It’s time to buy UK commercial property: strategists

Source : Business Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Reit managers need to grasp regulator’s position

Source : Business Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

S’pore firms shrug off Dubai default

Source : Straits Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From fishing village to desert paradise in 40 years

Source : Straits Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rules should cover concerted action by agents

Source : Straits Times – 28 Nov 2009

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

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

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

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

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

Ho Kah Chuen

Resorts World househunt reaches into HDB heartland

Source : Business Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From mass market to high end

Source : Business Times – 28 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cool response to smaller HDB flats

Source : Straits Times – 27 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sports Hub delay: Patience, please

Source : Straits Times – 27 Nov 2009

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

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

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

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

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

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

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

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

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

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

Alvin Hang
Director
Corporate Communications & Relations
Singapore Sports Council

Debt default shadow on Dubai’s sand castle

Source : Business Times – 27 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CDL studies fallout of Dubai World move on South Beach

Source : Business Times – 27 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

City e-Solutions has since exited the joint venture.

New York gets nod to seize property for project

Source : Business Times – 26 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Abu Dhabi limits housing construction to avoid glut

Source : Business Times – 26 Nov 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Two properties on tap for investment players

Posted by luxuryasiahome on November 26, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Revamped Mandarin Gallery opens this Friday

November 26, 2009

MANDARIN Gallery is set for a soft launch this Friday after a $200 million makeover. About half of the 103 stores are open for business and the mall should be fully operational around the third week of January.

‘It is almost completely leased out and we expect tenants to move in by January 2010,’ said Patrina Tan, senior vice-president of retail, marketing and leasing for Overseas Union Enterprise (OUE).

The revamp was aimed at creating a full-fledged mall, whereas previously, Mandarin Gallery was an annexe that catered largely to hotel guests, Mrs Tan said. Mandarin Gallery is connected to the Meritus Mandarin Singapore.

The four-storey mall – which spans 126,000 square feet – is targeting ‘highly affluent, well travelled’ customers aged 25-45 years with its tenant mix.

Its frontage boasts five flagship duplexes – Emporio Armani, D&G, Montblanc, Marc by Marc Jacobs, and Bread & Butter. Mandarin Gallery will also introduce international and local new-to-market brands such as a.i. by Ashley Isham, Henry Cotton’s and benWU.

Popular Japanese ramen restaurant Ippudo will make its South-east Asian debut at the mall. All-day breakfast joint Wild Honey will open its first store.

And food emporium jones the grocer will set up its second outlet in Singapore.

‘This is a great opportunity for jones to grow the business and our partnerships in Singapore, because apart from Australia, all other countries have only one store offering,’ said Bruce Chapman, general manager of jones the grocer Singapore.

Mandarin Gallery is also working with the Nanyang Academy of Fine Arts to create Nanyang@Mandarin Gallery, where artists from the school will have a platform to display their work.

Public welcomes move to regulate property agents

Source : Business Times – 26 Nov 2009

THE Ministry of National Development (MND) has received more than 200 independent comments and suggestions on its proposed regulatory framework for property agents.

The vast majority of respondents in a recent public consultation exercise welcomed stronger regulation of the real estate industry, MND said yesterday.

The suggestions were generally supportive of key features proposed under the new regulatory framework – such as mandatory accreditation for property agencies and agents; setting up a public central registry for agents, and an independent tribunal to deal with disputes; and introducing a demerit points system.

Public consultation took place from Oct 13 to Nov 17.

MND said that because complaints often arose from alleged unethical practices or misconduct, respondents felt it was important that agents pass a standard industry entrance examination covering not only practical knowledge but also ethics, before they are allowed to practise.

They also agreed with a proposal that an agent should represent only one party in a transaction to avoid conflict of interest.

MND said: ‘These views were generally consistent with feedback gathered during industry consultations conducted from Sept 10 to Oct 1, when MND consulted stakeholders including industry associations, real estate agency directors, individual agents, Case (the Consumers Association of Singapore) and Redas (the Real Estate Developers’ Association of Singapore).’

Views received from various parties will be consolidated and taken into consideration for refining the new regulatory framework, MND said.

Key elements are expected to be ready for announcement by early 2010.

TripleOne Somerset to open after $50m face-lift

Source : Business Times – 26 Nov 2009

Ex Singapore Power Building refurnished to include retail and F&B space

THE former Singapore Power Building in Somerset Road will re-open in January 2010 as TripleOne Somerset – after a $50 million make-over.

The office building – acquired by Singapore-based Pacific Star Group in February 2008 for more than $1 billion – has been refurbished to include two floors of retail and food and beverage (F&B) space with a total area of 60,000 sq ft.

Pacific Star converted some of the net lettable area (NLA) into retail space, which has been leased out at better rents. Rents for office space in TripleOne Somerset are now $6-$8 per sq ft on average, while retail rents are at $15-$20 psf.

The conversion of lower value space to higher value retail use has enhanced the building, as with other properties in Pacific Star’s portfolio, such as Wisma Atria in Orchard Road, said Benett Theseira, Pacific Star’s president of direct investments.

‘By adding the additional retail space, we have improved our revenue (from the building) about 10 per cent,’ he said.

Looking ahead, the building should be able to command higher office rents with the new retail and F&B facilities in place, Mr Theseira said. Rents could climb by 5-10 per cent when current three-year leases expire, he said.

When it was acquired by Pacific Star, the building’s NLA was 550,000 sq ft – all designated for office use.

After refurbishment, there is about 500,000 sq ft of office space, 60,000 sq ft of retail space and an outdoor refreshment area of about 5,000 sq ft.

The retail and F&B extension was created by converting areas previously occupied by an auditorium, cafeteria and three office units, empty space in the lobby areas facing Somerset Road and void areas above the carpark.

Further NLA expansion will be explored in 18-24 months, Pacific Star said.

It has so far secured commitments for more than 75 per cent of the mall space and is confident the mall will be fully leased when it opens in January 2010.

Tenants signed up so far include dining chain Applebee’s, whose outlet at the mall will be its first in Southeast Asia. Singapore’s largest supermarket chain NTUC FairPrice will open a 14,500 sq ft gourmet supermarket at the mall to cater to tenants and people living nearby.

Besides creating retail and F&B space, Pacific Star is upgrading the office building’s common areas such as the lift and reception lobbies to appeal to a wider range of tenants.

The office space is now 95 per cent leased. Singapore Power, the anchor tenant, continues to occupy around 200,000 sq ft of office space under a lease-back arrangement.

80 units sold at Marina Bay Suites preview

Source : Business Times – 26 Nov 2009

Developer not expected to release more units in the condo until 2010

ABOUT 80 of the 90 units previewed at Marina Bay Suites yesterday have been sold, at an average price understood to be slightly above $2,300 per square foot.

However, the consortium developing the project said that the ‘average price range was between $2,200 psf and $2,500 psf’. Only three and four-bedroom units on the low to mid- floors at the 66-storey development were released for yesterday’s preview.

‘Unit sizes range from 1,572 to 2,691 sq ft for the three to four-bedroom units,’ said a spokesman for Raffles Quay Asset Management, the asset manager for Marina Bay Suites.

BT understands that the consortium developing the 221-unit, 99-year leasehold condo, does not plan to offer any more units in the development until next year. The show suite for the condo will be completed in the first half of next year and housed in an office tower in the Marina Bay Financial Centre (MBFC).

The condo, MBFC and an earlier condo project, Marina Bay Residences, are being developed on a 99-year leasehold plot sold by the Singapore government in 2005 to a consortium controlled by Keppel Land, Cheung Kong Holdings and Hongkong Land Holdings.

Yesterday’s preview was held on the mezzanine level of One Raffles Quay, which was also developed earlier by the three partners. The project is being marketed by CB Richard Ellis and DTZ.

‘There are no immediate plans to officially launch Marina Bay Suites (MBS). This private preview was for invited clients, business associates, registered prospects, staff and directors. We will launch MBS at the appropriate time,’ the spokesman said.

Initially, the consortium had planned to release only 50 units but decided to add 40 more due to keen demand from potential buyers.

BT understands that at least a third of the buyers were foreigners (including permanent residents) and companies, with Indonesians being the predominant foreign buyers. Well-heeled Singaporeans also bought units in the condo.

Prices of three-bedders start from $3 million or about $1,908 psf, BT understands.

The least expensive four-bedder (a 2,045 sq ft unit) cost $4.3 million or $2,103 psf. For the larger four-bedroom apartments of 2,680 sq ft, prices start from $6.1 million or $2,276 psf.

Thumbs up for ending estate agents’ dual role

Source : Straits Times – 26 Nov 2009

Respondents in public consultation exercise also want an entrance exam

A PROPOSAL to ban property agents from representing both the seller and buyer in the same transaction has generated strong public interest – with many giving the idea the thumbs up.

This practice, widespread in the HDB resale market, leaves the agent with a clear conflict of interest.

But there is likely to be resistance from some agents who stand to lose commissions if it is implemented.

The proposed ban is one of a series of possible changes in a planned industry overhaul after years of complaints about questionable practices by some agents.

A public consultation exercise on a planned real estate regulatory framework drew more than 200 comments and suggestions, said the Ministry of National Development (MND) yesterday.

The proposal most commented upon was the ban on dual representation.

Many respondents also backed a plan to ensure agents have a minimum entry qualification – probably an entrance exam. They felt it was important for the exam to cover ethics, given that complaints often stem from unethical practices.

Most respondents were ‘generally supportive’ of the key proposals, MND said. These also include mandatory accreditation of agencies and agents, keeping a public central registry for accredited agents, setting up an independent tribunal to resolve real estate disputes, and introducing a demerit points system.

The views received during the exercise – conducted from Oct 13 to Nov 17 – were generally consistent with feedback gathered during industry consultations a month earlier, MND said. The respondents included property agents and clients who had been caught in unpleasant encounters with agents, said a spokesman.

The Government aims to better safeguard consumers’ interests and raise the level of professionalism in the industry.

Some of the key proposals are long overdue, some industry players said.

Most would be welcomed by the industry, but some agents may not be happy if dual representation is disallowed.

An agent representing both sides in an HDB deal can get two commissions, even though there is clear conflict as sellers would want the highest price for their property while buyers want the lowest.

‘This practice has been around since the first day HDB flats were traded. Obviously, there will be some resistance from property agents,’ said C&H Realty managing director Albert Lu.

As HDB flat transactions can be complex, it is useful for buyers and sellers to have their own agents, to ensure that an unrepresented party does not delay or mess up the transaction, he said.

Some respondents suggested disallowing dual representation for rental deals.

There were suggestions to mandate co-broking, to stipulate that all buyers are to engage an agent and to require agents to inform sellers of all offers, regardless of the offer price or agent fees.

There were also calls for a standard commission guideline to curb undercutting among agents and to protect less educated consumers, for instance.

Respondents had also called for the licensing of individual agents. While the Government had called for industry-led accreditation, some respondents wanted the Government to handle this.

Some also wanted to see minimum educational qualifications. Mr Lu felt this was unnecessary. Having paper qualifications does not guarantee an agent will act ethically, he said. Passing an entrance exam is enough, even though it does not ensure ethical behaviour. A Government accreditation board could suspend errant agents, he added.

Mr Lu felt that the entrance exam should also be conducted in Chinese, for the benefit of a group of older, experienced agents who are Chinese-educated.

PropNex chief executive Mohamed Ismail expects a central registry to come in to help control rogue agents, who are now able to switch agencies unchecked. Some respondents suggested posting the names of blacklisted agents online to warn the public.

Suggestions from the public include the use of standard forms and contracts as well as disallowing agencies and agents from buying new properties from developers with a view to selling them.

MND expects to announce key elements of the framework early next year.

TripleOne Somerset to open in January 2010

Source : Channel NewsAsia – 26 Nov 2009

Singapore-based real estate investment house Pacific Star said on Thursday that the former Singapore Power Building is expected to open in January 2010.

Now renamed TripleOne Somerset, the building is undergoing a S$50 million comprehensive facelift.

The 32-year-old building, which Pacific Star acquired in February 2008, will introduce a revamped, striking frontage.

The refurbished facade includes the creation of two floors of 60,000 square feet retail space. To date, Pacific Star has secured commitments for more than 75 per cent of the mall space.

It is also in active talks with a number of new-to-market concept stores.

Pacific Star said it is confident the mall will be fully leased when it opens in January 2010.

Mandarin mall reopens

Source : Straits Times – 26 Nov 2009

Mandarin Gallery reopens tomorrow promising a novel retail and dining experience for shoppers

It is only half complete, but Mandarin Gallery will open its doors to the public tomorrow after a $200-million facelift.

About 50 of the Orchard Road mall’s 103 tenants will open in time for the Christmas buying season, says Mrs Patrina Tan, 41, senior vice-president of retail, marketing and leasing at Overseas Union Enterprise, which owns Mandarin Gallery.

They include Japanese lifestyle shop atomi, local clothes label Trioon, multi-label clothes boutique BLVD Gallery One, French lingerie label huit lingerie and high-end fashion label Galliano.

Others to open when the mall is fully operational by the end of January are local fashion label a.i. by Ashley Isham and luxury telecommunications company Vertu.

Located in Meritus Mandarin hotel, the 35-year-old mall had previously housed retailers such as fashion label Esprit and leatherware boutique Braun Buffel.

But after an 18-month refurbishment, the four-level mall has doubled its retail space to 11,706 sq m by taking over the hotel lobby and function rooms. The new hotel lobby is now on Level 5.

A prominent design feature is the five duplex (two-storey) shops that dominate the mall’s facade. One occupant, the multi-label boutique Bread And Butter, will open tomorrow. The other four, which will house Emporio Armani, D&G, Montblanc and Marc by Marc Jacobs, will open by the end of January.

‘Malls in Singapore do not really make use of shopping space on their ground floors. Maximising the space we have with these duplexes also gives depth to the brands as feature labels,’ says Mrs Tan.

The mall’s interiors, conceptualised by Japanese design company AIM Create, are modelled after a Japanese tea house to give more warmth with the use of wood instead of white plaster ceilings, she adds.

In addition, each level has a different shopping cluster. Level 1 and 2 house international labels such as Just Cavalli, Folli Follie and Italian clothes brand Henry Cotton’s. Level 3 has sports brand Adidas & Taylormade and all-day breakfast eatery Wild Honey.

Serving up international fare such as salmon tamago balls with sushi rice, Mexican burritos as well as homemade breads and jam, Wild Honey is bullish about its novel approach.

Says Mr Guy Wachs, 30, director of Wild Honey: ‘We have looked at the food scene in Singapore and feel that having an all-breakfast concept can be a little crazy, but for a strategic location such as Mandarin Gallery, it’s a good idea and a good partnership.’

Level 4 has lifestyle stores including spas and eateries. Opening tomorrow is Thai Thai, a fine-dining Thai restaurant chain from Malaysia. Joining the line-up will be steak restaurant Lawry’s Prime Rib, which moves from Paragon to Mandarin Gallery on Jan 10.

Japanese food lovers can also look forward to the opening of the famous Japanese ramen restaurant, Ippudo, which will make its debut here on Dec 15. This will be the chain’s second venture outside Japan. Its other overseas outlet is in New York.

New homes near former tomb of Raffles’ ‘mistress’

Source : Straits Times – 26 Nov 2009

A NEW residential development is set to be built on prime land near the former tomb of a Chinese woman believed to have been the mistress of Sir Stamford Raffles.

Developer Tang City Homes is building a 20 unit residential block at 52, Stevens Road, next to the former resting place of Tan Chwee Neo, alleged to be the lover of Singapore’s founder.

Her remains were left there for nearly 100 years before they were exhumed in 2003 and moved to a temple.

The new freehold Fifty-Two Stevens project, which is located opposite Stevens Close and near the Metropolitan YMCA and The Pines Club, is likely to be launched during the first quarter of next year, after Chinese New Year.

It comprises mainly one-bedroom apartments and is expected to be priced just below $2,000 per sq ft.

Despite claims at the time by family members that Tan was Raffles’ mistress, some have cast doubt on the link.

In 2002, Professor Ernest Chew of the National University of Singapore’s history department dismissed the notion on the grounds that she may not have been a contemporary of Raffles.

According to her ancestral tablet, she was born in 1818 and died in 1904.

This would have made her five years old during Raffles’ final visit to Singapore in 1823.

However, her family claims the birth date records were inaccurate.

Strong sales at Marina Bay Suites preview

Source : Straits Times – 26 Nov 2009

Buyers snap up most of the 90 units released for sale yesterday

A one-day preview at the upmarket Marina Bay Suites development saw invited buyers snap up most of the 90 units released for sale at average prices ranging from $2,200 to $2,500 per sq ft (psf).

At least 81 units were bought yesterday at the 99-year leasehold, 221-unit condominium in Marina Bay, whose launch had been delayed by almost two years, said a spokesman for Raffles Quay Asset Management, which manages Marina Bay Financial Centre. The centre has two residential towers – Marina Bay Residences, which sold out in late 2006, and Marina Bay Suites.

Prices achieved were below the expectations the developers had early last year, before the property market slumped as the global crisis took hold.

It was then thought that the condo could be priced around $3,000 psf, given that the most expensive units in Marina Bay Residences and The Sail @ Marina Bay had then traded beyond that price level.

The invited group of buyers yesterday consisted of registered clients, directors and staff working for the developers – a consortium comprising Keppel Land, Hongkong Land and Cheung Kong Holdings.

The condo has units of three- to four-bedrooms ranging in size from 1,572 sq ft to 2,691 sq ft, as well as three larger penthouses.

Yesterday, the three-bedroom units went for between $3 million and $3.7 million.

The smaller four-bedroom units sold for around $4.3 million to $5 million, while the larger four-bedroom units achieved prices of $6.1 million to a shade below $7 million.

About two-thirds of the Marina Bay Suites buyers were Singaporeans, with the balance made up of foreigners, permanent residents and a few companies, said Mr Joseph Tan, executive director for residential properties at one of the marketing agents, CBRE.

Marina Bay Suites had been slated for launch early last year when there was talk that the three-bedroom units would command a price of $4 million to $5 million.

But the market downturn prompted the postponement and, said Mr Tan, the preview had to be pitched at today’s prices.

Cushman & Wakefield managing director Donald Han agreed that in today’s high-end market, ‘you need to provide a discount from the peak levels’.

‘The value proposition is there for investors keen on luxury properties,’ he said.

‘Generally, there may be more upside as prices in the high-end to luxury markets are still about 20 per cent to 25 per cent from the peak levels in early 2008.’

Mr Han said the market is seeing demand slowly returning in the $2,000 psf to $3,000 psf range, but not yet for those priced above these prices.

Experts also said Marina Bay Suites’ location is a major selling point.

‘The lure factor of Marina Bay properties is the proximity to the integrated resort, and the finite supply of homes there,’ said Mr Han.

Caveats lodged for The Sail @ Marina Bay this month showed deals done at between $1,744 psf and $2,800 psf, while Marina Bay Residences deals were done at $2,170 psf to $2,420 psf last month.

Sellers are hoping that values in the area will rise by the time the integrated resort in Marina Bay is completed, he said.

Indeed, Mr Tan said the plan was to launch the condo at ‘better prices’ in the first half of next year when the integrated resort opens.

The showflat would be ready by then.

185 evicted for subletting rental flats

Source : Straits Times – 25 Nov 2009

THE Housing Board (HDB) has evicted 185 tenants in the past 12 months, after they were found to have illegally sublet their rental flats.

These tenants were living elsewhere while subletting the flats, which is disallowed under the law, said National Development Minister Mah Bow Tan.

‘They have abused government subsidy and deprived the truly needy of a rental flat,’ he said in a written reply to a question raised in Parliament on Monday.

He was responding to Mr Lim Biow Chuan (Marine Parade GRC) who asked for an update on the number of evictions of rental flat tenants, and if there are plans to review rental rates to take inflation and the higher cost of living into account.

Noting that rental flats are heavily subsidised, Mr Mah said there is no need to revise rental rates as these are already low and affordable – even for those who earn a very low income.

Households with a total monthly income of less than $800 pay only $30 a month for a one-room rental flat. Those with monthly incomes of between $800 and $1,500 pay 30 per cent of the market rate. Rental rates, Mr Mah said, have been frozen at $110 a month for one-room flats since 2005.

For tenants in severe financial difficulty, the HDB will extend more help, for example, by working out an instalment plan, Mr Mah said.

He also gave an update on studio apartments for the elderly, in response to a question from Nominated MP Paulin Tay Straughan. To date, the HDB has launched 17 such developments in both mature and non-mature estates, with near 100 per cent take-up rate.

Singapore private sector pumps $1.1b into Iskandar Malaysia

Source : Business Times – 25 Nov 2009

Manufacturing SMEs account for bulk of investment, says Mah in Parliament

Iskandar Malaysia has attracted RM2.64 billion, or some S$1.1 billion, in manufacturing investments from Singapore’s private sector since 2006.

National Development Minister Mah Bow Tan said that this sum comes from the 178 manufacturing projects with Singapore participation which have been approved by Malaysia from 2006, when the Johor economic zone was first launched, till May this year.

‘Singapore is among the top three investors in Iskandar Malaysia,’ said Mr Mah, in a written response to MP Ho Geok Choo’s question in Parliament on local investments in the project and issues discussed at the 5th meeting of the Joint Ministerial Committee (JMC) for Iskandar Malaysia (IM) on Nov 4.

To enhance transport connections, key to developing business links, the JMC agreed at that meeting to ‘double the number of cross-border bus services by January 2010′, Mr Mah said.

He jointly chairs the committee, set up in 2007 to promote bilateral cooperation on IM, with Malaysia’s Minister in the Prime Minister’s Department Nor Mohamed Yakcop.

While the JMC’s sub-groups have been working on transport and immigration clearance, and promoting joint tourism development and environmental cooperation, ‘the private sector has actively seized the economic opportunities that IM presents’ too, Mr Mah said.

Most investments from Singapore have been in manufacturing, particularly those by small and medium enterprises (SMEs), he noted. The majority are in the business of producing plastics, electronics or electrical goods and fabricated metal products.

Manu Bhaskaran, economist and CEO of Centennial Asia Advisors, was not surprised at the large proportion of SME manufacturers investing in Iskandar. ‘In fact, that is exactly the role that Iskandar can play,’ he told BT, since costs are higher in Singapore, although an SME with limited resources is less likely to be able to move its operations far.

It is beneficial to Singapore too, that local companies have the option of relocating manufacturing operations to IM, rather than further afield.

‘The proximity makes it more likely that they will then still keep their headquarters in Singapore,’ Mr Bhaskaran added.

In the written reply, Mr Mah said that local companies in sectors other than manufacturing, such as healthcare services and real estate, ‘have also been actively exploring investment opportunities in IM’. Parkway Holdings plans to set up a hospital in IM, while another Singapore healthcare player, Health Management International, has a hospital already in operation there.

Mr Bhaskaran expects Singapore’s investments in IM to climb, but noted that the development region is still ‘in its early stages’, and issues such as recent concern over the impact of multiple top management changes on investor confidence, lingering concern over Johor’s crime rates, and accessibility from Singapore, will need to be addressed.

Some of these issues have been looked into by the JMC. The JMC’s 5th meeting also noted that ‘fast track’ lane access with the Malaysian Automated Clearance System was extended to all frequent travellers to Malaysia in September.

A study was also commissioned to assess the feasibility of developing nature sites in IM and Singapore’s Sungei Buloh Wetland Reserve as a joint tourism destination. Environmental agencies on both sides are exchanging expertise in areas such as river cleaning, Mr Mah said.

Earlier this month, the JMC said that it would form a new work group to study the joint development of an iconic economic project in IM, proposed by both countries’ prime ministers in May. The JMC will next meet in the first half of next year.

Pine Grove residents keen to sell en bloc again

Source : Straits Times – 25 Nov 2009

PINE Grove residents are looking to sell their sprawling Ulu Pandan estate en bloc, after failing to do so in previous attempts during the 2007 boom.

They are not alone. Industry sources say there is a growing group of other estates that previously failed to sell en bloc but is now looking for reruns.

The collection of signatures at Pine Grove, a 660-unit former HUDC estate on 893,178 sq ft of land, started on Nov 15. If successful, this latest attempt will net each unit owner at least $1.6 million to $2.05 million, depending on unit size.

Many units are about 1,754 sq ft and will achieve a price of about $1.95 million each, according to an owner who declined to be named. Prices are based on a reserve level of $1.246 billion, he added.

The total price works out to at least $740 per sq ft per plot ratio, estimated a property expert. This is because the buyer of the site will have to pay an upgrading premium, plus a differential premium on top of the asking price to cover the cost of bringing the land tenure up to 99 years and site redevelopment.

Marketing agent Jones Lang LaSalle declined to comment.

Pine Grove’s collective sale attempts in 2007 failed to bear fruit, even though the average payout was eventually raised to about $2 million per unit.

At Tulip Garden in Holland Road, Bravo Building Construction failed to complete a $516 million collective sale purchase last year due to funding issues.

Residents of Chin Swee Road’s Landmark Tower were unable to attract a buyer in their collective sale attempts in 2007 and last year, but are keen to try again.

The sale processes at Tulip Garden and Landmark Tower are still in the preliminary stage and The Straits Times understands both have yet to officially appoint a marketing agent.

The estates are understandably eager to try again now that the economic outlook has improved and private home prices have risen, said DTZ South-east Asia research head Chua Chor Hoon.

The recent market slowdown has yet to significantly hamper owners’ expectations, given that the process of collecting signatures and launching the sale may take a while, said an expert.

Kwek: Govt can play downpayment card

Source : Business Times – 25 Nov 2009

But resurgence in speculative activity not likely in short term, says CDL boss

Property tycoon Kwek Leng Beng feels that the authorities could raise the downpayment on the purchase of private homes if there is a risk of resurgence in speculative activity.

Currently, home buyers make a 5 per cent minimum cash downpayment.

‘The downpayment payable . . . can be increased to reduce the amount of speculation. This amount can be increased further should the speculation go unabated,’ Mr Kwek said this week in an e-mail response to BT’s questions.

He had been asked what steps the government could potentially take if a speculative bubble builds up again, following a recent statement by the Monetary Authority of Singapore that the risk of renewed escalation of property speculation could not be discounted.

In the short term, however, Mr Kwek said he does not envisage a resurgence in speculative activity, noting that developers’ sales have slowed for three consecutive months since peaking in July this year.

On Nov 9, the Monetary Authority of Singapore said further action to cool the property market may be needed if recent measures to dampen speculation prove insufficient. It said ‘the risk of a renewed escalation of speculative momentum cannot be discounted’ as Singapore emerges from recession and with the market expecting low interest rates to persist for some time.

‘Going forward, price levels and transaction activity bear close monitoring,’ it said.

Mr Kwek, who is executive chairman of City Developments Ltd (CDL), was generally more measured in his outlook on the Singapore private residential sector in his latest interview than he had been during CDL’s half-year results briefing in August.

He now says the Singapore private residential market ‘will slow down’ following the MAS warning and reinstatement of the confirmed list next year. ‘The integrated resorts (IRs) will not affect the real estate market immediately, unless the world economy recovers substantially when the IRs open, which is not likely.’

In August, Mr Kwek had sounded more optimistic about how the opening of the two IRs with casinos next year will provide a fillip to the Singapore property market, especially luxury homes, citing the experience in Macau.

The pronouncement from Singapore’s de facto central bank this month on the possible risk of a revival of property speculation came just three days after the Ministry of National Development announced it will offer eight sites that can potentially generate 2,925 private homes (including exec condos) for sale under the confirmed list in H1 2010.

The quantum was bigger than what most developers had expected.

‘I was rather surprised by the quantum of the confirmed list but I can understand the government’s explanation for introducing the number of land parcels in the confirmed list,’ Mr Kwek told BT this week.

In announcing the confirmed list, MND noted that the private residential market had seen ‘very strong demand’ from February to September, with developers selling about 12,800 units in the first nine months of this year, against just 4,300 units for the whole of 2008.

The government has also sought to assure market players that there is ample supply and that there is no need for buyers to rush their purchase decisions.

In September, the government scrapped interest-only housing loans and the interest absorption scheme, which some market watchers blamed for stoking speculation.

After last year’s global financial crash, developers began to enjoy a revival in home sales starting in February, peaking at 2,772 units in July. Sales have since slowed, easing to 811 units in October.

Mr Kwek also said the Singapore hotel market will improve in 2010. ‘But by how much and how quickly will depend on the initial success of the IRs . . . The hospitality industry will be directly affected – either adversely or favourably – by the IRs,’ he added.

CDL owns 54 per cent of Millennium & Copthorne Hotels plc, which in turn has a stake in CDL Hospitality Trusts – the biggest owner of hotels here.

Whne the economy recovers, the Singapore office market will rebound in tandem as business picks up in the various sectors, Mr Kwek said. Already, the decline in office rentals is moderating and the sector is seeing an increase in leasing activity and requests for proposals from occupiers, many of which are likely to firm up in the near future.

When asked if financial industry players in the West are likely to resume their pre-crash strategy of developing hubs in Singapore, Mr Kwek said: ‘They have to address their own problems first and put their institutions on sound footing before they start to relocate and to expand.

‘They cannot ignore the Asia-Pacific region, and I believe they also can’t ignore Singapore, which has built up equity in its brand,’ Mr Kwek said.

URA releases site at Kaki Bukit for industrial development

Source : Channel NewsAsia – 25 Nov 2009

The Urban Redevelopment Authority (URA) has released for sale a site at Kaki Bukit Avenue 4 for industrial development.

The land parcel has a site area of about three hectares and a gross plot ratio of 2.5.

The site will have a lease period of 60 years.

The site is being released under the government’s Reserve List. Under the Reserve List system, a site would only be put up for tender if a developer’s indicated minimum bid price in his application is acceptable to the government.

Developers interested in purchasing the site can now apply to URA, for it to be put up for tender.

Consumers back proposals to regulate real estate agents

Source : Channel NewsAsia – 25 Nov 2009

Members of the public said that property agents must pass a standard industry entrance examination before they are allowed to practise.

The exam should not only test them on practical knowledge of the real estate industry and how to carry out their work, but it should cover ethics as well.

This was part of the feedback received during a public consultation exercise for a new regulatory framework for the real estate industry. The exercise gathered over 200 comments.

The public consultation is now closed, and the Ministry of National Development (MND) said that most of the feedback received was in line with the suggestions made by industry experts during an earlier consultation exercise.

The MND spent about two months consulting industry practitioners and the public on what the new regulatory framework for the real estate industry should comprise. The key elements of the framework are expected to be announced early next year.

Most complaints about property agents stem from unethical practices or misconduct. Hence, it’s no wonder why consumers who gave their views on the real estate regulatory framework supported proposed measures to weed out errant agents.

Members of the public welcomed the move to license individual agents. They also supported the proposal to disallow an agent from representing both the buyer and the seller of a property.

Some respondents also suggested that the government regulate the commission earned by agents by setting a standard commission guideline. This will serve to curb undercutting among agents and protect less-educated consumers from being over-charged by agents and minimise disputes between consumers and agents.

Other suggestions on regulating the industry include educating consumers on their rights and responsibilities, and disallowing property agencies and agents from buying properties directly from sellers or developers and reselling them during good times.

Industry players hope the government will implement the minimum entry qualification for agents soon.

Dr Tan Tee Khoon CEO of Singapore Accredited Estate Agencies, said: “This is to stipulate competence so that when a client is dealing with a particular agent, he or she would know that this agent has the requisite body of knowledge to deal with real estate transactions. And the demerit points system will help to provide a deterrence to negative professional conduct.”

But industry players said the suggestion to limit the size of agencies to better control agents was impractical.

PropNex CEO, Mohamed Ismail, said: “We’ve seen such things being implemented in Malaysia. And they (agencies) beat the system by having more licences and one of the main problem they realise here is that when you limit, you not only curtail entrepreneurship but also they don’t enjoy the economies of scale.

“And today, all the big agencies in Singapore, because they do have these numbers, they’re able to provide greater support like in-house legal, conventions, training, mediations, disciplinary board within the company. Such things are only possible when you have the numbers.”

Even though the government has only received over 200 suggestions from the public, industry players said it is not the quantity but the quality of the feedback that counts.

In fact, they said the public’s proposals come as no surprise, because ultimately the practitioners and the consumers are making the same call, that is, to raise the professionalism and standards of the real estate sector in Singapore.