Bangkok home prices may fall 10%

Source : Business Times - 21 Feb 2009

Resort area and luxury sector transactions grind to a halt as foreign buyers continue to disappear

BANGKOK’S residential property prices will fall by 10 per cent this year, while resort area transactions have ground to a halt, but domestic political turmoil may have prevented a market crash, experts say. Foreign buyers, who account for around 30 per cent of Bangkok’s condominium market, continue to evaporate, leading developers to cut prices as luxury sector transactions stall. But prices will not implode by the same extent as in Singapore and Hong Kong.

‘In the past couple of years we viewed Singapore’s booming a market with some jealousy as local politics here dampened prices,’ said David Simister, chairman for CBRE Thailand, Cambodia and Vietnam. ‘But we’re now thankful that we’ve avoided the subsequent spike and crash.’

CBRE has seen a significant slowdown in transactions in the 17 off-plan projects it represents in Bangkok.

Robert Collins, managing director, Savills Thailand, said that there will be a ‘flight to quality completed projects’, and that preventing oversupply is crucial in preventing a price crash.

‘A lot of what’s being marketed is off-plan,’ he said. ‘It would be very healthy for the market for these developers to postpone or shelve their plans until existing projects have reduced their inventory. This would prevent a huge surge in the current oversupply, which would inevitably lead to a market depreciation if it took place.’

However, Bangkok prices will still drop by 10 per cent this year, said Thaninee Satirareungchai, property analyst, KGI Securities (Thailand). Early sales by investors and speculators, who account for about 20 per cent of Bangkok’s condominium market, are taking place, but there is little evidence of distress selling, she said.

‘The current situation is simply mute transactions, there’s no real distress selling as in the previous 1997 crisis.’

Bangkok-based property broker Harrisons said its condominium sales in Bangkok had recovered slightly from an exceptionally low base last quarter, which was down 70-80 per cent on the first nine months of 2008. While condominium developer Grand Unity Development slashed prices at a Bangkok project by 20 per cent to boost sales before completion this July.

Luxury property prices will be the hardest hit, but cheaper projects will continue to sell, said Ms Thaninee.

‘Pacific Star, a Singapore-based property company, still works hand-in-hand with Asian Property Development for mid-to-high-end condo developments in central Bangkok.’

‘Overall, the condo market in Bangkok would be fine as most projects are not high-end segment and, therefore, not dependant on foreign investors,’ she said.

Experts said sales in resort areas like Phuket have ground to a halt.

CBRE saw its Phuket residential transactions slump by more than 60 per cent year on year from January to four, despite making record sales in the first 10 months of 2008.

‘Phuket missed its high season last year which has led to very disappointing sales,’ said Mr Simister, ‘but we still maintain our view that the residential villa and property market remains strong in terms of long-term demand.’ Mortgage approvals continue to decline but housing loans will still grow by 6.8 per cent this year to 1.69 billion baht (S$72.7 million), down from 7.8 per cent growth in 2008, said Kasikorn Research Centre. More cautious lending could benefit lower-risk borrowers as intense competition in the loan market will see some banks build market share through refinancing by offering aggressively favourable interest rates to existing borrowers, it said.

Sentosa’s seventh wonder

Source : Straits Times - 21 Feb 2009

Sentosa’s latest hotel - the ultra-luxurious Capella Singapore - opens next month, bringing to seven the number of hotels on the small, 500ha island.

The $400-million hotel designed by renowned British architect Norman Foster is set to be the jewel in Sentosa’s crown, with its distinctive figure-eight shape wrapped around two grand colonial buildings restored to their former glory.

It will have 111 rooms from a selection of suites, villas and what the Capella people call ‘manor’ houses.

Given that the resort island already has 1,200 hotel rooms, and with at least 1,650 more to come within the next three years, it begs the question: Is Sentosa in danger of being ‘hoteled’-out?

No, say industry experts who point out that the various hotels cater to different markets.

For example, Capella Singapore’s luxury rooms with villas and manors are the first of their kind on Sentosa, says Mr Philip Lim, director of hospitality and tourism training academy, The Tourism Academy@Sentosa.

‘It will be clearly differentiated from what is already available,’ he says. His training institute is a collaboration between Temasek Polytechnic and Sentosa operator Sentosa Leisure Group and offers diplomas in hospitality and tourism business.

Capella Singapore’s market is very high-end: Room rates start from $750 and go up to $7,500 - the priciest on the island.

Sentosa’s other hotels cater to either those on a budget, making them popular with families, or the upmarket crowd who can splash out but not to the level of Capella’s luxe lot.

Hotels in the first category are the Costa Sands Resort (Sentosa), Siloso Beach Resort and Treasure Resort. Prices start from $80, $260 and $288 for a night respectively.

Those belonging to the latter category are the five-star Rasa Sentosa Resort and The Sentosa Resort & Spa, and the boutique resort, Amara Sanctuary Resort Sentosa. Prices start from $375 at Rasa Sentosa, $380 at The Sentosa Resort and $500 at Amara Sanctuary.

Mr Goh Lye Whatt, Sentosa’s director of property and planning, points out that the island’s hotels and resorts are popular among a diverse group, from families on getaway vacations to business travellers and holiday-makers on extended stays.

He adds that as part of Sentosa’s master plan, these hotels were planned for the long haul in line with more tourism initiatives and to bring a wider range of offerings to meet the needs of travellers.

Singapore Tourism Board’s director of hospitality division Caroline Leong says ‘the wider range of offerings will better position Singapore to meet the accommodation needs of travellers’.

Indeed, Mr Albert Teo, chief executive officer of Amara Holdings which owns Amara Sanctuary, is unfazed by the opening of Capella Singapore. He says that with Capella’s additional 111 rooms, ‘it’s not that many to Sentosa’s total room count’.

Capella Singapore also offers extended stays that can be as long as 20 years. ‘It is catering to a niche market that is different from ours,’ says MrTeo of his 121-room hotel. He says Amara Sanctuary is meeting its targeted occupancy rate but declines to elaborate.

As well as the lavish Capella Singapore, built over nearly six years, Sentosa will have several more hotels opening over the next few years.

Singapore’s first of two integrated resorts, Resorts World at Sentosa, is expected to open in March next year. Four of its six hotels will be open by then, offering 1,400 rooms.

Property giant City Developments is also developing a 250-room hotel at Sentosa Cove, which it says will be ready in ‘two, three years’. It was originally reported to be a W hotel (part of the hip W hotel brand), but a spokesman says it will unveil the name at a later stage.

But that is a long way off. Right now, the buzz is all about Capella Singapore, the flagship property for Capella Hotels and Resorts in Asia.

General manager Michael Luible says it has been receiving bookings since January and ‘now has a healthy number of advance bookings’. These include room bookings by corporate travellers, individuals and families.

Mr Lim says whether Sentosa can take more hotels will depend on the demand ‘when the economy is back in its healthy state and when all hotels including those in Resorts World are ready’.

Mr Luible says consumers benefit from more options on Sentosa as the island provides a wide range of lifestyle and hospitality choices for various budgets and needs. But other than those already planned for, he prefers ‘to see no further hotel developments on the island, to preserve its natural beauty’.

Capella Singapore: WOW factor

Source : Business Times - 21 Feb 2009

CAPELLA Singapore finally opens its doors to its first paying customers on March 30. This marks the start of what the hotel and its owners hope will be a new chapter in the top end of the local hospitality industry - an establishment that successfully and seamlessly combines Singapore’s colonial past with the latest in resort-style accommodation and ‘a new standard of luxury’. Developed at a cost of $400 million by an associate company of the Pontiac Land group and managed by the US-based West Paces Hotel Group, the 111-room Capella Singapore is opening at a difficult time, thanks to the current global economic meltdown. Viewed from a different perspective, however, the hotel - the first in the region for the Capella group - is positioned to take advantage when the market for ultra-luxe hotel properties regains its lustre.

Given its spectacular 30-acre site on a hillside in Sentosa and the fact that every aspect of the hotel’s development has been gone over with a fine toothcomb, there is little doubt that Capella Singapore will create a positive buzz when it opens for business at the end of next month. Just to make sure, though, it gave the media an advance look at the property earlier this week.

The design line-up, led by brand name architect Norman Foster, is certainly impressive enough. The British architect’s ability to blend traditional design with futuristic elements has earned him a worldwide reputation, although he has yet to produce an iconic, impact-making building in Singapore along the lines of, say, the HSBC headquarters in Hong Kong or the German Parliament Building in Berlin.

There is a definite sense of The Grand Arrival at Capella Singapore. A long driveway leads up a hill and follows its natural contours before ending in front of Tanah Merah, two 19th-century colonial buildings that served as function halls for official British Government events have been meticulously restored to form the reception area of the hotel.

Rather than a conventional hotel lobby, guests will be made to feel as if they have arrived at a large private home. The rooms in Tanah Merah, which means ‘Red Earth’, are built on an intimate scale and decorated in a neo-colonial style with white-stained ceiling beams, wooden furnishing, grey-veined white marble floors and patterned rugs - somewhat clubby and evoking an unmistakable sense of plush privacy.

A flight of stairs leads from the reception room to a wood-panelled lounge called The Library, for obvious reasons. The overall setting is not as grand as, say, Carcosa Seri Negara - the former British High Commissioner’s residence in Kuala Lumpur that was built in the late-19th century and also turned into a luxury hotel - but there are many more layers to Capella Singapore.

For openers, Tanah Merah marks just the start of the Capella experience. Traditional architecture then gives way to the Foster treatment - guests emerge from the colonial-era buildings to find a long, curvilinear roof, linking the existing buildings with an entirely new, low-rise main block that houses the guest rooms. The contemporary shape, reminiscent of the futuristic curves found in several of Foster’s projects, looks from above like a large figure eight. The continuous aluminium roof is finished in a dark earth tone, in keeping with the traditional roof tiles on Tanah Merah.

Simultaneously, guests will not fail to notice a panoramic view of tropical greenery, comprising a tree canopy that follows the contours of the site down to the sea, where ships lie at anchor in the distance. The natural topography adds prominence to the main building, which sits atop the site, with rooms, restaurants and other facilities spread over several levels. Top-notch designers hired to decorate individual spaces include Jaya Ibrahim for the guest rooms, Andre Fu for Cassia, the hotel’s Chinese restaurant and Koichi Yasuhiro of SPIN for The Knolls, its all-day restaurant.

A three-tiered swimming pool complex (there are another 50 pools throughout) and 38 garden villas are sprinkled over the sloping land, together with a further 82 suites and duplexes intended for long-term guests who will be able to enjoy the benefit of the hotel services along with the main hotel guests. Apart from some villas that appear to be clustered together a little too closely, the Capella evokes a sense of true resort-style luxury - a definite rarity in an urban environment.

A concerted effort has been made to keep the grounds natural, so the landscaping is organic rather than ornamental, with planting intended to affect a paddy-field look in certain sections. Meanwhile, the overall design look is contemporary, with local touches - materials used in the guest rooms include Burmese teak, dark granite and limestone, while the curved themed extends to the villa roofs and ceilings as well.

A collection of artworks adorn other parts of the site - notable works include a steel installation on the lawn fronting Tanah Merah, an installation by Japanese artist Tomoko Sawada and a glass sculpture hanging from the ceiling of the uniquely circular, glass-domed ballroom.

Hotel rack rates start at $660 while villas are priced between $1,800 and $7,500. Rooms are uniformly spacious, ranging from 77 square metres for a deluxe room with a large picture window. The presidential suite, known as the Capella Manor, comprises three bedrooms and 4,000 square feet of space.

Rates for the long-stay accommodation will be individually priced, depending on the view, says Capella Singapore’s general manager Michael Luible. ‘Among affluent travellers who have houses and yachts around the world, the problem is who looks after them?’ says Mr Luible. ‘We take all these problems away and market the homes under the Capella umbrella.’

He adds, ‘It’s all about privacy and space and creating a certain word of mouth. We are offering a resort lifestyle and hopefully, we will deliver a ‘wow’ experience.’

Time for professional body to regulate real estate industry

Source : Straits Times - 21 Feb 2009

TUESDAY’S report, ‘The murky world of real estate practices’, encapsulates the morass in which the real estate industry finds itself in. Sad to say, all is not well in the industry and relief is not yet in sight.

As the Institute of Estate Agents (IEA) has no power to keep errant agents out of the industry, it is akin to a toothless tiger. Currently, estate agents handle both HDB and private property transactions and many buyers and sellers depend on them for their services.

The complaints committee of the Singapore Medical Council handles all complaints against doctors and this is governed by Section 40 of the Medical Registration Act 1997. Disgruntled patients have recourse to voice their grievances against doctors who indulge in any malpractice. Why is there no recourse for real estate transactions that have gone awry?

When an owner appoints an estate agent to market his property, a relationship of agent-principal is established. This is called power of attorney. Such a relationship plays an important role in the real estate business. Even if the agent is fired or he quits, the agreement does not automatically end. The agent can still have lingering apparent authority since various third parties may remain unaware of the termination of the relationship. To ensure that the agent does not act beyond his authority at the end of the relationship, the principal must be sure to give notice (via the newspapers) that the individual is no longer his agent.

In California, its 400,000 estate agents (called realtors) are governed by a code of ethics. They have to pass a course on the legal aspects of real estate, general accounting, business law, escrow (a document kept in the custody of a third party), mortgage loan brokering and computer application in real estate.

A realtor is obliged to safeguard his principal’s lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal’s bargaining position. This duty precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must sell a property (under pressure by banks) below the listed price. Conversely, a broker who represents a buyer should not disclose to a seller that the buyer will be willing to pay more than what has been offered for a property.

Since 1924, the Real Estate Institute of Australia has been the national professional association of the real estate industry in Australia. The institute is a politically non-aligned organisation that provides advice to the federal government. It has a stringent code which specifies, inter alia, that members must maintain a working knowledge and act in accordance with the relevant laws governing the real estate profession, act in the best interests of their clients and in accordance with their instructions, except where to do so is unlawful or contrary to good agency practice.

They must treat fellow real estate practitioners with respect and professional integrity and should not disclose confidential information obtained while acting on behalf of a client or dealing with a customer, except where required by law to disclose.

Perhaps Singapore’s Parliament should introduce legislation to set up a professional body like the Australian institute which has powers to discipline its members and uphold the professional integrity and reputation of such an august body.

Heng Cho Choon

Wide support for Reits to hold AGMs

Source : Straits Times - 21 Feb 2009

MARKET participants welcomed the idea of real estate investment trusts (Reits) being required to hold annual general meetings (AGMs), saying that it would be good for corporate governance and transparency. It would also be long overdue.

JP Morgan analyst Chris Gee said that it was actually ‘kind of perverse’ that Reits currently do not have to hold AGMs.

Instead, Reit trustees may convene extraordinary general meetings (EGMs) to discuss matters such as major acquisitions and fund raising. Reit unitholders may also request the trustee to convene meetings.

Currently, at least one Singapore Reit, Ascendas Reit, holds annual meetings with its unitholders although this is not required.

A pioneer of the Singapore Reit industry explained that the reason S-Reits are not required to hold AGMs has to do with their origin. ‘S-Reits were created based on existing unit trust guidelines, and unit trusts are not required to hold AGMs. In Hong Kong, however, Reits are governed by a distinct Reit code, which requires Reits to hold AGMs,’ he added.

Securities Investors Association of Singapore (SIAS) president and CEO David Gerald said that the group has not received any complaints about Reits here not holding AGMs. ‘This may be due to the fact that Reits are generally very transparent and there is a trustee to take care of the interests of the unitholders,’ he said.

On Thursday, the Singapore Exchange revealed that the Monetary Authority of Singapore will be consulting on a proposed requirement for Reits to hold AGMs to promote good corporate governance and to be in line with the practices for listed companies and business trusts.

The SGX statement was in a release on further measures to speed up and ease listed issuers’ fund-raising efforts. This includes allowing issuers to seek a general mandate from shareholders to issue up to 100 per cent of the share capital via a pro-rata renounceable rights issue - up from a 50 per cent limit currently.

Since Reits do not hold AGMs, they do not have a forum for seeking such general mandates. ‘Instead, they convene EGMs when they need to issue new units to raise funds for acquisitions, and this lengthens exposure time, and the volatility in the unit price could affect the success of the capital raising,’ said a market observer.

‘So if Reits have the forum during which they can seek and obtain this general mandate for rights issues, then they will be in a more flexible position to raise equity,’ he added.

Source : Business Times - 21 Feb 2009

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Property developers’ earnings sink

Posted by luxuryasiahome on February 21, 2009

EARNINGS at property developers here have sunk like a tonne of bricks as confidence in the residential property market continues to take a beating.

Wheelock Properties yesterday reported a 63 per cent drop in full-year net profit for last year, while MCL Land sank deep into the red, reversing a healthy bottom line a year earlier.

In view of the poor market, Wheelock Properties says it is ‘currently reviewing the building plans’ for its proposed luxury project Ardmore 3, while MCL Land is reviewing ‘the carrying value of development properties for sale in Singapore’.

For the year ended Dec 31 last year, Wheelock Properties posted a net profit of $100.9 million, down from $273.5 million, even though revenue rose 19.4 per cent to $454.6 million. The previous period was nine months due to a change in the company’s year-end.

The company attributed the higher revenues to the sale of units at Scotts Square as well as higher rental rates accrued by Wheelock Place, the group’s office and retail property in Orchard Road.

Although the depressed residential market here meant prices of freehold non-landed private prime homes fell 14 per cent in the last quarter, the group sold 13 units in Scotts Square last year for a revenue of $54 million, or $4,028 per sq ft, it said.

Total sales for the project have now reached $903 million, and ‘this revenue will be recognised progressively in the accounts until Scotts Square is completed’ next year.

Wheelock Place was also revalued - from $700 million to $790 million - last year.

Earnings per share were 8.44 cents, down from 22.86 cents the previous year.

Net asset value per share stood at $1.72, down from $1.82 a year earlier.

The board has proposed a final dividend of six cents a share.

MCL Land reported a net loss of US$107.3 million (S$165 million) for the year ended Dec 31 last year, after posting a net profit of US$61.9 million in 2007.

The group recorded full-year revenue of US$343.1 million, a 12 per cent drop. This was mainly attributable to the completion of Mera Springs and The Esta.

The group acknowledged that the residential property markets in Singapore and Malaysia ‘were difficult due to the damaging effects of the global financial crisis’.

It noted that the prices of high-end condominiums in the prime district fell by 20 per cent to 30 per cent last year, while prices of mid-tier homes in the central areas fell by 10 per cent to 15 per cent.

Still, the group believes it is ‘well-placed to weather the difficult economic and market conditions’, with ’strong cash flow’ generated from the sale of three projects - The Fernhill, Tierra Vue and Hillcrest Villa.

Loss per share was 29 US cents, down from earnings per share of 16.73 US cents the previous year.

Net asset value per share stood at US$1.06 as at Dec 31, down from US$1.42 a year earlier.

The board has recommended a final dividend of 10 Singapore cents per share.

REITS: Ride out storm without special help

Source : Straits Times - 21 Feb 2009

REAL estate investment trusts (Reits) should not expect any additional help from the Government to get through the credit crunch. They will have to adjust like other listed firms.

That was the message yesterday from the Senior Minister of State for Finance and Transport, Mrs Lim Hwee Hua, who added that the days of easy credit and low financing are over.

Reits have been trading significantly below their net asset value. They are having trouble refinancing because of the tight credit market, and some of the smaller ones recently asked the Government to lower the 90 per cent minimum payout ratio to unit holders, which is needed to qualify for tax transparency treatment.

But the Government is resisting the calls. Mrs Lim told a Reit summit yesterday that the Ministry of Finance and the Monetary Authority of Singapore (MAS) have ‘deliberated this issue’ and decided that the minimum payout ratio will not be changed.

‘The key characteristics of Reits as a stable, high-payout, pass-through vehicle are important considerations for investors and, hence, must be preserved,’ said Mrs Lim.

She added that there are no strong grounds to justify a special tax treatment for Reits that is not made available to other entities.

‘It is unrealistic for (Singapore) Reits to expect to have continued access to cheap and easy credit during this recession,’ she said.

Many businesses across various sectors face similar refinancing difficulties as Reits, said Mrs Lim, who spoke at the Singapore Reit Summit organised by the Asian Public Real Estate Association (Aprea).

Earlier this month, Aprea asked the Government to help Reits refinance $4 billion of debt. They stressed that Reits are what will attract investors to Singapore as it moves out of this recession.

Mrs Lim said the Reit market is one of the key sectors in Singapore’s equity market, and MAS, other government agencies and the Singapore Exchange (SGX) have been actively seeking feedback and reviewing suggestions on the challenges it faces.

She added that measures to facilitate secondary fund-raising by listed issuers, including Reits, have been introduced.

On Thursday, the SGX also announced further temporary measures to help listed firms raise funds. It said it will continue to explore other initiatives to ease secondary fund-raising, including the Australian accelerated rights issue structure, which requires more detailed study.

Yesterday, Mrs Lim also mentioned the possibility of requiring Reits to hold annual general meetings to ensure better corporate governance.

DMG & Partners securities’ investment analyst Brandon Lee told The Straits Times: ‘As long as the credit market remains distressed, the smaller Reits will certainly find it harder to refinance or roll over their outstanding debt, given that banks are currently more inclined towards extending credit to those with strong sponsors, proven track records and quality assets.’

Saizen Reit announced last week that it will not give any payout for the second quarter. It said it wants to conserve cash due to the uncertain credit environment and the maturity schedule of its loans.

But despite calls for concessions, some Reits said reducing the payout ratio should not be an option, particularly if Singapore is to remain the leading hub for Asian Reits.

‘We strongly oppose any moves to make short-term, knee-jerk changes to our Reit regulations which will destroy investors’ confidence and consequently the S-Reit market,’ said the chief executive of Mapletree Logistics Trust Management, Mr Chua Tiow Chye.

‘If managers are allowed discretionary powers to decide how much to pay out, the Reit will be no different from a normal developer company.’

A CapitaLand spokesman agreed: ‘Reducing the payout will fundamentally alter the characteristics of the Reit as a high-payout, tax-transparent investment vehicle.’

In the short term, however, the Reit sector could see some consolidation.

This is ‘not unlikely’ as asset values are looking increasingly cheap, said DMG’s Mr Lee. ‘In the worst-case scenario, asset divestments at distressed prices could end up as the last resort for these Reits to pare down their debt levels.’

It’s status quo for Reits on payout ratio

Source : Business Times - 21 Feb 2009

Government’s stand is to preserve the stable, high-payout characteristics of the trusts, says minister

IT’S official. The authorities will not be lowering the minimum payout ratio that real estate investment trusts (Reits) must meet to qualify for tax transparency treatment.

Spelling out the government’s stand, Senior Minister of State for Finance and Transport Lim Hwee Hua said at a Reits seminar yesterday: ‘The key characteristics of Reits as a stable, high-payout, pass-through vehicle are important considerations for investors, and hence, must be preserved.’

‘Ministry of Finance and Monetary Authority of Singapore have deliberated this issue and have decided that the minimum payout ratio would not be changed,’ she added.

Yesterday’s official pronouncement on the topic confirms earlier BT reports.

Under current guidelines, Reits have to distribute to unitholders at least 90 per cent of their distributable income, in order to enjoy tax transparency, which means exemption from paying corporate tax at the Reit/vehicle, on the portion of income they distribute.

‘While we appreciate the refinancing difficulties faced by Reits, there are, at present, no strong grounds to justify a special tax treatment for Reits that is not made available to other entities,’ Mrs Lim said at a seminar organised by the Asian Public Real Estate Association (Aprea).

She noted that a few Singapore Reits have already managed to secure refinancing either through bank loans, loans from sponsors or recapitalisation, albeit at a higher cost. ‘It is unrealistic for S-Reits to expect to have continued access to cheap and easy credit during this recession,’ Mrs Lim commented.

BT reported last month that some Reit managers had urged the government to trim the minimum payout to unitholders to as low as 50 per cent of distributable income, while still allowing Reits to enjoy tax transparency.

The proposals were meant to help Reits - especially smaller ones - conserve cash. But they sparked concerns that Reit investors, especially institutional players like funds who count on the certainty of a regulated minimum distribution from their investments in the S-Reit sector, may pull out from this market if this rudimentary attraction of S-Reits disappears.

The issue of fairness also surfaced. It was asked why Reits enjoy special treatment when many other listed companies also return a chunk of their profits to shareholders but still have to pay corporate taxes.

Mapletree Logistics Trust’s deputy CEO Richard Lai welcomed yesterday’s official pronouncement. ‘We have never agreed with any move to reduce the distribution payout ratio because it will destroy investors’ confidence and consequently tarnish the S-Reit market. S-Reit is a special play for investors and reducing the payout ratio would definitely bring into question the very existence of Reits. Why do we need Reits if they don’t have the discipline to maintain high payout ratios?’

However, Securities Investors Association of Singapore president and CEO David Gerald said: ‘The 90 per cent rule means that a Reit is always geared. If there is a reserve, the Reit can face economic downturn or financial crisis confidently as banks may not be willing to lend. For this reason, I am not in favour of the authorities insisting that the 90 per cent level be maintained as that may affect the liquidity of a Reit, especially in these bad times.’

Mapletree’s Mr Lai suggests that to conserve cash, Reits could give investors the option to receive their distributions in the form of new units issued, instead of cash. ‘That could be dilutive but unitholders who support you would understand, whereas if you seek to reduce the payout ratio, you’d be destroying the very nature of having Reits,’ he added.

In her speech, Mrs Lim said: ‘With the credit crunch, many businesses across various sectors are faced with similar refinancing difficulties that S-Reits are facing.’ She noted that the government has introduced measures in last month’s Budget to stimulate businesses, including $5.8 billion of measures to stimulate bank lending such as the Special Risk-Sharing Initiative.

In addition, S-Reits can also tap measures announced recently by Singapore Exchange to facilitate listed issuers’ secondary fund-raising efforts. ‘SGX will continue to explore other initiatives to facilitate secondary fund raising, including the Australian accelerated rights issue structure, which requires a more detailed study,’ Mrs Lim added.

Singapore committed to developing Seletar Aerospace Park

Source : Channel NewsAsia - 20 Feb 2009

Singapore will press on with development plans for the Seletar Aerospace Park and grow the research and development (R&D) efforts for the aerospace industry.

The aviation industry has taken a nosedive amid turbulent economic conditions.

But the Economic Development Board (EDB) believes that long-term prospects remain positive.

President of the Association of Aerospace Industries of Singapore, Charles Chong, said: “There are many areas where there are opportunities and I think research and development is one of them. We have to find new methods to do things more efficiently, to reduce costs and so on.

“It will be a pity if companies because of this current economic problems cut back on that, then we will never improve.”

For one, Singapore is pressing ahead with plans to develop the 300-hectare Seletar Aerospace Park.

The park will host maintenance, repair and overhaul activities, as well as some manufacturing and other aviation businesses.

Giving an update on the project, the EDB says upgrading works on the Seletar Airport have started last month.

And it will take about 18 months to complete the extension of the runway to 1.8 kilometres. This will allow larger aircraft to land at the airport.

The aerospace industries association says the Seletar Park and similar developments in China and India will see the Asia Pacific region taking a higher stake of the global aerospace pie.

Infrastructure aside, observers say industry players must keep up with new technologies.

Deputy director of A*STAR’s Science and Engineering Research Council, Jasbir Singh, said: “I think this lull period is a time where we are trying to get more people to come on board and hopefully by reducing their risk in investing in these ideas on their own, they can work with us.”

Eight companies signed up with the council’s aerospace R&D programme on Friday.

They will look into areas such as the development of intelligent sensors, advanced materials for aircraft bodies, improvements for maintenance, repair and overhaul practices.

Genting Int’l to pour another $590m into IR

Source : Business Times - 20 Feb 2009

Genting International has announced that Resorts World at Sentosa is now expected to increase its investment in the integrated resort (IR) to $6.59 billion, up from $6 billion.

In a statement released yesterday, it added that the additional investment will be funded by operating cash flows from the IR when it opens in the first quarter of 2010. ‘Financing for the resort is in place with the successful syndication of a $4 billion credit facility in April 2008. As at 31 December 2008, Resorts World at Sentosa Pte Ltd has awarded more than $4.5 billion of the $6.59 billion project costs,’ it said.

First to open will be four hotels, the casino, Le Vie Theatre, a 7,300-seat ballroom, and Universal Studios Singapore.

Resorts World’s chief executive officer Tan Hee Teck added that to date, it has drawn down $600 million of its credit facility. One third of the IR was funded by equity. About $2 billion has been set aside for interest costs and pre-operating costs.

At the time of opening, capital expenditure is projected to be less than $6 billion.

Mr Tan said that the increase in investment is due to changes made to the design and architecture of the integrated resort to improve its entertainment offerings, including enhancements to its casino and Universal Studios Singapore.

Of its Universal Studios attractions, 18 out of 24 are new or have been redesigned for Singapore.

Improvements were made to the quality of interiors as well as to foot traffic accessibility to retail and dining outlets.

The last time the budget for the Sentosa IR was revised upwards was in November 2007 - from $5.2 billion to $6 billion. This was attributed to building-cost escalation and more attractions being added.

The budget for Las Vegas Sand’s IR, Marina Bay Sands, has also been increased from US$3.6 billion to about US$4.5 billion.

While construction costs are said to be coming down this year, Mr Tan said that it would only benefit from contracts signed within the last two months.

The announcement comes on the back of Genting International’s full year financial results which saw it register a 14 per cent fall in revenue to $643.8 million, down from $751.6 million a year ago.

This was attributed to lower revenue from the group’s UK casino’s operations and lower interest income. Genting said that revenue from the UK casinos’s operations was affected by the weakening of pound against the Singapore dollar and lower business volumes.

It also reported a net loss of $124.8 million for FY2008, compared with a net loss of $381.5 million for FY2007. This can be largely attributed to a lower impairment loss on goodwill recorded in the current financial year for the acquisition of Genting Stanley of $100.8 million compared with $454.6 million in the previous year.

For the year, it also said that the UK casinos’s operations recorded a loss before impairment, foreign exchange losses and interest expense of $12.5 million compared to a profit of $53.4 million in 2007.

Mr Tan, however, is confident of the success of Resorts World at Sentosa as more cost-conscious Asian holiday-makers are travelling within the region. He said: ‘Asians are telling us they are doing medium to short-haul flights now.’

Sentosa, Marina IRs get pricier

Source : Straits Times - 20 Feb 2009

Both are revising costs upwards for 2nd time

SINGAPORE’S two integrated resorts (IRs) are getting increasingly expensive, with both developers revising their cost estimates upwards for a second time.

Construction in progress at Marina Bay Sands, certain section of which are expected to open by year’s end. It was announced last week that the IR project is now estimated to cost US$5.4 billion, up from previous estimates of US$3.6 billion and US$4.5 billion. — ST PHOTO: ALPHONSUS CHERN

An additional $590 million will need to be pumped into the kitty for the Sentosa project, while the price tag for the Marina Bay Sands development has gone up by US$900 million.

Resorts World at Sentosa yesterday revised the cost for the 49ha resort in its earnings call, bringing it up to $6.59 billion. This is the second time the budget has been revised: It was bumped up from $5.2 billion to $6 billion in November 2007.

Marina Bay Sands will cost more as well. At last week’s earnings call, Las Vegas Sands Corp announced its Singapore IR is estimated to cost US$5.4 billion, an upward revision from previous estimates of US$3.6 billion and US$4.5 billion.

No explanations were given by Sands for the increase in cost, but it raised US$2.1 billion last November in a rights issue to cover its projects, including the one in Singapore.

Resorts World at Sentosa chief executive officer Tan Hee Teck said yesterday that additional funding would come from operating cash flows when the casino resort opens next year.

The extra money was needed for improvements to the design of the casino project, he said. Areas which were tweaked included pedestrian flow, the monorail stop at the resort and adjustments to the 24 attractions.

He said: ‘We want to make sure each and every attraction is up to standard. We found we needed more money to bring the attractions up to a superlative level.’ Moreover, construction costs had risen sharply in the last few years, he added. Steel, for example, rose from $800 per tonne in 2007 to $1,800 last year.

CIMB-GK Song Seng Wun said it was simply bad timing that the IR projects were awarded at the peak of the construction boom, which led to costs spiralling upwards.

Construction projects awarded earlier do not benefit from prices softening since the global financial meltdown, as they had locked in materials at a higher rate, Resorts World’s Mr Tan said.

Despite the revision in budget and the ongoing global recession, Mr Justin Tan, managing director of parent company Genting International, said he is ’still as confident’ in the success of the project.

As travellers trim their budget to take in short-haul travel, visitors from China and India who may have splurged on trips to Las Vegas or Europe would head to Singapore instead, he added.

Resorts World at Sentosa is slated to open on schedule by March next year.

One section of the resort is due for completion next week when its first 11-storey hotel, the Maxims Tower, is topped off. It will be the first development to be completed at either of the IRs.

Marina Bay Sands is expected to open in the fourth quarter of this year. However, it is uncertain which parts of the resort will be ready as Las Vegas Corp said only ‘certain features’ are targeted to be ready by December.

The resort has applied to the Government for a staggered opening, but has yet to receive official approval.

Serangoon Gardens dorm could open in August

Source : Straits Times - 20 Feb 2009

THE foreign worker dormitory proposed for Serangoon Gardens, which sparked outrage among residents before it was announced, could begin operations in August.

Aljunied GRC Member of Parliament Lim Hwee Hua, in a letter to residents posted on the GRC’s website, also provided updates on the tender process, which closed in mid-December last year.

The contract to build the dorm at a disused school is likely to be awarded by early next month and work can start in May.

An access road, which will allow the dorm residents to come and go without passing through the estate, is likely be completed by the end of July, she added.

Residents of the ageing estate of landed properties kicked up a ruckus last September when they got wind of the Government’s plan to site a foreign worker dorm in their neighbourhood.

More than a thousand residents put their signatures on a petition against the dorm and gave this to National Development Minister Mah Bow Tan.

The key concerns they raised included traffic congestion, security and safety, and competition for the use of common facilities.

Last October, the Ministry of National Development said that it would go ahead and convert the disused school there into the dorm, but the residents’ concerns would be considered.

For example, the dorm would accommodate 600 workers at most for a start, and they would be those working in manufacturing and services only; the dorm would also be given its own facilities, such as a provision shop.

The access road was included among the measures to reassure Serangoon Gardens residents that their estate would not be overrun by foreign workers.

Mr E.T. Mohan Dass, a 60-year-old resident, when asked whether he was still concerned about these foreigners being there, said he was ‘okay’ with it if the access road is in place.

‘It’s not that we don’t like them, the estate is just too small,’ he said.

Office rents may slide until 2012

Source : Straits Times - 20 Feb 2009

AFTER two years of being squeezed by soaring rents, office tenants are finally seeing the market turn in their favour.

Up to four years of falling or flat rents are in store for them as a wave of upcoming office space outstrips lacklustre demand, according to a new report by property consultancy Savills.

Its Asia-Pacific regional commercial head Chris Marriott expects top-grade office values here to halve from last year’s peak by the end of next year, and not start to recover until 2012. Top-tier buildings downtown such as One Raffles Quay and Republic Plaza offer Grade A space.

Rents of such offices are predicted to drop 30 per cent to 40 per cent this year, and a further 20 per cent to 25 per cent next year, he said at a briefing yesterday.

The expected falls are due to the huge volume of new office space to be completed by 2011: 5.5 million sq ft, or about 30 per cent of all existing Grade A space.

At the same time, demand for new offices - which far exceeded supply recently when firms were still expanding - has become anaemic, due to the global economic slowdown, said Mr Marriott.

‘Office rents have generally come off by 10 per cent from the peak last year, although for new lettings we’ve seen more like a 25 per cent drop,’ he said.

Average Grade A rents peaked at $15.10 per sq ft (psf) last year and fell to $13.70 psf by the year end. Savills believes they will drop to $6 to $7 psf next year, leaving prime office space here some 20 per cent cheaper than in Hong Kong. Singapore’s office market will see a more severe adjustment, partly because the proportion of new space in relation to existing space is bigger, Mr Marriott said.

Other property experts agree that office landlords are in for a tough time.

Cushman & Wakefield managing director Donald Han is tipping a 20 per cent decline in rents this year and another 20 per cent fall next year, although he said the drops may be bigger if Singapore’s economic outlook continues to worsen.

In the past three months, most Grade A office landlords have cut rents by up to 10 per cent to 15 per cent, he said. ‘Landlords…are becoming more aggressive in trying to keep their tenants happy.’

Still, he notes that even if rents bottom at $7.50 psf - his own forecast - they will remain higher than during the last downturn, when they touched $5 psf.

CB Richard Ellis executive director Moray Armstrong is not expecting rents to correct by so much. ‘We have seen in previous cycles that when demand picks up, the available office supply is often very swiftly absorbed,’ he said. ‘Cycles here have been very short in the past, quite often in the order of two to three years.’

But now, landlords are ‘very much prepared to negotiate’, said DTZ Debenham Tie Leung’s senior director Shaun Poh. ‘Some of the landlords have stopped quoting actual prices; now they just ask tenants to make them an offer,’ he said.

Existing tenants are also trying to cash in on the recession, Mr Poh said. ‘Some tenants who have already settled on a price are asking to renegotiate or to get longer rental holidays.’

But not all landlords are worried. CapitaCommercial Trust, which owns 11 prime properties here, said it is ‘not true’ overall rents are down sharply, compared to trends in previous downturns. A spokesman said the trust charges $15 to $17 psf for Grade A space, while its overall average rent is ‘only $7.44 psf’.

‘We…expect to see positive rental reversions for leases renewed in 2009.’

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Tenants rethink pre-booked space

THE credit crunch is forcing major tenants in Hong Kong to scale down ambitious plans to take up more office space there.

Property consultant Savills said yesterday at a press conference at SGX Centre1 that these tenants are unlikely to proceed with all the space they have booked.

The global credit crunch has battered many major financial institutions in the past year.

The firms mentioned by Savills included big names such as Credit Suisse, Deutsche Bank and Morgan Stanley. They had been due to move into the Hong Kong International Commerce Centre upon its completion next year.

Consultants say this hesitancy to take up pre-committed space has yet to occur in Singapore but it may happen in the months ahead.

Mr Moray Armstrong, executive director at property consultancy CB Richard Ellis, said: ‘It’s not a stretch to expect that to happen here, given that many of the pre-commitments were made by financial institutions.’ He also said these institutions may choose to sublet space they cannot occupy.

This might be seen at the new Marina Bay Financial Centre, set to be ready in 2012. All three towers of prime GradeA office space have been at least partially pre-leased. Tenants include American Express, BHP Billiton, DBS Group Holdings, and the Macquarie Group.

Cairnhill Heights sale: Would-be buyer pulls out

Source : Straits Times - 20 Feb 2009

Developer cites poor market conditions for 11th-hour decision

A DEVELOPER has backed out of a planned $44 million purchase of an enbloc sale site in the prime Cairnhill area at the 11th hour - sparking anger from some of the home owners.

Owners of Cairnhill Heights will now get their share of the forfeited deposit, after deducting for expenses. — ST FILE PHOTO

The firm, Jewel 1, blamed ‘difficult, uncertain and deteriorating market conditions’ for its decision to pull out of buying Cairnhill Heights.

The move came just 20 days before the deal to buy the 19-unit condo was due to have been completed on Feb 24, the condo’s sales committee said yesterday. The developer, wholly owned by one shareholder, will have to forfeit its 5 per cent deposit of $2.2 million.

‘This really feels like a stab in the back. Where is the good faith?’ said one owner, also a sales committee member, who declined to be named.

The decision came despite a protracted legal battle in which Jewel fought for the right to buy the site.

The developer outlined its decision in a letter to the lawyer involved in the proposed sale.

Three sale committee members told The Straits Times they felt let down by the developer, as they regarded the firm as a partner in a deal that they had robustly defended against all challenges, believing it was a reputable property developer.

Jewel 1, which was registered in 2006, has only one shareholder and director - Mr Cheong Sim Lam. He was not available for comment.

Mr Cheong’s family owns Hong Fok Realty, and he is the uncle of SC Global chief Simon Cheong.

He had agreed to buy Cairnhill Heights in May 2007, at the height of the property boom and amid a frenzy of collective sale deals.

The Strata Titles Board granted the sale in March last year. An objector at Cairnhill Heights then took the case to the High Court but lost the appeal in November.

A sale committee member who wished to remain anonymous said: ‘Having been on the same side for almost two years now, sometimes fighting shoulder-to-shoulder to secure the sale, the last thing you would have expected is for your contracting party to turn around and leave you in the lurch.’

The sale committee said it has reserved all options in terms of possible legal recourse.

Owners of the 19 units will get their share of the forfeited deposit, after deducting for expenses, which are still being calculated.

If the sale had gone through, each owner would have received $1.97 million to $2.5 million, apart from the sole penthouse owner, who would have pocketed $5.5 million.

About half of the owners have rented out their units. One of the owners lives there but also own properties elsewhere in Singapore.

At least one owner is believed to have already bought a replacement property - assuming the full sale price would soon be paid - and is now stuck with two homes.

One owner, businessman Georg Mechtler, said: ‘We felt aggrieved, having committed for more than two years to sell this property while the market kept climbing. Now, we have missed all our selling opportunities of this cycle. And the buyer only forfeits a miserable 5 per cent.’

Still, not all owners are upset. One said she is happy that an architectural icon has been preserved. Cairnhill Heights was designed by Singapore- based architect Geoff Malone.

‘We should keep evidence of our architectural heritage,’ she said.

Office rents may plunge 30-40% in 2009: Savills

Source : Business Times - 20 Feb 2009

Rental recovery here can be seen from 2012 onwards

Grade A office rents here could fall 30-40 per cent this year and another 20-25 per cent in 2010, based on new research from Savills.

Rents here fell 1.9 per cent in 2008, the property firm said. Savills’ research, which also forecasted rents at competing markets Hong Kong and Shanghai, shows that Singapore will be the worst-hit - in terms of rental declines for Grade A office space - in 2009 and 2010.

Grade A office rents here stood at $13.70 per square foot per month (psf pm) at end 2008, Savills said. This is expected to fall to $8-9 psf by end 2009, and $6-7 psf by end 2010.

Grade A rents in Hong Kong are forecast to fall by a smaller 30 per cent this year and 10 per cent in 2010. In 2008, Grade A office rents in Hong Kong grew 3.3 per cent.

Savills’ data showed that Grade A rents were around HK$59.80 psf pm at the end of 2008. Savills forecasts that this will fall to HK$42 psf by end 2009 and HK$38 psf by end 2010.

As a consequence, Grade A office rents here are likely to be about 20 per cent lower than in Hong Kong by end-2010. In the second half of 2007 and early 2008, Grade A office rents in Singapore were higher than in Hong Kong as rents shot up here in 2007 and 2006.

Property firms have said in December 2008 that Singapore’s Grade A office rents nearly doubled in 2007 after growing by more than 50 per cent in 2006.

But now, rents in Hong Kong are higher again as rentals here took a big hit in 2008. According to CB Richard Ellis, for example, Grade A rents fell to an average $15 psf pm in Q4 2008 - a fall of 12.5 per cent from end-2007. CBRE and Savills use different baskets of properties to calculate market rents. But both firms expect rents to fall further in 2009 and 2010 on the back of new supply.

Singapore and Hong Kong rushed to develop offices for their rapidly expanding financial services sectors in the last few years. Now, with the global downturn, an excess of unwanted space is depressing rents.

But Hong Kong’s rents are expected to take less of a hit as new office supply there was rolled out earlier than in Singapore.

‘With a minimum of a four year lead time for any significant office development, Hong Kong’s core supply arrived in the nick of time to satisfy the burgeoning demand whilst Singapore has been caught by the unforeseen credit crisis,’ said Chris Marriott, Savills Asia-Pacific’s regional head of commercial.

Some 5.5 million square feet of new prime office space is due to come up in Singapore from 2009 to 2011 - about 30 per cent of existing supply, Savills said.

By contrast, Hong Kong has a smaller 4.52 million sq ft of office space coming up, which will add 6 per cent to the total stockpile.

Mr Marriott expects Hong Kong to see the quickest recovery among the three markets studied. For Singapore, rental recovery could be seen from 2012 onwards, he said. But investor interest is expected to pick up by early 2010.

There are a number of new funds with allocations for Asia which are already targeting assets regionally. Mr Marriott said: ‘These institutions are already focusing on prime assets in core markets at discounts.’

In particular, they are looking at Australia, Japan, Korea, Hong Kong and Singapore, and will start buying once vendors reduce their prices, he said.

Mum, brother lose suits

Source : Straits Times - 19 Feb 2009

IN 2005, Singapore-born businessman Charles Loo Chay Loo lay dying in a United States hospital following a suicide attempt after he allegedly killed his adopted son.

At the same time, his older brother, Mr Loo Chay Sit, filed court papers from Singapore against him - addressed to his hospital bed in the US - staking a claim over his Margate Road home.

When Charles Loo died at the age of 51, Mr Loo Chay Sit served the writ on his brother’s widow - Madam Wendy Chen Tsui Yu - even before she was appointed to administer the estate.

The writ was served by way of a newspaper advertisement, even though he had her address.

In Madam Chen’s absence, Mr Loo Chay Sit obtained judgment in his favour, transferred the property to himself, then promptly sold it off for $4.8 million.

On Tuesday, his actions were criticised by a High Court judge in a 52-page written judgment, which threw out his claim that the house belonged to him.

Justice Judith Prakash said his conduct in the suit ‘left much to be desired’ and the whole proceedings ’smacked of opportunism’.

The judge was not convinced by his claim that he was the house’s rightful owner because he had paid for it: He was inconsistent and often evasive on the stand and made assertions he could not back up. ‘All in all, he did not impress me as honest,’ she said.

Justice Prakash also dismissed a second suit brought by the brothers’ mother - Madam Tan Chan Tee - against Charles Loo’s widow, claiming ownership of another house in Seraya Lane.

The judge found that Madam Tan, 81, seemed to be making ‘thoroughly unsubstantiated claims’ and her testimony was inconsistent.

The tussle over the two properties began in separate suits in 2005 and 2006, after Charles Loo attempted suicide while awaiting trial for killing his teenage son.

One house, in Margate Road off Mountbatten Road, was in his name. It has since been demolished. The registered owner of the other property, in Seraya Lane off Haig Road, was Madam Chen, his widow.

But Mr Loo Chay Sit, 58, and his mother claimed they had paid for the properties and were therefore the true owners.

The Margate Road house was bought in 1979 for $195,000 under Charles Loo’s name. Mr Loo Chay Sit said this was done to prevent his former wife from laying claim to it while he was undergoing a divorce. However, he could not explain why he did not transfer it back to his name once the divorce went through.

Lawyer Chiah Kok Khun, who acted for Charles Loo’s widow and his estate, said Charles Loo had always acted as the owner of the house, paying property tax and other expenses and mortgaging it for loans.

As for the Seraya Lane property, it was bought in 1975 by Madam Tan and her sister-in-law. In 1987, she bought over her sister-in-law’s share. The house was later transferred to Madam Chen.

Madam Tan said this was because Charles Loo had convinced her that she would have to pay heavier taxes if she hung on to it as she already owned another house.

However, Madam Chen testified that she had bought the property from the two women.

Justice Prakash also noted that she was the one who eventually paid off the mortgage over the property.

When The Straits Times contacted Taiwan-born Madam Chen in the US, she said in Mandarin: ‘They took advantage of me, a mere housewife, when I was not around and going through a difficult time.’

Madam Chen, 56, said she felt hurt that her relatives made personal attacks against her in court. ‘Justice has been done after all these years.’

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Two houses at stake

Late 1993: Mr Charles Loo Chay Loo and his family leave Singapore for the United States.
September 2004: He attempts suicide after allegedly stabbing his 17-year-old adopted son to death.
February 2005: While in prison awaiting trial for murder, he attempts suicide again and lapses into a coma.
April 2005: His older brother Chay Sit starts court action against him, staking a claim on Charles’ house in Margate Road in the Mountbatten area.
May 2005: Charles dies in hospital.
March 2006: In the absence of a representative of Charles’ estate, Chay Sit wins a court declaration that the house was held in trust for him. He transfers the property to his name and sells it within six months for $4.8 million.
July 2006: The brothers’ mother, Madam Tan Chan Tee, starts court action, staking her claim on a Seraya Lane house in the name of Charles’ widow, Madam Chen Tsui Yu.
January 2007: Madam Tan wins a default judgment.
July 2007: Madam Chen successfully applies for the judgments to be set aside.
May 2008: Hearing starts in the High Court to determine the rightful owners of the two houses.
February 2009: Justice Judith Prakash rules in favour of Charles’ estate and Madam Chen.

Luxury condo prices dive in KL

Source : Business Times - 19 Feb 2009

Foreigners cash out as they feel better times are not around the corner

PRICES of luxury condos in the Kuala Lumpur City Centre (KLCC) area have dived 15-20 per cent as the economic downturn bites and foreigners try to cash out for the best they can get, says a real estate consultant.

Malaysian buyers were the first to sign up for the high-end condos in 2004 during the onset of recovery after the 1998 Asian financial crisis, Rahim & Co managing director Robert Ang said on Monday. They bought at a half the price of foreigners who went into the market in 2006-07.

‘Most foreigners bought at appreciated levels, so they are flexible about asking prices,’ he said. ‘But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.’ The only bright spot is that so far there have been no forced or fire-sales, Mr Ang told a news conference.

Rahim & Co’s executive chairman Abdul Rahim Rahman said he believed prices in the KLCC area would have softened anyway because of oversupply.

An estimated 1,760 units will be completed in the area this year, adding to 1,200 in the past two years.

Mr Ang said: ‘The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent.’

At the peak, top KLCC apartments were edging towards RM3,000 (S$1,254) per sq ft. But most projects are now selling at RM1,000 plus psf in the resale market, though developers are still asking about RM2,000 psf for premium units under construction, such as at OneKL.

It is highly unlikely that better times are around the corner. Sellers and buyers know the market has yet to feel the full impact of the global economic slide.

Just on Monday, Malaysia’s Deputy Prime Minister Najib Razak said the government’s 2009 economic growth target of 3.5 per cent may not be achieved, as exports and production figures collapse.

Although property players claim the overall market is still liquid, fear of the unknown has led to a near-collapse in demand for luxury condos.

Mr Ang said Rahim has advised clients to defer new launches of luxury developments to the second half or third quarter. On the brighter side, landed property prices have held up so far, he said.

In the past three years, many foreigners went into Kuala Lumpur real estate, buying as many as a third of the units in some KLCC projects. They were attracted by the weak ringgit and a market that had not run up as much as others.

But now, some of them may be about to pay the price. After Malaysia’s last recession in 1998 the property market took about four years to recover. Mr Abdul Rahim reckons things could move faster this time - if the economic decline can be swiftly arrested.

Sibor dives, but home loan rates go up

Source : Straits Times - 19 Feb 2009

A KEY interest rate that sets the cost of interbank lending has plunged in recent weeks, but those taking out new mortgages will be no better off.

The three-month Singapore Interbank Offered Rate, or Sibor, dived to 0.68 per cent this month, bringing it near the all-time low of 0.63 per cent reached in June 2003.

The rate at which banks lend to one another has been dropping since September last year, and is expected to stay low.

But new home buyers expecting interest rates for Sibor-linked housing loans to fall in tandem will be disappointed.

To compensate for increased risk and the higher cost of capital, most banks have upped the spreads that they charge above Sibor, making Sibor-pegged home loans more expensive.

At DBS Bank, a home buyer taking a loan of 80 per cent of his property’s value in July last year would have paid a rate of Sibor plus 1.25 percentage points. Now, a new buyer has to pay Sibor plus 1.75 percentage points.

Even though Sibor fell from 1 per cent to 0.68 per cent between last July and now, the rate charged has actually risen from 2.25 per cent to 2.43 per cent.

The margin on HSBC’s standard Sibor-pegged package now stands at 1.25 points, up from 0.7 point last July. The rate has effectively risen to 1.93 per cent, from 1.7 per cent.

However, at least one bank - Citibank - has not raised its spreads on Sibor-linked loans. A customer applying for a loan now would get the same rate as last July’s.

The bank’s head of secured finance solutions, Ms Vibha Coburn, said it has remained consistent in the pricing of spreads on Sibor-linked packages.

Its range of spreads is still between 0.8 percentage point and 1.25 percentage points, ‘depending on the extent of the customer’s relationship with the bank and the type of home loan package’, she added.

Rising spreads will affect a growing number of borrowers as Sibor-linked loans have become increasingly popular after banks introduced them about two years ago.

One reason for their popularity is their transparency when compared to loans pegged to banks’ own board rates.

However, although new loan applicants will feel the pinch of the higher rates, home buyers who locked into the more competitive Sibor-pegged mortgages last year are seeing their monthly instalments fall steeply in line with the nosediving Sibor.

Loans pegged to the Singapore dollar Swap Offer Rate (SOR) - another popular benchmark interest rate - have also been hit by the increasing spreads.

OCBC Bank is now charging SOR plus 1.75 points for its home loan, compared to plus 1.25 points just two months ago, according to a news report last December. This means its rate has increased from 2.25 per cent to 2.43 per cent.

Banks said they have raised their spreads because the credit crunch has made lending more expensive and riskier.

‘Unlike the period of robust property markets in 2006 and early 2007, banks now have to contend with higher capital costs and increased credit risks, given the current financial turmoil and economic crisis,’ said Mr Gregory Chan, OCBC’s head of consumer secured lending.

Mr Dennis Ng from mortgage broker www.HousingLoanSG.com agreed: ‘Property values have fallen, so default risk has definitely gone up. It’s natural for banks to increase the interest margin to cater for this higher risk of lending.’

The higher margins are also being introduced because banks are seeing fewer home loan applications as the property market softens.

‘If banks reduce rates, they face not only a decline in loans growth but also a decline in margins, which could affect them quite badly,’ said Mr Ng. ‘So they may increase their margins to make sure revenue doesn’t drop that much.’

No update was available from two other banks here that offer Sibor- or SOR-linked home loans: Standard Chartered Bank could not respond by press-time while United Overseas Bank declined to comment.

URA to auction parking sites at Old Toh Tuck Rd

Source : Business Times - 19 Feb 2009

The Urban Redevelopment Authority (URA) said yesterday it will auction two sites at Old Toh Tuck Road to meet growing demand for heavy vehicle parking.

Trailers, buses and other vehicles with a maximum laden weight exceeding five tonnes will be allowed to park on the sites.

The bigger site, at 11 Old Toh Tuck Road, covers 10,844sqm, while the smaller site, at number 9, covers 9,765sqm.

The sites are being offered on 10-year leases.

The public auction takes place on March 17 at 2pm at the URA Centre’s third-storey theatrette.

Developer’s packets can be bought on line or at the URA Centre for $52.50.

Property buyers hit a bump on sliding valuations

Source : Business Times - 19 Feb 2009

Banks slash loan amounts before disbursing them

The rapid slide in property prices has resulted in some banks slashing the loan amount to borrowers just before it is disbursed. This has put property buyers in a quandary, forcing them to either top up the difference or pay a penalty for backing out of the loan offered.

And valuers have become the latest ‘villains’ as borrowers find it harder to get home loans to match their purchase prices. ‘I don’t tell people I’m a valuer,’ sighed Lydia Sng, Knight Frank executive director.

Bankers agree that the time lag between the loan offer and disbursement can result in a final smaller loan. The loan offer, while based on an indicative valuation, contains a clause that it is subject to a formal valuation.

But borrowers who want to cancel the loan are hit with a punitive 1-1.5 per cent cancellation fee. Also, by this time, it would be hard to back out because they would have already committed to the purchase of the property.

The wobbly market is not helping. A Citigroup report last month said that, in the high-end segment, properties have seen price corrections of about 35 per cent from a year ago and they could fall by another 30-40 per cent this year.

Ms Sng said the problem is with the valuation process. ‘They’ll give us a call with the address, we’ll give a range as we’ve not seen the property. It’s a bit like calling the doctor and telling him your symptoms and asking for a diagnosis,’ she said.

Gregory Chan, OCBC Bank head of secured lending, said: ‘It is possible to receive a lower formal valuation on a property compared to the initial indicative valuation. To mitigate this, as well as to ensure valuations are realistic, OCBC Bank does not rely solely on a single valuer for indicative valuations,’ said Mr Chan.

A DBS spokeswoman said the indicative value will be based on the information declared by the customer in the home loan application form.

‘In the event that the formal valuation is lower due to the wrong details provided on the property, the bank will have to take the lower of either the purchase price or valuation as per regulatory stipulations. As such, the buyers will be required to top up the difference between the purchase price and valuation in cash. If the borrowers decide to abort the purchase and cancel the loan at any point after loan acceptance, a cancellation fee will apply,’ said the DBS spokeswoman.

‘We monitor our panel of valuers regularly to ensure that valuations are always fair and based on current market values,’ said a United Overseas Bank (UOB) spokeswoman.

Jerry Tan, managing director of Jerrytan Residential Pte Ltd said his beef is that valuers sometimes look to non-comparable transactions to determine the price. But it could be comparing a five-star development to a three-star one, he said.

DTZ executive director Poh Kwee Eng said that if they were valuing a unit and there had not been a transaction in the same building for some time, they would look nearby, in similar developments. If the five-star unit was priced 20 per cent higher during last year’s red hot bull market compared to a three-star one, similar premiums would still hold.

‘Say, last year, your unit was sold at $1,000 per square foot and next door a unit went for 800 psf, there was a 20 per cent difference. So if the next-door unit is now selling at $500 psf, I would adjust your unit by 20 per cent upwards,’ explained Ms Poh.

Some banks are said to be staying clear of certain developments where there is a wide range of valuations such as The Sail with 1,111 units and Sentosa Cove.

UOB head of loans Kevin Lam declined to comment on specific projects but offered general observations about mortgages. ‘We have been conservative all along. With the recent further fall in prices, we have become even more careful,’ he said.

Knight Frank’s director of research and consultancy Nicholas Mak said valuations vary widely among the 1,111 units at the 63-storey The Sail. As for Sentosa Cove, ‘newer developments have better views or better designs. Some earlier projects didn’t have sea views,’ he said.

Some ground-floor condos sited between the landed homes with the sea front were not very different to condos on the mainland, said Mr Mak. ‘The value of a sea view alone is difficult to pin down,’ he said.

Credo Real Estate managing director Karamjit Singh said that The Sail and Sentosa Cove, as new markets which targeted foreigners, provided their own challenges. ‘The Sail was part of a new market that emerged as part of the development for the new downtown including the integrated resorts,’ said Mr Singh.

He said it takes time for prices to find their equilibrium, and they have not stabilised yet. ‘It’s a challenge everyone faces, including banks.’

Genting says Sentosa integrated resort bill could rise to S$6.59b

Source : Channel NewsAsia - 19 Feb 2009

Genting International is warning that its Sentosa integrated resort development could cost almost S$600m more than expected.

Its total investment is expected to increase from S$6 billion to S$6.59 billion.

And the firm warned that these hefty opening costs would have a “significant” impact on its earnings this year.

Genting said that over the past year, changes have been made to the design and architecture of the integrated resort to substantially improve its entertainment and fun offerings. These include enhancements to its casino and Universal Studios theme park.

The company said construction is on track for a soft launch by early 2010. This will include the opening of the casino, four hotels and the Universal Studios.

Genting said the extra investment will be funded by operating cash flows from the resort when it opens next year.

Genting gave this update as it announced a narrower net loss of S$124 million for the 2008 financial year.

Resorts World at Sentosa to top out first hotel this month

Source : Channel NewsAsia - 19 Feb 2009

Resorts World at Sentosa will top out its first hotel, Maxims Tower, by the end of this month.

The structural completion of the 11-storey hotel marks yet another major milestone in the development of the integrated resort, which remains on track for a soft opening in the first quarter of 2010.

Maxims Tower will open with three other hotels - Hotel Michael, Festive Hotel and Hard Rock Hotel - as well as the casino, Le Vie Theatre, a 7,300-seat Grand Ballroom, and Universal Studios Singapore.

Installation of ride equipment for the many attractions at Universal Studios Singapore has also begun, with testing and commissioning of the attractions scheduled to begin in October 2009.

Serangoon Gardens dorm may begin operations in August

Source : Channel NewsAsia - 19 Feb 2009

The foreign workers’ dormitory in Serangoon Gardens could begin operations in August, says the area’s MP, Mrs Lim Hwee Hua.

Last September, the proposal to have a foreign workers’ dormitory built in Serangoon Gardens resulted in a heated debate and protest from the residents.

A website was set up to inform residents on the dorm’s progress.

In a letter that was put up on the website, Mrs Lim, who is also the Senior Minister of State for Finance and Transport, said the Ministry of National Development (MND) had provided her with a timetable of how the dorm will be built over the next few months.

She said the tender for the dorm operator had closed, and the award will likely be made by early March.

But 938LIVE found out that before the successful bidder can begin work on the dormitory, 14 conditions must be fulfilled.

A working committee representing some 1,500 households in the estate was set up to gather feedback from the residents and work with MND. The committee was divided into four subgroups, focusing on traffic, security, environment and engagement with MND.

Chairman of the committee, John Leow, said the dorm will only materialise if all the conditions are met.

He said: “We have actually set it up for MND when they sent out the tender documents, and it’s all been stated in the tender documents - everything which we’ve requested. So obviously, before the contract can be signed, we will ensure that all these conditions are laid out, and we will not accept otherwise.”

Mr Leow said the conditions range from safety requirements to ensuring that traffic jams do not become a problem.

When asked if residents still objected to having the dormitory in their midst, Mr Leow said that as long as the conditions are met, the residents will be appeased.

“I think it’s ok, they’ve accepted it. The only thing now (is) they hope that we will do a good job representing them,” he said.

Work on the access road linking the dorm and Ang Mo Kio Avenue 1 has also begun and will likely be completed by the end of July.

Manhattan condo developer faces foreclosure on taxes, maintenance

Source : Business Times - 19 Feb 2009

A downtown Manhattan condominium developer is facing foreclosure for failing to maintain the property and pay contractors.

Anglo Irish Bank Corp plc said Yair Levy and his company, YL Rector Street LLC, are in default on US$165 million in loans because they didn’t pay property taxes or contractors and failed to ‘complete the work needed to make the project safe and habitable’, according to a lawsuit filed in New York State Supreme Court.

About 75 per cent of the units at 225 Rector Place remain unsold, according to the complaint. Developers moved into the financial district during the five-year property boom, buying up office buildings and converting them into upscale condominiums. Demand for such properties has dwindled as financial firms fire employees in the second year of the US recession.

The Rector Place building has no heat in the lobby or in the hallways, and promised amenities such as a gym and a concierge had not been provided, said Pam Flakowitz, a resident who paid US$565,000 for a 600-square-foot apartment there.

On Feb 13, the building’s management company told residents that there was only enough money in a common fund to keep the heat and water on for another week, Ms Flakowitz said.

‘Their explanation was they have no reserve accounts, there’s no capital account and he hasn’t paid common charges since day one,’ she said of Mr Levy.

Anglo Irish said in the lawsuit that Mr Levy also failed to contribute to a building escrow fund, among other expenses. Mr Levy, who turned the rental building into condominiums, has sold 72 of the 304 units in the building, according to the suit. His company still controls the condominium board and he is responsible for paying maintenance fees on behalf of the unsold units, the suit said.

Mr Levy did not return a call for comment at his Manhattan development office.

In its request for foreclosure, Anglo Irish is also asking the court to appoint a receiver over the property.

‘We are extremely concerned that the property be maintained in a safe and habitable condition while we resolve the issues that are before the court,’ said Chris Sullivan, a partner at Herrick, Feinstein LLP, which filed the suit on behalf of Anglo Irish.

Resorts World Sentosa to cost 10% more

Source : Business Times - 19 Feb 2009

Genting International has announced that its integrated resort (IR), Resorts World Sentosa, will now cost $6.59 billion, and increase of 10 per cent from the last reported figure of $6 billion.

It added that the additional investment will be funded by operating cash flows from the integrated resort when it opens next year and that construction is on track for the IR’s soft opening by early 2010 with the opening of the casino, and four hotels.

Investors sue US real estate lender

Source : Business Times - 19 Feb 2009

They say Orange County lender misled them into a risky scheme

Was it the real estate downturn, or were people misled into a risky investment scheme? That’s the question at the centre of a lawsuit filed on Tuesday that accuses Orange County real estate lender Dan J Harkey of bilking dozens of investors out of more than US$15 million
.
In an added twist, the investors claim that their money helped fund the election of Mr Dan Harkey’s wife, California state Assemblywoman Diane L Harkey, R-Dana Point.

The lawsuit accuses Mr Dan Harkey of using slick marketing techniques - including mass mailings and DVDs of sales meetings - to attract investors in short-term, high-interest loans to real estate developers. It contends that Harkey exaggerated the value of the properties used as collateral by borrowers, making the individual investments appear much safer than they were.
Dan Harkey denied wrongdoing, saying any losses were related directly to the downturn in the real estate and financial markets.

Assemblywoman Harkey declined to be interviewed. A spokesman disputed the lawsuit’s claim that she used investor money to bankroll her campaign.

‘She had a 30-year career in business and banking in which she acquired substantial financial resources of her own,’ said Dave Gilliard, the assemblywoman’s political consultant. ‘She used her personal resources to help fund her political campaigns.’ Campaign finance records show that Ms Diane Harkey contributed US$1.1 million of her own money to two recent campaigns - an unsuccessful bid for the state Senate in 2006 and last year’s winning run for the Assembly.
Mr Gilliard added that Ms Diane Harkey had no ownership interest in her husband’s company, Point Center Financial Inc of Aliso Viejo.

The allegations centre on a little-known and lightly regulated segment of the real estate industry known as ‘hard-money’ lenders.

These lenders often provide financing for high-risk projects that banks won’t touch, such as speculative housing developments.

Wealthy individuals looking for outsized returns often provide the investment capital. The lawsuit alleges that many investors were retired people who entrusted Mr Dan Harkey and Point Center with their life savings.

The lawsuit, filed in Orange County Superior Court in Santa Ana, claims that Point Center made millions of dollars by charging broker fees upfront to borrowers, allowing the company to profit regardless of whether the loans were repaid.

When the borrowers defaulted, the lawsuit alleges, the investors were often left with foreclosed properties worth a fraction of the money they had invested.

The suit cites a US$19.3 million loan in 2006 to Burnett Development Corp, which planned to build 451 homes surrounding a golf course at the Palm Springs Country Club. The loan was made near the peak of the real estate boom, but conditions soon changed. Burnett Development defaulted on the loan in 2007 and Point Center foreclosed, according to court records. Burnett officials could not be reached.

The now-closed country club has fallen into such disrepair that the city of Palm Springs filed a lawsuit last year - naming individual Point Center investors as defendants - seeking immediate repairs to a property filled with weeds, polluted ponds and graffiti.

‘I was shocked. I thought this was being properly handled by Point Center Financial,’ said Terry Holdt, an investor and one of the plaintiffs in Tuesday’s lawsuit. ‘I knew the intention was to develop the property. I didn’t realize it hadn’t gone very far.’ Mr Dan Harkey declined to address specific cases cited in the suit, but said the plaintiffs represented a small group of unhappy investors. He said investors would make money once the market rebounded.
‘We will manage and chart our way through this,’ said Mr Dan Harkey, 62.

‘I can’t control it if there’s a very tiny renegade group that tries to create all these illusions. We’re probably the best-suited company in California to manage the portfolio back to health.’ The lawsuit also cited Point Center’s US$10 million loan in 2005 to a company that planned to build luxury oceanfront homes in Carpenteria.

In a summary of the project distributed to prospective investors, Point Center said the property owner had ’spent the past seven years securing California Coastal Commission approval’ and needed only final approval from the city of Carpenteria.

The developers, brothers Paul and Richard Ehline, personally guaranteed the loan, according to the Point Center summary. The summary advertised an ‘estimated minimum’ return of 23.5 per cent.

It sounded like a good opportunity to Carlsbad Realtor Jim Haiduck, who said he invested US$200,000 in the project based on assurances by Mr Dan Harkey’s staff that nearly all approvals had been secured.

But the Coastal Commission had not approved the project, the lawsuit alleges. In 2007, Ehline Development Corp defaulted on the loan, Point Center foreclosed and the Ehlines filed for bankruptcy protection.

The brothers listed US$120 million in bad debt in their bankruptcy filings, including US$43.6 million of debt on four separate Point Center loans.

‘This was just a clear case of misrepresentation,’ Mr Haiduck said.

‘We just don’t know where the money went. Now it’s in foreclosure.’ Richard Ehline, in an interview with the Los Angeles Times, said the project stalled when city planning officials said they would prefer a luxury hotel instead of a purely residential development. He said the US$10 million went to acquire the land and for pre-construction expenses.

Mr Ehline said the company spent all its money, was unable to acquire additional financing and was forced to give up the project.

‘We were getting ready to submit the formal application into the city for approval. That’s about the point in time that real estate started to take a downhill turn,’ he said.

The lawsuit, filed by Irvine attorney David C Grant, seeks to have investors reimbursed for their losses. Mr Grant said he hoped a third party could be appointed to manage the properties that investors now own through foreclosure.

Investors say they also filed complaints with the Securities and Exchange Commission, the California Department of Real Estate and the FBI. Officials with those agencies declined to comment.
The lawsuit also alleges that Mr Dan Harkey operated a ‘classic Ponzi scheme’, by renewing short-term loans and using new investors’ money to pay off investors who chose not to renew. One example cited by the plaintiffs was a loan for construction of a proposed shopping centre in Riverside County called Murietta Commons.

Point Center funded the original US$3.9 million loan in 2005 and then allowed the developer to renew the loan in 2007 for US$6.8 million without improving the property, using new investors’ money to repay investors who chose not to renew, the lawsuit alleges.

Investors in both loans were victimised by inflated appraisals, the lawsuit contends.
The proposed shopping centre was part of a flood-control channel and no tenant could be found, according to the lawsuit. The Murietta project was never built and the property went into foreclosure, the suit says.

Mr Dan Harkey called the Ponzi scheme allegation ‘nonsense’, noting that no agency had filed any allegations against him. Point Center has no record of discipline with the state Department of Real Estate, records show.

Mr Dan Harkey said he had been involved in real estate financing for more than 30 years. The Harkeys own a multimillion-dollar home in a gated Dana Point neighbourhood. Their car collection includes a Bentley, a Porsche and two Mercedes Benzes, according to Department of Motor Vehicles records.

The lead plaintiff in the lawsuit is retired Orange County attorney Lloyd Charton, who said he was owed more than US$1 million, some of which went to the Murietta refinancing.
‘He scammed us,’ Mr Charton said. ‘The representations that Dan Harkey made about the safety of the loans were untrue. He was bringing in new money to pay off investors on the same loan, and that’s a Ponzi scheme.’ Mr Charton lives two houses away from Mr Dan Harkey, and said his neighbour made the investments seem foolproof.

In a video-recorded sales pitch to potential customers - DVDs of the meeting were distributed to potential investors - Mr Dan Harkey vowed that investors’ money would be safe because the borrowers’ collateral far exceeded the loan amounts.

‘A default doesn’t mean you lose money. It merely means there’s a set of problems to solve,’ Mr Dan Harkey said in the video.