Thursday, June 17, 2010

Sale of potentially record-setting luxury property in Hong Kong falls through

Hong Kong billionaire Lee Shau-kee’s Henderson Land Development said the sale of 20 luxury apartments has collapsed, ending HK$2.67 billion ($478 million) in deals that sparked a government inquiry and fueled efforts to rein in home prices.

Most buyers pulled out of the 39 Conduit Road project in Hong Kong island’s Mid-Levels district, Henderson said in a filing to the stock exchange, responding to government demands for more information on the sales of 24 units. Henderson said it has sold four of the units and will record a charge of HK$734 million in its half-year results.

The failure of the sales, including a unit that would have set a world record price of HK$88,000 per square foot, marks a setback for Hong Kong’s second-richest man as regulators try to cool the city’s surging property market.

“We won’t be cutting prices,” said Mr Lee. “Maybe we’ll make more money when we sell these apartments again.” Henderson said it was confident in selling them because of the “prestigious” location.

Source : Today – 17 Jun 2010

Lower rentals in CBD expected to dampen office rents in city fringe

Rental growth for transitional offices located in the city’s fringe is expected to slow in the months to come but such offices can maintain their yields, if they are located in areas around Scotts Road and Mohammed Sultan.

Office rents in the Central Business District have slipped some 60 per cent from their peak in 2008 and that has prompted some companies to move back into the city.

Analysts said the pick up in demand will help rental recovery for prime offices in the CBD, but transitional offices could see slower rental growth instead.

Market watchers said prices for transitional office space have held steady at $5 to $6 per square foot (psf), just slightly down from their $8 highs two years ago.

Meanwhile, CBD prime office rentals have slipped to around $8 psf, down from $18 to $21 psf recorded in 2007 and 2008.

Link (THM) Holdings chairman Kenny Tan said: “We have put in the effort into not just building a transitional office. We are building something which is up to what the market requires, which is closer to A-grade office area.

“We are asking for rentals which are just 20 per cent below the CBD areas, while being two minutes away from the CBD.”

Another plus: Tenants at transitional offices outside the city will not have to bear extra cost, such as Electronic Road Pricing charges.

Source : Today – 17 Jun 2010

Chip Eng Seng setting up SPV for Punggol executive condominium development

Construction firm Chip Eng Seng said Wednesday that its wholly-owned subsidiary, CEL Development will set up a special purpose vehicle (SPV) to facilitate the development of an executive condominium (EC) in Punggol.

This is in view of the fact that CEL and its partner, Choicehomes Investments, have emerged as the top bidder in a tender for the site.

Both sides put in a joint bid of $223.74 million for the 99-year leasehold site.

The site has a gross permissible plot ratio of three and a maximum allowable gross floor area of some 67 and a half thousand square metres.

The proposed development, with full condominium facilities, will comprise approximately 600 residential units.

CEL and its Choicehomes will incorporate a special purpose company to jointly develop the project.

Choicehomes will hold a 60 per cent stake in the SPV while CEL will have a 40 per cent interest in the SPV.

Choicehomes is a wholly-owned subsidiary of NTUC Choice Homes Co-operative.

Chip Eng Seng says the Proposed Development will be financed by internal fund and bank borrowings.

Source : Channel NewsAsia – 16 Jun 2010

M&C puts Tanglin Shopping Centre up for sale

Millennium & Copthorne Hotels said its unit has signed a collective sales agreement to put Tanglin Shopping Centre up for sale.

Under the terms of the agreement, a sales committee has been authorized to negotiate and finalize the collective sale of the shopping-cum-office development situated at Tanglin Road.

This sales committee has also been authorised to enter into a sale and purchase agreement on behalf of the owners of units in Tanglin Shopping Centre which have signed the agreement.

M&C’s unit, King’s Tanglin Shopping owns 85 freehold strata units comprising both retail and office units as well as 325 carpark lots in Tanglin Shopping Centre which have been held as a long-term investment since 1981.

The hotelier said discussions regarding the potential sale are still at an early stage.

Source : Channel NewsAsia – 16 Jun 2010

Wednesday, June 16, 2010

Ibis Hotel on Bencoolen up for sale

Ibis Singapore on Bencoolen, a three-star hotel that opened its doors in February last year, has been put up for sale via a private tender.

Results of the tender will not be out until next month, though market watchers are guessing that the 538-room hotel could fetch more than $200 million.

Ibis Singapore is owned by hospitality group Accor and real estate investor LaSalle Investment Management in a 30:70 venture. Accor also owns the Ibis brand. According to past reports, the partners put in $145 million to develop the hotel at Bencoolen Street after winning the tender for the site in 2006.

Jones Lang LaSalle Hotels is handling the tender. According to its managing director of investment sales in Asia Mike Batchelor, the private tender began last month. As part of the deal, Accor will continue to operate the hotel under a long-term management agreement, meaning that the Ibis brand will stay.

The owners have been receiving ‘a number of unsolicited approaches from investors’ to buy Ibis Singapore, he told The Business Times. As a result, ‘they decided to formally offer the asset for sale.’

Interest in the hotel has come mainly from private families and high net worth individuals, from not just Singapore but also regional countries such as Malaysia and Indonesia, Mr Batchelor added.

Market watchers felt that Ibis Singapore is a fairly attractive asset, given that it is new, well located, and has been performing relatively well.

Accor Asia Pacific spokesman Evan Lewis said that for the last three months, the hotel has ‘achieved occupancies in the mid-90 per cent with an average rate of around $140.’

A consultant who declined to be named pointed out that ‘hotels in Singapore are very difficult to come by’ so there will be demand. ‘It’s only about whether the pricing is sensible enough,’ he said.

Another consultant felt that there is an insufficient number of good three-star hotels here. This puts Ibis Singapore in good stead, especially with property funds returning to scout for investments. ‘There’s quite a lot of money starting to come back globally,’ he said.

With Singapore’s hospitality industry picking up, some market observers even suggested that it might be better to sell the hotel later, when it might fetch a higher price.

‘Most hoteliers would want to hold on to their properties given the robust outlook’ for the hospitality sector, an analyst said. One reason is that the integrated resorts could draw more tourists later.

In April, the number of visitors to Singapore grew 20.4 per cent year-on-year to 938,000. Consultancy HVS Global Hospitality Services recently projected that the average room rate will rise 10-15 per cent this year from $191 last year.

Within the hospitality industry, fears of an oversupply of hotel rooms have started fading. Some upcoming hotels include Park Regis Singapore and Ibis Novena.

Source : Business Times – 16 Jun 2010

More shops in underpass linking ION, Tangs Plaza unlikely to raise retail competition

Having more retail outlets in the underpass linking ION Orchard and Tangs Plaza will not threaten the businesses above ground in the malls.

Analysts said that’s because shops along the underpass might likely cater to basic needs like an automated teller machine lobby.

But some have called for more creative use of the underground space like having interchanging upscale retail booths.

The underpass today is home to a busker and a more transient crowd that walks between ION Orchard or Orchard MRT station and Tangs Plaza.

But this would change in 2014 when the upgrading works is completed for the linkway which will accommodate shops on both sides of the tunnel.

However, some observers feel Orchard Road doesn’t need more retail shops.

Lau Chuen Wei, executive director, Singapore Retailers Association, said: “We should maybe turn our minds to look at what we’re short of on Orchard Road and not what we already have plenty of.

“For instance, we could have a nice upmarket bazaar. That may be an opportunity for young entrepreneurs and retailer wannabes to test the waters and instead of having to tie themselves down to a two or three-year lease, they could maybe just test it for three or six months.

“And it could be like a funnel so you test it there and when you think that you’re ready to take on a longer lease, then maybe you can be funnelled to the more permanent places within the mall. So it’s like a test bed.”
But as ION Orchard will manage the revamped underpass, others believe the passageway may end up housing up to 10 shops.

Each store may span 300 to 500 square feet on average.

Charles Ng, retail director, Colliers International, said: “I reckon rental there will be far higher than those say in Citylink Mall. This is because this is Orchard Road and I believe that traffic will certainly be far higher.

“It should be in the region of mid 30 dollars, say S$35 per square foot, as opposed to say Citylink Mall which is achieving about S$25 to S$28 per square foot.”

Analysts said there is no shortage of human traffic along the underpass as hundreds of people walk through here on a daily basis.

And as traffic is so heavy, observers said that shops like convenience stores, pharmacies and mid-end apparel and shoe outlets will likely be located here in the future.

This they said is so that consumers can hop in quickly, make impulse or last minute purchases, before moving on to their intended destination.

An ION Orchard spokesperson had said that the enhanced linkway would be similar to that of the ION Paterson Link, connecting ION Orchard to Wheelock Place. The passageway is also set to be widened by double the existing width to 10 metres.

The sale of the underpass has been awarded to CapitaLand and its Hong Kong partner Sun Hung Kai Properties.

The Land Transport Authority will manage the upgrading project

It has awarded the tender for the upgrading works to McConnell Dowell South East Asia.

When completed in 2014, the upgraded underpass will be managed by ION Orchard.

Source : Channel NewsAsia – 16 Jun 2010

Yanlord and Ho Bee jointly acquire 6 prime residential sites for 504.6m yuan

Yanlord Land Group and Ho Bee Investment have acquired six prime residential development sites for 504.6 million yuan or S$102.9 million in Hebei’s Tangshan Nanhu Eco-City in China.

This works out to an average purchase price of 1,302 yuan or S$265.6 per square metres.

The purchase was made through their new joint venture company Yanlord Ho Bee Investments.

In a statement, Yanlord Ho Bee said the sites have a combined area of 186,444 square metres with total planned gross floor area (GFA) of some 387,597 square metres.

The eco-city is located on the south of Tangshan City which is near to the central business district.

Yanlord said the acquisition follows their earlier developments in Tianjin and reflects the company’s continued confidence in the region.

Meanwhile, Ho Bee added that the latest development is targeted at home buyers looking to live in an eco-friendly neighbourhood.

Source : Channel NewsAsia – 16 Jun 2010

Private home sales fall

Sales in May less than half that in April

The feverish property market lost some of its sizzle last month, as Europe’s debt crisis and the resulting retreat in global stock prices sent prospective home buyers scurrying to the sidelines, but analysts said underlying sentiment would likely remain firm, supported by Singapore’s strong economic fundamentals and steady demand.

Data released yesterday by the Urban Redevelopment Authority (URA) showed just 1,078 units of new private homes were sold last month, less than half the 2,208 units sold in April.

The slowdown did not surprise analysts, coming as the Singapore stock market fell by 7.5 per cent in May alone.

“In the first five months of 2010, developers sold a total of 7,666 private homes. Such a rapid pace of sales is not sustainable. All it takes is for some event to prick the confidence bubble and the sales volume will deflate,” said Mr Nicholas Mak, a real estate lecturer at Ngee Ann Polytechnic.

Despite the sharp month-on-month volume decline last month, analysts said the number of units stayed healthy at above the 1,000-unit mark since January. They added home prices would continue to rise, albeit at a slower rate.

“Based on the strength of the Singapore economic fundamentals, there are sufficient factors to exert upward pressure on private home prices for the rest of this year, but at a slower pace. For the whole of 2010, the average capital values of private residential properties could increase by 10 to 15 per cent.” Mr Mak said.

But for now, June is likely to continue to be a slow month amid uncertainty in Europe and as many people take time off to enjoy the World Cup.

Dr Chua Yang Liang, head of research of property consultancy Jones Lang LaSalle said: “”Both developers and buyers are expected to hold back their launches and purchases in June on the back of the heightened uncertainty arising from the euro zone debt crisis. As a result, the sales volume is expected to moderate a further 15 to 35 per cent to around 650 to 850 units.”

Data from URA showed a decline in transactions across all segments in May.

Homes located in the city fringe were most popular during the month with 451 transactions, but this pales in comparison with the 1,044 deals done in April.

Sales of new homes in the city dipped to 179 units last month from the 393 units sold the month before. Meanwhile, sales volume of homes in the suburban areas fell to 448 units from 771 units in April.

Developers placed a total of 1,134 units for sale last month, significantly lower than the 2,085 units launched in April.

Source : Today – 16 Jun 2010

Tuesday, June 15, 2010

Tender for Punggol Field/Punggol Rd site attracts highest bid of S$223.7m

The Housing and Development Board’s (HDB) tender for a residential site at Punggol Field and Punggol Road has attracted the highest bid of S$223.7 million.

This came from a joint bid by two companies – ChoiceHomes Investments and CEL Development.

That translates to about S$298 per square foot per plot ratio for the reserve list site meant for executive condominium development.

The next highest bid came from another joint bid by Hoi Hup Realty and Sunway Developments. They had bid S$215.2 million.

The state land parcel has a site area of almost 22,500 square metres and a maximum gross floor area of over 67,000 square metres.

The site was launched for public tender on May 5 and has a lease period of 99 years.

A total of five bids was received for the site.

HDB said it will decide on the winning bidder at a later date.

Source : Channel NewsAsia – 15 Jun 2010

URA awards tender for Upper Serangoon Rd site to Qingdao Construction

The Urban Redevelopment Authority has awarded the tender for the residential site at Upper Serangoon Road and Pheng Geck Avenue to Qingdao Construction.

The company submitted the highest bid of S$113.7 million, or about S$588 per square foot of gross floor area.

The tender was launched in April this year and closed two weeks ago.

A total of 15 bids was received for the site.

Other developers who submitted bids included Frasers Centrepoint and Sim Lian Land.

The 99-year lease site can yield a maximum gross floor area of some 17,400 square metres.

Source : Channel NewsAsia – 15 Jun 2010

Height could hit en bloc profit

But some residents of Nim Gardens happy to stay, citing condominium’s size, green surroundings

A planning provision has hampered the plans of some residents at Nim Gardens to make more money should their development go up for an en bloc sale. Nim Gardens in Seletar Hills is 10 storeys.

According to the rule, any new development cannot exceed this height, nor the gross floor area. This means residents would not see a bigger profit if the new development were limited to 10 storeys.

MediaCorp has learnt a resident had written to the Ministry of National Development in support of any new development to be built above Nim Gardens’ current height.

When approached, the resident – who declined to be named – referred to the Urban Redevelopment Authority’s (URA) April 2000 circular, which spelled out that a 10-storey block could be increased to 12 storeys. The revision allows for more flexibility in design and to free up more space for communal use.

But, the URA said the planning relaxation does not apply to Nim Gardens, saying: “We are not able to support any further intensification at this location as it may have an adverse impact on the environmental character of the neighbourhood, which is safeguarded for three-storey landed housing.”

The area around Nim Gardens was part of an area designated for landed housing in 1994.

The sprawling 23,197 sq m site, was approved as a condominium development in 1982, with one block of four-storey apartments and three blocks of 10-storey apartments. There are 124 units there, each about 1,860 sq ft in area.

Mr Joseph Wong, 60, is happy to live there, saying: “Where can I get an apartment as big as this and birds chirping in such lush surroundings?”

Should Nim Gardens go en bloc, it could fetch $100 million or $286 psf per plot ratio, according to a conservative estimate from Chesterton Suntec International research and consultancy director Colin Tan.

Source : Today – 15 Jun 2010

URA to launch tender for hotel site

The Urban Redevelopment Authority, URA will launch a tender for a hotel site at the junction of Clemenceau Avenue and Havelock Road in two weeks time.

It has accepted an application from a developer for the hotel site, which is on the Reserve List, for public tender.

The developer has committed to bid at least $40.8 million for the land parcel.

The URA said the 99-year leasehold site can generate a maximum gross floor area of 11,555 square metres.

The site spans 0.55 hectares.

A hotel of not more than seven storeys can be built on the plot.

Ms Tay Huey Ying, director for research and advisory of Colliers International, said the site is likely to be developed into a hotel catering largely to business travellers.

The site could attract four to eight bids ranging from $47 million to $53 million, said Mr Nicholas Mak, real estate lecturer at Ngee Ann Polytechnic.

These are likely to come from a mix of foreign and local developers and hotel owners, with possible joint ventures.

With the nearby Swissotel Merchant Court and competitors in the surrounding area, he said the hotel needs to carve its own niche.

“This new hotel will be smaller than Merchant Court Swissotel and it is located at a busy junction, so it cannot compete head-on with the bigger hotels in the area,” he said.

Source : Today – 15 Jun 2010

Monday, June 14, 2010

New CEO for HDB from August

The Housing and Development Board (HDB) will have a new CEO in August.

She’s Cheong Koon Hean, currently the CEO of the Urban Redevelopment Authority.

Mrs Cheong will relinquish her current appointment but continue as Deputy Secretary (Special Duties) at the Ministry of National Development (MND) with the responsibility of overseeing land reclamation issues.

Current HDB CEO, Tay Kim Poh, will be appointed Deputy Secretary (Development), at MND.

Mr Tay will replace Mr Tay Lim Heng, who has left the ministry to pursue other interests.

Mr Ng Lang, currently CEO of the National Parks Board, NParks, will take over the appointment URA’s CEO.

Mr Poon Hong Yuen will be appointed CEO of NParks.

He’s currently Director (Economic Programmes/International Relations), at the Finance Ministry.

Source : Channel NewsAsia – 14 Jun 2010

Golden era of development

Early this week, a developer gave itself a pat on the back for delivering good returns on its maiden residential project. Considering that almost every established developer made record profits in their recent history, was it such an achievement?

If ever there was a period which could be described as a golden era for developers, the years from 2007 to the present day – with the exception of 2008 – must be it.

Laden with massive liquidity from huge profits earned on sold-out projects, it is no wonder that developers’ appetite for development sites has remained unabated.

The aggressive bidding for the most recent state sale of a residential plot at the corner of Sembawang Road and Canberra Drive, was the second tender to confirm that the ramping up of land supply has not had a major impact.

One major reason for the high bids and good participation rate was that there are still some developers who have yet to replenish their land bank. They are likely to ramp up their bids even higher.

However, what is interesting is that quite a number of developers continue to participate in such tenders even though they have already been successful in earlier rounds.

Perhaps reflecting the greater risks going forward, there appear to be more joint ventures – some with strategic tie-ups with contractors. With so many projects coming up over the next few years, securing a contractor will prove more difficult over time.

Flush with liquidity, developers probably feel there is no other better option. In any case, should their bids be successful, it may have an averaging down effect on their overall land cost.

The market continues to surprise even the most seasoned of developers. After bidding aggressively for a site and turning it around in double-quick time within nine months, some developers are caught in a dilemma when their projects sell out in days. They are back to square one but with even greater cash resources.

Thus, we may have a scenario where sites are taken up even quickly as they are made available, and this will probably be so even when land prices start to decline to more moderate levels. How much more land supply will it take to satisfy this seemingly insatiable appetite?

If developers continue to be able to unload their apartments, the risks are slowly being transferred to the investors. And when developers are in a healthy position, do not expect them to chop prices any time soon.

It can even be argued that it is in the developers’ interest to continue to participate in land tenders even when bid prices are coming down. This is because the most vulnerable are those who paid the highest prices for their sites. Developers with lower land cost are able to undercut their rivals.

I end this piece with this last paragraph of a recent article on asset bubbles by an NUS don: “While the ‘efficient market hypothesis’ prescribes minimal government intervention … regulators should prevent huge asset bubbles rather than look for ways to cure the economy only after a crash. By that time it may be too costly.”

Colin Tan, head of research and consultancy at Chesterton Suntec International.