Source : The Business Times, October 22, 2008
Three property and infrastructure funds issued statements on Wednesday in a bid to reassure investors of their financial positions.
The Macquarie International Infrastructure Fund Limited (MIIF) said that its businesses are performing strongly in line with management's expectations.
The fund revealed that it has no bilateral dealings with known troubled financial institutions, and the earliest maturity date for borrowings held by underlying businesses stands at 2011.
Facing a possible rating downgrade by Moody's, MacarthurCook Industrial Reit (MI-Reit) said that its income is secured by a long lease expiry profile, head lease arrangements and quality and diversified tenants.
MI-Reit added that it is in negotiations to refinance debt maturing in April 2009. Negotiations should be finalised in January next year.
The MacarthurCook Property Securities Fund also highlighted its commitment to further reduce debt and prudently manage its underlying portfolios.
Wednesday, October 22, 2008
CMT Puts Works At Three Malls On Hold
Source : The Business Times, October 22, 2008
Trust's fundamentals strong, rents not likely to bottom out
CAPITAMALL Trust (CMT) yesterday said that it will put upgrading plans for some of its properties on hold because of high construction costs.
The Atrium: CMT's third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from this new acquisition
Singapore's biggest property trust also said that its third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from new acquisition The Atrium. Q3 distribution per unit (DPU) rose to 3.64 cents a share, from 3.4 cents a year earlier. Net property income rose 13.1 per cent to $86.9 million, from $76.8 million in Q3 2007.
The earnings were in line with expectations, analysts said. The news pushed CMT shares to their highest level in more than two weeks. The stock rose as much as 16 cents or 7.8 per cent to $2.21 before ending the day at $2.11.
Looking ahead, CMT will be cautious, will review new commitments carefully and will not sacrifice liquidity for new projects, said Lim Beng Chee, chief executive-designate of the trust's manager. For now, enhancement programmes that have not started at three malls - Funan DigitaLife Mall, Tampines Mall and Jurong Entertainment Centre (JEC) - have been put off. Works at JEC were projected to cost about $170 million.
The trust's fundamentals are strong as rents are not expected to bottom out in the next few quarters, said Pua Seck Guan, CMT's outgoing chief executive. So far this year, CMT has renewed 289 leases - which make up 15.4 per cent of total net lettable area - at a 9.3 per cent increase to preceding rental rates. There is also a $12.2 million projected increase in net property income from ongoing asset enhancement works.
Analysts agreed with Mr Pua. Singapore's retail sector remains resilient, as evidenced by CMT's latest results, Macquarie Research Equities analysts said in a note yesterday. 'CMT remains one of our top Singapore Reit (real estate investment trust) picks, with growth from active leasing, asset enhancements and acquisitions,' it said. Citigroup also issued a 'buy' call on CMT, citing its steady income stream.
CMT has already secured refinancing for $187.5 million and $80 million of loans due in December 2008 and May 2009 respectively and is in the midst of negotiating refinancing for $673.7 million due in August 2009. Both the trust and analysts are confident funding will be secured.
'CMT exists within the enlarged CapitaLand group, and the group as a whole is well supported by local and foreign banks,' said UOB Kay Hian analyst Jonathan Koh. Earlier this month, CapitaLand said that with its various listed entities, it has raised more than $5 billion of debt year-to-date. In May this year, the trust raised its target asset size to $9 billion by 2010, from an earlier forecast of $8 billion. CMT agreed in May to buy The Atrium along the Orchard Road shopping belt for $839.8 million, boosting its assets to $7.2 billion at June 30.
Yesterday also marked Mr Pua's last results briefing at CMT's helm. He quit in September to pursue personal interests. His resignation is a 'big loss' and could threaten the group's ability to grow in the longer term by acquiring under-utilised assets, said Citigroup analyst Wendy Koh. 'However, his departure is unlikely to affect the rental income stream from existing portfolio and major asset enhancement pipeline for existing properties,' she added.
Mr Lim acknowledged that Mr Pua has left 'big shoes' to fill, but is confident that the management team can fill them.
Trust's fundamentals strong, rents not likely to bottom out
CAPITAMALL Trust (CMT) yesterday said that it will put upgrading plans for some of its properties on hold because of high construction costs.
The Atrium: CMT's third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from this new acquisitionSingapore's biggest property trust also said that its third-quarter distributable income rose 14.2 per cent to $60.8 million, from $53.2 million a year earlier, as contributions kicked in from new acquisition The Atrium. Q3 distribution per unit (DPU) rose to 3.64 cents a share, from 3.4 cents a year earlier. Net property income rose 13.1 per cent to $86.9 million, from $76.8 million in Q3 2007.
The earnings were in line with expectations, analysts said. The news pushed CMT shares to their highest level in more than two weeks. The stock rose as much as 16 cents or 7.8 per cent to $2.21 before ending the day at $2.11.
Looking ahead, CMT will be cautious, will review new commitments carefully and will not sacrifice liquidity for new projects, said Lim Beng Chee, chief executive-designate of the trust's manager. For now, enhancement programmes that have not started at three malls - Funan DigitaLife Mall, Tampines Mall and Jurong Entertainment Centre (JEC) - have been put off. Works at JEC were projected to cost about $170 million.
The trust's fundamentals are strong as rents are not expected to bottom out in the next few quarters, said Pua Seck Guan, CMT's outgoing chief executive. So far this year, CMT has renewed 289 leases - which make up 15.4 per cent of total net lettable area - at a 9.3 per cent increase to preceding rental rates. There is also a $12.2 million projected increase in net property income from ongoing asset enhancement works.
Analysts agreed with Mr Pua. Singapore's retail sector remains resilient, as evidenced by CMT's latest results, Macquarie Research Equities analysts said in a note yesterday. 'CMT remains one of our top Singapore Reit (real estate investment trust) picks, with growth from active leasing, asset enhancements and acquisitions,' it said. Citigroup also issued a 'buy' call on CMT, citing its steady income stream.
CMT has already secured refinancing for $187.5 million and $80 million of loans due in December 2008 and May 2009 respectively and is in the midst of negotiating refinancing for $673.7 million due in August 2009. Both the trust and analysts are confident funding will be secured.
'CMT exists within the enlarged CapitaLand group, and the group as a whole is well supported by local and foreign banks,' said UOB Kay Hian analyst Jonathan Koh. Earlier this month, CapitaLand said that with its various listed entities, it has raised more than $5 billion of debt year-to-date. In May this year, the trust raised its target asset size to $9 billion by 2010, from an earlier forecast of $8 billion. CMT agreed in May to buy The Atrium along the Orchard Road shopping belt for $839.8 million, boosting its assets to $7.2 billion at June 30.
Yesterday also marked Mr Pua's last results briefing at CMT's helm. He quit in September to pursue personal interests. His resignation is a 'big loss' and could threaten the group's ability to grow in the longer term by acquiring under-utilised assets, said Citigroup analyst Wendy Koh. 'However, his departure is unlikely to affect the rental income stream from existing portfolio and major asset enhancement pipeline for existing properties,' she added.
Mr Lim acknowledged that Mr Pua has left 'big shoes' to fill, but is confident that the management team can fill them.
Property Sub-Sales Net $95m Profits
Source : The Straits Times, Oct 22, 2008
Third-quarter showing still strong but market will soften soon: Experts
PRIVATE home prices may have slid in the third quarter but the sub-sale market was still going strong.
Ninety-six per cent of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore.
These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.
Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said.
This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.
Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay.
Excluding this sale, the average gain was $301,784 - almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.
Still, 'to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable', said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.
But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.
'The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,' said Mr Nicholas Mak, director of research and consultancy at Knight Frank.
'These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.'
Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006.
Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills' data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.
If they had sold the unit in the first half of the year, however, they would probably have doubled their gain.
The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences.
On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.
All the losses were for units that had been bought last year or this year, according to Savills' data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most.
'In any case, there are always desperate sale cases even during good times,' Mr Ku noted.
The Sail @ Marina Bay had the largest number of sub-sales in the quarter - 19 - with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.
Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade.
But the profits were not just confined to developments in the prime districts.
At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.
Third-quarter showing still strong but market will soften soon: Experts
PRIVATE home prices may have slid in the third quarter but the sub-sale market was still going strong.
Ninety-six per cent of owners who resold an uncompleted home between July and last month pocketed profits from the deals, according to new data by property consultancy Savills Singapore.
These transactions, officially known as sub-sales, occur when you buy a home and resell it before it is built. They are used as a proxy for property speculation because the owner resells the home without ever living in it.
Only 12 sub-sale transactions out of the 306 that Savills analysed in the quarter incurred a loss, amounting to just under $1 million of red ink. The rest made a total of $95.1 million in gains, Savills said.
This continues the trend in the first half of the year, when 97 per cent of such deals turned in profits. But the profits seen in the third quarter were considerably narrower as home prices started softening more quickly.
Profitable sub-sellers made an average of $323,420 in the third quarter, but this was skewed upwards by a single large deal: a whopping $6.7 million profit from the sale of a 63rd-storey penthouse at The Sail @ Marina Bay.
Excluding this sale, the average gain was $301,784 - almost 40 per cent lower than the average gain in the first half of the year. It works out to an average profit for each seller of about 30 per cent over the purchase price.
Still, 'to be able to achieve such gains in a year when the property market has gone into a standstill is highly commendable', said Mr Ku Swee Yong, director of business development and marketing at Savills Singapore.
But in case would-be speculators become tempted by these gains, other consultants noted that the bulk of these deals probably occurred before the Sept 14 collapse of United States investment bank Lehman Brothers, which caused the financial crisis to take a sudden turn for the worse.
'The real estate market typically lags behind the stock market by six months or more, so we will probably start to see the real effect early next year,' said Mr Nicholas Mak, director of research and consultancy at Knight Frank.
'These profitable sub-sale transactions took place before the market hit the skids. It is extremely risky to go and speculate in the market right now.'
Most sellers who made a profit in the third quarter had originally bought their units in the last two years and benefited from the sharp run-up in prices in the period, said Mr Ku. While values have weakened somewhat this year, they are still generally higher than in 2006.
Sellers who held on to their units for a longer time before reselling them in the third quarter made more gains, Savills' data showed. Even those who had bought a unit as late as this year and offloaded it in the third quarter made an average gain of $98,600.
If they had sold the unit in the first half of the year, however, they would probably have doubled their gain.
The biggest profits of more than $1 million each were for units at The Sail @ Marina Bay, St Regis Residences and Cairnhill Residences.
On the flip side, sub-sale losses for the quarter averaged $76,820 for each loss-making deal. A unit at Watermark Robertson Quay chalked up the biggest loss of $207,552, while units at Soleil @ Sinaran, 8 @ Mt Sophia and One Amber were also sold at losses of more than $100,000 each.
All the losses were for units that had been bought last year or this year, according to Savills' data. Sub-sellers who had bought their units at the peak of property fever, between June and September last year, bled the most.
'In any case, there are always desperate sale cases even during good times,' Mr Ku noted.
The Sail @ Marina Bay had the largest number of sub-sales in the quarter - 19 - with each deal netting its seller an average profit of $1.1 million. There was one loss, of $62,890, for a second-floor unit.
Other projects with more than 10 sub-sales included Parc Emily in Dhoby Ghaut, Park Infinia at Wee Nam, Riveredge in Tanjong Rhu and The Esta in Marine Parade.
But the profits were not just confined to developments in the prime districts.
At Casa Merah in Tanah Merah, 10 sub-sales yielded an average profit of $100,351, while Atrium Residences in Geylang saw four sub-sales with an average gain of $54,556.
Construction Sector In For Tough Times
Source : The Straits Times, Oct 22, 2008
Industry hopes the Govt will resume deferred public-sector projects
THE construction sector will not escape the global financial turmoil but the Government will help cushion an anticipated fall in demand, said National Development Minister Mah Bow Tan last night.
'Accordingly, we must all be prepared to face some tough and challenging times ahead,' he told an industry gathering.
'Fortunately, we have had a good run so the momentum is sustaining us one year and, if we are lucky, another year.'
Domestic construction demand is estimated at $30 billion this year, but it is expected to fall, he said.
The global crisis has not caused any disruption or slowdown so far and progress payments of projects have remained prompt and stable.
'But we still need to be watchful because the situation is very fluid and can deteriorate as the financial crisis feeds into the real economy over the next few months and quarters,' warned Mr Mah, who was speaking at the Singapore Contractors Association's annual dinner.
The financial meltdown overseas has brought rapid changes to the once red-hot construction sector.
While there remains a lack of capacity, raw material prices have already started to come down, said industry experts.
Mr Jon Button, director of Gammon Construction, said: 'There'll be a levelling off of demand for the next couple of years. Quite a few (private-sector) projects are already deferred.'
He added that contractors continued to tender for work.
Association president Desmond Hill told the gathering that they hope to see the Government bring back deferred projects by next year or in 2010 as existing jobs will be coming to completion.
Mr Mah said in his speech the Government is prepared to consider suggestions that it resume deferred public projects.
'It is something that we are in a position to consider and will certainly do so, should the need arise. However, we must consider the timing carefully,' he said.
The Government has since last November deferred $4.7 billion worth of public- sector construction projects to ease the pressure on building costs.
Mr Mah said the Government will monitor the situation closely, taking into account construction demand, contracts awarded and cost trends.
Injecting some of the deferred projects back into the market now, when the availability of skilled manpower, equipment and other resources is still 'pretty tight', will not help, he said. 'It will only drive already high construction costs up.'
But there was a brighter note from Mr Mah: 'Look beyond the gloom...and see whether the slowdown presents an opportunity for the industry to consolidate and strengthen its capabilities after recent years of strong growth.'
The industry, he said, must start preparing to tackle the increasingly challenging business environment, as well as exploit future opportunities and 'continue to stay relevant and remain sustainable'.
Industry hopes the Govt will resume deferred public-sector projects
THE construction sector will not escape the global financial turmoil but the Government will help cushion an anticipated fall in demand, said National Development Minister Mah Bow Tan last night.
'Accordingly, we must all be prepared to face some tough and challenging times ahead,' he told an industry gathering.
'Fortunately, we have had a good run so the momentum is sustaining us one year and, if we are lucky, another year.'
Domestic construction demand is estimated at $30 billion this year, but it is expected to fall, he said.
The global crisis has not caused any disruption or slowdown so far and progress payments of projects have remained prompt and stable.
'But we still need to be watchful because the situation is very fluid and can deteriorate as the financial crisis feeds into the real economy over the next few months and quarters,' warned Mr Mah, who was speaking at the Singapore Contractors Association's annual dinner.
The financial meltdown overseas has brought rapid changes to the once red-hot construction sector.
While there remains a lack of capacity, raw material prices have already started to come down, said industry experts.
Mr Jon Button, director of Gammon Construction, said: 'There'll be a levelling off of demand for the next couple of years. Quite a few (private-sector) projects are already deferred.'
He added that contractors continued to tender for work.
Association president Desmond Hill told the gathering that they hope to see the Government bring back deferred projects by next year or in 2010 as existing jobs will be coming to completion.
Mr Mah said in his speech the Government is prepared to consider suggestions that it resume deferred public projects.
'It is something that we are in a position to consider and will certainly do so, should the need arise. However, we must consider the timing carefully,' he said.
The Government has since last November deferred $4.7 billion worth of public- sector construction projects to ease the pressure on building costs.
Mr Mah said the Government will monitor the situation closely, taking into account construction demand, contracts awarded and cost trends.
Injecting some of the deferred projects back into the market now, when the availability of skilled manpower, equipment and other resources is still 'pretty tight', will not help, he said. 'It will only drive already high construction costs up.'
But there was a brighter note from Mr Mah: 'Look beyond the gloom...and see whether the slowdown presents an opportunity for the industry to consolidate and strengthen its capabilities after recent years of strong growth.'
The industry, he said, must start preparing to tackle the increasingly challenging business environment, as well as exploit future opportunities and 'continue to stay relevant and remain sustainable'.
URA Rejects Sole Bid For Mohd Sultan Office Site
Source : The Business Times, October 22, 2008
THE Urban Redevelopment Authority has rejected the sole bid - submitted by RSP Architects Planners & Engineers - for a transitional office site in Mohamed Sultan Road, as the price offered was too low. The tender for the site closed a week ago, with RSP bidding $4.65 million.
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Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, RSP's bid equated to $46.67 per sq ft per plot ratio (psf ppr).
Only one other transitional office site, at Aljunied, has drawn a lower bid - of $38.37 psf ppr in January. This site was also not awarded.
DTZ senior research director Chua Chor Hoon said: 'URA's decision not to award is expected because of the very low and lone bid. The low bid reflects the poor sentiment in the office sector, which is facing weakening demand and substantial supply in the pipeline.'
According to DTZ, island-wide average office occupancy eased 0.6 of a percentage point in the third quarter of this year to 96.3 per cent on a quarter-on-quarter basis.
The average office rent also peaked in Q3, with no rental growth during the quarter, DTZ noted.
On the need for alternative office space, Ms Chua said: 'Transitional office sites are like Executive Condominiums. They have a part to play only during certain stages of a property cycle, when office rents and residential prices rise too much and become out of reach for some occupiers. Now the office sector is weakening and the concern is about falling rents and prices, transitional office sites would not be relevant.'
The rejection of RSP's bid does not bode well for the future of transitional office sites.
'The sale of transitional office sites, which started last year, was a novel idea but has less relevance today,' said Cushman & Wakefield managing director Donald Han. 'The operating environment has changed from one that is of a supply crunch to one of sustainable demand - all within the past 18 months. That being said, for demand to sustain, business costs, such as occupancy costs, should be kept affordable to ensure the viability of businesses.'
Asked to comment, a URA spokesman said yesterday: 'There is an ongoing tender for another transitional office sale site in Mountbatten Road, which closes on Nov 18. The government will be evaluating the market response to recent tenders and the demand for transitional office sites as part of the process of planning the next Government Land Sales programme.'
THE Urban Redevelopment Authority has rejected the sole bid - submitted by RSP Architects Planners & Engineers - for a transitional office site in Mohamed Sultan Road, as the price offered was too low. The tender for the site closed a week ago, with RSP bidding $4.65 million.
+Logo.gif)
Based on the 66,482 sq ft site and maximum permissible gross floor area (GFA) of 99,727.5 sq ft, RSP's bid equated to $46.67 per sq ft per plot ratio (psf ppr).Only one other transitional office site, at Aljunied, has drawn a lower bid - of $38.37 psf ppr in January. This site was also not awarded.
DTZ senior research director Chua Chor Hoon said: 'URA's decision not to award is expected because of the very low and lone bid. The low bid reflects the poor sentiment in the office sector, which is facing weakening demand and substantial supply in the pipeline.'
According to DTZ, island-wide average office occupancy eased 0.6 of a percentage point in the third quarter of this year to 96.3 per cent on a quarter-on-quarter basis.
The average office rent also peaked in Q3, with no rental growth during the quarter, DTZ noted.
On the need for alternative office space, Ms Chua said: 'Transitional office sites are like Executive Condominiums. They have a part to play only during certain stages of a property cycle, when office rents and residential prices rise too much and become out of reach for some occupiers. Now the office sector is weakening and the concern is about falling rents and prices, transitional office sites would not be relevant.'
The rejection of RSP's bid does not bode well for the future of transitional office sites.
'The sale of transitional office sites, which started last year, was a novel idea but has less relevance today,' said Cushman & Wakefield managing director Donald Han. 'The operating environment has changed from one that is of a supply crunch to one of sustainable demand - all within the past 18 months. That being said, for demand to sustain, business costs, such as occupancy costs, should be kept affordable to ensure the viability of businesses.'
Asked to comment, a URA spokesman said yesterday: 'There is an ongoing tender for another transitional office sale site in Mountbatten Road, which closes on Nov 18. The government will be evaluating the market response to recent tenders and the demand for transitional office sites as part of the process of planning the next Government Land Sales programme.'
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