Marina Bay To Provide 1.1m Sq M Of Office Space

Source : The Business Times, February 29, 2008

YESTERDAY IN PARLIAMENT

It will become a seamless extension of Raffles Place, says Mah

THE upcoming financial district at Marina Bay will be twice the size of London's Canary Wharf and will provide as much Grade A office space as Hong Kong's Central.
















Revealing more plans for Singapore's new financial hub, National Development Minister Mah Bow Tan told Parliament yesterday that Marina Bay remains the centrepiece of the government's efforts to provide more office space.

'URA (the Urban Redevelopment Authority) will make available more sites for development in this area over the next five to six years, in line with market demand,' he said. 'When completed, these new developments will provide more than 1.1 million sq m of office space, to match the total amount of office space at Raffles Place today.'

The area will become a seamless extension of Raffles Place, Mr Mah said. It is expected to take more than 15 years to materialise, depending on market demand.

The existing central business district will not be neglected, he said. URA will release land around the Tanjong Pagar precinct as well as redevelop the Ophir/Rochor corridor into an office cluster.

Mr Mah also touched on plans for Orchard Road, saying that URA plans to work with the private sector to build a pedestrian network with underground links, walkways at street level and second-storey links between buildings.

The Ministry of National Development will set out its land use plans for the next 10-15 years in the next few months in its Master Plan 2008. The plans have been developed with three key objectives in mind - to ensure that Singapore has sufficient land to support economic growth; to reduce commuting by bringing jobs closer to home; and to provide greater greenery and leisure options.

Addressing a now-hot topic, Mr Mah said that sustainable development will continue to be a priority.

To encourage environmentally friendly practices, the government will look at a range of measures including public education, research and development, and possibly legislation, he said.

CDL Boss Punctures Popular Wisdom

Source : The Business Times, February 29, 2008

Mid-market may not shine and high-end is unlikely to collapse, he says

City Developments Ltd (CDL) executive chairman Kwek Leng Beng yesterday turned a popular market view of the Singapore residential sector on its head.

Many have whispered that the high-end residential segment is in danger of being hardest hit by the sub-prime crisis while the mid-tier and mass-market segments will be better shielded. Not true, says Mr Kwek.

'The high-end is not going to collapse like what some (in the market) are saying. The mid-end is not going to be fantastic, like what is commonly believed, because of the subprime situation and Singaporeans' wait-and-see attitude.

'The mass market will do well, but selectively. It's not going to be what you've seen before...people queuing up,' Mr Kwek said.

The Housing & Development Board also provides a credible alternative to mass-market private housing, Mr Kwek said at a media and analysts' briefing to announce CDL's results for the year ended Dec 31, 2007. The group's full-year net profit doubled to $725 million - a record.

Mr Kwek also acknowledged that the current market environment was not conducive to setting up real estate investment trusts (Reits). He would look into opportunities to buy into existing Reits, but only if they were being offered for sale together with their respective Reit management companies, which earn handsome fees.

On the high-end residential sector, Mr Kwek noted that it is supported not only by wealthy local investors with holding power, but also by well-heeled foreigners. 'Super-rich investors from Russia, Middle East and even hedge-fund managers have yet to come into Singapore in a big way.

'With Singapore developing into a global city and placed into the limelight, it can be a very attractive place to invest for these well-heeled clienteles, as seen in London,' CDL said in its results statement.

The next big wave for the Singapore property market will come when the two integrated resorts are operating successfully. 'It will be a different Singapore altogether. Singapore is a hub. I've been harping on this. Nobody believed me until last year,' said Mr Kwek.

He also sought to debunk another popular view, that the deferred payment scheme which was removed by the authorities in October last year, had only served to fuel property speculation. 'Deferred payment is not only an instrument for speculation. It is an instrument to enable buyers of new (residential) units to dispose of their existing units at a gradual pace, instead of being forced to sell their existing homes,' he said.

Noting that sentiment in the local property market has become subdued because of the sub-prime issue, Mr Kwek said: 'Sentiment is more important than supply and demand. The higher the prices, the more people buy.'

He also recommended buying real estate as a hedge against inflation, especially given the current low housing loan rate environment, adding in the same breath that he was not trying to talk up the market - drawing laughter from the audience.

But Mr Kwek also had some advice on affordability. 'You must be able to pay your instalment, that is most important. If you can't pay the instalment, and you hope (the property value) will go up tomorrow, then you are speculating.'

Referring to the squabbles among owners in estates with en bloc sales, Mr Kwek said: 'People are fighting, because they are jealous somebody sold higher. Who can say this is the peak? You should be happy if you have a good gain, don't fight. That's my advice.'

He estimates that about 50 per cent of those who've sold their homes through en bloc sales have not yet bought replacement homes, even if they may want to downgrade.

Property Players Sweat Over Lending Squeeze

Source : The Business Times, February 29, 2008

Banks batten down hatches amid global turmoil and as big deals suck liquidity

The squeeze is on. Banks have tightened financing for property investment deals, which include big transactions like sales of office blocks and development sites. This, in turn, may keep some buyers from participating in the market, industry players have told BT.

It's also taking longer to wrap up property sales deals these days as securing funding becomes more of an issue - and this could be a drag on investment sales.

Bankers cite two main causes for the tightening. The turmoil in the global financial market has led to increased awareness of risks all round, and several mega transactions in the past 12 months here have left less liquidity available for others.

Says Tan Teck Long, DBS Bank managing director, corporate and investment banking: 'There are a couple of large deals such as the integrated resorts (IRs) which have soaked up a fair bit of liquidity.'

Yesterday, Las Vegas Sands Corp announced the completion of its $5.25 billion loan syndication for the Marina Bay Sands IR, the largest deal of its kind here.

Brad Nelson, global head of commercial real estate, Standard Chartered Bank, agrees that the big deals had been sucking liquidity out of the market. 'Banks only have a certain amount of capital base,' he points out.

Banks' exposure to property-related loans is capped by law at 35 per cent of their total loans, to keep risks from the industry in check. This does not include mortgages for owner-occupied properties.

Meanwhile, banks have become more cautious and are giving smaller loans relative to a property's valuation than, say, 12 months ago. This serves to provide them with a greater buffer in the event of a fall in property values given the weaker sentiment in the Singapore property market today.

Jones Lang LaSalle regional director and head of investments Lui Seng Fatt says that about a year ago, banks may have given loans of up to 75 per cent of valuation for income-producing assets like office blocks. Today, the figure may be closer to 60-65 per cent.

Things are even harder for relatively unseasoned, smaller players buying residential development sites. They face greater scrutiny these days before banks give them loans, BT understands.

'Financing for real estate projects has definitely tightened, especially since last quarter. This is essentially because of tighter liquidity brought about by limited appetite in the capital markets, due to current market developments,' says Paul Kwee, Citigroup Singapore corporate bank director and head of real estate.

Lending amounts are more conservative now and covenants tighter, he says.

And despite the decline in Singapore dollar interest rates, the margins that are added to the floating interest rate reference are wider today, observes Mr Kwee. Margins are wider by 50-100 basis points now compared to last year, say bankers. Property sources say that while big established developers can still secure financing for purchases of development sites with relative ease, things are less rosy for smaller players.

Maybank head of business banking Lee Hong Khim acknowledges that his bank hesitates to finance new players whose core business is not in property development.

Mr Lee adds that Maybank is 'more selective in the projects we finance; the location of the project is an important consideration as well'.

Giving his take, Citi's Mr Kwee says: 'Smaller players may find it harder because they have fewer financing options available to them as compared to the big boys who may also be able to tap the convertible bond or Sing-dollar bond market, for instance.'

But Mr Nelson of Stanchart says that 'when liquidity is tight, lenders will normally take the position of supporting their existing relationships . . . regardless of whether they are SME (small and medium enterprise) or wholesale customers'.

Another outcome of banks becoming more cautious in evaluating loan applications is that it's taking longer to complete property investment sales deals, says JLL's Mr Lui.

The investment head of another major property consultancy group feels that the tighter financing environment could change the profile of institutional property buyers. 'We may see greater participation from core funds, which assume lower risk, lower returns, and lower debt, and less participation from opportunity funds, which assume higher risks, higher returns and higher debt.'

Market watchers point to an extreme recent example, when UK-based New Star International Property Fund made a pure-cash (zero debt) acquisition of One Phillip Street, an office block in the Raffles Place area, for $99.02 million.

Funds that need to assume higher leverage to achieve their investment returns may find it difficult to buy property assets in Singapore - and their numbers may dwindle.

Chicago Business School To Move To Tanglin Village

Source : The Straits Times, Feb 28, 2008

THE University of Chicago Graduate School of Business is to move from its Penang Road campus to a bigger site in Tanglin Village next year.

The school's Asian campus, set up here in 2000, plans to offer more classes and also services like career counselling.

Its Tanglin Village campus - the groundbreaking for which took place on Thursday - will have 18 study rooms, a student lounge and 29 offices and meeting rooms.

The school enrols about 90 students per intake for its executive MBA course; more than 1,000 others go through its executive programmes every year.

'The Chicago Graduate School of Business' decision to switch from renting space to building its own Asian campus strongly reflects its confidence in, and commitment to, Singapore,' said Economic Development Board chairman Lim Siong Guan at its groundbreaking ceremony.

CDL Able To Weather Uncertainty For Next 3 Yrs

Source : The Business Times, February 29, 2008

It posts full-year profit of $725m; bottom line would be $2.8b if fair value gains included

THE top brass at City Developments Ltd (CDL) yesterday said the property group has 'the financial muscle to weather the current period of uncertainty even for the next three years', after announcing a record full-year net profit of $725 million.

Attractive asset: City Square Mall

The group sold about $6.2 billion of residential projects in 2006 and 2007, which means it has locked in, to a very large extent, handsome profits which have yet to be booked.

These substantial and better-than-expected profits will continue to be recognised progressively based on construction progress. 'Some will come in 2008, 2009, perhaps also into 2010,' CDL managing director Kwek Leng Joo said at the group's results briefing yesterday.

'Even if the market recovery should take place a little bit later than expected, I think we'll be OK,' he added.

In short, the group can afford to delay launches of new residential projects if necessary to ride out the current weak sentiment.

As a major office landlord, CDL will also benefit from the office crunch as many of its key tenant leases are up for renewal between now and 2011 - a period when office supply is expected to be limited.

In the hospitality sector, CDL's hotel arm Millennium & Copthorne Hotels has a string of hotels with a wide geographical spread - which should act as 'an insurance against a downturn in any particular geographical area', CDL executive chairman Kwek Leng Beng said.

The group also has many other attractive assets such as City Square Mall and St Regis Hotel in Singapore which it could potentially sell, boosting its bottom line.

As well, CDL has a healthy balance sheet, with relatively low net gearing of 48 per cent.

CDL posted a 106 per cent jump in group net profit for the year ended Dec 31, to a record $725 million. However, had it adopted the revaluation policy of its peers, its bottom line would have surged to $2.84 billion after factoring in about $2.1 billion of fair value gains on investment properties.

The $2.84 billion net earnings for the year ended Dec 31 would pip the $2.76 billion net profit posted by fellow property giant CapitaLand for the same period.

CDL's fourth-quarter net profit rose about 71 per cent year-on-year to $235 million, with revenue inching up 3.7 per cent to $765.7 million.

The group has also yet to recognise any profits for One Shenton, The Solitaire, Cliveden at Grange and Wilkie Studio, as these residential projects are still in the initial stage of construction. These projects alone account for $1.7 billion in sales value.

Even if the group defers or paces its launches, it will proceed with the construction of its projects where construction cost had been favourably secured earlier, CDL said.

It may also consider building selected projects when the construction cost stabilises at a reasonable level. It expects that when sentiment improves and the market begins to recover, there will be pent-up demand which the group will be in a position to meet.

The group is planning to launch in the first half of this year some 427 private homes in four Singapore projects - Shelford Suites, a condo on the former Lock Cho Apartments site at Thomson Road, The Quayside Isle @ Sentosa Cove and a condo at Pasir Ris.

In its results statement, CDL also said that it has an investment commitment in the private fund Real Estate Capital Asia Partners, which acquired Jungceylon complex at Phuket's Patong Beach. This is a 1.5 million sq ft mall which opened for business recently and is next to the Millennium Resort Patong Phuket.

CDL also reckons it has 'ample time' to review its strategy for its office portfolio, given improving office rental yields.

Its options include retaining its office properties at a low cost base, monetising the portfolio and/or extracting maximum value by selling its assets wholesale or individually. Another option would be to spin off an office real estate investment trust.

The group has all along been following its conservative policy of stating investment properties at cost less accumulated depreciation and impairment losses. On adoption of Financial Reporting Standard FRS 40, the group continues to state these assets at cost less accumulated depreciation and impairment losses.

Most other Singapore- listed property groups state investment properties at fair value, as permitted by FRS 40.

CDL's full-year revenue for the year ended Dec 31, 2007, rose 22 per cent to $3.1 billion, also a record for the group.

The group also gave a segmental breakdown of profit before tax, including share of after-tax profit of associates and jointly controlled entities, which showed that pre-tax from property development more than doubled from $225.8 million in 2006 to $506.3 million in 2007.

Pre-tax profit from hotel operations fell from $396.6 million in 2006 to $285.4 million in 2007, mainly because the 2006 figure had included a $150.9 million one-off gain from the sale of long leasehold interests in four Singapore hotels to CDL Hospitality Trusts.

Profit before tax from rental properties more than quadrupled from $30 million in 2006 to $133.6 million in 2007.

CDL is proposing a final dividend of 7.5 cents per share as well as a special final dividend of 12.5 cents per share. Both payouts are tax exempt.