OCBC's US-Linked $10m Write-Down To Be Its Last

Source : The Straits Times, Feb 22, 2008

OCBC Bank drew a line under the blight of sub-prime problems in the United States yesterday with assurances that the worst is over.

The bank told a results briefing that the relatively small additional allowance it made in the fourth quarter should be the end of any red ink related to the US mortgage meltdown.

OCBC chief financial officer Soon Tit Koon said: 'There will be immaterial impact going forward' for write-downs related to asset-backed collateralised debt obligations (CDOs). Some of the securities are linked to the US sub-prime crisis.

The bank made additional allowances of $10 million in its fourth quarter for CDOs - a fraction of the $221 million charge it took in the third quarter.

The assurance came on a day when OCBC posted a 16 per cent drop in core profit, but one that still beat market expectations.

Core net profit, which excludes exceptional items, for the three months ended Dec 31 last year was $425 million, slightly below the $432 million recorded a year ago. But the result surpassed the $397 million fourth-quarter average forecast of 15 analysts polled by Reuters Estimates, who had predicted net profits of $2.04 billion for last year.

Full-year net profit was $2.07 billion, up from $2 billion a year ago, thanks to robust loans growth, insurance and fee-based activities. This meant that full- year core earnings per share surged 32 per cent to 59.7 cents - OCBC's 'best performance since 1999', said OCBC chief executive David Conner.

Net asset value was $4.79 compared with $4.07 in 2006.

Investors greeted the news of the planned final tax-exempt dividend of 14 cents per share by pushing the shares up 15 cents to $7.60 yesterday. The full-year dividend will be 28 cents a share, up from 23 cents a year ago.

Shareholders can opt to take their dividends in cash or invest them in securities that pay a 'reasonable interest rate' coupon and can be converted into shares later at a fixed price.

These are called subordinated notes. Holders of subordinated debt only get paid interest after other creditors like bondholders are paid in full.

The proposed scheme will help replace more expensive capital with cheaper debt held in its Tier II capital. If all shareholders subscribe to the note, OCBC may end up issuing up to $432 million in convertible notes.

Morgan Stanley analyst Matthew Wilson noted: 'Luring retail investors into Tier II capital with a dividend funding scheme is a clever way to attempt to raise cheap Tier II capital. If they went direct to wholesale markets, raising capital may be more expensive.'

OCBC's fourth-quarter performance took a hit from higher expenses, which rose 14 per cent during the period. The bank forked out higher salaries, business promotion expenses and professional fees. Meanwhile, net interest income rose 9 per cent from the third quarter on the back of 7 per cent loans growth. OCBC raised net interest margins by 0.07 of a percentage point.

Mr Conner said he does not expect a mortgage price war to erupt in Singapore despite the plummeting Singapore inter- bank interest rates. He noted that there is still 'reasonably healthy demand for home loans' and the interest rate spreads are still not wide enough for most banks to start cutting rates.

He added that the bank continues to deepen its penetration of overseas markets such as Indonesia and Malaysia and is looking for opportunities in Vietnam, where it will raise its stake in local lender VP Bank to 15 per cent from 10 per cent currently.

It is exploring the possibility of getting a license for a wholly- owned locally incorporated unit in Vietnam, while its asset management unit Lion Capital is also eyeing the market, he said.


A SOLID GUY IN THE NEW CEO

'I trained him... He was my subordinate for 5-1/2 years. He is a good banker, a solid guy. What can I say? We were both born in the Year of the Rat, so we must have some great characteristics.'

MR CONNER, on new DBS chief executive Richard Stanley. Mr Stanley worked at Citigroup Singapore as head of the financial institutions and securities division from 1990 to 1995. His boss was Mr Conner, who was then Singapore country head for Citigroup.

Rising Inflation Across Asia Mauls S'pore Reits

Source : The Straits Times, Feb 23, 2008

Trusts may still get big lift from higher rents, higher hotel rates, say analysts

SOARING inflation across Asia has sucked the life out of real estate investment trusts (Reits), whose high-yielding dividends have made them wildly popular among investors in recent years.

Investors had wrongly penalised Reits with concerns over acquisition growth and credit-tightening conditions. They have ignored the 'organic' boost Reits may get from higher rents and hotel rates. - MORGAN STANLEY, in a report recommending property trusts to its clients -- ST FILE PHOTO

Reits, in general, have fallen about 32.5 per cent in value from their peaks last year, but those with assets in inflation-prone economies, such as China, have fared even worse, according to financial portal Shareinvestor.com.

CapitaRetail China Trust, for instance, has fallen 52 per cent in four months, as inflation in China galloped to 7.1 per cent - its highest level in over a decade.

Reits are financial instruments investing in real estate like shopping malls, office buildings and hotels.

Investors can buy units, which are much like shares, offering attractive dividend yields of 6 per cent to 8 per cent derived from rents.

This is far higher than the 1.5 per cent interest on one-year fixed deposits at a bank.

Historically, a low interest rate environment has been good for Reits - if accompanied by low inflation.

Take CapitaMall Trust, the first Reit listed in Singapore. Its assets include the Tampines Mall and Junction 8 shopping centres.

It received an overwhelming response from investors when it listed six years ago, rising from just 96 cents in July 2002 to a record high of $4.32 in July last year. Inflation played its part by staying at a benign 1 per cent.

As the consumer price index, however, surged from 1.3 per cent in June to 4.4 per cent in December, CapitaMall slid 20 per cent over the period.

The inflation pressure is unlikely to abate in the near future.

Last week, the Government revised its estimates upwards to between 4.5 per cent and 5.5 per cent for the year, from an earlier forecast of 3.5 per cent to 4.5 per cent.

So, while fears of a United States recession are causing much grief among investors as they watch the value of their growth stocks evaporate, inflation is becoming a big threat to those with high dividend-yield plays like Reits.

One trader explained: 'A Reit may offer 6 per cent in dividend yield. But if inflation is running at 4.5 per cent, the actual yield an investor is getting is only 1.5 per cent.'

To compensate for the lower return, an investor will demand a lower price for the Reit, which escalates the pressure on its share price.

Still, analysts have not stopped promoting Reits, despite their lacklustre performance, to clients.

Morgan Stanley made a case last month with a report arguing that investors had wrongly penalised Reits with concerns over acquisition growth and credit-tightening conditions.

Investors have ignored the 'organic' boost Reits may get from higher rents as leases expire and hotel rates are jacked up during peak periods.

Citigroup noted on Tuesday that while there may not be a clear growth strategy for Reits this year, some are trading at hefty discounts to their net asset values, despite offering single-digit or even double-digit dividend yields.

'This makes Reits potential takeover targets, if they have loose shareholding structures,' it added.

Its top picks include Ascendas Reit, Suntec Reit and Parkway Life Reit.

Wheelock May Not Launch Orchard View This Year

Source : The Business Times, February 23, 2008

WHEELOCK Properties (Singapore) is likely to hold off launching Orchard View at Angullia Park for sale until next year, when the project is slated for completion. The company had earlier indicated that the development would be launched some time this year.

The group, which yesterday posted a six-fold jump in group net profit for the quarter ended Dec 31, 2007, to $217.5 million, also said it expects to launch Ardmore 3 next year. Piling work for the project is in progress and the development is slated for completion in 2012.

For Orchard View, the main construction work is already in progress and the development is scheduled for completion next year.

For the quarter ended Dec 31, 2007, Wheelock's revenue from continuing operations rose 43.8 per cent to $189.3 million. Wheelock's strong topline and bottomline were mainly due to the start of revenue and profit recognition for units sold in Ardmore II condo. The bottomline also received a boost from a $200 million revaluation surplus on Wheelock Place, the group's retail-and-office investment property on Orchard Road.

Wheelock, which has changed its financial year-end from March 31 to Dec 31, said that for the current year it will book the remaining profits from The Sea View condo in the Amber Road area and The Cosmopolitan at the River Valley/Kim Seng Road corner, which are slated for completion in first-half 2008 and mid-2008 respectively.

It will also continue to book profits from Ardmore II based on the progress of construction work and expects to book maiden profits on Scotts Square, a 338-unit apartment development which is already 67 per cent sold at an average price of $3,988 psf. 'Sales of the remaining units are ongoing and we expect to sell progressively over the next two years,' the group said.

Wheelock Place is also expected to continue maintaining full occupancy in the current strong market conditions and 'prospects for improved rental rates are good for both office and retail space'.

'The group remains in a strong financial position to take advantage of opportunities which may arise,' Wheelock said.

As at Dec 31, 2007, the group had total liabilities of $749.5 million and total equity of $2.18 billion. It had cash and cash equivalents of $557.7 million as at the same date. Shareholders will receive a 6-cent per share (one-tier) first and final dividend for the period ended Dec 31, 2007.

With the change in its financial year, the group reported net earnings of $273.5 million for the nine months ended Dec 31, 2007, against net profit of $297.9 million for the 12 months ended March 31, 2007.

Wheelock's net asset value per share stood at $1.82 as at Dec 31, up from $1.69 as at March 31, 2007.

Earlier this month, the group boosted its investment in fellow upscale residential developer SC Global Developments from 12.01 per cent to 13.09 per cent.

Zaha Hadid To Design CapitaLand Condo

Source: The Business Times, February 23, 2008

CAPITALAND, which had harboured ambitions to commission renowned architects like Daniel Libeskind and Frank Gehry to design its proposed integrated resort projects here will now get to work alongside Zaha Hadid.

Having designs: CapitaLand's condo on the former Farrer Court site will be designed by MsHadid

UK-based Ms Hadid won the coveted Pritzker Architecture Prize in 2004. Her most recent commissions include the billion euro Louvre in Abu Dhabi.

The news was announced yesterday by Patricia Chia, chief executive of CapitaLand Residential Singapore.

She said that Ms Hadid will design a new condominium that will come up on the site of the former Farrer Court, for which CapitaLand, Hotel Properties and US-based Wachovia Development Corporation paid $1.34 billion in June last year. Ms Chia did not say when the new development will be launched for sale.

Ms Hadid was responsible for the masterplan for one-north here, but did not design any of the buildings coming up at the science hub.

Apart from two bungalows designed for Elevation Developments, CapitaLand's condominium will be Ms Hadid's first architectural work in Singapore.

Property Transactions With Contract Dates Between Jan 14th - Feb 2nd, 2008

CapitaLand Reports Record Full-Year Profit Of S$2.8b

Source : Channel NewsAsia, 22 February 2008

Southeast Asia's biggest property developer CapitaLand has reported record earnings for the fourth year in a row.

Net income for 2007 came in at better than expected S$2.8 billion, almost three times higher compared to the previous year.

The jump was due to robust growth in its key markets of Singapore, China and Australia as well as fair value gains on its portfolio.

CapitaLand expects Singapore's residential market to remain robust in 2008, with prices climbing by 5 to 10 percent.

It is confident about its business fundamentals despite the current US sub-prime woes.

Apart from record profits last year, revenues also came in at an all-time high of S$3.8 billion, a jump of 20.5 percent year-on-year.

With a strong cash flow, CapitaLand is looking to capitalise on opportunities that may arise in these uncertain times.

Liew Mun Leong, President and CEO, CapitaLand, said: "In our case, our financial position is very strong. We have a strong balance sheet. We have very low debt equity ratio of only 0.47; (this) is a very low gearing for a real estate company... So in terms of borrowings we still have a lot of capacity.

"In fact, today we have a cash - free cash - of S$4.4 billion. So financially we are there in terms of addressing the opportunity in the market. Of course going forward, we still got to watch out for how long the crisis will affect the credit market. We think that we are in a better position than most companies."

The property developer says it will focus on growing its key markets of Singapore, Australia and China, which together account for 70 to 80 percent of its business.

Last year it saw strong growth in its earnings, in particular, from Singapore and China. Earnings before interest and tax for Singapore rose 150 percent on-year to S$2.3 billion.

Meanwhile, China grew 115 percent to S$879 million, while Australia saw a 61 percent jump to S$450 million.

But CapitaLand is also looking at emerging markets such as Vietnam, India and Abu Dhabi. It is expected to look for growth opportunities in new markets for serviced apartments and financial services, as well as through private real estate funds and REITS.

Mr Liew said: "Today we have a number of REITS which are doing very well. We are still interested in creating more REITS. Our target is to have 10 REITS at least in our portfolio. There are some promising potential for us to do new REITS." Currently CapitaLand has five REITS.

CapitaLand also announced that it has entered into a joint venture with AustraLand Industrial and Logistics International to grow its logistics and industrial sectors in Asia.

The developer is proposing a final and special dividend of 15 cents per share, compared to 12 cents in the previous year. - CNA/ch

Wheelock Properties Sees Six-Fold Jump In FY Profit To S$218m

Source : Channel NewsAsia, 22 February 2008

Wheelock Properties said its full year 2007 profit jumped nearly six-fold to S$218 million.

The improvement was fuelled by changes in fair value on its investment property. Revenue rose 44 percent to S$189 million.

Wheelock remains upbeat about its strong financial position. For the financial year 2008, Wheelock will recognise the remaining profits from its property developments - The Sea View and The Cosmopolitan.

It will also continue to recognise profits from Ardmore II based on the progress of construction works. The firm expects to start profit recognition on Scotts Square.

Its flagship Wheelock Place will also continue to maintain full occupancy in the current strong market conditions. Prospects for improved rental rates are expected to be good for both office and retail space. - CNA /ls

NUS Plans Programmes, Speeds Up Work On University Town

Source : Channel NewsAsia, 22 February 2008

Round-the-clock work is underway to make sure the S$500 million (US$356 million) University Town at the former Warren Golf Course is completed in time for the Youth Olympic Games in August 2010.

The University Town will be the Athletes Village for some 3,500 young athletes during the inaugural Games.

Related Video Link - http://tinyurl.com/394ut3

But hardware aside, the National University of Singapore (NUS) is also planning an array of activities to engage the young athletes.

Among them is a new module on climate change which will see athletes taking part in group discussions on environmental challenges.

The module will be piloted among NUS students in 2009 and will likely include topics like energy resource and water. No credits will be offered for the module as it is an informal course.

Professor Shih Choon Fong, president of NUS, said: "One of the pressing issues around the world is water. Water is becoming an increasingly scarce resource. We hope to be able to talk about issues of water, water desalination, recycling of water and so forth. Perhaps, we may even be able to organise a side trip to some of the water desalination plants in Singapore."

During their stay here, the athletes will also get a chance to tour the university campus where they can view the facilities and better understand the programmes offered. NUS hopes to build on the event and showcase itself to the world so as to attract more international students and faculty members.

NUS is expected to award tenders for various building contracts by the middle of this year. It is also working with the Education Ministry to ensure there is sufficient support and funding for the activities. - CNA/so

Singapore To Host First Youth Olympics

Source : The Business Times, February 21, 2008

Singapore will host the inaugural Youth Olympics in 2010, the International Olympic Committee (IOC) announced on Thursday.

It won the right to stage the games in a straight contest up against Moscow. It will be the first time for the city-state to host a multi-disciplinary sporting event of such a magnitude.

The brainchild of IOC chief Jacques Rogge, the Youth Olympics will feature traditional sports such as athletics and swimming, but also some innovative events such as beach-wrestling and BMX bike riding.

Mr Rogge made the announcement himself from the IOC headquarters in Lausanne.

Primarily aimed at encouraging youngsters to get involved in sport and spend less time in front of computer and television screens, the games will see 3,500 athletes aged between 14 and 18 competing in 26 sports.

Singapore is proposing 24 venues, with four being built as temporary facilities, including one large cluster of 13 in its Marina-Kallang area.

The Youth Olympic Village would be located at a new US$423-million student residential complex at the National University of Singapore, slated for completion months before the event.

Singapore is budgeting US$75.5 million to run the event covering everything from educational and cultural programmes to development of services and transport. -- AFP

Rise In Office Rents To Slow This Year

Source : TODAY, Friday, February 22, 2008

Office rents in Singapore are likely to rise at a slower pace this year, even as supply, especially in prime areas, remains tight.

Robust demand for grade A office space by financial institutions and other companies will still contribute to overall rental growth, but it would not match the upward spiral seen last year, said property consultants.

“A variety of factors indicate a slower pace of rental growth. These include companies’ willingness to move outside prime areas, a few signs of rising caution due to external issues in the United States and the growing realisation by occupiers that the market will be more friendly beyond 2010,” said CBRE’s Moray Armstrong, executive director of office services.

“Office rental growth is reaching a point of inflection, not a turning point,” according to Mr Steve Smith, deputy managing director at property consultancy Savills. He expected prime office rentals to grow 15 to 20 per cent this year, after rising 90 per cent last year.

While the top-end office rents in Singapore still remain lower than Hong Kong’s, “the average Grade A office rents in Singapore could possibly exceed Hong Kong’s by the second quarter this year because Hong Kong has a bigger supply coming through this year, about 3 million sq ft,” Mr Smith added.

The supply crunch in grade A office space prompted the Government to put forth plans during Budget 2008 last week to make available more space in the central area. Finance Minister Tharman Shanmugaratnam said the Government planned to relocate some agencies out of the central area to free up 20,000 sq metres of office space by early next year. It has also released 15 transitional office sites that will add 150,000 sq metres of office space in the near term.

According to the Urban Redevelopment Authority (URA), office rentals islandwide rose 56.1 per cent last year. In the last quarter, competition for the pockets of vacant space in the central business district remained intense and prime office rents averaged $15 psf per month, said CBRE. By the end of the year, prime rents could average $17 per square foot per month, it added.

Auric Pac Sells Office Building Fr $99m

Source : The Business Times, February 22, 2008

Price is 2.6 times what it paid for 16-storey building two years ago

LIPPO unit Auric Pacific has sold One Phillip Street in the Raffles Place area to UK-based New Star International Property Fund for $99.02 million or $2,736 per square foot of the 999-year leasehold building’s net lettable area (NLA).

Auric’s selling price is about 2.6 times the $37.6 million it paid for the 16-storey building about two years ago when it bought the property from Kewalram Group. Interestingly, Kewalram had bought One Phillip Street from Lippo in early 1996 for $76.8 million.

The latest sale earlier this week is believed to have been brokered by Jones Lang LaSalle.

The property, with 36,194 sq ft net lettable area, is fully leased. Tenants include Auric Pacific, First Reit and Miller Insurance Services. Completed in 1993, the building does not have immediate redevelopment potential based on current planning parameters.

The asset is New Star’s second major acquisition in Singapore. In May last year, it bought Parakou Building, at the time a newly completed freehold office block, at the corner of Robinson Road and McCallum Street for $128 million or $2,013 psf of NLA.

Since its acquisition of Parakou Building, New Star has enjoyed a 20 per cent capital appreciation of the property. The building’s occupancy has also increased from 85 per cent to 100 per cent, and its rental income risen by 31 per cent since acquisition, according to New Star Asset Management’s head of acquisitions (Asia-Pacific) Simon Tyrrell.

As for the One Phillip Street purchase, Mr Tyrrell acknowledged that the passing yield (based on current leases) is ‘quite low’ but added that New Star plans to boost returns from the building through its professional management, which includes achieving more efficient power usage, improving the leasing structure and embarking on refurbishment and upgrading works that could potentially boost the property’s NLA and income.

This is the 17th asset the fund has bought since its launch in June last year. Its properties are located in Japan, Australia, Germany and the Netherlands, in addition to Singapore. The open-ended fund has raised £pounds;650 million (S$1.8 billion) so far, of which about £pounds;270 million have been invested so far.

‘We’re an unleveraged fund, and make pure-cash acquisitions. So we’re not susceptible to sub-prime issues. We’re also a long- term investor,’ he added.

Mr Tyrrell revealed that the fund is eyeing another acquisition in Singapore to the tune of $50-100 million. ‘We’re looking across all asset classes, including office, industrial, retail and industrial/office,’ he added.

The fund is also looking at properties in Taiwan and Korea.

Auric said the net book value of One Phillip Street as at Sept 30, 2007, was $79.25 million and the sale was part of its strategy of divesting non-core investments.

Auric owns stakes in Robinson and Co (currently the subject of a takeover offer by Dubai’s Al-Futtaim Group), Food Junction Holdings and the Delifrance chain.

The sale will result in a net gain of about $13.52 million which will be recognised in Auric’s group profit and loss accounts for the current year ending Dec 2008.

Assuming that the sale had been effected at the end of the company’s financial year ended Dec 31, 2006, the net tangible assets per share would have increased by 46 cents from $1.79 to $2.25.

Assuming that the sale had been effected at the beginning of the company’s financial year ended Dec 31, 2006, the earnings per share would have decreased by 0.29 cent from 15.71 cents to 15.42 cents.