Source : The Business Times, November 7, 2007
Resorts World factors in rising construction costs, new attractions, improved designs
The cost of the integrated resort (IR) on Sentosa could climb to as much as $6 billion - from an original $5.2 billion - as building costs escalate and more attractions are added.
Resorts World at Sentosa (RWS) yesterday said that it has revised its budget to $5.75 billion and made a further contingency provision of $250 million, taking the overall budget to some $6 billion.
$275 million of the confirmed $550 million budget increase can be attributed to new rides and attractions, improved hotel and resort designs and better transport and infrastructure. The other $275 million increase is due to rising construction costs, said Justin Tan, managing director of Genting International, which won the bid for the resort in December 2006.
The announcement by RWS comes after Marina Bay Sands said in August this year that its cost could escalate to $5.2 billion, from an original $5.05 billion.
Rising construction costs have affected developers island-wide. 'We have been able to lock in the prices of concrete and structural steel at very competitive prices,' said RWS senior director of projects Michael Chin. 'Labour costs and margins of contractors, however, have risen significantly.'
Developers have also reported that projects are being delayed because by a shortage of contractors. Despite this, RWS yesterday said that construction is on track for the resort's soft opening in early 2010.
More than 50 per cent of the overall excavation, piling and reclamation work has been completed and more than $600 million of construction contracts awarded, it said. Another $1 billion of contracts will be awarded by early 2008.
Mr Tan does not expect the new contracts to hold up the project's completion. 'At this point in time, we are in negotiations with some of these contractors,' he said. 'They have not indicated that (possible delay) to us.' He also said that with the new attractions, plans for the resort are now final.
RWS yesterday announced six new attractions - two new rides at Universal Studios Singapore and four new performances that will be open to visitors free of charge.
Separately, Genting International reported a third-quarter loss because of an 'impairment' charge as a result of its acquisition of a UK casino group. Genting International lost $393.4 million in the three months ended Sept 30, compared with a profit of $86.9 million a year earlier.
Wednesday, November 7, 2007
Horizon Towers Hearing 'I Don't Believe Anything In The Papers'
Source : The Business Times, November 7, 2007
Sales committee member grilled on why he didn't take heed of rising prices
Suggestions that the Horizon Towers sales committee failed to act in owners' best interests took centrestage when the Strata Titles Board (STB) hearing resumed yesterday.
The serious mien of the session was, however, periodically broken by moments of frivolity - some more tasteful than others.
Former sales committee secretary Wee Hian Siew spent a tough full day on the stand, as lawyers for the minority owners - those who didn't agree to the collective sale - grilled him on how he and the sales committee handled the sale.
It is the minorities' contention that the en bloc sale of Horizon Towers - to Hotel Properties and its partners for $500 million - was carried out in bad faith and should not be approved by the STB.
Philip Fong of Harry Elias Partnership questioned Mr Wee for almost three hours on the collective sale procedures carried out by the sales committee.
Mr Fong cited specific instances of when key procedures were not followed - such as when notices and circulars to owners on the collective sale were insufficient, untimely or inaccurate.
Mr Fong also asked why Mr Wee didn't try to get a better sale price when it became known that residential property prices were beginning to soar; he referred Mr Wee to a Jan 11 Business Times article, 'Developers revive interest in unsold collective sale sites', reporting just such a surge in home prices.
Mr Wee's response - 'I don't believe anything in the papers.' - drew sniggers from the crowd.
When Mr Fong pressed on, saying that BT was 'a respectable daily', Mr Wee clarified his comment to mean that he felt 'we should not take everything at face value'.
The protracted session, however, prompted several abrupt remarks from the tribunal's chairman Philip Chan, who interrupted Mr Fong on more than one occasion - once, for an early lunch break and a second time to tell the senior lawyer that his allotted time was up.
Kannan Ramesh of Tan Kok Quan Partnership also subjected Mr Wee to a lengthy cross-examination.
He focused on the promise made to owners that they would get an 80 per cent premium if they sold their unit in an en bloc sale than if they were to sell them individually.
Referring again to the Jan 11 BT article - and the fact that neighbouring development, The Grangeford, had upped its minimum asking price by a quarter - Mr Ramesh said these should have alerted the Horizon Towers' sales committee to the fact that property prices were rising, that the promised premium had been 'significantly eroded' and that they should have done more to get a higher price.
Mr Wee said the sales committee did try but relied on the expert advice of their sales agent, Alvin Er, that $500 million was the best price they could get. He said it never occurred to him that he could seek advice from other experts.
The tribunal's chairman, Mr Chan, then asked Mr Wee if he felt he had carried out the duties expected of a secretary of the sales committee.
That prompted Mr Wee to ask, 'What do you mean by a secretary?', to which Mr Chan retorted 'without a skirt' - a comment that drew an audible objection from some members of the viewing public.
The STB also rejected one majority owner's application to have separate representation in this hearing.
Susanna Rusli had applied last week to participate in the hearing, separately from the other majority owners - but the board yesterday dismissed her arguments.
The hearing continues today with a second former sales committee member, Henry Lim, on the stand.
Sales committee member grilled on why he didn't take heed of rising prices
Suggestions that the Horizon Towers sales committee failed to act in owners' best interests took centrestage when the Strata Titles Board (STB) hearing resumed yesterday.
The serious mien of the session was, however, periodically broken by moments of frivolity - some more tasteful than others.
Former sales committee secretary Wee Hian Siew spent a tough full day on the stand, as lawyers for the minority owners - those who didn't agree to the collective sale - grilled him on how he and the sales committee handled the sale.
It is the minorities' contention that the en bloc sale of Horizon Towers - to Hotel Properties and its partners for $500 million - was carried out in bad faith and should not be approved by the STB.
Philip Fong of Harry Elias Partnership questioned Mr Wee for almost three hours on the collective sale procedures carried out by the sales committee.
Mr Fong cited specific instances of when key procedures were not followed - such as when notices and circulars to owners on the collective sale were insufficient, untimely or inaccurate.
Mr Fong also asked why Mr Wee didn't try to get a better sale price when it became known that residential property prices were beginning to soar; he referred Mr Wee to a Jan 11 Business Times article, 'Developers revive interest in unsold collective sale sites', reporting just such a surge in home prices.
Mr Wee's response - 'I don't believe anything in the papers.' - drew sniggers from the crowd.
When Mr Fong pressed on, saying that BT was 'a respectable daily', Mr Wee clarified his comment to mean that he felt 'we should not take everything at face value'.
The protracted session, however, prompted several abrupt remarks from the tribunal's chairman Philip Chan, who interrupted Mr Fong on more than one occasion - once, for an early lunch break and a second time to tell the senior lawyer that his allotted time was up.
Kannan Ramesh of Tan Kok Quan Partnership also subjected Mr Wee to a lengthy cross-examination.
He focused on the promise made to owners that they would get an 80 per cent premium if they sold their unit in an en bloc sale than if they were to sell them individually.
Referring again to the Jan 11 BT article - and the fact that neighbouring development, The Grangeford, had upped its minimum asking price by a quarter - Mr Ramesh said these should have alerted the Horizon Towers' sales committee to the fact that property prices were rising, that the promised premium had been 'significantly eroded' and that they should have done more to get a higher price.
Mr Wee said the sales committee did try but relied on the expert advice of their sales agent, Alvin Er, that $500 million was the best price they could get. He said it never occurred to him that he could seek advice from other experts.
The tribunal's chairman, Mr Chan, then asked Mr Wee if he felt he had carried out the duties expected of a secretary of the sales committee.
That prompted Mr Wee to ask, 'What do you mean by a secretary?', to which Mr Chan retorted 'without a skirt' - a comment that drew an audible objection from some members of the viewing public.
The STB also rejected one majority owner's application to have separate representation in this hearing.
Susanna Rusli had applied last week to participate in the hearing, separately from the other majority owners - but the board yesterday dismissed her arguments.
The hearing continues today with a second former sales committee member, Henry Lim, on the stand.
Tampines Office Site Attracts Just One Bid
Source : The Business Times, November 7, 2007
Property consultants wonder if caution is creeping into this sector
In a possible reflection that caution among developers may be extending to the office sector, a tender for a transitional office site in Tampines yesterday drew just one bid - from City Developments Ltd's (CDL) unit Glades Properties.
The thin bidding may be due to concern that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
And its bid of $10 million, which worked out to $80.65 psf per plot ratio (ppr), was lower than the $100 psf ppr region that most property consultants had expected the 15-year leasehold site to fetch.
The government has indicated recently that it will inject more office space into the market soon - a step that could cool prices. Some felt that yesterday's bidding reflected caution on part of the developers while others suggested Tampines may not be a popular location among office investors.
They pointed out that the next-door 99-year leasehold office site offered through a tender that closed in May this year had also drawn just one bid, again from CityDev, although at a more substantial price of $622 psf ppr.
The maiden 15-year leasehold transitional office plot next to Newton MRT station attracted a whopping 11 bids with a top price of $219 psf ppr in August.
Whether the weaker sentiment among office investors is confined to Tampines or is spreading to the Central Business District (CBD) as well will be seen in a tender closing on Nov 13 for Marina View Land Parcel B, a 99-year leasehold site with stipulated minimum office and hotel components.
Property consultants polled by BT unanimously expect URA to award the 124,000 sq ft transitional office site at Tampines Ave 5 to CDL, despite its bid being the sole offer and that too at a price lower than expected.
'Government should make the award since as a transitional office site, it is part of the interim solution to the acute office shortage here. Otherwise, the government objective would not be met,' Knight Frank managing director Tan Tiong Cheng reasoned.
The Urban Redevelopment Authority said yesterday in response to a query by BT that 'the government will continue to release more transitional office sites to meet business needs; details on these sites will be released shortly'.
Colliers International director (research and consultancy) Tay Huey Ying said: 'If the government releases more transitional office sites in or near the CBD, I believe demand will be healthy.'
She reckons the thin bidding for the Tampines plot yesterday may be due to concern among developers that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
'There may be concern that post-2010, when there will be a large influx of new office space being completed within the CBD, the spillover demand for suburban offices may recede,' she added.
'Next week's tender for Marina View Land Parcel B will be interesting to watch, to see whether developers are also concerned about office supply in the CBD itself,' she added.
CB Richard Ellis executive director Li Hiaw Ho said: 'That is a much better site (than today's Tampines plot), although I do not expect a lot of bidders because it is a huge site with a substantial outlay.'
Property consultants wonder if caution is creeping into this sector
In a possible reflection that caution among developers may be extending to the office sector, a tender for a transitional office site in Tampines yesterday drew just one bid - from City Developments Ltd's (CDL) unit Glades Properties.
The thin bidding may be due to concern that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
And its bid of $10 million, which worked out to $80.65 psf per plot ratio (ppr), was lower than the $100 psf ppr region that most property consultants had expected the 15-year leasehold site to fetch.
The government has indicated recently that it will inject more office space into the market soon - a step that could cool prices. Some felt that yesterday's bidding reflected caution on part of the developers while others suggested Tampines may not be a popular location among office investors.
They pointed out that the next-door 99-year leasehold office site offered through a tender that closed in May this year had also drawn just one bid, again from CityDev, although at a more substantial price of $622 psf ppr.
The maiden 15-year leasehold transitional office plot next to Newton MRT station attracted a whopping 11 bids with a top price of $219 psf ppr in August.
Whether the weaker sentiment among office investors is confined to Tampines or is spreading to the Central Business District (CBD) as well will be seen in a tender closing on Nov 13 for Marina View Land Parcel B, a 99-year leasehold site with stipulated minimum office and hotel components.
Property consultants polled by BT unanimously expect URA to award the 124,000 sq ft transitional office site at Tampines Ave 5 to CDL, despite its bid being the sole offer and that too at a price lower than expected.
'Government should make the award since as a transitional office site, it is part of the interim solution to the acute office shortage here. Otherwise, the government objective would not be met,' Knight Frank managing director Tan Tiong Cheng reasoned.
The Urban Redevelopment Authority said yesterday in response to a query by BT that 'the government will continue to release more transitional office sites to meet business needs; details on these sites will be released shortly'.
Colliers International director (research and consultancy) Tay Huey Ying said: 'If the government releases more transitional office sites in or near the CBD, I believe demand will be healthy.'
She reckons the thin bidding for the Tampines plot yesterday may be due to concern among developers that strong office demand currently outside the CBD is the result of an overflow of demand from the CBD.
'There may be concern that post-2010, when there will be a large influx of new office space being completed within the CBD, the spillover demand for suburban offices may recede,' she added.
'Next week's tender for Marina View Land Parcel B will be interesting to watch, to see whether developers are also concerned about office supply in the CBD itself,' she added.
CB Richard Ellis executive director Li Hiaw Ho said: 'That is a much better site (than today's Tampines plot), although I do not expect a lot of bidders because it is a huge site with a substantial outlay.'
Soros Warns Of 'Serious' US Economic Correction
Source : The Business Times, November 7, 2007
He says things are worse than what Fed chief sees
(NEW YORK) Billionaire investor George Soros has forecast that the US economy is 'on the verge of a very serious economic correction' after decades of overspending.
Mr Soros: Predicts that it's payback time for the US economy after decades of overspending
'We have borrowed an awful lot of money and now the bill is coming to us,' he said during a lecture at the New York University, adding that the war on terror 'has thrown America out of the rails'.
Asked whether a recession was inevitable, Mr Soros said: 'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing.'
On the same note, David Rosenberg, chief economist for North America at Merrill Lynch & Co in New York, forecast that the US economy will come close to stalling in the fourth quarter.
The economy will probably grow at an annual rate of between zero per cent and one per cent, Mr Rosenberg said in his weekly report to clients dated Nov 2. He currently forecasts a 0.7 per cent pace of expansion this quarter.
The third-quarter's 3.9 per cent growth rate was artificially boosted by 'non-recurring factors' that will disappear in the last three months of the year, Mr Rosenberg said.
Add to that the collapse in sub-prime-mortgage lending and a worsening housing slump and the expansion will slow, he said in an interview on Monday.
'This is by far the most leveraged economic expansion in modern history,' Mr Rosenberg said in the interview. Parts of the mortgage market 'just aren't coming back. This is going to have a deleterious impact on growth.'
A drop in gasoline prices even as oil prices jumped, a surge in auto inventories before threatened strikes and an increase in defence spending propelled third-quarter growth and won't be repeated, Mr Rosenberg's report said.
On the forex market, Mr Soros, famous for his speculative attack on the Bank of England that made him more than US$1 billion, declined to nominate which currencies were more vulnerable currently. He also declined to comment specifically on the dollar.
'I know exactly where the currencies are going to but I'm not going to tell that to you,' he told the audience.
Last week, investment guru Jim Rogers, who co-founded the Quantum Fund with Mr Soros in the 1970s, recommended selling the dollar as well as US investment banks and US housing stocks.
In an interview with Bloomberg News Agency, Mr Rogers said that US credit markets are enduring their worst bubble ever and forecast that it may take six years for them to return to normal.
'Never in American history have people been able to buy a house with no money down,' Mr Rogers said. 'We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years.'
Mr Rogers, the chairman of Beeland Interests Inc, also said he's pessimistic on the US dollar. He said he hoped the Fed raises interest rates to stem inflation, but if it does 'the dollar is going to collapse'. -- Reuters, Bloomberg
He says things are worse than what Fed chief sees
(NEW YORK) Billionaire investor George Soros has forecast that the US economy is 'on the verge of a very serious economic correction' after decades of overspending.
Mr Soros: Predicts that it's payback time for the US economy after decades of overspending'We have borrowed an awful lot of money and now the bill is coming to us,' he said during a lecture at the New York University, adding that the war on terror 'has thrown America out of the rails'.
Asked whether a recession was inevitable, Mr Soros said: 'I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing.'
On the same note, David Rosenberg, chief economist for North America at Merrill Lynch & Co in New York, forecast that the US economy will come close to stalling in the fourth quarter.
The economy will probably grow at an annual rate of between zero per cent and one per cent, Mr Rosenberg said in his weekly report to clients dated Nov 2. He currently forecasts a 0.7 per cent pace of expansion this quarter.
The third-quarter's 3.9 per cent growth rate was artificially boosted by 'non-recurring factors' that will disappear in the last three months of the year, Mr Rosenberg said.
Add to that the collapse in sub-prime-mortgage lending and a worsening housing slump and the expansion will slow, he said in an interview on Monday.
'This is by far the most leveraged economic expansion in modern history,' Mr Rosenberg said in the interview. Parts of the mortgage market 'just aren't coming back. This is going to have a deleterious impact on growth.'
A drop in gasoline prices even as oil prices jumped, a surge in auto inventories before threatened strikes and an increase in defence spending propelled third-quarter growth and won't be repeated, Mr Rosenberg's report said.
On the forex market, Mr Soros, famous for his speculative attack on the Bank of England that made him more than US$1 billion, declined to nominate which currencies were more vulnerable currently. He also declined to comment specifically on the dollar.
'I know exactly where the currencies are going to but I'm not going to tell that to you,' he told the audience.
Last week, investment guru Jim Rogers, who co-founded the Quantum Fund with Mr Soros in the 1970s, recommended selling the dollar as well as US investment banks and US housing stocks.
In an interview with Bloomberg News Agency, Mr Rogers said that US credit markets are enduring their worst bubble ever and forecast that it may take six years for them to return to normal.
'Never in American history have people been able to buy a house with no money down,' Mr Rogers said. 'We have the worst credit bubble, and it's going to take a long time to work its way out. You don't cure a bubble in five or six months. It takes five or six years.'
Mr Rogers, the chairman of Beeland Interests Inc, also said he's pessimistic on the US dollar. He said he hoped the Fed raises interest rates to stem inflation, but if it does 'the dollar is going to collapse'. -- Reuters, Bloomberg
OCBC's $221m Writedown To Cut CDO Losses
Source : The Business Times, November 7, 2007
Bank hopes aggressive move will lift shadow from future earnings as market for ABS CDOs dries up
The market for some debt instruments linked to US sub-prime mortgages that were popular with banks worldwide 'has come to a virtual standstill', said OCBC Bank yesterday.
This led it to slash the value of its portfolio of ABS CDOs, or collateralised debt obligations comprising pools of asset-backed securities (ABS) from $270 million to just $48 million - less than a fifth of their original value.
Its $221 million writedown of its CDO holdings is the most aggressive so far among the three Singapore-listed banks.
'We can't predict the future, but what we've done this quarter is prepare for the worst and there logically is not going to be any future earnings impact from this portfolio,' said chief executive David Conner at a media briefing yesterday after the bank released its third-quarter results.
He said the bank decided in September and early October to value these ABS CDOs using a model from 'one of the global banks' after the market for the ABS CDOs became so illiquid that market quotations were no longer a reliable measure of their value. 'The ABS CDO market is effectively closed.'
Based on the model, OCBC wrote down the value of its ABS CDO portfolio by 82 per cent. Had the bank continued to rely on market quotes, the value of the ABS CDOs would have been $65 million, instead of the $48 million suggested by the model, said the bank. Inputs to the model are based on observable US housing market data, including delinquency rates and foreclosures, it said, although it did not name the bank that provided the model.
OCBC has another $372 million invested in corporate CDOs - those backed by corporate bonds - that are not exposed to the US sub-prime market. For these corporate CDOs, 'the market is still open and operating, it has not declined dramatically, so we're still marking those to market', said Mr Conner. The fair value of the corporate CDO portfolio at end-September was $357 million, said the bank.
He stressed that even with recent downgrades in the credit ratings of some of the CDO tranches, 'the portfolio that we have is still rated investment grade' and there had been no defaults on payments to the bank.
In its third-quarter earnings release on Oct 26, DBS Group said it made $70 million in allowances for its $275 million in CDOs that were exposed to US sub-prime assets.
On Oct 30, United Overseas Bank (UOB) said it had made an additional provision of $20 million for its CDO investments, bringing its total provision to $55 million so far. UOB has total CDO investments of $388 million, of which $90 million is in ABS CDOs.
Yesterday's writedown by OCBC came at a trying time for banks elsewhere. In the US and Europe, large financial groups such as Citigroup, Merrill Lynch and Credit Suisse recently said they had suffered much bigger losses from the credit market turmoil than earlier estimates had suggested. The chief executives of both Citigroup and Merrill Lynch have since been forced out.
Bank hopes aggressive move will lift shadow from future earnings as market for ABS CDOs dries up
The market for some debt instruments linked to US sub-prime mortgages that were popular with banks worldwide 'has come to a virtual standstill', said OCBC Bank yesterday.
This led it to slash the value of its portfolio of ABS CDOs, or collateralised debt obligations comprising pools of asset-backed securities (ABS) from $270 million to just $48 million - less than a fifth of their original value.
Its $221 million writedown of its CDO holdings is the most aggressive so far among the three Singapore-listed banks.
'We can't predict the future, but what we've done this quarter is prepare for the worst and there logically is not going to be any future earnings impact from this portfolio,' said chief executive David Conner at a media briefing yesterday after the bank released its third-quarter results.
He said the bank decided in September and early October to value these ABS CDOs using a model from 'one of the global banks' after the market for the ABS CDOs became so illiquid that market quotations were no longer a reliable measure of their value. 'The ABS CDO market is effectively closed.'
Based on the model, OCBC wrote down the value of its ABS CDO portfolio by 82 per cent. Had the bank continued to rely on market quotes, the value of the ABS CDOs would have been $65 million, instead of the $48 million suggested by the model, said the bank. Inputs to the model are based on observable US housing market data, including delinquency rates and foreclosures, it said, although it did not name the bank that provided the model.
OCBC has another $372 million invested in corporate CDOs - those backed by corporate bonds - that are not exposed to the US sub-prime market. For these corporate CDOs, 'the market is still open and operating, it has not declined dramatically, so we're still marking those to market', said Mr Conner. The fair value of the corporate CDO portfolio at end-September was $357 million, said the bank.
He stressed that even with recent downgrades in the credit ratings of some of the CDO tranches, 'the portfolio that we have is still rated investment grade' and there had been no defaults on payments to the bank.
In its third-quarter earnings release on Oct 26, DBS Group said it made $70 million in allowances for its $275 million in CDOs that were exposed to US sub-prime assets.
On Oct 30, United Overseas Bank (UOB) said it had made an additional provision of $20 million for its CDO investments, bringing its total provision to $55 million so far. UOB has total CDO investments of $388 million, of which $90 million is in ABS CDOs.
Yesterday's writedown by OCBC came at a trying time for banks elsewhere. In the US and Europe, large financial groups such as Citigroup, Merrill Lynch and Credit Suisse recently said they had suffered much bigger losses from the credit market turmoil than earlier estimates had suggested. The chief executives of both Citigroup and Merrill Lynch have since been forced out.
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