tan said the property bull-run of yesteryear – which pushed prices to record levels – has resulted in once-overly-bullish investors held hostage by the large loans they undertook.

HSR Property Group executive director Eric Cheng thinks this is especially so in the luxury segment, where “people are more likely to be highly geared and own more than one property”.

For sellers unwilling to budge on their asking price, the latest Citigroup report on the property market makes for grim reading.

The bank forecasts mid-tier to high-end residential property prices here to fall another 35 per cent, bringing “prices back to 1998 levels”. For prices of luxury properties such as Ardmore Park, the fall would be even steeper – up to 60 per cent from their peaks two years ago, Citi estimates.

Noting the current general scarcity of cash, Mr Tan said: “For sellers, maybe it’s better for them to cut losses now, rather than take a bigger loss later on. But sometimes you have geared up so much, the situation is out of your hands – you are stuck.”

‘Buyers can wait’

Before buying a property, buyers can request from banks a preliminary valuation – determined by an independent professional – which estimates a property’s open market value.

Such a valuation takes into account, among other factors, recent transactions and property launches in the vicinity. The banks would then carry out a final valuation onsite before granting a loan, capped at 90 per cent of the purchase price or valuation, whichever is lower.

According to Mr Cheng, the final valuations usually do not veer much from the preliminary ones. In rare cases, banks may increase their valuation – by up to 20 per cent – to match the asking price, provided they are convinced of the buyers’ ability to finance the loan, he said.

Still, the lack of activity in the property market, to some extent, means valuers are groping in the dark when setting the property value. “A lot of it is based on gut-feel,” said Mr Cheng.

But Mr Dennis Ng, spokesman for mortgage consultancy portal www.housingloansg.com, believes that valuations accurately reflect current dire sentiments. He predicts the impasse will be broken in the second half of the year – when it becomes a buyers’ market. “Ultimately one party will give way,” said Mr Ng.

For now, Chesterton Suntec International’s Mr Tan has this advice for prospective buyers: “You can afford to wait. Only go (into a transaction) when it is a property you really like and it is within your affordability.”

UOL Group Makes Bid For UIC

Source : The Straits Times, Jan 15, 2009

Firm controlled by Wee Cho Yaw offers $1.20 a share for stake

UOL Group has triggered the biggest corporate play since the financial crisis flared last year by offering to buy United Industrial Corp (UIC) in a deal that values the real estate developer at $1.6 billion.

UOL, a property firm controlled by United Overseas Bank (UOB) chairman Wee Cho Yaw, will pay $1.20 a share for the stake it does not already own in UIC, according to a filing on the Singapore Exchange yesterday.

That is a 9.1 per cent premium to UIC's last traded price of $1.10.

UOL Equity Investments - a wholly owned unit of UOL - and the relevant parties, including UOB, Haw Par Corp and Mr Wee himself, now own about 29 per cent of UIC.

Under the proposed deal, UOL Equity Investments has agreed to acquire 15.86 million UIC shares, or 1.2 per cent of the issued shares, from unnamed sellers.

This means UOL and the relevant parties will own about 30.2 per cent of UIC. As they have crossed the 30 per cent mark, they will have to make a mandatory general offer with the aim of reaching a controlling stake of more than 50 per cent.

UOL and UIC clearly have areas of common interest, and a merger could spell dividends.

The jewel in the UIC crown is its 72.4 per cent stake in listed property group Singapore Land (SingLand), which owns various office and retail properties, including the Marina Square shopping mall.

UOL has a stable of properties in Singapore and abroad, including Odeon Towers, Faber House, Novena Square, United Square, as well as Grand Plaza Parkroyal Kuala Lumpur and Grand Plaza Parkroyal Penang in Malaysia.

If, for instance, UOL and the relevant parties accumulate more than 50 per cent of UIC, the offer turns unconditional, which means the deal will have to go through, being no longer dependent on any conditions to succeed.

In such a scenario, UOL will also be required to make a mandatory takeover offer for SingLand at $3.57.

Market watchers think that UOL's offer of $1.20 per share is too low.

While UIC stock has plunged from its year-high of $3.17 last June, its net asset value per share as at Sept 30 stood at $2.48. At $1.20 a share, UOL is getting a 'bargain', they say.

Earlier this month, Filipino tycoon John Gokongwei raised his stake in UIC to 35.05 per cent after his investment vehicle, Telegraph Developments, bought 500,000 shares at an average price of $1.085 each.

This was on top of purchases of 1.095 million shares at between $1.002 and $1.085 apiece that Mr Gokongwei, who is UIC's deputy chairman, made in December.

Two questions come to mind.

Why is Mr Wee offering such a low price for UIC, even after factoring in market conditions that have dragged down asset valuations?

'He could have offered $2, or slightly more. Shareholders may have been more inclined to accept,' said a fund manager.

One argument is that Mr Wee, an astute banker and dealmaker, wants to pay as little as possible and may be looking for distressed sellers who need cash.

Other UIC shareholders include JG Summit Holdings, Morgan Stanley and Fullerton Fund Management Company, a wholly owned unit of Temasek Holdings.

JG Summit Holdings is the holding company of JG Summit Philippines, which in turn is the holding company of Telegraph Developments.

For one thing, Mr Gokongwei is unlikely to accept the offer.

He made a takeover bid for UIC in 2005, after his stake rose above the 30 per cent mandatory takeover trigger.

His offer was at $1.09 a share, which then prompted Merrill Lynch, the independent financial adviser to UIC's independent directors, to say it 'is not fair from a financial point of view'.

Though the bid failed, it allowed Mr Gokongwei to accumulate up to 1 per cent of UIC's share capital in any six-month period without triggering further mandatory takeover offers.

The second question surfaces: What exactly is Mr Wee up to?

There is no doubt he sees something in UIC. UOL has said the deal would allow it to 'better align' the strategic objectives of UIC with its own.

If Mr Wee wanted to 'prise away' UIC, UOL would have come up with a higher bid, but the fact that it did not leaves some observers to believe that UOL's move is purely tactical.

'In merger and acquisition, you never show your best hand,' an investment banker said.

Mr Wee's UOL could even end up doing a Mr Gokongwei-style takeover, suggested one observer, gradually nibbling away at UIC and shoring up stakes in the property-based conglomerate so long as the 1 per cent threshold is not breached in any six-month period. It remains to be seen what Mr Gokongwei will do.

UOL said yesterday it does not intend to revise the offer price 'except that the offerer reserves the right to do so in a competitive situation'.

An analyst said: 'I would love for Mr Gokongwei to trump the bid. It sends a strong signal to the market that there are people who aren't bothered by the credit crunch and can look to long-term growth in the Singapore property market.'

UOL Makes Bid For UIC

Source : The Straits Times, Jan 14, 2009

UOL Group , a property firm controlled by United Overseas Bank Chairman Wee Cho Yaw, on Wednesday offered to buy United Industrial Corp (UIC) in a deal that values UIC around S$1.6 billion.

UOL, which currently controls 30.2 per cent of UIC, will pay $1.20 for every UIC share it does not own, according to a filing on the Singapore Exchange.

That represents a premium of 9.1 per cent over UIC's last traded price of $1.10 a share. The shares were suspended earlier on Wednesday.

David Lum, an analyst at Daiwa Institute of Research, said it appeared UIC's major shareholders believed the company to be significantly undervalued.

'Do I see that happening in other companies? Yes. If you know the intrinsic value of your assets, which has been grossly undervalued in the market, you could acquire those assets,' he said.

Shares in UIC, which is part-owned by the Wee family, have fallen from a 12-month high of $3.17 in June last year.

UOL owns various properties in Singapore, Malaysia, China, Australia and Myanmar as well as the firm that manages the Pan Pacific hotel chain. Its current market capitalisation is around $1.75 billion.

'As the principal activities of the UOL Group and the UIC Group are substantially the same, UOL is of the view that the offer represents an opportunity to better align the strategic objectives' of the two firms, UIC said in the filing.

UIC's main asset is its 72.4 per cent stake in another listed company called Singapore Land (SingLand) , which owns various office and retail properties including Singapore's Marina Square shopping mall.

According to UOL, it will be required to make an offer for SingLand at $3.57 a share if or when its offer for UIC becomes unconditional. SingLand shares were last traded at $3.42 apiece.

UOL is being advised in its takeover bid by United Overseas Bank, DBS and ANZ. -- THOMSON REUTERS

Help For Centris Condo Buyers

Source : The Straits Times, Jan 14, 2009

Developer offers to help secure bank financing, in bid to avoid defaults

DEVELOPERS of a Jurong condominium project have offered to help buyers secure bank financing for their units in a bid to head off any defaults or fire sales.

Those who bought at the launch of The Centris in 2006 but have yet to secure financing can meet loan officers from the three local banks at a roadshow organised by the developer this weekend.

The Centris, in Jurong, was offered under the deferred payment scheme and well before the market weakened. -- ST PHOTO: STEPHANIE YEOW

Prime Point Realty Development is taking a proactive approach because the 610-unit project was offered under the deferred payment scheme and well before the market weakened.

With deferred payment, buyers secure a unit with a small amount paid up front - 10 to 20 per cent of the purchase price. The rest is due once the building gets its temporary occupation permit (TOP).

That will be around June, but the rapid deterioration in the economy, falling home prices and tightening of credit markets may have left some buyers at risk of not meeting their full payment.

The added danger is that this could result in fire sales or eventual defaults.

It has prompted Prime Point Realty to write to buyers asking if they want loan advice. About 250 buyers who have yet to obtain loans or who are keen on switching to a better loan rate have responded.

The roadshow with United Overseas Bank, DBS and OCBC will be held this weekend at Jurong Point, which is linked to The Centris.

'(It will) make it very convenient for our purchasers to discuss their end-financing arrangements if they have yet to do so. We believe that this is the prudent thing to do,' said Mr Michael Leong, executive director of Guthrie Properties, one of the partners in the Prime Point Realty joint venture.

The others are Lee Kim Tah Holdings and TMW PCCW, a German investment fund managed by Pramerica Real Estate Investors (Asia).

Representatives from property firm ERA, which marketed The Centris launch, will also attend the roadshow. ERA can help sell the units of buyers who cannot get sufficient financing.

The roadshow initiative has baffled one property consultant, who said The Centris was launched at a low price. He said the developer's risk of being hit by defaults or being stuck with returned units is small compared with projects launched at the height of the market.

It is also a mass-market condo that would have attracted mostly owner-occupiers, added the consultant.

Prime Point Realty's risks are limited to the original buyers as the developer does not offer the deferred payment scheme for sub-sales.

The 99-year leasehold condo sits on top of the new extension of Jurong Point mall and is near the Boon Lay MRT station and bus interchange.

It was first sold at an average of just below $500 per sq ft (psf). Its launch came before home prices peaked in 2007 and current price levels are still hovering above launch prices.

Sales registered last month show prices of between $557 psf and $610 psf. One of them, a $561 psf deal, netted the seller a profit of about $130,000 as he had bought cheap during the preview.

'If any of the buyers have problems financing their units and want to sell at (the launch price), there will be a ready pool of buyers out there,' said a property agent, who declined to be named.

Property values in Jurong are expected to be supported by government plans to transform the area into a bustling lakeside hub for business and leisure, he said.