Sunday, August 31, 2008

Huh? What's A Development Charge?

Source : The Sunday Times, August 31, 2008

Where do you see this?

Mainly when a plot of land that is already built on is sold to be redeveloped, such as in a collective sale of an existing estate.

What does it mean?

When a developer buys a site for redevelopment, it will submit a proposal to the Government to build a new development on the land that will have a higher value.

If the Government approves this proposal, it will tax the developer on the enhancement in the value of the land plot resulting from this redevelopment.

This tax is the development charge.

Why is it important?

The development charge that is levied on a plot of land affects how much the developer is willing to pay for it.

Also, the Government revises the development charge every six months - in March and September - to bring them in line with recent transacted land prices. The revised development charge is seen as a reflection of how much land costs have gone up or down in the last six months.

So you want to use the term? Just say...

'If a developer tears down this small condo and builds a high-rise one in its place, it will probably have to pay a high development charge.'

Fire Sale? Unlikely

Source : The Sunday Times, August 31, 2008

Panic selling of homes unlikely this year and next as investors sitting on comfortable profits are in no hurry to exit market, say analysts

The panic selling of homes that some property experts had forecast months ago has not materialised after all - not this year, anyway.

Market watchers had previously warned that the negative sentiment in the property market - which stemmed from the United States sub-prime crisis late last year and persists still - might prompt property investors to offload their uncompleted units at fire-sale prices and drive home prices down.


But a recent analysis by Savills Singapore found that almost everyone who sold a private apartment or condominium unit in the sub-sale market in the first seven months of this year pocketed robust gains.

This implies that, for this year at least, property investors are still sitting on comfortable profits and are likely to be in no hurry to exit their investments, said Savills' director of business development and marketing, Mr Ku Swee Yong.

'The cost of holding on to properties is quite low right now because of low interest rates, so for those who haven't already exited the market, there's no urgency to sell,' he added.

When an individual buys an uncompleted property and resells it before it has been built, the transaction is called a sub-sale. Such sales are often used to measure property speculation, since sub-sale sellers are often short-term investors who never intended to occupy their units.

Savills' data, first published in the Business Times last Tuesday, showed that 97 per cent of sub-sale sellers this year have cashed out at a profit. On average, they reaped $417,563 per unit, or a 36.5 per cent gain.

Property consultants say this comes as little surprise, as many of the units that were sub-sold this year were in developments that were launched in 2006 or even earlier, at relatively low prices that allowed plenty of room for price gains.

Citylights in Jellicoe Road, for instance, which saw the most number of sub-sales this year, was first launched in December 2004 at an average price of $590 per sq ft (psf). Up till the development was completed earlier this year, units changed hands at steadily rising prices, topping out at $1,200 to $1,300 psf.

But while the private housing market may be spared the carnage of selling hysteria this year and even next year, some industry players caution that 2010 may be a different scenario.

The projects that will be completed then were mostly launched during the peak of the market last year and this year. Buyers bought high and are likely to register losses if they want out of their investments, experts say.

Generally, there is a rush to offload units right before a project's completion, as that is when more payment instalments are due.

So come 2010, if prices stay soft and the economy has not made a spectacular recovery from the current slowdown, buyers might start to feel a greater urgency to sell their properties and the market might be flooded with these 'expensive apartments', said Wing Tai chairman Cheng Wai Keung last week.

Mr Colin Tan, associate director of Chesterton International, added that investors who have cashed out by now are the experienced ones, while 'it is the novice investors who are usually left holding on to their units' and may be more prone to panic selling later.

Already, the profits that were reaped by sub-sellers this year have dwindled according to how recently they bought their units, consultants noted.

Those who made the original purchase in 2004 and 2005 gained more than $600,000 each on average, while those who bought their units last year made only $230,000 on average, according to Savills' data. Investors who bought and sold within this year reaped only about $175,000 on average.

Part of this is due to the general principle that the longer you hold a property investment, the greater the gains will be, said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

However, a large part of the difference in gains also arose from the huge run-up in prices over the last two years. This spectacular growth is unlikely to be repeated, removing a cushion from investors still hoping to resell their units before completion in 2010 and beyond.

But a glimmer of hope for the property market lies in the healthy profits that investors have made so far this year.

Savills estimates that punters took home a total of $350 million in profits alone from sub-sales in the first seven months of this year. While consultants think it is unlikely that all the money has already been ploughed back into property, they expect it to return to the market eventually, which may help to prop up prices.

However, Chesterton's Mr Tan believes this will happen only when current prices soften enough to attract investors again.

'Properties are not like shares - you cannot come in and out even as prices decline,' he said. 'To lessen your risk, you come in only when you think prices have bottomed out or are at sustainable levels.'

Saturday, August 30, 2008

URA In Eatery, Nightspot Review

Source : The Business Times, August 30, 2008

THE Urban Redevelopment Authority (URA) is reviewing the activities allowable in restaurants, food shops and pubs located in private shophouses.

One of the considerations is to allow more flexibility in providing live entertainment on the premises of restaurants and pubs.

Currently, live music and performances are not allowed in restaurants at private shophouses near residential estates.

URA has allowed pubs to operate along some main roads on the fringe of residential estates, but live entertainment is not allowed either.

Under URA's guidelines, the primary purpose for 'restaurants' is the sale of food while that of bars and pubs is the sale of alcoholic drinks.

As such, any restaurant, bar or pub that wants to provide live entertainment will need to apply to URA for a 'change-of-use'. For instance, a pub might need to be designated a 'nightclub' instead, as the guidelines for nightclubs do allow for the sale of alcoholic drinks with singing, dancing or live entertainment.

And the operator will still need to comply with licensing controls of various agencies such as the National Environmental Agency, the Police Entertainment Licensing Unit (PELU) and even the Land Transport Authority, depending on the traffic conditions. However, the process of applying for these licences is not as odious as it may sound.

An operator of a bar close to a residential neighbourhood who did not want to be named said that he had applied for and received a licence for live entertainment from PELU quite quickly. However, he was not aware that he also had to apply to URA for a 'change-of-use'.

Indeed, URA reveals that for the last three years, it has approved five applications for 'change-of-use' from restaurant to nightclub and one application from pub to nightclub.

A restaurant operator that provides occasional live entertainment (who also did not want to be named) revealed that after checking with PELU, it found that it was exempt for having to apply for a licence at all.

According to the Public Entertainment and Meetings Act, it does appear that PELU exempts certain performances from requiring licences if, for instance, these end before 10.30pm and the event is not held at the same place for more than three consecutive days within a month.

More flexibility will favour the business community. However, as the operators that BT spoke with have found, the neighbourhood residents are not always happy.

CapitaLand Divests Stake In KL Tower

Source : The Business Times, August 30, 2008

CAPITALAND is divesting its 30 per cent stake in a company that owns Menara Citibank, a 50-storey office tower in Kuala Lumpur's Jalan Ampang, for RM176 million (S$75.5 million). Upon completing the divestment, the Singapore-based property giant will recognise a gain of about S$22.1 million.

The company being divested is Inverfin Sdn Bhd, whose principal asset is Menara Citibank. CapitaLand and the other Inverfin shareholders - Citibank (50 per cent) and Lion Group (20 per cent) - are selling their respective shareholdings in Inverfin to IOI Corporation Bhd.

The total consideration for the divestment is RM586.7 million and based on the net asset value of Inverfin which values the property at about RM733.6 million, this works out to about RM1,000 per square foot of net lettable area for the freehold property.

CB Richard Ellis Singapore and RE Group Associates Sdn Bhd acted for Inverfin's shareholders.

CapitaLand Commercial Ltd CEO Wen Khai Meng said the group will recycle or redeploy proceeds from the divestment to tap on new opportunities in the growing Malaysian market.

The Malaysian real estate market continues to enjoy good growth underpinned by the country's healthy economic performance, CapitaLand said in a statement yesterday.

Riding on this positive backdrop, CapitaLand has continued to expand its investments in Malaysia through Quill Capita Trust (QCT), which owns nine properties in Cyberjaya and Klang Valley. In addition, CapitaLand manages the US$30 million Mezzo Capital Fund, which has invested in five residential projects in Kuala Lumpur, and the US$270 million Malaysia Commercial Development Fund (MCDF).

MCDF holds stakes in two sites in Kuala Lumpur Sentral to build offices and serviced apartments with retail amenities, and has other projects located in quality residential and commercial precincts including Mont' Kiara and the Kuala Lumpur City Centre area.

The group is planning to list a Malaysian mall real estate investment trust (Reit) this year, barring unfavourable market conditions. The new Reit will initially comprise three shopping malls worth RM2 billion - Penang's Gurney Plaza, and Mines Shopping Fair and Sungei Wang Plaza in Klang Valley.

Rates Tweaked Slightly In Dull Market

Source : The Business Times, August 30, 2008


Bigger cuts in store if stronger evidence of falling property values emerges

Despite weaker property sentiment, the government has opted to leave development charge (DC) rates largely unchanged, except for an average 6.3 per cent cut for non-landed residential use.

There may not be sufficient evidence of declines in property values yet, market watchers said, but the rates could be cut at the next revision if stronger evidence emerges to show values are falling.

DC rates, which may be payable for enhancing the use of some sites, are revised twice yearly, on March 1 and Sept 1, by the Ministry of National Development in consultation with the Chief Valuer.

DC rates are stated across 118 geographical sectors. MND announced changes to boundaries affecting eight geographical sectors in three vicinities - the Race Course Road area (following the realignment of Race Course Road after the completion of Farrer Park MRT Station), Jurong Lakeside area (where there are plans under draft Master Plan 2008) and Pulau Brani (which has been moved out of the geographical sector that includes Sentosa).

Jones Lang LaSalle's analysis shows that a site redesignated from one sector to another in the Jurong Lakeside area could see increases in DC rates of 35 per cent for landed residential use, 39 per cent for hotel use and 38 per cent for industrial use based on Sept 1, 2008 rates.

As for the minimal changes in DC rates for most use groups, CB Richard Ellis executive director Li Hiaw Ho said this was in line with the slow pace of public and private land transactions seen this year.

Knight Frank managing director Tan Tiong Cheng said: 'For the commercial (office, retail) sector, we do not have direct evidence to show land values have dropped. For residential, the collective sales market has quietened but there has been evidence at recent state land tenders to show a decline in land values.'

That could account for the chops in DC rates for non-landed residential use.

Jones Lang LaSalle head of research (Southeast Asia) Chua Yang Liang too pointed to several cases of 99-year condo sites being sold at state land tenders recently at prices below their March 1, 2008 DC rate-implied land values.

DC rates for non-landed residential use were trimmed in 116 of the 118 locations. The cuts ranged from 3.8 per cent (in the Pasir Ris/Loyang and Punggol areas) to 10.8 per cent in the Balestier area. Recent transacted prices for non-landed projects like The Marque, Vutton and Pavilion 11 might have been the reason for the DC cut. The rate for Sentosa was trimmed 10.5 per cent, perhaps based on prices achieved recently at condos like Marina Collection and Turquoise at Sentosa Cove.

Two adjacent geographical sectors covering Ang Mo Kio/Bishan and Braddell/Potong Pasir, saw respective cuts of 10 per cent and 9.4 per cent. The cuts could be due to a 99-year condo site at Lorong 2/3 Toa Payoh near Braddell MRT Station being sold in April at 23 per cent below the price paid for a condo site next to Ang Mo Kio Hub in September last year.

DC rates for landed residential, commercial and hotel uses were completely untouched across the 118 geographical sectors. For industrial use, the rate was increased 11.1 per cent in the Paya Lebar/Eunos area but unchanged in the other 117 locations.

CBRE's Mr Li said the latest DC rate revisions were 'pretty much an academic exercise as there aren't many en bloc sales or redevelopments of sites going on which would involve DC payments'.

'Nobody is getting excited; there's little practical effect.'

Dip In Property Development Fees

Source : The Straits Times, August 30, 2008

Lower charges for non- landed private homes - first time in 5 years - reflect fall in land values

ANOTHER sign that the values of land and private homes are sliding arrived yesterday in the form of the new property development charges.

These charges, which reflect changes in land and property values over the last six months, were lowered for residential apartments and condominium units for the first time in five years.

Aside from prime locations, city fringe areas similar to this one off Newton Road are always development rates have dropped the most. -- ST FILE PHOTO

Property consultants were not surprised. They had expected fees in this sector to stay stable or dip slightly, given that the only residential plots sold in the past six months were state-owned parcels that transacted at fairly low prices.

No area was spared, with rates for non-landed residential homes falling across the board by an average of 6 per cent islandwide.

The move was the ‘first signal from official sources that some values in the property market are falling’, said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

The Government levies development charges on developers who want to build a new, bigger development on an existing site they have bought.

The fees are categorised by sector and location. They are revised every six months by the chief valuer, based on transactions of land and property in the past half-year.

Lower charges imply that recent land and property deals have been transacted at lower prices, and also mean that it will be cheaper for developers to buy and redevelop a collective-sale site, for instance.

But property consultants do not expect the new lower charges to revive the deathly quiet collective-sale market.

‘The rise in construction costs is higher than the fall in development charges. So total development cost would still increase,’ said Mr Mak.

Developers may also hold out for further decreases in development charges in the next revision in March, he added.

‘All we need is another quarter of weak sentiment and chances are, six months from now, there could be more downward revision in the charges.’

Mr Li Hiaw Ho, executive director of CB Richard Ellis (CBRE) Research, also expects development charges to fall again in upcoming revisions.

‘In the next 12 to 18 months, development charges might move downwards moderately to reflect a scenario of realistic consolidation after the run-up in land prices in the past two years,’ he said.

This time around, the falls in fees for non-landed residential land ranged from 3.85 per cent to 10.77 per cent, depending on location.

Areas where rates dropped most included prime locations such as Ardmore Park and Sentosa, city fringe districts like Balestier, Keng Lee and Kallang, and suburban regions such as Bayshore and Bishan.

Apart from non-landed residential land, development charges barely budged in other sectors, reflecting the lack of activity and flat prices in the broader property market.

The fees for land to be used for offices, shops, landed homes, hospitals or hotels remained unchanged across all locations in Singapore.

For industrial land, charges rose only in the Ubi and Kaki Bukit area. They went up 11.1 per cent, possibly due to the recent sale of an industrial site in Ubi Avenue 4/Ubi Road 2 in April, suggested CBRE’s Mr Li.

UK Downturn Worse Than Expected

Source : The Straits Times, Aug 30, 2008

LONDON - BRITAIN's economic downturn is likely to be deeper and last longer than expected and could be the worst for 60 years, finance minister Alistair Darling said on Saturday.

In a candid interview with the Guardian newspaper, the Chancellor of the Exchequer said the government had failed to get its message across and would battle to persuade a sceptical electorate it deserved another term in power.

The paper's website quoted him as saying economic times for the country were 'arguably the worst they've been in 60 years'.

He added: 'I think it's going to be more profound and long-lasting than people thought.' Economic conditions presented the ruling Labour Party with its toughest challenge since the 1980s, he said.

'We've got our work cut out. This coming 12 months will be the most difficult 12 months the Labour Party has had in a generation, quite frankly.' Two days earlier, Bank of England policymaker David Blanchflower told sources that two million Britons could be out of work by Christmas.

Britain's economy failed to grow in the second quarter of the year for the first time since the early 1990s and many economists believed it had already tipped into recession.

Mr Darling's comments suggested growing unease in the highest ranks of the government that the downturn would make it difficult for Prime Minister Gordon Brown to recover popularity and fend off a resurgent opposition Conservative Party.

'We've got to rediscover the zeal which won three elections, and that is a huge problem for us at the moment,' Mr Darling was quoted as saying. 'People are pissed off with us.'

The BBC called Mr Darling's interview an 'astonishing intervention' and commentators are likely to question the wisdom of his comments on the economy before a planned relaunch by the government.

Mr Brown is expected to unveil a package of measures next week to support the economy and the housing market in what he hopes will be the start of a sustained campaign to regain the political initiative. -- REUTERS

Friday, August 29, 2008

Return On US Investments In S'pore Hits 34.8%

Source : The Business Times, August 29, 2008

Overall FDI return in 2006 averages an unchanged 20.5%

BAR the Bahamas and the Cayman Islands, the US scored the best returns on foreign direct investments in Singapore in 2006.

This was despite US direct investments here slipping to $37.1 billion, from $40.6 billion in 2005, according to figures released yesterday by the Department of Statistics.

The US achieved a 34.8 per cent return on its Singapore investments in 2006, up from 32.8 per cent the year before.

The respective returns for the Bahamas and the Cayman Islands were 36.1 and 77.9 per cent.

Overall, the average return on foreign direct investments in Singapore was 20.5 per cent in 2006 - the same as in 2005.

Total cumulative foreign direct investments here jumped 12.4 per cent from 2005 to $363.9 billion in 2006.

The stock of foreign equity rose 15.5 per cent to $365.9 billion, with most of it - 90.2 per cent - in direct equity investments and the remainder in portfolio equity investments.

Asia and Europe accounted for the bulk of foreign direct investments in Singapore in 2006 - 47.2 per cent from Europe and 22.4 per cent from Asia.

By country, the UK ($54.78 billion) was the largest foreign direct investor in 2006, followed by the Netherlands ($48.27 billion) and Japan ($45.02 billion).

The US was the fourth-largest foreign direct investor here.

The UK got only a 4.8 per cent return on its investments, down from 18 per cent in 2005 and among the lowest.

The Netherlands achieved a return of 24.3 per cent and Japan 12.1 per cent.

Among regions, Asia achieved a 12.6 per cent return, up from 11.4 per cent in 2005.

Europe's return fell to 17.4 per cent, from 19.5 per cent in 2005.

By industry, the wholesale and retail trade, hotels and restaurants offered the best investment returns in 2006 - 27.1 per cent, up from 23.6 per cent in 2005.

Led by petroleum products, the return for manufacturing was 22.9 per cent, down from 27 per cent in 2005.

According to the Department of Statistics, foreign direct investments in Singapore in 2006 were mainly in financial services (38.7 per cent) and manufacturing (29.9 per cent).

The wholesale and retail trade, hotels and restaurants (18.2 per cent) and transport and storage (6.2 per cent) sectors were also popular with foreign investors.

More than four-fifths of investments in financial and insurance services went into investment-holding companies.

In manufacturing, more than a third - 35.2 per cent - of investments were concentrated in pharmaceuticals, 29.7 per cent in electronics and 13.2 per cent in petroleum.

European investments in Singapore went mainly into manufacturing (37.7 per cent of Europe's total investments), financial services (35 per cent) and wholesale and retail trade, hotels and restaurants (14.4 per cent).

Asian investments went mainly into financial services (36.3 per cent) and wholesale and retail trade, hotels and restaurants (29 per cent).

While US direct investments in Singapore dipped in 2006, those from Europe - except Germany - rose, with Norwegian investments jumping 72.6 per cent to $14.8 billion.

Direct investments from the Netherlands increased 50 per cent, while those from the US went up 10.5 per cent.

Japan, which accounted for more than half - 55.3 per cent - of total Asian direct investments, saw its investments edge up 0.5 per cent in 2006.

South Korea raised its stake 29.8 per cent to $1.65 billion, and Hong Kong 29.3 per cent to $6.08 billion.

Allco Reit Gets BB Long-Term Rating From S&P

Source : The Business Times, August 29, 2008

Agency also places rating on CreditWatch with positive implications

STANDARD & Poor's Ratings Services yesterday said it has assigned its 'BB' long-term corporate credit rating to Allco Commercial Real Estate Investment Trust (Allco Reit).

Anchor Point: The weighted average lease term of 4.8 years for Allco Reit's portfolio is higher than average

At the same time, it placed the rating on CreditWatch with positive implications.

The rating on Allco Reit reflects the trust's smaller asset base compared with its global peers'.

It has nine properties (excluding units in unlisted property fund Allco Wholesale Property Fund).

'Allco Reit also has high tenant concentration, with its top two tenants representing about 30 per cent of the gross revenue of its portfolio,' said Standard & Poor's credit analyst Wee Khim Loy.

'In addition, the trust's market and tenant diversity could decline. Should Allco Reit's manager, Frasers Centrepoint Asset Management (Commercial) Ltd, continue the previous manager's strategy to exit the Australian market and focus on properties in Singapore and Asia, the trust's asset portfolio and cash flow stability would be negatively affected.'

The above weaknesses are partly offset by the quality of Allco Reit's investment portfolio.

The Asian properties, which require minimal capital expenditure, are mostly strategically located in central business districts.

These benefits are complemented by the stable rental cash flow of Australian properties, which are backed by longer term leases.

In addition, the weighted average lease term of 4.8 years for Allco Reit's combined diversified portfolio is higher than the average for comparable real estate investment trusts focusing on Asian office commercial properties.

Allco Reit's nine properties have more than 400 tenants in total, spanning five markets in three countries.

The diversification strength of the investment portfolio provides cash flow stability to the business.

The rating is also supported by the enhanced financial flexibility of Allco Reit following the change in the ownership of its manager.

Impending refinancing risk declined after Allco Reit was 'de-linked' from Allco Finance Group (AFG). Frasers Centrepoint Ltd (FCL) acquired 17.6 per cent of Allco Reit and 100 per cent of its previous manager, Allco Singapore Ltd, from AFG on Aug 14, 2008.

Allco Reit will be eventually renamed Frasers Commercial Trust. FCL is the wholly owned property arm of Fraser and Neave Ltd, a leading consumer group with a satisfactory credit profile.

Sands Wants To Build A Casino Strip In India

Source : The Business Times, August 29, 2008

(HONG KONG) Las Vegas Sands Corp, operator of Asia's biggest gambling resort, would consider spending US$12 billion to build a strip of casinos in India similar to its project in Macau, chairman Sheldon Adelson said.

'We would like to build a Cotai Strip in India,' Mr Adelson told reporters at a briefing in Macau yesterday. 'We would be happy to spend US$12 billion there' if India invites the company. India is the world's second most populous nation, behind China. Mr Adelson didn't give details of the potential investment. India now has only one legal casino, in the western state of Goa, a Portuguese colony until 1961.

Las Vegas Sands is investing more than US$15 billion building casinos in Singapore and Macau, the only place in China where casinos are legal. The company and rival Wynn Resorts are vying for the casino market in Asia, where economic growth is faster than in the US and Europe.

The Cotai Strip, modelled on the Las Vegas Strip, is on reclaimed land between Macau's Coloane and Taipa Islands. Mr Adelson plans to build as many as 14 hotels there by 2013. He spoke yesterday at the opening of the Four Seasons Macao, its second property in the district. The Four Seasons will be part of a complex of hotels that will have more than one million square feet of gambling space, three million square feet of shops and almost 21,000 hotel rooms.

Mr Adelson visited India, meeting the ministers of tourism and trade, before he arrived in Macau, he said yesterday, without giving details of their discussions. -- Bloomberg

Asian Market Fallout Set To Get Far Worse

Source : The Business Times, August 29, 2008

Property, stocks will be hit bad as foreign capital is pulled: symposium speakers

FALLOUT in Asian financial markets and institutions from the sub-prime crisis could become more serious now as foreign capital, from the US and other leading markets, is withdrawn, speakers at a symposium predicted yesterday. Asian property markets - in China and Vietnam especially - are likely to be hit hard while stock markets could take a battering, along with banks and other financial institutions, they suggested.

'There may be a sudden shift in capital flows as a result of fallout from the sub-prime crisis,' warned South Korea's former commerce minister Duck Koo Chung at the conference organised by the Asian Development Bank Institute (ADBI) and the North East Asia Research Foundation (NEAR).

'Coming weeks will be crucial' in this regard, Mr Chung later told BT.

ADBI dean Masahiro Kawai, who told the conference that 'global financial turmoil may continue longer than hoped for', suggested to BT that a flight from Asian property market investment by banks, investment funds and various stock market vehicles could damage these institutions as the property boom unwinds.

The warnings came as a sobering counter to the widely held view that Asian markets and institutions are likely to escape relatively unscathed from the sub-prime credit crunch that has wrought havoc upon major investment banks and others in the US and Europe. The theory of a 'decoupling' of Asian economies from outside problems has similarly been shattered by recent events.

Recent weeks have seen the collapse of a series of property development firms in Japan as US and other investors pulled funds from them. The most recent collapse - developer Urban Corp - marked Japan's biggest corporate bankruptcy this year and the implication of yesterday's warning at the conference was that firms elsewhere in Asia could be facing a similar fate.

Mr Chung told BT that property markets in China and Vietnam are especially vulnerable, while South Korea's property market is also facing problems along with those of other East Asian economies. 'There will be another round of credit crisis in developing economies', as money is 'pulled', he said. Foreign direct investment as well as portfolio investment in many Asian economies has been directed into property, added Mr Chung, who is now chairman of NEAR.

The cause of the US dollar's strength in recent weeks has been partly to do with the repatriation of investment funds from overseas, and this process could accelerate now as a fresh credit crunch threatens, in spite of injections of financial liquidity by the US Federal Reserve, Mr Chung commented. 'This will lead to a further correction in asset markets' in Asia and elsewhere, he suggested.

'We have been planting the seeds of the current crisis for many years,' said Mr Chung, who noted that Asia had supplied much of the financial liquidity that fed asset bubbles in the US and elsewhere. Now that US credit markets have seized up, the Fed is having to pump liquidity but this 'can only jeopardise the anchor position of the dollar' in global financial markets.

Recent Fed actions 'imply an expectation of continuing stress in financial markets', and meanwhile, economic slowdown has hit both Japan and Europe, Mr Kawai noted at the conference.

CapitaLand Sells 30% Stake In Menara Citibank In KL For M$176m

Source : The Business Times, August 29, 2008

CapitaLand is divesting its 30 per cent stake in Menara Citibank, a 50-storey office tower in Kuala Lumpur's Jalan Ampang, for a consideration of RM$176 million (US$52 million). Upon completing the divestment, CapitaLand will recognise a gain of about $22.1 million (US$15.6 million).

CapitaLand owns the asset through its stake in Inverfin Sdn Bhd, whose principal asset is Menara Citibank. The Singapore-based property giant is making divestment along with all the other shareholders of Inverfin, who are selling their respective shareholdings in Inverfin to IOI Corporation Berhad.

Development Charge Rates Mostly Flat

Source : The Business Times, August 29, 2008

The Ministry of National Development (MND) has left development charge (DC) rates - which may be payable for enhancing the use of some sites or building a bigger development on them - unchanged for most use groups, including commercial, landed residential and hotel/healthcare.

However, the average DC rate for non-landed residential use has been trimmed 6 per cent while the average DC rate for the industrial/warehouse use group increased by 0.1 per cent.

The new DC rates take effect from Sept 1, 2008. MND revises the DC rates twice a year in consultation with Chief Valuer, who takes into account current market values.

DC rates are listed by use groups across 118 locations or geographical sectors throughout Singapore. Under the latest revision, the boundaries of eight geographical sectors have been re-demarcated to better reflect current market values.

Fragrance Is Top Bidder

Source : The Straits Times, August 29, 2008

THE Fragrance Group, a hotel and property developer, has submitted a whopper bid in a tender for the use of two blocks at the old Changi military camp.

Its Fragrance Hotel Management has offered a monthly rent of $125,000, or $24.52 per sq m (psm), for the vacant state properties, which it plans to develop into a hotel.

The bid is miles ahead of the $28,500-a-month guide rent set by the Singapore Land Authority (SLA), which is effectively the landlord.

Fragrance’s offer is also twice as much as the next bid - $61,000 a month, or $11.97 psm - lodged by Forward Alliance, which is primarily in the general wholesale trade.

Orientus (Asia) Holdings, a new entrant in the property development sector, was next with a $52,000-a-month offer.

Two other bids came in at just $15,099 and $13,000 a month.

It is understood that the keen response will prompt the SLA to release the other four blocks at the Hendon Road camp for interim use, possibly also as hotels.

It earlier said it would consider leasing out the other blocks.

The lease for the first two blocks and a covered shed is for an initial term of three years, renewable up to 2018. The properties sit on 9,666 sq m of land, nearly twice as large as a football field.

The dilapidated three-storey buildings have a gross floor area of 5,097 sq m.

The SLA has said a hotel will help transform Changi Point into a homely, seaside destination with lots to do.

Property consultants believe a hotel on the site, likely at the mid-tier level, is appropriate, given Changi’s charm.

Knight Frank’s director of research and consultancy, Mr Nicholas Mak, says such a hotel will need a unique concept to differentiate it from nearby competitors.

Fragrance Hotel directors could not be reached for comment.

The firm is part of the listed Fragrance Group and is known for its budget hotels. It now has 18 no-frills outlets in Singapore, including those in Geylang and Balestier.

Fragrance Group chief executive Koh Wee Meng, 45, recently made headlines with his debut at No. 24 on Forbes magazine’s list of the 40 richest Singaporeans. He has a net worth of $230 million.

The SLA will spend the next two to three months evaluating the bidders.

‘Among other factors, the SLA would consider the best value for the state based on allowable uses and, in this case, hotel, business concept, track record and the financial health of the company,’ it said yesterday.

Shunfu Ville Gets HDB Approval To Go Private

Source : My Paper. Fri, Aug 29, 2008

SHUNFU Ville, an HUDC estate in Marymount Road, has been privatised.

The Housing Board (HDB) approved the required mandate for the estate to go private more than a week ago.

Out of 18 HUDC estates in Singapore, Shunfu Ville is the 13th to go private.

In April, my paper reported that a mass-signing exercise by residents of its 358 units had secured enough votes to go ahead with the move.

This was after an unsuccessful exercise in 2001 held by Shunfu's pro-tem committee, which fell short of the 75 per cent of votes needed. At the time, only 50 per cent agreed to privatisation.

According to the chairman of the committee, Mr Philip Liau, 57, gaining approval from the flat owners had not been easy.

Some residents were reluctant because of the uncertain economic outlook and the high cost of privatisation, a media report said.

Now, Shunfu's residents are allowed to sub-let their units without prior approval from HDB. They will also be allowed to purchase a second property.

Lessees will be able to re-finance or re-mortgage their properties.

When an estate is made private, HDB takes over the ownership of common areas, such as carparks, along with the management of the estate from the town councils.

BCA Taps China As Costs Go Through The Roof

Source : The Business Times, August 29, 2008

Construction industry can't cope with demand; tender price index shoots up

With the cost of construction escalating to new highs, the Building and Construction Authority (BCA) has flown missions to China in the hope of attracting construction companies to set up business here.

A spokesman for BCA said: 'A few Chinese contractors have since registered with BCA.'

Many firms were weakened after the construction industry hit rock bottom at the turn of the last decade. As demand picks up again, the industry cannot cope with the upswing in jobs.

One industry player put the number of top-tier construction companies currently at 45, down from 100 during the last peak.

A spokesman for the Singapore Contractors Association Ltd (SCAL) added: 'The reduced capabilities of (construction) companies and their respective available resources were directly proportionate to construction contracts awarded during the period of the downturn.'

BCA said that, currently, it has more than 6,000 firms registered with its Contractors Registry. 'During the last prolonged downturn in the construction industry, the number of firms did not change much but many had reduced their capacity, in varying degrees, to cope with the downturn. As a result, the sudden steep upsurge in construction demand recently has added tremendous pressure on the supply of construction resources and contracting capacity,' BCA added.

According to a report by construction cost consultant Rider Levett Bucknall (RLB), Singapore has risen the fastest on its International Tender Price Relativity Matrix.

The report reveals that between October 2007 and July 2008, Singapore's Tender Price Index (TPI) - which is based on a universal basket of construction cost variables - increased by 18.7 per cent.

Singapore ranks 13th on the matrix with an index score of 122, below cities like New York (154), London (151) and Honolulu (141).

According to RLB, the cost range for Premium Office Buildings is $2,450- $4,580 per square metre in Singapore, $3,115-$4,407 psm in New York, $6,230- $8,049 psm in London, and $2,505-$3,373 in Hong Kong.

Apart from 'volatile commodity prices', 'high demand and competition for limited resources, (and) the lack of tendering capacity among contractors', has also worsened the rise in building costs.

A Citi note this month highlights that crane rentals surged to a record high of $446 per tonne per month (up 7 per cent quarter-on-quarter and 29 per cent year-on-year). So, the cost of building materials is not the only worry the industry faces.

Citi expects other major infrastructure projects to take up the slack after the integrated resorts (IRs) are completed. Its forecast seems in line with RLB's projection for the Singapore TPI, which RLB expects to increase by 20 per cent for the whole of 2008, and 15 per cent for 2009.

United Engineers Ltd (UEL) managing director Jackson Yap does agree that resources are tight. 'Currently, most contractors are overstretched with projects, and this is on top of the postponement of projects by the government and some private developers,' he added.

To date, $4.7 billion worth of government construction contracts have been deferred.

Mr Yap reckons the TPI will increase by 20 per cent in 2008 but does not expect it to increase by more than 10 per cent next year. 'The outlook for the construction industry at least for the next three years will be good,' he added.

Bovis Lend Lease, which is building 313@Somerset on Orchard Road, said that there are signs of the TPI moderating. And this could be attributed to rising costs.

A spokesman for Bovis Lend Lease said: 'While the construction market is still pretty tight based on the backlog of work flowing through from the major capital investments in the last 12 months, there are discernible signs of the industry's growth decelerating.' High costs and the uncertain global economic climate are contributing to this.

CapitaLand maintains that its projects, 'are progressing on schedule'.

City Developments Ltd is taking a slightly different tack. It said earlier this month that 'the group will proceed to construct developments where it has favourably secured construction costs from reputable and strong construction companies, even before launching them'.

More players in the construction industry will certainly ease some cost pressure but SCAL cautions that companies working in any new market will need to understand the regulatory environment and market practices.

SCAL's spokesman added: 'The effort and final success to bring new construction companies to work here will be limited and will not help much in relieving pressure in the industry.'

But he added: 'The industry is always open to foreign competition, and local construction companies have always been competitive in their project prices, quality and delivery time.'

Swissotel Merchant Court Up For Sale

Source : The Business Times, August 29, 2008

Clarke Quay hotel on the market for $330m-$380m

After a holding period of barely two years, a fund managed by LaSalle Investment Management which bought Swissotel Merchant Court in the Clarke Quay area is putting the 476-room property up for sale.

The hotel, which stands on a site with a remaining lease of about 85 years, is being sold subject to a long-term management contract with Swissotel, part of Fairmont Raffles Hotels International.

The indicative price is understood to be in the $700,000 to $800,000 per room range, translating to an absolute quantum of around $330 million to $380 million.

The LaSalle Investment Management fund that currently owns the property bought it in late 2006 for about $250-300 million, it is understood.

The hotel, which stands on a site with a remaining lease of about 85 years, is being sold subject to a long-term management contract with Swissotel, part of Fairmont Raffles Hotels International.

Despite the softer visitor arrivals into Singapore lately, Jones Lang LaSalle Hotels, the sole marketing agent for the property, is confident that investors will find the property appealing given that Asia's hotel investment market is tightly held. 'Long-term investors don't take a weekly or monthly perspective, and the overall infrastructure being invested in Singapore gives them comfort on the long-term growth prospects here,' says Mike Batchelor, managing director, investment sales (Asia) at JLL Hotels.

The hotel will be marketed through an international tender that will close on Oct 3.

'Investor interest for the property is expected to be strong. We anticipate the property will attract interest from Europe and the Middle East as well as from the more traditional investment markets across North and South Asia,' Mr Batchelor said.

In May last year, CDL Hospitality Real Estate Investment Trust bought the nearby Novotel Clarke Quay in a deal that priced the 398-room hotel at $219.8 million or about $552,000 per room. Mr Batchelor argues that Swissotel Merchant Court's average room size of 30 square metres is larger than Novotel Clarke Quay's. Also, room rates are higher at Swissotel Merchant Court, which would allow for a higher pricing on the hotel. 'Historically, hotels in Singapore have been transacted at net yields ranging from about 4 per cent to 5.5 per cent,' he noted.

The LaSalle Investment Management fund reportedly bought Swissotel Merchant Court in 2006 from Fairmont Raffles Hotels International (owned by Kingdom Hotels International and Colony Capital), which had in turn acquired it as part of the entire hotel business of Raffles Holdings in 2005.

The hotel has three food-and-beverage outlets, conference facilities, an Amrita Spa complete with a fitness centre.

'The incoming purchaser will also have the opportunity to further enhance the asset through the redevelopment of the prime riverfront space overlooking Clarke Quay,' said JLL Hotels senior vice-president Tom Oakden.

'The hotel's ground floor space offers the ideal location for a new state-of-the-art indoor/out- door food-and-beverage facility, tying in well with plans to revitalise the riverfront precinct and new signature events such as The Singapore River Festival,' he added.

Swissotel Merchant Court Offered For Sale

Source : The Business Times, August 28, 2008

Swissotel Merchant Court in Singapore is being offered for sale by international tender through Jones Lang LaSalle Hotels.

The 476-room hotel also has three food & beverage outlets, conference facilities and an Amrita Spa and fitness centre.

'The incoming purchaser will also have the opportunity to further enhance the asset through the redevelopment of the prime riverfront space overlooking Clarke Quay,' said Jones Lang LaSalle Hotels senior vice-president Tom Oakden.

'The Hotel's ground floor space offers the ideal location for a new state-of-the-art indoor/outdoor food & beverage facility, tying in well with plans to revitalise the riverfront precinct and new signature events such as The Singapore River Festival,' he added.

S&P Assigns BB Long-Term Credit Rating To Allco Reit

Source : The Business Times, August 28, 2008

Standard & Poor's Ratings Services on Thursday said it has assigned its 'BB' long-term corporate credit rating to Allco Commercial Real Estate Investment Trust (Allco REIT).

At the same time, it placed the rating on CreditWatch with positive implications.

'The rating on Allco REIT reflects the trust's smaller asset base compared with its global peers'.

It has nine properties (excluding units in unlisted propertyfund Allco Wholesale Property Fund).

Allco REIT also has high tenant concentration, with its top two tenants representing about 30 per cent of the gross revenue of its portfolio,' said Standard & Poor's credit analyst Wee Khim Loy.

'In addition, the trust's market and tenant diversity could decline. Should Allco REIT's manager, Frasers Centrepoint Asset Management (Commercial) Ltd, continue the previous manager's strategy to exit the Australian market and focus on properties in Singapore and Asia, the trust's asset portfolio and cash flow stability would be negatively affected.'

The above weaknesses are partly offset by the quality of Allco REIT's investment portfolio.

The Asian properties, which require minimal capital expenditure, are mostly strategically located in central business districts.

These benefits are complemented by the stable rental cash flow of Australian properties, which are backed by longer-term leases.

In addition, the weighted average lease term of 4.8 years for Allco REIT's combined diversified portfolio is higher than the average for comparable real estate investment trusts focusing on Asian office commercial properties.

Allco REIT's nine properties have more than 400 tenants in total, spanning five markets in three countries.

The diversification strength of the investment portfolio provides cash flow stability to the business.

The rating is also supported by the enhanced financial flexibility of Allco REIT following the change in the ownership of its manager.

Impending refinancing risk declined after Allco REIT was 'de-linked' from Allco Finance Group (AFG). Frasers Centrepoint Ltd (FCL) acquired 17.6 per cent of Allco REIT and 100 per cent of its previous manager, Allco Singapore Ltd, from AFG on Aug 14, 2008.

Allco REIT will be eventually renamed Frasers Commercial Trust. FCL is the wholly owned property arm of Fraser and Neave Ltd, a leading consumer group with a satisfactory credit profile.

Property Transactions With Contract Dates Between Aug 11th - 16th, 2008

Chinese Banks Told To Be Careful On Property Loans

Source : The Business Times, August 28, 2008

(BEIJING) China's banking regulator and central bank yesterday ordered commercial lenders to be more careful when lending to real estate developers.

In an joint statement published on the People's Bank of China's website (, they said that banks should not lend any money to property developers for land purchases.

The statement also encouraged banks to give preference in their lending to affordable housing projects.

China has introduced a raft of measures to cool the property market, including a clampdown on loans for construction, a requirement for developers to build quickly or lose their land, and a tax on land price appreciation.

The tightening steps have already hit a few markets hard, especially in the southern cities of Shenzhen and Guangzhou.

The statement posted on the central bank's website was dated July 29 and said the guidelines should go into effect immediately. -- Reuters

New Dubai Registration Law To Curb Speculation

Source : The Business Times, August 28, 2008

Sales of unfinished properties must be registered before they can be resold

(DUBAI) Dubai has issued a new law to regulate the sale of real estate still under construction in an effort to curb speculation that has sent property prices in the Gulf Arab emirate skyrocketing, an official said on Tuesday.

Upside: Dubai property prices will probably jump 35 per cent this year and another 8.5 per cent in 2009, according to a poll

Under the law issued this week, sales of off-plan properties in Dubai must be registered with the department before they can be resold, Marwan bin Ghalita, chief executive of the Dubai Real Estate Regulatory Authority (RERA), said.

Standard Chartered Bank warned in July that Dubai's property market showed signs of overheating as speculators betting on quick gains inflate prices of units still under construction.

'It will help to curb speculation,' Mr Marwan said of the mew law. 'In Dubai we are introducing laws step by step . . . Now everything is going to be transparent because it is with the Land Department.'

Dubai property prices have surged 79 per cent since the beginning of 2007, Morgan Stanley said earlier in the month.

Demand for real estate in Dubai, home to the world's tallest tower and three man-made islands in the shape of palms, has surged since the government first allowed foreigners to invest in properties in 2002.

The government passed a freehold property law in 2006 granting foreigners the right to own properties at selected developments.

The off-plan law follows the issuance of a mortgage law last week as part of a drive to regulate the Gulf Arab business hub's booming real estate sector.

It will also prevent master and sub-developers from charging transfer fees on off-plan sales, Mr Marwan said. Developers however can be paid administration fees of 1,000-3,000 dirhams (S$386-1,157) for each transaction after approval by the Land Department, he said.

Property prices will probably jump 35 per cent this year and another 8.5 per cent in 2009, when they are expected to peak as Dubai takes measures to weed out short-term speculators, a Reuters poll showed on Tuesday.

The analysts said property prices would fall at least 15 per cent from peak to trough. -- Reuters

Condo Site Near Circle Line Station Up For Sale

Source : The Straits Times, August 28, 2008

A LAND plot for a condominium has been made available for sale in Serangoon Avenue 3, next to the Lorong Chuan MRT Station on the new Circle Line.

Despite lacklustre activity in the private housing market, property consultants expect this 1.39ha site to be favourably received, given its choice location.

'Although the current cautious mood and slow sale activity in the residential market have diminished developers' appetite for development sites, there is a high probability that the site will be released for sale by tender because of its favourable location with good surrounding amenities,' said Mr Nicholas Mak, director of research and consultancy at Knight Frank.

The plot is adjacent to Nanyang Junior College and near other schools such as St Gabriel's Primary and the Australian International School. It is also close to Serangoon Gardens and the Chomp Chomp food centre, as well as the mega mall in the future Serangoon Hub.

Mr Mak expects site bids of between $83 million and $107 million, or $200 to $255 per sq ft (psf) of potential gross floor area.

Mr Ku Swee Yong, director of business development and marketing at Savills Singapore, was slightly more optimistic. He said bids could come in at about $130 million, or $300 per sq ft of potential gross floor area, based on an expected selling price of $850 psf for the finished units.

'There are a couple of smaller developers who may be in need of land, and who may find this medium-sized mass market property suitable,' Mr Ku said. A new condo on the site could host 350 to 400 units of 1,000 to 1,200 sq ft each.

The Government yesterday said the site was open for applications by interested buyers. If a developer submits a minimum acceptable bid, it will trigger a public tender for others to submit offers.

Laguna Park En-Bloc Spat - Condo's MC Chairman Nabbed

Source : The Straits Times, Aug 28, 2008

Arrest followed 'glued doors' attack at two units this week; he's now out on police bail

THE chairman of the management committee at Laguna Park, recently hit by a spate of vandalism, was arrested this week on suspicion of gluing shut two residents' apartment doors.

No charges were brought against Mr Lee Kok Leong, 61, who has since been released on police bail.

He could not be contacted yesterday despite several attempts to do so.

A resident who declined to be named said he was surprised by the news of the arrest as Mr Lee was well respected in the 530-unit East Coast condominium, whose residents are now split over a collective sale.

The resident said of Mr Lee: 'Although he supported the en-bloc sale, he had claimed he was a victim - he said his mailbox was glued shut.'

The rift over the collective sale has turned ugly in recent months after several instances of vandalism against those opposed to the sale.

In the latest incident on Monday, two residents found their apartment doors stuck to the frames by glue.

Both live in Block E, and are against the sale.

In recent months, cars belonging to residents not keen on the sale were splashed with a corrosive liquid or paint, or scratched; mailboxes have also been found with glue in their keyholes.

Some residents were hit more than once.

One resident who found glue on the door to her apartment this week said she was worried that the culprits have accomplices, and did not feel safe.

To address the fears of residents like her, an extraordinary general meeting will be called in October.

Contacted yesterday, a spokesman for the management committee told The Straits Times that the purpose of the meeting was to find out where the residents stood on having closed-circuit television (CCTV) cameras installed.

'The big question is whether they would be willing to pay. Everyone wants security, but who is going to pay for it in the end?

'If they want a CCTV camera outside every unit, it would be very costly,' he said.

The move was in response to the vandalism in the estate, he added.

The possibility of a collective sale of the units in this seaside estate arose last December.

Residents have until the end of this year to secure an 80 per cent vote to put it up for sale.

So far, 65 per cent have indicated their agreement to it.

Residents have been told by a property valuer that an average unit could be worth more than $2.1 million in a collective sale, and the penthouses, almost $4m.

Developers Weigh Odds For Launches After Ghost Month

Source : The Business Times, August 28, 2008

Some may want to test market now rather than risk deterioration in sentiment

Some developers have been quietly oiling their launch machinery in the past few weeks as they get ready for previews and launches, especially with the Hungry Ghosts Month ending this Saturday.

Boulevard Vue's facade will be designed by well-known Japanese interior designer Super Potato. The freehold project's 26 apartments (one per floor) are about 4,500 sq ft each, while the two duplex penthouses occupying the top four levels are 8,000-plus sq ft and 11,000-plus sq ft.

With the property outlook expected to worsen before it gets better, there may just be an incentive for some to launch their projects sooner - or wait it out till late-2009/2010, a seasoned property consultant told BT.

Another consultant, Knight Frank executive director Peter Ow, said: 'Whatever name you call it - preview, private invitation, etc, the aim is for developers to test the market. If the response is sufficient at the price they want, they'll begin sales. If the response isn't up to what they want, they won't sell. As a developer, you don't want to risk launching a project, selling a few units and getting stuck.'

Projects that have begun to be previewed this month include Far East Organization's 85-unit freehold Miro at the corner of Lincoln and Keng Lee roads (at an average $1,600 per square foot) and a 54-unit cluster housing project at Greenwood Avenue. Units in the 103-year leasehold development range from 3,000 to 3,700 sq ft.

Over at Nathan Road, Tat Aik Group has been inviting potential buyers to view Nathan Residences, a 91-unit freehold project priced at around $2,000 psf on average.

Keppel Land is also expected to release this weekend in Hong Kong and Singapore about 30-40 units under the next phase of Reflections at Keppel Bay.

The average price is expected to be similar to the earlier phase launched around April last year, at about $1,800 to $2,000 psf. Deferred payment is expected to continue to be offered.

Hong Fok Corporation's 360-unit Concourse Skyline apartments at Beach Road, KepLand's 56-unit freehold Madision Residence near the junction of Bukit Timah and Keng Chin roads, and City Developments Ltd's The Arte at Thomson are understood to be other projects that could hit the market soon.

In the high-end segment - where sentiment is weakest - Far East Organization, which has already sold two units at its 28-unit luxury development Boulevard Vue at Cuscaden Road, opened its showflat for the project recently and is expected to step up marketing activity.

The project's 26 apartments (one per floor) are about 4,500 sq ft each, while the two duplex penthouses occupying the top four levels are 8,000-plus sq ft and 11,000-plus sq ft. Prices for low- and mid-level units in the 33-storey freehold project range from $3,600 psf to $3,900 psf.

BT understands the price tag for the bigger penthouse will likely be around the $4,500 psf mark, working out to an absolute sum of about $50 million. If achieved, the absolute amount would set a new record for a penthouse in Singapore.

Boulevard Vue's facade will be designed by well-known Japanese interior designer Super Potato. BT understands that the unit layouts will be customised to buyers' preference.

A critical factor affecting developers' launch decisions is pricing, given the bearish sentiment.

'Pricing will be more realistic for fresh launches, but for projects released earlier, it would be difficult for established developers to trim prices without upsetting earlier buyers, especially VIPs,' the seasoned property consultant said.

Agreeing, Jones Lang LaSalle Singapore's residential head Jacqueline Wong said: 'Such developers may just hold the remaining units in the project if necessary and have another shot at selling them upon the project's completion. For new projects too, the financially stronger players can hold off developing for a while.

'However, developers who are fairly new or need the cashflow will have to be realistic in their pricing and will be more amenable to negotiating with buyers.'

Another industry observer said that instead of outright price cuts, it may be easier for developers to attract new buyers into existing projects by offering furnishing vouchers, guaranteed yields (for newly completed projects) or arranging for attractive mortgage packages.

A mid-sized developer said: 'We have to accept the fact that prices have to be marked to market; otherwise we can't sell enough units to generate the required cashflow. For sites bought within the past 12 months, developers would need to sell at least 50 per cent of the development to generate sufficient cashflow to finance the project's construction - taking into account high land price paid and rising construction costs, among other factors.'

Sim Lian Net Profit Up A Third To $44m

Source : The Business Times, August 28, 2008

PROPERTY and construction group Sim Lian has posted a 33 per cent jump in fiscal full-year net profit to $44.1 million despite rising raw materials costs, thanks to higher revenue, a reversed impairment loss and a divestment.

Sim Lian also plans to launch three projects in fiscal 2009 at Surrey Road, Keng Lee Road and its second design, build and sell scheme project at Simei Road, it said in its financial statement, but added that they are not expected to contribute significantly to 2009 financials.

The company declared a first and final cash dividend of 1.6 cents per share.

Revenue rose 22 per cent to $389.6 million for the 12 months ended June 30, 2008. Property development sales were up 20 per cent to $250.4 million due mainly to revenue recognised from its projects, The Premiere @ Tampines and Carabelle.

Other operating income rose 92 per cent to $5.2 million due mainly to the divestment of its data centre.

Sim Lian's construction division posted a 22 per cent rise in revenue to $116.7 million, thanks to higher-value contracts clinched this year as well as a higher percentage of project completion.

Earnings per share rose to 7.8 cents from 6.3 cents, while its cashflow fell 33 per cent to $53.3 million.

The cost of raw materials and consumables jumped 56 per cent to $13 million, mainly due to pricier industrial lubricants.

The company also posted a negative balance of $258,000 in other operating expenses, thanks to a $6 million increase in valuation of its investment property and a $2.2 million reversal of impairment loss on property, plant and equipment. Stripping that out, other operating expenses would have jumped 58 per cent to $7.9 million due to a higher exchange loss recorded by its Malaysian subsidiary and in allowance for doubtful trade receivables.

Projects including The Premiere @ Tampines and Carabelle, as well as Clover by the Park at Bishan and The Amery at Telok Kurau - which were launched in June - are expected to contribute positively to the company's performance in fiscal 2009, said Sim Lian.

Despite rising construction costs and weak sentiment in the property sector, the company expects to achieve profitable operating results in fiscal 2009.

Singapore Is World's Top Brand

Source : My Paper, Thu, Aug 28, 2008

SINGAPORE is the best, based on how the Republic is perceived in leading international media.

This is according to a global survey of 200 countries conducted by Washington-based East West Communications, a company which helps countries improve the way they are viewed by the world.

All 192 members of the United Nations were included in the survey. The remaining eight were major non-members and territories, including Hong Kong and Taiwan.

Hong Kong and Malaysia were ranked second and third respectively.

The bottom three countries were Sudan, Iraq and Afghanistan.

In its press announcement earlier this week, the company said it hopes that these results will encourage countries to strive for a better ranking in the future.

The current results are valid only for the second quarter of this year. The first full-year Global Index 200 will use the same methodology to cover this year, and the results will be published early next year.

'Using our reports, governments can address their branding and messaging weaknesses, and build on their strengths,' said Mr Thomas Cromwell, president of East West Communications.

The company analysed five million references to the 200 countries or regions in '38 leading publications and other news sources in the United States and worldwide', from April 1 to June 30 this year, to compile the survey.

Based on the number of country references or mentions alone, Singapore was ranked 17th while the US came first.

However, the survey also used a text-analysis system developed by Ohio's Perception Metrics - which comprises a dictionary of 16,000 words and phrases - to determine positive and negative messages in any given text.

From the analysis of these positive and negative messages, and the number of times a country is mentioned, a score was calculated for each country.

Branding expert and author of the book Corporate Image Management, Mr Steven Howard, attributes Singapore's high ranking to the positive news the country generates.

Mr Howard, who has lived here for 28 years, said: 'Singapore is strong in terms of business growth, manufacturing productivity and government initiatives.

'It is well known globally as a leader in implementing innovative concepts, ranging from Singapore Airlines being the first to fly the Airbus 380, to being the host city for the world's first night Formula One race.'

A country's brand is much more difficult to manage, he added. 'It is created by an amalgamation of everything that is linked to that country.'

The managing director of branding consultancy BrandStory Inc, Ms Reene Ho-Pang, said that people's perception of a brand is what makes it successful.

'A brand rests in the minds of the people. What people around the world say and share about Singapore is extremely important and reflected in the media,' she said.

But Ms Ho-Pang hopes Singaporeans will not get complacent about managing the country's brand image.

'We must continue to do the right things for our brand, to evolve and make it relevant to the world.'

(East West branding survey, Q2 2008)

1. Singapore
2. Hong Kong
3. Malaysia
4. Taiwan
5. Australia
6. United Arab Emirates
7. Qatar
8. Monaco
9. Canada
10. United Kingdom

Wednesday, August 27, 2008

US Housing Upturn Unlikely Before '09

Source : The Business Times, August 27, 2008

Recently-passed law to avert foreclosures a key move: official

(WASHINGTON) A recovery from the worst US housing slump since the Depression is unlikely until 'well into 2009,' Housing and Urban Development Secretary Steve Preston said on Monday.

'I think we're right in the middle of it, and I think we have a ways to go before we start seeing a turnaround,' Mr Preston said in an interview in Washington. 'We'll be well into 2009 before we see some real energy in this market.'

A slowdown in home sales and a drop in prices has contributed to record foreclosures as borrowers struggle to meet their monthly mortgage payments.

Mr Preston said a foreclosure-prevention law Congress passed last month will be important in aiding mortgage-finance companies Fannie Mae and Freddie Mac, which are supporting most new mortgages.

'We have to begin seeing the inventory of new homes begin to reduce so that we can see the buying activity begin to pull us out of the situation we're in,' Mr Preston, 48, said.

US banks repossessed almost three times as many US homes in July as a year earlier, and the number of properties at risk of foreclosure jumped 55 per cent, California-based RealtyTrac Inc said in an Aug 14 report.

The law enacted last month creates a Federal Housing Administration programme in HUD to insure as much as US$300 billion in refinanced 30-year, fixed-rate mortgages for 400,000 struggling homeowners. The law lets the US inject capital into Fannie and Freddie through stock purchases or government loans.

Mr Preston deferred to the US Treasury and Federal Housing Finance Agency, the new regulator of Fannie Mae and Freddie Mac, on whether the companies should be bailed out or nationalised.

'I don't know what the future holds for them,' he said. Mr Preston said 'it's possible' he may propose other solutions to the housing crisis, without being specific.

'Many of the policy solutions are out there and working,' he said. 'My guess is that you're going to see more fine-tuning of these programmes to ensure that they're working, rather than large-scale change.'

Other programmes include an industry-led effort called the Hope Now Alliance organised last year to help troubled homeowners modify their mortgages to make monthly payments more affordable.

A programme HUD started a year ago called FHA Secure is also aimed at averting foreclosures by helping borrowers with adjustable-rate mortgages refinance into FHA-insured mortgages.

Mr Preston, who was head of the US Small Business Administration, in June replaced Alphonso Jackson, who quit amid a federal criminal probe into contracts awarded by the agency. -- Bloomberg

URA Rejects Sole Bid For Tampines Condo Site, Saying It's Too Low

Source : The Business Times, August 27, 2008

FOR the fourth time this year, the government has rejected bids at a state land tender for being too low, amidst weakening property market sentiment and rising construction costs that have forced bidders to clip their land bids.

And what's interesting is that in three of the four instances, the top or sole bidder was the Midview group, involved in the construction and property businesses as well as in general trading.

The company, controlled by Lim Kim Hong and Lim Huixing, has its office at Midview Building at Bukit Batok Street 23.

Yesterday, Urban Redevelopment Authority (URA) turned down the sole bid for a private condominium housing site at Tampines Avenue 1/Avenue 10 as the price offered was too low.

The 99-year leasehold plot, which faces Bedok Reservoir, drew a bid of about $118 per square foot per plot ratio (psf ppr) from Midview unit Boon Keng Development Pte Ltd.

The sole bid was below general market expectations, which ranged from $150 to $230 psf ppr. When the tender for the site closed on Aug 12, most property consultants had already said there was only a slim chance of the site being awarded.

The three sites where bids were earlier rejected by the state for being too low were the Ten Mile Junction site in Choa Chu Kang (which was to have a residential component), a landed housing plot at Westwood Avenue in Jurong, and a transitional office site at Aljunied Road/Geylang East Avenue 1.

Midview group was the top bidder for the Westwood Avenue plot as well as the sole bidder for the transitional office site.

Analysts have also pointed out that some of these sites were not that attractive to begin with.

The latest Tampines plot that was not awarded, for instance, does not have strong attributes like transportation links or proximity to amenities.

An industry observer also highlighted an element of opportunistic bidding seen, especially on the part of contractors, at recent state tenders.

'With the current market uncertainty and most developers keeping away from land tenders, some players see a chance to try and get land on the cheap and hopefully reap a windfall. I guess it's their business strategy: They can manage construction costs better, plus if they can get land at low cost, and even if the property market comes down, say, 30-40 per cent, they would still be OK,' he said.

The Tampines Avenue 1/10 plot was offered through the confirmed list of the Government Land Sales programme where sites are released according to a pre-stated schedule and the government's minimum or reserve price is not made known.

Separately, the Housing & Development Board yesterday made available for application a 99-year condo plot at Yishun Ave 2/Yishun Ave 7/Canberra Drive through the reserve list.

The plot will be launched for tender only upon successful application by a developer, with an undertaking to bid at a minimum price that is acceptable to the state.

Wing Tai's Q4 Net Slumps 60%

Source : The Business Times, August 27, 2008

Home sellers seen unlikely to resort to fire-sale - at least until 2010

PROPERTY group Wing Tai Holdings yesterday said that net profit for its fourth quarter fell by more than half as it sold fewer homes and saw lower fair value gains from investment properties.

At the same time, chairman Cheng Wai Keung, known for his often candid assessments of the property market, said that while home prices could see some adjustment in 2008 and 2009, sellers are unlikely to have a 'fire sale' of their properties - at least until 2010.

This is because home prices in Singapore started climbing rapidly only in 2006 and 2007, and buyers of these newer properties will see the projects completed only from 2010 onwards. The push to offload their units will happen only then, he said.

The company's net profit for the three months ended June 30 fell 60 per cent to $96.3 million, from $243.2 million a year ago. Fair value gains on investment properties dropped to $90.6 million from $189 million.

Revenue for the fourth quarter fell 57 per cent to $107.3 million, down from $249.1 million in Q4 2007. Among other projects, revenue was contributed by units sold in The Riverine by the Park in Singapore.

Earnings per share fell to 12.45 cents, from 33.83 cents a year ago.

Wing Tai has declared a dividend of six cents a share, comprising a first and final dividend of three cents and a special dividend of three cents.

For the entire 2008 financial year, Wing Tai reported that net profit fell some 40 per cent to $229.4 million, from $381.8 million in FY2007.

Revenue for the 12 months fell 56 per cent to $428.2 million, from $981.6 million a year ago.

Wing Tai said in a filing to the Singapore Exchange that the underlying fundamentals of the property market are still sound.

'I have always believed that property is actually a reflection of the fundamental strength of the economy,' said Mr Cheng. However, sentiment has a part to play too, he admitted.

Wing Tai sold some 205 units in Singapore during the financial year, although the majority of units were sold in the last six months of 2007.

The company has some 1.4 million square feet in its residential land bank, but no new launches are planned for the moment, Mr Cheng said.

Temasek Warns Of Lean Years As Returns Dwindle

Source : The Business Times, August 27, 2008

It flags stagflation risk; its 7% total shareholder return on portfolio lowest in recent years

Temasek Holdings has warned of a growing danger that global economic growth could stall as the fallout from the credit crisis spreads around the world, with possible stagflation posing a severe risk for years to come.

Temasek's own vast portfolio of investments was buffeted by the turmoil that swept financial markets since the start of the crisis last year.

By market value, the total return to Temasek's sole shareholder - the Finance Ministry - for the year to end-March fell to just 7 per cent, from 27 per cent a year earlier.

Economic profit or wealth added - which Temasek uses internally to gauge its returns above a risk-adjusted benchmark - was a negative $6.3 billion, the first time in five years it fell below the cost-of-capital hurdle. A year earlier, wealth added was $23.4 billion.

By one measure, the market risk of Temasek's portfolio rose 67 per cent over the year to end-March, reflecting the 'severe stress' in global financial markets, according to its latest annual report.

Group net profit for Temasek for the year to end-March doubled to a record $18.24 billion from a year earlier, boosted by strong operating performance at its portfolio companies and divestment gains from its asset sales.

Under standard accounting rules, the consolidated net profit includes Temasek's share of profits from companies in which it has a stake of 20 per cent or more, but does not directly reflect its share of the profits or losses of firms in which Temasek has a stake below 20 per cent. Profits from Singapore's DBS Group, of which Temasek owns 28 per cent, would be included, while profits from the UK's Standard Chartered Bank, in which Temasek has a 19 per cent stake, would not.

'The credit crisis is not over - we expect to see further contagion in the real economy in the US, Europe and also Asia over the next 24 months,' said Temasek chairman S Dhanabalan in the 2008 Temasek Review published yesterday.

The fallout from the credit crisis 'will continue to dampen the global economy' for the next two years, he added.

The 7 per cent one-year return to the government - which includes dividends paid by Temasek to the government net of new capital injections - is the lowest since Temasek started publishing its annual report in 2004, when the return was 46 per cent.

Temasek's portfolio performance over longer periods, however, remains strong, with compounded annual returns of 23 per cent over five years, 9 per cent over 10 years, and 18 per cent since Temasek's inception in 1974.

But Mr Dhanabalan was cautious on the outlook. 'We are concerned with the emerging risks of stagflation. This presents huge socio-political as well as economic risks in the next three to five years,' he said.

Bold policies by regulators in the US had averted a major systemic failure, but 'the risks of stagflation have become more apparent with the twin bogeys of high oil and food prices', he added.

Still, 'there may be opportunities as imbalances are corrected', although such opportunities may be limited if stagflation - a period of stagnant economic growth coupled with high inflation - does set in, he added.

During the year to end-March, Temasek sold $17 billion worth of assets, including some $12 billion in Asia, 'as we anticipated a massive structural adjustment', said Mr Dhanabalan.

In April last year, Temasek also received an injection of new capital from the government, which boosted its portfolio value by $10 billion, net of dividends paid to the government. An undisclosed dividend amount is set yearly by the Temasek board, said Michael Dee, Temasek senior managing director, international, at a media briefing yesterday. Mr Dee, a former investment banker, recently joined Temasek from Morgan Stanley.

US Mortgage Applications Up 1st Time In 3 Wks: MBA

Source : The Business Times, August 27, 2008

NEW YORK - US mortgage applications rose for the first time in three weeks as interest rates edged lower, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Aug 22 increased 0.5 per cent to 421.6.

Mortgage applications during the previous week had fallen to their slowest pace since December 2000.

While last week's increase was small, the report offers a glimmer of hope for the US housing market, currently suffering the worst downturn since the Great Depression.

Significantly tighter lending standards and an unwieldy supply of homes for sale are just some of the factors weighing on the US housing market.

Borrowing costs on 30-year, fixed-rate mortgages, excluding fees, averaged 6.44 per cent, down 0.03 percentage point from the previous week.

Interest rates were not far from year-ago levels of 6.41 per cent.

The MBA's seasonally adjusted purchase index rose 0.6 per cent to 315.9. The index came in well below its year-ago level of 424.0, a drop of 25.5 per cent.

Overall mortgage applications last week were 31.5 per cent below their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.05 per cent to 424.9.

The group's seasonally adjusted index of refinancing applications increased 0.3 per cent to 1,038.0. The index was down 40 per cent from its year-ago level of 1,729.6.

The refinance share of applications increased to 35.2 per cent from 34.8 per cent the previous week. The adjustable-rate mortgage share of activity decreased to 7.9 per cent, down from 8.0 per cent the previous week.

Fixed 15-year mortgage rates averaged 5.94 per cent, down from 5.99 per cent the previous week. Rates on one-year ARMs increased to 7.15 per cent from 7.07 per cent. -- REUTERS

Investing In India's Real Estate Sector

Source : The Business Times, August 27, 2008

Foreign investors need to address some key issues and regulatory requirements before jumping in

INVESTMENT in the Indian real estate sector continues to grow, albeit the pace may be slowing just a little. Foreign developers as well as private equity funds remain bullish, long-term, on India's property market.

From a foreign investor's perspective, the recent correction in real estate prices in some parts of India is good news in that it could result in land being available at attractive values.

Unclear picture: As for partially completed projects, the foreign direct investment (FDI) guidelines do not clarify whether FDI would be permitted into such projects Not only is investment flowing into the 'first-tier' cities, but attractive real-estate deals are also being negotiated and signed in 'second-tier' cities such as Indore, Jaipur and Cochin.

But although Indian property may make an attractive investment for foreign investors, it is important that they address some of the regulatory issues prior to making an investment.

According to India's current foreign direct investment (FDI) policy, 100 per cent FDI is allowed under the automatic route - that is, without requiring government approval - for the construction and development projects that include housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional-level infrastructure and townships.

But this is subject to certain conditions:

# Minimum area for development under each project should be:

i) 10ha in the case of services housing plots; or

ii) 50,000 sq m in the case of construction development projects.

iii) In case the project is a combination of the two, any one of the two conditions would have to be met.

# Minimum capitalisation of US$10 million for wholly owned subsidiaries and US$5 million for joint ventures with Indian parties.

# The funds have to be brought in within six months of commencement of business of the company.

# The original investment is subject to a lock-in period of three years from the completion of minimum capitalisation.

# At least 50 per cent of the project must be developed within a period of five years from the date of obtaining all statutory clearances.

# Investors would not be permitted to sell undeveloped plots.

Though the investment policy seems straightforward, investors still need to address some key issues and comply with other regulatory requirements.

For example, when it comes to funding, India's exchange control regulations permit external commercial borrowings (ECBs) - that is, commercial loans in the form of bank loans, buyers' credits, suppliers' credits, and loans from shareholders.

There are several restrictions on the end use of ECB funds. One of these is that the proceeds of ECBs cannot be used for the purpose of acquiring real estate in India. Accordingly, ECBs cannot be used for real estate development in India.

Preference shares are also considered as ECBs and, likewise, cannot be used to invest in a real estate project in India.

The only exception is the use of compulsory convertible preference shares or fully and mandatorily convertible debentures, which would be treated as part of equity and would be considered as FDI.

Therefore, apart from pure equity funding, only compulsory convertible preference shares and fully and mandatorily convertible debentures can be used. This would tend to minimise the options available for funding a project in India because all funds would have to be in the form of equity or instruments which can be converted into equity.

As per the FDI regulations, a foreign investor's original investment 'cannot be repatriated before a period of three years from completion of minimum capitalisation'.

Original investment

The question therefore arises as to the meaning of the term 'original investment'. Should the term be interpreted as 'minimum capitalisation' or should it be interpreted to mean the funds brought into the company in the first six months?

Since the term is not defined, it becomes important to have a correct interpretation, as the 'original investment' is subject to a three-year lock-in period. The view that seems to be emerging is that funds brought into the company in the initial six months - that is, the minimum capitalisation of the commencement of business - is the original investment and subject to the lock-in period.

However, the risk is that if an amount in excess of the minimum capitalisation is invested during the first six months, the entire amount would be treated as 'original investment' and would be subject to lock-in. To minimise this risk, only funds to the extent of minimum capitalisation should be invested during the first six months.

Investors in real estate have to bring the funds into India within six months of 'commencement of business'. Again, the term 'commencement of business' has not been defined. It can be interpreted in various ways; for instance, in the construction business it could mean the point at which construction actually commences.

The view emerging from Indian regulators is that the term 'commencement of business' means when the shareholders agreement or joint venture agreement is signed. Accordingly, the funds have to be invested within six months upon signing the agreement.

Finally, there are questions surrounding partially completed projects. The FDI guidelines do not clarify whether FDI would be permitted into these.

The question would arise as to the meaning of 'partially developed'. In this connection the view appears to be that if the project is less than 25 per cent complete, FDI would be permitted. However, in this case it may be prudent to seek prior approval of the Foreign Investment Promotion Board before making an investment.

Given the fact that India desperately needs good-quality housing and commercial space, the current slowdown in deals in India is likely to be temporary.

In due course, growth in the Indian real estate sector will resume with more acquisitions and consolidation. But foreign investors planning to enter India's real estate sector need to address a number of regulatory issues before they go in.

The writer is the head of tax of BDO Raffles in Singapore. The views expressed in this article are his own