Sunday, March 23, 2008

CapitaLand Poised To Ride On Asian Growth

Source : The Business Times, March 22, 2008

A FEW years back, Liew Mun Leong, chief executive of CapitaLand, came to Singapore Press Holdings and gave a talk to journalists. His talk left a deep impression on me.

The topic was how he saw the property market going through a strategic inflection point. Mr Liew drew the idea of strategic inflection point from the book Only the Paranoid Survive by Andy Grove, the chief executive of Intel.

Mr Grove defines a strategic inflection point as a time in the life of a business when its fundamentals are changing significantly, and these would be times when critical decisions can make or break a business. In the book, Mr Grove said only those who constantly try to anticipate change will survive when change happens.

Indeed Mr Liew has thoroughly absorbed the essence of the book and put it into practice with great effect. He successfully steered CapitaLand in directions which subsequently positioned it to enjoy the developments which had played out in the last few years.

Today, CapitaLand is a completely different animal. Not only is it the largest real estate company listed on the Singapore Exchange, with a market capitalisation of $16 billion, it is also the largest in South-east Asia. It is now the leading foreign real estate developer in China, with about $6 billion worth of its balance sheet represented by assets in China.

There, it has stakes in over 70 malls as well as serviced apartments which will hit 10,000 by 2010, and has a pipeline of more than 35,000 residential homes. It is the largest retail mall owner/manager in Asia, the largest serviced residence owner-operator globally, and the leading real estate fund and investment trust manager.

More than 50 per cent of its assets are now outside Singapore. It has footprints in more than 100 cities in over 20 countries. And its assets range from residential to commercial and integrated leisure, entertainment and convention centres. Another new business to be built is industrial and logistics real estate.

I don’t envy analysts who have to cover CapitaLand. I can’t imagine how they go about ascertaining the revenue from its numerous sources in over 100 cities. However, I was offered the opportunity to have a chat with Mr Liew last week and that helped in gaining a somewhat deeper understanding of the group.

CapitaLand, says Mr Liew, is positioning itself to capture the one big long-term inevitable trend, which is the economic development of Asia. As the trend plays itself out, there will be increased economic activities, rising income, urbanisation of cities, increased consumer spending and rising demand for leisure and entertainment.

Each of CapitaLand’s products is tapping into two or more of these ’sub-trends’. For example, the residential business will thrive as economic activities pick up, income increases and more people migrate to the cities. Retail is poised to benefit from all the five ’sub-trends’.

And for each of the product offerings, the group is capturing profits at almost every stage. The biggest value is created at the development stage when the group buys a piece of land to build one of its products, be it a condominium, commercial building or other real estate. Here, it will have to bear risk that the market may turn bad, make sure that the products to be built will be what the buyers want, source for funding for these projects, etc. Once the product is built, CapitaLand can either sell it or offer it to one of its Reits. CapitaLand has stakes in the Reits which earn stable income from the rental. Meanwhile, it also earns management fees for running its five Reits as well as 15 private equity funds. CapitaLand is where it is today because it was able to see ahead of the curve.

Inflection points

The first inflection point for the real estate market in the last 10 years was soon after the Asian financial crisis, said Mr Liew. The crisis was caused by excesses in Asia, companies borrowing ever more to fund projects based on very bullish assumptions. ‘Banks were lending money to property companies, earning debt returns but assuming equity risks because there was no recourse. The recourse was only the property.’

During the crisis, central banks limited commercial banks’ exposure to the real estate. ‘That was one inflection point. Our thesis is that we must learn to tap the capital markets. So we started commercial and residential mortgage-backed securities (CMBS and RMBS).

‘We also decided that going forward, real estate companies cannot be run like a traditional family-run type of business. Asian real estate has to be institutionalised, that is institutional investors have to come in. One way was through Reits. We think that if in the US, Reits can be a solution to the savings-and-loan crisis (of 1989 to 1992), then it should be something we could use.’

The process of pitching the idea of Reits to the government took six years, said Mr Liew.

Now we are entering a second inflection point. Bank lending has seized up. Meanwhile, the window to tap the capital markets through asset securitisation is not as open as before. In the current crisis, the well-capitalised real estate companies will emerge even stronger. While those with weaker balance sheets will have difficulties getting funding - ‘the juice to do business dries up’ in the words of Mr Liew.

Meanwhile, those who can have access to funds will get them at cheaper rates than before as the US Federal Reserve continues to lower interest rates.


Mr Liew has achieved a lot since he took over Pidemco Land which then bought over DBS Land in 2000. Along the way, he had to make some very difficult decisions and take harsh criticisms.

In the second half of 1990s, he resisted the pressure of initiating new investments in countries like the Philippines, Indonesia, Thailand, China, Hong Kong and Vietnam at sky-high prices. But when he bought Furama Hotel in Hong Kong in 1998, he was severely criticised.

‘One of the key decisions which made us what we are today was to buy DBS Land. That gave us scale,’ said Mr Liew. Then he sailed into the perfect storm of the dotcom bust, the 9/11 terror attacks, Sars, Iraq war and the two Bali bombings which lasted nearly four years.

In 2001, he decided to revive the Shanghai Raffles City project, which had been abandoned a few years before. He was questioned why he wanted to throw good money after bad. Today, Raffles City in Shanghai is worth at least twice its investment cost of $350US million. It is now a recognised brand and three more are being constructed in Beijing, Chengdu and Hangzhou.

In the years immediately after the merger, the group’s share price languished at just $1-plus, about half the price Pidemco Land paid to buy DBS Land. ‘I was almost in tears when I spoke to my management in one of our retreats,’ said Mr Liew. ‘I said we were ex-civil servants, professionals, very good people. Surely we can run the company well so people can recognise the value in our shares.’

Then recognising the need to have an alternative source of funding, the need to get institutional investors in, the need to create a steady stream of income for the group, CapitaLand introduced Reits to Singapore. ‘It took us six years to pitch it to the government. We had to convince them of tax transparency, then we had to get the green light from MAS, MND and Ministry of Finance.’

As with most successful businessmen, luck had some role to play at some point. Mr Liew said that perhaps it was a blessing in disguise that CapitaLand did not get the integrated resort projects. ‘If it was in our books, it’d occupy a few billion dollars debts. Under the current landscape of credit crunch, it’s going to be a strong burden on the balance sheet. In terms of creating value, I’m not sure we could recover it so fast.

‘If I have to do a $5 billion project, I’d rather do it in various pieces in a more distributed way. So from the standpoint of creating value for shareholders, from the standpoint of economic value added, it’s much better if we don’t do it.’

The capital, he said, has since been invested in Vietnam and China. ‘That’s why we can buy nearly 100 malls in China,’ said Mr Liew.

In the last seven years, Mr Liew said CapitaLand has amassed profits of $4.9 billion and created shareholder value of $18 billion as at end February. Mr Liew stressed that it was not because of the good run in the market in the last two years that record profits were made. ‘The fruits were planted during the difficult years.’

I did some calculation. Between 2002 and 2007, the group generated cash totalling $7.5 billion - from operations or from sales of investments after netting off new investments but before paying interest charges and dividends. Relative to its capital, the return works out to about 7.8 per cent a year, a rather decent number.

There’s no doubt CapitaLand is a good company. But as a very astute investor told me this week, it’s very easy to identify good businesses. ‘Any cab driver can tell you DBS, OCBC are good businesses. But the question is: It is reasonably priced?’ That, of course, is the difficult part. The astute investor says he generally will not pay anything more than the revalued net asset value for a property company.

CapitaLand last traded at $5.68 and its net asset value per share is $3.54. Which means it is now trading at 1.6 times its asset value. So it’s up to one’s judgement if you think property inflation will continue, and whether all the positives of CapitaLand will continue to add value to its asset portfolio.

Bad Times Throw Up Good Opportunities For CapitaLand

Source : The Business Times, March 22, 2008

As credit crunch lays rivals low, it’s ready to swoop on bargains in next 2 years: CEO

A LOT of opportunities will be thrown up in the real estate market in the next two years and CapitaLand is well placed to take advantage of them, chief executive Liew Mun Leong says.

‘There will be distressed properties, distressed companies. We can probably buy land cheaper and even acquire companies,’ said Mr Liew in an interview with BT this week.

He said the current credit crunch is making borrowing very difficult for real estate companies whose balance sheets are not too strong. Meanwhile, it is also difficult to tap the capital market for funds.

‘If banks are now restricting their exposure to you in direct lending, and the capital market is now very cautious, then funding becomes a problem,’ he said. ‘For us, we are very well capitalised. Banks still trust us to do the normal borrowing. Our gearing is only 0.47. For every 0.1 increase in gearing, we can raise $1 billion. And we can still have access to the capital markets.’

CapitaLand group chief financial officer Olivier Lim pointed out a big difference between now and the Asian financial crisis 10 years ago: then, the cost of funds was going up; now, it is going down, with the US Federal Reserve continuing to ease interest rates. ‘So those who have access to funds are getting them cheaper,’ he said.

Added Mr Liew: ‘At the end of the day, some of our competitors will be weakened. And our relative combat power - to use a military term - will be stronger.’ With lower land costs and lower financing costs, CapitaLand will also be able to maintain its margin, he added.

In fact, CapitaLand currently has ready ammunition at its disposal.

In the last nine months, it raised $2.3 billion in convertible bonds, at 2.9 per cent and 3 per cent. And the conversion premium was pretty high.

In addition, CapitaLand has $12 billion worth of investible private equity funds for the different sectors of the market.

Mr Liew said CapitaLand’s failure to clinch the integrated resort (IR) projects might have been a blessing in disguise.

‘If we had a few billion dollars of debt for that kind of big-ticket item, in the current credit crunch landscape, I think it’s going to be a big burden on the balance sheet,’ he said.

Mr Liew does not think there will be a quick rebound from the current credit crunch.

He said: ‘The problem is getting worse. If you’d asked me last month, I would have said it’s still not so bad. This month, it’s worse. I can’t pretend to know when it will be over; some people say a few years. It’s like a sick man - the fever is rising, and now, worse, there’s diarrhoea. We need to stop the diarrhoea first, and then wait for the fever to go down. All I can say is, it’s not a pretty picture.’

CapitaLand, said Mr Liew, will continue to invest despite the strong headwinds ahead. It was through investing in the bad years of 2001 and 2003 that CapitaLand reaped record earnings in the last two years.

‘You have to invest. It takes time to plant the seeds and reap the rewards. Our fruits in the last two years were planted in those bad times when we had the perfect storm of the dotcom bust, the bombing of the US World Trade Center, Sars, the Iraq war and the two Bali bombings,’ he said.

Mr Liew’s vision is for CapitaLand to be the Nokia or Nestle of Singapore - that is, a truly international company.

‘In 5-10 years’ time, I aim to have CapitaLand as the top three or top five real estate companies in Asia; we are now Number 9 or 10. I want all our overseas businesses to be run by the locals. And I want each of our major markets to have a representative on our board of directors.

‘Singaporeans will look for new businesses to grow the group, look at asset allocation and have an overview of the various businesses,’ said Mr Liew.

M&As In S-Reit Market Imminent: Macquarie

Source : The Business Times, March 22, 2008

RECENT developments in the S-Reit market suggest that consolidation has begun and more merger and acquisition (M&A) activity is imminent, says Macquarie Capital Advisers executive director and global head of property group Antony Green.

In case there is any doubt, future M&As could turn hostile and will almost certainly grab the headlines. But Mr Green says: ‘History shows the first few deals are always friendly.’

He believes that the current state of the S-Reit market corresponds to that of the Australian market about 10 years ago.

In 1999, the number of Australian-listed property trusts (LPTs) peaked at 46, then slowly dwindled to around 26 today, with the asset pool remaining largely the same.

Consolidation, if or when it is considered by S-Reit players, will be trickier because property assets have surged in value recently, making acquisitions less likely to be yield-accretive.

Mr Green says that although yield-accretiveness ‘is one of the first tests’ when making an acquisition, ‘you have to think of total return’.

‘There is strategic merit in buying something that in several years’ time is going to create more value for you as an investor,’ he adds.

He also says: ‘With a bit of synergy, maybe a management fee waiver of some sort, a bit more or less debt, you can make it positive for both sides.’

Mr Green could, of course, be talking about Macquarie MEAG Prime Reit (MMP Reit), which recently announced a strategic review, on which he is advising.

MMP Reit could be sold in its entirety or have its underlying assets sold piecemeal.

On the attractiveness of MMP Reit, Mr Green says that while it was trading for around $1.05 a unit before the strategic review announcement, its NAV based on the underlying assets had been valued around $1.61 a unit. And at the end of the trading day on Thursday, it closed at $1.19 a unit unchanged.

For current investors, however, MMP Reit has not delivered growth.

‘A lot of S-Reits have traded on the fact that they will provide growth. MMP Reit, given its cost of capital, struggled to provide the acquisitions and the growth,’ Mr Green says.

He has no comment on the details of MMP’s strategic review, but says it is in Macquarie Group’s interest not to sell its 26 per cent independently but to seek an offer for all unitholders instead.

On consolidation of the S-Reit market and the Reit market in Asia in general, he believes this will make it more ‘efficient’. ‘Some Reits will disappear and some will go from strength to strength.’

Mr Green does not think the S-Reit market has matured yet. But the perception that S-Reits are a growth vehicle is changing. ‘Some of that gloss has come off a bit,’ he says.

‘It is not a bad thing that people realise what Reits actually are and not what they think they are supposed to be.’

Mass Market And Mid-Tier Private Apartments Expected To Do Well This Year

Source : Channel NewsAsia, 21 Mar 2008

Prices of mass market and mid-tier condominiums are expected to remain strong this year.

But those of high-end residential properties could taper off by up to 10 per cent.

And if you’re looking to buy, the market is in your favour, according to Propnex’s CEO, Mohamed Ismail Abdul Gafoore, in a speech to alumni members at the National University of Singapore.

Despite the weaker market sentiments, industry players expect mass market condominiums to do relatively well this year and prices are set to climb but at a more sluggish pace.

And more supply will come into the market as 31,000 new private apartments are completed over the next five years.

Propnex said it’s now a buyers market and home hunters could get good deals.

Mr Mohammad Ismail said: “When we compare the prices of places like Parc Oasis or Woodsgrove condo, the prices today hold and in some instances are even higher per square foot.

“Look at today, the public housing pricing, and the DBSS pricing per square foot. They are already going at almost S$600 if one would want to buy at a mass market price that is less than S$800 with full facilities.”

According to agents, the landed housing space could see modest growth but prices should hold steady.

The outlook is less positive for luxury apartments, which only six months ago were transacted upwards of S$2000 per square foot.

Property agents expect the dust kicked up by the US sub-prime crisis and the rising oil prices to settle by 2009.

They are also confident that the future is still bright for the property market as Singapore has the right fundamentals in place.

Meanwhile, demand for public housing is expected to remain robust this year, providing to prices.

So some agents believe it’s a good time for HDB flat owners to trade up to a mass market private property.

Testing Times For Singapore Reits

Source : The Business Times, March 21, 2008

AFTER several years of impressive achievement, Singapore’s real estate investment trust or Reit sector is clearly facing more testing times.

In theory at least, the defensive nature of Reits with their dividend yields should be good shelter for investors in the current volatile market. Instead, Singapore Reits have taken a beating. The FTSE ST Reit Index, which tracks Reits listed on the Singapore Exchange, has lost more than 10 per cent since it was launched early this year. A number of potential Reit listings have also been put on hold.

Key to the bearish sentiment are worries about the ability of Reits to secure funding in the future. Last week, Fitch Ratings warned that the global credit crunch sparked by US mortgage defaults may restrict the access of Singapore Reits to funding as well as reduce international investor interest in Singapore’s real estate sector. This may impact the ability of Singapore Reits to take advantage of any acquisition opportunity and will limit the number of any interested parties in any asset disposals.

And highlighting the pressure on the sector, Allco Commercial Real Estate Investment Trust (Allco Reit) this week tried - and failed - to obtain a court injunction to head off a downgrade by Moody’s which the Reit feared may undermine its fund-raising efforts.

But while the jitters are understandable and some of the concerns are clearly valid, the whole sector should not be tarred with the same brush. The Singapore Reit sector has grown to a stage where there is much variation within the theme. Obviously, there will be smaller Reits that will be hurt by the credit crunch. But there are also large Reits with strong parentage such as CapitaLand, the Keppel Group and Temasek Holdings which are unlikely to face a similar squeeze in funding and will be in a good position to capitalise on acquisition opportunities in current weak market conditions.

Even among the smaller Reits, there could be investment opportunities. Some of these - with smaller market capitalisation, fragmented shareholdings or shareholders who may be open to exiting their stakes - are potential targets and could benefit from takeover play. And the fact still stands that S-Reits offer average yields of 6.4 per cent, compared with 2.08 per cent for 10-year Singapore government bonds.

What is needed is probably a change in investor perception. The sector’s explosive pace in the early phase of expansion - Singapore has been rated as the best location in Asia-Pacific for Reits - has created high expectations among investors. Many have come to see Reits as growth stocks, not defensive plays. The current market uncertainties will inject a big dose of reality, which may not be a bad thing at all.

Despite Downgrade, Allco Reit Gets Some Relief

Source : The Business Times, March 21, 2008

It manages to secure extension of its debt repayment deadline.

Allco Commercial Real Estate Investment Trust (Allco Reit) - which went to court to fend off a ratings downgrade - has succeeded in obtaining an extension of its debt repayment obligations, despite the ratings cut.

The trust had sought to obtain an injunction to prevent Moody’s Investors Service from downgrading its credit rating, as it feared the revision would hurt its efforts to refinance some $620S million in debt.

But the injunction was set aside this week and Moody’s went ahead to lower Allco Reit’s corporate family rating to ‘Ba2′ from ‘Ba1′ - and retained the ratings on review for further possible downgrade.

The trust, however, still managed to obtain some relief on its debt refinancing obligations.

Allco (Singapore) Limited, the manager of Allco Reit, announced yesterday that the trust had received in-principle approval for the extension of the maturity date of $550S million of debt from July 31, 2008 to Dec 31, 2009.

Allco Singapore said that it is reviewing the terms and conditions of the extension and will soon execute binding documentation.

It expects to repay the remaining $70S million of debt, due to mature on Nov 22, 2008, with the proceeds Allco Reit is likely to receive from Allco Wholesale Property Fund - which has interests in several properties in Sydney.

Allco Reit had announced earlier this month that it is considering selling the assets of Allco Wholesale Property Fund - and intends to return the net proceeds to unitholders in the third quarter of this year.

It was this proposed sale of its Australian assets that sparked off the ratings downgrade in the first place.

Moody’s ratings review panel had decided to meet, upon Allco Reit announcing its intention to divest its Australian assets - properties valued at $483A million ($603S.3 million). The panel agreed to downgrade the trust’s credit rating, on the basis that the sale would affect its credit standing.

Allco Reit felt the agency’s move was ‘precipitous and wholly unwarranted’, as it had not yet sold the assets but was only considering doing so. It sought an injunction to prevent Moody’s from issuing the downgrade, as it felt that would hurt its attempts to obtain credit approvals from bankers for the refinancing of the $620S million in debt.

But Moody’s battled the injunction, arguing that it undermined the agency’s very purpose and integrity and that it would prevent the public from accurately judging Moody’s assessment of Allco Reit’s credit worthiness.

The High Court set aside the injunction on Tuesday, and Moody’s issued its downgrade.

Allco Reit To Get Extension For $550m Of Debt

Source : The Straits Times, Mar 21, 2008

AFTER failing in a legal bid to avoid a credit rating downgrade, Allco Commercial Real Estate Investment Trust (Reit) has received some good news.

The Reit has won in-principle approval for the extension of the maturity date for $550 million of debt by 17 months.

The due date of the debt will now be Dec 31, 2009, instead of July 31, this year, said the Reit manager Allco (Singapore) yesterday.

The Reit manager said in a statement that it is currently reviewing the terms and conditions of the extension and will execute binding documentation as soon as practicable.

Global ratings agency Moody’s had on Tuesday downgraded Allco Reit’s rating to Ba2 from Ba1.

It also said that further downgrades were possible. These ratings gauge a company’s credit standing.

A Ba-rated company is judged to have speculative elements and be subject to substantial credit risk, according to Moody’s definitions.

Allco Reit has been in the news lately as it had taken unprecedented legal steps to try to prevent Moody’s from downgrading its rating for the second time in two months.

The ratings agency had downgraded Allco by one notch from Baa3 to Ba1 on Jan 31.

Allco Reit wanted to avoid the second revision as a lower rating could complicate its efforts to raise funds.

This came amid a global credit crunch that has made it harder for companies to secure funding.

Court documents obtained by The Straits Times on Wednesday showed that Allco had felt that a $620 million bank refinancing deal could be jeopardised by a downgrade.

In its statement yesterday, Allco Reit also said that it will repay in full $70 million in debt due to mature on Nov 22, with the proceeds of its sale of the Allco Wholesale Property Fund.

The properties that Allco Reit owns include China Square Central and 55 Market Street in Singapore.

Propnex Says Home Buyers May Snag Good Deals If They Want To Upgrade

Source : Channel NewsAsia, 20 Mar 2008

For those with an eye on property, it’s a buyers market now, and home hunters who’ve done their homework may be able to snag some good deals, especially for those looking to upgrade.

This, according to real estate agency Propnex’s CEO, Mohamed Ismail, who held a talk for alumni members at the National University of Singapore.

Prices of HDB flats jumped 17 per cent in 2007 and it is set to continue its climb in 2008, though at a more modest pace.

Industry players also expect robust demand with HDB ramping up its building programme.

But the private residential space is seeing prices moderate.

So, some property agents said it’s an appropriate time to upgrade if home owners can afford it.

Mr Mohamed Ismail said: “If someone wants to buy a mass market property or upgrade to a landed property, I think this is the best time for the HDB owners.

“It makes sense for them to sell their public housing when the market is positive and go look for a bargain buy to upgrade themselves when the market shifts and starts to move.

“A 10 per cent increase in the private property would mean that a million dollar property would cost 1.1 million. While at the same time, a 10 per cent increase of a HDB property that is worth S$400,000 is going to grow by 40,000. The net result - you are going to lose out.”

Agents said the private mass market segment will continue to do well this year, with prices creeping up slowly.

“Look at today’s public housing pricing, and the DBSS (design Built and Sell Scheme) pricing per square foot. They are already going at almost S$600 if one would want to buy at a mass market price that is less than S$800 with full facilities,” the Propnex CEO continued.

In the high-end space, prices are expected to fall by between five and ten per cent from six months ago.

But prices of landed homes may be steady.

Property agents expect the dust kicked up by the US sub-prime crisis and the rising oil prices to settle by 2009.

They are also confident that the future is still bright for the property market. That’s because Singapore has the right fundamentals in place.

These include a tight labour market, stable economy and a series of high-profile international events lined-up such as the Formula One Grand Prix in September, and the Youth Olympics in 2010.

MacarthurCook Reit To Fight Any Hostile Bid

Source : The Business Times, March 20, 2008

Trust now keen on buying two Asian properties, not 10

THE manager of Singapore-listed MacarthurCook Industrial Reit, a subject of takeover speculation, said yesterday that it will fight any hostile bid to acquire the trust.

'I can guarantee you that it will be contested. We certainly won't let somebody just walk in the door and take over management,' Craig Dunstan, managing director of Australia's MacarthurCook Ltd, told Reuters in an interview.

He said the Australian property manager now controls 13.2 per cent of MacarthurCook Industrial, raising its stake from an initial 2.3 per cent when the trust was listed last April.

Singapore's real estate investment trust (Reit) sector is expected to consolidate in the short term, and brokerages such as Goldman Sachs have cited MacarthurCook Industrial as a potential takeover target due to its diffuse shareholding structure.

The absence of a large controlling shareholder makes it easier for predators to buy a majority stake.

MacarthurCook Industrial's share price fell 2.9 per cent yesterday, while the broader Singapore market was flat.

MacarthurCook Industrial and other Singapore Reits controlled by Australian firms have suffered the most in the current weak market due to concerns over their ability to raise debt or equity.

Allco Commercial Reit, which is planning to sell its Australia properties as embattled manager Allco Finance Group struggles to repay its debts, fell 8.1 per cent after Moody's downgraded its credit rating further on Tuesday.

Mr Dunstan said MacarthurCook Industrial, which owns about $620 million worth of factories and warehouses, mainly in Singapore, will not meet its annual asset growth target of $500 million for the fiscal year to end-March 2009.

'We're not going to raise equity in today's market at today's prices, because that's not the right thing to do for our current investors,' he said.

MacarthurCook Industrial currently trades at around a 24 per cent discount to its net asset value of $1.30 a share.

The property trust dropped a $200 million equity fundraising exercise in January citing poor market conditions, and is now looking to buy two properties in Asia instead of the 10 it was considering initially, Mr Dunstan said.

'Our responsibility is to generate good risk-adjusted returns for our current investors. They will continue to get a good return whether we buy another asset in the next 12 months or not,' said Mr Dunstan, a former lawyer who founded MacarthurCook in 2002. -- Reuters

House Buyer Cheated Of S$5,000 Deposit

Source : Channel NewsAsia, 20 Mar 2008

A house buyer was cheated of S$5,000 when she was buying a five-room resale flat in Woodlands.

Wong Git Siow said: "Since I was already buying the house, and... she (the flat owner) said she did not have enough money for the New Year, I did not mind giving her the $5,000 deposit."

Ms Wong claimed that the flat owner changed her mind after receiving the S$5,000 deposit, and never returned the money.

She also said that the owner failed to bring the relevant documents on two separate occasions when she tried to seal the deal last November.

The owner has been missing in action since then.

Ms Wong had applied for a house loan and if it is cancelled, she will have to pay a penalty of S$2,000.

She added that the seller had taken a S$2,500 loan from the property agent and did not pay back.

Both Ms Wong and the property agent have filed a police report and reported the matter to the Consumers Association of Singapore (CASE).

But CASE pointed out that this case is not within its jurisdiction as it only deals with companies and agencies. It advised Ms Wong and the property agent to approach a lawyer instead.

The transaction period for the flat expired earlier this month. - CNA/ac

1st Software Plans $175m Acquisition Of Property Firm

Source : The Business Times, March 20, 2008

It will issue new shares to acquire Teambuild in reverse takeover deal.

IN a bid to retain its listing status, 1st Software is acquiring a construction and property development firm for $175 million in a reverse takeover deal.

1st Software entered into an agreement with Teambuild Corporation yesterday to acquire it through the issue of about 10.94 billion new 1st Software shares at 1.6 cents each, which will give the vendors of Teambuild an approximately 85 per cent stake in 1st Software’s enlarged capital.

Teambuild, which has offices in Singapore and Malaysia, is a privately-held company specialising in property development and building construction.

The firm’s current business is made up of a mix of public and private residential developments, as well as institutional and upgrading projects.

Another reason for the proposed acquisition is that it will allow the company to participate in the business of property development and building construction based primarily in Singapore with a strong growth potential, said 1st Software.

Under the deal, Teambuild provided a post-tax profit guarantee of at least $8 million for FY2007 and $20 million for FY2008.

For its 2007 financial year, Teambuild may declare dividends out of its reserves of not more than $10 million. If Teambuild fails to meet its profit targets, the vendors will have to pay 1st Software for the shortfall.

The acquisition is subject to regulatory and shareholder approval. It is also contingent on other prevailing conditions including the ability to secure a $2 million loan to finance the buyout. An application has also been made for waiver from a general offer. Shares of 1st Software have been suspended since Dec 26, 2006, following the sale of its core digital publishing business earlier in the year.

In a bid to find a new venture to maintain its listing, the company had tried to acquire Hong Kong commodities trading firm Psons Ltd through a $67.95 million reverse takeover deal in November 2007 but the transaction eventually fell through.

Cheung Kong Pips Far East In URA Tender

Source : The Business Times, March 20, 2008

It offers $305psf ppr for West Coast condo plot next to Blue Horizon.

Cheung Kong Holdings-linked Billion Rise yesterday pipped Far East Organization to emerge as top bidder for a 99-year leasehold condo site facing West Coast Park and overlooking the sea.

Billion Rise’s bid of $110.44 million or $305 per square foot per plot ratio (psf ppr) was just 1.4 per cent higher than the next highest offer of $301 psf ppr by Far East unit Tian Hock Properties .

The tender for the choice plot, next to Blue Horizon condo developed by Far East, attracted 12 bids. City Developments and TID, Allgreen Properties , Frasers Centrepoint, MCL Land, Sim Lian, a Kheng Leong unit and Hoi Hup Realty were among the other bidders. Entities linked to Alpha Investment Partners and Teambuild Construction also took part in the tender.

Yesterday’s outcome was in a sharp contrast to that at a state tender last week for a landed housing plot at Jurong West when there were just two bids - both way below market expectations. The Housing & Development Board, which conducted that tender, decided not to award the site.

On offer at yesterday’s tender, conducted by Urban Redevelopment Authority, was a more appealing site near the sea and a short drive from the VivoCity shopping and entertainment complex.

‘The plot attracted an overwhelming response of 12 bids from major and mid-size developers and contractors,’ said CB Richard Ellis executive director Li Hiaw Ho. ‘It signals developers’ confidence in the suburban segment despite the current lukewarm response to new projects.’

Notwithstanding the wide participation in yesterday’s tender, the top bid of $305 psf ppr was towards the lower end of the $260-400 psf ppr range of bids indicated by property consultants when the site was launched in January.

Industry sources suggested that Cheung Kong’s breakeven cost for the condo could be about $600-630 psf. ‘It is likely that units in the proposed development will be sold at an average price of around $750-800 psf,’ said Knight Frank director Nicholas Mak.

Units at Blue Horizon next door were transacted at an average price of $740 psf in Q4 last year.

Market watchers had expected Cheung Kong, controlled by Hong Kong tycoon Li Ka-shing, to be awarded the latest site. The last time that a company in Mr Li’s stable was awarded a 99-year condo site in a state tender here was 11 years ago in early 1997, when Japura Pte Ltd placed the top bid of $456.51 psf ppr for a site in Bayshore Road, which it later developed into the Costa Del Sol condo that boasted sweeping views of Singapore’s eastern shoreline.

Costa Del Sol is in front of The Bayshore condo, which was developed by Far East. This time, the heavyweights took the competition to the West Coast.

Horizon Minorities Say Sale Done In Bad Faith

Source : The Business Times, March 20, 2008

The minority owners of Horizon Towers say the collective sale of the development was conducted in bad faith because the sales committee did not seek the best price.

This was the case they put forward yesterday on the opening day of their appeal against a decision by the Strata Title Board (STB) on Dec 7 last year to approve the en bloc sale of Horizon Towers.

Some of their arguments were already presented at the STB hearings but the minority owners felt the need to bring them up again as they believe they did not get a fair hearing when the sale was adjudicated by STB last year.

The group of minority owners, represented by Harry Elias Partnership, dwelt heavily yesterday on their claim that the Horizon Towers sales committee deliberately ignored an offer from a Hong Kong developer that was higher than the $500 million offered, and eventually paid, by Hotel Properties Ltd and its partners.

The minorities say an offer of $510 million came from Vineyard Holdings (HK) via Malaysian law firm Shan & Su, and that the sales committee deliberately hid this information from the other owners.

The minorities also claim the sales committee set onerous conditions for this competing offer and misrepresented at the STB hearing that its lawyer had advised it to dismiss the offer.

The minorities also introduced fresh evidence they say contradicts testimony to STB last year by sales committee member Henry Lim. Mr Lim said he was advised by the sales committee’s law firm, Drew & Napier, not to pursue the Vineyard Holdings offer.

But Harry Elias Partnership produced a letter from Drew & Napier in which the law firm said it advised Mr Lim to follow up all potential offers - and left the responsibility of doing so entirely to him. ‘At no time was Drew & Napier asked to do anything in relation to Vineyard’s interest,’ the firm’s letter said.

The letter was obtained only in January this year, after STB made its decision on the collective sale of Horizon Towers.

The minorities are arguing that STB therefore based its decision on false and misleading evidence, as it relied on the testimony of Mr Lim to conclude that the sales committee did not act improperly in not pursuing the Vineyard offer.

The hearing of the minorities’ appeal continues today. Hotel Properties ‘ law firm Allen & Gledhill, which was granted leave yesterday to intervene in the appeal, will present its arguments. The majority owners who agreed to the collective sale, represented by Tan Rajah & Cheah, will also put their arguments.

Two minority owners - Lo Pui Sang, who represented himself, and Canterford, who was represented by Senior Counsel Michael Hwang and Dr SK Phang - decided not to appeal against STB’s decision. Minority owner Jasmine Tan, previously represented by Tan Kok Quan, has opted to represent herself in the appeal.

Right To Hold Property Guaranteed By Law

Source : The Straits Times, Mar 20, 2008

I REFER to Monday’s letter, ‘En bloc sales eroding our ’sense of kampung’, in which Ms Susan Prior has stated that minority owners have to fight desperately to keep their homes. She has also said that in Singapore, your home is not really your home and can be taken from you by your neighbours.

Article 12(1) of the Singapore Constitution states that all persons are equal before the law and entitled to the equal protection of the law.

The right to acquire, hold and dispose of property is enshrined in the Constitution. ‘To acquire’ means to become the owner. Unless there is a transfer of property to another or vesting and divesting of property , there cannot be said to be any acquisition of property . The acquisition must be through legal means. An usurper of another’s property cannot justify his acquisition in law and is not protected either by Article 9, which protects liberty, or Article 12.

The term ‘to hold’ means to possess the property and enjoy the benefits which are ordinarily attached to the ownership, including its management. Your neighbour should not be able to sell your property which you have acquired. ‘To dispose’ means to transfer, assign or sell the property . The power to dispose of a property follows from the power to hold property .

The power to acquire, hold and dispose property is a ‘liberty’ that is protected by law.

If Article 12 (2) does not restrict the State from imposing unreasonable restrictions on the enjoyment of property , it would reduce the protection offered by the Constitution against an abuse of power by the State against a citizen’s rights that are protected by the Constitution.

The word property in Article 12 (2) may not cover a mere contractual right for which a proper action is a suit for damages. Ms Prior’s fears that her home is not really her home and can be taken from her by her neighbours may not be strictly accurate.

K.S. Rajah

Sense Of Kampung In Condos Overstated

Source : The Straits Times, Mar 20, 2008

WITH reference to Ms Susan Prior’s letter on Monday (’ Enbloc sales eroding our ’sense of kampung’), I wish to point out that in a kampung, you can walk up to a neighbour’s home and peer through the open door and windows to strike up a conversation.

It is a place where children can run from one house to another and where one can take temporary shelter when caught in a sudden downpour.

Can you duplicate this openness and fraternity in large, multi-storey private housing estates like Gillman Heights and Bayshore Park where closed doors, grilled gates and windows with drawn curtains are the norm? Obviously not.

The kampung era is long gone. The world has moved on. An enbloc development allows old estates to be redeveloped and not degenerate into slums like in many other countries.

It is a better alternative than the compulsory acquisitions during those kampung days, when compensations were a pittance.

Also, one should move out of this kampung mentality and learn to make new friends while keeping the old.

This sense of kampung being eroded by enbloc sales is being overplayed by a dissenting few. The fact that the majority are willing to sell says much - that many are no longer enamoured of this kampung sentiment.

Lau Chee Kian

Horizon Towers Case Back In High Court

Source : The Straits Times, Mar 20, 2008

THE seemingly never-ending saga of the Horizon Towers collective sale is clearly losing steam.

Two of the nine sets of minority owners fighting the sale have dropped out of the High Court appeal that started yesterday, and even the number of onlookers in the public gallery was noticeably fewer than at previous hearings.

The dropouts - a couple representing themselves and a foreign firm - were not represented in court yesterday.

Minority owners Jasmine Tan and Rudy Darmawan are representing themselves and three others while Mr Quek Keng Seng is representing himself. The other minority owners are represented by Harry Elias Partnership.

Senior Counsel Harry Elias told the court that the $500 million sale price was not obtained in good faith. He highlighted the fact that a higher offer of $510 million from Vineyard Holdings in Hong Kong was not communicated to the owners.

Mr K. Shanmugam and his team from Allen & Gledhill, who are representing the buyers, applied successfully to participate in the court session.

Minority owners are appealing a decision in December last year by the Strata Titles Board (STB) to approve the $500 million sale of the 99-year leasehold Leonie Hill estate.

The on-off again sale has reflected the roller-coaster ride Singapore’s property market has been on over the past two years or so.

The Horizon Towers deal was inked in January last year, before the market shot up. Hotel Properties , Morgan Stanley Real Estate and Qatar Investment Authority agreed to pay $500 million.

But as the market boiled over last year, minority owners felt they were getting a raw deal and tried to halt the sale. They had some success when the STB rejected the sale on a technicality, but that ruling was overturned by the High Court in October. The STB approved the sale in December.

But the once-hot market has cooled considerably since then. Sale volumes have thinned out dramatically although prices have generally held up.

The minority owners are still fighting the sale as they never wanted to sell from Day One. And the sale price of less than $900 per sq ft is still below prevailing market rates, said an industry source.

The hearing before Justice Choo Han Teck continues today.

One Pleaded Damage, The Other Argued Integrity

Source : The Business Times, March 20, 2008

Inside peek at the arguments that raged between Allco Reit, Moody’s.

Allco Commercial Real Estate Investment Trust (Allco Reit) fought hard against a credit ratings downgrade by Moody’s Investors Service because it believed the downgrade would cause it ‘irreparable damage’.

But Moody’s stuck to its guns as it felt its very integrity - as well as that of the market - was at stake.

Both sides presented impassioned arguments - till now unknown to the public - before the High Court earlier this month. The battle raged in chambers, away from the eyes of the media and members of the public.

The Business Times managed to get an inside look into the case, by inspecting documents filed with the High Court.

The case had made headlines yesterday when it became known that Allco Reit had taken legal action to prevent Moody’s from downgrading its credit ratings. Little else was known about the suit other than the fact that Allco Reit’s action failed, and Moody’s went ahead with the downgrade.

The documents point to a spirited tussle. Nicholas McGrath, CEO of Allco Reit, said in his affidavit that he had earlier this year impressed upon Moody’s vice-president and senior credit officer Peter Choy that it was ‘crucial that there was no revision of Allco Reit’s rating before requisite credit approvals from bankers are obtained for the refinancing of debt worth S$620 million (on March 20, 2008)’.

Mr McGrath, represented by Senior Counsel Alvin Yeo of Wong Partnership, said he was assured by Mr Choy that Moody’s ratings panel would not meet before March 20.

Allco Reit subsequently announced through the Singapore Exchange (SGX) on March 9 that it was considering selling its Australian assets - properties valued at A$483 million (S$617 million) - in the wake of an Australian media report.

Mr McGrath said he had informed Moody’s that the sale was not confirmed, but that Moody’s ratings panel had still felt the need to meet to discuss Allco Reit’s SGX announcement. It was at this meeting that the panel decided to downgrade Allco Reit’s rating, on the basis that it was selling its Australian assets.

Mr McGrath said it was ‘puzzling’ that Moody’s would downgrade Allco Reit’s rating on the basis that it was merely considering the sale of such assets, adding that the agency’s ‘precipitous and wholly unwarranted conduct is baseless’.

He said the trust then felt compelled to obtain a court injunction to stop the ratings downgrade, as such a revision would result in ’serious and irreparable prejudice and damage to Allco Reit’.

Moody’s, represented by Senior Counsel K Shanmugam of Allen & Gledhill, responded to Allco Reit’s claims and sought to set aside the injunction. The agency argued that it cannot - and should not - ever be prevented from issuing its current views on credit ratings, as that was the very basis of its existence.

Mr Choy, in his affidavit, said that Moody’s customers must accept the ratings agency’s independence and the fact that they cannot control or influence its ratings.

He said that Mr McGrath’s assertion that Moody’s had agreed to suspend its review of Allco Reit until March 20 has ‘no basis whatsoever’ - as such a decision by Moody’s would effectively undermine the value of the ratings it issues.

He added that the injunction which Allco Reit sought, to prevent Moody’s from downgrading the trust’s rating, prevented the public from accurately judging Moody’s assessment of Allco Reit’s credit worthiness.

He referred to the regulatory requirement that all Reits registered with the Monetary Authority of Singapore must have a rating from one of three agencies - Moody’s, Standard & Poor’s or Fitch Ratings - and for that rating to be disclosed to the public.

Moody’s pushed for the injunction to be lifted, on the basis that its very integrity was at stake.

Justice Choo Han Teck lifted the injunction on Tuesday morning, but didn’t specify his grounds for doing so. Allco Reit had intended to appeal the decision but later withdrew its appeal when Moody’s went ahead and issued its downgrade of the Reit.

The agency lowered the trust’s corporate family rating to ‘Ba2′ from ‘Ba1′ - and retained the ratings on review for further possible downgrade.

Higher Price Not Negotiated Because Of ‘Commission Agreement’, Court Told

Source : TODAY, Thursday , March 20, 2008

THE property agent of a condominium locked in an en bloc tussle had colluded with the potential buyer, and did not seriously negotiate for a higher price because of a “commission agreement”.

So asserted a minority owner of embattled Horizon Towers, and in so doing, Ms Jasmine Tan - who represented herself in the High Court yesterday - applied for the minutes of meetings and correspondences between the consortium and First Tree Properties to be revealed.

The consortium (HPPL) comprises Hotel Properties Limited, Morgan Stanley Real Estate and Qatar Investment Authority.

Ms Tan also asked for documents and minutes of the consortium discussing the $500 million sale price for the development, be revealed. These would show that there was a conflict of interest when First Tree Properties revealed the reserve price to the consortium, failing to “seriously” negotiate for a higher price, she said.

Citing unnamed sources inside the consortium as well as residents, Ms Tan described HPPL as “laughing all the way to the bank” because it was prepared to offer as much as $600 million.

But Justice Choo Han Teck rejected her application.

Two months after the Strata Titles Board (STB) decided that the controversial $500 million sale could proceed, residents and their lawyers met in court again yesterday after its minority owners appealed against the STB’s decision.

The en bloc process for Horizon Towers began in May 2006 and a deal was sealed eight months later. But some majority owners tried to back out of the sale, after seeing how nearby properties, such as Grangeford, had revised their reserve price upwards.

At the height of the wrangle last year, the majority owners managed to stave off a $1-billion lawsuit HPPL had brought against them for loss of profits, when they successfully appealed against the board’s original decision in August to throw out the deal over technical irregularities.

Firing the first salvo in yesterday’s appeal, Senior Counsel Harry Elias, the lawyer for other minority owners, said that the sale committee had not acted in good faith since it “suppressed” a higher offer of $510 million for the estate from a foreign firm. The hearing continues.