Thursday, February 25, 2010

Straits Times Forum: Don't micro-manage property market

Feb 25, 2010 
Don't micro-manage property market 

I REFER to Mr David Goh's letter on Tuesday ('They don't go far enough in curbing excess') about the new measures to curb property speculation. While the causes of the property price spike mentioned are valid, the proposed solutions may not be in Singapore's best interests.

Raising the interbank interest rate too quickly could put the Singapore economy out of sync with the rest of the world. Our competitiveness may be hampered.

In addition, it must be noted that raising interbank interest rates has widespread ramifications. It should be undertaken only if it is deemed beneficial for the economy at large, and not just to curb speculation in a specific market.

There were also suggestions to ban collective sales of properties that are less than 30 years old, and requiring developers to redevelop en bloc properties within three years of acquisition. These measures would be detrimental to the free market principles that Singapore has thrived on. 

I agree that the authorities should intervene in the property market as justified by the exuberance shown.

However, the two proposed solutions seem like an attempt to micro-manage the industry, which could hurt our free-market, business-friendly image.

Business activities, including property development, and prices should largely be established by free market participants. 

The Government should not be deciding optimal property prices or which properties to acquire and when to develop them. Its role is to act in a counter-cyclical manner in terms of broad policy direction, so as to guide the market away from extreme booms and busts. 

The latest steps by the Government seem moderate and considered. If the property market heats up further, an escalation of macro measures can be introduced subsequently. Drastic measures must be avoided as they can plunge the market into disarray.

Loke Hon Yiong

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Business Times: Beijing scraps some home purchase incentives

February 25, 2010
Beijing scraps some home purchase incentives

(BEIJING) Beijing will scrap some home purchase incentives after property prices surged, reducing the scope of the housing sales-tax exemption and enforcing the 40 per cent down payment requirement for second homes. 

Homes sold after being owned for five years will be exempt from the tax, compared with two years previously, the Beijing Municipal Commission of Housing and Urban-Rural Development said in a statement posted on its Web site late on Tuesday. 

The measures are aimed at curbing investment and speculative purchases and at balancing supply and demand, according to the statement. 

China's property prices surged 9.5 per cent in January, the most in 21 months, as total new loans surged to 1.39 trillion yuan (S$286.8 billion), more than in the previous quarter combined.

The China Banking Regulatory Commission told banks last month to 'strictly' follow property lending policies. 

Beijing will also tighten rules on home purchases by foreigners, temporarily relaxed after the financial crisis. Non-Chinese resident for less than a year can't buy properties and qualified purchasers are limited to one home, the statement said. 

The local government will also adopt administrative measures to help developers speed up construction and sales, the government agency said. 

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Business Times: Buzz in private housing sales continues

February 25, 2010
Buzz in private housing sales continues
Weekend sales of about 45 units at Waterscape at Cavenagh and over a dozen units at L'VIV

THE buzz in private home sales appears to be continuing even after last Friday evening's government announcement of new measures to cool the property market.

About 45 units at Hiap Hoe's Waterscape at Cavenagh are said to have been sold since Saturday - the bulk of them one bedders although some two and three-bedroom units were also sold. Hiap Hoe is understood to have offloaded 61 units so far in the 200-unit project, which will be officially launched soon. The majority of buyers are understood to be Singaporeans; foreigners made up about 15-20 per cent of purchasers.

The freehold project is five to seven storeys high. The average price achieved is understood to be about $1,873 per square foot, with prices ranging from $1,738 to $2,010 psf. The lowest-priced unit sold was a one-bedder of 581 square feet on the second level that fetched $1.03 million or $1,778 psf.

Wing Tai is also understood to have sold slightly more than a dozen units over the weekend at L'VIV at Newton Road. This takes total sales to about 35 units. 

The 147-unit freehold project comprises almost entirely of one and two-bedroom units (both with study). The average price is said to be about $2,000 psf and buyers have to purchase on the old deferred payment scheme (DPS). They pay 20 per cent of the purchase price initially with the rest deferred till the 32-storey project receives Temporary Occupation Permit, which is expected around 2013.

Developers that had obtained approval from the authorities to sell projects on DPS prior to the scheme being scrapped in October 2007 are still allowed to offer DPS.

Last Friday, just hours before the government's announcement, a joint venture between Sing Holdings and Forum Partners is said to have sold more than 40 units at The Laurels on Cairnhill Road, which is being developed on the former Hillcourt Apartments site.

The units were sold at a one-day private preview held for former owners of Hillcourt Apartments as well as the developers' staff and business associates. Those who turned up for the preview were quoted a price range of $2,500 to $2,900 psf, although a one-bedder on the 18th floor is said to have sold at just a shade below $3,000 psf. In absolute quantum, the highest-priced unit transacted was a penthouse with four bedrooms and a garden that fetched almost $9.9 million or about $2,040 psf, BT understands.

The buyers were mostly Singaporeans, although some Indonesians who had formerly lived in Hillcourt are also said to have bought. The Laurels will be next previewed in a fortnight, on March 13.

The project is near Capitaland's Urban Suites, where 88 units were sold last month at prices ranging from $2,213 psf to $2,921 psf.

The landed housing market also continues to teem with activity. RealStar Premier Property Consultant managing director William Wong says that his firm has brokered or co-brokered four bungalow deals in the past few days. These include a two-and-a-half- storey property at Berrima Road off Dunearn Road that sold for $8.75 million or $1,944 psf, based on its land area of about 4,500 sq ft. The bungalow was completed a few months ago.

At Kheam Hock Road nearby, a brand new bungalow sold for $8.5 million or $1,577 psf. The other two transactions were at Namly Grove ($10.8 million or $1,125 psf) and Coronation Road West ($10.4 million or $906 psf).

Mr Wong does not expect the measures announced by the government last Friday - which include a seller's stamp duty for those who sell a residential property within a year of purchase - to affect landed property buyers. Those who buy bungalows often renovate them and this could take six months to a year; so they're unlikely to have been planning to resell within a year, according to Mr Wong. Besides, bungalow buyers usually have more holding power, he added.

Mr Wong forecasts a 5-10 per cent rise in landed home prices this year, citing limited supply; the stock of landed homes on the island is much smaller than condos/apartments.

Singaporeans make up about 60 per cent of Mr Wong's bungalow buyers these days; the other 40 per cent are permanent residents, who are allowed to buy bungalows with land areas up to around 15,000 sq ft.

Meanwhile, at West Coast Crescent, agents marketing The Vision are said to be collecting cheques ahead of the 99-year leasehold project's preview planned in the second week of March.

Those issuing cheques are said to have been told prices could be in the $1,000 to $1,200 psf range, although there will be an early bird discount. 

The Vision, being developed by a Singapore unit of Cheung Kong Holdings, comprises 281 apartments housed in two 33-storey towers and 14 strata houses. The development will not have any one-bedroom apartments, which typically are the first to be snapped up these days because of the lower entry barrier in terms of a smaller lumpsum investment.

Instead, The Vision's apartments will be two, three, and four bedders as well as penthouses. The majority of units are three-bedroom apartments - mostly ranging from 1,259 to 1,313 sq ft, with three ground floor units (inclusive of private enclosed space) of 1,776 sq ft to over 2,000 sq ft.

Summing up the continued enthusiasm of home buyers, a seasoned property consultant said: 'Buyers are quite confident prices won't fall; in fact, they're likely to rise because of the improving economy and the completion of the IRs.'

Agreeing, an agent says: 'There's still a lot of money; if you can't put it in property, where else can you put it?'

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: HK ups stamp duty on sales of luxury homes

February 25, 2010
HK ups stamp duty on sales of luxury homes
Move may drive speculators to target lower end of property market

(HONG KONG) Hong Kong raised taxes on luxury homes for the first time in more than a decade, a move some analysts said may backfire by fuelling speculation in the cheaper housing market. 

Stamp duty on sales of more than HK$20 million (S$3.6 million) will rise to 4.25 per cent from 3.75 per cent from April 1, Financial Secretary John Tsang said yesterday in his Budget speech, citing the increased risk of a property bubble. 

For people buying their own homes 'there might be some impact, but it shouldn't be that big,' said Buggle Lau, chief property analyst at realty company Midland Holdings Ltd. 'For speculators, the cost of speculation increases, so they may shift their target to the lower end of the property market.' 

The lowest mortgage rates in at least two decades and an influx of overseas capital equivalent to more than a third of Hong Kong's annual gross domestic product helped fuel a 29 per cent gain in property prices last year. 

The government is concerned at the risk to the economy should interest rates rise and will move to limit speculation if it spreads, Mr Tsang said. 

'If there's a reappearance of speculation, we will act quickly with measures to cool down the market,' Mr Tsang told reporters yesterday. While 'it's easy for the government to roll out some measures pushing home prices down, it's difficult to push them back up. We won't act recklessly.' 

The new transaction tax on luxury homes, the first increase since 1999, will only affect about 2 per cent of the property market. Of 110,000 Hong Kong residential sales in 2009, about 2,000 sold for more than HK$20 million, according to Midland. 

'It will have a 0.01 per cent impact because they raised the stamp duty by half a percent on properties accounting for 2 per cent of the total market,' said Nicole Wong, a Hong Kong- based real estate analyst at CLSA Asia-Pacific Markets, the regional brokerage unit of Credit Agricole SA. 'What they announced today is only paying lip service. It will have almost no impact because there is no sign of determination. ' 

Mr Tsang said the government will also seek to address the supply of land for development by putting more residential sites up for auction. 

The change in auction policy could also have an unintended effect as prices 'in bull markets become signposts', said Ms Wong. 'More auctions more frequently could even fuel the property market further.' 

In Hong Kong, the primary source of land available to property developers is through government auctions. The operator of the city's Mass Transit Railway, the MTR Corp, and the Urban Renewal Authority also put sites up for tender. 

Under the current system for government auctions, developers must indicate interest in a site on a government list. Once a 'trigger price' has been met, the land is auctioned. Mr Tsang said the government would now put sites up for sale at its own discretion. 

He said the government will also ensure an increase in the supply of small and medium-sized flats by imposing conditions of future land sales. The government held the first land auction of 2010 on Feb 22. 

'Overall the government wants to increase the land supply,' said Midland's Mr Lau, who noted there were only two auctions last year. 'In the past the land bank replenishment pace has not been very fast.'

Luxury property prices, for which there is no official index, may have risen as much as 40 per cent last year, Ms Wong said. Buyers of luxury homes were undeterred by an October increase in downpayment requirements from 30 per cent to 40 per cent. 

Since the fourth quarter of 2008, HK$640 billion of capital had flowed into Hong Kong's HK$215 billion economy, Mr Tsang said. 

Sun Hung Kai Properties Ltd, the world's biggest developer by market value, reported selling 900 homes in the suburban Yuen Long area for HK$4.2 billion on Feb 20 and 21, or an average of HK$5,400 per square foot. That compared with HK$3,000 in the same area a year ago, Centaline Property Agency Ltd said. 

'The increased risk of a bubble forming in the property market has also aroused public concern about the difficulty in buying homes,' Mr Tsang said. 

Shares of real estate developers gained after the speech, with Sun Hung Kai adding 1.5 per cent to HK$107.20 at the close of trading and Sino Land Co. up 1 per cent at HK$13.92. The Hang Seng Property Index was the only one of the four industry groups on the benchmark gauge to rise. 

The stocks gained because 'there is nothing too radical on property' in the Budget, said Andrew Sullivan, a sales trader at Mainfirst Securities Hong Kong Ltd. 

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: US home prices rise in December

February 25, 2010
US home prices rise in December
Home-price index rose 0.3% from Nov '09, more than economists expected

(WASHINGTON) Home prices in 20 US cities rose in December for a seventh consecutive month, indicating the industry at the heart of the worst recession since the 1930s is stabilising. 

The S&P/Case-Shiller home-price index increased 0.3 per cent from the prior month on a seasonally adjusted basis, more than anticipated and matching the gain in November, figures from the group showed on Tuesday in New York. The gauge was down 3.1 per cent from December 2008, the smallest decline since May 2007. 

Lower property values, rising incomes and government credits are making homes more affordable. A sustained recovery in housing still faces hurdles that include mounting foreclosures, a weak labour market and the eventual end of a Federal Reserve program aimed at keeping borrowing costs low. 

'It's reassuring that we're seeing stabilisation and outright increases in home prices,' said Michael Feroli, an economist at JPMorgan Chase & Co, who accurately forecast the adjusted month-over-month gain. He said he expects prices to be 'flat' in coming months. 

Economists surveyed by Bloomberg News anticipated that prices would drop 3.1 per cent in the 12 months to December, based on the median estimate of 27 projections. Estimates ranged from a decline of 5.3 per cent to a gain of 3 per cent. They also forecast a 0.1 per cent seasonally adjusted increase in December from a month earlier, the survey showed. 

Stocks fell and Treasury securities rose after a separate report showed consumer confidence dropped in February to a 10-month low. The New York-based Conference Board said its index of sentiment slumped to 46, below the lowest forecast in a Bloomberg survey, from 56.5 in January. 

The Standard & Poor's 500 Index fell 1.2 per cent to 1,094.49 at 12.53 pm in New York. The yield on the 10-year Treasury note declined seven basis points to 3.72 per cent.

Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis, while five had a decline. The biggest month-to-month gain was in Los Angeles, where prices rose 1.4 per cent. Home prices rose an adjusted 1.2 per cent in Phoenix, 1.1 per cent in San Diego, and 0.9 per cent in both Boston and Las Vegas. 

Increased foreclosures and an unemployment rate that economists forecast will end the year at 9.5 per cent are obstacles to steady gains in housing prices. Rising foreclosures are adding to inventory and may discourage some builders from beginning construction. 

A record three million US homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc forecast last month. Last year there were 2.82 million foreclosures, the most since the Irvine, California-based company began compiling data in 2005. 

In an effort to bolster the housing market, President Barack Obama in November extended a tax credit for first-time homebuyers and expanded the programme through April 30 to include some current owners. 

The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, represents another challenge for the industry. The programme is scheduled to expire by March 31. 

'The rebound in the housing market since April seems to be related to government efforts such as the homebuyer tax credit and the Fed's purchase of mortgage-backed securities,' said Robert Shiller, who co-created the home-price index, on Tuesday in a Bloomberg Television interview. 'A lot of people are coming in buying because they think the recession has just ended.' 

Mr Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, a former economist professor at Wellesley College, created the index based on research from the 1980s. 

Some homebuilders are seeing gains ahead of the expiration of the homebuyer tax credit. DR Horton Inc, the second-largest US homebuilder by revenue, this month reported its first quarterly profit since 2007. 

'We expect our September quarter will be the most challenging as a tax credit support for home sales will have expired,' said Donald J Tomnitz, president and chief executive officer, on Feb 2.

Lowe's Cos, the second-largest US home-improvement retailer, on Monday posted better-than- forecast sales in the fourth quarter, signalling a recovery in the housing market. The Mooresville, North Carolina-based company said sales in stores open at least 13 months may rise as much as 3 per cent this year. 'We don't have the job losses at as large a rate as we had previously,' chairman and chief executive officer Robert Niblock said. 

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Martin Koh/ Sherry Tang
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Business Times: US commercial mortgage defaults soar

February 25, 2010
US commercial mortgage defaults soar

(SAN FRANCISCO) The default rate for commercial property mortgages held by US banks more than doubled in the fourth quarter and may reach a peak of 5.4 per cent at the end of next year, according to Real Capital Analytics Inc.

The default rate for loans on office, retail, hotel and industrial properties surged to 3.8 per cent from 1.6 per cent a year earlier, the New York-based real estate research firm said on Tuesday in a report. The default rate for loans on apartment buildings climbed to 4.4 per cent from 1.8 per cent.

'The level of distress continues to rise irrespective of improving economic trends,' Sam Chandan, Real Capital's global chief economist, said in an interview.

The US jobless rate declined to 9.7 per cent in January from 10 per cent in December, after hitting a 26-year high of 10.1 per cent in October. 

Unemployment and tighter credit are hurting commercial property values, which fell 29 per cent in December from a year earlier and are down 41 per cent from the October 2007 peak, according to the Moody's/REAL Commercial Property Price Index released on Feb 22.

US banks with US$100 million to US$1 billion in assets hold 25 per cent of commercial property loans outstanding and 15 per cent of apartment loans, Real Capital data show. The biggest banks, those with more than US$10 billion in assets, hold about half of commercial loans and two-thirds of apartment loans.

'With the concentration of commercial mortgages in small and community banks, there is a potential spillover that will impinge on their ability to make loans to small businesses and families,' Mr Chandan said.

Almost US$1.1 trillion in commercial loans and US$211 billion in apartment loans were held by US banks on Dec 31, according to Real Capital.

The Congressional Oversight Panel on the financial system bailouts said in a Feb 10 report that 'the ultimate impact of the commercial real estate whole loan problem will fall disproportionately on smaller regional and community banks' that have higher concentrations of such loans.

'Some community banks seemed to have abandoned, or never really practised, sound risk management' by lending too much on real estate in their local markets, David Hendler, New York-based analyst for CreditSights Inc, said in a Feb 22 note.

The commercial default rate rose from 3.4 per cent in the third quarter, representing an increase of US$4.5 billion in defaulted loans in the period, according to Real Capital. The rate will reach 5.1 per cent at the end of this year, the research firm said.

The apartment default rate rose from 3.6 per cent in the third quarter. The jump reflected a US$1.6 billion increase in defaulted loans. Apartment defaults will peak at 5.3 per cent at the end of 2010, said Real Capital, which based its analysis on bank filings and data from the Federal Deposit Insurance Corp. 

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Business Times: Lower gearing allows MRCB to acquire more land

February 25, 2010
Lower gearing allows MRCB to acquire more land

(KUALA LUMPUR) Malaysian Resources Corporation Bhd's (MRCB) lower gearing provides more room for it to acquire new land bank for future growth, says Kenanga Research. 

'The successful rights issue, which raised RM514 million (S$212.7 million), lowered net gearing to 0.3 times from 1.25 times. It has also positioned the company to acquire new land bank for future growth or invest in infrastructure concessions, ' it said. 

OSK Research in a separate note said that the potential acquisition of federal land could provide a further re-rating of MRCB's share price from RM1.63 per share. 

OSK had previously quoted MRCB's target price at RM1.54.The research house also said it expects an overall strong performance by the company in 2010. 

As for the 2009 financial results which moved MRCB back into the black, Kenanga said, it was mainly due to the continuous strong construction and property revenue and profit contribution. 

MRCB posted a pre-tax profit of RM46.492 million for the year ended Dec 31, 2009 against a pre-tax loss of RM42.155 million in the previous financial year. 

Revenue jumped to RM921.616 million from RM788.552 million previously. 

Kenanga is maintaining MRCB's net profit forecast of RM56.6 million for its financial year ending Dec 31, 2010 and estimates the 2011 net profit to be RM80.9 million. 

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: Wyndham puts more eggs in hotel basket

February 25, 2010
Wyndham puts more eggs in hotel basket
Segment will make up a third of group Ebitda in 5-10 years, from a fifth now

(NEW YORK) Wyndham Worldwide Corp projects that its hotel unit will be a larger part of its business in the next five to 10 years, as it seeks to grow in China, India and a host of other global hotspots. 

Wyndham projects that hotels would make up a third of its earnings before interest, taxes, depreciation and amortisation as early as 2015, chief executive Stephen Holmes said on Tuesday at the Reuters Travel and Leisure Summit. 

Currently, hotels make up 21 per cent of Ebitda. 

'Brands are not as prolific outside the US as they are inside the US, so there's tremendous opportunity for growth,' Mr Holmes said. 

Wyndham is the No 2 hotel company in the world as measured by number of rooms, according to Smith Travel Research. The company also has a vacation exchange and rentals business as well as a timeshare unit. 

Wyndham said in 2008 that it would shrink its timeshare unit, cutting 4,000 jobs in the process. The segment accounted for roughly half of the company's revenue in 2009. This year, the timeshare segment will provide a smaller percentage of the revenue, Mr Holmes said. 

Growth in the lodging segment could come through adding more hotels or a new brand to its portfolio. Wyndham said in recent quarterly calls that it was looking for brands to acquire. 

The number of new hotels in the United States is expected to tick up this year, but that growth is expected to be muted compared to earlier years. There is also a dearth of hotel rooms in areas that are starting to see travel demand grow. 

Mr Holmes said last year that Chinese tourism officials told him there would 200 million additional travellers entering the leisure market. 

'Two hundred million - they do not have enough hotel rooms to service that population growth.'

India presents an array of challenges, but Mr Holmes see that country as holding tremendous potential for the company. 

'The infrastructure in India still has a ways to go. that is the biggest challenge to that market,' he said. 'We're active in that market and we hope to see growth there.'

Like many hotel operators, Wyndham does not own any of its properties. It franchises and manages hotels owned by others. 

But many properties, including a handful run by Wyndham, have gone into foreclosure in the past year. Mr Holmes said that the seizure of the credit markets was a source of concern for him. 

The number of hotels changing hands last year fell to a 10-year low as buyers and sellers haggled over their worth. When a hotel changes hands, there is an opportunity for a company such as Wyndham to change the brand on the property. 

'Clearly, the decrease in transaction volume . . . is (a) dampener of growth for us,' Mr Holmes said. 

Investors have bet heavily on Wyndham's shares since last March. The stock has risen nearly seven-fold since then, outpacing the S&P 500 which is up 60 per cent. 

Some of that rise is attributable to the company's decision to shrink its timeshare unit, said FBR Capital Markets analyst Patrick Scholes who rates the stock an 'outperform' .

The CEO also said that Wyndham's share price could run higher, given that its valuation remained below its peers. 

'We still have a tremendous amount of running room,' Mr Holmes said. 'We're gaining momentum.' 

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: Horizon Towers lawsuits headed for trial

February 25, 2010
Horizon Towers lawsuits headed for trial
High Court dismisses striking out action by 2 former sales committee members

(SINGAPORE) The latest legal tussle involving Horizon Towers looks set to go into full swing, with the High Court having dismissed the action by the two defendants to strike out the lawsuits filed against them. 

This means the court will hear the claims brought by three sets of minority owners against the two former sales committee members - unless the defendants succeed in appealing against yesterday's decision.

BT understands that the first defendant - former sales committee chairman, Arjun Samtani - will appeal the High Court decision, while the second defendant, Tan Kah Gee, is still deliberating if he should appeal.

The High Court yesterday also ordered both Mr Samtani and Mr Tan to jointly bear the costs of the striking-out application and the court hearing - amounting to a total of $6,000.

The minority owners are suing the two former sales committee members to reclaim close to $1 million in legal and administrative costs which they say they incurred during the lengthy fight to keep their homes.

The en bloc sale of Horizon Towers was a saga that dragged out for more than two years, and involved several High Court and Strata Titles Board hearings. The Court of Appeal eventually decided in April last year that the deal could not go through because the development' s sales committee had failed in its duty.

The Court of Appeal had ordered the bulk of costs to be borne by the development' s potential buyer, Hotel Properties Ltd (HPL), and its majority owners.

But three sets of minority owners, represented by Kannan Ramesh of Tan Kok Quan Partnership, are now seeking compensation for the sums not covered by the Court of Appeal judgment. The three sets of owners are seeking between $117,000 and $370,000 in costs - making for a total claim of more than $800,000.

The minorities say they were made to defend their homes against an en bloc process actuated by a lack of good faith on the part of the sales committee, and had to spend much for their effort.

They said Mr Samtani and Mr Tan were 'key players in the process leading up to the commencement, facilitation, management and finalisation of the collective sale process'.

In his defence, Mr Samtani - represented by N Sreenivasan of Straits Law Practice -- said he was not alone in driving the sale process. He said 'each and every member of the SC (sales committee) played an equally important role' and that he 'did not have any special powers' that could influence the committee's decisions.

Mr Samtani also claimed that the committee 'followed up on all expressions of offer' for Horizon Towers and that it received no offer better than HPL's at the relevant time. He said the committee was advised by its lawyers to proceed with the HPL offer.

Mr Tan, represented by Senior Counsel Tan Cheng Han and Ian Lim of TSMP Law Corporation, said he was 'not a key player' and cited various correspondence and minutes of sales committee meetings which he said showed that he did not play a major role in the various aspects of the collective sale.

Mr Tan also said that the sales committee did not seriously consider an alternative offer made at the time by a Vineyard Holdings, as it had 'questioned the credibility of the expression of interest from Vineyard and their level of seriousness given that Vineyard was a Hong Kong company that was not well known and its lawyers were not from a Singaporean firm, but from a small Malaysian law firm'.

He claims he suggested waiting for a higher offer, but that the majority of the sales committee did not agree. He said the sales committee genuinely felt they would not get a better offer than the one by HPL, and that they had been advised by their lawyers to accept the offer.

Mr Tan had also sought to strike out the minorities' suits against him and Mr Samtani, saying that the entire remedy sought by the minorities was already dealt with by the Court of Appeal last April, when it decided on how it would award costs to the various parties. But the High Court chose to dismiss this application yesterday.

The defendants have 14 days to submit their appeal.

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: HK acts again to prick its property bubble

February 25, 2010
HK acts again to prick its property bubble
Stamp duty on luxury property sales raised in Budget; supply of flats to increase

(SINGAPORE) Hong Kong's government yesterday raised the stamp duty on luxury property sales and warned that more such measures could follow - the clearest sign yet that officials there fear the consequences of a bubble forming, and then bursting, in the territory's private- home market.

The transaction tax on properties worth more than HK$20 million (S$3.63 million) will be increased to 4.25 per cent on April 1, from 3.75 per cent now, Financial Secretary John Tsang said in his Budget speech yesterday. In addition, buyers will no longer be allowed to defer payment of stamp duty on such transactions.

The government may also raise the transaction tax on properties valued at HK$20 million or less, 'if there is excessive speculation in the trading of these properties', Mr Tsang warned.

An inflow of over HK$640 billion of funds into Hong Kong since the fourth quarter of 2008 has increased the risk of creating asset-price bubbles, he said. 'We are also concerned that if capital flows were to reverse or interest rates rebound, asset prices would become more volatile. This in turn may affect the stability of our financial system and the recovery of the real economy.'

The large inflow of capital has also pushed up the prices of luxury flats, as well as smaller apartments, he said. Overall, property prices are 8 per cent above their peaks before the recent financial crisis; some luxury-flat prices have even returned to their peaks reached during the 1997 property boom, he added.

The rise in property prices has picked up again after slowing slightly in the fourth quarter of last year, and turnover has also increased, Mr Tsang said. He added that he was 'particularly concerned' that some people would be unable to meet their mortgage payments if interest rates rise from their current, unusually low, levels.

The government will also work to increase the supply of affordable flats, and will put up several urban residential land sites for sale by auction or tender in the next two years, if the sites have not been triggered by an application by a private developer, Mr Tsang said.

'The measures are quite similar to those introduced recently by Singapore to rein in excessive exuberance in the residential property market,' said Leonard Ong, executive director at KPMG Tax Services here. 'The Hong Kong government is clearly concerned with the risk of a property bubble forming.'

Tracy Ho, tax partner at Ernst & Young in Hong Kong, said that the moves to cool the property market were not surprising, given the sky-high prices seen in a number of property transactions in recent months. 'I wouldn't call it unbelievable, but you wouldn't think some of this would happen after the financial tsunami.'

The aim of raising the stamp duty 'is really to increase the transaction costs for speculators, to cut down the speculative atmosphere', she added.

Last October, the Hong Kong Monetary Authority reduced the loan-to-value limit on housing loans for properties worth HK$20 million or more to 60 per cent, from 70 per cent, and capped the maximum loan amount for cheaper properties at HK$12 million.

In Singapore, the government also introduced various measures late last year to curb speculation in the property market.

Last Friday, it announced a seller's stamp duty to be levied on those who buy a residential property and sell it within a year, and lowered the loan-to-value limit on housing loans to 80 per cent, from 90 per cent.

Yesterday, Mr Tsang said he expects the Hong Kong economy to expand 4-5 per cent this year, after shrinking 2.7 per cent last year.

He also introduced several proposals to promote a 'green economy', including a HK$300 million fund to spur the transport industry to test energy-saving and low-carbon-emission transport technologies; a HK$540 million subsidy scheme to encourage the replacement of older, more polluting diesel commercial vehicles; and tax incentives to promote the use of environment- friendly commercial vehicles.

Team Marshe
Martin Koh/ Sherry Tang
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Business Times: Game on as MBS gears for April 27 opening

February 25, 2010
Game on as MBS gears for April 27 opening
Second casino will split punters, show real size of market

(SINGAPORE) With Singapore's first casino hogging the headlines and the clientele so far, the second one has edged its way into the picture by announcing that it will open for business on April 27.

Las Vegas Sands (LVS) made the surprise announcement yesterday that its Marina Bay Sands (MBS) casino will get rolling in about two months, leaving market watchers speculating on the timing of the news so far in advance of the opening.

Some believe that LVS may be under pressure from its bankers to give some indication on when MBS can start generating cash flow.

LVS, which has operations in the US and Macau has total debt of about US$11 billion and approximately US$5.85 billion of cash, cash equivalents and available sources of liquidity.

If LVS's bankers are nervous, it is likely due to the turnout at rival the Resorts World Sentosa casino which has been seeing about 21,000 punters a day - relatively low, compared to new casino openings in Macau.

Analysts at Nomura expect this number to fall further with MBS claiming its market share. 'With hardcore gamblers increasingly being deterred from entering the casino, we see significant downside risks to the unrealistically high expectations on the potential size of the casino gaming market by consensus,' it added.

Earlier earnings projections by LVS may now be unrealistically high. In December 2009, LVS chairman Sheldon Adelson had said that MBS could rake in about US$1 billion annually before deducting interest, taxes, depreciation and amortisation expenses.

While some market estimates range between US$400 million and US$800 million, Citigroup has projected a 2010 Ebitda of as low as US$248.8 million in a recent report.

Citigroup also visited the MBS site recently and said: 'Post our recent site visit in January, we remain sceptical that MBS will be ready to open by April.'

Bank of America Merrill Lynch analyst Melvyn Boey noted that LVS estimates have been 'fairly bullish' so numbers will have to pick up to achieve earlier forecasts.

Market watchers believe another reason for LVS's announcement is try to expedite the award of the casino licence in the light of Resorts World Sentosa casino opening with less than 50 per cent of the integrated resort operational.

The MBS casino will open together with about 40 per cent of its hotel rooms, part of the retail mall and convention centre, as well as some F&B outlets, 'subject to construction proceeding as scheduled and being able to attain the necessary regulatory approvals'.

LVS said that the Sands SkyPark, the Event Plaza, the remaining hotel rooms, more shops and F&B outlets will open on June 23.

This will be followed by the two theatres in October and the Marina Bay Sands museum in December.

Giving some clarity on requirements for the casino licence, a spokesman for Singapore Tourism Board said: 'One of the requirements for issuing the casino licence is that at least half of the integrated resorts' gross floor area has been completed and at least half of the committed investment has been expended.'

Vivian Heng, spokeswoman for the Casino Regulatory Authority (CRA) added: 'CRA issued the casino licence to Resorts World Sentosa on 6 February 2010, after Resorts World Sentosa fulfilled the requirements for casino licence issuance.'

CRA added that MBS needs to obtain other regulatory approvals (eg surveillance plan, internal controls systems) before the casino licence is issued. 'Marina Bay Sands is in the process of clearing the required steps for casino licence issuance,' it added.

Regardless of whether LVS gets its casino licence in time, MBS will have to open if only because it is committed to welcoming delegates of the Inter-Pacific Bar Association' s annual conference within days of the April 27 deadline, with Al Gore said to be one of the speakers.

Apart from competing for casino business, RWS has also emerged as a rival for some of MBS's meetings, incentives, conventions and exhibitions (Mice) business too. 

Still, Jonathan Galaviz, an independent travel and leisure sector strategist believes MBS has a clear advantage here. 'I would expect that both RWS and MBS will compete for smaller scale Mice events with MBS of course having the stronger competitive advantage for the larger ones,' he added. 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

Wednesday, February 24, 2010

CNA: Tender for Ten Mile Junction site attracts eight bid

Tender for Ten Mile Junction site attracts eight bids
By Wong Siew Ying, Channel NewsAsia 23 February 2010 

SINGAPORE : The tender for a commercial-resident ial site at Ten Mile Junction in Choa Chu Kang has attracted eight bids. 

The 1.56-hectare site is the first to be launched for tender this year under the Confirmed List of the government land sales programme. 

The top bid of nearly S$164 million came from Dollar Land Singapore, a subsidiary of Lucky Realty Company. 

This translates to a tendered sale price of some S$4,700 per square metre of gross floor area. And it is higher than market expectation of between S$135 million and S$150 million. 

CEL Development, a subsidiary of Chip Eng Seng Corporation, put in the second highest bid at about S$148 million, followed by Sim Lian Land at about S$139 million. 

The remaining bids for the site at the junction of Choa Chu Kang Road and Woodlands Road ranged from S$71 million to S$126 million. 

The award of the tender will be announced at a later date pending evaluation of the bids. 

In 2008, the government rejected the top bid of S$61 million for the same site as it was too low. 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

CNA: Marina Bay Sands' first phase to open on Apr 27

Marina Bay Sands' first phase to open on Apr 27
24 February 2010 

SINGAPORE: Las Vegas Sands has said it plans to open the first phase of its US$5.5 billion Marina Bay Sands development on 27 April 2010. 

The date was announced by Las Vegas Sands in a statement on its website. 

In the statement, Marina Bay Sands chief executive officer, Thomas Arasi, was quoted as saying that the integrated resort plans to open its 963 hotel rooms - part of the shopping mall and convention center - as well as dining outlets and casino on April 27. 

This he said was subject to construction proceeding as scheduled and being able to attain the necessary regulatory approvals. 

Marina Bay Sands expects to host its first event, the Inter-Pacific Bar Association' s annual conference, just days after opening its doors. 

The second phase will open on June 23, as part of the grand opening. This will include the opening of the SkyPark and Event Plaza. 

In October, one of the integrated resorts two state-of-the- art theatres will welcome Disney's The Lion King. Marina Bay Sands said the second theatre, which will also open later this year, will be home to a variety of special events and famous headline acts. 

Moreover, the iconic Marina Bay Sands museum is expected to open by December. It will feature international blockbuster exhibitions. 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

Straits Times: UIC Building may become residential block

Feb 24, 2010 
UIC Building may become residential block 
UIC board still assessing options, says chief of UOL, whose full-year profits surge to $424m
By Harsha Jethnani 

UNITED Industrial Corporation (UIC) has won in-principle approval from the Urban Redevelopment Authority to convert its UIC Building in Shenton Way into a mainly residential development.

But no firm decision has been made on the building's fate.

The UIC board is assessing all alternatives to ensure the best use for the property, according to UOL group chief executive Gwee Lian Kheng.

He disclosed this yesterday as the property group announced a near tripling in full-year profits to $424.2 million in the 12 months ended Dec 31.

The sharp jump was predominantly attributable to UIC having become a 32 per cent associated company of UOL. 

Net profits included a negative goodwill sum of $281.1 million from the acquisition of shares in UIC.

Earnings from associated company Nassim Park Residences also contributed to the surge in profits.

UOL posted a record-breaking year in revenues, which rose 12 per cent from $899 million to just over the $1 billion mark.

'Our strategy of tapping the demand of mass- and mid-market housing segments was well timed,' said Mr Gwee.

'This has helped us reach a major milestone of becoming a billion-dollar company by turnover.'

Strong sales from the group's Double Bay Residences and Meadows@Peirce contributed to the revenue rise. 

The group's property development arm represented 53 per cent of revenue.

Higher average rental rates brought about a 12 per cent rise in revenue from investment properties to $141.7 million. 

Revenue from hotel operations declined 13 per cent to $294.5 million as revenue per available room fell amid a slowdown in tourism, the group's statement said. 

Pan Pacific Hotels Group, the group's listed hotel subsidiary, saw revenue fall by 9 per cent due to weaker performance in the group's hotels.

Mr Gwee said the 'difficult period for the hotel industry may be over' and that efforts would be made to 'secure more hotel management contracts, thus increasing fee-based income'.

The developer remains focused on Singapore's resilient mass and mid-tier to high-end residential market.

A total of 1,138 residential units are in the pipeline this year. Developments at its Dakota Crescent and Toh Tuck Road sites are expected to be launched by the second quarter of this year. A total of 616 and 172 units respectively are estimated to be made available at these sites.

In the second half of the year, the group will launch a development in the Spottiswoode area, where it had purchased Spottiswoode Apartment and Oakswood Heights in 2007, releasing about 350 units.

Overseas, another 1,014 units are in the pipeline - 520 in a mixed development in Tianjin, China, and another 494 units in a development located in Kuala Lumpur.

Full-year earnings per share were 53.7 cents, up from 18.5 cents the year before.

Net asset value per share as of Dec 31 stood at $5.29, up from $4.26 previously. A final dividend of 10 cents per share has been proposed.

UOL shares closed 11 cents higher at $4 yesterday before the results were announced.

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

ST: Suburban plot draws eight bids with Far East unit submitting top offer

Feb 24, 2010 
Bid 2 years ago: $61 million 
Top bid now: $164 million 
Suburban plot draws eight bids with Far East unit submitting top offer
By Joyce Teo 

IN A striking sign of how the property sector has rebounded, a site that failed to sell two years ago when it attracted an offer of just $61 million has now received a bid of $164 million in a new tender.

Eight developers placed bids for the suburban plot that can accommodate residential and commercial development.

The top offers for the site at the junction of Choa Chu Kang and Woodlands roads were all in a fairly tight range, with Far East Organization' s Dollar Land Singapore on top with a bid that beat market expectations.

It offered nearly $164 million, or $436.65 per sq ft (psf) of gross floor area, about 10 per cent more than the $148.28 million or $394.80 psf offered by second-placed Chip Eng Seng's CEL Development.

Sim Lian Land was next with $138.89 million or $369.79 psf. 

Other bidders included a joint venture between Frasers Centrepoint and NTUC FairPrice Cooperative, and Soilbuild Group Holdings, which came in last with a bid of just $71.23 million. 

CBRE Research had expected bids to range from $135 million to $150 million.

The $164 million bid could reflect a price of $50 million to $70 million for the commercial podium, with the developer possibly selling the apartments for around $700 psf to $800 psf, consultants said.

In April 2008, the site attracted just two bids of $61 million and $45.68 million when its sale tender closed. The bids were rejected as being too low.

The site, to be co-located with the Ten Mile Junction LRT station on the third storey of the podium block, will be near the future Bukit Panjang MRT station, part of the future Downtown Line 2 and due for completion by 2015.

Property consultants said the results showed that demand for land was still fairly strong, particularly coming after the Government's recent measures to pre-empt a property bubble. 

The Government has imposed a duty on sellers who offload property within a year of purchase, and lowered the maximum loan-to-value amount buyers can borrow from 90 per cent to 80 per cent.

Knight Frank chairman Tan Tiong Cheng said: 'The top three bidders are the more experienced players familiar with the suburban market.

'Their bids suggest they would think the recent measures would not affect prices in the longer term.'

With fewer sources of private land, developers are chasing government sites as they need to replenish land banks, said Colliers International executive director (investment sales) Ho Eng Joo.

He said the cooling measures will affect the sales market more than developers' demand for land. 

In the short term, some potential buyers will want to wait and see if prices will fall, experts said.

But those who are already planning to buy will likely go ahead.

Ms Christina Sim, Cushman and Wakefield's director of investment and capital markets, said the one-year timeline for the seller's duty is relatively short and unlikely to affect the market much.

Still, an analyst who declined to be named said: 'The latest announcement begs the question - what conditions would qualify as a stable market? If transactions are above 1,000 units a month, that's probably a warning sign.' 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

Business Times: Estate tax may rise from the dead

February 24, 2010
Estate tax may rise from the dead
The tax may have been eliminated for 2010 but the estates of people who die before the year is out may still not pass free and clear to their heirs

(NEW YORK) THE estate tax isn't dead. It's resting. The tax has been eliminated for 2010, but the estates of people who die before the year is out may still not pass free and clear to their heirs. The complexities of the tax system and the likely return of the estate tax next year - maybe even sooner - are creating confusion for accountants, lawyers and many families.

Possibly greater expense, too, and not just for the wealthy. Odd as it may seem, tax specialists caution, the absence of an estate tax could result in greater liability on smaller fortunes than on bigger ones.

Say that someone worth US$10 million dies on Dec 31 this year. Because there is currently no estate tax for this tax year, the beneficiaries divide the whole amount, although they may also inherit liability for capital gains tax on some of the assets.

But what if the person in this example doesn't die until Jan 1, 2011 - when the estate, apart from a US$1 million exemption, is due to be taxed at 55 per cent? There will be a lot less to share.

Estate planners say that the tax hiatus has inspired jokes among their peers along the lines of 'throw momma from the train in 2010'. Yet if momma has a fortune of less than seven figures, her loved ones probably would be better off keeping her on board.

Consider what happens when someone worth less than US$1 million dies. There is no estate tax whether the death occurs this year or next, but capital gains on inherited assets are to be calculated in a much less favourable way in 2010. That is a result of a legislative compromise way back in 2001, which ultimately brought the respite from the estate tax this year and its resumption next year with a higher rate and a lower exemption than in the past.

'In 2009, the estate tax hit the rich,' said Ian Shane, a tax specialist at the New York law firm Golenbock Eiseman Assor Bell & Peskoe. 'Now, not-so-wealthy people could also get hit.'

Of course, Congress could belatedly enact an estate tax for 2010 or a portion of it. Any impact will depend on the details of the tax, including whether it is made retroactive. Mr Shane expects no change for the rest of 2010.

'The general view is that Congress wants to, and should, re-enact the estate tax retroactive to the beginning of this year,' he said. 'In January, February or March, that's easy; but as the year goes on, it becomes more difficult.'

Justin Ransome, a partner at Grant Thornton, foresees some rules revision, but perhaps not an attempt to turn back the clock. 'All indications on the Hill are that reform will be done in 2010,' he said, 'but it's not as certain that it will be done retroactively. '

Tax specialists say that doing nothing would be the worst outcome, as it would increase the chance that rules approved for 2011, which call for more onerous conditions than in previous years, would be put into effect and remain.

'The worst result, practitioners agree, is no action at all because then we go back to the highest rate and lowest exemption,' said Joanne Johnson, head of the American wealth advisory service of JP Morgan Private Bank. 'If no action is taken, then at the stroke of midnight' next Jan 1, 'we go back to a US$1 million exemption and 55 per cent rate.'

Whatever the legal backdrop, what can people do to ensure that the greatest amount of wealth possible goes to heirs and not to the Treasury? A few steps might put the odds more in their favour.

'Give gifts as much as you can this year,' Mr Shane suggested. 'You want to give as much to the kids and grandkids this year as possible.' Gift givers will be taxed at 35 per cent this year and probably 55 per cent in 2011. As with the estate tax, exemptions apply. You can give up to US$13,000 per recipient this year before the tax kicks in, up to a US$1 million lifetime exemption.

Ms Johnson cautions against the creative vagueness that is often found in trust documents. Because bequests to a surviving spouse are exempt from estate tax, it's common to find language like 'I hereby fund this trust to the maximum amount I can shelter from federal estate tax,' she said. The rest can then pass tax-free to the spouse.

Such wording is risky as long as the estate tax is off the books, she pointed out, because there is no maximum. 'Now if you have that clause, everything goes to the kids,' she said. 'The spouse says, 'What about me?'

Confusion and ambiguity about the estate tax are likely to linger for some time. 'There's no ironclad trust for most people to take advantage of to shore up their estates against anything that might come along down the line,' said Elizabeth Ruch, a financial planner at Waddell & Reed.

Her advice is to take the same basic steps to minimise estate tax as when the legal landscape is clearer. 'Every estate plan should be reviewed every four or five years,' she said. 'Make sure everything's relevant, with the right beneficiaries in place. Know what you want to do and why you want to do it.' 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400