Source : The Business Times, August 12, 2008
Despite rising prices, Philippine builder says demand is not flagging
(MANILA) Megaworld Corp, the Philippine builder controlled by billionaire Andrew Tan, says that apartment sales will reach a record this year as the nation withstands a credit crisis that triggered a property slump in the US and UK.
'The world may be ending in other parts but not in the Philippines,' Kingson Sian, executive director of the country's second-biggest builder by market value , said in an interview. 'This isn't 1997.'
Banks continue to lend and the eight million Filipinos abroad are sending home cash in record amounts, softening the blows of commodities prices at records and a weakening of global growth, he said.
Megaworld shares, which has lost 57 per cent this year, dropped 89 per cent in 1997 when the Asian financial crisis eroded the peso and raised borrowing costs, hurting property sales.
'It's been a tough environment but the market hasn't dried up,' says Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc, which manages about US$5.9 billion in trust assets. 'Some home buyers are just delaying their purchases.'
Philippine consumer prices last month rose a faster-than-estimated 12.2 per cent and the central bank warned of more rate increases after raising borrowing costs twice since June. Yet Mr Sian said that demand isn't flagging and Megaworld will probably proceed with its plan to start a record 17 projects this year.
The Manila-based company booked 11.3 billion pesos (S$358.9 million) worth of orders from January to May, 71 per cent more than a year ago.
Mr Sian forecast 24 billion pesos in record reservation sales this year, 26 per cent more than in 2007.
The company's market value increased more than eightfold in the five years through 2007 as falling interest rates and record remittances from overseas Filipinos fuelled a building spree that included Megaworld transforming a block of warehouses into Eastwood City, an upscale residential and commercial development in the Manila suburb of Quezon City.
Projects such as Eastwood and Forbes Town Center in one of the Philippines' most expensive residential district have made Megaworld the nation's biggest builder of residential towers.
Still, investors shouldn't be rushing into Megaworld and other builders because of accelerating and rising interest rates, says Olan Caperina, who helps manage about US$6.7 billion at BPI Asset Management Inc in Manila. 'Property stocks are for those with strong stomachs for high volatility.'
While builders have raised prices by 5 per cent to 15 per cent this year and more increases may be forthcoming, Mr Sian says that the orders haven't stopped.
That's partly because of overseas Filipinos, who account for about 15 per cent of Megaworld's home sales. Cash from Filipinos abroad hit a record 14.4 billion pesos last year, helping boost economic growth to 7.3 per cent, the fastest in 31 years.
The central bank forecasts remittances, which make up a 10th of the country's economy, will reach US$16.45 billion this year.
Philippine banks are also 'liquid', and some have approached Megaworld about 'taking on our receivables,' Mr Sian said. 'So they're still willing to fund home purchases.'
Bank loans will probably grow 10 per cent this year, according to the central bank.
'There is pressure on banks to increase their loan portfolio if they want to grow,' said Jody Santiago, strategist at the Manila unit of UBS. 'The high-yielding government instruments where banks used to place their funds aren't there anymore.'
Megaworld's apartments, priced from 500,000 pesos to 10 million pesos, allows it to sell to a broad income group, Mr Sian said. This 'diversity' allows Megaworld, which sells units in 40 projects, to sell to buyers scaling back planned purchases, he added.
Ayala Land Inc, the nation's largest builder by market value, has a portfolio of 21 residential projects.
Most of Megaworld's projects are 'strategically located' in Manila, says Mr Santiago, who recommends buying the company's shares. 'Megaworld bought these properties when the market was at a bottom so it's not faced with inventory constraints in Manila as its rivals,' he said. -- Bloomberg
Tuesday, August 12, 2008
Russell To Double Asia Property Investments
Source : The Business Times, August 12, 2008
US-based Russell Investments, which manages over US$211 billion in assets, wants to boost its exposure to Asian real estate as it sees growing markets in China and India withstanding a global downturn.
The company, which raises money from institutions such as pension funds and invests them with other fund managers, said it expects to more than double its investments in Asia properties over the next three years, from about US$300 million currently.
'Our clients tell us they want to be in Asia property, and we go where our clients want to go,' said Martin Lamb, newly appointed Asia Pacific head of property for Russell, the funds and indices unit of Northwestern Mutual Life Insurance.
'Regardless of the downturn in the US and Europe, there is a strong domestic need particularly in India and China that continues to fuel demand for housing and retail,' said Mr Lamb, who is Russell's first property chief to be based within the region.
An increasing number of financial and property firms have set up funds to invest in Asia property in the past year, including the property investment units of Jones Lang LaSalle and Prudential, and Singapore developers such as CapitaLand and Keppel Land. -- Reuters
US-based Russell Investments, which manages over US$211 billion in assets, wants to boost its exposure to Asian real estate as it sees growing markets in China and India withstanding a global downturn.
The company, which raises money from institutions such as pension funds and invests them with other fund managers, said it expects to more than double its investments in Asia properties over the next three years, from about US$300 million currently.'Our clients tell us they want to be in Asia property, and we go where our clients want to go,' said Martin Lamb, newly appointed Asia Pacific head of property for Russell, the funds and indices unit of Northwestern Mutual Life Insurance.
'Regardless of the downturn in the US and Europe, there is a strong domestic need particularly in India and China that continues to fuel demand for housing and retail,' said Mr Lamb, who is Russell's first property chief to be based within the region.
An increasing number of financial and property firms have set up funds to invest in Asia property in the past year, including the property investment units of Jones Lang LaSalle and Prudential, and Singapore developers such as CapitaLand and Keppel Land. -- Reuters
M'sian developer SDB Launches First Project Here; More To Come
Source : The Business Times, August 12, 2008
MALAYSIAN property developer Selangor Dredging Berhad (SDB) is making a foray into Singapore, and the company is not about to be put off by the slowing economic environment.
Ms Teh: Her company started marketing its Wilkie Road development, Jia, three weeks ago on both sides of the Causeway through private previews. Some 30-40% of the 22-unit development has been sold at around $1,600 psf.
SDB, which is listed on Bursa Malaysia, has started marketing one high-end residential project on Wilkie Road here and hopes to launch another project by the end of the year.
Managing director Teh Lip Kim admits that times are not good, but she believes that the projects will do reasonably well.
'Singapore stands to benefit from what is currently viewed as political instability in Malaysia, Vietnam and Thailand,' Ms Teh said.
SDB was incorporated in 1962 by Ms Teh's father, Teh Kien Toh. Originally a tin mining company, it began diversifying its business activities in the 1980s.
When the then 31-year- old Ms Teh took over the helm in 1998, Malaysia was in the midst of the Asian financial crisis. She was forced to re-evaluate and to restructure the company's business activities and dispose of non-performing assets.
This revamp led to the company changing its core business and since 2002, SDB has focused entirely on property. It has launched five residential projects in Malaysia so far, and also owns an office building and a hotel.
The company started marketing its Wilkie Road development, called Jia, about a month ago in both Singapore and Malaysia through private previews. SDB bought the site for between $21 million and $22 million in December 2006.
Some 30 per cent of the 22-unit development has been sold at prices of around $1,600 per square foot (psf) - mostly in Malaysia - SDB said. The project has two and three-bedroom apartments, as well as three penthouses.
Next up is SDB's 66-unit development on Gilstead Road in Newton. The company bought Gilstead View in a collective sale in May last year for $96.5 million - or $1,070 psf of potential gross floor area - in what was said to be a new benchmark in the Newton area.
The new development on the site will be launched in end-2008 or Q1 2009, Ms Teh said.
SDB also owns a commercial property in Balestier and is on the lookout for more opportunities, she added.
Most Malaysian developers baulk at entering the Singapore property market - mostly citing the off- putting high price of land here - but Ms Teh says that the high land prices are something that anyone who chooses to venture into a developed economy will have to live with in exchange for stability.
'If you want to go to a place that is more progressive, one has to accept the high prices,' she said. After all, margins for developers in both Malaysia and Singapore are similar - around 18-20 per cent - Ms Teh said.
Right now, SDB gets all of its revenue from Malaysia. But in five years' time, Ms Teh hopes that as much as 40-50 per cent of turnover will come from overseas, including Singapore.
Other markets SDB is looking at include Thailand, Vietnam and Australia, but the developer wants to 'gets things right' in Singapore first, Ms Teh said.
MALAYSIAN property developer Selangor Dredging Berhad (SDB) is making a foray into Singapore, and the company is not about to be put off by the slowing economic environment.
Ms Teh: Her company started marketing its Wilkie Road development, Jia, three weeks ago on both sides of the Causeway through private previews. Some 30-40% of the 22-unit development has been sold at around $1,600 psf.SDB, which is listed on Bursa Malaysia, has started marketing one high-end residential project on Wilkie Road here and hopes to launch another project by the end of the year.
Managing director Teh Lip Kim admits that times are not good, but she believes that the projects will do reasonably well.
'Singapore stands to benefit from what is currently viewed as political instability in Malaysia, Vietnam and Thailand,' Ms Teh said.
SDB was incorporated in 1962 by Ms Teh's father, Teh Kien Toh. Originally a tin mining company, it began diversifying its business activities in the 1980s.
When the then 31-year- old Ms Teh took over the helm in 1998, Malaysia was in the midst of the Asian financial crisis. She was forced to re-evaluate and to restructure the company's business activities and dispose of non-performing assets.
This revamp led to the company changing its core business and since 2002, SDB has focused entirely on property. It has launched five residential projects in Malaysia so far, and also owns an office building and a hotel.
The company started marketing its Wilkie Road development, called Jia, about a month ago in both Singapore and Malaysia through private previews. SDB bought the site for between $21 million and $22 million in December 2006.
Some 30 per cent of the 22-unit development has been sold at prices of around $1,600 per square foot (psf) - mostly in Malaysia - SDB said. The project has two and three-bedroom apartments, as well as three penthouses.
Next up is SDB's 66-unit development on Gilstead Road in Newton. The company bought Gilstead View in a collective sale in May last year for $96.5 million - or $1,070 psf of potential gross floor area - in what was said to be a new benchmark in the Newton area.
The new development on the site will be launched in end-2008 or Q1 2009, Ms Teh said.
SDB also owns a commercial property in Balestier and is on the lookout for more opportunities, she added.
Most Malaysian developers baulk at entering the Singapore property market - mostly citing the off- putting high price of land here - but Ms Teh says that the high land prices are something that anyone who chooses to venture into a developed economy will have to live with in exchange for stability.
'If you want to go to a place that is more progressive, one has to accept the high prices,' she said. After all, margins for developers in both Malaysia and Singapore are similar - around 18-20 per cent - Ms Teh said.
Right now, SDB gets all of its revenue from Malaysia. But in five years' time, Ms Teh hopes that as much as 40-50 per cent of turnover will come from overseas, including Singapore.
Other markets SDB is looking at include Thailand, Vietnam and Australia, but the developer wants to 'gets things right' in Singapore first, Ms Teh said.
Will Falling Bids Lead To Tweaking Of GLS?
Source : The Business Times, August 12, 2008
Rising costs leave many developers with hands tied but govt retains options
WILL the Government Land Sales (GLS) Programme fizzle out because developers are offering low land bids in the face of rising construction costs?
Two suburban condo sites - at Woodleigh Close and Choa Chu Kang Drive - were sold at state tenders over the past few months at land prices below construction costs. The question is: Will the government still keep awarding Confirmed List sites if land bids continue to fall?
The problem with the Confirmed List system is that the government doesn't reveal the minimum or reserve price for sites in this list, which are released according to a pre-stated schedule regardless of demand. Reserve List sites, on the other hand, are launched for tender only if a developer undertakes to bid at a minimum price that is acceptable to the state. Since this minimum price is publicised by the government when the sites are triggered for release, developers that take part in the ensuing tender will know the minimum price they need to bid.
Given the uncertain environment, it was a good move on the part of the authorities to have leaned more towards the Reserve List for the current H2 2008 GLS Programme.
As for sites on the Confirmed List (where the minimum price is not made public), these too have by and large been awarded. But there has been the odd case here and there where the government could not award a site because the top bid was too low. Some market watchers are wondering if that could become more commonplace.
A BT story last month highlighted that land bids for 99-year suburban condo sites have fallen below construction costs. This is the first time in at least two decades this has happened. Examples include Confirmed List sites at Woodleigh Close and Choa Chu Kang Drive, which fetched top bids of $270 psf of potential gross floor area (GFA) and $203 psf of GFA respectively at state tenders that closed in June and May respectively this year. In both instances, the top bids were below construction costs. According to construction cost consultancy Rider Levett Bucknall (RLB), construction prices for medium-quality condominiums indicatively ranged from $280 to $350 psf of GFA for Q2 2008, up from the Q1 2008 figure of $260 to $320 psf of GFA.
The government awarded the two sites. But things may change in future.
Developers will have to allow a larger sum for contingencies for their projects because of the way prices of construction materials have been escalating. So there's not much else they can do but bid lower for land - especially since the outlook for home prices remains weak.
A recent Jones Lang LaSalle study pointed out that 'the unceasing escalation in building tender prices will definitely impact the profitability of residential developments'.
'This will affect developers' sentiments, which will be evidenced in their future land-bidding strategies,' it added.
'Rising construction costs, coupled with a ceiling selling price, will put downward pressure on land tender prices,' the study predicted.
But will it reach a point where the bids are too low for the state to award Confirmed List sites?
A lot will depend on the Chief Valuer's assessment of reserve price, which might be adjusted lower if construction costs keep escalating.
So state land awards should still be possible as long as bids are reasonable, and not seen as opportunistic attempts by developers to get land on the cheap. After all, keeping land prices up has never been the objective of the GLS Programme. Rather, it has aimed to ensure a steady state of supply for the property market.
However, one could argue that land is a strategic resource of Singapore and should not be sold on the cheap, even if market conditions warrant it.
There are other dimensions to this discussion. Construction costs will not keep rising forever. Once oil prices are tamed and/or economic growth slows all over the world, construction material prices should also ease.
Meanwhile, if land bids slip further, perhaps one should be prepared for even fewer sites being released on the Confirmed List - unless they serve a strategic purpose.
Fortunately, there is still the Reserve List - which is not only a more market-driven approach but also takes guesswork out of developers' equation.
Rising costs leave many developers with hands tied but govt retains options
WILL the Government Land Sales (GLS) Programme fizzle out because developers are offering low land bids in the face of rising construction costs?
Two suburban condo sites - at Woodleigh Close and Choa Chu Kang Drive - were sold at state tenders over the past few months at land prices below construction costs. The question is: Will the government still keep awarding Confirmed List sites if land bids continue to fall?
The problem with the Confirmed List system is that the government doesn't reveal the minimum or reserve price for sites in this list, which are released according to a pre-stated schedule regardless of demand. Reserve List sites, on the other hand, are launched for tender only if a developer undertakes to bid at a minimum price that is acceptable to the state. Since this minimum price is publicised by the government when the sites are triggered for release, developers that take part in the ensuing tender will know the minimum price they need to bid.
Given the uncertain environment, it was a good move on the part of the authorities to have leaned more towards the Reserve List for the current H2 2008 GLS Programme.
As for sites on the Confirmed List (where the minimum price is not made public), these too have by and large been awarded. But there has been the odd case here and there where the government could not award a site because the top bid was too low. Some market watchers are wondering if that could become more commonplace.
A BT story last month highlighted that land bids for 99-year suburban condo sites have fallen below construction costs. This is the first time in at least two decades this has happened. Examples include Confirmed List sites at Woodleigh Close and Choa Chu Kang Drive, which fetched top bids of $270 psf of potential gross floor area (GFA) and $203 psf of GFA respectively at state tenders that closed in June and May respectively this year. In both instances, the top bids were below construction costs. According to construction cost consultancy Rider Levett Bucknall (RLB), construction prices for medium-quality condominiums indicatively ranged from $280 to $350 psf of GFA for Q2 2008, up from the Q1 2008 figure of $260 to $320 psf of GFA.
The government awarded the two sites. But things may change in future.
Developers will have to allow a larger sum for contingencies for their projects because of the way prices of construction materials have been escalating. So there's not much else they can do but bid lower for land - especially since the outlook for home prices remains weak.
A recent Jones Lang LaSalle study pointed out that 'the unceasing escalation in building tender prices will definitely impact the profitability of residential developments'.
'This will affect developers' sentiments, which will be evidenced in their future land-bidding strategies,' it added.
'Rising construction costs, coupled with a ceiling selling price, will put downward pressure on land tender prices,' the study predicted.
But will it reach a point where the bids are too low for the state to award Confirmed List sites?
A lot will depend on the Chief Valuer's assessment of reserve price, which might be adjusted lower if construction costs keep escalating.
So state land awards should still be possible as long as bids are reasonable, and not seen as opportunistic attempts by developers to get land on the cheap. After all, keeping land prices up has never been the objective of the GLS Programme. Rather, it has aimed to ensure a steady state of supply for the property market.
However, one could argue that land is a strategic resource of Singapore and should not be sold on the cheap, even if market conditions warrant it.
There are other dimensions to this discussion. Construction costs will not keep rising forever. Once oil prices are tamed and/or economic growth slows all over the world, construction material prices should also ease.
Meanwhile, if land bids slip further, perhaps one should be prepared for even fewer sites being released on the Confirmed List - unless they serve a strategic purpose.
Fortunately, there is still the Reserve List - which is not only a more market-driven approach but also takes guesswork out of developers' equation.
State Property At Changi On Offer
Source : The Business Times, August 12, 2008
The parcel has a land area of 104,044 sq ft and GFA of 54,864 sq ft
HOTEL operators can look forward to another state property to develop - this time at Changi.
The Singapore Land Authority (SLA) yesterday launched the plot - part of a former military camp - for public tender.
The tenancy, for an initial three years, is renewable up to 2018. The guide rental is $28,500 a month.
The parcel has a land area of 104,044 sq ft and a gross floor area (GFA) of 54,864 sq ft. It comprises two three-storey buildings and a shed.
'SLA is offering a number of vacant state properties for adaptive re- use, such as hotels and lifestyle attractions, in line with the government's vision for Changi Point as a seaview hotel, resort and recreational destination,' said Teo Cher Hian, SLA's director for land operations (private).
Since last year, SLA has awarded four state properties in the Changi area for adaptive commercial re- use. Two are now restaurants, while the former Changi General Hospital is being turned into a spa resort.
Groundbreaking takes place next month and the resort is expected to be ready by next year.
The Singapore Tourism Board (STB) says leading hoteliers have expressed keen interest in the latest property.
According to STB, mid- tier and economy hotels enjoyed average room occupancy rates of 85 and 87 per cent respectively in the first half of 2008.
Nicholas Mak, director of research and consultancy at Knight Frank, said the successful tenderer for the Changi plot will have to come up with a unique concept.
He said the hotel needs to play on Changi's laid- back character and is likely to be mid-tier.
The first state property to be converted for hotel use, at Chin Swee Road, is a boutique establishment with 140 rooms. It officially opened in mid-May, with an initial occupancy rate of about 50 per cent.
The parcel has a land area of 104,044 sq ft and GFA of 54,864 sq ft
HOTEL operators can look forward to another state property to develop - this time at Changi.
The Singapore Land Authority (SLA) yesterday launched the plot - part of a former military camp - for public tender.
The tenancy, for an initial three years, is renewable up to 2018. The guide rental is $28,500 a month.
The parcel has a land area of 104,044 sq ft and a gross floor area (GFA) of 54,864 sq ft. It comprises two three-storey buildings and a shed.
'SLA is offering a number of vacant state properties for adaptive re- use, such as hotels and lifestyle attractions, in line with the government's vision for Changi Point as a seaview hotel, resort and recreational destination,' said Teo Cher Hian, SLA's director for land operations (private).
Since last year, SLA has awarded four state properties in the Changi area for adaptive commercial re- use. Two are now restaurants, while the former Changi General Hospital is being turned into a spa resort.
Groundbreaking takes place next month and the resort is expected to be ready by next year.
The Singapore Tourism Board (STB) says leading hoteliers have expressed keen interest in the latest property.
According to STB, mid- tier and economy hotels enjoyed average room occupancy rates of 85 and 87 per cent respectively in the first half of 2008.
Nicholas Mak, director of research and consultancy at Knight Frank, said the successful tenderer for the Changi plot will have to come up with a unique concept.
He said the hotel needs to play on Changi's laid- back character and is likely to be mid-tier.
The first state property to be converted for hotel use, at Chin Swee Road, is a boutique establishment with 140 rooms. It officially opened in mid-May, with an initial occupancy rate of about 50 per cent.
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