Wednesday, April 23, 2008

First Reit Q1 DPU Increases 15.6% To 1.85 Cents

Source : The Business Times, April 23, 2008

HIGHER rents and contributions from new properties led healthcare-focused First Reit to a 15.8 per cent gain in first-quarter distributable income to $5.1 million.

The performance lifted distribution per unit 15.6 per cent to 1.85 cents, from 1.60 cents in Q1 last year. On an annualised basis, this translates to 7.5 cents or a distribution yield of 10.7 per cent, based on last Friday's closing price of 70 cents a share.

Ronnie Tan, CEO of the Reit's manager Bowsprit Capital Corp, said that the results reflect the structure of the Reit, which focuses on long-term stability.

'Our properties are leased to master lessees for relatively long tenures of 10 and 15 years, with provisions for favourable yearly rental increases,' he said. 'This minimises the risk associated with short-term leases and multiple tenants. . .

'In addition, the base rent for our Indonesian properties is pegged to a relatively stable Singapore dollar, which helps reduce forex volatility.'

First Reit has eight properties in its portfolio, including three Siloam Hospitals and the Imperial Aryaduta Hotel and Country Club in Indonesia. Between Q2 and Q3 last year, the trust acquired Adam Road Hospital, The Lentor Residence and two nursing homes in Singapore.

For the three months ended March, net property income rose 24 per cent to $7.4 million. Management fees rose 27.2 per cent to $701,000. The trust also incurred $490,000 in finance costs for external borrowings used to fund the Singapore acquisitions.

With a debt-to-property valuation ratio of 15.6 per cent, Dr Tan said that there is ample space to support further growth in assets. The Reit is aiming for a portfolio size of $400 million by the end of this year, from $326 million now. It is eyeing opportunities in China, Indonesia and Malaysia.

Amid expectations of a global economic downturn, Bowsprit Capital remains optimistic that First Reit will continue to perform 'because of its stable revenues which are based on long-term rental leases'.

Shares of First Reit went up half a cent yesterday to close at 70.5 cents.

China - Property Tax Unlikely This Year

Source : The Business Times, April 23, 2008

Technical, political issues need to be ironed out first, say officials, analysts

(BEIJING) China will not start to levy a general property tax in 2008, because many technical and political issues need to be worked out first, according to officials and analysts.

Talk of the tax, which would replace the existing web of levies and fees related to property and land, has been swirling in the market since 2003.

Renewed rumours about the tax, along with worries about other measures to cap prices, have hit property shares in recent weeks.

Analysts say it could potentially not only streamline the taxation system but also discourage speculation. But it has yet to materialise even as real estate prices have soared in recent years.

'It's an arduous and long-term task to establish a reasonable and standardised property tax system,' Zhou Yin, a deputy division head of the State Administration of Taxation, told a forum in Beijing on Monday.

Others agreed that there was a lot still to do before it would become feasible.

Long Guoqiang, a senior economist who has advised the government on the issue, said tax offices still needed to do a lot work to build databases on the amount of land and number of properties, as well as their changing prices. Intensive training of staff to conduct appraisals is also needed, he said, as are adjustments to the models used to assess the value of property in particular cities.

However, Gary Cornia, a board member of the Lincoln Institute of Land Policy in the US, said Chinese tax officials, in Beijing and nationwide, clearly understand the technical issues involved in administering the property tax. 'The question is: is there the political will to do that, or are the political costs so high that even with the political will, it might not be worth it?' he asked at the forum.

Mr Zhou noted that the property tax reform aimed to give local governments a steady revenue stream so that they could offer better public services, distributing tax income that would otherwise have stayed with the central government.

Jia Kang, a senior economist at a think tank under the Ministry of Finance, told the forum that the tax would serve to stabilise prices, as some buyers would be put off expensive homes given the extra tax they would incur, forcing developers to build more modest apartments.

Average property prices across 70 large and medium-sized cities rose 10.7 per cent from a year earlier in March, slowing from February's 10.9 per cent pace.

'The reform will help with the development of a healthy property market in China and fairer distribution of the national wealth,' said Mr Zhou.

Still, the final launch of such a tax structure will probably not come any time soon, some officials say. 'It's unlikely that China will launch the new tax within five years,' said a tax official in the eastern province of Jiangsu. His province is one of 10 regions that have started to simulate the introduction of the tax on a pilot basis.

The tax administration said in January that it would expand the simulation exercise to three to five more provinces and municipalities this year.

'The property tax reform is a gradual process,' Mr Zhou said. 'We need to address all the problems by expanding and deepening our trial programme.'

An official at the Beijing tax bureau, told Reuters that residential properties would be exempted at first and said authorities had yet to decide on a tax rate.

Mr Long added that even when China started to tax residential buildings, it would need to exclude certain low-income families. - Reuters

Inflation Is A Serious Problem, Or Is It?

Source : The Business Times, April 23, 2008

IMF's global measure shows the rates have been relatively good in recent years

IS INFLATION a problem? This is one of the key global issues at the moment. In recent years the world economy has boomed, but that boom did not trigger the type of inflation that one might normally have expected with rapid economic growth.

Meaty issue: Asset prices are falling in many places, instead we are seeing a rise in the relative prices of some food and energy. Food accounts for a large component of the main inflation measures in countries such as China

Instead, most headline rates of inflation around the world have stayed relatively low in recent years. Now, in most countries, headline rates of inflation are rising, despite intense global competition, as food and energy prices rise.

The International Monetary Fund's (IMF) measure of global inflation provides a good insight into the recent favourable inflation environment. According to the IMF, consumer price inflation in the emerging and developing countries averaged 51.4 per cent during the 1990s, but in recent years has been only 6.6 per cent (in 2003), 5.9 per cent (2004), 5.7 per cent (2005), 5.4 per cent (2006), rising to 6.4 per cent in 2007.

Thus current inflation worries need to be put in the context of what went before. Even allowing for this, there is no room for complacency. The IMF expects 7.4 per cent consumer price inflation this year, decelerating to 5.7 per cent in 2009 and 4.5 per cent in 2010. This is low. Many regions have seen dramatic improvements over recent decades, such as Africa and Eastern Europe.

Developing Asia, meanwhile, saw relatively low inflation through the 1990s of 8.6 per cent, decelerating in the early part of this decade before picking up in recent years from 3.8 per cent in 2005 to 4.1 per cent in 2006 and 5.3 per cent in 2007, and the rate is expected by the IMF to reach 5.9 per cent this year.

The IMF includes Hong Kong, Singapore, Korea and Taiwan in advanced economies, whilst China and other Asian economies are included in developing Asia - this definition breakdown does not alter the overall picture.

For the advanced economies, consumer price inflation averaged 3.0 per cent during the 1990s, and the highest it has reached on an annual basis this decade was 2.4 per cent in 2006; but this year the IMF is expecting 2.6 per cent, led by the US.

The GDP deflator, a broader measure of inflation, shows a similar trend for the industrialised economies, albeit at slightly lower rates.

Many factors accounted for this period of relatively low inflation in recent years. One of the key ones was the world boom that occurred after a period of relatively moderate growth, and thus there was ample spare capacity in the world economy.

China factor

That is, there was plenty of scope for growth to accelerate before any bottlenecks were hit. Another factor was the emergence of China. The shift of global manufacturing from the West to the East has been an ongoing feature of recent decades which have seen Asia move from producing cheap, low-quality goods to producing cheap, but much higher-quality, goods.

China has resulted in a flood of cheap goods and has ensured the scale and pace of change is far more dramatic. And despite the appreciation of the yuan, these goods are still much cheaper than the places in the West in which they might previously have been produced.

The share of world GDP that is moving to the developing world is rising. Indeed, I have often said that CPI figures (consumer price indices) should have been renamed China Price Indices, such was the impact of China!

China's increased production of cheap goods has had a profound impact on global competition too, forcing firms around the world to squeeze further savings out of their supply chain. This is still an ongoing development.

Another vital factor contributing to low global inflation has been the credible macro-economic policy environment. Take Africa, for example, where a decade ago high inflation, depreciating currencies and high interest rates were typical of most countries. Now currencies are more stable, rates lower.

But, more generally, in many countries around the world, political parties on the Left and the Right have often adopted similar, anti-inflationary monetary policies.

Yet, the picture was not that clear-cut. There has been much debate about whether inflation has been measured properly, particularly in the US. I am not convinced by the criticism of the data, but one has to be sure about what the inflation measure is actually measuring!

As we have said many times, even though headline inflation as measured by consumer price figures has been low in recent years, there has been inflation but in other areas. In particular, whilst headline inflation has been low, in recent years we have seen rapid asset price inflation in many countries, with rising prices of real estate and equities.

In many instances this has not been captured in the headline inflation measures.

Meanwhile, there is still intense global competition in internationally traded goods. The appreciation of the yuan is adding to concern that China's deflationary impact is disappearing.

Now asset prices are falling in many places. But instead we are seeing a rise in the relative prices of some food and energy. These are captured in the main inflation measures. Indeed, sometimes they are a large component. For instance, in China, food makes up about a third of the basket. This is leading to a focus again on so-called cost-push inflation, and whether rising costs of key factors can lead to overall inflation.

The last time there was a global focus on cost-push inflation was in the 1970s, when oil prices rose. How this feeds through in inflation depends, crucially, on two factors - the reaction of central banks and whether they accommodate this pick-up in prices or not - and whether the rise in costs feeds through into higher wages and into higher inflation expectations.

On that the jury is still out. In many poor countries, riots in reaction to higher food prices are often not a sign of rising inflation but more a reaction to an increase in prices that is not feeding through into higher wages, and that is both reducing the amount of food that people can buy and also squeezing the amount that they can spend on other items.

This deflationary impact of rising food prices is often overlooked. This explains the present challenge.

The writer is chief economist and group head of global research, Standard Chartered Bank, United Kingdom

Bracing For Tougher Times Ahead

Source : The Business Times, April 23, 2008

ECONOMISTS read in the Monetary Authority of Singapore's (MAS) surprise decision two weeks ago to strengthen the Sing dollar an indication that inflationary concerns loomed large over downside growth risks, even as the global outlook grows cloudy with recession in the air.

While the Singapore economy got off to a robust start (though the final first-quarter growth may well be revised down from the 7.2 per cent flash estimate), gross domestic product (GDP) growth is widely expected to ease in the months ahead. The big question is - by how much, as the US economic downturn winds its way to Singapore and the rest of Asia.

For now, the prognosis remains an optimistic 'minimal hit' scenario with regional resilience and demand expected to offset much of the decline in the Western markets. The Singapore economy's growth is expected to remain within the trend potential rate of 4-6 per cent in 2008. But MAS did note: 'A more severe global downturn cannot be ruled out if there is a further escalation of the financial crisis in the US. If this occurs, Singapore's growth will be adversely affected.' And Government of Singapore Investment Corporation (GIC) deputy chairman Tony Tan - who in January said that his biggest worry for 2008 was inflation - has just warned about the impact of the world's deepest recession in 30 years, if policymakers in the US and other major markets do not take decisive and timely action to calm investors' nerves, improve sentiment and restore some market stability.

Hopefully, the necessary decisions and actions will not be derailed or otherwise impaired by the fact that there will be a changeover soon in the White House. And one would hope that the three presidential aspirants are giving the matter of global financial and economic stability some thought, despite their current preoccupation with domestic issues.

For Singapore and the rest of Asia, it's best to be prepared for rough times, even if the domestic economy manages to grow at a reasonably respectable rate.

It's when the chips are down that true colours show. Singapore, with its strong economic fundamentals and political stability, has mostly passed this test in recent crises. But the battles ahead could be tougher. Apart from facing a dramatically weaker global growth environment, Singapore will also face a host of keen rivals when it comes to attracting investments, from both the developed and developing world.

In 2003, Singapore was ranked as the world's best place to do business by the Economic Intelligence Unit. But the latest rankings see Denmark and Finland on top, with Singapore down to third place. Not a bad position to be in, but the change in ranking is a sobering reminder that the world has become increasingly competitive. In the recessionary environment that looms ahead, this will be even more true.

Cold Market Forces Mapletree, JTC To Freeze Reit Plan

Source : The Business Times, April 23, 2008

JTC to sell assets worth $1.7b to private Mapletree trust instead

Timing is everything. JTC Corp and Temasek subsidiary Mapletree Investments are not proceeding with their earlier plan to list a real estate investment trust (Reit) owning a portfolio of JTC assets for now, because of unfavourable market conditions.

Instead, JTC Corp will divest the $1.71 billion worth of assets to a private trust sponsored by Mapletree.

It was more than two years that JTC Corp revealed plans to divest part of its property assets to a Reit and a couple of months ago that it announced it had picked Mapletree to manage the proposed Reit, after a 'rigorous selection process'.

This process eliminated Australia's Goodman group, which had earlier been reported as JTC's initial top choice. According to market talk yesterday Goodman apparently got cold feet and did not want to even attempt a Reit IPO. Instead, it wanted to buy the JTC assets to park into a wholesale property fund.

Mapletree, on the other hand, agreed to try a Reit IPO in the first instance but offered a 'backstop option' of buying the assets for a private trust if the IPO was not feasible. The end result appears to be similar - no Reit IPO for now. BT also understands that Goodman had wanted JTC to put some money into the wholesale property fund.

'There were probably other factors at play as to why JTC picked Mapletree and not Goodman, but it seems we're none the wiser now,' an analyst with a stockbroking house said.

Agreeing, a market watcher added: 'It looks like JTC has missed the window of opportunity for listing a Reit.'

Mapletree CEO Hiew Yoon Khong said in a release yesterday that in due course, the company will explore the possibility of listing the JTC portfolio as a Reit, possibly in combination with other Mapletree industrial assets. The transfer of properties to Mapletree is expected to be completed by July 1, 2008.

Tenants of the flatted factories, stack-up and ramp- up buildings in the portfolio will have a rental cap for a period of three years from this date. Mapletree will cap the increase in rent to a maximum of 5 per cent per annum based on JTC's July 1, 2007 posted rent.

The properties to be divested comprise 39 blocks of flatted factories in various locations including Kaki Bukit, Kallang Way, Loyang, Serangoon North and Tanglin Halt, 12 amenity centres, six stack-up buildings, a ramp-up building, The Synergy and The Strategy at International Business Park in Jurong and The Signature at Changi Business Park, plus a warehouse building at Clementi West.

JTC and Mapletree said in a joint statement yesterday that they will not be proceeding with the proposed Reit listing 'at the present time' based on the advice of the Reit financial advisors DBS Bank, Goldman Sachs and UBS AG. 'This is in light of the current volatile market conditions which are not conducive for a Reit initial public offering.'

JP Morgan analyst Chris Gee acknowledged that market conditions are indeed challenging for floating a Reit today. 'The cost of capital for Singapore Reits has risen over the last year. The average (distribution) yield spread for S-Reits over the 10-year Singapore Government Bond yield is 350 basis points today, up from a low of 80 basis points around a year ago.'

Cambridge Industrial Trust is currently trading at about 8.8 to 9 per cent distribution yield based on analysts' consensus earnings forecast for the year ending Dec 2008, and Ascendas-Reit, which has a larger and more diversified portfolio, is currently trading at about 6 per cent based on March 2009 consensus earnings, Mr Gee notes.

BT understands that the forecast 2009 net property yield on the JTC portfolio bought by Mapletree is about 6-7 per cent but rental growth prospects may be muted over the next few years because of the rental caps. 'You need time to let the portfolio mature. Income will also grow as occupancy rates in the properties rise, from the current portfolio average of under 90 per cent,' an analyst estimates. On a portfolio basis, the properties have an average remaining land lease of 50-60 years.

Mapletree is expected to look into combining the JTC assets it is buying with those of its privately-held Mapletree Industrial Fund - which has about $300 million of non-warehouse industrial properties in Singapore, Malaysia and China - for an eventual Reit listing at some point.

The three banks are expected to be compensated by JTC for their services thus far, but they'll miss out on lucrative underwriting fees they would have reaped had there been an IPO.

Sing Dollar At Fresh High Against US

Source : The Business Times, April 23, 2008

The Singapore dollar hit a record high against the US dollar on Wednesday and the Malaysian ringgit hit its highest in more than a decade as investors bet on currencies of those Asian countries that seemed determined to fight inflation.

The US dollar was generally lower, with the euro climbing above US$1.6 for the first time since its 1999 inception on Tuesday after comments from European Central Bank Governing Council members Christian Noyer and Yves Mersch suggested the next move in ECB rates would be up.

While the South Korean won, Singapore dollar and ringgit rose, other currencies in the region stayed rangebound.

Analysts warned the calm belied market anxiety.

'The driver (of rising tension) appears to be the continued escalation in global food and energy prices that has broader implications for Asia's fiscal position arising from funding additional subsidies from additional bond issuance,' analysts at JPMorgan said in a note.

Despite the uncertainty, investors placed their bets on the Singapore dollar, which rose 0.3 per cent to 1.3474 per US dollar ahead of inflation data for March later in the day.

Markets expected prices in Singapore rose at an annual pace of 6.8 per cent.

The currency was propped up by expectations the central bank would allow further appreciation to ease inflationary pressures, traders said.

Earlier this month the Monetary Authority of Singapore (MAS) shifted up the centre of the secret trade-weighted band in which it allows the Singapore dollar to move and which it uses to manage monetary policy.

'The US dollar is stil heavy, and the Singapore dollar is below 1.3500 and on the way to 1.3450, though momentum may be slow,' a Singapore-based trader said.

Analysts said investors favoured Asian currencies in countries where central banks aimed to fight inflationary pressures instead of seeking to encourage growth.

The Malaysian ringgit was among those. It rose by 0.3 per cent to 3.1307, hitting its highest since October 1997 for a second consecutive day.

Traders in Kuala Lumpur said they expected the ringgit to end the day at 3.13. March inflation data for the country is due at 0900 GMT on Wednesday.

The South Korean won inched up by 0.3 per cent to 995.7, buoyed by a rise of 1 per cent in stock prices. -- REUTERS

S'pore's March CPI Rises 6.7% To 26-Year High

Source : The Business Times, April 23, 2008

Singapore's inflation accelerated to an expected 6.7 per cent in March from a year ago to a 26-year high, the government said on Wednesday, as higher food, transport and housing costs lifted consumer prices.

Consumer prices in March rose 0.3 per cent from February after seasonal adjustments, the Department of Statistics said in a statement. Annual inflation was the highest since 7.5 per cent in March 1982.

Economists said inflation was probably near a peak after a run-up in the past year, but expected the central bank to keep tight monetary policy and allow the Singapore dollar to rise further to rein in domestic inflationary pressures.

Singapore's central bank conducts policy by steering the Singapore dollar within a secret trade-weighted band against a basket of currencies, not by adjusting interest rates.

Singapore's central bank tightened monetary policy this month to fight inflation after economic growth in the first quarter was stronger than expected. It is due to meet next in October.

It allowed the Singapore dollar to rise higher, citing a 'backdrop of continuing external and domestic cost pressures'.

The Singapore dollar rose 0.2 per cent to a record high of 1.3482 per US dollar on Wednesday as investors expected the central bank to allow for further currency appreciation to rein in inflation.

Economists had expected annual consumer prices to rise above January's high of 6.6 per cent due to record energy and food prices.

The government expects 2008 inflation to fall within 4.5 to 5.5 per cent, more than double last year's 2.1 per cent.

A sub-index for housing costs was up 8.1 per cent in March from a year ago while food prices, which carry the largest weighting in the index at 23 per cent, rose 7.6 per cent.

The statement does not include seasonally adjusted figures for the sub-indices. -- REUTERS

Malaysia-S'pore Rapid Rail Plan Scrapped: Report

Source : The Business Times, April 23, 2008

KUALA LUMPUR - A proposed multi-billion dollar high speed train linking Kuala Lumpur to Singapore is off the cards due to exorbitant project costs, according to Malaysian press reports on Wednesday.

The decision by Malaysia's Economic Planning Unit, which evaluates and helps implement key projects within the country, comes less than a week after both countries said they were exploring the possibility of the link.

'The Government will not go ahead with the project because the financial model submitted involves a significant cost to be borne by the government,' the Unit's director general Sulaiman Mahbob told the Star daily.

The paper said he did not reveal how much the government would have had to bear.

The RM8 billion (US$2.6 billion) train project proposed by Malaysian property and utility firm YTL Corp in 2006 envisaged top speeds of 350kmh, cutting journey time from about seven hours to 90 minutes.

YTL's managing director Francis Yeoh had earlier said the new train would save the government 'tens of billions of ringgit' in fuel subsidies in the long term, the paper reported.

Last week, Malaysian Foreign Minister Rais Yatim and his Singapore counterpart George Yeo agreed to study the possibility of the train link.

Mr Yeo said the two sides decided to set up a joint ministerial committee to explore the proposal after Rais raised the issue with Singapore Prime Minister Lee Hsien Loong.

It takes about five hours to drive between Kuala Lumpur and Singapore. -- AFP

SingTel To Build New State-Of-Art Green Data Centre

Source : The Business Times, April 23, 2008

Singapore Telecommunications Limited (SingTel) announced today that it will build a new state-of-the-art data centre at Kim Chuan, which will boost the telco's total data centre capacity in Singapore to more than half a million square feet.

The Kim Chuan Telecommunications Centre 2 (KCTC-2), expected to be completed in early 2010, will offer 150,000 square feet of data centre space, making it one of the largest data centres in Singapore.

Mr Bill Chang, SingTel's Executive Vice President for Business, said that SingTel anticipates strong demand for KCTC-2's hosting facilities due to its strategic location, state-of-the-art infrastructure and complete infocomm service offerings.

The new KCTC-2 will be constructed to meet the recently revised requirements of the Building and Construction Authority's (BCA) Green Mark scheme, a green building rating system that evaluates buildings based on criteria such as energy and water efficiency, as well as environmental protection and innovation.

SingTel shares were trading 3 cents lower on Wednesday afternoon at $3.85 a share. -- BT Newsroom.

Unifiber To Divest Construction Unit, Targets Up To $300m In New Deals

Source : The Business Times, April 23, 2008

United Fiber System Ltd said on Wednesday it is looking to divest its construction unit, making forestry and pulp-making its core business in the next few years to get higher margins.

Unifiber chief executive officer Jaka Prasetya told Reuters in an interview the pulp and forestry business gives up to 50-60 per cent profit margins, compared to the 10 per cent margin from its building unit, Poh Lian Construction (PLC).

'In the medium-term, we'll probably find a new partner for the construction business to take the company to the next level,' Mr Prasetya said.

'That can mean spinning-off PLC and make it an independent company from Unifiber, or find a partner for PLC to venture overseas.'

In the meantime he said the firm is targeting up to $300 million (US$222 million) worth of new building projects this year, adding to a construction order book so far of $560 million.

'The other side of the business needs to pick up first,' Mr Prasetya said, adding that the firm's US$900 million pulp mill in Indonesia will only begin operations in 2010.

When asked about the impact of Unifiber's forestry business on the environment in Kalimantan on the island of Borneo, Mr Prasetya said the firm plants its own trees and does not clear existing forests.

'We have the logs we need and we don't need to touch the natural forest,' he said. 'So we are confident we won't have any issues,' he said.

Unifiber, with a market cap of US$419 million, owns 269,000 hectares of plantation - nearly four times Singapore's land area. At least 50 per cent of the pulp produced from the mill will be exported to China. The mill is a collaboration with a unit of state-owned China Metallurgical Group Corp. -- REUTERS

Poh Lian Wins $19.5 Mln C&C Project

Source : The Business Times, April 23, 2008

United Fiber System Limited (Unifiber) on Wednesday said its unit, Poh Lian Construction Pte Ltd, has won a $19.5 million building contract from Cycle and Carriage Industries Pte Ltd (C&C).

Poh Lian will build an additional 2nd storey to the main building, as well as the additions and alterations to the existing industrial building, involving the extension of a multi-storey carpark at Pandan Gardens.

The project is scheduled to be completed within 12 months from the contract's commencement date.

The project is expected to contribute positively to the group but not expected to have any material impact on the group's current year results.

The current order book including the project is about $552 million. -- BT newsroom

Keppel Land Q1 Profit Down 3.5%

Source : The Business Times, April 23, 2008

Keppel Land, Singapore's third-biggest developer by market value, posted on Wednesday a 3.5 per cent fall in quarterly net profit as the US sub-prime mortgage crisis hurt new property launches.

KepLand, which derives the bulk of its income selling apartments in Asian countries including Singapore, China, Vietnam, and India, earned $60.3 million (US$44.77 million) in the three months to end-March, down from $62.5 million reported a year ago.

The developer, 53 per cent-owned by conglomerate Keppel Corp, said this week that it secured an option to develop a 1,500 unit residential project in Vietnam costing US$390 million. -- REUTERS

Resorts World Award $1.05 Bln Contract To Kajima JV

Source : The Business Times, April 23, 2008

Resorts World at Sentosa announced on Wednesday it has awarded a $1.05 billion building contract to a joint venture between Kajima Overseas Asia Pte Ltd and Tiong Seng Contractors (Pte) Ltd.

The award -- the biggest awarded to-date by Resorts world -- marks a milestone for the $6 billion integrated resort slated for completion in early 2010, and tallies the total building contracts awarded to date to a worth of over $2 billion.

Kajima-Tiong Seng will construct 3 of the 6 hotels in RWS, and the resort's thoroughfare, FestiveWalk. The contract also includes the construction of the casino and the Le Vie Showroom, where the resort's residential theatre production Le Vie will reside. -- BT Newsroom


《联合早报》Apr 23, 2008









Flaw In En-Bloc Mediation Process

Source : The Straits Times, Apr 23, 2008

IN A collective property sale, minority objectors create uncertainty, resulting in hardship for the 80 per cent majority owners, as follows:

# They cannot commit to a new home and property prices may rise against them;

# They may commit to a new home but are unable to get the sales proceeds to pay for the new property;

# They lose interest on the sales proceeds (which may be a substantial amount) while the minority holds out; and

# They are unable to rent at market rates because of the long sale process.

To add insult to injury, under the mediation process, minority objectors are legally allowed to negotiate with buyers for higher compensation, which can run into millions of dollars.

When successful, such payments to minority objectors are kept 'strictly confidential'.

As the law should be equal for all Singaporeans, the authorities should remove this legal loophole by abolishing the mediation process. Objectors should object on the grounds of whether the sale process is fair, transparent and handled in good faith. There must be transparency in the legal system.

Ong Boot Lian (Mdm)

'I think 99 per cent, as she suggested, is too high. Perhaps 90 per cent is more reasonable.'
MR WILLIAM TAY, responding to Ms Susan Prior's suggestion to increase the percentage required before a collective property sale can be approved. The current rate is 80 per cent

US Existing Home Sales Fall, Prices Lower

Source : The Straits Times, Apr 23, 2008

WASHINGTON - SALES of previously owned homes in the United States fell last month, as loan restrictions and the prospect of further price declines kept buyers away.

Purchases dropped 2 per cent, less than forecast, to an annual rate of 4.93 million from 5.03 million in February, the National Association of Realtors said yesterday. The median sales price fell 7.7 per cent from a year earlier.

Defaults on sub-prime mortgage loans have led banks to tighten borrowing rules, while home values are decreasing as foreclosures add to the glut of unsold properties.

The housing slump, now in its third year, is one reason some Federal Reserve policymakers are concerned the US is heading into a recession.

'There still is an imbalance in the existing housing market that needs to be corrected through lower inventories and higher sales,' said Ms Michelle Meyer, an economist at Lehman Brothers in New York, which correctly forecast the sales level.

'The market will remain out of balance this year and most of next. As long as the housing market remains weak, we think the economy will remain weak as well.'

Existing home sales account for about 85 per cent of the US housing market, while new home sales make up the rest. Monthly figures on re-sales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier.

Many economists consider new home purchases, which are recorded when a contract is signed, a more timely barometer of the market. - BLOOMBERG NEWS

Landed Plots Fetch 22% Less At URA Auction

Source : The Business Times, April 23, 2008

LANDED-HOUSING sites at Sembawang were sold yesterday at prices 22 per cent lower on average than nearby plots a few months ago. Yesterday's auction by the Urban Redevelopment Authority was for 11 plots with 99-year leasehold tenure. All were sold - for a total of $45.29 million, or $223 per sq ft (psf) on average.

The plots come under phase two of Sembawang Greenvale estate. URA sold the 12 plots in nearby phase one in October last year for about $285 psf on average. Smaller developers and individuals turned up yesterday to bid for the phase two plots, which can be developed into 90 dwellings - one bungalow, 16 semi-detached houses and 73 terraced houses.

Fragrance Homes reaped the biggest harvest, winning four plots that can house eight semi-detached houses and 40 terraced houses. The largest plot, in Penaga Place, designated for 18 terraced houses across 35,624 sq ft, cost Fragrance $8.7 million or $244 psf. This was the highest psf price for any of the 11 plots.

Odeon Properties' $1.66 million bid for a plot in Kerong Lane represented the lowest psf price of $151. The 10,989 sq ft site can accommodate one bungalow and two semi-detached houses. Reflecting the better market last year, prices on a psf basis in phase one ranged from a higher $210 to $327 psf.

The only individual to submit a wining bid yesterday, Christina Sui Fong Fong, bought the third-largest land parcel for $6.65 million or $221 psf.

Asked about plans to release more landed-housing parcels, URA's director of land administration Choy Chan Pong said: 'We will be releasing according to market demand.'

Alternative Real Estate Ripe For Picking

Source : The Business Times, April 23, 2008

WITH probably less than 350 completed office and industrial buildings in Singapore available for sale on a strata basis, transaction volumes have been steadily rising with more investors seeing an upside.

In a White Paper, Colliers International notes that since 2006, the strata office sector saw sales transactions rise 59.1 per cent from 2005 levels while the corresponding rise for the strata industrial sector was 49.6 per cent.

By 2007, the office sector chalked up total annual sales of 595 transactions, a 117.2 per cent rise compared with 2005.

The industrial sector, on the other hand, saw 1,227 sales transactions in 2007, up 81.8 per cent from 2005.

While Colliers does say that some of the purchases were by end-users, it also believes that investors were drawn by the attractive net rental yields offered by these properties. This can range between 5 and 7 per cent.

Residential properties, however, offer net yields of 2.5 to 4 per cent.

'Judging from the caveats lodged for office and industrial properties, signs of interest in office and industrial properties started showing as early as 2006 when their capital values were at or close to rock bottom,' added Colliers.

Besides end-users and investors, Colliers believes there were buyers who bought units in ageing developments (particularly offices) with collective sale potential in the hope of reaping a windfall some time in the near future.

Examples of developments which were popular with such investors in the last two years include Textile Centre and Golden Mile Complex, both in the Beach Road area.

'With the office supply crunch likely to persist in the next two years, the industrial sector will continue to enjoy robust spillover demand from the office sector on top of demand from the mainstream manufacturing industry,' added Colliers.

Colliers also highlighted that, compared with the mid-1990s peak, capital values of office and industrial properties as at end-2007 were still some 27.5 per cent and 33.7 per cent lower. 'The sectors, thus, still hold immense upside potential in rents and capital values,' Colliers added.

Colliers said that the bulk of available strata office and industrial properties are likely to be more than 20 years old.

Strata office buildings that have seen high transaction volumes since January 2006 include Chinatown Point, International Plaza and People's Park Centre.

Strata industrial buildings that have seen high transaction volumes include E-Centre @ Redhill, Eunos Technolink and Ubi Tech Park.

Six Months, Still No F&N CEO

Source : TODAY, Wednesday, April 23, 2008

Is it a question of finding the right person or deciding on a new direction first?

IT HAS been more than six months since local food and beverage giant, Fraser and Neave (F&N) has been without a full-time chief executive officer following the hasty departure of Dr Han Cheng Fong last October.

Mr Lee Hsien Yang
assumed the post of chairman in the middle of that same month and has since had to take on the CEO’s responsibilities at the same time. But he is on record as saying: “I have no desire to stay on as acting CEO or executive chairman for long.”

He also said that the company would be announcing a new CEO in “due course”. That was said at the company’s annual general meeting of shareholders in January.

It’s now coming to the end of April and there still is no CEO at F&N. F&N is not only the largest producer of soft drinks in Singapore, but the company is also into brewing beer, developing property, running serviced apartments and, under Times Publishing, printing and publishing.

Before that AGM, I had reported that the company had temporarily suspended its search for a CEO pending a review of its business units. The review was to determine whether the company was going to hive off its three main business units — food and beverage, property and printing and publishing — into separate companies or retain the status quo and keep the three businesses in one company.

This was vehemently denied by F&N group company secretary Anthony Cheong: “It has not been put on hold and is not ‘pending a review of the group’s future direction’.

However, the company was reported to have said that it was not in a hurry as it wanted to find the right person for the job.

But would it make sense to hire somebody to run F&N as it is now, only for him to see the company broken into separate units later on? Wouldn’t it be better to a make a decision now on the company’s direction and then decide on the appropriate person?

It was reportedly a finding by Dr Han, 65, that group morale would be adversely impacted should F&N be broken up that led to differences with then chairman Michael Fam and the former’s eventual departure from the company.

Many analysts believe that the sum of parts — that is if the group is broken up into separate business units and listed separately — would bring greater benefits to F&N’s shareholders.

It was only six years ago that F&N privatised Centrepoint Properties and Times Publishing and absorbed them into the main company. At that time, the rationale was: “The privatisation of Centrepoint and TimesPub is aimed at restructuring F&N into a stronger and more flexible group, to further enhance shareholder value and sustain long-term growth ... F&N, as an entrepreneurial shareholder in these companies, already plays a proactive and pivotal role in charting the strategic directions of these businesses. The privatisation of Centrepoint and TimesPub will give more flexibility in managing their resources.”

Dr Fam also went on to add that “through appropriate rationalisation and consolidation measures, we hope to realise greater synergies within the group — for instance, by sharing best practices and tapping on the combined wealth of experience, knowledge and expertise of the management teams”.

While F&N should ensure that it finds the right person for the job, keeping its shareholders guessing for too long on where it’s going is also not fair to them.

Mr Lee is more than capable of running the company well, but his declaration that he does not want to be CEO or executive chairman for long might give the impression, rightly or wrongly, to shareholders that he is just doing a maintenance job.

JTC To Sell $1.7b Of Properties

Source : TODAY, Wednesday, April 23, 2008

Volatile capital markets cited as main reason

JTC Corp has scrapped plans to divest a large chunk of its industrial property portfolio through a listed real estate investment trust (Reit).

Instead, it will sell the 62 properties for $1.71 billion to Temasek-linked Mapletree Investments, which it had earlier appointed to manage the planned trust. This is because of recent weak stock market conditions.

“Since the appointment of Mapletree as the Reitmanager in February, the global and local capital markets have continued to remain volatile,” explained Ms Ow Foong Pheng, JTC’s chief executive.

Mapletree may still proceed with listing the properties as a REIT at a later date.

Singapore’s 20 existing listed Reits have fallen on average by 11 per cent this year amid concerns that the credit crisis in the United States might spread and hurt their ability to finance shortterm debt.

JTC’s decision to divest followed Mr Raymond Lim’s “Yellow Pages rule” in 2005, while championing entrepreneurship under the Ministry of Trade and Industry.

Besides cutting red tape, Mr Lim then said government agencies should not be in any business where the private sector is already performing and can be found in the Yellow Pages.

This was to help provide space for private businesses to bloom.

JTC heavily dominates Singapore’s industrial property landscape.

Mapletree may be independently managed but it still has government links as it is part of the Temasek family.

Mr Hiew Yoon Khong, Mapletree’s chief executive, said: “Mapletree will explore the possibility of listing the portfolio as a Reit, possibly in combination with other Mapletree industrial assets in due course.

“Meanwhile, our immediate focus will be to ensure a smooth transition for tenants and we look forward to working closely with them in the near future.”

Mapletree has an asset base of around $4.4 billion, comprising office, logistics, industrial, retail and lifestyle properties. It also manages another $3 billion worth of properties across Asia.

In this sale, Mapletree will get 39 blocks of flatted factories, 12 amenity centres, six stack-up buildings, one rampup building, one warehouse, and three multi-tenanted business parks. They are the Synergy and Strategy at the International Business Park and Signature at the Changi Business Park.

JTC said it may still divest other industrial properties through trade sales.

CapitaMall Trust's Q1 Distributable Income Up 24% On-Year To S$58m

Source : Channel NewsAsia, 22 April 2008

CapitaMall Trust has booked a first quarter distributable income of S$58 million, up 24 per cent compared to a year ago.

The growth was driven by higher rental rates on new and renewed leases for most of its malls.

For the first quarter ended March 31, the property trust will distribute 3.48 Singapore cents per unit, up from the three cents distributed in the same period last year.

CapitaMall Trust said it is committed to distribute 100 per cent of its taxable income to unit holders for the full year ending December.

It added it "remains confident of delivering its 2008 forecast DPU of 13.9 cents." - CNA/ac

MAS Stresses It Will Not Regulate Islamic Banking Sector In S'pore

Source : Channel NewsAsia, 22 April 2008

The central bank has reiterated its stance that it will not regulate the Islamic banking market here in Singapore.

At a conference on Islamic Finance on Tuesday, the Monetary Authority of Singapore (MAS) instead argued that Shariah-compliance should be regulated internally as part of a bank's good practice in governance and control.

The Islamic banking market is estimated to be worth as much as US$800 billion worldwide and it is growing by up to 30 per cent in some markets.

While there has been a push for Singapore to have a greater pie of the market, the MAS said regulation may be counter-productive in small markets.

Chia Der Jiun, Executive Director, Prudential Policy, MAS, said: "Much of the business is going to be wholesale, off-shore, international counter parties, and these counter parties may reside in the Gulf, in Southeast Asia, and they have Shariah interpretations and standards that may be somewhat unique in their jurisdictions."

The response came amid talk that regulation may be needed to help boost investor confidence. Some industry players said this will help attract more Islamic private wealth from overseas and further increase Singapore's status as a wealth management hub.

Aimi Zulhazmi, Principal Officer, BIMB Trust, said: "People are looking at Singapore as a leading player in the financial market. A lot of wealth especially on the private wealth management resides in Singapore."

While the MAS said there is no need for a separate Islamic banking regulatory framework, it noted that more disclosures are needed as they would help investors make better investment choices. - CNA/vm

JTC, Mapletree Scrap Plans To List REIT

Source : Channel NewsAsia, 22 April 2008

JTC Corporation and Mapletree have cancelled plans to list a real estate investment trust due to current volatile market conditions.

Instead, JTC will divest the S$1.71 billion real estate portfolio to a private trust sponsored by Mapletree.

This divestment option was part of Mapletree's proposal to JTC, when Mapletree was appointed by JTC as the REIT manager for the selected portfolio in February this year.

JTC and Mapletree said the choice to keep the assets private was made "in light of the current volatile market conditions which are not conducive for a REIT initial public offering".

The properties to be divested include 39 blocks of flatted factories, 12 amenity centres, as well as multi-tenanted business park buildings.

Mapletree Chief Executive Hiew Yoon Khong said, "Mapletree will explore the possibility of listing the portfolio as a REIT, possibly in combination with other Mapletree industrial assets in due course.

"We believe that this is an excellent portfolio to be potentially offered to investors as a yield-based investment product." - CNA/al

Tekka Centre To Close For Upgrading And Will Re-Open In Late 2009

Source : Channel NewsAsia, 22 April 2008

The Tekka Centre, which is located at Blk 665, Buffalo Road, will close for upgrading on 1 May 2008 till the third quarter of 2009.

It will be given a makeover under the National Environment Agency's (NEA) Hawker Centres Upgrading Programme (HUP).

The market cum hawker centre was built in 1980 and has become a tourist attraction over the years.

NEA said the upgraded centre will be more accessible as there will be provisions such as escalators, lifts and wider passageways for the elderly and handicapped. The centre's total seating capacity will also be increased after the upgrading.

During the upgrading period, about half of the stallholders will continue their business operations at a temporary centre located between Northumberland Road and Race Course Road.

Most of the remaining stallholders have decided to rest during the upgrading period.

NEA manages 112 markets/food centres. To date, 62 markets/food centres have been upgraded. The centres currently undergoing upgrading include Blk 335 of Smith Street and Geylang Serai Market. - CNA/vm

Malaysia Drops KL-Singapore Bullet Train Project

Source : Channel NewsAsia, 22 April 2008

KUALA LUMPUR - Malaysia has shelved plans for a bullet train linking Kuala Lumpur to Singapore because of the cost, a top planning official said on Tuesday.

The 8 billion ringgit (US$2.5 billion) project, proposed by Malaysian infrastructure and utilities group YTL Corp in 2006, aimed to cut travel time between the two cities to 90 minutes from seven-and-a-half hours presently.

Singapore-Johor Causeway

"The letters on the decision were sent to parties such as YTL and the relevant agencies in early April," Economic Planning Unit (EPU) director-general, Sulaiman Mahbob, told Bernama news agency on Tuesday.

He said the government would have to bear a significant cost based on the financial model that was submitted by YTL.

"Based on the financial model submitted by YTL, the government has decided not to go ahead with the bullet train (project)," he said, without elaborating on the amount the government has to bear.

Officials of YTL had no immediate comment.

The idea for a high-speed train between Kuala Lumpur and Singapore, about 300 kilometres apart, dates back to the late 1990s, but was revived after the Malaysian government invited companies to submit ideas for privately funded projects.

The Malaysian government backed the project in 2007 after it passed a feasibility study, but said at the time it wanted to conduct a social impact study since the project would involve land acquisition.

News of the abandonment came shortly after Prime Minister Abdullah Ahmad Badawi said several infrastructure projects under the 200-billion ringgit (US$64 billion) 2006-2010 development plan may be delayed due to escalating costs.

Abdullah, who is also finance minister, said high on the casualty list is the construction of the three-billion-ringgit (US$826m) bridge linking the northern island of Penang to peninsular Malaysia.

Construction of the planned 24-kilometre bridge linking the town of Batu Maung on the island and Batu Kawan on the mainland was expected to be completed by January 2011 but has been hit by delays.

The construction of the bridge will be funded by the government and private investors and undertaken by United Engineers (Malaysia) Bhd (UEM), a major infrastructure player linked to the ruling United Malays National Organisation (UMNO). UEM's foreign partner is the China Harbour Engineering Company.

Abdullah last September warned a spike in global oil prices could affect the country's multi-billion-dollar development programmes. But in the run-up to the March 2008 polls, Abdullah launched five ambitious developments corridors nationwide to spur growth and eradicate poverty.

Last week, an independent think tank said Malaysia's economy would decline in the second half of the year due to a downturn in the US economy, with growth in 2008 expected to reach 5.4 percent.

The central bank last month said Malaysia's growth is expected to slow to 5.0-6.0 percent in 2008, down from 6.3 percent last year. - CNA/al/ir

Housing Slump Could Exceed Drop Of Great Depression: Economist

Source : The Straits Times, Apr 23, 2008

NEW HAVEN (Connecticut) - AN INFLUENTIAL economist who long predicted the housing market bubble cautioned on Tuesday that the slump in the US housing market could cause prices to fall more than they did in the Great Depression and bailouts will be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 per cent drop in the historic depression of the 1930s.

Home prices nationwide already have dropped 15 per cent since their peak in 2006, he said.

'I think there is a scenario that they could be down substantially more,' Mr Shiller said during a speech at the New Haven Lawn Club.

Mr Shiller's Standard & Poor's/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

Mr Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.

Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in US history, Mr Shiller said.

'Basically we're in uncharted territory,' Mr Shiller said. 'It seems we have developed a speculative culture about housing that never existed on a national basis before.'

Many people became convinced that housing prices would increase 10 per cent annually, a notion Mr Shiller called crazy.

Mr Shiller, who said it's difficult to forecast prices, endorsed legislation proposed by Democratic Sen. Chris Dodd and Rep. Barney Frank that would allow the Federal Housing Administration to back as much as US$300 billion (S$405 billion) in mortgages for struggling homeowners.

Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages.

On Tuesday, the National Association of Realtors said that sales of existing homes fell in March while the median home price declined to US$200,700, a decline of 7.7 per cent from the median price a year ago.

Sales of existing single-family homes and condominiums dropped by 2 per cent in March to a seasonally adjusted annual rate of 4.93 million units.

Many analysts said they do not expect a rebound for a number of months, given the problems weighing on housing from a severe glut of unsold homes to tighter credit standards for prospective buyers and a rising tide of mortgage foreclosures. -- AP

China Property Prices Set To Rise Further

Source : The Straits Times, Apr 23, 2008

BEIJING - UPWARD pressure on China's property prices will only increase in the April-to-June period, following an 11 per cent annual rise in the first quarter, the top economic planning agency said in a report published.

The National Development and Reform Commission (NDRC) said on Wednesday that the recent weakness in the country's stock markets, coupled with rapid rises in consumer prices that are eating into real deposit rates, would only encourage more people to invest in real estate.

'This will give new impetus for property prices to increase,' the agency said in a report, summarised in the official China Securities Journal.

The NDRC did not give any forecasts for property price rises in the second quarter, but it said that increases in the price of steel and the cost of labour would hit housing prices in small- and medium-sized cities especially hard.

It recommended further steps to increase support for government rental housing, as well as to ensure that there is adequate land available for affordable, commercially built housing.

The government should also strictly implement restrictions on obtaining mortgages on second homes, it said. -- REUTERS

Deferred Payment Scheme: Up To 4,200 Homes May Be Dumped

Source : The Straits Times, Apr 23, 2008

No URA figure on units sold but experts say 30% could be offloaded

THE hugely popular deferred payment scheme (DPS) - scrapped last year - may now be a thing of the past, but what sort of shadow will it cast on the Singapore property market going forward?

RUSHING IN: More than 8,000 units were sold at the peak of the property buying frenzy last year. -- PHOTO

This has been the question on market watchers' lips since the Urban Redevelopment Authority (URA) revealed last week that as many as 29,250 homes offered under the DPS, including 5,760 unsold units as at the end of last month, will be completed from this year to 2013.

The concern is that speculators who bought homes under the DPS could dump their units at below-market prices, and this could drastically drag down overall sentiment.

But just how many units are at risk of being sold, and how big will the impact be?

The URA said while it has the number of units approved under DPS, it does not have data on how many units were actually sold under the scheme.

But four property experts The Straits Times spoke to estimated that up to 30 per cent of homes sold under the scheme last year could be held by speculators who may offload homes as the completion date nears. This translates to roughly 4,200 homes, going by a back-of-the-envelope calculation.

That is because out of the 23,490 units approved under the DPS and sold, only about 50 to 60 per cent - or roughly 14,000 - are likely to have been sold under the DPS, say property consultants and agency bosses from Knight Frank, Savills Singapore, HSR Property Group and PropNex.

The remaining 40 to 50 per cent were not bought under the DPS. Either developers did not eventually offer it, or buyers chose to pay via progressive payments, because buying a home with DPS usually means a further 2 to 3 per cent added to the price.

Next, property experts estimated that of the 14,000 or so homes sold under the DPS, about 20 to 30 per cent were probably sold to short-term investors or speculators.

This means that as a group, speculators could be holding on to as many as 4,200 units.

Why are speculators prone to selling their units as they near completion?

The DPS allowed buyers to pay just 10 or 20 per cent of the sale price upon purchase, with the rest due only when the unit received its temporary occupation permit (TOP) on completion.

Speculators would, therefore, typically opt for the DPS and hope to sell their units for a profit before the TOP. Any later and they would have to pay up for their homes by arranging for bank loans or other means of financing.

Industry experts were, however, divided on the impact these 4,200 homes would have on the market.

Some maintained that panic selling is not likely, given Singapore's strong economic outlook, which is backed by upcoming mega projects such as the integrated resorts and the 2010 Youth Olympics.

Mr Eric Cheng, HSR's executive director, noted that homes set to be completed this year and next are less likely to be sold indiscriminately, since their owners are probably sitting on healthy gains.

But those who bought at the peak of last year's buying frenzy, from April till October, are most likely to be at risk. These homes are likely to be completed after 2010.

Mr Ku Swee Yong, Savills' director of business development and marketing, said the sell-off will likely be staggered, because investors have different levels of holding power.

Also, investors have bigger coffers compared to the last property peak in 1996, he added.

But he warned that if too many units in a single large project get dumped at below-

market prices, overall market sentiment may be hit.

Mr Colin Tan, Chesterton International's head (research and consultancy), thinks that the potential risk created by the DPS is relatively high.

He added that data on homes sold under the DPS should be collected and made public, so investors know 'what they're getting themselves into'.

The DPS was scrapped abruptly last October after a decade-long run to remove excessive speculation and ensure financial prudence in the property market.