Tuesday, December 11, 2007

MGPA Leads Foreign Brigade Of Property Buyers

Source : The Business Times, December 11, 2007

Goldman Sachs, Europe's SEB and Dubai World also make big purchases

Investment sales of property have hit an all-time record of $50.8 billion so far this year - up 66 per cent from the whole of last year.

And for the first time, a foreign player has emerged as the biggest buyer - Macquarie Global Property Advisors (MGPA) with $4.3 billion of purchases.

In fact, foreign institutional investors/property funds have been a dominant buying force this year, especially in the office sector, notes CB Richard Ellis executive director Jeremy Lake.

Besides MGPA, other big foreign investors in Singapore's property market in 2007 include US heavyweight Goldman Sachs (with an investment of over $800 million), European pension fund manager SEB, which bought SIA Building and 12 floors at Springleaf Tower for a total $751 million, and Dubai World Group, with a total investment of over $500 million.

US-based Wachovia Development Corporation also entered the Singapore property market this year, with more than $700 million invested so far in the Farrer Court and Char Yong Gardens collective sale sites, and apartments at a new condo, Cliveden at Grange.

'The Singapore property market has become much more appealing to global buyers over the last two to three years. In a reversal of the perfect storm, a series of factors have combined to create a sweet spot for Singapore: including the Integrated Resorts and F1 attractions, Singapore emerging as a wealth management hub and financial centre, the whole remaking of Singapore story, and an oversold property market, which made Singapore relatively attractive to global players,' Mr Lake explains.

CBRE's investment sales figures include land deals, collective sales, and transactions of entire office blocks and other buildings, as well as strata-titled units of at least $5 million.

The strong level of investment sales reflects major property players' continued confidence in the mid to long-term prospects for the Singapore real estate sector.

With $50.8 billion done so far this year and another three more weeks to go, CBRE reckons the full-year figure may be about $52 billion.

The firm attributes the big jump over last year's $30.6 billion to 'the meteoric performance of the collective sales market in the first-half and the very strong office market'.

The residential and office sectors combined to account for about 90 per cent of the total value of investment sales so far this year.

Office investment sales more than doubled, from $4.4 billion in first-half 2007 to around $10.5 billion in the second half.

However, residential deals halved from $20.3 billion in H1 to $10.3 billion in H2, on the back of a drastic slowdown in collective sales.

With the current en bloc sales slowdown expected to continue, next year's overall investment sales of property is likely to be lower, probably reverting to the 2006 level of around $30 billion, Mr Lake reckons.

'However, the office market is likely to remain strong. We've not seen the pool of buyers diminish in the past few months,' he added.

Jones Lang LaSalle's regional director and head of investments Lui Seng Fatt too reckons 2008 will be a more stable year for investment sales.

He also projects that the public sector, comprising primarily Government Land Sales, will account for a bigger slice of total investment sales in 2008, at about 40 per cent - up from a share of about 22 per cent so far this year.

'For the private sector, the strong en bloc sale performance seen in the first seven months of this year is unlikely to be repeated, but we still expect to see healthy land prices being maintained,' Mr Lui suggests.

CBRE's data shows that the biggest property deal in the public sector so far this year has been the $2.02 billion sale of Marina View Parcel A to MGPA, followed by the $1.69 billion sale of the former NCO Club and Beach Road camp grounds to a consortium comprising City Developments, Dubai World and Elad Group.

In the private sector, the top deal has been Farrer Court, which was sold for $1.34 billion to a consortium including CapitaLand, Hotel Properties, Wachovia and a foreign fund. The next biggest transaction was MGPA's $1.04 billion purchase of Temasek Tower.

Mr Lake also observed that the $50.8 billion overall investment sales figure this year was close to the $54.9 billion in the eight years from 1996 to 2003.

Inflation In S'pore To Taper Off As Growth Slows: Economist

Source : The Business Times, December 11, 2007

He blames energy prices for recent surge in inflation

The recent surge in the pace of inflation here is mostly due to a sharp increase in energy prices and is unlikely to last as economic growth slows next year, a senior economist maintained yesterday.

Meanwhile, Asian economies still have a lot of tools at their disposal to keep their economies afloat even if growth in the US slows down more than expected, said Jan Lambregts, head of research in Asia for Rabobank International.

'In my mind there is no inflation problem' for Singapore, he said. Although inflation has been rising everywhere, 'I'm not pessimistic when it comes to this because the MAS (Monetary Authority of Singapore) already a couple of years ago adopted a tightening stance, so they were very early to the game when it came to fighting inflation,' he said.

'Energy prices are mainly to blame for the recent surge in inflation and I would expect some of that to taper off as growth moderates next year.'

Like several other economists who have in recent weeks published their forecasts for next year, he expects the US economy to avoid a recession, although he predicts it will grow at a much slower pace before recovering in the second half of 2008.

The main reason is that although housing prices there are likely to fall further, he believes that the impact on US consumer spending will not drag the overall economy down as much as some people expect.

'Research shows that consumers' response is asymmetrical. That is, when prices go up, they tend to consume quite a bit more, but when prices go down, they sit on their houses and they don't tend to lower their consumption in a comparable way.'

And while a US slowdown would typically hit small, open economies such as Hong Kong and Singapore hard, the vibrant domestic economy in both cases will cushion the blow, he said.

But the outlook for equities in most markets next year is 'mixed', he said. Although companies' profits and margins are likely to suffer from higher energy and raw material prices, their balance sheets are strong and their stock prices relative to expected profits and cash flows are still reasonable, he said.

Also, with the US Federal Reserve expected to lower interest rates further to revive the slowing US economy, interest rates in Singapore and Hong Kong - where central banks focus on managing their currency exchange rates rather than interest rates - are likely to follow 'and that's traditionally going to help equity markets'.

For Singapore's economy, he expects next year's growth to be 5.3 per cent - lower than an earlier Rabobank forecast and the 6.3 per cent median forecast by private sector economists in an MAS survey published last week, but 'still very decent'.

As a result, he expects the Straits Times Index of blue-chip stocks to reach 4,000 points at the end of next year, about 12-13 per cent above its current level.

Dubai World's Limitless Sets Up Office Here

Source : The Business Times, December 11, 2007

S'pore base will look for investments in the region

DUBAI World's real estate arm, Limitless LLC, officially started operations at it new regional office here at UOB Plaza yesterday. It will use Singapore as a base to look for new investment opportunities here and in the region.

On route to Hanoi for the ground-breaking ceremony of its US$220 million Halong Star mixed development project in Vietnam, Limitless CEO Saeed Ahmed Saeed said yesterday: 'Without doubt, South-east Asia is one of the most exciting and dynamic regions for Limitless. Its fast-growing economy presents us with endless opportunities to demonstrate our core skills of master planning large-scale, balanced projects and waterfront development.'

To date, Limitless, which was established in July 2005, has a portfolio of five real estate projects worth about US$100 billion. Three are in the Middle East, with the others in India and Vietnam.

Limitless has considered development sites in Singapore, including the first parcel at Marina View, although it decided not to put in a bid eventually.

'We took strategic position on Marina View and decided it was not the right time to tender for it,' said Philip Atkinson, regional director (South-east Asia) at Limitless.

Mr Atkinson added: 'The Singapore market now is buoyant and fast paced, and we would take a cautionary view.'

Dubai World, through its subsidiary Istithmar, has however, recently acquired a one-third stake in the government land sales development site now known as South Beach, which is estimated to cost a total of $2.5 billion.

Mr Saeed would not say what its expected target rate of returns would be for its projects but added: 'Different countries have different hurdle rates.'

Like its parent company, Limitless will mostly fund its investment with equity but Mr Saeed said that it could also raise debt from the capital markets.

Limitless is also likely to be looking at emerging markets around the world as this is where large-scale projects that can leverage on its town-planning skills will be.

Particularly bullish on the two huge markets, Mr Saeed said: 'India and China will probably need new homes for the next 100 years.'

Buyers Snap Up New Flats From HDB

Source : The Straits Times, Dec 11, 2007

# NO. OF FLATS: 316

DEMAND for Housing Board flats has hit an all-time high.
More than 1,700 applications were made for 316 new flats in the north-east zone released yesterday - just hours after the homes went on sale.

In terms of sales, almost every unit of the HDB's unsold stock, released once every two months, has been snapped up immediately.

In the August and October sale of flats in established towns and in the north and west zones, the take-up rate was 100 per cent for the first time, said HDB.

All 843 units offered in both sales were snapped up.

Just three years ago, about 10,000 flats were languishing in the market unsold. But this figure had been slashed dramatically to 2,400 as at Oct 31, an HDB spokesman told The Straits Times.

The flats released yesterday were the HDB's fifth sale under its once-in-two-months sales scheme for four-room and bigger flats, introduced in April to replace its previous walk-in selection system.

Earlier this year, the old system drew flak when queues formed outside HDB Hub, sparking rumours that leaked tip-offs had been given to the early birds - a charge since refuted by the HDB.

The new sales exercise has received very good response with a 96 per cent overall take-up rate of the 3,034 units released, said HDB.

It said yesterday that 'the robust property market has given rise to strong demand for HDB flats'. HDB's latest launch offers 233 four-room, 57 five-room and 26 executive flats in Hougang, Punggol and Sengkang.

The prices range from $142,000 for a four-room flat in Hougang, to $358,000 for an executive flat in Sengkang.

Half of the 316 flats are ready and the other half are being built. They include new, unsold and repurchased units. Interested buyers can submit their applications online before next Monday, said HDB.

High demand may mean HDB is clearing its backlog, but newly-wed first-timers such as operations officer

Mohammed Samsudin, 29, struggle to get that dream home.

Yesterday was Mr Mohammed's eighth attempt this year at getting an HDB flat. He has been trying since he got married almost two years ago, and holds out little hope.

'The demand is so high now, and families like mine are priced out of the resale market. It's been difficult to get our own home,' said Mr Mohammed, who rents a room of an HDB flat with his wife. HDB's latest sale also follows a recent announcement that it will offer more than 7,000 new flats for sale over the next seven months, as well as seven plots of land which could boast another 3,200 units.

Some couples, such as Mr Mohammed and his wife, in desperate need of homes, said these homes - not ready for three to five years - do not address the current shortage.

The HDB has said it would progressively offer its unsold stock, located across various estates, in upcoming sales exercises.

78 Shenton Way Sold For $650m To German Group

Source : The Business Times, 11 December 2007

$1,857 psf deal shows foreign players still prize S'pore office market

FOREIGN institutional investors continue to be drawn to the Singapore office market.

The numbers: The deal is based on a total net lettable area of about 350,000 sq ft, comprising 275,000 sq ft in the existing 34-storey office tower and a further 75,000 sq ft that is being built in an extension that will be spread across six levels of offices above the carpark podium

The latest investor to come in is Germany's Commerz Grundbesitz Investmentgesellschaft (CGI) group, which has bought 78 Shenton Way for $650 million, BTunderstands. The price works out to $1,857 per square foot based on a total net lettable area of about 350,000 sq ft. This comprises about 275,000 sq ft in the existing 34-storey office tower and a further 75,000 sq ft that is being built in anextension that will be spread across six levels of offices above the carpark podium.

The extension is expected to be completed in the second half of 2009.

78 Shenton Way is on a site with a remaining lease of about 75 years. The propertywas sold by a joint-venture between Credit Suisse and CLSA funds which bought the 34-storey tower this January for $348.5 million.

Sources say that the vendors are expected to pump in about $80 million to build the extension and spruce up theexisting property.

Jones Lang LaSalle is said to have advised 78 Shenton Way's sellers, while buyer CGI - which is making its maiden entry into the Singapore real estate market - is understood to have been advised by CB Richard Ellis. CGI is thecapital investment company for the open-ended fund Haus-Invest.

The $1,857 psf of net lettable area achieved for the deal is in line with current office values in the area, industry observers say. In April this year, TSO Investment, a unit of aCLSA Capital Partners-managed property fund, sold SIA Building at Robinson Road to European pension fund manager SEB for about $1,780 psf of net lettable area.

In September, SEB also bought 12 floors at Springleaf Tower in the Anson Road area at$2,088 psf of net lettable area.

In October, Allco Commercial Real Estate Investment Trust picked up KeyPoint in the Jalan Sultan/Beach Road area for $370 million or $1,186 psf of net lettable area. The deal includes income support of up to $10.5million for two years to be provided by the seller.

In August, a Goldman Sachs-linked fund bought Chevron House (formerly Caltex House) along Raffles Place for $2,780 psf, a record for an office block here. Chevron House stands on a site with aremaining lease of about 81 years.

The Goldman Sachs group is also expected to stitch a deal early next year to buy the nextdoor Hitachi Tower, which faces Collyer Quay, for about $3,000 psf, industry observers say. A higher price can bejustified for Hitachi Tower due partly to its superior tenure (999-year leasehold) and orientation. As well, Hitachi Tower is not weighed down by rental caps for a major tenant, as in the case of Chevron's lease at Chevron House, which limits thenear-term rental upside of the property, according to an earlier media report.

Annuity Made Palatable

Source : The Straits Times, Dec 11, 2007

BIT BY bit, the probable final shape of the compulsory annuity scheme for old-age support is emerging. Two features of the proposal which a good many people found objectionable may be modified, according to the principals working on the plan. These are the sequestering from the policyholder's heirs of surplus sums left upon death, and the seemingly ambitious age of 85 at which payouts from the annuity are to begin. Under modifications being studied by a government-appointed panel headed by Professor Lim Pin, the unused portion will revert to the family. This will be welcomed and should remove the one impediment that stands between voluntary and grudging acceptance of the old-age protection idea.

Just as cognisant of public unhappiness expressed is the concession that policyholders could have a choice of starting ages at which they will begin receiving payouts. Manpower Minister Ng Eng Hen, who is steering the annuity scheme, mentioned by way of illustration a range from age 65 up to 90. The base is obviously too low. A credible number could be 75 or 80. Senior Minister Goh Chok Tong has said he favours age 80. The original access age of 85 on the face of it is scaled too high. All that the Government has said of longevity projections is that half of those Singaporeans who attain age 62 will go on to live beyond 85. How many would that be? The incredulity with which this was received by many people was undoubtedly a visceral response, but it was enough to dump controversy on a proposal which by rights should get easy passage, as about half of CPF members simply would not have enough money in their accounts to support themselves if they lived to extreme old age. The Government will now engage private actuaries to verify data on projected life spans. This preferably should have accompanied the announcement of the original proposal, but better late than never.

Two points arising are worth recording. First, the Government has taken on board views and criticisms that clearly are deeply felt, even if these should eventually turn out to be not completely justified. The receptiveness will be welcomed by the people. But they should be prepared to pay higher premiums, and consequently have reduced CPF balances, for the relaxed criteria. Second, it should be remembered reform of old-age pension proposals had begun in the 1980s. Data showed Singaporeans were living longer and outstripping their modest savings. Life expectancy was only 61 years when the CPF was started in 1955. As those who need help most are least able to accumulate enough in voluntary savings, a mandated plan is unavoidable.