Thursday, August 21, 2008

CapitaLand Going Ahead With 2nd Malaysian Reit

Source : The Business Times, August 21, 2008

Latest offering will comprise 3 malls worth RM2b: chief investment officer

CAPITALAND will list its second Malaysian real estate investment trust (Reit) this year, barring unfavourable market conditions, the company's chief investment officer Kee Teck Koon said yesterday.

Mr Kee: CapitaLand will time the launch of the Reit 'so it can capture the imagination of investors'

The Reit will initially comprise three shopping malls worth RM2 billion (S$849 million), he said. CapitaLand will gauge market sentiment to ensure the launch is timed 'so it can capture the imagination of investors'.

At a news briefing after the topping-out ceremony for Kuala Lumpur's Tower D, which is owned jointly by CapitaLand and Malaysia's Quill Group, Mr Kee said that the listing plan for the second Reit has not changed. 'The intention is very clear,' he said.

Penang's Gurney Plaza and two malls in the Klang Valley - Mines Shopping Fair and Sungei Wang Plaza - will form the Reit's initial core assets. Mr Kee would not say who CapitaLand's local partner in the Reit would be.

The company's reservations about market sentiment are warranted. The last three listings on Bursa Malaysia have debuted below their offer price. In the latest, shares of Perwaja Steel yesterday opened 10 sen short of the RM2.90 offer price before closing at RM2.48.

Although Malaysian Reits are seen as defensive, interest among foreign investors has been dampened by relatively high withholding tax.

Still, some investors continue to be attracted to local real estate because its comparative pricing ought to allow for greater capital appreciation down the road.

For example, the Malaysia Commercial Development Fund (MCDF) - a US$270 million closed-end private equity investment fund launched jointly by CapitaLand and Maybank in March 2007 with a gross development value of US$1 billion - is fully invested, CapitaLand Commercial chief executive Wen Khai Meng said yesterday.

CapitaLand 'may consider subsequent funds' focused on residential, commercial and retail segments, he said.

MCDF provides a pipeline of projects to be injected into Quill Capita Trust - a commercial Reit jointly listed by Quill and CapitaLand in January 2007 with an initial fund size of RM276 million, which has grown to over RM800 million.

Tower D in the KL Sentral area will allow them to further leverage on strong demand for commercial property and is likely to be injected into the Reit.

To be completed by January, the Grade A building, which has a net lettable area of 355,000 square feet, has a confirmed tenancy rate of 65 per cent and is expected to be fully tenanted by March.

The 29-storey office block with a six-storey retail podium has attracted several multinational and big local companies as tenants, said Quill director Michael Ong.

Rental rates are around RM6 to RM7 per square foot and a number of tenants have signed three-plus-three-year leases, he said.

CapitaLand, through MCDF, owns 40 per cent of Tower D developer Quill Realty.

En bloc Spat: Mailboxes Hit

Source : The Straits Times, August 21, 2008

FIRST cars, now letter boxes.

A police investigator examining vandalised mailboxes at Laguna Park condo last night. -- MUGILAN RAJASEGERAN/THE STRAITS TIMES

Several residents of the Laguna Park condominium in Marine Parade Road had their mailboxes vandalised last night.

In the third such attack this month, vandals used glue to seal the keyholes of eight letter boxes - all belonging to residents who had not signed the condominium's en bloc sales agreement.

For some victims, last night's attack was the second time they had been hit.

Several had their cars damaged last month when vandals threw a corrosive liquid, possibly paint thinner, on them.

The residents have appealed to their management committee for help, and have suggested that closed-circuit television cameras be set up to prevent future attacks.

This is being studied.

One victim of last night's mailbox attack, who wanted to be known only as Mr Chan, 50, said: 'I'm disappointed that it has come to this. The kampung spirit we had here has gone...all over an en bloc sale.'

He added: 'I fear that this is not the end.'

Police are investigating.

CityDev To Issue Islamic Bond By Yr End

Source : The Business Times, August 21, 2008

City Developments, Southeast Asia's second-biggest developer by market value, will issue the first tranche of a $1 billion (US$708 million) Islamic bond programme by the end of this year.

'We hope to do the first tranche before year-end, subject to market conditions,' CityDev CFO Goh Ann Nee told journalists at a briefing.

CityDev last week announced that it was planning to sell $1 billion in sharia-compliant debt arranged by Malaysian lender CIMB, in what would be Singapore's first Islamic unsecured financing arrangement and aimed at tapping new markets.

CIMB Bank is part of CIMB Group which is listed on the Malaysian stock exchange through Bumiputra Commerce Holdings . -- REUTERS

A-Reit Awards S$76.5m Changi Business Park Contract

Source : The Business Times, August 21, 2008

The building will be on land with an area of over 28,000 sq metres - one of the biggest developments there, Lum Chang said. The project is due to be completed by October 2009.

The contract marks the second time that A-Reit has appointed homegrown construction company Lum Chang for a Changi Business Park development.

The first project was awarded in 2007, is progressing well and is on track for completion in the first quarter of 2009.

Hersing Partners Global Property Fund For Storhub Business

Source : The Business Times, August 21, 2008

Hersing Corporation on Thursday annnounced it has entered a non-binding memorandum of understanding with a leading global real estate fund which it did not name for a proposed joint venture relating to to Hersing's self-storage business.

Hersing, through its wholly-owned subsidiary Storhub Self Storage Pte Ltd, manages and operates self-storage businesses in five locations across Singapore. The company intends to expand its self-storage business throughout the island and in Asia-Pacific. 'The proposed joint venture will allow the company to leverage on the financial expertise, network and other resources of the real estate fund for this intended expansion,' Hersing said in a statement.

Under the terms of the MOU, Storhub will transfer four properties - 25A Changi South Street 1, 743 Lorong 5 Toa Payoh, 615 Lorong 4 Toa Payoh, and 15 Changi South Street 1 - to four Singapore-incorporated asset holding companies, which in turn will be beneficially owned by an entity to be 80 per cent held by the global real estate fund and 20 per cent by Hersing.

The real estate fund will also buy from Hersing a 20 per cent stake in a company that will be set up to provide property management and asset management services for the asset holding companies.

Hersing said that the deal will allow the company to realise capital gains which in turn will enhance shareholders' value.

Japan's Slowdown Holds Lessons For Asia

Source : The Business Times, August 21, 2008

IT may be going too far to describe the economic recovery that Japan enjoyed from 2002 until earlier this year as a 'fraud', and yet the speed with which it is falling apart now that other major economies are slowing down certainly suggests that the recovery was more illusion than reality. Meanwhile, the jury is still out on how genuine have been the economic 'success stories' seen in other parts of Asia in recent times.

To argue this is not to deny that Asian economies have made spectacular progress in their development, or that they appear to have compressed into decades what it took centuries to achieve in Europe and America. But there is a real issue as to whether these economies have been piggy-backing too much on demand from the so-called advanced economies - demand that was based upon profligate expansion of credit rather than genuine growth.

Japan is itself an advanced economy in the sense that it is the world's second largest, and its transition to modernity dates back to the start of the Meiji era in 1868. But its export-led development, which persists even to this day and which has provided a model for much of the rest of Asia, classifies Japan more comfortably among its emerging market neighbours than among the economies of Europe and North America.

This is of critical interest to the rest of Asia precisely because of the leadership role that Japan has played in development. Where goes Japan, so goes the rest of the region (East Asia at least) - and there are disquieting signs that Japan is going virtually nowhere. It is like an electric light bulb that glows brightly when infused with the power of external demand but dims to the point of being extinguished once that demand is removed.

Japan's most recent economic recovery - which lasted from 2002 until earlier this year and was the longest in Japan's post-war history - amply illustrates this point. The recovery was attributed to many things, not least being the economic 'reforms' ushered in during the era of superstar former prime minister Junichiro Koizumi.

Corporate restructuring and banking reform under Mr Koizumi were said to be behind the 'success story'. Yet, behind all the talk of a 'new Japan', and despite the way in which Mr Koizumi managed to convince the public that postal system privatisation was the answer to all of Japan's post bubble-economy economic woes, lay a hidden reality.

This was that it was in fact China that came to Japan's rescue. From the early 2000s, China's economy boomed in the same way (some might say an equally suspect way) that Japan's had in the 1960s and 1970s and pulled Japan along with it. The China boom was in turn driven by credit-gorged US demand.

Just about all the products upon which Japan had built its post-war export success in North America and Europe - from steel and cement to shipbuilding to heavy machinery - were in heavy demand from a fast-industrialising China. For Japan's traditional industries that were groaning under a heavy burden of excess capacity and excess debt, this was a godsend. US demand, meanwhile, provided the backdrop for a boom in Japanese motor and electronics industries.

Mr Koizumi enabled Japanese industry to shake off its third burden - excess labour - by making corporate restructuring socially acceptable. Meanwhile, the greatly enhanced cash flows generated by this surge in industrial activity, based upon demand from China and the US (and to a lesser extent Europe), enabled corporate Japan to repay its debts. The country's banking crisis then duly disappeared.

All very impressive - albeit highly vulnerable to changes in external demand. Which brings us to the present day. The US financial bubble has finally burst and this time, unlike in previous decades, it cannot be re-floated with a massive injection of financial liquidity, because the system that intermediates credit is bust.

Europe has slowed in sympathy while Japan is on the brink of economic recession. If Japan has not been able to build domestic demand that can survive a US slowdown after a century and a half of economic development, what hope is there that China and others in Asia have had more success?

My personal prediction is that, in the global recession that will spread in ever-wider ripples from the vortex of imploding US demand, Asia will have to rethink its economic model and also the idea that it is possible to concertina development into a few decades and to sustain growth rates that have been the envy of the rest of the world.

Domestic demand has a lot of catching up to do with the output capacity that Japan and its Asian neighbours have built up in pursuit of a now-shattered American Dream of unending growth.

US$ Slips On Housing Data, Lender Worries

Source : The Business Times, August 21, 2008

IN OVERNIGHT trading, the US dollar gave back a small portion of the strong gains it had chalked up over the past month, rattled a bit by the combination of a stronger - than - expected number out of the Eurozone, and the weaker US housing numbers released on Tuesday evening.

Combined with persistent reminders about the fragile state of US financial-sector health, these punished Wall Street and helped gold to rebound smartly through US$800 per ounce, and oil prices to recover in excess of US$2 per barrel.

Given that some of the week's more important data releases were crammed into Tuesday trading, players suggested that this might have provided some added incentive for a little profit-taking on overbought US dollar positions in overnight trading - especially when the breaking news worked against the latter's favour.

Out of the Eurozone, for example, a closely watched August ZEW index of economic expectations for Germany showed a chunky improvement to -55.5, compared with July's -63.9 reading and forecasts for a softer outcome of between -60 and -64.

Out of the US, by stark contrast, the numbers for July housing starts and building permit readings both showed good-sized slippage from their respective June readings, fuelling concerns about more large US financial-sector provisions down the road.

At least partly in response to that, gold finished the day almost 2 per cent stronger higher from Tuesday's Asian close at US$809 per ounce. Notable victims of the US dollar's recent resurgence such as the euro, Australian dollar and New Zealand dollar rode gold's bounce to finish up to 0.3 per cent better - at US$1.4713, 86.90 US cents and 71.08 US cents respectively.

Sentiment, however, continued to be rough on the Indian sub-continent, with Nymex light crude revisiting the US$115 per barrel mark yesterday. Despite the mild slippage recorded elsewhere, the greenback was able to score a fresh 17-month high of 43.86 rupees yesterday.

Indeed, players report that it might have risen even more sharply if not for widespread talk of possible intervention sales by the agent banks of the Reserve Bank of India. JP Morgan researchers, for example, project that the US dollar will end 2008 back up towards the 45-rupee level. 'The rupee weakened at a brisk pace in the past week owing to broad-based US dollar strength, elevated purchases from oil marketing companies and renewed withdrawal of funds from foreign investors,' they explained yesterday.

By the Asian close, the US dollar had recorded gains of up to half a per cent each versus the rupee as well as another notoriously oil price-sensitive currency, the Philippine peso, at 43.77 rupees and 45.68 pesos respectively.

Elsewhere in the region, the greenback also closed 0.2 per cent better at 110.2 Japanese yen, but slipped between 0.2 and 0.3 per cent to finish at 9,160 Indonesian rupiah, 3.3345 Malaysian ringgit and 6.8552 Chinese yuan. At the same time, it ended about unchanged at S$1.4160, 1,049 Korean won and NT$31.39.

Economic Tough Times Divide Sydney

Source : The Business Times, August 21, 2008

(SYDNEY) This is a tale of two cities.

There's the beachside Sydney, washed by white foamy waves, dotted by cafes and high class restaurants and multi-million dollar houses and apartments - it's boomtown Sydney.

Tide has turned: Sydney, like the rest of Australia which has enjoyed years of economic growth and a recent housing boom, now has a two-speed economy and the divide between winners and losers seems to be widening

Then there's the other Sydney. The one not in the tourist brochures, that stretches west and is home to the bulk of the city's six million residents, many struggling to survive the global credit squeeze, a 12-year high interest rate of 7.25 per cent, rising food and fuel costs and falling house prices.

Sydney, like the rest of Australia which has enjoyed 17 straight years of economic growth and a housing boom in recent years, now has a two-speed economy and the divide between winners and losers seems to be widening.

By the end of 2008, an estimated one million Australian households will be suffering mortgage stress, which means they pay 30 per cent or more of their household income on mortgage repayments, says a recent Fujitsu Consulting/ Wizard Home Loans survey. Hundreds of thousands of homeowners are in severe mortgage stress and are unable to make repayments on time.

'The sad fact is that come Christmas time, we estimate that one million Australians will suffer mortgage stress. That's a huge number of people that are potentially going to face losing their property unless drastic action is taken,' said Mark Bouris, chairman of Wizard Home Loans.

And the country's biggest city Sydney has some of the biggest mortgages. The average monthly mortgage repayment in the city has risen more than 40 per cent in the past five years, says a study of the city by the University of New South Wales (NSW).

The study said homeowners in western suburbs such as Canterbury, Bankstown and Auburn, were paying over 40 per cent of their income on mortgage repayments. Meanwhile, wealthier eastern and northern suburbs have seen incomes rise to accommodate higher mortgages.

'Sydney got richer in the first five years of the new century, but that new wealth was very unevenly spread about,' said the report titled 'Our Changing City' by The City Futures Research Centre at the University of NSW.

Home repossessions and personal bankruptcies in Sydney's west are rising and while some homeowners are selling up, sliding house prices are leaving them with large debts to banks.

There were 1,077 court-ordered home repossessions in NSW in the first quarter of 2008, compared with 921 in the same period in 2007. Of the top 10 worst areas for delinquency, late mortgage payments, six were in Sydney. And its Sydney's western suburbs where most homes were lost.

While residents in the city's affluent east, north and inner west may have large, often multi-million dollar mortgages, their properties are holding their value. In contrast, housing prices in some western suburbs have fallen 20 to 50 per cent.

Sydney house prices have fallen 2.1 per cent in the quarter to June, the largest fall since 2004, and will experience an annual fall of 8.4 per cent, says Australian Property Monitors (APM).

The median price for a Sydney house in June was officially A$542,000 (S$667,000), but that will not buy you a house anywhere near Bondi in the east, where the starting price for a house is well above A$1 million, nor anywhere north of Sydney Harbour.

Housing affordability is declining in Sydney, especially in outer suburbs, said The City Futures Research Centre report.

'This is consistent with an analysis of the changing income growth across the city, with stagnant household incomes in many middle and outer west suburbs contrasting to strong income growth in the inner, eastern and northern suburbs,' said the report.

Not only has 12 interest rate rises since 2002 divided Sydney, but so has the rising cost of living, with inflation forecast by the central bank to reach 5 per cent by year end.

Australia's economic boom has seen credit card debt soar to around A$44 billion, with the average card carrying a 19.5 per cent interest charge on a monthly balance of A$3,100.

'Household indebtedness is around historical highs,' says the Reserve Bank of Australia (RBA). Welfare groups say financial crisis services are swamped by people, many from western Sydney, struggling with mortgages and sometimes up to 12 credit cards.

'It's not unusual to see a person come with a large mortgage debt but also a string of credit cards as well, which they have often maxed out to maintain the mortgage for as long as they can. They use credit cards to buy food, pay utilities,' said The Salvation Army's Tony Devlin.

'There's definitely an economic divide (in Sydney). There's two economies operating, the one our clients operate in and the other that you see on the front page of the Australian Financial Review,'said Devlin. - Reuters

Dubai's New Law On Mortgage

Source : The Business Times, August 21, 2008

(DUBAI) Dubai newspapers are reporting that the local government has issued a mortgage law aimed at regulating the city-state's booming property market.

Yesterday's reports in the Khaleej Times and the Gulf News say that the law requires that mortgages be insured, sold by approved banks, registered with local authorities and that they specify the property value and terms of the loan.

They say the ruler of Dubai, Sheik Mohammed bin Rashid al-Maktoum, issued the decree on the new law. It will take effect 60 days from publication. -- AP

San Francisco Bay Area Home Sales Up

Source : The Business Times, August 21, 2008

7,586, or 2% more, units sold in July, recording first sales gain since Jan 2005

(SAN FRANCISCO) San Francisco Bay Area home sales rose in July for the first time since 2005 and the median price fell to the lowest in more than three years as buyers bought discounted properties in foreclosure.

Cheap buys: One-third of the Bay Area's resales in July were homes fresh off foreclosure. Buyers are attracted by foreclosure sales to inland areas where home prices fell after rapid appreciation during the housing boom

Sales increased 2.2 per cent last month from a year earlier, San Diego-based MDA DataQuick, a property research firm, said in a report on Monday. A total of 7,586 houses and condominiums sold in July in nine Bay Area counties.

The median fell a record 29.3 per cent to US$470,000, the lowest since March 2005.

'We know one-third of the Bay Area's resales in July were homes fresh off foreclosure,' said John Walsh, MDA DataQuick president. 'Who knows how many more involved a desperate seller and a lender who accepted a short sale?'

Foreclosure sales are attracting buyers to inland areas where home prices declined after rapid appreciation during the five year housing boom. Those transactions accounted for 33 per cent of total Bay Area sales last month, up from 29.9 per cent in June and from 4.2 per cent a year earlier.

Eleven ZIP codes in Solano and Contra Costa counties had foreclosure sales at least double the amount in July 2007, according to MDA DataQuick.

Falling prices enabled 48 per cent of households to afford an entry-level home in the state in the second quarter, compared with 24 per cent a year earlier, the California Association of Realtors said in a separate report on Monday. The minimum qualifying income was US$62,870, compared with US$101,440 a year earlier, the Realtors said.

The year-over-year sales gain was the first since January 2005, MDA DataQuick said. Transactions increased 5.7 per cent in July from June. Southern California home sales rose 14 per cent to the highest level since March 2007.

Sales are slower in more expensive coastal areas such as San Francisco, Marin and San Mateo counties, MDA DataQuick said.

Potential buyers are waiting for mortgage terms to become less strict and sellers are reluctant to put their homes on the market as prices fall, Mr Walsh said.

Purchases made with jumbo loans, those over US$417,000, fell by half in July from a year earlier and help explain why the region's median price declined the most since MDA DataQuick, a unit of Vancouver-based MacDonald Dettwiler and Associates, began statistics in 1988, the company said.

The Bay Area median hasn't been lower since March 2005, when it was US$469,500.

Prices dropped in all nine counties, led by a 42 per cent decline in Contra Costa. Prices decreased 34 per cent in Solano, 30 per cent in Sonoma, 28 per cent in Napa, 27 per cent in Alameda, 16 per cent in Santa Clara, 16 per cent in San Mateo, 13 per cent in Marin and 6 per cent in San Francisco, according to MDA DataQuick.

Sales increased 47 per cent in Napa, 45 per cent in Solano, 30 per cent in Contra Costa and 8 per cent in San Francisco. They fell 13 per cent in Santa Clara, 11 per cent in San Mateo, 10 per cent in Marin and 9 per cent in Alameda. Sales were unchanged in Sonoma, MDA DataQuick said.

The typical monthly mortgage payment was US$2,218 in July, down from US$2,282 in June and US$3,222 a year earlier.

Adjusted for inflation, current payments are 15.1 per cent below payments in the spring of 1989, the peak of the prior real estate cycle, and 36.1 per cent below payments in June 2006, the current cycle's peak, MDA DataQuick said. -- Bloomberg

Key Japan Real Estate Sector Seen Tripling

Source : The Business Times, August 21, 2008

Logistics property market investments may grow 3-fold in a few years: LaSalle

(TOKYO) Japan's market for investment in logistics real estate - such as warehouses, distribution centres and ports - is seen growing threefold within a few years as more players enter a sector considered stable even in an economic slowdown, an executive of LaSalle Investment Management said.

The real estate securitisation investment market was about 320 billion yen (S$4 billion) in 2007, accounting for only 3.8 per cent of Japan's total Reit (real estate investment trust) investment.

But LaSalle, which manages US$54 billion assets in global real estate markets, sees such logistics-area investment accounting for more than 10 per cent of total J-Reit investment in the near future, executive officer Yosuke Yoshikawa told a Tokyo seminar.

'Logistics property investment is still immature here for reasons such as a dearth of investment opportunities and limited information disclosure . . . maybe that's why only one J-Reit is solely focusing on the logistics field,' Mr Yoshikawa said.

'But considering its big and established presence in Europe, especially in Britain, and the relative strength of the economic slowdown, logistics real estate investment has a big growth potential,' he said.

After raising 360 billion yen, the Tokyo-based investor launched 'LaSalle Japan Logistics Fund Two' last year.

LaSalle still has some 280 billion yen left to invest until 2010 after spending 80 billion yen since the fund's launch, another executive told Reuters after the seminar.

A planned investment would include development of multi-purpose logistics centres and 'off-balance- sheet' support for logistics companies.

LaSalle is a unit of Chicago-based property services company Jones Lang LaSalle Group which manages property investments of institutional investors such as pension funds and companies.

Tokyo-based LaSalle bought out an asset management company in 2007 and injected fresh capital into a Reit that has since been renamed LaSalle Japan Reit Inc.

LaSalle Japan Reit closed down 12.3 per cent at 191,200 yen yesterday, while the Tokyo Stock Exchange's Reit index shed 0.3 per cent to 1,269.54. -- Reuters

CityDev Inks Deal With CIMB

Source : The Straits Times, August 21, 2008

SINGAPORE property developer City Developments on Thursday inked a deal with Malaysian financial group CIMB in a bid to raise one billion Singapore dollars through the issuing of Islamic bonds.

City Developments hopes to have the first tranche of the issue on the market by the end of the year, the company said. CIMB is lead manager for the issue.

The signing followed the announcement last week by City Developments that it planned the unsecured Islamic bond offering.

'This is the first Islamic unsecured financing transaction of its kind in Singapore,' said Mr Kwek Leng Joo, City Developments managing director.

The city-state has been trying to grow its share of the Islamic finance market.

He said the Islamic bond offering will boost City Developments' coffers and enable it to tap opportunities during an emerging global economic slowdown.

'We always believe that in the midst of any economic slowdown, there are tremendous opportunities to explore and take advantage of,' Mr Kwek said.

City Developments is one of Singapore's leading property developers and also has interests in hotels.

Islamic banking fuses principles of sharia, or Islamic law, and modern banking. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling, considered taboo by Muslims.

According to CIMB, the Islamic bond market is holding up despite global economic woes.

'It is holding up quite well considering that it is a new market and people are still hungry for assets and the demand is still very much there for any issue whenever they come to market. They will take it up,' said Mr Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Berhad.

Muslim-dominated Malaysia has the world's largest Islamic bond market, accounting for about 66 percent of total Islamic bonds issued worldwide in 2007, figures from CIMB showed.

The global market for sukuk - the Islamic equivalent of bonds - could top 100 billion US dollars (S$140 billion) in the next few years after exceeding 60 billion dollars last year, credit ratings firm Standard and Poor's said in March. -- AFP

Property Transactions With Contract Dates Between Aug 4th - 9th, 2008