A chance to grab a piece of London property

Source : Business Times – 9 May 2009

THOSE interested in buying real estate in London will get a chance next week to find out more about what the market there has to offer, as well as the opportunity to be part of a new London property launch.

To provide investors information about the London property market, Benham and Reeves Residential Lettings will conduct 30 free, no-obligation one-hour consultations on May 11 and 12.

The consultations will be provided by Anita Mehra and Marc von Grundherr, managing directors of the firm, who between them have 40 years’ experience in the London property market.

Benham and Reeves has nine offices in London, as well as others in Singapore, Hong Kong and Dubai.

Later in the week, investors seeking to buy a property will get a chance when Berkeley Homes (Urban Renaissance) launches Napier at West 3 – its latest West London residential development – in Singapore.

The upmarket project is well connected to central London, the West End and Heathrow Airport.

The Singapore launch – the first for the development ahead of London and elsewhere – aims to “leverage on the growing interest from overseas buyers in London properties”.

Exhibitions of the development will be held on May 16 and 17 at the Grand Hyatt by Jones Lang LaSalle, the exclusive marketing agent.

Gardens in the sky

Source : Straits Times – 9 May 2009

Garden terraces on high-rise buildings are a growing idea.

More condominiums, Housing Board carparks and office towers are sprouting plants and trees amid the concrete, helping Singapore bloom as a ‘garden city’.

Everyone is happy: Developers like adding high-rise greens because they say they help keep buildings cool and beautify the urban jungle. Residents like them because they help them keep close to nature, despite being above the ground.

The idea gets the (green) thumbs-up from housewife Mei Wong, who lives in one of Singapore’s oldest housing estates, Toa Payoh, which boasts the first sky garden to connect five HDB blocks. It has landscaped footpaths, sheltered seating areas and a trellis where creepers grow.

Ms Wong, 40, who goes there often with her two children, says: ‘There’s no need for me to grow plants at home. I just come here.

‘The plants keep the sky garden cool, and it is pleasant to look out onto it from my 20th-storey window.’

The HDB and the National Parks Board first started a pilot project to green the roof of a multi-storey carpark in Punggol in 2003. At some multi-storey carparks in new HDB projects, there are also roof gardens which the public can access.

The idea is also taking root in the private sector (see separate stories). Last month, the Urban Redevelopment Authority (URA) launched a new programme called Landscaping for Urban Spaces and High Rises – or appropriately, Lush in short – to promote more skyrise greenery.

Its initiatives include making landscaping, such as to shape rooftop gardens or sky terraces, a must for new developments in Raffles Place, Shenton Way, Marina Centre, along Kallang River and Jurong Gateway, the upcoming commercial hub in the west.

Already, since 1997, the URA has encouraged developers to incorporate sky terraces in residential projects by allowing a higher building height if they are provided. Covered sky terraces are also exempt from gross floor area computation, which means a developer has more room to build more apartment units.

Under Lush, these guidelines were revised to require that sky terraces are lushly landscaped and that the greenery is visible externally, to ensure a more attractive communal space.

New condos are showing they are taking the sky garden concept to new heights. At year-old Icon in Tanjong Pagar, residents are living a luxe lush life.

The sky terrace on the 31st storey of the mixed-use development makes for one superb venue for residents’ private parties. It is filled with shade-loving plants such as frangipani trees, and small pockets of areas have been created to give some privacy.

Mr Chng Kiong Huat, director of development and planning for the condo’s developer, Far East Organization, says the sky terrace was created so residents can ‘live, work and play within the compound’.

Property developer Capitaland has also introduced high-rise greenery at two recent residential projects, Citylights near Lavender and RiverGate near River Valley Road. At Citylights, there is a sky terrace on the 24th storey with fitness facilities, plus reading and yoga corners, amid the lush greenery.

Over at RiverGate, its sky gardens are made up of a series of public and private gardens and balconies which give the development a green and ecologically harmonious appearance on Singapore’s skyline, says Capitaland.

At Fusionopolis, the science and research centre in Buona Vista, there are 13 sky gardens which the public can visit.

Developer JTC Corporation says the sky gardens provide visual relief and serve as green lungs and social pockets.

Mr Eric Van Steen, 38, senior manager of Accenture, a consulting firm, goes to the gardens about twice a week.

‘The greens, with the breeze and the great views, make it a pleasant space to step out of the office to clear the mind,’ he says.

Newton Suites, developed by UOL Group, also has a 100m wall of vertical greenery on the 36-storey tower.

Architect Chan Ee Mun from award-winning firm Woha, which designed the Newton Road condo, says ‘elevated gardens bring nature closer to the residents and afford the luxury of greenery that was previously reserved only for landed living’.

The greenery absorbs sunlight and carbon dioxide emissions and helps create oxygen. Mr Chan adds that by planting vertically, ‘we are also populating our dense urban centres with gardens and greenery that encourage a thriving biodiversity’.

Newton Suites resident, financial consultant Mona Honegger, 43, lives on the ninth storey but regularly goes up to the lush sky terrace on the 31st storey to revel in the unblocked views of the city.

The Swiss expat, who enjoys a drink and relaxes there before bedtime, says: ‘Being here among the green gives me a feeling of being close to nature.’

Developer says: time to pay up Buyer says: give me more time

Source : Straits Times – 9 May 2009

ANOTHER buyer who purchased luxury condominiums in bulk under the deferred payment scheme is now having trouble paying up.

Keppel Land said yesterday that an Indonesian investor who bought 51 units at The Suites @ Central in Devonshire Road has asked for more time to cough up the final payments.

The investor paid $1,806 per sq ft (psf) for the freehold apartments, which were bought in June 2007, Keppel said in a filing to the Singapore Exchange. It would not disclose the total price of the units or whether the investor is an individual or an institution, such as a company or a fund.

But a check of the Urban Redevelopment Authority’s (URA) Realis caveats shows that a series of 51 units were sold at that time for a total of $127 million. The units were not bought in a single block and do not appear to make up entire floors, but span the second to the 33rd floors.

The units were bought under the deferred payment scheme. This means the buyer made a downpayment of 20 per cent of the purchase price and then deferred the rest of the payments until the apartments were completed.

The Suites @ Central was completed in February, but the buyer failed to pay up on time.

Two other buyers, both Singaporeans, also missed the payment deadline, Keppel said. One had bought two apartments in the fully-sold project; the other had bought three.

Keppel has received payment for the other 101 apartments in the 157-unit project, which is a 60-40 joint venture between Keppel and Chip Eng Seng.

The Indonesian buyer has asked for an extension of the payment deadline in order to ‘arrange funds for payments’, Keppel said.

The developer has agreed to a six-month extension starting from yesterday, but is requiring the Indonesian buyer to pay $500,000 per month during the extension period. The first payment has already been received, Keppel said.

Other developers have also recently reported problems collecting payments for units they sold under the deferred payment scheme.

MCL Land ran into trouble last month with the buyer of its Fernhill condominium off Stevens Road. The buyer, reported to be a company called Concordia Overseas controlled by a Hong Kong resident named Chan Ki, had purchased all 25 units in the project and managed to resell five soon after.

But when the time came to make payment for the 20 units it still owned, Concordia missed a few deadlines. It subsequently managed to resell 19 units in time to meet the final deadline, but reportedly at a loss.

The price Concordia paid for the units was $1,410 psf, but the Business Times reported that it fetched only $1,180 psf for the 19 units it resold.

Market watchers said that if the Indonesian buyer of the 51 units at The Suites @ Central has to offload the apartments in a hurry, it may end up making a loss.

The average price of apartments at the project has fallen to about $1,470 psf, according to five caveats lodged for units that have been sold so far this year.

More buyers with payment problems could surface in the coming months, as the property slump coincides with the fallout from the deferred payment scheme, which was scrapped in October 2007.

Some 29,250 homes planned for completion between last year and 2013 were offered with the deferred payment scheme, the URA revealed last year. Analysts have estimated that about 14,000 were actually sold under the scheme.

But even if a handful of buyers default, it may not be statistically significant, noted Mr Nicholas Mak, director of research and consultancy at Knight Frank.

At CapitaLand’s RiverGate, about 2 per cent of buyers have missed payments since the project was completed in March, the developer said on Thursday. Most of the project’s buyers had opted to take the deferred payment scheme.

‘Two per cent is not an alarming figure,’ said Mr Mak. ‘Once in a while you get cases like a single buyer unable to pay for 51 units but, if you look at the bigger picture, it may just be a small proportion.’

But he added that next year will be the time of reckoning, as many projects that were sold during the height of the market – in the second half of 2007 and early last year – will be completed then, with the bulk of their payments due.

Buyer of units at The Suites gets a break

Source : Business Times – 9 May 2009

KEPPEL Land yesterday said that it has granted a six-month payment extension to a buyer who purchased 51 apartments in its 157-unit The Suites @ Central project.

The buyer purchased the units in an en bloc deal for an average price of $1,806 per sq ft under the deferred payment scheme (DPS) in June 2007 – at the height of the property market boom.

Keppel Land, which jointly developed The Suites @ Central with Chip Eng Seng, did not disclose the buyer’s identity.

Upon the execution of sale-and-purchase agreements, the buyer paid 20 per cent of the purchase price, with the balance of $1,445 psf due after the project obtains its temporary occupation permit (TOP).

Units at the fully-sold The Suites @ Central have been progressively handed over to purchasers since TOP was obtained.

The buyer of the 51 units has since asked to extend the due date to arrange funds for payment. Keppel Land and Chip Eng Seng have agreed to a six-month extension that started yesterday.

But the extension is subject to the purchaser paying $500,000 a month during the extension period. The first payment of $500,000 has been received, Keppel Land said.

The Suites @ Central was developed by Devonshire Development, 60 per cent owned by Keppel Land and 40 per cent by CEL Development, the property arm of the Chip Eng Seng group.

Last month, it emerged that a China investor that bought 20 units in MCL Land’s The Fernhill condo failed to pay about $30 million that was due when the project received its TOP.

As a result, MCL Land booked first-quarter profit from only five units in the 25-unit freehold project for which buyers have paid the outstanding balance by the due date.

The investor, Concordia Overseas, subsequently managed to re-sell 19 of the 20 units.

Market watchers have said that developers who sold projects on DPS at peak prices in 2007 and early 2008 may have reason to worry if buyers do not pay up as the projects are completed in the coming months.

Such developers may have to sue buyers to get them to complete the purchase at the contracted price, or agree to a payment extension.

CapitaLand meets property valuers

Source : Business Times – 9 May 2009

CAPITALAND, Singapore’s biggest developer by market capitalisation, recently met property valuers to discuss the valuation process, sources told BT.

CapitaLand chief executive Liew Mun Leong chaired the meeting, which ran for more than an hour. About 40 people were present, including valuers and consultants from Singapore’s top property firms, a former chief valuer and CapitaLand employees.

BT believes Mr Liew was seeking to understand the methodology used to arrive at property valuations.

Asked about the meeting, a CapitaLand spokesman said the company has regular dialogues with partners and professional organisations involved in real estate, such as banks, architects, contractors, designers, accountants and valuers.

‘During these dialogues we exchange views about industry practices, market outlook and other general aspects,’ the spokesman said. ‘There are no direct references to our properties or projects.’

Most developers here have their investment projects revalued annually, and many include the revaluation gains and/or losses in their profit-and-loss figures.

In 2008, for example, worsening economic conditions put pressure on real estate values, and as a result there was a downward revaluations of some CapitaLand properties. CapitaLand recorded a fair value loss of $58.9 million in Q4 2008, mainly from the revaluation of its portfolio of investment properties held by subsidiaries in Australia.

Payment collected for 98% of sold RiverGate units

Source : Business Times – 8 May 2009

PAYMENT has been collected for 98 per cent of the 542 condo units sold at CapitaLand’s RiverGate project since Temporary Occupation Permit (TOP) was obtained in March, the developer said yesterday.

Payment collection for the remaining 2 per cent, or 11 sold units, is ongoing, and the buyers have been served notice to pay up. The 11 units were ‘all sold separately to individual buyers under the deferred payment scheme (DPS)’, a CapitaLand spokeswoman said.

More than 90 per cent of the 542 RiverGate units sold were under DPS, she added. CapitaLand developed the 545-unit freehold condo in the Robertson Quay area through a 50:50 joint venture with Hwa Hong Corporation.

Asked what CapitaLand will do regarding the 11 buyers that have not paid up, the spokeswoman said: ‘For genuine homebuyers who may face difficulties meeting the payment obligations, we will address these on a case-by-case basis. We will see how we can lend our assistance within the constraints of the obligations under the securitisation structure.’

The progress payments and deferred payment receivables for sold units were securitised through special purpose vehicle Okeanos Investment Corporation, which in January 2007 issued US$477 million ($731 million) of floating rate notes due 2011.

With the proceeds collected for RiverGate so far, the US$477 million of notes are expected to be fully redeemed by the expected maturity date in June 2009, CapitaLand said in a statement yesterday.

RiverGate buyers who opted for DPS paid 20 per cent of the apartments’ price when booking them. Upon obtaining TOP, a further 65 per cent of the price is payable, with the balance of 15 per cent to be paid once the development obtains a Certificate of Statutory Completion and legal completion status from the authorities.

The 43-storey freehold project was launched in phases, with the initial phase in 2005 priced at $1,080 per square foot on average, and the final phase in 2006 priced at $1,600 psf on average. Units in the project have recently changed hands at about $1,200-1,380 psf.

Among those who bought RiverGate units from the developers is property fund manager Ferrell, which acquired 100 units in two tranches – 80 around Chinese New Year in 2005 and 20 later that year.

RiverGate is the first residential project in Singapore to be accorded landmark status by the Urban Redevelopment Authority in recognition of its strategic location and cutting-edge architectural design, CapitaLand pointed out yesterday.

‘At 43 storeys, the development towers above the predominantly 10-storey buildings in the vicinity,’ it said. ‘Against this urban landscape, the majority of RiverGate’s apartments enjoy views of the river and the business district city-scape.’

People’s Park Complex…or Hostel?

Source : Straits Times – 8 May 2009

APARTMENTS at People’s Park Complex in Chinatown are being partitioned to create extra rooms holding bed spaces for foreign workers, and the Urban Redevelopment Authority (URA) is on the case.

The signs of overcrowding are there.

The three lifts serving residents in the iconic green-and-orange building are jam-packed and frequently break down, and long-time residents there say the place has become noisier and dirtier.

They also fear that the partitioning within units and packing in of beds have created fire hazards.
Two URA officers were at the complex on Tuesday, and a URA spokesman said investigations were on.

Private apartments are for residential use and long-term residential stay, so leasing them out on daily, weekly or monthly terms is generally not allowed, URA said.

Also, planning approval is needed for a single residential unit to be broken up into more units.
URA can take action against unauthorised use of residential space.

The Straits Times reported yesterday that the agency had quashed the plan of a master tenant in Leonie Hill’s Grangeford condominium to run a student dormitory there.

URA said it is also investigating condo owners elsewhere who are reportedly renting out rooms as hotel rooms.

URA is not the only enforcement agency: The Singapore Civil Defence Force said it issued composition fines to nine units at People’s Park Complex this year and 18 units last year for unauthorised conversions of apartments into workers’ quarters, flouting fire-safety regulations.
Those that have been caught, however, could just be the tip of the iceberg.

When The Straits Times visited the complex, many of the estimated 288 apartments from the eighth to the 31st floors looked like they were occupied by more people than a typical family unit.

The cues: shoe racks with 15 to 30 pairs of shoes, laundry strung out on window grilles, on racks in the hallway and in staircase landings; kitchens that appeared to have been turned into bedrooms; and notices on doors reminding occupants to keep quiet or to shut the door.

One unlocked regular-size unit of 1,119 sq ft had at least seven rooms. In its original state, a unit that size would have only three bedrooms and a living room.

Tenants in the complex, observed to be mostly Chinese nationals, said they were renting bed spaces for between $180 and $300 a month.

Mr Li Guiquan, 28, a chef, said he has been paying $200 a month for his bed space for more than a year. His bed is one of six in a room with three double-decker beds. He reckoned 30 people occupied the seven or eight rooms in the unit.
He said nonchalantly in Mandarin: ‘Perhaps it’s just the way it is in Singapore.’

People’s Park Complex residents said the conversion into workers’ quarters became apparent two years ago.

Long-time resident Beverly Lee, 49, in a letter to this newspaper’s Forum page published on Monday, said that, with the alert on for the Influenza A (H1N1) flu, contact tracing would be difficult in such overcrowded conditions.

The complex’s management corporation seems to have its hands tied.

Complex manager Wilson Goh said the management corporation managed only the common areas and had no jurisdiction over the apartments. ‘What we can do is only to persuade owners to take care of the issue,’ he said.

Some residents are resigned.

One resident who has been living there for more than 10 years and who gave his name only as Benny, 58, said: ‘There is no use complaining.’

Mr Jeff Teo, 33, who lives beside a unit which he estimates houses up to 20 foreign workers, quipped: ‘Right now, you can call it People’s Park Hostel.’

New hotel opens in Clarke Quay

Source : Straits Times – 8 May 2009

AGAINST a backdrop of declining numbers of tourists to Singapore, another hotel, the Park Hotel Clarke Quay, has opened this month.

Like many others braving the downturn, the brand new 336-room four-star hotel in Unity Street is dangling a special package with freebies.

Guests who book between now and Aug 31 will get, for $198 and upwards, a room with free Internet access, free breakfast and lunch, free non-alcoholic mini-bar drinks and a free river taxi ride, on top of discounts on laundry, drinks and food.

Those who pay $238 and upwards for a Park Privilege Club room will also get free afternoon tea and evening cocktails, free use of the Club Lounge facilities and free laundry services.

Many hotels have rolled out similar promotions. Far East Organization’s boutique hotel Quincy opened in March with a $208 flat rate (excluding taxes) covering all its services, such as three meals, Internet access and limousine pick-up from the airport.

The offers are a sign of how anxious hotels are for their share of a shrinking pie. In March, visitor arrivals fell for the 10th straight month compared with the same period last year.

The downward trend forced hotels to slash their average room rate to $196 in March. It marked the first time in nearly two years that the average room rate has dropped below $200.

But the Park Hotel Group remains optimistic. Based on the ’strong’ booking response from leisure and business travellers, its director Allen Law forecasts 80 per cent occupancy by August. The average hotel occupancy was 74 per cent in March.

He said: ‘Clarke Quay is an area which a lot of tourists want to visit, and there are not many hotels there. We think we’ve hit a good market segment.’

Ion Orchard to have 12,000 sq ft of watch retail

Source : Business Times – 8 May 2009

SWISS luxury watch manufacturer IWC Schaffhausen’s stand- alone boutique in Ion Orchard will be part of some 12,000 square feet of watch retail space that the upcoming mall will have.
IWC has 21 boutiques across the world, but the one in Singapore – which will measure 1,000 sq ft – will be the first for the brand in Asia outside Hong Kong.

The watch company joins the ranks of other internationally renowned luxury watch brands – such as Rolex, Omega, TAG Heuer and Patek Philippe – in setting up shop in Ion Orchard.
Home-grown specialist watch retailers The Hour Glass and Cortina Watch will also be taking up space in the mall, which is due to open for business in July.

In all, Ion Orchard will have some 12,000 sq ft of space devoted to the retail of watches.
‘Attracting the world’s leading luxury watchmakers to bring their unique designs and concepts to Singapore was an important part of Ion Orchard’s leasing strategy,’ said Soon Su Lin, chief executive of Orchard Turn Developments, the developer of Ion Orchard.

Orchard Turn Developments is jointly owned by Singapore- listed CapitaLand and Sun Hung Kai Properties of Hong Kong.

Ion Orchard has secured 80 per cent tenancy commitment and is in advanced negotiations for the remaining space, the mall said in a recent update.

Andreas Boesch, general manager of IWC’s South-east Asia division, said that the company invested a ’significant’ amount in the upcoming boutique.

IWC’s boutique in the mall will host all the brand’s watches – except, of course, for those editions that are sold out.

Mr Boesch says that many tourists from the region can be expected to buy watches at the new boutique as Singapore is the de facto watch hub for the region.

‘We have been looking at the market here in Singapore for quite a while and we needed a very good solution like what Ion Orchard is offering,’ said Mr Boesch.

IWC has reduced the number of stores along Orchard where third-party distributors sell its watches from six outlets about six months ago to just two outlets now.

Payment collected for 98% of sold RiverGate units

Source : Business Times – 8 May 2009

PAYMENT has been collected for 98 per cent of the 542 condo units sold at CapitaLand’s RiverGate project since Temporary Occupation Permit (TOP) was obtained in March, the developer said yesterday.

Payment collection for the remaining 2 per cent, or 11 sold units, is ongoing, and the buyers have been served notice to pay up. The 11 units were ‘all sold separately to individual buyers under the deferred payment scheme (DPS)’, a CapitaLand spokeswoman said.

More than 90 per cent of the 542 RiverGate units sold were under DPS, she added. CapitaLand developed the 545-unit freehold condo in the Robertson Quay area through a 50:50 joint venture with Hwa Hong Corporation.

Asked what CapitaLand will do regarding the 11 buyers that have not paid up, the spokeswoman said: ‘For genuine homebuyers who may face difficulties meeting the payment obligations, we will address these on a case-by-case basis. We will see how we can lend our assistance within the constraints of the obligations under the securitisation structure.’

The progress payments and deferred payment receivables for sold units were securitised through special purpose vehicle Okeanos Investment Corporation, which in January 2007 issued US$477 million ($731 million) of floating rate notes due 2011.

With the proceeds collected for RiverGate so far, the US$477 million of notes are expected to be fully redeemed by the expected maturity date in June 2009, CapitaLand said in a statement yesterday.

RiverGate buyers who opted for DPS paid 20 per cent of the apartments’ price when booking them. Upon obtaining TOP, a further 65 per cent of the price is payable, with the balance of 15 per cent to be paid once the development obtains a Certificate of Statutory Completion and legal completion status from the authorities.

The 43-storey freehold project was launched in phases, with the initial phase in 2005 priced at $1,080 per square foot on average, and the final phase in 2006 priced at $1,600 psf on average. Units in the project have recently changed hands at about $1,200-1,380 psf.

Among those who bought RiverGate units from the developers is property fund manager Ferrell, which acquired 100 units in two tranches – 80 around Chinese New Year in 2005 and 20 later that year.

RiverGate is the first residential project in Singapore to be accorded landmark status by the Urban Redevelopment Authority in recognition of its strategic location and cutting-edge architectural design, CapitaLand pointed out yesterday.

‘At 43 storeys, the development towers above the predominantly 10-storey buildings in the vicinity,’ it said. ‘Against this urban landscape, the majority of RiverGate’s apartments enjoy views of the river and the business district city-scape.’

Green technologies to win you over

Source : Straits Times – 6 May 2009

SINGAPORE’S nascent green building industry is set to get a boost from a new event in October which will showcase the best of the Republic’s technologies.

The Building and Construction Authority (BCA) yesterday announced that it will hold the inaugural International Green Building Conference on Oct 28.

The three-day event aims to attract 1,000 participants from around the region.

BCA director of technology development Tan Tian Chong told reporters yesterday the event will help realise Singapore’s goal of greening 80 per cent of all its 15,500 buildings by 2030 from the current 1 per cent.

This was one of the targets outlined in a blueprint on sustainable development unveiled by the Government last week.
‘Such events will continue to raise the awareness and adoption of environmentally friendlier, more sustainable designs, materials and construction methods among builders and developers in the region,’ he said.

The conference will be held in partnership with BEX Asia, a green building exhibition organised by events firm Reed Exhibitions, which expects to attract 5,000 participants from more than 16 countries.

Mr Ashvinkumar Kantilal, president of the Singapore Institute of Architects, another event partner, said yesterday that architects have seen a big rise in the number of developers requiring green features in their buildings.

‘The buy-in from the industry has been very rapid, as building owners recognise the potential savings from building green,’ said Mr Kantilal, adding that this has been aided by cash incentives given out by the BCA to building owners.

The success of Singapore’s Green Mark scheme, used to rate a building’s environmental performance, has even led Malaysia’s building industry to work with local players here to develop its own green building scheme, he added.

The BCA will also be opening Singapore’s first zero-energy building at the conference. The complex will have a net zero energy consumption over a year, made possible by solar panels covering an area of 1,300 sq m which will be integrated on the roof of one of the buildings.

SEEING THE LIGHT
‘The buy-in from the industry has been very rapid, as building owners recognise the potential savings from building green.’ – Mr Ashvinkumar Kantilal, president of the Singapore Institute of Architects

Source : Business Times – 7 May 2009

For many owners of high-end homes, their strategy backfired when the market for jumbo mortgages dried up

Chuck Dayton put down a quarter of the US$950,000 purchase price when he bought his house in Newport Beach, California, in 2004. He was making US$500,000 a year with his drywall company and he expected home values to keep rising.

Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Mr Dayton, 43, went into default four months ago because he could not afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure. ‘It’s just wait and see right now,’ he said.

Borrowers such as Mr Dayton, whose 2004 compensation was almost 10 times the median US household income, are becoming trapped by the same issue facing the poorest sub-prime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.

The number of US homes valued at more than US$729,750 – the jumbo-loan limit in the most affluent areas – entering the foreclosure process jumped 127 per cent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc of Irvine, California, show. The rate rose 72 per cent for homes valued at less than US$417,000 and 78 per cent for all homes, RealtyTrac said.

‘It’s the trickle-up effect,’ said David Adamo, chief executive officer of Luxury Mortgage Corp, a home-loan bank in Stamford, Connecticut. ‘Just like homeowners in smaller homes, these homeowners anticipated being able to refinance mortgages to continue making payments and at a future date, sell for a gain and put it toward their next home. That strategy backfired when the market for jumbo mortgages dried up.’

Jumbo loans are larger than what government-controlled Fannie Mae and Freddie Mac will buy or guarantee, currently US$417,000 in most areas. Jumbo lending slowed in the fourth quarter to US$11 billion, or 4 per cent of the mortgage market, the lowest quarterly figure since Inside Mortgage Finance started tracking the data in 1990.

Sub-prime loans were made available to borrowers who never proved they could make monthly payments on time. The loans accounted for more than 20 per cent of the US mortgage market in 2005, up from less than 8 per cent in 2003, according to Inside Mortgage Finance.

Defaults by sub-prime borrowers began rising in 2007. Since then, financial institutions that had bet on earning cash flow from home loans packaged into securities have announced credit-market losses and writedowns of almost US$1.4 trillion, data compiled by Bloomberg show.
The US government has lent banks US$392 billion to stem the losses through its Troubled Asset Relief Program. Another US$12.4 trillion was spent, lent or guaranteed by the government and the Federal Reserve to stop the longest recession since the 1930s.

About US$500 billion of prime-jumbo mortgages are bundled into bonds, according to FTN Financial. In February, JPMorgan Chase & Co analysts John Sim and Abhishek Mistry in New York almost doubled their projections for losses on those mortgages to as much as 10 per cent because of increasing defaults.

Foreclosures have come to the Hamptons, the beach towns east of New York City on Long Island, where homeowners have included Blackstone Group LP chief executive officer Stephen Schwarzman, hedge fund manager John Paulson and Goldman Sachs Group Inc CEO Lloyd Blankfein.

Almost 90 borrowers entered the foreclosure process in the towns of East Hampton and Southampton in the first 10 weeks of this year. That compared with 109 in the same period last year and 73 in the first 10 weeks of 2007, according to the Real Estate Report in West Islip, New York.

Home sales in the Hamptons fell 67 per cent in the first quarter from a year earlier, the most since records were first kept in 1982, according to Town & Country Real Estate of the East End LLC. The median sale price slid 28 per cent from a year earlier.

Rule changes spurred by rising defaults now require lenders to work with delinquent New York homeowners before beginning the foreclosure process, said Pat Ammirati, president of the Real Estate Report.

‘There was this unrealistic view that the crazy financing was limited to sub-prime when of course it was across the board,’ said Andrew Laperriere, Washington-based managing director at research firm International Strategy & Investment Group. ‘A lot of jumbo mortgages were nothing down with high debt-to-income ratios.’

Mr Dayton said that he financed the purchase of his home with a payment-option adjustable-rate mortgage now serviced by JPMorgan’s Washington Mutual. The option allowed him to pay less each month than the interest on the loan, with any unpaid amount added to his debt.
He refinanced in February 2007 with a US$1 million loan from Washington Mutual, and used some of the proceeds for business expenses, said Robin Milonakis, his agent at Altera Real Estate in Dana Point, California. He also took out two private mortgages and now has a balance of US$106,000 on those loans, she said.

Mr Dayton went into default on Jan 29 and owes US$46,584 in delinquent payments and penalties, according to First American CoreLogic, a Santa Ana, California-based mortgage data firm. Mr Dayton said that he has found a buyer willing to pay US$950,000. The foreclosure process typically takes about a year. That means jumbo-loan defaults, which are climbing at the fastest pace in at least 15 years, will increase over the next year, according to LPS Applied Analytics in Jacksonville, Florida.

President Barack Obama’s Homeowner Affordability and Stability Plan has no provision to help jumbo-mortgage borrowers. The plan focuses on shoring up home loans eligible to be bought by Fannie Mae and Freddie Mac, also called conforming loans.

‘The government has thumbed their noses at people who have jumbo mortgages,’ said Steve Habetz, president of Threshold Mortgage Co in Westport, Connecticut.

The share of US homes in the foreclosure process that are valued at more than US$729,750 increased to 2.83 per cent this year through March 10, from 2.21 per cent in the same 10 weeks of 2008, according to RealtyTrac. In the same 10-week period, the share of homes valued at US$417,000 or less in foreclosure fell to 87 per cent from 89.7 per cent in 2008, RealtyTrac said.
California is hardest hit by luxury-home foreclosures. More than 1,500 borrowers with properties in the state that once sold for more than US$1 million defaulted on their mortgages in February, said Mark Hanson, managing director of the Field Check Group, a real estate company in Palo Alto, California.

About 3 per cent, or 254,745, of the state’s 8.5 million houses are assessed for more than US$1 million by county assessors, according to San Diego-based MDA DataQuick, a real estate monitoring company.

While sales for all homes in the state increased 2.5 per cent last year from 2007, sales of homes valued at more than US$1 million declined 43 per cent to the lowest since 2003, MDA DataQuick reported. Part of the reason is falling prices as California’s median home price dropped 41 per cent in February to US$247,590, according to the state’s Association of Realtors. Another explanation may be stricter lending guidelines, Mr Hanson said.

‘You have to have income of US$250,000, a 20 per cent down payment and near perfect credit to buy a US$1 million home now, so the number of buyers isn’t what it was,’ Mr Hanson said. ‘There just aren’t enough buyers to sop up supply. We’re seeing the collapse of the high-end market.’

Values have taken longer to decline in more affluent areas, taking some homeowners by surprise, said Philip Tirone, president of Los Angeles-based Mortgage Equity Group Inc.
‘People are coming to me to do a refinance or buy another property, and what they thought they had in the equity of the home they don’t have and they don’t know what to do,’ he said.

Delinquencies are caused by people who owe more on their mortgages than their houses are worth, said James McLauchlen, a broker and appraiser in Southampton, New York, for James R McLauchlen Real Estate Inc and Hamptons Appraisal Service Corp.

‘They throw their hands up and say I’m not going to kill myself trying to take care of this debt,’ Mr McLauchlen said. ‘Some folks work hard to make payments. Others just can’t pay. They offer a deed in lieu of foreclosure and off they go.’

Mr Dayton said that he does not know when he’ll restart his drywall business, which he shut down in November for lack of work. ‘This market is not even close to bottoming out, in my opinion,’ he said. ‘It continues to drop.’

Over 20% of US homeowners are underwater

Source : Business Times – 7 May 2009

Home values in the United States extended their fall in the first quarter, with more than one in five homeowners now owing more on their mortgages than their homes are worth, real estate website Zillow.com said yesterday.

US home values posted a year-over-year decline of 14.2 per cent to a Zillow Home Value Index of US$182,378, resulting in a total 21.8 per cent drop since the market peaked in 2006,
according to Zillow’s Q1 Real Estate Market Reports, which encompass 161 metropolitan areas and cover the value changes in all homes, not just homes that have recently sold.

US homes lost US$704 billion in value during Q1 and have depreciated US$3.8 trillion in the past 12 months, according to analysis of the reports.

Declining home values left 21.9 per cent of all American homeowners with negative equity by the end of Q1, Zillow said.

By comparison, 17.6 per cent of all homeowners owed more on their mortgage than their property was worth in Q4 of 2008, and 14.3 per cent were underwater in Q3 of last year, the reports showed.

Nine consecutive quarters of declines have left eight regions – including the Modesto, California, Stockton, California, and Fort Myers, Florida regions – with median value declines of more than 50 per cent since those markets peaked.

UK house prices fall 1.7% in April

Source : Business Times – 7 May 2009

Prices have now fallen by 22% from their peak in August 2007
House prices in Britain fell by a bigger- than-expected 1.7 per cent in April and by 17.7 per cent in the three months to April compared with a year earlier, the Halifax house price survey showed yesterday.

Economists had expected a fall of one per cent on the month and a three- month annual decline of 17.7 per cent.

The mortgage lender said house prices were also 17.7 per cent lower than in April last year and that prices have now fallen by 22 per cent from their peak in August 2007.
The figures suggest the housing market is still a long way from recovery, despite some signs that activity levels may be stabilising, and Halifax said prices were likely to keep falling for some time.

Halifax said April’s fall took the average price of a home to £154,716, a level not seen since April 2004.
‘We think conditions will remain challenging over the next few months. The fact that the economy is in recession and unemployment is rising sharply is not a great recipe for demand,’ said Halifax chief economist Martin Ellis.

‘There are some signs that confidence is improving a little bit but we still expect further house price falls.’

Falling prices combined with record low interest rates have improved conditions for people who are able to invest in property.

Halifax said the house price to earnings ratio, a key measure of affordability, fell to 4.26 in April, the lowest since September 2002.

But lending conditions remain tight, Mr Ellis said. ‘There are some signs that more deals are becoming available and that the restrictions on credit availability are loosening up a little bit, but it’s still a lot tougher than a couple of years ago.’

Asia construction frenzy needs green injection

Source : Business Times – 7 May 2009

Powered by solar energy generated on its roof, Taipei 101, the world’s tallest completed building, is not only a leader for its breathtaking height but also for its eco-friendly features.
Finished in 2004, the skyscraper is a rare example of green design in Asia, a region with the world’s busiest construction sector yet one of the poorest records for eco-friendly building.

China alone is said to be building half of the world’s new floor space, but the vast majority of these new projects will be energy guzzlers. Environmentalists worry that these buildings will produce high carbon emissions for decades to come.

‘Energy efficiency is fast becoming one of the defining issues of our times, and buildings are that issue’s ‘elephant in the room’,’ Bjorn Stigson, president of the World Business Council for Sustainable Development, said in a statement.

‘Buildings use more energy than any other sector and as such are a major contributor to climate change,’ he added.

In China, 80 per cent of the nearly one billion square metres of new buildings constructed every year are high-energy buildings that consume two to three times more energy per unit of floor-space than buildings in developed countries, according to a report by the Asia Business Council.
Beijing and other governments in the region are trying to encourage green construction, but Asia lags far behind Europe which has a 2019 deadline for all new buildings to produce the same amount of energy they consume.

Office buildings use at least 30 per cent of an average country’s total energy consumption and produce a similar proportion of their greenhouse gas emissions.

Turning buildings green could reduce carbon emissions by 1.8 billion tonnes per year worldwide, according to the United Nations Environment programme. That is easier said than done, especially in Asia, where the bottom line is often all that counts.

Asia’s price-sensitive builders baulk at the steeper materials and construction costs for green buildings, about 5 per cent higher, for features ranging from alternative energy systems to fixtures such as low-energy lights and reinforced glass that cuts down on heating and air-conditioning costs.

Despite the initial higher cost of environmentally friendly construction, architects say that it pays for itself after five or 10 years due to lower energy and water bills.

Apart from the energy savings, developers usually get higher rent yields if their buildings are ‘green’.
‘Asia is the latecomer,’ said Peter Halliday, vice-president of Siemens Ltd Taiwan. ‘It’s true that the developers are (still) holding back on green buildings, though over the life of a building you get your money back.’

Experts hope that pressure from Western firms for ‘green’ office space that includes features ranging from low-energy lights to waste recycling, might change that in the coming years.
‘There are an increasing number of multinationals and large overseas corporations that require green-rated buildings,’ said Tan Loke Man, head of the Malaysian Architects Association. ‘This will be the case as more and more companies become more environmentally concerned.’

China aims to reduce energy use by 60 per cent in new buildings, offering tax rebates as incentives. But ‘enforcement is always an issue in China’, said Janet Pau, from the Asia Business Council, which monitors green construction.

‘China needs to do more. They need a more coordinated building policy,’ Ms Pau added. ‘Buildings last for decades and just by being there, they will slowly be damaging to the environment.’

The government’s efforts, as well as demand from foreign firms for green office space, has spurred several high profile projects that may kindle interest in low-energy buildings across the region.

The Shanghai Tower, in China’s commercial capital, will minimise wind resistance and energy consumption when it is completed in 2014 at a cost of US$2.2 billion.
The building will house 54 wind turbines to power heating and air-conditioning, along with a rainwater collection system.

Interest picks up in strata offices: Cushman & Wakefield

Source : Business Times – 7 May 2009

Price gap between sellers and buyers also narrows in past few months
THERE has been a pick-up lately in activity and prices in the strata office market, says Cushman & Wakefield Singapore managing director Donald Han.

For instance, a 2,443 sq ft unit on the 38th floor of Suntec Tower 2 sold for $1,780 psf last month – above the recent low of $1,300 psf set in March for the entire 32nd floor of Suntec Tower 1, even after factoring in a 5-10 per cent discount for an entire-floor transaction, according to Mr Han.

At International Plaza in Anson Road, which is another popular location for strata office investors, a 17th level unit changed hands for $1,146 psf in March and a 16th level unit went for $1,100 psf in April – higher than transactions of around $1,000 psf in December last year on the same floors. The gap between sellers’ and buyers’ prices has also narrowed in the past few months.
‘Late last year, after the Lehman fallout, the gap between sellers’ asking prices and bids from buyers was as much as 30 to 40 per cent,’ Mr Han said. ‘This has narrowed to around 5 to 15 per cent today, which is why transactions are happening. Generally, vendors have become more realistic in their pricing.’

The latest transacted price at International Plaza of $1,100 psf is about 26 per cent lower than the level in May last year. ‘The smart money is now looking at compelling price discounts from the peak rather than waiting to buy at the market-bottom,’ Mr Han said. ‘Once you see prices about 30-40 per cent off the peak, it provides compelling reasons to look seriously. Some of those who have bought at Suntec recently may be looking to locate their businesses in these premises, instead of renting.’

Credo Real Estate managing director Karamjit Singh agrees that buying interest in strata offices has picked up, but notes that there are still few transactions.
‘The market is going through a phase in which buyers’ perception is slowly changing,’ he said. ‘Previously they were staying away or offering prices that worked in a huge buffer (against potential price falls). Today, buyers are more confident that the downside is limited, or prepared to stomach further downside as the good properties may not necessarily surface at the absolute bottom of the market.’

Some market watchers say there is liquidity in the marketplace for smaller strata transactions involving investments of under $20 million. ‘One contributing factor is wealth creation from the more positive stock market,’ said Cushman’s Mr Han.

URA puts stop to Grangeford ‘dorm’ flats

Source : Straits Times – 7 May 2009

A PLAN to run student dormitory rooms at Grangeford condominium in Leonie Hill is no more.
Master tenant Ideal Accommodation completed sub-dividing 140 apartments into a total of 600 units last month.

But it has been ordered to take down all the partitions by the end of the month.
The Urban Redevelopment Authority (URA) investigated the project after receiving complaints about the plans.

Late last month, URA asked for the condo units to be restored to their original condition, according to a Business Times report. URA declined to comment.

The Business Times also earlier reported that Ideal had found takers for about half of the 600 units – seeking monthly rents of $900 to $1,400 per furnished unit.
Now it may have to terminate the leases and find the takers alternative accommodation. Ideal’s founder Tang Yong declined to comment. But The Straits Times understands that Ideal is appealing against the decision.

The condo’s owner, Overseas Union Enterprise (OUE), which had signed a two-year lease with Ideal for 170 flats, will have to step in if Ideal fails to act.

OUE had acquired Grangeford in a $625 million collective sale during the property boom in 2007. Because demand is very poor, it is holding back the launch of the project and leasing the units out.

Owners of other apartments and projects are also reportedly carrying similar sub-divisions but on a smaller scale.

The Straits Times understands that the URA is also investigating these cases.

Singapore’s green trump card

Source : Straits Times – 7 May 2009

SPRUCING up and greening Singapore with trees all over the island was a key economic strategy from Day One, Minister Mentor Lee Kuan Yew said last night.
In order to differentiate the country from its larger neighbours, one of his first tasks on becoming Prime Minister was to develop a Garden City with good infrastructure and telecommunications.

To woo investors from developed countries, ‘we had to make this a First World oasis in a Third World region’, he told some 600 guests from the public and private sectors, non-governmental organisations and the landscape and horticulture industry at a dinner marking the Botanic Gardens’ 150th anniversary.
MM Lee took part in a dialogue at the event on the greening of Singapore, moderated by Ambassador-at-Large Tommy Koh.
Professor Koh asked him at the start of the hour-long dialogue why cleaning up ‘dirty and smelly’ Singapore was a priority when it faced numerous other challenges upon gaining independence in 1965.
‘It was part of a bigger plan. After we were asked to leave Malaya, we had to work out a strategy which would allow a little island dependent on Malaya for its hinterland to survive,’ MM Lee said.
What could be done immediately was ‘to show investors that this was a well-organised place’, he said of what was effectively Singapore’s secret weapon.
Coming from the airport into town, they would pass by lush greenery, and when they visited him in the Istana, they would see well-maintained lawns and shrubs.
‘So without having to tell anything to the chief executive officer, I knew he would understand that when I say we will deliver, he knows we can deliver; that this is a country where the administration works, where there is a system,’ he said.

The fact is, he added with a laugh, ‘you can’t just plant a tree and walk away. The tree will die’.
‘You need tree doctors, you need to understand what soil and how much sunlight it requires. You put it under a flyover and you got to get forest shrubs that grow in shaded areas,’ he explained.
‘It’s a very complex thing that all people who run big organisations will understand,’ said the man who personally oversaw the greening process here.

He credited the British colonial administration for having ‘done the basics’ which Singapore’s landscape architects and park managers were able to build on.

Indeed, it was under British rule that the Botanic Gardens first started life in 1859, as a venue for flower shows and later where rubber was first cultivated.

Today it is one of Singapore’s top tourist attractions and a premier institution for botanical research, said National Development Minister Mah Bow Tan at last night’s event.
The dinner and dialogue with MM Lee raised $550,000 which will go towards scholarships for Singapore’s future botanists and horticulturalists.
Guests last night also paid tribute to MM Lee’s role in greening Singapore. Prof Koh said former National Parks chief executive Tan Wee Kiat, who was at the dinner, told him that he must have been ‘the only gardener in the world who reports directly to the PM’.
MM Lee stressed that planting and maintaining trees and parks was ‘the easy part’.
The tough part, once all the infrastructure was in place, was ‘to get people to change from Third World to First World behaviour’.

This led to ‘endless campaigns’ to tell people ‘not to bring chickens and pigs into high-rise (buildings), not to pee in elevators’ and above all, he joked, ‘not to steal the plants’.
It took 30 or 40 years, but finally Singapore has reached the stage where its people feel a sense of ownership for the environment, he said.

‘It took some time to get them to understand (that) if you keep your environment nice and clean, your property values go up; if your environment is scruffy and dirty, then when you want to sell the flat, the price is down.’

MM Lee was so exercised by the ‘Clean and Green’ campaign that he told Mr Goh Chok Tong, upon handing over the reins as Prime Minister in 1990, that ‘if you lose interest in this, (Singapore) will go back to the bad old days’.

Bubble lifts pop up in HDB blocks

Source : Straits Times – 7 May 2009

ONCE found only in places such as shopping malls and hotels, bubble lifts are going up at Housing Board blocks.

Since January, residents of Block 46, Owen Road, near Farrer Park, have been enjoying the view from their very own glass lift – the first of its kind in an HDB block.
As part of HDB’s Lift Upgrading Programme, four other blocks in the precinct will be fitted with 10 such lifts. They will be ready for use by July.

These lifts are different from conventional ones as they have transparent glass panels along their walls. Instead of being enclosed, they also adopt a shaftless design, which gives passengers in the lifts a view of the outside.

As part of a pilot trial by HDB, bubble lifts will find their way to 19 HDB blocks in areas such as Jurong East Street 24, Buffalo Road in Little India, and Sims Drive in Aljunied.
Depending on the residents’ receptiveness as well as the lifts’ performance, bubble lifts might eventually pop up all over Singapore.

Bubble lifts are not only attractive for the views they afford, they are also faster to build. It takes about one year to construct a bubble lift, while a conventional lift takes a couple of months more.

Bubble lifts are also cheaper. An HDB spokesman said the design of a bubble lift means there is no need to construct an enclosed shaft, which is required for a conventional lift. This shaves off about 25 per cent of the total construction cost.

This also means a more affordable price for residents. For an eight-storey block of three-room flats like Block 46, Owen Road, each household has to pay only $760, or 5 per cent of the lift upgrading cost. The rest is subsidised by the Government and the town council.

But due to its design, a bubble lift is not suitable for all estates. HDB explained that for places with little shade, it might get too hot in the lift car or the sun’s glare might be too strong during the day.

Constant exposure to the elements also means that the lift has to be built with materials that can withstand weathering, or problems might occur.

The Straits Times understands from residents of Block 46 that during its first three months of operation, the bubble lift stalled a few times every week.

‘My daughter got stuck in there before,’ said Mr Andrew Liew, a 63-year-old retiree.
‘But it’s not so bad now,’ he added. ‘It’s definitely much more convenient to have a lift on every floor, plus the view is nice.’

Indeed, the see-through concept of the lift is proving popular with many residents.
Madam Xuan Gui Zhu, 56, said in Mandarin: ‘My two grandchildren love it. When the lift was ready, they would take it up and down again and again.’

She also saw things from another angle: ‘Not only can we look out, other people can also look in. That makes it safer for everyone.’

Will property recover faster than expected?

Source : Business Times – 7 May 2009

MARKET turning points are very hard to spot. A recent example was the March 9 market bottom. Then, the world seemed a bleak place: we were in for a prolonged depression; banks were going to fail; many companies were going bankrupt and millions were going to lose their jobs and stay unemployed for years. That period also coincided with a spate of bad news from the Chinese companies listed in Singapore – the so-called S-chips.
The cash wasn’t in the banks. The founders were losing control over their companies because they’d pledged their shares to financial institutions. Profit was overstated, and the companies’ status as going concerns was in question. One by one, the S-chips were getting suspended.

Under the never-ending onslaught of bad news, many investors threw in the towel and cashed out. By February, cash sitting on the sidelines was at its highest in more than 10 years. Government statistics showed that the amount of deposits of non-bank customers with domestic banking units and deposits with finance companies was equivalent to 99 per cent of the aggregate market value of all the stocks listed on the Singapore Exchange (SGX). The previous peak was in 2002, when the cash/market cap ratio was 91 per cent.
History has shown that such a high level of cash holdings portends strong upside in the equities market. The rebound did eventually come – almost out of the blue – and took many by surprise. The recovery – fuelled by sightings of ‘green shoots’ in the economy – has lasted eight weeks and equity prices have gained more than 40 per cent. But through it all, many analysts and fund managers still doubt the sustainability of the recovery.
So what do we make of the projections of most property consultants that private residential property will slump by 25-35 per cent this year? The forecasts suggest more downside for the rest of the year given that prices fell ‘only’ 14.1 per cent in the first quarter. But like the pundits in the stock market, there is a possibility that these consultants too will miss the market turning point. For one, the stock market leads the property market by 4-8 months. If the stock market remains buoyant, then there is a probability that the property market too will stabilise. And, as noted earlier, there is a lot of cash waiting to get into the market.

Already, there are signs that US real estate – the source of the current global financial crisis – is recovering. According to The New York Times, Sacramento (among the first US cities to fall victim to the real estate collapse) has seen investors and first-time buyers out in force competing for bargain-price foreclosures. Sales are up 45 per cent from last year, and the vast backlog of inventory has diminished. Progress is also visible in other hard-hit areas.
If so, one shouldn’t be too quick to dismiss the hope that the US property slump, just like the stockmarket slump, may end sooner than the doomsters think.

Green building events may add buzz to industry

Source : Business Times – 6 May 2009

Downturn may have some impact on the conference and exhibition: BCA

THE Building & Construction Authority (BCA) expects 800 to 1,000 local and foreign participants to turn up for its inaugural International Green Building Conference in October.
The conference, which will focus on green building technologies and designs, will take place alongside South-east Asia’s green building exhibition BEX Asia, which could draw another 5,000 visitors.

The economic downturn may have some impact on the events, said BCA director of technology development Tan Tian Chong.

But with new incentives to get at least 80 per cent of buildings in Singapore Green Mark-certified by 2030, they may ‘add more buzz to the industry and create an interest to improve the value and energy efficiency of existing buildings’.

Last week, the government introduced several schemes to promote sustainable development in Singapore.

For instance, BCA launched a $100 million Green Mark incentive scheme for existing buildings to entice owners of some private non-residential developments to carry out energy efficiency retrofitting.

According to Mr Tan, BCA’s co-funding can help shorten the investment’s payback period by as much as a third.

The agency found in a study that a building with the Green Mark platinum rating can carry a cost premium of 2 to 8 per cent, with a payback period of two to eight years.

President of the Singapore Institute of Architects Ashvinkumar Kantilal, who is also projects director at Architects 61, said his firm has got ‘quite a handful of enquiries’ in the past two days from clients who wish to know if they can benefit from the green incentives. He believes other architectural firms are seeing a similar trend.

BCA said that 245 buildings have received Green Mark certification.
They have a gross floor area (GFA) of around 10.47 million sq m, out of a total building stock of about 210 million sq m.

Of the 245 buildings, however, only 60 are complete and in use, representing a GFA of around 1.7 million sq m.

SLA to auction land for heavy vehicle park

THE Singapore Land Authority (SLA) has launched for auction one land parcel for heavy vehicle park use at 20 Eunos Road 4 under tenancy.

It has a site area of 20,288 square metres and a tenure of 3+2 years. The specified minimum deposit is $24,600.

SLA has appointed Colliers International (Singapore) as the auctioneer. The public auction will be held at 2.30pm on May 27 at Amara Hotel.

The site is being released to help meet heavy vehicle parking needs in the area. Heavy vehicles that will be allowed to be parked there include trailers, buses and other vehicles with a maximum laden weight of over 5 tonnes.
Source : Business Times – 6 May 2009

URA acts against Grangeford ‘dorms’

Source : Business Times – 6 May 2009

OUE and master tenant Ideal told to restore units to original condition

Overseas Union Enterprise (OUE) and its master tenant at the Grangeford condo have been instructed to restore the apartments to their original condition. Ideal Accommodation, the master tenant, had subdivided apartments into smaller units resembling a dormitory layout.
‘Urban Redevelopment Authority has investigated and taken enforcement action against the persons responsible for the unauthorised use of Grangeford Apartments.

‘Enforcement notices have been served on the persons responsible to discontinue the unauthorised use and restore the apartment units to their approved condition,’ a URA spokeswoman told BT.

OUE and Ideal could face penalties if they do not act within the time frame stipulated by URA.
BT understands the enforcement notice was served towards the end of last month.

The paper reported last month that a fully owned subsidiary of OUE had signed a two-year lease with effect from Jan 1, 2009 with Ideal for 170 apartments at the condo at Leonie Hill. Of these 170 apartments, Ideal split 140 apartments into a total of 600 units. Most had no access to rubbish chutes. Kitchen and living room areas were boarded up to create new units. Tenants of some units have to share toilets.

Ideal, set up by Chinese citizen Tang Yong, provides rental housing accommodation including student housing and serviced apartments.

Last month, URA had indicated that change of use of Grangeford’s apartments from residential use to boarding house/dormitory use was not allowed.

OUE bought Grangeford through a $625 million collective sale struck during the market peak in 2007. With the property slump, OUE decided against redeveloping the project for the time being and opted to lease out the existing 193 apartments instead. It managed to rent out 22 apartments before it signed a master lease with Ideal for the 170 apartments.

BT noted in its reports last month that owners of apartments in other developments have also carried out similar subdivisions, though on a much smaller scale.

With the swine flu alert, the issue has become more critical as the overcrowding could pose a health hazard and contact-tracing could be difficult on account of transient tenants, as a letter writer living in People’s Park Complex pointed out in The Straits Times Forum pages on Monday.

Q1 Aussie home prices dive on low demand

Source : Business Times – 5 May 2009

Index measuring the weighted average of house values fell 6.7% from 2008

Australian house prices fell by a record annual amount in the three months through March as the nation’s first recession since 1991 and surging unemployment sapped demand for property.

An index measuring the weighted average of prices for established houses in the eight capital cities slumped 6.7 per cent from a year earlier, after dropping a revised 3.9 per cent in the fourth quarter, the Australian Bureau of Statistics said in Sydney yesterday. It was the biggest decline since the bureau began recording prices in 1986.

To prevent Australia’s property market suffering a US-style slump as the nation enters its first recession in two decades, central bank governor Glenn Stevens cut borrowing costs last month to a 49-year low of 3 per cent. The government also tried to stoke demand for homes by increasing grants in October for first-time buyers to as much as A$21,000 (S$22,914).
‘It’s a sizeable drop and isn’t surprising,’ said Matt Robinson, an economist at Moody’s Economy.com in Sydney. ‘We had a period where people just didn’t know how bad things were going to get, and no amount of monetary policy stimulus and first-home-owners grants were going to encourage them to buy.’
The Australian dollar traded at 73.68 US cents at 12.42 pm in Sydney from 73.59 cents just before the report was released. The two-year government bond yield was unchanged at 3.26 per cent.
Prices fell 2.2 per cent from the fourth quarter, when they declined a revised 1.2 per cent. The median estimate of 15 economists surveyed by Bloomberg News was for no change. Economists also forecast a 3.9 per cent annual decrease.

While annual declines in Australian house prices have accelerated since the December quarter, falls in the UK have slowed. The average cost of a home in England and Wales fell 0.3 per cent in April, the smallest drop in 12 months, Hometrack Ltd said on April 27. Prices fell 10.1 per cent from a year earlier, after sliding an annual 10.3 per cent in March.

The drop in home prices in the 20 major US cities slowed in February for the first time since 2007. The S&P/Case-Shiller index’s 18.6 per cent decrease compared with a record 19 per cent decline the month before.

Australia’s biggest quarterly drop was in Perth, where prices fell 10.1 per cent in the first quarter from a year earlier. Prices fell 7.3 per cent in Sydney, 6.7 per cent in Melbourne, 6.3 per cent in Brisbane, 5.1 per cent in Canberra and 1.9 per cent in Adelaide. Darwin rose 10.8 per cent and Hobart increased 0.6 per cent.

‘Our forecast is for house prices to fall 10 per cent from peak to trough’ in Australia, said Helen Kevans, an economist at JPMorgan Chase & Co in Sydney. ‘The acute shortage of new homes and accelerating population growth will, however, prevent falls similar to those in weaker offshore markets.’

Demand for property may be curbed as the unemployment rate climbs.
The jobless rate probably rose to 5.9 per cent last month, the highest level in almost six years, according to the median forecast of 19 economists surveyed by Bloomberg News. The employment figures will be released on May 7.

A separate report published yesterday by Australia & New Zealand Banking Group Ltd showed job advertisements in newspapers and on the Internet tumbled 7.5 per cent in April, taking the decline from a year earlier to a record 49.9 per cent.

The worsening employment market also shows signs of eroding pricing power for landlords. TD Securities Ltd said yesterday that rents fell 2 per cent in April, after sliding by around 3 per cent in the previous two months.

Mr Stevens and his board will keep the overnight cash rate target at 3 per cent today to gauge whether a record 4.25 percentage points of rate cuts since early September and government spending will spur the economy out of a recession, according to 18 of 19 economists surveyed by Bloomberg.

HK to auction first home site in a year

Source : Business Times – 5 May 2009

But small size may not draw interest from bigger builders
Hong Kong’s government will auction a residential building site for the first time in almost a year today, in a test of developers’ expectations in Asia’s second-most expensive luxury housing market.

The site, of 306 square metres (3,300 square feet) in Sheung Shui in northern Hong Kong, may be too small to draw interest from bigger builders, said Buggle Lau, chief analyst at Midland Holdings Ltd, the city’s biggest publicly-traded property agency.

‘Developers are eager to replenish their land bank, but this site is pretty small,’ Mr Lau said yesterday, declining to identify which builders may be interested. Midland expects the land to sell for HK$39 million (S$7.4 million).

Prices of existing homes in Hong Kong rose 10.7 per cent between December 28 and April 26, according to figures from Centaline Property Agency Ltd, amid optimism that the world’s biggest economies are recovering from a recent slump on stimulus spending.

Hong Kong has the second-highest luxury home prices in Asia, with an average price of US$16,125 a square metre, after Tokyo with an average of US$17,998, according to the Global Property Guide website.

The government, one of Hong Kong’s biggest suppliers of unoccupied land, sells land under a system where developers trigger auctions from a list of available sites by promising to pay a minimum amount.

Today’s auction is the first of the fiscal year that started April 1 and the government’s first public sale of a building site for housing use since May 9, 2008, according to the Lands Department.

The winning bidder can build 1,407 square metres of floor space on the site, with a height limit of 20 metres, according to Midland.

Government land sales and premium revenue was likely HK$16.9 billion in the year through March 31, 2009, 73 per cent less than the previous 12 months, according to figures in the budget, released on Feb 25.

Income for the year through March 31, 2010, may be HK$16.5 billion, according to the budget.

Dubai developer posts 87% fall in Q1 profit

Source : Business Times – 5 May 2009

Union Properties nets 30m dirhams as sales fall, projects get delayed
Union Properties PJSC, the Dubai-based developer that suspended work on a Formula One-themed park, said that first-quarter profit plunged 87 per cent as the global financial crisis hurt real-estate sales and caused projects to be delayed.

Net income fell to 30 million dirhams (S$12 million), or one fil a share, from 238 million dirhams, or 7.8 fils, a year earlier, the company said in a statement yesterday. Sales dropped 40 per cent to 572 million dirhams.

The worst financial crisis since the 1930s has weakened the property market in Persian Gulf states as banks curtailed mortgage lending and speculators sold assets.
Union Properties was hurt by lower revenue at its largest business segment, contracting to build projects for other developers, it said.
Union Properties declined two fils, or 2.7 per cent, to 73 fils at 1.02pm in Dubai trading. The shares have gained 12 per cent this year, while the six-member Dubai Financial Market Real Estate Index has risen 4.6 per cent.
‘The drop today isn’t severe, which suggests the market is bottoming out,’ said Samer Al-Jaouni, general manager at Middle East Financial Brokerage Co in Dubai, referring to Union Properties stock.
Emaar Properties PJSC, the largest developer in the United Arab Emirates, last week said that first-quarter profit dropped 74 per cent as the liquidity crunch and falling house prices cut off growth in Dubai’s real estate market.

Emaar is reducing costs and delaying projects after demand fell in Dubai.
Dubai house prices may slump as much as 70 per cent from their peak late last year as demand drops and banks fail to resume mortgage lending, prompting mergers, UBS AG said in a report on April 22.

Union Properties suspended its planned Dubai Formula One theme park because of the financial crisis, it said on Feb 26.

The company had 6.2 billion dirhams in bank debt at the end of the quarter, giving it a debt-to-equity ratio of 34 to 66, according to yesterday’s statement. Union Properties agreed to refinance 1.1 billion dirhams of short-term debt this quarter.

The company started handing over properties in the MotorCity development at the start of the current quarter and will book revenue as the properties are delivered to clients.

UAE grants multi-entry visas to foreign homeowners

Source : Business Times – 5 May 2009

The United Arab Emirates (UAE) said it would grant expatriate homeowners multiple-entry visit visas enabling them to stay six months at a time if they own properties worth at least one million dirhams (S$402,061).

Property buyers had been waiting for legislation for years to clarify their residency rights in the second-largest Arab economy after many of the country’s seven emirates allowed foreign investment in property in recent years.

Still, analysts said the government decree, issued on Saturday, needed more details on which properties would be eligible amid a real estate downturn that dragged Dubai property prices down 41 per cent in the first quarter.

‘Greater clarity regarding visa and ownership rights of property owners would help to increase transparency and hence confidence in the market, perhaps providing a positive trigger for demand,’ EFG-Hermes said in a research note.

Some developers in Dubai – home to the world’s tallest tower and man-made islands shaped as palm fronds – had been offering foreign property buyers promises of residency visas if they bought properties.

But, according to a decree issued by UAE Minister of Interior Sheikh Saif bin Zayed al-Nahayan, ‘owners of built-up properties can stay for six months from the date of entry into the country.’
After six months, owners would have to leave the country and would be granted re-entry only if they meet certain conditions, including that their property be wholly owned, built, worth least one million dirhams and fit for accommodation by a family.

The owner should also have a fixed income of no less than 10,000 dirhams a month, or the equivalent in a foreign currency.

The visit visa does not give the owner the right to work in the UAE, the decree said.
The UAE, the world’s third-largest oil exporter, is a federation of seven emirates including Abu Dhabi and Dubai, each of which has adopted separate rules regarding foreign ownership of real estate.

‘More clarity is needed,’ said Sana Kapadia, vice-president, equity research at EFG-Hermes in Dubai. ‘It depends whether it means one million dirhams at the time of purchase or if it is the current selling price.’

Real estate prices in Dubai, for instance, have tumbled 41 per cent in the first three months of 2009, according to property consultants Colliers.

Home prices rallied during a six-year boom spurred by Dubai’s decision in 2002 to allow foreigners to invest in some properties on a freehold basis.

Now, many units are now selling for less than one million dirhams, according to real estate brokers.

‘You’ll find an apartment in Discovery Gardens, International City and Jumeirah Lake Towers for less,’ said Vincent Easton, an independent property analyst.

Prices are even lower in smaller emirates such as Ajman and Ras al-Khaimah, he said, adding that the one million dirham benchmark could refer to a country-wide average price.

Office rents in Asia slump 7.9% in Q1: CBRE

Source : Business Times – 5 May 2009

Singapore, Hong Kong see steepest fall; leasing activity remains subdued

Office rents across Asia sank in the first quarter of this year – with Singapore and Hong Kong suffering the sharpest declines – a report by CB Richard Ellis (CBRE) shows.

Overall office rents in Asia fell 7.9 per cent quarter-on-quarter in Q1, after a 7.3 per cent decline in Q4 2008, according to the CBRE Asia Office Rental Index. Rents have now declined 18.5 per cent from their peak in Q2 2008.

Asia’s major financial centres – Singapore and Hong Kong – continued to see the biggest falls. Rents in Singapore dropped 18.6 per cent, while those in Hong Kong declined 14 per cent. On an annualised basis, corrections in Singapore and Hong Kong have now exceeded 34 per cent, CBRE said.

‘The Asian office property market deteriorated further during the first quarter of 2009 as companies continued to down-size and cut back on costs,’ it said.

Leasing activity remained subdued across the region, with transactions dominated by renewals, although a few deals involving companies relocating to cheaper premises were concluded.

Across many markets, landlords were forced to offer more concessions to retain and attract tenants, CBRE noted: ‘In some major Asian office markets, they are displaying a new willingness to negotiate lease restructuring with tenants they desire to retain.’

In Singapore and Hong Kong, the rise in vacancies was ‘less than what might have been expected and availability remains tight’, CBRE said. But the amount of shadow space due to sub-letting activity continued to rise.

A number of hedge funds in Hong Kong were considering sub-leasing and surrender options during the quarter, while landlords remained under significant pressure to reduce rents still further.

Likewise, Knight Frank said yesterday in a report on Singapore that there are signs that tenants are seeking to cut their occupation costs and, in some cases, are trying to sub-let space.
‘Landlords have needed to offer reduced rents and incentives to retain existing tenants,’ Knight Frank said. ‘There is substantial new supply expected in 2009, which may further dampen rental prospects.’

Leasing activity in the Hong Kong office market has likewise slowed, with corporate occupiers continuing to down-size amid the financial crisis.

‘A number of occupiers appear to be attempting to surrender office space by seeking replacement tenants, while some companies have moved from Central Hong Kong to Kowloon East to save occupation costs,’ Knight Frank said in its report.

Current DC rates too high for Lush to be an incentive

Source : Business Times – 5 May 2009

A NEW initiative called Landscaping for Urban Spaces and High-Rises (Lush) – launched last week by the Urban Redevelopment Authority – offers a gross floor area (GFA) incentive scheme for buildings in the Orchard and Downtown Core planning areas to promote roof-top greenery.

This additional GFA can be used only for Outdoor Refreshment Areas (ORAs) at roof-top level if owners provide roof-top landscaping. A Development Charge (DC) or land premium, where applicable, is payable for this additional GFA.

The DC system, now used in Singapore, is based on the principle of sharing of enhanced land value. Since July 18, 2007, DC rates have been pegged at 70 per cent of land value, up from 50 per cent previously.

The 30 per cent balance is free, which is supposed to give the owner an incentive to undertake development work.

Under the fixed-rate system, the DC rate is an average value within a geographical sector. Applying it to a multi-storey development on a specific site, it is also an average value for that development.

As building intensifies or plot ratio increases, the additional floor area inevitably goes to higher floors. DC rates, therefore, work in favour of office and residential developments, where higher floors command higher value, but vice-versa for shopping centre and industrial/warehouse developments.

By levying the DC rate on a roof-top retail floor area, the 30 per cent benefit to the owner for undertaking the development is diminished. For example, take a typical five-storey shopping centre development where the DC rate is $7,000 per sq m (psm) of GFA.

The implied average land value of $10,000 psm would be at third-storey level. As rental and capital values decrease progressively towards higher floors, the land value of the floor area on the fifth storey roof-top could well drop more than 30 per cent to below $7,000 psm. There is, therefore, no financial incentive for the building owner to participate in such an initiative.

That’s just the DC component of cost. There will be other elements to consider, such as the cost of landscaping the roof-top and building the ORA, as well as the installation of additional mechanical and electrical equipment if necessary.

Most important is the accessibility of roof-top space. To install a new pair of escalators just to service a 200 sq m of ORA would not be cost-effective.

If the DC rates for roof-top ORA remain pegged at 70 per cent, how effective this initiative will be in promoting roof-top greenery will depend on the movement of the DC rates in the next few DC reviews.

The current DC rates for commercial use for the Orchard and Downtown Core planning areas, ranging from $4,550 psm in the Rochor Road area to $11,200 psm in the Scotts Road area, are near an all-time high.

The DC rates have to drop to make the Lush initiative attractive to building owners. And the drop has to be significant – and occur before the three-year validity period of the new scheme is over.

The writer is the owner of Landmark Property Advisers, a boutique property agency specialising in investment sales and property advisory services

The Fernhill: China investor sells 19 units at Fernhill

Source : Business Times – 5 May 2009

THE China buyer who failed to make outstanding payment to MCL Land for 20 units at The Fernhill when the project received its Temporary Occupation Permit recently has sealed a deal to sell 19 of the units.

MCL Land in its filing with the Singapore Exchange yesterday did not give the price fetched by the China investor Concordia Overseas Pte Ltd, which MCL did not identify in its statement.
However, BT understands the price was about $1,180 per square foot, below Concordia’s purchase price.

The Fernhill is a five-storey freehold project with a total of 25 units at the corner of Orange Grove and Fernhil roads. Concordia Overseas, controlled by Hong Kong resident and Singapore PR Chan Ki, had bought all 25 units on a deferred payment scheme (DPS) from MCL in January 2007 for $1,410 psf, paying an initial 20 per cent of the purchase price to MCL. Concordia later subsold five units to foreigners at an average price of about $2,200 psf, leaving it with the remaining 20 units.

Some sources were surprised that MCL’s statement yesterday indicated that Concordia had sold only 19 units. They had learnt that Concordia inked a sale and purchase agreement late last week to sell all its remaining 20 units to a group of local investors and the lumpsum investment was said to be about $39 million.

‘The units may have been sold individually, with each investor in the group taking a few units,’ a property industry observer suggested.

The completion of the sale of the apartments by Concordia to the new buyers is slated to take place ahead of the expiry on May 26 of a 21-day notice that MCL will serve today to treat its sale and purchase agreement with Concordia as having been repudiated by the latter.

This was after Concordia failed to pay up an outstanding amount – equivalent to 65 per cent of its purchase price on the 20 units – by yesterday, 14 days after the due date for the payment.
If Concordia manages to pay up by May 26, MCL cannot forfeit the 20 per cent of the $1,410 psf purchase price that it collected from Concordia back in 2007, and re-sell the units. The Hongkong Land subsidiary will then recognise the revenue and profit from the sale of the units in its second quarter results.

Going by information in its Q1 results statement last week, it should be able to book US$31 million in revenue and US$9.3 million net profit on the 20 units in its Q2 results.

In its Q1 results statement last week, MCL Land said that for The Fernhill, it booked profit on only five units for which it received the outstanding purchase price by the payment date.

BT reported earlier that the buyers of these five units had picked up their units in the subsale market from Concordia at an average price of nearly $2,200 psf. MCL did not extend DPS to these subsale buyers.

While Concordia will be incurring a loss from the subsale of the 19 units, it reaped handsome gains on the five units it subsold back in 2007.

The Fernhill: Buyer resells 19 of 20 Fernhill units

Source : Straits Times – 5 May 2009

A CHINESE investor that failed to pay up for 20 of the apartments it bought at MCL Land’s The Fernhill condominium has managed to resell 19 of those units.

Concordia Overseas, controlled by a Hong Kong resident named Chan Ki, was reported to have missed about $30 million in payments that were due when the project was completed recently, according to reports by the Business Times (BT).

Concordia had reportedly bought all 25 units in the freehold condominium, located off Stevens Road, in January 2007 at $1,410 per sq ft (psf). It then resold five units within the year, at an average price of almost $2,200 psf, according to BT.

The apartments were all bought under the deferred payment scheme, which allows a purchaser to pay an upfront deposit for the apartments – in this case 20 per cent – and then defer the rest of the payments until the units are completed.

But when the time came to pay in full for the remaining 20 units, Concordia failed to do so. MCL Land, a subsidiary of Hongkong Land, sent a payment notice last month but did not receive the money.

Under the sale and purchase agreement, MCL Land is now entitled to give 21 days’ notice to Concordia to rescind the agreement. If Concordia does not make payment by the end of the 21 days, it will forfeit its 20 per cent deposit and MCL Land can take back the units and resell them.
In a filing to the Singapore Exchange yesterday, MCL Land said the 21-day notice period will start today.

It also said it has been informed by Concordia’s lawyers that Concordia has successfully resold 19 units and will complete the sale this month, before the 21-day period expires.
If this happens, the units will not be forfeited and MCL Land will be able to recognise the revenue and profit from these units in its second-quarter results, the developer added.

MCL Land did not book the income from these 20 units when it released its first-quarter results last week. It included profit only from the five units that had been resold in 2007.

The Fernhill deal is being closely watched by the property industry as one of the first major examples of negative fallout from the deferred payment scheme, which was removed in October 2007.

Now that home values are falling, developers who sold projects at the peak of the market are on edge. If an apartment has lost more in value than the initial 20 per cent downpayment, the developer will find itself out of pocket if the buyer walks away from the agreement.

Buildings go green to cut costs amid economic downturn

Source : Channel NewsAsia – 5 May 2009

One way to cut costs amid the current downturn is to make buildings more eco-friendly and efficient. Experts said this can save as much as a 20 per cent in energy bills.
And for those worried about higher investments, there are initiatives that can cover up to 35 per cent of such costs.

Demand for ‘green’ buildings has grown amid the current downturn. Environmentally-conscious consumers are increasingly demanding more eco-friendly homes.

The Building and Construction Authority (BCA) has seen applications for its green mark certification jump from 17 in 2005 to over 100 in 2008. So far in 2009, there are some 120 buildings waiting for certification.

The BCA Green Mark Scheme was launched in January 2005 to push Singapore’s construction industry to build more environmentally friendly buildings. Experts said even old buildings can be retrofitted to be green.

“I suppose the economic crisis will affect the demand for green buildings, but… the focus will be on retrofitting, so we are thinking there will be a resurgence in retrofitting,” said Tan Tian Chong, director of Technology Development at BCA.

The BCA is pumping funds into retrofitting development, and as a result is expecting retrofitting projects to generate over S$1 billion by 2020.

Such retrofitting – which includes modifications such as air-conditioning and lighting systems – will need 3 to 4 years before showing returns on the investment. The BCA said with the new incentives, the time frame could be further reduced by one third.

Currently, only one per cent of completed buildings in Singapore are certified green. But by 2030, the BCA is targeting to bring this to 80 per cent.

To encourage developers to go green for new projects, the BCA will be offering additional gross floor area for projects that qualify.

New green buildings will take 6 to 8 years to show returns on investment, and could present up to 30 per cent in energy savings.

Is Raffles Hotel on sale or not?

Source : Business Times – 4 May 2009

REGARDLESS of what his plans really are for Raffles Hotel, Saudi billionaire Prince Alwaleed bin Talal seems to have made a smart move by getting the authorities’ approval to expand it.
The prince’s investment company said recently that its unit, Fairmont Raffles Hotels International (FRHI), had secured the go-ahead to add as many as 78 guest rooms at the hotel’s shopping arcade. Coming just days after a London-based newspaper speculated on the hotel’s sale, the news once again sparked interest and left many observers wondering about the national monument’s fate.

Surely FRHI has no plans to sell the hotel if it is still planning to expand it, some say. Well, it depends. The option to redevelop the shopping arcade might come in handy in more ways than one.

Supposing that Raffles Hotel is up for sale, the expansion option would make FRHI’s offer more attractive to prospective buyers. And if the speculated terms of the offer are true, there would be quite a lot of sweetening to do.

Asking price $670m
For one, FRHI may be asking for close to $670 million for the hotel, based on the London report. This is pretty hefty considering floundering market conditions today. A BT report last year noted that the hotel and shopping arcade was valued at about $200 million in 2005.

The London report did not mention if FRHI has asked to retain management of Raffles Hotel. A long-term management contract (reportedly lasting 40 years) was part of the deal when it tried to sell the property in May last year. Some interested buyers may also find this condition a hard one to swallow if it is still there.

If the deal involves a high asking price and a long-term management contract, FRHI would have to justify its terms by showing that high returns are achievable, possibly by having more hotel rooms. And it could add value to its offer by getting the paperwork ready for the next owner.

FRHI can expand the hotel on its own but so far, there are few signs of work happening soon. On a visit to the shopping arcade a few days after its possible redevelopment was announced, shops remained open and many sales assistants did not know of plans to move.

‘It is business as usual for the foreseeable future,’ a Raffles Hotels & Resorts’ spokeswoman told BT. ‘Any proposals for strategic investment in the hotel and arcade are considered preliminary in nature and it would be premature to discuss them at this time.’
Downturn repositioning maybe

The Urban Redevelopment Authority’s (URA) data last month did not show when the project might get its temporary occupation permit.
But supposing that the prince is not seeking a buyer for Raffles Hotel – as his investment company said after the London report surfaced – FRHI may truly be looking for more returns.
URA granted approval for the creation of 78 hotel rooms across a gross floor area of over 79,300 sq ft. Assuming that 70 per cent of the new rooms are filled at $590 per night, the hotel can already expect to bring in an additional $11-plus million a year.

However, this does not factor in rental losses if some of the shops in the arcade have to make way for rooms. BT understands that retail rents there range from the mid- to high-$20s psf, and they make up a relatively stable source of income in the unpredictable tourism industry.

Without details from the hotel, it would be hard to pinpoint changes to come. But some industry observers believe that the hotel will retain some popular outlets and restaurants for a more optimal mix of returns.

But why think about having more rooms now, when the global economy is sinking, tourism numbers are down and the swine flu is on the attack? As a property consultant pointed out, renovation works may not be ideal when business is booming. ‘In a downturn like this, it will be good to reposition.’