Monday, November 30, 2009

Eunos HDB lift woes unresolved

THE offer was laid on the negotiation tables by the HDB. But a group of Eunos residents who have been unhappy for years over external lift shafts which block their homes are refusing to budge

Some of the 42 affected flat owners in Blocks 411, 415 and 417 in Eunos Road 5 refused to accept any of the four options offered over the weekend by the HDB in its latest bid to solve the problem.

Some of them crossed out all the options with marker pens and wrote on the form that they were still not happy with the olive branches offered.

Some want the offending lift shafts totally torn down instead.

These Eunos residents face a rather unique problem because of the way the three blocks were constructed. Each block is in a U-shape and the two staircases are located at both ends of the U while existing lifts are located in the middle.

Because odd-numbered floors do not share a common corridor - the building combines double-storey maisonettes with single-storey corner units - just upgrading the existing lift shafts was not sufficient to give all units lift access.

When the estate went through a lift upgrading programme which started in early last year, the two additional lift shafts per block could not be built facing a staircase like how it is done with most other blocks.

The new shafts ended up blocking residents' flats from sunlight and wind, making their homes dark and hot. They have had to switch on lights and air-conditioning during the day, increasing their utility bills. One resident even reported mildew growing on his walls.

Since 2006, some of the 42 flat owners have been taking on the HDB since they found out where the new lifts would be positioned. They have had numerous meetings with the HDB and the area's Member of Parliament Ong Seh Hong.

At a discussion last month, it was agreed that the project consultants to the lift upgrading works would come up with several options on tweaking the designs of the lift shafts. But at a survey conducted over the weekend on residents' preferred options, most residents who came by to look at the mock-ups were still unhappy.

Some of them surrounded HDB's deputy director of upgrading programmes management Chee Kheng Chye last Saturday morning, firing questions at him. The questions included why the lift shaft was built blocking most of the front door and one bedroom unit, when in a brochure given out to residents, the lift shaft had appeared different on the floor plan. The diagram, explained Mr Chee, is schematic and not drawn to scale.

Residents said the suggested changes were too minor to make a real difference.

One design suggested replacing part of a newly constructed wall linking the lift shaft to the corridor with aluminium fins to improve the ventilation and lighting. But as the fins are tilted at an angle to prevent people from looking into affected homes, residents said it did not make much difference. Yet, not doing so would compromise their privacy - the windows would expose their homes, including the bedroom, to the full view of anyone using the lifts.

Retiree Chew Keng Woh, 64, who rejected all the options, said: 'They have to give us an alternative, then we can make suggestions.'

Corporate planner Khng Hwee Peng, 40, who also said no to all the options, said: 'I wouldn't go to the extreme of tearing down the whole thing but we're still hoping that they will come up with a solution to add ventilation and light.'

Others, like retiree Eng Ah Hee, 63, suggested the HDB buy back their flats so they can relocate elsewhere. They said the value of their flats have been affected.

While the HDB had earlier said it would proceed with only options picked by a majority of the affected residents, it said yesterday that it would be referring the survey results to the working committee and the area's MP to decide what to do next.

Dr Ong said he hoped residents would consider the choices offered, saying that the project had been delayed for six months while solutions were explored. 'You cannot say the HDB has been short of trying,' he said.

The lift upgrading was scheduled to be completed by the first quarter of next year but now, it is likely to be done in the last quarter instead.

But at least one affected resident will be choosing from existing options. Madam Asia Mahwan, 44, said that if the project continues to be delayed and left as a construction site, the dust and debris would be a continuing inconvenience. 'We have no choice. We have to compromise...I don't think HDB will pull down the lift shafts.'

Source, Straits Times 30 November 2009

Reit investors get a reality check

They discover the ability of most Reits to deliver decent yields - something which many had neglected when they chased capital gains before the recession

(SINGAPORE) After a heart-stopping year, investors in real estate investment trusts (Reits) seem to have swallowed a dose of reality on what the sector can - and cannot - deliver.

It was a lesson learnt the hard way. Once favoured for offering high capital gains, the Reit sector lost that shine early in the year as unit prices tanked - the FTSE ST Reits Index fell as much as 50 per cent from September 2008 to March 2009. The sector was hit by market concerns over earnings, as property rents and occupancy rates dropped, and debt levels, as credit lines froze.

Saizen Reit, for one, was forced to suspend distribution payouts since its fiscal second quarter because of credit problems. More recently, the public wrangle between MacarthurCook Industrial Reit and Cambridge Industrial Reit highlighted the financing issues that the sector has to grapple with.

What stood out amid the tumult was the ability of most Reits to deliver decent yields - something which many investors had neglected when they chased capital gains before the recession. Looking at annualised distributions per unit (DPU) in the third quarter of the calendar year and closing unit prices as at last Thursday, all 13 Reits BT looked at had distribution yields of more than 5 per cent.

This has changed how investors view the sector. 'People are becoming more receptive to Reits as yield instruments rather than as growth instruments,' noted CIMB Reit analyst Janice Ding.

The financial crisis has tested the strength of the Reit model and revealed risk factors which investors may have previously overlooked, market watchers say. OCBC Investment Research analyst Meenal Kumar said: 'We believe this is for the better, as investors now have a more balanced perspective on the strengths and weaknesses of this investment vehicle.'

Overall distribution yields in the sector could have been higher if not for weaker DPUs. Of the 13 Reits, as many as nine saw their DPU slide from a year earlier.

For five of these nine, lower DPUs were caused by reduced earnings. This was the case for those in the hospitality sector - Ascott Residence Trust and CDL Hospitality Trust both had less distributable income as the downturn hit tourism.

But there were four other Reits with lower DPUs even though their distributable income increased. Equity raising was the culprit - all four conducted rights issues or private placements in the one-year period under review. This means that distributable income had to be spread over larger unit bases, lowering DPUs.

Equity raisings have been rife among Reits, as they tried to pay off maturing debts amid the credit crisis. Their efforts have been successful - so far - in reducing the pressure on the balance sheet. According to the Monetary Authority of Singapore's Financial Stability Review, the local Reit sector had 18.5 per cent of total borrowings maturing in 2009 and 2010 as at end-October this year, down from 57 per cent at end-2008.

While immediate refinancing pressures have eased, Reits still have huge chunks of debt due in 2011 and 2012. This leads some analysts to believe that equity raisings will continue next year. CIMB's Ms Ding expects acquisitions - on top of debt repayment - as another driving factor. With so much fund raising, more discerning investors may also not respond well to cash calls used merely to reduce debt, she added.

Some Reits are already showing renewed appetite for assets. 'We expect more acquisitions in 2010 as that is an important growth strategy underpinning the Reit model,' said OCBC's Ms Kumar.

The pace of acquisitions may be constrained in the medium term because Reit managers are targeting lower gearing after the crisis, she added. 'But risk appetite is not static and it could increase as and when the property market recovers.'

For now, Reit investors are likely to remain cautious. As the MAS highlighted in its report, several other risks remain - credit conditions could worsen again with sudden and large declines in financial markets, and rental yields for commercial and industrial space could fall further.

In particular, office Reits are gaining little favour among analysts. CIMB's Ms Ding believes that negative rental reversions will set in next year and affect DPUs. The dilutive effect of rights issues and private placements will also extend into 2010 for some Reits, she said.

OCBC's Ms Kumar believes that hospitality Reits should see year-on-year gains in income as the travel industry recovers, helping occupancy and room rates improve.

Source: Business Times, 30 Nov 2009

Iskandar zone not affected by debt debacle: Johor

(KUALA LUMPUR) The Malaysian state of Johor says its economic zone, which has the nation's largest number of Middle Eastern investors, should be unscathed by the Dubai debt crisis, reports said yesterday.

Dubai World, the city state's flagship conglomerate announced last Wednesday that it was seeking a six-month reprieve from its US$59 billion debt payments, sending global stocks into a nosedive on fears of a default.

Johor Chief Minister Abdul Ghani Othman told the Star daily only one Dubai company, Damac Properties, had invested in the Iskandar special economic zone.

'Since only one company from Dubai is involved in Iskandar, we don't think the Dubai financial crisis would have an effect on the regional growth area,' he told the paper. 'Most of the investors in the growth area are from Saudi Arabia, Kuwait and Abu Dhabi.'

He did not say how much Damac had invested in Iskandar, where the company is involved in a project on an 8 hectare site.

An aide to Mr Abdul Ghani confirmed his comments to AFP on condition of anonymity, saying the Dubai company had yet to begin operations in the area.

He said total investment for Iskandar, which was launched in 2006, had hit US$13 billion so far, with about 15 per cent coming from Middle Eastern investors.

Almost three times bigger than neighbouring Singapore, the Iskandar region will be Malaysia's largest economic zone upon completion in 2025, by which time the government hopes to have created 800,000 jobs and attracted around US$100 billion in investment. -- AFP

Source: Business Times, 30 Nov 2009

Dubai's woes could hit the fragile US real estate market

Dubai World, with US$59b of debt, set off a global stock market selloff last week

(NEW YORK) Dubai's debt woes could further unhinge an already fragile US commercial real estate, as it illustrates the importance of that tiny country to global investors in an increasingly interconnected world.

A state-owned investment conglomerate Dubai World, with US$59 billion of liabilities, set off a global stock market selloff last week after it said it wants to restructure its debt, including at its property subsidiary Nakheel.

'This downturn has had more of a global impact,' said Tony Ciochetti, chairman of Massachusetts Institute of Technology's Center for Real Estate in Cambridge, Massachusetts.

'As I try to explain to my students, with a global economy, we're all attached at the hip financially in some way, shape or form,' he added.

The Dubai news also cast doubt over the strength of the fledgling US economic recovery, and the prospects for a bottoming of property prices.

On Friday alone, the Dow Jones US Real Estate Index fell 2.9 per cent, nearly twice the decline of broader US market indexes. 'Dubai may have to unload some very prestigious properties at distressed prices and this will drive the price of all commercial real estate lower,' wrote Richard Bove, a banking analyst at Rochdale Securities in Lutz, Florida.

In the US, Dubai World's portfolio includes several well-known properties, and the fallout could have a larger impact on the entire real estate market.

The company is a partner with casino operator MGM Mirage in the US$8.5 billion CityCenter project, which would add 6,000 rooms to a Las Vegas Strip gambling corridor already saturated with unoccupied hotel rooms.

Nakheel, perhaps best known as the developer of Dubai's palm-shaped islands, also carries the Mandarin Oriental and W hotels in New York in its portfolio, and has a 50 per cent stake in the Fontainebleau Miami Beach resort.

And, through its Istithmar affiliate, Dubai World controls the upscale retailer Barneys New York Inc.

The main threat to US commercial property from Dubai World woes may be 'potential for contagion', said Sam Chandan, chief economist at Real Estate Econometrics LLC in New York. 'It has the potential to spill over into the broader perception of real estate development and real estate as being a very risky area for exposure,' Mr Chandan said.

Many have already been burned.

US commercial real estate values have already fallen 42.9 per cent from their 2007 peak, Moody's Investors Service said. Last month, delinquencies on US commercial real estate loans that were packaged into commercial mortgage-backed securities reached 4.8 per cent, more than six times the year earlier level, according to Trepp LLC in New York.

In a Nov 23 report, Moody's analyst Nick Levidy said prices could bottom at 45-55 per cent below their peak, implying an additional 5-28 per cent decline, but in a 'stress case' could drop 65 per cent from their peak. Like US investors, foreign investors were enticed through much of this decade to buy US real estate aided by cheap credit and the hope that property prices would steadily rise for a long time.

Currency fluctuations also provided a boost. And the US dollar lost about one-third of its value against a basket of currencies since late 2002, making it easier for foreign investors to scoop up US real estate even when valuations grew too rich for investors at home.

Dubai World's holdings go far beyond real estate. It has a 20 per cent stake in Canada's Cirque du Soleil, and also invests in the global bank Standard Chartered Plc and New York boutique investment bank Perella Weinberg Partners.

Other investments go farther afield - or under water. Dubai World is suing a former executive in a case arising from a wayward foray into submarine financing. But Mr Ciochetti suggested that it is premature to quantify Dubai World's impact on US commercial real estate.

'It is hard to focus on any one particular participant and then generalise about the whole market,' he said. 'It illustrates that very few places and participants in the commercial real estate market are totally exempt from the global economic crisis.' - Reuters

Source: Business Times, 30 Nov 2009

Keen interest for CapitaMalls

THE buzz created by last week's listing of CapitaMalls Asia (CMA) - the biggest initial public offering (IPO) here in 16 years - is triggering keen interest in its contracts.

Investors who wish to take advantage of a possible upside on the counter may consider a CMA call warrant offered by Macquarie Securities - the only contract of its kind in the market. This warrant has an exercise price of $2.25 and expires on May 5 next year.

It has been actively traded since it was listed, with 9.9 million units done last Wednesday and about 6.1 million changing hands last Thursday. The contract gained 1.5 cents to close on 30 cents last Thursday.

CMA's IPO raised $2.8 billion, and was Singapore's largest since SingTel's in 1993, which raised more than $4 billion.

CMA made its trading debut last Wednesday, gaining about 8.5 per cent from its offer price of $2.12 to close at $2.30. It shot up to as high as $2.39 the next day before closing unchanged at $2.30.

CMA, a shopping mall unit of CapitaLand, has a $20.3 billion portfolio of 86 malls here, in China, Malaysia, Japan and India. The majority - 50 properties - are in China, including 18 still under development.

CIMB-GK noted: 'The IPO has unleashed a pan-Asia retail mall

behemoth with strong debt and capital market capacity to execute asset recycling.'

The broker noted that parent CapitaLand's success with this model has typically led to its share- price outperformance.

A call warrant lets an investor buy into a stock or index at a pre-set or strike price over a period of three to nine months. A put warrant allows an investor to sell the stock or index at a pre-set price over a period of time.

Source: Straits Times, 30 Nov 2009

Sunday, November 29, 2009

Calmer home sales pace likely in 2010

The unusual frenzy in private home sales till September this year is fast winding down, as launches slow.

It should be a short lull before new launches kick in from late February, after Chinese New Year. Next year, however, is expected to see a steadier and calmer pace.

And, unlike this year, more high-end launches are expected next year, experts said.

DTZ head of South-east Asia research Chua Chor Hoon expects sales activity to remain low for next month and early next year.

This is because there are few mass market projects being launched in the next few months.

Recent government cooling measures seem to have had an effect too, making home hunters and speculators more wary about wading in, she said.

The property market will likely pick up only after Chinese New Year in mid-February next year, said Knight Frank’s executive director (residential) Peter Ow.

Apart from the high-end launches next year, home hunters can expect several large projects including those on sites that were sold en bloc during the previous boom, experts said.

These include the site of Minton Rise condo in Hougang; a site in Dakota Crescent, near Old Airport Road; and a project in Yishun.

The 99-year Minton Rise project will have at least 1,000 units of various sizes while the Dakota Crescent site, also a 99-year project, may have around 600 units.

In Yishun, MCL Land has a launch-ready 608-unit project a 10-minute walk from the Khatib MRT station.

Prices for this 99-year condo, which offers a view of Lower Seletar Reservoir, could well be above $700 per sq ft (psf), an industry source estimated.

Other likely non-prime projects in the first half of next year include the collective sale sites of Flamingo Valley in Siglap and Rainbow Gardens in Toh Tuck Road.

But one industry source said it is the high-end market that will be interesting to watch.

Next year, developers are expected to start pushing out their high-end projects for sale, after a year with no major luxury launches. ‘Buyers will have a lot of choices so they should be selective,’ the industry source said.

Possible new prime launches include the condo on the former Parisian site in Orchard; The Laurels as well as Urban Resort in Cairnhill; Ardmore III and the new condos on Pin Tjoe Court and Anderson 18 sites in Ardmore Park.

Some of these en bloc sites were kept for lease as the developers rode out the downturn.

While mass market home prices have since peaked, high-end prices have not reached the previous high of $4,000 psf to $5,000 psf.

Today, there is still little demand for homes priced beyond $3,000 psf, sources said.

Affordability has been a key issue in the past year, such that many developers reconfigured their projects to have smaller units in general in order to keep absolute prices low.

MCL Land, for instance, reconfigured its Yishun project to allow for more small units.

Most new launches next year would still have small units in general, said Mr Ow.

Third-quarter data shows that these small units of 500 sq ft and below remained popular, with sales totalling 253 units, up from 102 units in the same period a year ago, according to data from DTZ.

They form about 2.7 per cent of total transactions this year, compared to 3 per cent last year, and just under 1 per cent in 2007.

Source: Sunday Times, 29 Nov 2009

Skybridges not deemed part of condo's gross floor area

We refer to last Sunday's article, 'More condos let you walk on air', which reported that fully covered skybridges are considered part of a condominium's gross floor area, which is pre-determined by the Urban Redevelopment Authority (URA).

The report elaborated that this means the floor area occupied by a skybridge could have been used for another apartment unit, giving developers additional income.

The article made reference to Lincoln Suites, that the space taken up by the skybridge could have been used for a $700,000 studio apartment.

Skybridges are not considered part of a condominium's gross floor area (GFA).

A covered skybridge that connects communal areas between two or more blocks, and serves as a communal passageway to facilitate the residents' movement at the upper levels is exempted from the GFA calculation of the development.

In the case of Lincoln Suites, the design of the skybridge includes both a passageway as well as an indoor gym.

As the gym functions more like a clubhouse facility and does not serve as a passageway to facilitate the movement of residents between the two blocks, it does not qualify for GFA exemption.

The remaining area of the skybridge is exempted from GFA just like other covered skybridges.

Han Yong Hoe
Group Director (Development Control)
Urban Redevelopment Authority

Source: Sunday Times, 29 Nov 2009

HDB: Agencies helping to mediate dispute

We refer to the letter, 'Helpless against difficult neighbour' (Nov8), by Ms Serene Wong.

Our branch office had contacted Ms Wong and informed her of the actions taken by the various agencies, such as the police, West Coast Town Council and grassroots leaders.

The various agencies are working with the parties concerned to resolve this neighbourly dispute through mediation efforts.

We hope that such social issues can be resolved in an amicable manner instead of through the legal process.

Lim Lea Lea (Ms)
Head (Clementi Branch Office)
Housing & Development Board

Source: Sunday Times, 29 Nov 2009

London luxury home prices up

London - Luxury home prices in central London rose on an annual basis for the first time in 17 months as bank and hedge fund executives bought houses and apartments in anticipation of bonuses, Knight Frank said.

Values of properties costing more than £1 million (S$2.3 million) were 1.6 per cent higher this month than a year earlier, the first annual increase since June last year, the London-based broker said in an e-mailed statement today.

Still, prices are 15 per cent below their peak in March last year.

'Anecdotal evidence from across our offices suggests that money is becoming more apparent as we get closer to the end-of-year bonus season,' Mr Liam Bailey, head of residential research at Knight Frank, said in the statement. 'Demand from senior management is driving the market.'

Bonuses for financial services employees in the City of London and Canary Wharf, the two largest financial districts, may rise 50 per cent this year to £6 billion, according to Knight Frank. Finance industry workers account for half the demand for luxury homes.

Prices rose 1.2 per cent this month from last month, the eighth straight month-on-month increase, Knight Frank said. The most expensive homes did not start recovering in value until May, the broker said.

Houses and apartments in Chelsea, Kensington and Knightsbridge, districts favoured by bankers, rose the most.

Luxury residences may return to peak prices in 2012, a year or two sooner than the rest of the British housing market, according to Knight Frank and Savills estimates.

The sterling's 19 per cent decline against a basket of currencies since the home market's peak has revived demand from foreign investors.


Source: Sunday Times, 29 Nov 2009

Honey, let's book our flat early

Many courting couples book new HDB flats years before tying the knot

Help! They are getting married but they cannot get a new flat quickly enough, the couples in distress say.

Dr Muhammad Faishal Ibrahim, an MP for Marine Parade GRC, is used to hearing such laments. He sees three to four cases a month of couples in need of a quick housing fix.

They could turn to the resale market but surging demand means the high prices are beyond the reach of many young couples.

Which is why Dr Muhammad said: 'Housing should be part of your wedding plans.'

In other words, couples should plan ahead, like what transport planner Teo Ti Pin has done. Wedding bells for him will ring in 2013 when his new five-room flat in Punggol is ready.

He and his girlfriend of five years have registered under a scheme for courting couples to book new HDB flats.

They are not alone. Four in 10 first-time applicants for new flats are under this fiance/fiancee scheme.

They need to produce their marriage certificate only within three months of getting the keys to their flat.

While the HDB said this proportion is 'high', Dr Muhammad feels it could be higher.

Sure, there is a wait for the flat to be built, but the payoff is in not coughing up a big sum to get a resale flat.

High demand for such units has caused prices to surge, by 3.6 per cent in the third quarter this year compared to the previous quarter - a record high in five years.

The cash-over-valuation (COV) - or the cash top-up payable by buyers above a flat's valuation - also quadrupled from a median of $3,000 in the previous quarter, to $12,000 in the third quarter.

Dr Muhammad, an assistant professor of real estate at the National University of Singapore, feels that couples who run into trouble with housing often fail to plan ahead.

'I've met residents who are often in distress and can't get a flat because they apply six months or a year before their wedding date, without thinking it takes three years to build the flat,' he noted.

Indeed, Mr Teo, 26, said he was advised by a colleague this year to plan earlier for a flat.

The couple, who met in their first year in university, want to settle down in a few years' time. His girlfriend, Ms Ng Yizhen, 24, a researcher in a laboratory, wants to have children before she turns 30.

They initially looked for a resale flat near his parents' home in Boon Keng. Weekends were spent viewing flats in Toa Payoh, Potong Pasir and Serangoon but prices were beyond their reach.

'People were asking for at least $20,000 cash-over-valuation. A four-room flat cost at least $450,000,' said Mr Teo.

Their combined income just about exceeds $6,000 a month.

Mr Teo said while they would have married if they could find a resale flat, they are not in such a rush that they would rent or move into either of their parents' homes.

The HDB scheme, which was started in the 1960s, carries with it the risk of a couple's relationship turning sour while they wait for the flat to be built.

They cannot replace the name of their partner with that of another, or a parent.

They will also have to forgo the downpayment - 5 per cent of the flat's selling price - if they give up the unit, as is the case with married applicants.

While acknowledging the risks, Dr Muhammad said the upside is that couples have a new flat when they begin their married lives.

Engineer Dennis Ee, 27, who is on the scheme, feels the same way. He is mindful of the risks in joining the scheme but 'we are quite sure we will commit to each other'.

He and his girlfriend, Ms Ashley Qiu, 26, also an engineer, are due to get their four-room flat in Punggol in 2013.

Source: Sunday Times, 29 Nov 2009

Saturday, November 28, 2009

JRF mulls 50b yen share sale after merger

JAPAN Retail Fund Investment Corp (JRF) is considering selling shares to raise as much as 50 billion yen (S$795 million) once its planned merger with LaSalle Japan Reit is completed in March, the retail fund’s asset manager said.

JRF, which owns 50 commercial buildings including shopping malls, plans to merge with LaSalle Reit by March 1.

The new real estate investment trust (Reit) would have total assets of over 700 billion yen, putting it just behind Nippon Building Fund Inc, the biggest listed Reit in Japan.

Takuya Kuga, chief executive of Mitsubishi Corp-UBS Realty, which manages JRF, said in an interview that it is an ideal time to start buying selected properties as he sees an increasing number of attractive deals in central Tokyo as well as satellite towns.

‘The prices (that sellers and buyers are offering) have begun matching,’ Mr Kuga said, adding that he wants to carry out the Reit’s public offering as soon as the planned merger is approved and completed. ‘Some (commercial) property prices are seen coming close to the bottom.’ He also said that the JRF is interested in buying shopping centres located outside big cities and retail properties in prime locations such as Ginza and Omotesando.

Asked about the share sale size, Mr Kuga said that it would likely be between 10 billion yen and 50 billion yen, considering costs and JRF’s current asset size of over 580 billion yen.

‘It would depend on the market’s condition, but if we were to do it (a share sale), it needs to be a certain size,’ he said.

The asset manager is 51 per cent held by Japanese trading firm Mitsubishi Corp, with UBS holding the rest.

Japan’s property market has been hurt by the economic slowdown, with tighter credit making it harder to finance deals.

But a recovery in capital markets began prompting Japanese companies to tap the equities market for much-needed cash, with 40 billion yen already raised so far this year through common stocks and convertible bond issues.

The Reit sector is also seeing a share sale rush with funds such as Nippon Accommodations Fund and Nomura Real Estate Residential Fund announcing public offerings in the past two months.

Looking ahead, Mr Kuga said that JRF’s planned dividend of 13,534 yen per share for the six months to February 2010 would likely be the lowest that it would pay, and that the asset manager aims to raise payouts to an initial target of 30,000 yen (per share) annually as early as possible.

The asset manager plans to reconsider its dividend policy by the middle of January, taking into account the likely impact of the merger.

‘I can’t say we’re optimistic about the business outlook, but we have already secured the funds necessary to repay debts due to mature in February,’ Mr Kuga said. ‘We’ve tried to build a solid financial foundation in the current period (to February), with an eye on expansion after the credit crisis ends.’

Source: Business Times, 28 Nov 2009

It’s time to buy UK commercial property: strategists

Prices rose 1.9% in Oct, the biggest gain since Dec 2005

FIRST, it was corporate bonds; then stocks. Now it’s time to buy commercial real estate in the UK, according to strategists in Edinburgh advising on about £400 billion (S$917 billion) of assets.

Standard Life Investments is telling investors to consider increasing the proportion of money they hold in stores, office buildings and warehouses, said Andrew Milligan, head of global strategy. Today, the commercial property market compares with where stocks were about seven months ago, said Mike Turner at Aberdeen Asset Management Plc.

‘It’s the last major asset class where there is still a higher risk premium than warranted, so we’ve been looking at it,’ Mr Turner said in an interview at his office in the Scottish capital. ‘April is a good expression of the stage we’re at, just off the lows and starting to gain some traction.’

After gains this year in stocks and corporate bonds, Scotland’s biggest fund management firms are honing in on where they reckon money can be made next. UK commercial property prices rose 1.9 per cent in October from the previous month, the biggest gain since December 2005 and the third straight increase after more than two years of declines, according to Investment Property Databank Ltd. Values are still down 42 per cent from the market’s peak in June 2007.

Land Securities Group Plc, Britain’s largest real estate investment trust (Reit) by stockmarket value, said a week ago that the market started to recover earlier than it had expected. ‘Now looks a good time to consider what the strategic weightings for property should be,’ Mr Milligan said at his office in Edinburgh’s Georgian city centre. ‘If we are at the start of a subdued but normal economic recovery, then very clearly property will inexorably become more expensive.’

Aberdeen, whose headquarters are in the oil city of the same name, and Standard Life and Scottish Widows Investment Partnership, both based in Edinburgh, are Scotland’s three largest fund managers.

Standard Life oversaw £137 billion on Sept 30, while Aberdeen had £129 billion on June 30. Scottish Widows runs about £135 billion after taking on money from another part of parent Lloyds Banking Group Plc.

Scottish Widows started adding to UK commercial property investments in September, moving to ‘overweight’ in its mixed-asset funds from ‘underweight’ the previous two years, said Ken Adams, head of global strategy.

‘UK commercial property is cheap, and cheaper than stocks,’ Mr Adams said in an e-mail. ‘Credit is, broadly speaking, close to fair value.’

They all expect stocks to continue to rise in 2010, though not as much. Mr Turner predicted increases of less than 10 per cent for markets next year, while Mr Adams forecast a total return of 10-15 per cent over the next 12 months.

The MSCI World Index is up 26 per cent this year. The index has gained 68 per cent since March 9, when it was close to the lowest level since at least 1995.

Mr Milligan said a key catalyst for the markets next year will be how central banks and governments around the world withdraw measures designed to tackle the financial crisis. For example, the Bank of England bought bonds to increase the amount of money in the market.

‘We certainly see the stock market continuing to improve into 2010 and we should see more evidence that companies are able to generate profits and investor confidence should improve,’ Mr Milligan said. ‘We’re certainly warning clients that there could be more volatility.’

When it comes to commercial property, the strategists are still reticent about the US market because they said prices may have further to fall. In the UK, yields on shopping centres and offices have jumped as prices fell.

‘We’ve put money into UK commercial property funds,’ said Mr Turner. ‘We’re not anticipating any significant capital performance, but just the yield alone.’

Prime malls in Britain yielded 6.85 per cent in October compared with 4.85 per cent two years earlier. For offices in the City of London financial district, yields rose to 6.5 per cent from 4.75 per cent, according to data from property adviser CB Richard Ellis Group Inc.

Source: Business Times, 28 Nov 2009

Reit managers need to grasp regulator’s position

Muted investor response to MI-Reit proposal indicates restructuring needs to be communicated transparently

THOSE seeking to handle mergers and acquisitions of real estate investment trusts (Reits) will have to develop a better understanding of the regulator’s position, OCBC Investment Research said in a report this week.

Earlier this month, the manager of Cambridge Industrial Trust failed to take control of a competing Reit, MacArthurCook Industrial Reit (MI-Reit), after the Monetary Authority of Singapore (MAS) stepped in due to potential conflicts of interest.

Appendix 2 of MAS’s Code on Collective Investment Schemes sets out the responsibilities of property funds, and it is understood that this was the basis for MAS’s decision.

OCBC analyst Meenal Kumar said that control of most Reits changes hands at manager level, and this was the first time that control was also contested at unit-holder level.

According to Ms Kumar, muted investor response to the original MI-Reit proposal also indicates that attempts to restructure Reits through dilutive cash calls and acquisitions of sponsor-owned assets, however necessary, need to be communicated to the market more transparently.

MI-Reit finally succeeded – by margins of just a few percentage points in some cases – in pushing through a restructuring plan on Monday under which it will issue new units to investors including AMP Capital as a co-sponsor, present sponsor AIMS Financial Group and other cornerstone investors, followed by a rights issue and a new debt facility.

But unit-holders said that the exercise severely diluted their holdings. CIT’s manager led a week-long campaign to oust MI-Reit’s manager and install itself instead, but the attempt was blocked by the authorities.

‘To be fair, we could see where CIT was coming from (at least on the surface),’ Min Chow Sai said in a Nomura report released on Wednesday. ‘Prior to the recapitalisation announcement, MI-Reit was trading at a 56.4 per cent discount to its book value, which would have been the valuation at which CIT’s $10.3 million investment was made.

‘If CIT’s management had succeeded in taking over as MI-Reit’s manager, it could have potentially unlocked the value of MI-Reit’s portfolio at a narrower discount to book. The investment, which we view as somewhat opportunistic, did not work out as planned.

‘There now appears little CIT can do besides subscribing for its pro rata rights to prevent further dilution. This means the bulk of CIT’s July placement proceeds will now be invested in MI-Reit, instead of de-leveraging its own portfolio.’

Nomura said that allowing for the proposed additions to MI-Reit’s portfolio and higher refinancing costs, ‘we estimate MI-Reit will add about 0.4 cent per unit to CIT’s distribution per unit for forecast FY 2010′.

‘Our numbers suggest the MI-Reit investment adds 0.5 cent per unit to CIT’s value, which is more than offset by a 1.3 cent per unit increase in net debt and 0.7 cent per unit dilution from potential equity raising,’ it said.

Source: Business Times, 28 Nov 2009

S’pore firms shrug off Dubai default

THE debt troubles of Dubai World appear to have had a limited impact on Singapore companies with links to the Gulf emirate.

Property group City Developments (CDL), which tied up with the Dubai government investment company to develop the billion-dollar South Beach site near Suntec City, said it does not expect ‘any impact at all’ on the site’s development.

‘Dubai World holds only a one-third share’ of the development, a CDL spokesman said yesterday. CDL has another third, and the last third belongs to the United States-based El-Ad Group.

The spokesman told The Straits Times that no further capital needs to be pumped into the project at present.

‘However, when the time comes for construction to proceed, all partners will be required to put in their share of additional funds. Should Dubai World decide not to contribute their proportionate share for whatever reasons, their shareholding will be diluted.’

Dubai World had asked on Thursday for six more months to repay its debts, sending global financial markets into a panic over Dubai’s possible bankruptcy.

Analysts singled out banks as among the most vulnerable to a Dubai debt default. The news could have a ‘meaningful impact’ on banks across Asia, said Mr Daniel Tabbush, a banking analyst at CLSA in Bangkok.

He listed Standard Chartered, HSBC and Singapore’s DBS Group as the most exposed in the region.

DBS has a branch in Dubai that was opened in 2006, marking the bank’s first foray into Islamic finance. DBS could not be reached for comment yesterday.

Along with United Overseas Bank and OCBC Bank, DBS is also part of a syndicate helping to finance CDL’s South Beach project.

Market observers said the banks that have exposure to Dubai only through the South Beach project are unlikely to be affected by Dubai’s financial problems, as they will have collateral in the form of the property.

Public transport company SMRT also has a partnership with Nakheel, a property developer that works under the umbrella of the Dubai World group.

SMRT has a six-year contract worth about $120 million with Nakheel to operate and maintain a monorail running through the Palm Jumeirah development in Dubai.

In response to queries about how Dubai’s debt difficulties would affect SMRT, chief operating officer Yeo Meng Hin said the impact to the monorail’s operations, if any, would be minimal.

‘We are long-term partners with Nakheel, and will continue to work closely with its management during this challenging time,’ he said.

Other Singapore companies that have crossed paths with Dubai World include Labroy Marine and Pan-United Marine. The Dubai firm bought both Singapore shipyards in 2007 for about US$2 billion (S$2.7 billion).

Earlier that year, Dubai World’s sister firm Dubai Ports World grabbed headlines in Singapore when it beat PSA International to buy P&O Ports for £3.9 billion (S$8.8 billion).

Source: Straits Times, 28 Nov 2009

From fishing village to desert paradise in 40 years

IN A land seemingly built for the purposes of conspicuous consumption, Dubai never lacked extravagant icons of success.

The most extravagant – and most emblematic of the once sleepy fishing village’s transformation to oasis playground for the rich – were surely the palm tree and the sail.

In keeping with the tiny Gulf emirate’s grandiose vision, both were artificial. One was a set of man-made islands in the shape of palm trees and the other the sail-shaped Burj Al Arab, the world’s most expensive hotel.

Then there was the man-made harbour, the largest in the world, built at Jebel Ali while a free-trade zone was created around the port, catapulting Dubai into the league of major international business hubs.

Billing itself as a safe haven within a volatile region for investors and tourists alike, Dubai, which discovered oil in 1966, tripled its economy to US$34.5 billion (S$47.9 billion) in the 10 years to 2006 and achieved double-digit growth every year until the financial crisis struck.

Its expansion was relentless. By last year, foreign direct investment into Dubai totalled US$21 billion, according to the Financial Times.

The Gulf emirate established itself as the region’s trade and tourism hub, developing businesses such as port operator DP World that became leaders in their field.

It also set out to become a world-class financial centre, competing with the likes of New York and London and boasting an edge in the burgeoning area of Islamic finance.

In 2007, Dubai and Qatar became the two biggest shareholders of the London Stock Exchange, the third-largest bourse in the world.

Within its own borders, Dubai embarked on a massive six-year building boom that turned sand dunes into a glittering metropolis and the city into a magnet for the young, rich and glamorous.

No project was too lavish for Dubai. It is home to the world’s biggest shopping mall – the 1,200-shop Dubai Mall – and will have the world’s tallest building when the 160-storey Burj Dubai is completed next year at an estimated cost of US$1 billion.

The Burj Al Arab hotel was itself the tallest building in the world when it was completed in 1999. The hotel gave itself a seven-star rating – the first in the world – and watched as the publicity, room rates and bookings rocketed.

Dubai made the unthinkable possible with Ski Dubai, which opened in 2006 to offer the ultimate in luxury: skiing in the desert, on one of the world’s largest indoor ski slopes with fresh powder all year round.

Celebrities converged on Dubai’s sands, with David Beckham and Brad Pitt reportedly owning villas in the Palm Jumeirah development, the only one of three planned palm-tree shaped islands that has been completed.

The future of the other two Palm islands is now up in the air – much like that of Dubai itself.

Source: Straits Times, 28 Nov 2009

Rules should cover concerted action by agents

I REFER to Thursday’s report, ‘Thumbs up for ending estate agents’ dual role’.

The Ministry of National Development’s (MND) proposal to ban agents from representing both seller and buyer in the same property transaction is a step in the right direction. However, the proposal is silent on agents who may act in concert in the same transaction, such as agents from the same team of the same agency.

Under the proposed framework, teams could continue to represent both seller and buyer in property transactions. Agents may continue to profit handsomely by attaining exclusivity from sellers and dealing only with associated agents, to the exclusion of all others. Such uncompetitive market structures would give agents strong pricing power when negotiating fees as well.

Agents operating in teams are a common feature of Singapore’s property market and so the proposals by MND should extend beyond the regulation of single agents to include that of teams as well.

Otherwise, agents may continue to follow only the letter of the law with regard to safeguarding both buyers’ and sellers’ interests, disregarding its intent.

Ho Kah Chuen

Source: Straits Times, 28 Nov 2009

Resorts World househunt reaches into HDB heartland

Property consultants say Sentosa IR is scouting for rental flats for some of its foreign staff

VISITORS to the Universal Studios theme park in Resorts World at Sentosa (RWS) will soon be able to live out adventures seen in various movies. There will be zones based on films such as Madagascar, Shrek and Jurassic Park, to bring thrill-seekers to a make-believe world far away from home.

For some employees at RWS, being away from home will also be a new adventure. The integrated resort will be hiring a considerable number of foreigners, and it is said to be searching for hundreds of HDB flats to help them settle in. C&H Realty managing director Albert Lu said that RWS is looking for HDB flats to rent, and approached his firm a few months ago to find out about the rental market. RWS did not share many details then, but the number of flats is ‘in the hundreds’, he told BT.

Another property market insider who declined to be named also said that RWS has been ‘aggressively looking for flats to rent’, and is probably in need of ‘a few hundred’ units.

So far, there is no official statement on the number of foreigners that RWS could hire. Overall, it will employ about 10,000 people when it opens next year. RWS spokesman Robin Goh told BT that it remains committed in recruiting Singaporeans and Singapore permanent residents.

A media report in June noted that RWS had hired 600 workers, of whom 80 per cent are locals. Assuming that the local-foreign ratio stays constant, its headcount from abroad could reach 2,000.

Going by HDB rules, one- or two-room flats can each be rented out to at most four people; three-room flats to at most six people; and four-roomers or bigger flats to at most nine people. Assuming that RWS hires 2,000 foreigners and all of them rent four-room flats, it would need to find at least about 220 units.

Mr Goh said that RWS started looking for ’suitable accommodation’ for foreign staff early this year, with help from a ‘reputable service provider’. He did not specify the types and number of housing involved.

‘To help reduce their stress and anxiety of relocating overseas, we assist our foreign team members in addressing one of their basic needs – accommodation,’ he said. ‘We make sure that they settle down comfortably as well as enjoy working and living in Singapore.’ And it is important for RWS to keep its employees happy because that could enhance their work performance and in turn, visitors’ experience at the integrated resort, he said.

Mr Goh added that RWS considered several factors in choosing accommodation, including the place’s accessibility and proximity to amenities such as convenience stores. ‘The locations we have chosen facilitate good interaction between the local community and foreign talent,’ he added. BT understands that units at Tiong Bahru and Toa Payoh have been found.

C&H Realty’s Mr Lu said that he believes that RWS would want flats in areas near Sentosa, such as Telok Blangah. But he pointed out that the supply of rental flats in such central locations is tight, and RWS might have to broaden its search to estates near MRT stations.

Rents of HDB flats in the central region rose between the second and third quarter of the year. For instance, the median sub-letting rent for a four-room flat in the area increased from about $2,000 to $2,200.

HDB’s website shows that up to the third quarter of this year, the agency has granted 11,235 sub-letting approvals. The bulk of these – 3,978 or 35 per cent – were for three-room flats. Another 3,593 approvals were for four-room flats.

Also, looking across all towns and flat types, median sub-letting rents have remained relatively steady from the first to third quarter.

Dennis Wee Group director Chris Koh observed that the HDB rental market is ‘more stabilised’ compared with the period when collective sales were rife and many displaced residents were looking for lodging. His firm has seen more rental enquiries direct from foreigners working with RWS.

Marina Bay Sands, the other integrated resort due to open next year, has not engaged property agents to look for accommodation for its foreign staff. ‘Housing arrangements will take into account the needs of the prospective foreign employees,’ said a spokeswoman. ‘At this time, Marina Bay Sands is giving priority to attracting and selecting Singaporeans and permanent residents for our job opportunities.’

Source: Business Times, 28 Nov 2009

From mass market to high end

Analysts upgrade property counters with exposure to the top end of the sector

SALES of high-end homes have picked up. And as a result, analysts are more upbeat about property counters with exposure to the top end of the market.

DBS Group Research has upgraded its calls on SC Global, Ho Bee Investment and Wheelock Properties to ‘buy’. The three developers have significant exposure to the high end of the market.

‘We see value emerging for these companies, following price consolidation in recent months, and this is backed by our expectation of a pick-up in activity in the high-end segment come 2010,’ DBS analyst Adrian Chua said in a Nov 17 report.

DMG & Partners Securities analyst Brandon Lee said in a Nov 16 note: ‘The confluence of the integrated resorts’ opening, strong real estate fundamentals and more positive economic newsflow should lead to an upswing in high-end prices from current levels over the next six months.’

Mr Lee issued fresh ‘buy’ calls on City Developments, Wing Tai Holdings and SC Global.

The property recovery started in the mass market, where sales began to improve as early as February this year. Activity at the top end of the market only started to pick up in Q3.

‘The number of units transacted at more than $2,000 psf – our definition of high-end – is just below the number of units we saw back in Q1 2007, prior to the run-up in the high-end market,’ said DBS’s Mr Chua.

And while the property market cooled in October, the high end held up. Developers sold 811 new private homes in October, down from the 1,143 in September.

But the number of high-end homes sold climbed month on month. Goldman Sachs said that 285 homes with a median price of more than $1,500 psf were sold in October 2009, compared with 115 in September. Prime district sales are now the driver, the bank said on Nov 16.

Analysts cited a number of reasons for betting on high-end homes. Policy risk is smaller for this segment as government policies tend to focus on the mass market.

The government announced cooling measures in September and warned recently that further pre-emptive measures will be taken, if necessary, to ensure a stable market.

But the government has traditionally been less concerned with the top end of the market, as this is seen to be the playing field of high net-worth individuals.

Any new cooling measures, if prudent, will also only have a near-term negative impact on share prices, as improving property fundamentals and still attractive valuations matter more, according to Goldman Sachs analysts Paul Lian and Rishab Bengani. They have ‘buy’ calls on two property stocks – CapitaLand and City Developments.

Another boon for the high end is the opening of the integrated resorts (IRs) in early 2010, which could boost demand from foreigners in particular.

DBS’s Mr Chua said that high-end homes in Singapore now look relatively cheap compared to those in Hong Kong – similar to the valuation gap before the 2007 high-end run here. He said that the high-end segment here could also be a beneficiary of Chinese demand, which did not factor in a big way in 2007 but could be a force in 2010.

Looking ahead, top-end prices are expected to trend upwards. Prices here have stayed between $1,750 and $1,825 psf over the past quarter, up 38-44 per cent from the bottom in April 09, DMG’s Mr Lee said. ‘Nonetheless, this represents 15-20 per cent off Q4 2007 peaks, which should head upwards over the subsequent six months in the wake of the IRs’ opening and improved economy.’

Property analysts are also encouraged by developers’ Q3 results. They came in mostly ahead of expectations, with year-on-year bottom-line growth.

‘Perhaps the most important takeaway is the substantial improvement in developers’ balance sheets,’ CIMB Research said in its Q3 2009 earnings round-up. ‘Robust property sales and stabilising asset values helped push down average net gearing from 0.5 times in Q2 2009 to 0.3 times for developers under our coverage.’

Source: Business Times, 28 Nov 2009

Friday, November 27, 2009

17,300 Punggol units completed so far

CLOSE to two-thirds of Punggol flats launched in the last decade have been completed so far, as the Government focuses its efforts on building up Singapore's north-east neighbourhood.

There have been 27,000 Punggol flats launched since 1998, out of which 17,300 have been completed.

The updated figures were announced last night by Deputy Prime Minister Teo Chee Hean, at an exhibition showcasing the winning entries of the Punggol Waterfront Housing Design Competition.

The results were released to the media earlier this month. The winning entry, by international architectural firm Group8asia and local firm Aedas, features sky terraces and a resort-style environment.

This housing project of 1,200 units fronting an upcoming waterway is due to be launched by the middle of next year. It will be part of a cluster of an additional 21,000 flats and private homes.

Punggol has become a focal point again for the Government in recent years, as it is slated to evolve into a vibrant waterfront town.

In the 1990s, efforts to develop the estate were stymied by the Asian financial crisis.

The plan was resurrected in 2007, under the Punggol 21-plus programme.

Since then, despite yet another economic downturn, there has been aggressive efforts to build up Punggol.

Almost 44 per cent of new flats launched in Singapore in the last two years have been in Punggol.

Besides new housing, a 4.2km waterway will also be developed. Its name - My Waterway@Punggol - was announced last night.

Mr Teo said that the canal is still on track for completion at the end of next year.

Next month, workers will start landscaping work at the town park and the areas along the waterway promenade.

'We all look forward to canoeing, kayaking or enjoying other water activities right at the doorsteps of our Punggol residents,' said Mr Teo, who is a Member of Parliament for the Pasir Ris-Punggol GRC.

Source: Straits Times, 27 Nov 2009

Feeding and housing a new Singapore

IT IS a crisis that jumps from today's headlines: rising sea levels threaten to engulf Singapore and make life and economic activity intolerable for its five-million strong population.
While the risk seems real if the climate change experts are to be believed, so is the solution going by the architects at Woha.

The team put its collective heads together with boffins from the National University of Singapore and design firms Black Design and Obilia to devise a nifty answer: a ring of 15m-high dykes along the coastline that can double as freshwater reservoirs to supplement inland lakes.

Their blueprint seems to have all the bases covered. The dykes do not cost taxpayers too much because private developers buying coastal plots for projects have to integrate them into their projects.

As a result, the dykes take on many forms and guises - amusement parks, rolling cliffs, fruit valleys, even padi fields. They become tourist attractions in themselves.

Underground MRT tunnels are moved up as water levels rise but they carry more than just trains in this new world. Multi-level viaducts 15m above the ground stack bicycle lanes and running tracks on top of the train tracks.

And energy supplies are secure because the northern part of the island has become a solar farm. All buildings within the 100sqkm zone are fitted with rooftop mirrors directing sunlight onto a 900m 'energy tower' which then converts the sun's rays to electricity.

In the north-west, waves supply power. Underwater turbines harness the energy from seawater moving through a narrowed channel, built in front of lushly landscaped apartment blocks.

Meanwhile, Jurong has become a plantation to feed Singapore. The industrial buildings of old are stacked underneath fields that grow anything, from rice to coconuts. There are even fish farms within the compact 'plantation'.

The East Coast retains its laid-back charm. High-density housing developments stand above dykes integrated with attractions like seafood farms, scuba-diving schools and spas.

With seafront homes so appealing, older Housing Board flats inland fall out of favour. The vacant HDB blocks are converted to high-rise farms. Each block houses just one or two families, with the rest taken up by pigs, cows and chickens on some levels, and vegetables on others.

Farming, in 2050, has become a new-age industry in a country that has kept the tide at bay.

Source: Straits Times, 27 Nov 2009

Cool response to smaller HDB flats

ALMOST a year ago, the Government pledged to ramp up the supply of smaller flats to meet demand from downgraders amid Singapore’s deepest recession.

But 12 months on, new Housing Board figures obtained by The Straits Times show that the take-up rate of these smaller flats has not been as strong as expected.

Smaller flats are defined as studio apartments, two-room and three-room units.

The weakest sales are in the two-room category. At Senja Green in Bukit Panjang launched under the HDB’s build-to-order (BTO) scheme in August last year, the take-up rate of two-room flats was 20 per cent – 19 flats – of the 96 two-room flats offered.

At two other projects, Jade Spring @ Yishun Phase 2 and Dew Spring @ Yishun, the take-up rate for two-room flats was 81 and 53 per cent of flat supply respectively.

HDB’s numbers show the application rates for smaller flat types ranged from about 40 per cent to three times the number of flats offered – less than the typical four to five times seen for four- and five-room units.

However, when it came to sales of smaller flats, studio apartments and three-roomers did relatively well compared to two-roomers, with take-up rates of about 96 to 100 per cent.

Analysts say the less-than-hot demand could be due to the turnaround in the property market in the second quarter of this year, which came sooner than expected.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said people could be holding off on their downgrading plans because HDB resale flat prices have risen.

‘The longer home owners hold on to their flats, the higher their capital gains,’ he said.

HDB data reveals that the supply of smaller flats has been increasing in recent years – after a lapse of about two decades during which it stopped building this type of flats.

In 2007, HDB offered 1,403 such flats. Last year, it supplied 1,164 units and for this year, it will supply 3,600 such homes.

HDB said it intends to launch 1,400 two- and three-room flats under its BTO programme next month.

The HDB stopped building two- and three-roomers in the 1980s as the growing number of families fuelled demand for bigger flats, but they were re-introduced in 2004 to meet increasing demand.

National Development Minister Mah Bow Tan announced last year that HDB would ramp up supply of such smaller flats.

This was meant to offer a steady stream of these flats for lower-income families who needed to downgrade amid the grimmer economic times.

Smaller flat types, not surprisingly, tend to be the cheaper HDB flats. At Dew Spring, for example, two-roomers were priced at $76,000 to $90,000; three-roomers were going for between $120,000 and $146,000; and four-roomers cost between $197,000 and $238,000.

Industry observers such as Chesterton Suntec International research and consultancy director Colin Tan pointed out that two-roomers might be less popular because of their small size of about 485sqft.

Studio apartments are aimed at a specific group – the elderly – and three-roomers appeal to families given their more spacious 700 sq ft or so.

‘The market seems to be saying that it doesn’t want two-room flats’, but they could become more popular as they are built, as they offer downgraders a more immediate housing option, Mr Tan added.

HDB said that the take-up rates of two-roomers are usually lower at the initial stage after launch.

‘However, despite the initial weaker demand, the take-up of two-room flats improves during subsequent sales exercises when the flats are nearing completion or are completed,’ it said in a statement.

Housewife Koh Gay Hua, 50, considered downgrading from her five-room flat in Bukit Panjang to a smaller flat at the height of the recession.

‘But now, with HDB prices still rising, and with some help from my children, I don’t have to sell,’ she said.

On next year’s supply of flats, HDB is ‘monitoring response to the smaller flats and will make adjustments to the supply to meet the needs of flat buyers’.

Source: Straits Times, 27 Nov 2009

Sports Hub delay: Patience, please

I REFER to Mr Chew Chee Meng’s letter, ‘End the delay and start building’ (Nov 20).

The Singapore Government is fully committed to building the Sports Hub. The Sports Hub is being developed using a Public-Private Partnership (PPP) approach, under which the successful consortium is responsible for designing, financing, building, operating and running programmes in the Sports Hub over 25 years.

The Government will, in turn, make annual payments to the consortium for making the facilities available.

The Government has chosen to adopt a PPP approach as having the same consortium undertake all these functions will help to optimise life-cycle cost and operations efficiency. For example, the consortium will design and build the facilities in a way that enables efficient programming while keeping operating costs as low as possible. The consortium is also incentivised under the PPP arrangement to complete construction as soon as possible, as it will start receiving the Government’s annual payments only when the facilities are built and available.

The project was unfortunately delayed by a steep rise in construction costs worldwide early last year. In addition, under the PPP arrangement, the selected consortium will raise funds from the market to finance the project, but with the global financial crisis from October last year, bank funds became either unavailable or available only at very high costs.

Given the unprecedented scale of the global financial crisis, any consortium selected for the project, be it the Singapore Sports Hub Consortium or any other consortiums, would have faced similar challenges in raising funds. Many PPP projects around the world faced similar difficulties.

Liquidity is gradually returning to the market and banks have started to extend long-term loans again.

The Government therefore agreed for the selected consortium to go out to the market again to raise the loans required. We have chosen to continue with the PPP model, not because the Government is short of funds, but because we believe in the benefits a PPP arrangement can bring.

The Sports Hub will be one of Singapore’s national icons that will be with us for the next 25 years or more. We must build it expeditiously but not at all cost or ending up with a sub-optimal facility.

We seek everyone’s patience as we build a Sports Hub that will be a lasting legacy, and one which we can all be proud of for decades to come.

Alvin Hang
Corporate Communications & Relations
Singapore Sports Council

Source: Straits Times, 27 Nov 2009

Debt default shadow on Dubai’s sand castle

Saddled with a staggering US$59 billion in liabilities, Dubai World – the state-run investment firm behind Dubai’s sizzling growth over the past 20 years – wants to delay repaying its dues until end-May next year.

In a move that has stunned investor confidence across the Persian Gulf, possibly leading to the biggest sovereign default since Argentina in 2001, the Dubai government has said that it intends to reorganise the severely cash- strapped Dubai World, which is one of the emirate’s largest and most important conglomerates.

The US$59 billion debt owed by Dubai World is a large chunk of the US$80 billion accumulated by Dubai as it rapidly expanded in various sectors such as banking, transportation and real estate.

‘Dubai World has a portfolio of strategically important businesses and the restructuring will be designed to address financial obligations and improve business efficiency for the future,’ the government said in a terse statement explaining its decision, issued just hours before the start of the Eid al-Adha holiday and the United Arab Emirates national day celebrations, which will see the region shut down until Dec 6.

The five-paragraph note also said that the Dubai Financial Support Fund – which is responsible for disbursing US$10 billion in federal rescue funds to Dubai government-controlled entities – had appointed veteran bankruptcy expert Aidan Birkett, a managing partner overseeing corporate finance at accounting firm Deloitte, as Dubai World’s chief restructuring officer.

Markets across Europe reacted negatively to the news. The FTSE 100 index of leading British shares was down 99.84 points, or 1.9 per cent, at 5,264.97.

Over in Asia, the Shanghai index fell 119.19 points, or 3.6 per cent, to close at 3,170.98, its biggest one-day fall since Aug 31. In South Korea, shares in construction issues lost ground, with Samsung C&T leading the way with a 6.2 per cent decline.

Dubai’s announcement came after the closing of its stock market for the long holiday, but the value of Nakheel’s 2009 bonds slumped 27 per cent, according to EFG-Hermes regional investment bank. US markets were closed for the annual Thanksgiving holiday.

The request for a creditor standstill also applied to Dubai World’s subsidiary, Nakheel Development, which is behind a number of extravagant real estate developments including the city-state’s Palm Jumeirah, a man-made palm-shaped island housing hotels and luxury villas that count Hollywood actor Brad Pitt and footballer David Beckham on the list of owners.

Already, home prices in Dubai have fallen 50 per cent from their peak in 2008.

Dubai World is one of Dubai’s three biggest conglomerates together with Dubai Holding and the Investment Corporation of Dubai responsible for carrying out the emirate’s development strategies. Dubai World also owns DP World, the third-largest international ports operator.

Back in 2006, DP World won a three-month battle to take over British port operator Peninsular and Oriental Steam Navigation Company (P&O) after PSA Singapore withdrew its 470 pence-a-share bid, leaving DP World’s 520 pence-a- share bid as the only offer left on the table.

After the emirate’s years of rapid growth, the sense among analysts is that the weight of the global credit crunch and recession has finally caught up on Dubai’s ambitious economic model, one that is largely based on mega-construction projects and a huge influx of foreign capital.

Eckart Woertz, an economist with Dubai’s Gulf Research Centre, told the Financial Times: ‘This will destroy confidence in Dubai – the whole process has been so opaque and unfair to investors.’

Many are finding the news hard to swallow, particularly as senior Dubai officials had over the past few months taken steps to reassure investors that the emirate would still be able to meet all its existing debt obligations. Nakheel, for one, is due to pay back US$3.5 billion on a maturing Islamic bond on Dec 14.

According to latest data from Deutsche Bank, Dubai owes US$4.3 billion next month and a further US$4.9 billion in the first quarter of 2010 in government and corporate debt.

Earlier this year, Dubai raised US$10 billion in a bond issue that was taken up by the Abu Dhabi central bank.

On Wednesday, Dubai announced that it had raised a further US$5 billion from Abu Dhabi banks – much less than the US$20 billion it had been hoping to attract in foreign investment.

In a note, the Royal Bank of Scotland said that investors would now have to ‘reappraise the quality of sovereign support’ for state-owned entities in the region.

‘The other risk is that rating agencies would reassess their views of names in the region, which in many cases benefit from substantial rating premiums driven by assumptions about sovereign support, which is no longer a given.’

Standard & Poor’s (S&P) and Moody’s Investors Service immediately downgraded the ratings of all six government-related issuers in Dubai and left them open for a possible further downgrade. Moody’s cut ratings on some government-related entities to junk status, while S&P cut ratings on some entities to one level above junk.

Source: Business Times, 27 Nov 2009

CDL studies fallout of Dubai World move on South Beach

City Developments Ltd (CDL) is studying news of a restructuring of Dubai World, which is a partner in a CDL-led consortium that will develop the landmark South Beach site in Singapore.

‘This is a new development and we will study this matter, in consultation with our other partners. If necessary, we will respond again in due course,’ a CDL spokeswoman said yesterday evening.

Construction of the 99-year leasehold project – which will have offices, luxury hotels, retail space and residences – has been delayed.

The Government of Dubai has announced its intention to restructure the emirate’s biggest corporate debtor. Dubai World would ask all providers of financing to itself and its affiliate Nakheel to ’stand still’ and extend maturities of the debt until at least May 30, 2010.

In 2007, CDL, Dubai World and El-Ad Group teamed up to buy the South Beach site for $1.69 billion at a Singapore government tender. In November last year, CDL announced a deferment of the project’s construction until construction costs eased.

CDL executive chairman Kwek Leng Beng said in August this year that construction is likely to begin around Q3 2010 with CDL and a new investor, Hong Kong developer Nan Fung, probably the ones that will pump in further money.

El-Ad and Dubai World are likely to be passive investors who may then see their share in the project diluted.

Nan Fung came into the picture in June this year when it subscribed for $205 million of five-year secured convertible notes under a refinancing exercise for a loan on the 3.5-hectare site. CDL also subscribed for the remaining $195 million of the notes.

The consortium refinanced an earlier $1.2 billion loan that matured in June this year by a combination of an $800 million two-year secured bank loan and the $400 million convertible notes.

In 2007, CDL subsidiary City e-Solutions inked a joint venture with Dubai World unit Istithmar to set up a chain of 30 budget hotels across South-east Asia over three years.

The US$50 million joint venture also included Tune Hotels.Com, which was to have developed and operated the hotels. Tune Hotels.Com is owned by the founders of the AirAsia budget airline.

City e-Solutions has since exited the joint venture.

Source: Business Times, 27 Nov 2009

Thursday, November 26, 2009

New York gets nod to seize property for project

Court ruling makes it easier for cities to take property for redevelopment

New York is legally permitted to seize property to make way for developer Bruce Ratner’s Atlantic Yards project in Brooklyn, New York, which includes a basketball arena and apartments, the state’s high court ruled.

In a decision that may make it easier for New York cities to take private property for redevelopment, the Court of Appeals in Albany on Tuesday upheld a lower court ruling against property owners who sued to stop the state from taking their homes and businesses.

Developer Forest City Ratner Cos plans a US$5 billion project at the site including an arena for the New Jersey Nets basketball team, as well as residential and commercial towers.

The Empire State Development Corp, the state agency behind the development, told the court last month that eminent domain, the government’s right to take private property for public need, was legal because the site was ‘blighted’. Lawyers for the property owners, who formed a group called Develop Don’t Destroy Brooklyn, said that the distinction was an excuse to seize their homes for Mr Ratner’s benefit.

‘This is a terrible day for anyone who owns or rents properties in New York,’ said Daniel Goldstein, a spokesman for Develop Don’t Destroy. ‘The fight against Atlantic Yards is far from over. There are four outstanding lawsuits against the project and there’s still further action we’re considering on this particular case.’

The group called upon governor David Paterson to execute a ‘binding legal contract’ to assure that all the intended affordable housing is built and that the project is completed in 10 years.

The 22 acre development would be built partly over the Metropolitan Transportation Authority’s (MTA) Long Island Rail Road storage yard near Flatbush and Atlantic avenues in downtown Brooklyn. It was planned to include about 6,400 units of market-rate and affordable housing, according to Mr Ratner’s website, plus 336,000 square feet of offices, 247,000 sq ft of retail space and a 180-room hotel.

‘This project represents a significant public benefit for the people of Brooklyn,’ Mr Ratner said in a statement. ‘Today, however, this project is even more important given the need for jobs and economic development.’

Development is already underway at the site, said Mr Ratner’s spokesman, Joe DePlasco. Clearing for the arena has begun and a new rail yard was turned over to the MTA yesterday, he said.

The projected cost of the project is now close to US$5 billion, according to Mr DePlasco, up from a previous estimate of US$4 billion.

New York Court of Appeals Chief Judge Jonathan Lippman wrote in one of two majority opinions that ‘it may be that the bar has now been set too low – that what will now pass as ‘blight’ shouldn’t be permitted to constitute a predicate for the invasion of property rights and the razing of homes and businesses. Any such limitation, Mr Lippman concluded though, ‘is a matter for the legislature, not the courts’.

The lone dissenter, Judge Robert Smith, wrote that ‘the bad news is that the majority is much too deferential to the self-serving determination by Empire State Development Corporation that petitioners live in a ‘blighted’ area, and are accordingly subject to having their homes seized and turned over to a private developer’.

In June, the MTA voted to defer Mr Ratner’s US$100 million payment for rights to the Brooklyn rail yard, requiring him instead to pay US$20 million upfront and the rest over 22 years. The delay was a response to the recession and the credit crisis, agency officials said at the time.

Mr Ratner has said that he intends to begin construction of the Nets new home, to be called Barclays Center, this year. Barclays plc bought naming rights.

‘We can now move forward with development which will accomplish its goals of eliminating blight, and bringing transportation improvements, an arena, open space, affordable housing and thousands of jobs,’ Warner Johnston, spokesman for the Empire State Development Corp, said in an e-mailed statement.

Andrew Brent, a spokesman for New York City mayor Michael Bloomberg, and Morgan Hook, a spokesman for New York governor David Paterson, did not immediately return calls seeking comment.

The mayor is majority owner of Bloomberg LP, parent of Bloomberg News.

Source: Business Times, 26 Nov 2009

European CMBS at risk of defaulting: Fitch

A slower correction in mainland European property values has turned tens of billions of euros of mortgage-backed bonds into potential time-bombs with a greater risk of defaulting than their UK peers, Fitch Ratings said.

The agency has so far this year downgraded 47.2 billion euros (S$97.7 billion), or 69 per cent, of European commercial mortgage- backed securities (CMBS) notes that it tracks, and maintains either Rating Watch Negative or Negative Outlook on a further 52 billion euros of notes.

It said that refinancing risk for CMBS linked to French, Dutch or German real estate may be even greater than in Britain because so many transactions were completed at the peak of a property boom in 2006 and 2007.

UK real estate prices have rallied after falling almost 45 per cent in the two years to September, but Fitch senior director Euan Gatfield said that continental European markets may be lagging, with further declines likely to collide with a wave of impending maturities over the next five years.

‘There is hope that the worst is over for UK commercial real estate, something that cannot be said for most mainland European markets,’ Mr Gatfield said.

‘With a prolonged wave of maturities arriving in two years time, financing pressures are building in the sector,’ he said.

Negative rating action has been concentrated in European CMBS without UK exposure, despite the fact that few borrowers have yet to deal with a loan maturity in European CMBS.

Although less than 5 per cent of European CMBS loans have suffered a missed payment, Fitch said that the growing number of financial covenants in breach of their terms has foreshadowed the difficulties that even performing borrowers will face when repayment is due.

Fitch said that about five billion euros of CMBS are due to mature in 2010, followed by 61 billion euros between 2011 and 2014, with a third of securities falling due in 2013. Some 13.5 billion euros worth of German CMBS loans are set to mature in 2013, including 10 billion euros from just four multi-family housing mortgages, twice the UK’s peak of 6.6 billion euros projected for 2012.

Source: Business Times, 26 Nov 2009

Melbourne mansion sale smashes record

A mansion in Melbourne’s inner east has broken the city’s record for a house price, Australian Associated Press reported yesterday.

A Melbourne businessman bought Avon Court in Shakespeare Grove, Hawthorn, on Tuesday night for a sum believed to be between A$21 million and A$25 million (S$27 million-S$32 million).

The property was sold by Melbourne businessman Clinton Casey, the former chairman of the Richmond Football Club and an owner and developer of retirement homes and property.

Neither the seller nor the buyer of Avon Court wanted the price made public, Kay and Burton real estate managing director Michael Gibson said.

‘In terms of Melbourne residential prices it is right at the top of the tree,’ he said.

The house contains a private cinema, gym, ballroom, six kitchens, parking for 10 cars, two pools and lifts to four levels.

Top-end property sales are currently rebounding around Australia following last year’s downturn.

The average price for a house in Melbourne was about A$480,000 at the September quarter, according to the Real Estate Institute of Victoria.

Source: Business Times, 26 Nov 2009

Abu Dhabi limits housing construction to avoid glut

Abu Dhabi is limiting construction to avoid the housing glut and price declines that battered the real estate market in neighbouring Dubai, Aldar Properties PJSC chief executive officer John Bullough says.

The emirate has a shortage of 15,000 to 20,000 units and the government will let the ‘rope out on development in a measured way’, Mr Bullough, whose company is the United Arab Emirates’ second-biggest developer, said in an interview. ‘There will be, in our view, a lag between supply and demand.’

Abu Dhabi, the UAE’s capital and holder of 8 per cent of the world’s oil reserves, controls development from homes to offices and transportation links under its ‘Plan 2030′, devised in 2007. The plan foresees the population growing to as much as 5 million by 2030 from an estimated 1.6 million in 2008.

‘There is a short-term question mark, but then there is a medium- to long-term suitability,’ Aldar CFO Shafqat Malik said in an interview last week at the company’s Abu Dhabi headquarters.

‘What we saw over here is the doubling of rents and prices. Is this a sustainable way for any economy to grow? The answer is probably no.’

Aldar said it plans to deliver 3,500 homes and 140,000 square metres of commercial space over the next 18-24 months.

Abu Dhabi’s government owns 18.9 per cent of Aldar through Mubadala Development Co and 7.2 per cent through state fund manager Abu Dhabi Investment Co, according to the emirate’s exchange.

Limiting supply ‘brings up the cost of housing and can be seen as an additional tax on companies’, Jesse Downs, director of research and advisory services at Dubai-based Landmark Advisory, said in a phone interview. ‘So it could potentially curb job growth, which has a residual effect on the real estate market.’

Abu Dhabi home prices have dropped an average of 33 per cent from their peak in the third quarter of 2008, according to Matthew Green, head of UAE research at CB Richard Ellis (CBRE) Group Inc.

Dubai’s residential property values have fallen more than 50 per cent and UBS AG said last week that they may decline as much as 30 per cent more.

‘We are not in the business of releasing and withholding units or regulating prices,’ Fouad Kassem, public affairs officer for Abu Dhabi’s Urban Planning Council said in a phone interview. ‘Our role is focused on planning, and proposed projects that don’t fit with the master plan are not allowed.’

Slowing down construction was easier in Abu Dhabi than Dubai because more projects were at the planning stage when the financial crisis hit and therefore easier to postpone, Mr Downs said.

Dubai is moving to tighten control of its own property supply through a planned merger of Emaar Properties PJSC, the country’s biggest developer, with state-controlled Dubai Properties LLC, Sama Dubai LLC and Tatweer LLC.

A housing shortage in Abu Dhabi won’t help lift prices because residents can commute from Dubai, which has an oversupply, Deutsche Bank AG said in note in June. The highway linking the two cities makes ‘both markets highly interconnected’, it said.

Dubai opened its property market to foreign investors in 2002, followed by Abu Dhabi three years later, fuelling a boom bolstered by low interest rates. Prices slumped at the onset of the global financial crisis as banks clamped down on mortgages, and speculators left the market.

‘We suffered from the same thing here as the rest of the world in terms of speculation and flipping,’ Mr Bullough said. ‘Those days are gone and there is a much more pragmatic focus to purchases. The dealers, it’s fair to say, have left the market.’

Property speculation in Abu Dhabi and Dubai caused institutional investors such as ING Groep NV’s US$150 billion real estate fund to shun the markets and prompted governments in both emirates to cap annual rent increases.

‘There has been a significant reprioritisation across the whole of the development community,’ Mr Bullough said. It ‘delayed delivery of a lot of what was in the pipeline, and that bodes well for the future because it means we will be able to maintain a more effective balance between supply and demand.’

Aldar postponed its Al Dana development, originally designed as a luxury project, and asked for a redesign to suit the needs of low-income buyers, Aldar’s chief operating officer Sami Asad said in February.

‘We see greater demand at the smaller scale, more affordable end of the market,’ Mr Bullough said. ‘That’s perfectly normal for any market. You have a much higher proportion of people who can afford a medium-sized place.’

Source: Business Times, 26 Nov 2009

BOA sells top exec’s home at 44% discount

Bank of America Corp (BOA), the biggest US home lender, sold a home for its top housing executive for 44 per cent less than its initial asking price set last year, property records show.

Barbara Desoer, head of the bank’s home-loan and insurance unit, put her 4,500-square-foot house in Charlotte on the market on Aug 1, 2008 for US$1.675 million. The home sold on Nov 22 for US$930,500, according to a Multiple Listing Service report.

Ms Desoer, who bought the home with her husband in 2000 for US$1.15 million, moved from Charlotte after being named head of Calabasas, California-based Countrywide Financial Corp, which the bank acquired in July 2008. Her Charlotte home was sold to BOA in December 2008 through a relocation company. The property went on the market at about US$1.3 million.

The US real estate market is showing signs of improvement although demand for luxury homes remains sluggish because of increasing job losses and tighter lending standards.

Home prices in 20 US cities, including Charlotte, rose for a fourth straight month in September, according to the S&P/Case-Shiller home-price index, while sales of existing US homes in October reached their highest level since February 2007, the National Association of Realtors said.

BOA, based in Charlotte, will cover costs associated with the sale of the house, including a possible loss, plus US$1.5 million for Ms Desoer’s new home in California and US$1.1 million related to taxes, according to the bank’s March 2009 proxy.

BOA officials in September cited Ms Desoer as one of six potential internal candidates to succeed chief executive officer Kenneth Lewis, who is retiring on Dec 31.

Chief risk officer Gregory Curl and retail banking head Brian Moynihan are the most likely insider candidates to win the post, according to people familiar with the situation.

Source: Business Times, 26 Nov 2009

Two properties on tap for investment players

Big industrial plot put on reserve list; Boon Building up for grabs for $12-13m

PLAYERS in the property investment sales market have just been offered two properties – an industrial plot at Kaki Bukit Avenue 4, made available for application through the government’s reserve list, and Boon Building, a six-storey commercial property at 61 South Bridge Road.

The Kaki Bukit site is 323,133 sq ft and has a 2.5 plot ratio, which means the maximum gross floor area works out to a whopping 807,833 sq ft. It is zoned Business 2 – suitable for a range of uses such as clean/light industry, general industry and warehousing – and offered with a 60-year lease.

Under the reserve list system, the site will be launched for tender by the state only if a developer makes an application with a minimum bid price acceptable to the government.

Colliers International director (industrial) Tan Boon Leong reckons top bids for the plot – assuming a tender takes place now – could come in at $70-80 per sq ft per plot ratio (psf ppr). This works out to a land cost of about $56.5 million to $64.6 million.

According to Mr Tan, the plot is in a lesser location than an earlier plot in Kaki Bukit Road 2 that was sold in August this year after attracting a total 18 bids. ‘The latest plot is farther away from the main mature industrial estate in the Kaki Bukit/Eunos area,’ he said.

The earlier plot was awarded to KNG Development for $12.1 million or about $105 psf per plot ratio. It is about 1.07 hectares with a 1.0 plot ratio and is also zoned for Business 2 use, but came with a 30-year lease.

The latest plot, in Kaki Bukit Ave 4, is likely to appeal to developers, who may then build landed terrace factories to sell to end-user industrialists, as well as flatted factories, Mr Tan suggests.

‘Perhaps some of the unsuccessful bidders at the earlier tender may bid for the latest plot,’ he said. ‘However, as the latest site is much larger in terms of land area as well as gross floor area, developing it will entail a bigger investment. Hence, it will likely fetch a lower psf ppr unit land price.’

In October last year, Sim Lian clinched a 1.15-ha, 60-year leasehold site in Ubi Ave 4 for Business 1 use for $26.3 million or $85.05 psf ppr. It has a 2.5 plot ratio.

Boon Building, a 999-year leasehold property, is being sold by Raffles Point Holdings, controlled by property investor Kishore Buxani and his family. The indicative guide price is $12-13 million, which works out to $1,165 to $1,262 psf based on the estimated net lettable area of 10,299 sq ft.

According to caveats records, the property was last transacted for about $9.5 million in August 2007. It will be sold with vacant possession and is being marketed by DTZ through a tender exercise that closes on Dec 17.

DTZ senior director for investment advisory services Shaun Poh said: ‘The property’s appeal lies in the building’s excellent location and investment quantum. The availability of naming rights also offers the opportunity to carve out a flagship building with its own corporate identity.’

Mr Buxani and his partners also own 108 Robinson Road and six floors of Samsung Hub.

Source: Business Times, 26 Nov 2009

CMA shares climb 8.5% on debut

Shares of CapitaMalls Asia (CMA), Singapore’s largest public offering in 16 years, debuted 8.5 per cent above the IPO price yesterday.

The pan-Asian shopping mall developer and manager, which was spun off from property giant CapitaLand, started trading at $2.30 before losing some ground to fall as low as $2.23. It ended at $2.30, comfortably above the IPO price of $2.12.

Elsewhere, there were also strong debuts by Chinese property developer Fantasia and coal mining equipment maker Sany, which rose as much as 10 per cent and 45 per cent respectively in Hong Kong.

The new listings are the latest in a string of share sales across Asia as companies take advantage of the ongoing market rally. Funds are also flocking back to Asia in search of higher growth and large IPOs such as CMA’s are proving to be popular, analysts said.

In particular, CMA is seen to be attractive for its China exposure. CMA has a portfolio of 86 malls in Singapore, China, Malaysia, Japan and India worth some $20.3 billion in all. Fifty of these malls are in China.

‘CMA’s ownership and management interests in 50 retail malls (of which 18 are under development) in 33 cities in China make it a formidable player there, and also gives investors exposure to China’s growth from rising urbanisation and consumer demand,’ said CIMB Research analyst Donald Chua.

‘Recurring income from its more mature malls in Singapore, Malaysia and Japan provides additional support.’

CIMB yesterday initiated coverage on CMA with an ‘outperform’ call and a target price of $2.77.

CapitaLand, which now owns 65.5 per cent of CMA, said on Tuesday that the IPO saw strong response from international institutional investors, particularly from the United States and Europe.

There was demand of about 2.5 times for the placement tranche of 1.059 billion shares and an additional 174.8 million shares were over-allotted due to strong demand. CapitaLand raised about $2.8 billion from the IPO.

Looking ahead, CIMB’s Mr Chua said that he estimates CMA to consistently report earnings before income tax (EBIT) of $100-120 million a year, which should help take care of working capital and expansion needs in emerging markets.

Separately, CapitaLand announced that Lim Beng Chee, who is the chief executive of the newly minted CMA, has relinquished his role as chief executive of CapitaMall Trust (CMT).

The property trust, which runs 14 malls in Singapore, will now be helmed by Simon Ho Chee Hwee, who was previously the deputy chief executive officer. Mr Ho has also been appointed a director of CMT. Goh Hwee Peng, who was previously CMT’s head of investment and asset management, will now be the trust’s deputy chief executive.

CMA has a 29.8 per cent stake in CMT.

Source: Business Times, 26 Nov 2009