Thursday, August 14, 2008

CPF Keeps OA Interest Rate At 2.5%

Source : The Business Times, August 14, 2008

Concessionary rate for HDB mortgage loans remains 2.6%

THE Central Provident Fund Board (CPF) will continue to pay 2.5 per cent interest per annum for members' savings in their Ordinary Account (OA) from Oct 1 to Dec 31.

Savings: The interest rate for the Special, Medisave and Retirement accounts (SMRA) for October to December will be announced next month

CPF said that although its computed interest rate derived from the rates of major local banks for the period May 1 to July 31 works out to be 0.74 per cent per annum, the higher rate of 2.5 per cent will be paid because that is the minimum specified under the CPF Act.

The Housing and Development Board (HDB), meanwhile, has announced that the concessionary interest rate for HDB mortgage loans, pegged at 0.1 of a percentage point above the CPF interest rate for the OA, will remain unchanged at 2.6 per cent per annum from Oct 1 to Dec 31.

The interest rate for Special, Medisave, and Retirement accounts (SMRA) for October to December will be announced next month.

The prevailing CPF interest rate for SMRA is 4 per cent, based on the 12-month average yield of the 10-year Singapore Government Security plus one per cent.

To help members adjust to this floating rate, the 4 per cent floor for the SMRA rate will be maintained for the first two years, as earlier announced.

An extra one per cent interest will continue to be paid on the first $60,000 of a member's combined balances, with up to $20,000 from the OA.

The extra interest from the OA will go into members' Special or Retirement accounts to enhance their retirement savings.

Greenspan Sees US House Price Bottom In 2009: WSJ

Source : The Business Times, August 14, 2008

NEW YORK - Former Federal Reserve Chairman Alan Greenspan predicts US house prices will begin to stabilise in the first half of next year, the Wall Street Journal reported on Wednesday.

Mr Greenspan: 'Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities'

Mr Greenspan also offered a novel suggestion to bolster the housing market - increase the number of potential home buyers by admitting more skilled immigrants.

'Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009,' he said in an interview with the Wall Street Journal, reported on the newspaper's website on Wednesday.

But Mr Greenspan cautioned that even at a bottom 'prices could continue to drift lower through 2009 and beyond.'

An end to the decline in house prices, he explained, matters not only to American homeowners but is a necessary condition for an end to the current global financial crisis.

'Stable home prices will clarify the level of equity in homes, the ultimate collateral support for much of the financial world's mortgage-backed securities,' he said. 'We won't really know the market value of the asset side of the banking system's balance sheet - and hence banks' capital - until then,' he said.

Mr Greenspan's forecast rests on two pillars of data.

One is the supply of vacant, single-family homes for sale, both newly completed homes and existing homes owned by investors and lenders. He sees that 'excess supply' - roughly 800,000 units above normal - diminishing soon.

The other pillar is a comparison of the current price of houses - he prefers the quarterly S&P Case-Shiller National Home Price Index because it includes both urban and rural areas - with the government's estimate of what it costs to rent a single-family house.

As other economists do, Mr Greenspan essentially seeks to gauge when it is rational to own a house and when it is rational to sell the house, invest the money elsewhere and rent an identical house next door.

In the past, Greenspan's crystal ball has been, at best, cloudy, the Wall Street Journal noted. He didn't foresee the sharp national decline in home prices. But recently released transcripts of Fed meetings do record him warning in November 2002: 'It's hard to escape the conclusion that at some point our extraordinary housing boom...cannot continue indefinitely into the future.'

Mr Greenspan is currently promoting his book, the paperback version of which is to be issued next month with an epilogue. -- REUTERS

US Foreclosure Filings Surge 55%

Source : The Business Times, August 14, 2008

WASHINGTON - The number of homeowners stung by the dramatic decline in the US housing market jumped last month as foreclosure filings grew by more than 50 per cent compared with the same month a year ago, according to data released on Thursday.

Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 per cent from about 175,000 in the same month last year and up 8 per cent from June, RealtyTrac Inc said. That means one in every 464 US households received a foreclosure filing last month.

Irvine, California-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 77,000 properties were repossessed by lenders nationwide in July, the company said.

Nevada, California, Florida, Arizona, Ohio, Georgia and Michigan had the highest foreclosure rates. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing US economy has left financially strapped homeowners with few options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan.

As foreclosures soar, banks and mortgage investors are also facing a pileup of foreclosed properties on their books and are cutting prices dramatically.

RealtyTrac noted that it had more than 750,000 foreclosed homes in its database of properties for sale, equal to about 17 per cent of the 4.5 million US homes that were up for sale in June.

To speed up the disposition of the 54,000 foreclosed properties it owns, Fannie Mae is opening offices in California and Florida and is considering selling those properties in bulk to investors. 'I do not think this is a time to be holding onto (foreclosed properties) hoping for a better day,' Fannie Mae Chief Executive Daniel Mudd said last week.

It remains to be seen how much the government's intervention will stem the housing crisis. President Bush last month signed sweeping housing legislation that aims to prevent foreclosures by allowing homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan.

The bill is projected to help about 400,000 households.

The number of foreclosures 'could start to stabilise as early as the first quarter of next year if the government program gains any traction,' said Mr Rick Sharga, RealtyTrac's vice president for marketing. 'That's really the unknowable right now.'

Even with government help, nearly 2.8 million US households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's

In the RealtyTrac report, the Cape Coral-Fort Myers area in Florida was the metro area with the highest rate of foreclosure, followed by three California cities: Merced, Stockton, and Modesto.

Las Vegas ranked fifth. -- AP

CityDev Profit Down 15%, To Raise Funds For Buys

Source : The Business Times, August 14, 2008

City Developments suffered a 15 per cent fall in quarterly profit on poor property sales but said it may issue up to $1 billion (US$712 million) in debt to build an acquisitions war-chest despite the global economic slowdown.

Mr Kwek: 'The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised'

CityDev, Southeast Asia's second-biggest property developer by market value, said it may issue Islamic debt in a notes programme and sell hotels to boost its financial prowess to make acquisitions.

'The current slowdown in the economy is different from the Asian Financial Crisis of 1997. The group has very little unsold residential stock, a healthy balance sheet and locked-in profits yet to be recognised,' CityDev Executive Chairman Kwek Leng Beng said in a statement.

CityDev, 37 per cent-owned by Kwek's family, reported net profit of $165.2 million in the April-June period, down from $194.4 million reported a year ago as property sales slumped in the first half of this year.

The company said the planned $1 billion debt deal would be Singapore's first Islamic unsecured financing arrangement and aimed at tapping new markets and investors.

Its 53-per cent owned hotel group Millennium & Copthorne will also look at the sale of hotel assets, many of which were bought at a low cost and have since appreciated in value, CityDev said.

M&C, which in June sold the Millennium Seoul Hilton Hotel to Kangho AMC for $628 million, last week posted first half pretax profits of 58.4 million pounds, up 9.2 per cent but below market expectations as it warned of slowing growth at its Asia hotels.

No quarterly estimates were available but CityDev is expected to post a 1.8 per cent rise in full-year to December 2008 earnings to $738 million from $725 million last year, according to the average of 15 analysts polled by Reuters before Thursday's results.

Poor sales
Singapore's developers have been hit by poorer sales as concerns about the economic outlook caused a steep drop in sales volumes, while some analysts predicted home prices to fall up to 40 per cent over the next three years.

But analysts had expected earnings for CityDev to hold steady this year as it books income from sales made during a four-year Singapore property boom, and as its mass market residential projects continued to sell well this year.

CityDev said it will release for sale the rest of its Singapore mass market residential project Livia due to strong response, but could hold off on launching its high-end projects to maximise its profits.

Rival Keppel Land reported last month a 16.4 per cent drop in quarterly profit, while CapitaLand, Southeast East's biggest developer, saw its earnings dip 44 per cent, hit by slower sales and lack of one-off gains.

Shares of City Developments are down 25 per cent so far this year, underperforming the 19 per cent drop in the broader Straits Times Index . Rival developer CapitaLand lost 19 per cent, while Keppel Land fell 41 per cent. -- REUTERS

Inflation Should Be Main Focus For S'pore: IMF

Source : The Business Times, August 14, 2008

WASHINGTON - Containing mounting inflation pressures should be a priority for Singapore's authorities as economic activity is slowed by a global downturn, the International Monetary Fund said on Wednesday.

IMF board directors appeared divided over whether Singapore should further tighten monetary policy given rising inflation

'Against this background, ensuring that inflation expectations remain well anchored is a policy priority,' the IMF said in an annual evaluation of Singapore's economy.

IMF board directors, however, appeared divided over whether Singapore should further tighten monetary policy given rising inflation or wait and allow recent interest rate tightening to first feed into the economy.

IMF staff said the Singapore dollar 'remains weaker than the level implied by long-term fundamentals.' 'Given the downside risks to growth, many (IMF) directors favoured maintaining the current policy mix in the short term, with the authorities remaining ready to modify the policy stance going forward if necessary,' IMF board directors said in a statement.

'A number of other directors favoured the staff's view that a further degree of rebalancing of the macroeconomic policy mix toward a somewhat tighter monetary stance and a looser fiscal policy would be desirable. ... Directors agreed that, over the medium term, a broader reorientation of the policy mix is desirable,' the IMF said.

Singapore's central bank has aggressively tightened monetary policy since October to tackle inflation caused by surging oil and food prices.

The IMF forecast Singapore's economy would slow to 4.5 per cent this year and next from 7.7 per cent in 2007 as exports have been affected by a global economic downturn.

The IMF said turmoil in global credit and financial markets has had a limited impact on Singapore's financial system.

Credit spreads have widened, equity volatility has risen, and banks have incurred trading-related losses, including on structured credit products. Yet none of these developments have had systemic implications so far, it added. -- REUTERS

CityDev Plans To Launch 400 Pte Homes In 2H2008

Source : The Business Times, August 14, 2008

City Developments said on Thursday that it plans to launch 400 private homes in Singapore in the second half of this year, subject to market conditions.

The 400 units comprise 200 units in the second phase of Livia, a 99-year leasehold condo in Pasir Ris, and 100 units each at The Arte at Thomson and The Quayside Collection at Sentosa Cove.

At a second quarter results briefing on Thursday, the group also said it has achieved average prices of S$1,500 to S$1,600 per square foot for Shelford Suites and S$650-670 per square foot for the first phase of Livia.

Soilbuild Q2 Net Up 3% At $23m

Source : The Business Times, August 14, 2008

Soilbuild Group's second-quarter net profit rose 3 per cent to $23.1 million from a year earlier.

Revenue soared to $88 million, compared to just $16.1 million a year earlier, but expenses and finance costs also rose sharply.

The group said it expects to perform better this year with the progressive recognition of revenue from sold residential property units and the full-year rental contribution from leased business space properties, 'barring unforeseen circumstances'.

Wheelock Properties Profit Falls 50 %

Source : The Business Times, August 14, 2008

Wheelock Properties reported on Thursday a net profit of $15 million for Q2 2008, a fall of 50 per cent compared to $30 million in Q2 2007.

Revenue for the quarter was $88 million, a fall of 10 per cent for the same comparative period in 2007.

Wheelock said that revenue decreased as most units in The Sea View and The Cosmopolitan were sold in earlier years and dividend income from the investment in Hotel Properties Limited was lower.

The decrease was partially offset by revenue recognition in respect of units sold in Ardmore II in the current period, it added.

Wheelock said that if the effects of the revaluation surplus (net of tax) of $74 million on Wheelock Place and impairment loss of $85 million on its SC Global investment were excluded, the group's profit after tax for Q2'08 would have been $27 million, a decrease of 12 per cent when compared to Q2'07.

Earnings per share for the quarter was 1.27 cents per share , down from 2.55 cents per share in the corresponding quarter in 2007.

HPL Reports 64% Climb In Q2 Earnings

Source : The Business Times, August 14, 2008

Hotel Properties Limited (HPL) on Thursday said that net profit for the three months ended June 30, 2008 rose 64.3 per cent as the group's hotels and resorts did better.

Net profit rose to S$15.5 million for the second quarter, up from from S$9.4 million in Q2 2007.

Revenue for the three months rose to S$141.6 million, up 28.8 per cent from the S$109.9 million recorded in the corresponding period last year.

The increase was mainly due to higher income from HPL's The Met condominium in Thailand and stronger contributions from the hotels and resorts in general, the company said.

Earnings per share for the three months rose to 3.07 Singapore cents, from 1.95 Singapore cents a year ago.

Looking ahead, the slow down of world economies, coupled with high inflation, means that businesses are currently facing a challenging environment, HPL noted.

'Nevertheless, the group will continue to record profit from The Met condominium development as the construction progresses and from its hotel division as travel and accommodation business traditionally perform well in the second half of the year,' HPL said in a filing to the Singapore Exchange.

HPL shares closed 4 cents down at S$1.96 on Thursday.

Property Transactions With Contract Dates Between July 28th - Aug 2nd, 2008

Colliers Units Merge To Boost Services As Rivals Expand

Source : The Business Times, August 14, 2008

(NEW YORK) Commercial real estate broker Colliers ABR is combining with three affiliates to expand its services as rivals grow through acquisitions.

Formerly independent Colliers offices in Washington, Baltimore and St Louis will join forces with the New York firm, the companies said in a news release issued on Tuesday.

The consolidation will create the largest independent commercial property brokerage in the United States, Colliers ABR Chairman Mark Boisi said in an interview. It will make Colliers ABR into a stronger competitor in New York, and strengthen the Colliers International brand globally, he said.

Commercial brokers are joining forces to expand their tenant representation business as commissions from property sales may decline in the credit crisis. Jones Lang LaSalle Inc, the world's second-largest commercial real estate broker, agreed to buy the Staubach Co for US$613 million in June.

'This will allow us to supercharge our platform in New York and provide us with the opportunity to offer a greater breadth of services,' Mr Boisi said, particularly in the areas of corporate real estate account services and investment capital formation.

Washington-based Cassidy & Pinkard Colliers, Baltimore-based Colliers Pinkard, and St Louis-based Colliers Turley Martin Tucker will join with Colliers ABR. All four companies are members of Colliers International, a worldwide alliance of independently owned and operated real estate service firms. -- Bloomberg

In Slow Times, Rezoning Appeals To Developers

Source : The Business Times, August 14, 2008

Time-consuming process, so builders shy away from it in a go-go market

(NEW YORK) Property developers generally earn their money by putting up new buildings, but when the real estate market cools, making it difficult to obtain financing, they often look for other ways to help turn a profit.

New dawn: Brooklyn, New York. During a sluggish market, developers say, the city may be more willing to approve zoning changes to raise tax revenues.

Some developers - and their real estate lawyers - say that rezoning property is one of them. Juan D Reyes III, a partner in the law firm of Riker, Danzig, Scherer, Hyland & Peretti, said he had clients seeking zoning changes with hopes of developing or selling the property once the market improved. This particularly applies in areas zoned for manufacturing.

'At the height of the market, a lot of developers just wanted to buy it, develop it and get out,' Mr Reyes said.

Getting a change in zoning, however, can be time consuming.

'With zoning, even if you're doing a variance, it's a minimum of a year,' he said.

'A rezoning can take 2-3 years. Now is a good time to be doing that.'

Because obtaining any kind of discretionary city approval can take time and resources, developers may shy away from doing it during a go-go market, said Mitch Korbey, a lawyer with the firm of Herrick Feinstein.

'Their focus is often elsewhere, on other projects, for a variety of reasons,' he said.

But when the real estate market comes to a virtual halt, as it has currently, many developers cannot get development financing on favourable terms.

An attractive option is to wait out the torpid market while trying to add value to their property with a rezoning, Mr Korbey said.

Herrick Feinstein has several clients doing just that, specifically on properties zoned for manufacturing.

'These are areas that are not zoned in a way that permits residential, because you can't do residential development in a manufacturing zone,' he said.

'Yet residential is nearby, and you've got a manufacturing zone that's not so productive, that's not generating income, that's adding very few jobs.'

Mr Korbey said he was currently handling a case involving several blocks of contiguous vacant lots and warehouses that were once part of a Rheingold brewery in the Bushwick neighbourhood of Brooklyn.

The developers, Forest Lots LLC, recently applied for a zoning change to permit hundreds of residential units and retail development.

'We're at the beginning of a process that's going to require an environmental review and public input,' Mr Korbey said.

The developers are gambling that they will get the rezoning as the real estate market picks up, making their land ripe for development.

Though the developers want to build, another option would be to sell the land - most likely at a premium, Mr Korbey said. 'Obviously, there's tremendous upside to changing the rules to allow new low- and medium-density housing.'

During a sluggish market, the city may be more willing to approve zoning changes, said Stuart M Saft, a partner with the firm of Dewey & LeBoeuf.

'The city's tax revenues fall during a recessionary market, and what the city is looking for is increased taxes,' he said. 'If the zoning change will improve the value of the property after the building is constructed, the city will get an increase.' - NYT

Japan's Urban Fails With Debt Of 255b Yen

Source : The Business Times, August 14, 2008

Property firm cites difficulty in raising finance due to global credit crunch

(TOKYO) Japanese property developer Urban Corp yesterday failed with debt of 255.8 billion yen (S$3.3 billion), caught by the global credit crunch in the biggest collapse by a listed Japanese company in six years.

Worsening problem: The failure of apartment and shopping mall developer Urban is certain to turn away investors who have become increasingly fearful about the financial health of the Japanese property sector

The apartment and shopping mall developer was the latest in a string of Japanese real estate firms to fold as banks rein in lending to small and medium-sized developers seen at risk as the the world's No 2 economy flirts with recession.

Japanese property shares have crunched lower this year as fear of bankruptcy has spread, although the biggest developers with more robust financing have used the tough times as an opportunity to go bargain hunting.

Urban said in a statement that it had had growing difficulty in raising finance since late last year due to the global credit crunch, while a slowing economy saw it struggle to sell properties.

The company said it had sought a new partner to help it through the cash crunch but alliance talks had failed.

Hiroshima-based Urban's shares have lost 95 per cent of their value this year.

Investors have become increasingly fearful about the financial health of the Japanese property sector since developer Suruga Corp fell into bankruptcy in June after it failed to secure new financing from banks.

Tight financing sent fellow developer Zephyr Co to seek court protection last month with US$893 million in debts, prompting fears the problems were spreading.

On top of the financing squeeze, developers have been caught by soaring energy and raw material costs.

Urban's collapse, the largest by a listed Japanese company since financial firm First Credit Corp fell in 2002 with 260.5 billion yen in debt, will turn even more investors off the sector, analysts said.

'Banks seem to be taking a more strict attitude in their lending to property firms. I would not be surprised to see more (collapses),' said Fumiyuki Nakanishi, head of investment information department at SMBC Friend Securities.

'Urban has been said to be a winner in the industry. If today's Wall Street falls, it will be a double whammy to the Tokyo market tomorrow. I think there will be an Urban shock in the market tomorrow,' Mr Nakanishi said.

Urban's shares closed down 1.6 per cent at 62 yen ahead of the announcement, giving it a PBR (price-book value ratio) of 0.13 and a market capitalisation of about 14.3 billion yen. -- Reuters

InterContinental Q2 Profit Beats Estimates

Source : The Business Times, August 14, 2008

(LONDON) InterContinental Hotels Group Plc, owner of the Holiday Inn lodging brand, reported second-quarter profit that beat analysts' estimates as demand in Europe and the Middle East helped to counter a slowdown in the US.

InterContinental rose 3 per cent in London trading after the Denham, England-based company also said it reached a target on room openings six months early. Net income of US$101 million beat the US$74 million average of three analysts' estimates compiled by Bloomberg.

The company has added 60,490 net rooms since June 2005, beating its three-year goal. Revenue per available room, a gauge known as revpar, rose 4 per cent, driven by the Middle East and Europe, though the hotelier said that the market has 'become more challenging' in the US. Rival Marriott International Inc recently forecast lower profit, while Starwood Hotels & Resorts Worldwide Inc has said its earnings may miss estimates.

The 'more cautious short-term outlook tone is no worse than expected and already well highlighted in advance by US companies,' Dresdner Kleinwort analysts including Alistair Scobie said in a note. The company's results provided 'overall reassurance', they wrote.

The shares added 22.5 pence to 773 pence in London trading. The stock has dropped 13 per cent this year, better than the 17 per cent decline by the nine-member Bloomberg Europe Lodging Index.

Second-quarter net income fell 21 per cent from the US$128 million year-earlier figure on higher taxes and costs to rebrand the Holiday Inn chain. A year ago, the company had one-time gains of US$9 million from property sales. Revenue climbed 12 per cent to US$504 million.

Europe, Middle East revpar grew 9.9 per cent in Europe, the Middle East and Africa during the second quarter. That included growth of 27 per cent in the Middle East, where its hotels include the 500-room InterContinental Dubai Festival City.

Growth on that basis slowed to 1.6 per cent during the quarter from 2.3 per cent in the previous quarter in the Americas, as a slowing economy and higher fuel prices have hurt demand for business and consumer travel. There was a 'general softening' of revpar in the US in the last four to five months, and the second half will be more challenging, chief executive officer Andrew Cosslett said at a press conference.

'Clearly, gas price rises don't help,' the CEO told journalists on a conference call, adding that the slowdown was mainly on weekends, with demand on weekdays 'pretty strong'. Declining occupancy levels rather than lower room rates prompted the slowdown, he said.

Chinese revpar growth slowed to 0.5 per cent in the second quarter from 3.2 per cent in the prior three months, mainly because of the Sichuan earthquake and new visa restrictions. -- Bloomberg

Blackstone Eyes Four Shanghai Buildings

Source : The Business Times, August 14, 2008

Package of four commercial buildings may go for US$1b

(SHANGHAI) Global buyout funds and property investors including Blackstone Group are vying to buy up to four commercial buildings in Shanghai for as much as US$1 billion, three sources with direct knowledge of the matter said.

Super Ocean Group, whose chairman is high-profile businessman Ye Lipei, has put a package of four buildings on sale as it seeks cash to support its growth in other sectors, the sources told Reuters yesterday.

The four buildings to be sold by Super Ocean include the Bank of Shanghai Tower in the Lujiazui area of Shanghai's Pudong financial district; and Southern Securities Mansion, located on Nanjing Road, one of China's busiest commercial streets, the sources said.

Super Ocean aims to sell the four buildings together but potential bidders have the option to purchase three of the four, said the sources, who did not want to be identified because the deal was not finalised. They put the price tag for the deal at five billion yuan (S$1 billion) to seven billion yuan.

Representatives for US-based Blackstone could not immediately be reached for comment. Super Ocean declined to comment.

Two of the three sources said that no deal had been reached yet and talks between Blackstone and Super Ocean could collapse over valuation of the buildings. The third source said that Super Ocean aimed to complete the deal by the end of this month.

'It's not easy for Blackstone and Super Ocean to reach a deal as Super Ocean is probably asking too much for these properties,' said one of the sources.

'There are also concerns about the ownership structure, which is a bit complicated for some of the four buildings,' he added.

The seven billion yuan price tag for the four buildings in the proposed package deal was offered by Super Ocean late last year for bidders' reference, though the final price could be lowered amid growing concerns about global property investment.

In China, the government has clamped down on bank lending for construction and imposed various measures including taxes and new rules to try to stamp out property speculation.

Although aimed at the residential market, the steps are cooling appetite for land and starving property firms of funding, and could also put downward pressure commercial property prices.

Besides Blackstone, other potential buyers include Ireland's Treasury Holdings and an Australian asset manager, which the sources declined to name.

Negotiations between Treasury Holdings and Super Ocean stalled over price issues several months ago, said one source.

But Blackstone and the Australian fund are still separately in talks with the Chinese developer, the other sources said.

Treasury Holdings declined to comment. The Dublin-based firm established and owns a 46 per cent stake of China Real Estate Opportunities, listed on the AIM market at London Stock Exchange in July 2007.

In June, Blackstone agreed to pay 1.1 billion yuan for a commercial building in central Shanghai, making it the first foray into China's property market.

Last week, Blackstone, in which China's sovereign wealth fund holds a stake, opened a Beijing office and hired a former government official to expand its acquisition business in China.

Earlier this year, Morgan Stanley planned to sell at least two service apartment projects in Shanghai, which are wholly owned by its real estate fund, for several billion yuan, people familiar with the situation told Reuters. That deal has not been completed yet. -- Reuters

BHP Billiton To Lease Office Space At MBFC

Source : The Business Times, August 14, 2008

Aussie firm will take up 150,000 sq ft at Marina Bay Financial Centre's Tower 2

Mining and resources giant BHP Billiton of Australia is leasing about 150,000 sq ft at Marina Bay Financial Centre, BT understands.

The space will be in MBFC's 50-storey Tower 2, under the mega project's first phase, which is slated for completion in second quarter 2010.

With a view to grow: The space BHP Billiton will be leasing at MBFC is said to be more than twice its existing space in S'pore, suggesting expansion plans here --

BHP Billiton is one of the world's biggest producers of primary aluminium, copper, lead, zinc, nickel, iron ore and metallurgical coal. It is also a major producer and marketer of export thermal coal and has a significant oil and gas business with production operations in Australia, the UK, Gulf of Mexico, Algeria and Pakistan, according to information on the group's website.

Singapore is already one of BHP Billiton's three centralised marketing hubs (the other two are in The Hague in The Netherlands and Antwerp in Belgium) focusing on the Asian energy market, base metals, stainless steel materials and carbon steel-making raw materials. The centre in The Hague focuses on aluminium, petroleum and the European energy coal market, while the Antwerp office serves the group's diamond customers around the world.

BHP Billiton's Singapore operations are currently located at Capital Tower and Springleaf Tower, both near Tanjong Pagar MRT Station. Market watchers expect the group to give up its existing premises when it moves to MBFC. The 150,000 sq ft or so it will be leasing at MBFC is said to be more than twice the group's existing space in Singapore, suggesting expansion plans in Singapore.

BHP Billiton, which is listed on the Australian and London bourses, posted profit after taxation of US$13.5 billion for the year ended June 30, 2007, up 28.2 per cent from the preceding year.

Some property market watchers were pretty impressed with news of BHP Billiton's leasing deal at MBFC given the slower office leasing market.

MBFC is iconic of Singapore's ambitions to be a major financial centre. Including the latest leasing deal with BHP Billiton, MBFC's 2.9 million sq ft total net lettable area of offices is about 60 per cent pre-committed.

Monthly rents in the development are in the region of $16 per sq ft, said Kevin Wong, chief executive of Keppel Land, at a results briefing last month. KepLand is developing MBFC jointly with Hongkong Land and Li Ka-shing's Cheung Kong Holdings/Hutchison Whampoa.

However, BHP Billiton will probably be paying less than the $16 psf rental being quoted, given the size of space it is leasing, market watchers reckon.

Earlier tenants clinched at MBFC include Standard Chartered, which is taking 508,298 sq ft at the 33-storey Tower 1, also in the project's first phase. Barclays and American Express International have signed up for Tower 2, also in Phase 1 and where BHP Billiton will be housed.

The second phase of the project, expected to be completed in 2012, will include Tower 3, with about 1.3 million sq ft of offices, of which about 700,000 sq ft have been leased by DBS.

SC Global's Q2 Net Rises 117% To $11.47m

Source : The Business Times, August 14, 2008

SC Global Developments has reported a net profit of $11.47 million for Q2 2008, up 117 per cent from the $5.28 million in the year-ago period.

Revenue for the quarter was $32.4 million, marginally lower by 5 per cent compared with $34 million in Q2 2007.

Upmarket homes: The group saw revenue recognition from residential units sold in its Singapore development projects such as The Marq on Paterson Hill

The group saw revenue recognition from residential units sold in its Singapore development projects, namely, The Marq on Paterson Hill and Hilltops. This was also the first quarter of revenue recognition for Hilltops.

SC Global said that its development project under its Kairong brand in Shenyang, China, called Kairong International Gardens, also made a positive contribution for the quarter as construction progressed.

Gross profit for the quarter increased 116 per cent to $16.5 million compared with $7.7 million in the same period last year. Gross margins were also higher at 51 per cent for the quarter versus 23 per cent in 2007.

On a half year basis, gross profit for 1H 2008 was $41.6 million, up 48 per cent compared with $28.1 million a year ago.

SC Global said that higher selling prices achieved for the projects coupled with management of construction costs enabled the group to attain a high gross margin of 55 per cent for 1H 2008 against 32 per cent recorded in the year-ago period.

The group's associate company in Australia, AVJennings Ltd (AVJ), reported that its pre-tax profit for the full year ended 30 June 2008 was A$15.5 million (S$18.8 million) compared with A$17.8 million for the 15-month period ended 30 June 2007 (A$14.2 million annualised).

In Q208, the group increased its investment in AVJ through the subscription of its full entitlement under a rights issue undertaken by AVJ and acquired 32.6 million new shares at an issue price of A$0.67 each, increasing its shareholding from some 43 per cent to about 49 per cent.

Earnings per ordinary share for the quarter period was 2.9 cents compared with 1.65 cents (adjusted) a year ago.

At the close of trading, SC Global shares ended at $1.10 per share, down one cent.

SC Global added that operationally, its developments under construction are proceeding as planned and new projects in Ardmore Park and Sentosa Cove are continuing to progress in the planning stage.

Building Projects Busting Budgets

Source : The Straits Times, August 14, 2008

Shortage of construction workers and materials causing costs to shoot up by as much as 50%

SOME building projects in Singapore are facing cost blowouts of 30 to 50 per cent above their original budget as higher construction costs bite hard.

The continuing shortage of construction workers and building materials has left project bosses with little choice but to pay upfront for the far higher costs or abandon the project.

Anecdotal evidence suggests that building budget blowouts are far bigger than official figures indicate.

One project that has been hit by higher building costs is the Khoo Teck Puat Hospital in Yishun.

The chief executive of Alexandra Hospital, Mr Liak Teng Lit, who is overseeing the construction project, said some parts of the project face cost hikes of 30 to 40 per cent. The original total cost of the project was $400 million.

Another project that has been hit is Safra's Jurong clubhouse. Costs for the project have shot up 30 per cent since its groundbreaking ceremony in February last year. Its original budget: $30 million.

And earlier this month, the Health Ministry announced that it would provide Ren Ci charity with additional funding of 'up to $9.3 million' for its new hospital at Irrawaddy Road.

This was to help cover the hike in construction costs for the medical centre - now set to cost up to $42.4 million.

Although Ren Ci declined to comment on the issue, previous reports indicated that the initial budget for the project was $30.8 million.

One of the biggest cost increases reported this year involves the Singapore Island Country Club (SICC). The club was reported in June to have sought club members' approval to increase its budget to construct a new clubhouse from $60 million to $90.3 million - a whopping 50 per cent rise.

The Building and Construction Authority reported that construction costs rose 20 to 30 per cent last year.

A statement by National Development Minister Mah Bow Tan last month said a rise of another 3 to 5 per cent was recorded in the first quarter of this year.

Mr Goh Ngan Hong, president of the quantity surveying division at the Singapore Institute of Surveyors and Valuers (SISV), said: 'Based on leading quantity surveyor firms and general industry feedback, construction cost was estimated to have increased by about 20 to 30 per cent in 2007.'

He added that costs were 'estimated to have increased by another 10 to 15 per cent by mid-2008'.

Market watchers and most industry players such as property developers, contractors, suppliers and construction-related firms that The Straits Times spoke to broadly agreed with SISV's figures.

However, a number of projects surveyed by The Straits Times painted a bleaker picture.

Project bosses cited the escalating cost of essential construction materials, including sand, concrete, steel and other base metals. Another problem is the lack of construction industry manpower.

'This spike in basic plant, equipment, materials and labour costs is affecting construction project budgets,' said the executive director of the Singapore Contractors Association, Mr Simon Lee.

He said such cost increases would inevitably cause delays in the completion of contracts, which was 'not good for business'.

The construction cost hikes have affected big and small projects alike.

The Marina Bay Sands and Resorts World at Sentosa integrated resorts have also fallen prey to cost hikes.

Marina Bay Sands was recently reported to have blamed soaring prices of building materials for its cost rising from an estimated US$3.6 billion ($4.9 billion) to US$4.5 billion. And last November, Resorts World at Sentosa bumped up its budget to $6 billion from $5.2 billion.

The Singapore Manufacturers' Federation (SMa) took a more contrarian view of construction costs.

'Although raw material and labour prices have risen significantly over the past two years, costs or selling prices of most construction-related materials... have by and large not risen more than 15 per cent year-on-year,' said Mr Alan Lee, chairman of the SMa's building products and construction materials industry group.

When asked what measures the construction industry may put in place to tackle the problem of rising costs, the SISV said: 'Passing the higher costs to the property purchasers and other consumers - this seems to be the likely case.'