Monday, October 31, 2011

Global award for Pinnacle

Straits Times: Sun, Oct 30
The Pinnacle@Duxton has won a prestigious Urban Land Institute (ULI) Global Award for Excellence, the only Asian name this year among the five winners.

Judges were won over by the public housing project's success at meeting housing needs in an urban environment, as well as the transformation of the area's social life with the introduction of younger families.

Another winning factor: The development's ability to preserve the area's heritage.

It joins the likes of the High Line in New York City, San Francisco's California Academy of Sciences, Beijing's Finance Street and Tokyo's Midtown - all past winners in ULI's 33-year-old award, which aims to promote best practices in real estate development.

Completed in 2009, the Pinnacle@Duxton by the Housing Board is the tallest public housing development in Singapore at 50 storeys. Designed by ArcStudio Architecture + Urbanism, it has seven blocks, two skybridges and 1,848 flats housing 7,400 residents.

This is not the project's first award: It was named Best Tall Building by the Council on Tall Buildings and Urban Habitat; World's Best Housing Development at the World Architecture Festival Awards; and Design of the Year at the President Design Awards here last year.

Source: The Straits Times © Singapore Press Holdings Ltd.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Property is now a matter of trust

Straits Times: Sun, Oct 30
In a volatile stock market, investors are advised to return to the basic principles of investing: stick to buying defensive stocks with high-dividend yields and what better way than to buy into real estate investment trusts (Reits)?

The prices of Singapore-listed Reits, or S-Reits, have fallen quite sharply this year, which means that most are now cheap.

The FTSE ST Reits sub-index has plunged 9.5 per cent since the start of the year.

A Julius Baer report on Oct 20 noted that hospitality Reits have fared the worst, falling 23 per cent this year.

Office Reits performed marginally better, sliding 22 per cent, while industrial Reits slipped 7 per cent and retail Reits dropped 5 per cent.

The only Reits to turn in positive returns this year are those in the health- care sub-sector, which are up 10 per cent, Julius Baer said.

Analysts from various brokerage houses agree that Reits are currently undervalued and could make for good additions to a portfolio.

Furthermore, Singapore-listed Reits have much stronger balance sheets now than during the Asian financial crisis of 1998 and would likely be able to weather the economic downturn better this time around, they say.

'Compared to the time of the Lehman crisis, conditions in the credit market now appear favourable to the S-Reits sector,' wrote Royal Bank of Scotland (RBS) analyst Bryan Lim in a report earlier this month.

He was referring to the 2008 collapse of US investment bank Lehman Brothers, which caused chaos on stock markets around the world.

'We expect S-Reits to benefit from the availability of cheap funding, given that we expect the current low interest rate environment to continue for the next two years,' he added.

Deutsche Bank analyst Elaine Khoo told The Straits Times that she believes it is less likely that S-Reits will have to recapitalise as their balance sheets are now stronger and managers have been more proactive in capital management.

'Book asset values for most companies are still below peak levels and most can withstand writedowns of 5 to 10 per cent,' she said.

'What compelled the Reits to recapitalise during the last crisis were balance sheet and refinancing concerns amid severe credit market dislocation.'

If there is equity raising, that will likely be to fund acquisitions with most still looking to grow, she added.

Phillip Securities investment analyst Travis Seah believes investors should still stay out of the market for the time being, but those with a long- term view and some extra cash would do well to invest in Reits, he said.

'With the market still clouded with uncertainties and the downside risks outweighing the upside potential, we would advise investors to stay on the sidelines and await for better emerging values,' he said.

'However, Reits can be a good equity investment, given that investors have a mid- to long-term horizon of at least three years and above.

'Instead of depositing your savings in a bank, Reits can earn you a decent annual dividend yield ranging from 5 to 10 per cent, to beat or at least be on a par with the headline inflation of approximately 5 per cent, to prevent value erosion.'

But this advice is applicable only to investors who have a cash surplus and no immediate commitments in the short run, he noted.

So if you have some extra cash to invest and you are in the market for a Reit or two, which ones should you buy?

Health-care Reits

There are only two health-care Reits listed here - Parkway Life Reit and First Reit.

Parkway Life Reit has increased 9.6 per cent in value since the start of the year, while First Reit has risen 9 per cent.

Analysts believe they will only keep gaining strength. As Phillip Securities' Mr Seah notes, both Reits have a long-term lease structure, 100 per cent committed occupancy and stable and sustainable revenue and dividend payout.

Furthermore, a majority of their leases come with a rental escalation clause that is pegged to the inflation rate, he said.

Last Monday, Sias Research urged investors to increase their exposure to First Reit, following the release of its strong third-quarter results. Sias Research analyst Kenneth Lui wrote in a report that the trust's recently acquired properties, the Mochtar Riady Comprehensive Cancer Centre in Indonesia and the Sarang Hospital in South Korea, are still under-utilised, which indicates future topline growth.

Office Reits

Even though the prices of office Reits have declined over 20 per cent this year, most analysts are still rather bearish on the sub-sector, as the outlook for office rentals is not very bright.

Credit Suisse wrote in a report earlier this month: 'We now expect (office) rents to stay flat from now till 2013, especially for the Grade A space, supported by recent signed leases and our checks with the office Reits, which are not looking to cut rents at this stage.'

If you really must invest in an office Reit, Credit Suisse advises that you stick to those with mainly prime Grade A offices in their portfolios.

'We believe that the longer-term fundamentals remain intact, especially for Grade A buildings, as $10 to $11 per sq ft (psf) rents today are still at a 40 to 50 per cent discount to 2008's $18.40 peak,' Credit Suisse analysts noted.

'Also, Singapore still appears attractive as an office location, as rents are still 50 per cent below those of Hong Kong.'

Credit Suisse is most optimistic about CapitaCommercial Trust and K-Reit Asia.

RBS' Mr Lim has a 'buy' call on Suntec, saying: 'We expect Suntec Reit to announce its plans to refurbish Suntec City mall by year end and we see this as a strong short-term catalyst for the stock.'

CIMB, meanwhile, is bullish on Mapletree Commercial Trust. 'As its largest asset, an under-rented VivoCity should provide strong impetus for future growth,' CIMB analyst Janice Ding wrote in a note last Friday.

Industrial Reits

In mid-October, Credit Suisse analysts explained their negative stance towards the industrial Reit sector.

'We believe that the perception of its defensiveness, due to longer lease tenures, is misplaced,' they wrote.

Industrial rents have surpassed the peaks seen in 2007 and are at 10-year highs, they noted.

'We believe that the upside is limited from here on, given the moderating economic growth outlook, Singapore's high exposure to the US and European economies and the appreciating currency which will reduce Singapore's competitiveness as an industrial location of choice.'

Nonetheless, Credit Suisse is bullish on one industrial Reit: Mapletree Logistics Trust (MLT).

They believe the stock is less susceptible to a slowdown in the Singapore economy, given that over 50 per cent of its net property income is derived from overseas assets.

'Mapletree Logistics Trust also has a strong acquisition pipeline from its parent, Mapletree Investments, worth $1 billion, which can potentially boost MLT's asset base by 25 per cent,' they wrote.

Deutsche Bank has a 'buy' call on Mapletree Industrial Trust (MIT), with analyst Elaine Khoo saying that the trust's solid second-quarter results reflected firm underlying growth trends, despite economic uncertainties. 'We still like MIT's strong organic growth proposition and attractive yield,' she added.

OCBC Investment Research has a 'buy' call on Cache Logistics Trust, citing its healthy debt level and rising warehouse rentals.

Consultancy CB Richard Ellis said average island- wide monthly gross rents for warehouses rose by up to 3.6 per cent quarter-on-quarter in the three months to September.

'This supports our view that Cache is relatively well-protected from the market downturn and negative rental reversions, even when the leases come due,' said OCBC analyst Kevin Tan.

Retail and hospitality Reits

Though the economy may be going through uncertain times, analysts are largely positive on retail and hospitality Reits, as they expect tourist arrivals to remain strong.

'We do not expect a repeat of 2009 in terms of tourist declines just yet with regional economies still expected to grow, albeit slower, and tourist arrivals in past months still fairly unscathed,' CIMB's Ms Ding wrote in a report last Tuesday.

CIMB is most bullish on Frasers Commercial Trust and CDL Hospitality Trust over the long term.

Daiwa analyst David Lum also has a 'buy' call on CDL Hospitality, saying in a report last Tuesday that his forecasts for the trust's distribution per unit for the next two years are higher than other analysts' projections.

'We believe the market could be overestimating the severity of the forthcoming economic downturn and underestimating the tourist-drawing power of Singapore's two integrated resorts,' he noted.

RBS' Mr Lim, meanwhile, counts CapitaMall Trust (CMT) as one of his top two picks of all the S-Reits.

'We like CMT's portfolio of quality malls which we believe can provide a steady and resilient stream of income,' he said.

'CMT also has the ability to extract more growth through asset enhancement projects. For example, it is refurbishing Iluma and this should help to improve the mall's (rental) yield to 5.8 per cent from the current 3.8 per cent.'

Source: The Straits Times © Singapore Press Holdings Ltd.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Sunday, October 30, 2011

Homebuyers less keen on HDB resale flats with new measures

MORE build-to-order (BTO) flats introduced in September and the recent raising of the income ceiling for HDB homebuyers have slowed sales of resale public housing flats.
However, the ramp-up in public housing supply has failed to stop prices of resale units from rising.

Data from the Housing and Development Board (HDB) released yesterday showed resale applications falling 10 per cent to 5,903 cases in Q3 from 6,581 the previous quarter.

At the same time, resale units continued to exchange hands at ever higher prices. The HDB Resale Price Index hit a record high of 187.2 in the third quarter, 3.8 per cent higher than the previous quarter, and 11.6 per cent higher than Q3 2010.

In Tampines, for example, the median resale price of an executive flat was $630,000 in Q3 - 4.8 per cent higher than Q2's $601,000.

In September, HDB attempted to cool demand in the secondary market by putting up 8,200 BTO and sale-of-balance flats (SBF) for sale.

It announced yesterday that it would launch 4,200 BTO flats in Bedok, Bukit Panjang, Hougang, Punggol and Yishun in November. This brings the tally of public housing flats launched in 2011 up to 28,000 units.

Propnex Realty CEO Mohamed Ismail said that weakened resale transaction volumes show that the increased supply of public housing and the recently raised income ceiling for first- time buyers has persuaded some homebuyers to cross over to the BTO flat market.

'The lack of supply and high prices (of resale flats) have made it more difficult to conclude deals,' added ERA Realty key executive officer Eugene Lim.

Yet, resilience in resale flat prices means that demand for these units remains strong, say experts.

'The release of these new flats has not eradicated the strong demand for resale flats consisting of buyers who are singles, permanent residents, HDB upgraders and downgraders, as well as private property downgraders,' noted Mr Ismail.

The supply of HDB resale flats has remained tight, adding to price increases.

Homeowners grew reluctant to part with their property to get another after the government lowered the loan-to-value limit to 60 per cent for existing homeowners, leading to a supply crunch.

'This is worsened by the mindset that sellers add on a COV (cash over valuation) component despite increasing valuations. They are able to do this because supply is tight and demand is strong,' said Mr Lim.

For an executive flat in Tampines, median COV was chased up to $68,000 in the third quarter, from $51,000 in Q2.

Real estate analysts see resale transactions and prices moderating in Q4.

'With COV becoming a thorny issue with many young couples, it is expected that they will opt for new flats since the amount of cash they are forking out can be less or similar to what they pay for a resale flat,' said Dennis Wee Realty.

Mr Ismail thinks COV levels will rise further in Q4 before plateauing by mid-2012.

But there is a chance that COV levels will edge higher, he cautioned.

'If would-be HDB upgraders continue to be priced out of mass-market private properties, and the supply of resale flats does not rise fast enough or remains limited due to the minimum occupation period for both first-timers and non-first-time buyers, then increased demand for HDB resale flats may push COV levels up even further,' said Mr Ismail.

Saturday, October 29, 2011

Mass-market home prices rise above froth

THE mass-market housing segment or Outside Central Region in Urban Redevelopment Authority (URA) parlance continued to be the clear outperformer in the private housing market this year. While speculators who target other segments have been scared away by cooling measures, the mass-market segment was again held aloft in Q3 by genuine buyers.
'These people typically go for homes in affordable locations, in mass market projects in Outside Central Region (OCR),' said Credo Real Estate executive director Ong Teck Hui. On the supply side, too, the government has been pushing out development sites predominantly in OCR, which is translating to new project launches in these locations, say market watchers.

URA's figures show that the overall private home price index rose 1.3 per cent quarter on quarter (q-on-q) in Q3 this year, a slower rise than the 2 per cent q-on-q gain in Q2 2011. The sub-index measuring prices of non-landed private homes in OCR posted a 2.1 per cent q-on-q rise in Q3, outpacing a 1.2 per cent q-on-q increase in Rest of Central Region and 0.7 per cent q-on-q rise in the Core Central Region (which covers Singapore's choicest residential locations). Year to date, the increases for the three regions are 7.1 per cent, 4.4 per cent and 3.5 per cent respectively.

Numbers from Institute of Real Estate Studies (IRES) at the National University of Singapore released yesterday also showed that the Singapore Residential Price Index (SRPI) for Non-Central Region (excluding small units) has increased 10.2 per cent year to date (between December 2010 and September 2011), outpacing the 3.3 per cent rise in the SRPI Central Region (excluding small units) index.

IRES defines Central Region as Districts 1-4 (which includes the financial district and Sentosa Cove) and traditional prime residential districts of 9-11. SRPI covers completed private apartments and condos.

Reflecting the popularity of smallish units, the SRPI Small index, which tracks prices of completed non-landed private homes up to 506 sq ft islandwide, has climbed 10.1 per cent year to date. The Overall SRPI has appreciated 7.3 per cent year to date.

URA's numbers show that developers sold a total of 4,262 private homes (in uncompleted and completed projects) islandwide in Q3, down 4.1 per cent from 4,444 units in Q3.

In OCR alone, developers found buyers for 3,082 uncompleted units in Q3, up 13.8 per cent from Q2's 2,709 units. The figure for the first nine months of this year was 7,692 units - exceeding the full-year 2010 figure of 7,296 units for 2010 as well as the figures for the previous years, notes Credo's Mr Ong.

'This trend attests to the robust suburban mass market which has been the focus of market activity during this period. In contrast, for Core Central Region (CCR) only 207 units were sold in Q3, reminiscent of the volumes in 2008 when the market slumped. The 1,269 units sold in CCR from Q1-Q3 2011 is 59 per cent below that for the same period in 2010. The upper end of the market has become more sluggish, partly due to a lack of demand from investors,' he added.

Savills Singapore research head Alan Cheong predicts that it is unlikely the market will see any inflexion point for Q4 2011 or even Q1 2012 in the URA private home price index 'given the broad-based positive momentum from all (private residential) property types, both uncompleted and completed'. He predicts URA's headline index will rise 1.6 per cent in Q4 followed by 0.4 per cent in Q1 2012. 'Fundamentally this is supportable because HDB resale prices have also been rising strongly, thereby buttressing the lower end of the private property segment,' he added.

URA highlighted the build-up in the pipeline supply of uncompleted private homes to 76,255 as at end-Q3 2011, up 7.2 per cent from 71,111 units at end-Q2 2011 and the highest figure since such data was made available in 1999. Of the latest pipeline supply, 39,111 units were unsold. Credo's Mr Ong acknowledged: 'The number of unsold units has certainly increased in the past few quarters indicating a build-up in supply. However, this has to be seen in perspective to understand its severity. Back in 2008, when the market corrected due to the global financial crisis, the number of unsold units was as high as 43,473, constituting 64 per cent of the pipeline supply (67,569) in Q2 2008. The current 39,111 unsold units is 51 per cent of the Q3 2011 pipeline supply. What the current figures suggest is that the situation is not dire but could get risky if demand falls significantly,' he added.

DTZ's Southeast Asia research head Chua Chor Hoon noted that while the price increases of private residential homes continued to moderate in Q3, prices of office, shop and industrial space rose at a faster clip in Q3 than they did in Q2. 'This is likely due to investor interest as the non-residential sectors are not subject to cooling measures,' she notes.

'However, the pace of increase in commercial and industrial rents is slower in Q3 q-on-q as the slowdown in the economy and increasing concerns over the eurozone debt crisis take a toll on occupier sentiment. A continued slowdown in the rental increase will eventually filter down to prices as it will affect yields.'

Developers' property market confidence takes a hit in Q3

REAL estate players' sentiment about the property market weakened in the third quarter, with office and residential sectors expected to fare worse over the next six months.

According to the latest survey by the Real Estate Developers' Association of Singapore (Redas) and the National University of Singapore (NUS), the Current Sentiment Index - where respondents rate the overall Singapore real estate market conditions now vis-?? -vis six months ago - slipped to 3.6 in Q3 from 4.6 in the previous quarter.

The index ranges from 0 to 10, with a score below 5 indicating deteriorating market conditions and a score above 5 indicating improving market conditions.

The Future Sentiment Index - in which respondents rate overall property market conditions over the next six months - fell to 3.4 in Q3 from 4.4 in Q2.

As a result, the Composite Sentiment Index slipped to 3.5 in Q3, from 4.5 the previous quarter.

This is the third consecutive fall, from 5.7 in Q4 2010.

Specifically, the market outlook for the office sector looks bleak, recording the sharpest quarterly contraction.

Future net balance (difference between respondents who thought the office sector would fare better versus those who thought it would fare worse) fell from +42 per cent in Q2 to -57 per cent in Q3.

'The swift downgrade of office real estate sector performance shows how quickly the effects of a strong headwind buffeting the banking and financial services industry are being felt in terms of CBD office space demand,' said Steven Choo, chief executive of Redas.

Net balances of future performance for prime and suburban housing markets came in at -48 per cent and -46 per cent respectively for Q3, a contraction from +11 per cent and -37 per cent respectively.

Prime and suburban retail sectors saw future net balances of -28 per cent and -19 per cent respectively; the business park/ high-tech space and industrial/ logistics sectors saw future net balances of -38 per cent and -41 per cent respectively.

Results from the Redas-NUS Real Estate Sentiment Index survey also found that 55 per cent of developers expect more residential units to be launched over the next six months, compared to 70 per cent the last quarter.

A further 33 per cent anticipate launches to stay at the same level.

More than half (56 per cent) expect prices to remain flat, while 37 per cent expect a moderate decline, more than twice the 17 per cent reported the previous quarter.

'Most developers think that the latest revision in development charge (DC) rates was within market expectations for the landed residential and hotel sectors, but consider the respective hikes of up to 55 per cent, 39 per cent, and 32 per cent too high for the industrial, non-landed residential, and commercial sectors,' the survey noted.

Forty-five per cent of survey participants expect levels of interest in the Government Land Sales (GLS) programme to remain unchanged over the next six months, from 65 per cent the previous quarter. Forty-eight per cent expect less interest in GLS.

About a third of developers expect the same level of interest in en bloc land sales, down from 50 per cent previously, while 61 per cent anticipate less interest, up from 47 per cent.

Among the potential risk factors, slowdown in the global economy (96 per cent) was the most dominant concern, followed by domestic economy and jobs and land and property supply (45 per cent respectively), and rising construction costs (41 per cent).

Demographic changes such as fewer immigrants and lower household formation rates are expected to have the most impact on private residential demand in the long term.

More foreign buyers of private homes in Q3

FOREIGN buying of private homes has risen in the third quarter of this year, show latest figures from Urban Redevelopment Authority. The blitz by developers and property consultants to market projects to mainland Chinese buyers may have played a part in this, say market watchers.
Foreigners (who were not permanent residents) picked up 843 uncompleted private homes from developers in Q3, up nearly 20 per cent from 703 homes in the previous quarter. Their share of the total number of uncompleted private homes sold by developers rose from 16.3 per cent in Q2 to 20.1 per cent in Q3.

Included in the foreigners' purchases of private homes in Q3 were 46 terrace houses. These are believed to be strata landed homes in projects with condominium status such as Thomson Grand, euHabitat and Woodhaven.

Foreigners do not require permission from Land Dealings (Approval) Unit to buy such landed homes, which are within a development with condominium status. Hence, such landed units are popular with foreigners and some developers have taken to making them a strong selling point in their condo projects.

The above foreign buying data was released by Urban Redevelopment Authority as part of the Q3 real estate statistics yesterday. The information on ownership profile of uncompleted units sold by developers is based on developers' monthly sales declarations to URA, which are compiled into the quarterly numbers.

Separately, DTZ analysed URA Realis' caveats database which showed that foreigners' share of total private home purchases in both primary and secondary markets rose to 18.7 per cent in Q3 2011 from 15.9 per cent in Q2 2011 and 15.8 per cent in Q1 this year. The figure for the whole of last year was 11.7 per cent.

PRs' share of this buying pool has crept up less markedly, from 13.1 per cent for the whole of 2010 to 13.8 per cent in each of Q1 and Q2 this year and 13.9 per cent in Q3.

Said DTZ's Southeast Asia research head Chua Chor Hoon: 'The higher percentage of foreign buyers in Q3 2011 is due mainly to the mainland Chinese who accounted for 36.1 per cent among foreign buyers, up from 30.6 per cent in Q2 2011. This could be due to more of them looking to purchase overseas as they face policy controls in buying homes in China.

'In Hong Kong, sales volume and residential prices have fallen in Q3 2011 due to the stock market decline, effect of government policies and the tightening of interest rates by banks. This could also have spurred more mainland Chinese to buy beyond Hong Kong. The marketing efforts by developers and agents could also have made more of them aware of the buying opportunities in Singapore.'

In contrast, among PRs, Malaysians form the most dominant buying group largely because many of them study here and stay on to work and set up families, said Ms Chua. 'Hence many of their purchases are for owner-occupation.'

Friday, October 28, 2011

Upcoming Punggol mall to offer waterfront shopping

ALFRESCO dining and waterfront shopping options could be on the cards for Punggol, with the development of the town's newest shopping mall, which will be linked to Punggol MRT station.
The project, called Waterway Point, is the latest in the fast-rising tide of developments in the new town, where a major water feature opened on Sunday.

The new retail project is part of Watertown, a mixed-use project to be jointly developed by Frasers Centrepoint, Far East Organization and Sekisui House.

Earlier this year, the three partners paid $1.02 billion for the 3ha site, which is located at one of the bends of the newly opened Punggol Waterway.

Described as the 'Venice of Punggol', the $225 million waterway development is touted as the centrepiece of the new town, cutting a 4.2km route through Punggol estate.

Frasers Centrepoint told The Straits Times that while the retail project is still in the early stages of planning and development, some of the details have already been firmed up.

Retail will form the biggest component of the mall, taking up 40 per cent. Another 30 per cent will be for food and beverage outlets, while entertainment businesses and activities will make up 15 per cent.

The remaining 15 per cent will be dedicated to facilities such as educational institutions and banks, as well as civic and community amenities like libraries.

Tenants will be spread out across six levels - four above-ground and two basement floors.

Another feature of the mall is that it will be the first to be integrated with the Punggol MRT and LRT networks and the nearby bus interchange.

People will also be able to visit the integrated town square and visitors' centre, where they can learn more about the heritage of Punggol through exhibitions and community events.

The mall is scheduled to be completed in 2015. Frasers Centrepoint said more details will be available within the next few months.

'We are confident that Waterway Point will be a key feature in the waterfront town... and will be a charming, iconic retail space that will resonate with the community,' said Mr Lim Ee Seng, Frasers Centrepoint's group chief executive.

He added that the group aims to create a unique retail destination that will not only excite the Punggol residents, but also draw visitors from all over the island.

Aside from the shopping mall, the Watertown project will house a residential component, containing more than 900 homes, including suites, Soho (small office, home office) apartments, sky patios and condominium units.

Mr Nicholas Mak, SLP International's head of research, said: 'Punggol is a growing town and currently doesn't have a major retail mall within the estate... While the mall's location next to Punggol Waterway does add to the attraction, it is likely to do well regardless of that feature.'

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Yishun EC site draws top bid of $213.8m

AN EXECUTIVE condominium (EC) site in Yishun has attracted a top bid of
$213.8 million in a crowded eight-cornered contest among developers.

Interest in such sites is picking up after a policy shift that widened the pool of eligible buyers for ECs, a hybrid of public and private housing, experts say.

ECs were re-introduced to the market last year after a five-year hiatus - receiving an enthusiastic response.

MCC Land lodged the top bid of $293 per sq ft per plot ratio (psf ppr) for the 27,154 sq m site at the junction of Yishun Avenue 7 and Canberra Drive.

The site is close to the company's other EC project - 406-unit The Canopy in Yishun Avenue 11, which is 93 per cent sold as of last month. The land parcel was sold in March last year for $281 psf ppr.

Sunmaster Holdings was next with a bid of $197.5 million, or $270 psf ppr, while a joint bid by Kheng Leong subsidiary Russville and Low Keng Huat came in third at $190 million, or $260 psf ppr.

Ho Lee Group and a UE E&C unit submitted the lowest bid of $146.9 million, 31 per cent lower than the top bid.

Other bidders for the site, which can yield an estimated 725 units, included Chip Eng Seng, Qingjian Realty, a joint bid by Frasers Centrepoint and Koh Brothers, and BBR Property.

Experts say that while the tender has demonstrated sustained interest in EC sites, the bids are 'measured' and in line with expectations.

Colliers International's director of research and advisory, Ms Chia Siew Chuin, said the top bid was the highest unit land price lodged for an EC site since June, particularly after market sentiment was rocked by the West's debt crisis.

Mr Ong Teck Hui, Credo Real Estate's head of research and consultancy, said interest in EC sites has definitely picked up since the household income ceiling for ECs was raised to $12,000 in August.

'With a bigger pool of eligible buyers, developers are assured of demand and this has led to the good participation in this tender.

'Other than The Canopy, this is the only other new EC site in Yishun that will meet demand from buyers interested in that area,' he added.

He also noted that the top bid was close to the $291 psf ppr seen in the Pasir Ris Drive 3 EC tender, which attracted 11 offers earlier this month.

Mr Alan Cheong, Savills' research and consultancy associate director, said strong sales at The Canopy may also be why MCC Land was confident of its bid.

Recent EC transactions in the area were about $660 psf for Lilydale and $646 psf for The Canopy, he noted.

Colliers' Ms Chia expects the units to break even at about $580 psf to $600 psf, while Savills' Mr Cheong estimates the figure to be $630 psf.

CB Richard Ellis Research executive director Li Hiaw Ho said units in the new EC project would likely be priced in the $600 psf to $700 psf range, similar to prices at The Canopy.

Credo's Mr Ong said home buyers are likely to find the site attractive as it is just across from amenities at Chong Pang village and is a reasonable distance to Sembawang and Northpoint shopping centres, Yishun MRT station and the bus interchange.

The site also has a long frontage to Sungei Simpang Kiri and a landed housing estate is across from it, so views will be unimpeded, he added.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Wing Tai Q1 earnings soar

Business Times: Fri, Oct 28
WING Tai Holdings posted group net profit of $25.1 million for the first quarter ended Sept 30, 2011, 3.81 times that of $6.58 million for the same year-ago period. Revenue climbed 59 per cent to $108.97 million.

The group said that revenue from development properties for the latest quarter ended Sept 30, 2011, was mainly attributable to the additional units sold in Helios Residences at Cairnhill Circle and the progressive sales recognised from L'VIV in the Newton area in Singapore.

Profits recognised from these projects also contributed to the 125 per cent year-on-year increase in the group's operating profit to $16.7 million for the first quarter.

The group's share of profits of associated and joint-venture companies increased 71 per cent year on year to $24.7 million in the first quarter - on the back of higher contributions from the Floridian condo project in Singapore's Bukit Timah area and Wing Tai Properties Ltd in Hong Kong.

Wing Tai also said the group's net gearing ratio has been reduced from 0.36 time as at end-June 2011 to 0.24 time as at end-September 2011.

Cash and cash equivalents - comprising fixed deposits, cash and bank balances - rose from a restated figure of $575.7 million as at end-September 2010 to $700.2 million as at end-September 2011.

The increase is attributable mainly to cash received from the sale of residential property units, the property and retail group said in its results statement, which was released after the close of stockmarket trading yesterday.

Earnings per share climbed from 0.85 cent for Q1 ended September 2010 to 3.22 cents for Q1 ended September 2011. Net asset value per share rose from $2.43 as at end-June 2011 to $2.49 as at end-September 2011.

'The group will watch the property market closely and will, depending on market sentiment, release more residential units for sale in the current financial year,' it added.

Wing Tai closed 5 cents higher at $1.29 on the stock market yesterday.

In addition to its property business, Wing Tai is involved in the retail business. Its portfolio of popular retail brands includes Miss Selfridge, Topshop and Topman, Uniqlo, Dorothy Perkins, Warehouse and G2000.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Suntec Reit sells Chijmes for $177m to Pua-linked entity

Business Times: Fri, Oct 28
SUNTEC Real Estate Investment Trust (Suntec Reit) is selling Chijmes for $177 million to an entity whose shareholders include Pua Seck Guan's Perennial Real Estate group and OSIM boss Ron Sim.

Mr Pua and Mr Sim are also joint majority shareholders (40 per cent stake) in the nearby Capitol project, which will have retail/theatre, hotel and residential components.

According to a Perennial spokesperson, this acquisition provides good synergistic opportunities between the Chijmes and Capitol sites.

'We like this site because it's a good opportunity to own an iconic heritage landmark commercial site, and it's very rare to get an opportunity to invest in such a large commercial site right in the downtown core of Singapore CBD (central business district), with a low plot ratio of 0.8,' said the Perennial spokesperson.

HSBC Institutional Trust Services (Singapore), as trustee of Suntec Reit, entered into a property sale agreement with PRE 8 Investments Pte Ltd for the 154,062 sq ft plot located along Victoria Street.

With a gross floor area of 127,793 sq ft, the $177 million price tag translates into about $1,385 psf ppr (per sq ft per plot ratio). The area was valued at $143.7 million by DTZ Debenham Tie Leung (SEA) as at Oct 15, placing the divestment at 23.2 per cent above the valuation.

Suntec Reit is expected to recognise an estimated gain of about $39.5 million following the divestment.

The sale of Chijmes follows an expressions of interest exercise conducted by Colliers International.

According to Suntec Reit's results for the third quarter ended Sept 30, the property posted revenue of $2.7 million and net property income of $1.8 million during the quarter.

Going forward, PRE 8 Investments intends to spend some $40 million to rejuvenate the asset.

'In terms of efficiency of the asset, it will be enhanced; the tenancy mix will be reviewed and optimised; and in terms of ambience, a lot can be done to improve and blend it with the precinct. Over time, we hope to enhance the rental revenue from this asset.'

Chijmes has 79,794 sq ft of net lettable area and includes several conservation buildings and two gazetted national monuments - Chijmes Hall (the former CHIJ Chapel) and Caldwell House.

Chijmes is on a site with a remaining lease of about 79 years. It has 97 car park lots and is located opposite Raffles City and the City Hall MRT Station. Tenants include Lei Garden Restaurant and Harry's Bar.

The completion of the divestment is expected to be sometime in January 2012.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Homing in on interim housing

Straits Times: Thu, Oct 27
FOR the past 21/2 years, administration assistant Peter Suppiah and his family have called a three-room Housing Board (HDB) flat in Toa Payoh home.

The 57-year-old downsized to an interim rental unit because of financial difficulties. In most cases under interim-housing rules, a family must share the flat with another family.

For the past three months, the co-residents had been another family of six who have just moved out. The space crunch meant that Mr Suppiah and his wife slept on a mattress in the living room while his three children and elderly mother shared a bedroom.

The sole breadwinner pays a monthly rent of $380, which takes up a chunk of his salary of less than $1,500.

He cannot apply for a public rental flat until 30 months have elapsed after the sale of his Admiralty flat.

Interim housing was a talking point in Parliament last week and some observers said the discussions point to a growing segment of people, like Mr Suppiah, whose housing needs should be addressed.

Interim rental housing (IRH) was started in 2009 as a temporary shelter to assist families in hardship and facing a transition in their housing arrangement.

About 800 flats, mostly three-room units in places such as Toa Payoh, Bedok and Taman Ho Swee, are in the IRH scheme.

IRH tenants include households in the public rental-flat queue but in urgent need of accommodation, and those in financial hardship while waiting to move to smaller flats that are being built.

Mr Zainudin Nordin, an MP for Bishan-Toa Payoh GRC, said at least half of the 60 cases he sees during his Meet-The-People sessions concern interim housing.

'This means that they do not have an ideal housing situation and come to me so often they are like my regular customers.'

He mentioned, during Parliament last week, that some people have been in interim housing since 2009 and sometimes two families are squeezed into a two-room flat.

'I cannot imagine how schoolgoing children can study, and how parents can keep their young safe while living with strangers. I'm disappointed that we're slow at resolving this issue.'

He called on the HDB to enlarge its rental scheme and work out 'meaningful subsidies' so that families can live together safely.

MP Charles Chong, who used to see about 15 interim rental cases out of every 60 people he met during his Meet-The-People sessions when he was in Pasir Ris-Punggol GRC, said the problem is exacerbated by the mismatching of families.

IRH typically has two families sharing a three-room unit - a practice that HDB said is meant to help keep rents low.

One example he gave was a family with an asthmatic member matched with another family whose members smoked.

Mr Chong, now the MP for Joo Chiat, has also seen the demand for such housing go up as the economy improves.

'These people get into financial difficulties during the recession, and sell their flats when the economy picks up. After liquidating, they are hit by debarment rules and perhaps poor money management,' he said.

Under HDB rules, those who sell their flats have to wait 30 months before they can apply for subsidised rental housing.

PropNex chief executive Mohamed Ismail noted an increasing number of people who do not qualify for subsidised rental housing and yet have difficulty renting flats at open market rates.

'Income ceilings have risen for buying a new flat. Perhaps, given the rising cost of living, it's time to raise the $1,500 income ceiling for subsidised rentals as well,' he said.

Another suggestion is for more flats to be allocated to the IRH scheme.

In the open market, monthly rents for three- to five-room HDB flats can range from about $1,600 to $2,600.

Public rental flats, meant to be the final safety net, cost between $30 and $275 monthly depending on income level, and come in one- and two-room options.

In between these two options are rental flats meant for the less needy and managed by private operators such as EM Services, LHN Group and Katong Hostel.

There are about 2,200 flats under the Selective En Bloc Redevelopment Scheme offered for such uses. These are located in areas such as Tiong Bahru, Commonwealth Drive, Havelock Road, Toa Payoh, Boon Lay Avenue and Bedok.

Of these, 1,400 of them are offered at market rates while the remaining 800 are set aside for IRH, which costs about $300 a month for a room.

Allocating more flats under IRH could also benefit newly married couples who have already bought a flat but are waiting for it to be built.

Mr Ismail said: 'These are people committed to plan in advance, get married and would like to live on their own. They might need help too.'

His view is shared by Ms Lee Bee Wah, chairman of the Government Parliamentary Committee for National Development.

But overall, Ms Lee, who is also an MP for Nee Soon GRC, felt that IRH is the right solution as it 'helps to bridge families waiting for permanent homes'.

Mr Liang Eng Hwa, an MP for Holland-Bukit Timah GRC who also sits on the committee, believes that Mr Zainudin comes across the interim housing issue more often because there are such blocks in his area.

'I am not as exposed to this problem. The thing is, this is meant to be interim housing so I think it's serving its purpose,' he said.

When asked if the HDB would abolish its partnership with commercial landlords such as EM Services, National Development Minister Khaw Boon Wan said last week that he was reviewing rental policy as a whole but would abide by contracts previously signed.

Last week, one of the points he brought up was that he was reviewing the rental structure to introduce more rental tiers. This would be done so that 'the incentive to work harder and earn more is not unwittingly diminished'.

Calling vulnerable families who earn less than $1,500 a month a top priority, he added that the HDB is speeding up the programme to ramp up supply.

There are more rental flats in the pipeline, up to 57,000 by 2015. Mr Khaw gave assurances that there will be further improvements to the waiting time, which has been whittled down from its peak of 21 months in 2008 to six months now.

Summing up the situation, Mr Zainudin called for further tweaks to the rental structure.

He said: 'While the Government's stance is that home ownership should be as widespread as possible, the reality is that there will always be some people who cannot achieve this.

'We must have a solution that is good and robust.'

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Q3 earnings hit a comfortable $1.3b

Business Times: Thu, Oct 27
HALFWAY through the reporting season, 33 listed companies have reported a comfortable $1.335 billion in third-quarter earnings.

However, quarterly net profits for the 32 companies with comparisons slipped 11.6 per cent from a year ago to $1.322 billion.

Still, the mid-season scorecard shows 29 companies firmly in the black. Of these, 20 emerged with stronger profits than in the year-ago period.

Just four companies suffered losses. Both Asia- themed fund United International Securities and electronics manufacturer Aztech Group were newly in the red, alongside Top Global and Texchem-Pack Holdings.

For the nine-month period, the 33 firms took home total net profits worth $4.369 billion.

Excluding Sabana Reit, which listed only in November last year, the remaining 32 companies reported profits that were 5.4 per cent higher at $4.321 billion.

Heading the list of third- quarter earners were the likes of Keppel Corporation and real estate plays such as CapitaLand, Keppel Land and CapitaMall Trust.

At the top of the pack was diversified conglomerate Keppel Corporation. It beat street estimates with third-quarter takings of $406.1 million, one-third higher than what it bagged last year.

The property sector also packed a punch during the quarter, with seven of the 10 top earners being developers or real estate investment trusts (Reits) like CapitaLand, Keppel Land and CapitaMall Trust.

Keppel Corp's earnings were led by its offshore and marine division.

Analysts were largely buoyed by Keppel Corp's offshore-led performance and expect the company to remain on the growth path despite global macroeconomic uncertainty.

'Despite the uncertainty in the financial markets, fundamentals in the oil and gas industry remain sound due to favourable demand and supply dynamics,' said OCBC Research.

The group's separately listed property arm, Keppel Land, also reported the sixth highest profit among the 33 companies, bagging $58 million during the third quarter, a 6.6 per cent year-on-year rise from $54.4 million.

Real estate investment trusts tend to fare better than property developers.

CapitaLand's Q3 profit plummeted 82.6 per cent to $80.2 million from a restated $460.1 million, largely due to an accounting change.

Quarterly profits at CapitaMalls Asia, too, fell 30 per cent y-o-y to $36.5 million, from $52.4 million.

One of the most improved results came from the Reits sector: Ascott Reit doubled its profit to $25.3 million, from $12 million a year ago.

Double-digit rises also figure among other real estate trusts.

Commercial Reits Suntec Reit and K-Reit Asia reported 21.9 per cent and 17.7 per cent bottomline gains, respectively, to $56.4 million and $26.7 million.

Among the telecommunications firms, only M1 has released its financial results. The company underperformed expectations, even as its Q3 net profit rose 4.1 per cent to $41.1 million.

Despite that, analysts are betting on its earnings resilience and high dividend payout to be a good defence against the volatility that has mauled the market.

M1 rivals StarHub and SingTel will release their results on Nov 9 and Nov 10, respectively.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

Offshore fund acquires 50% stake in Robinson Land

Business Times: Thu, Oct 27
AN offshore fund controlled by a few high net worth individuals has acquired a 50 per cent stake in a company whose sole asset is the 12-storey freehold Finexis Building (formerly known as GMG Building) at Robinson Road.

The transaction was based on the office block's latest valuation of $110 million in July 2011. This works out to about $2,043 per square foot on its total strata area of 53,830 sq ft, which is understood to be close to the building's net lettable area. The share purchase agreement was signed early last week.

DTZ brokered the transaction.

The half stake in Robinson Land Pte Ltd was sold by a partnership that includes private real estate investor and ex-Goldman Sachs banker Kishore Buxani and offshore investors advised by Mukesh Valabhji of Seychelles-based Capital Management Group.

They will continue to hold the remaining 50 per cent in Robinson Land Pte Ltd.

The company acquired the office block, located at 108 Robinson Road, in late 2006 for $48 million and is said to have invested a further sum of about $6 million sprucing it up.

Finexis Building is more than 82 per cent let, with anchor tenant Finexis Advisory occupying five floors. Other tenants include Cliftons and BoxHill Institute, both from Australia, and Melior International College, which has a tie-up with Australia's CQ University.

Mr Buxani is a nephew of Raj and Asok Kumar Hiranandani, the founders of Royal Brothers group. Their sister is Mr Buxani's mother. Mr Buxani is well known as an investor in shophouses as well as strata retail units.

He left Goldman Sachs in 2005 after almost 10 years and has been investing in the Singapore commercial real estate market since 2000. He currently controls the Buxani Group, which focuses primarily on acquiring prime commercial properties in Singapore and adding value through asset refurbishments, repositioning and tenant remixing.

The partnership between Mr Buxani and Mr Valabhji's Capital Management Group has successfully acquired a number of properties in Singapore since 2006, with the largest deal being six floors or slightly over 26 per cent stake in Samsung Hub, a 999-year leasehold Grade A strata-titled office development at Church Street.

These six floors, totalling 78,490 sq ft, were bought from OCBC Properties in early 2007 for $122.44 million or $1,560 psf of strata area.

The current valuation of these six floors is about $220 million, based on the recent sale price of $2,800 psf for one of these floors. This is one of the highest prices ever achieved for a strata office floor in Singapore.

Finexis Building does not currently have any immediate redevelopment potential. Its current gross floor area of 64,766 sq ft is 11.67 times the land area of 5,549 sq ft - exceeding the 11.2 maximum plot ratio for the site under Master Plan 2008.

The latest rental transaction in the office block was done at $7 psf a month, but the current average monthly passing rental (that is, what is being paid by existing tenants) in the building is lower, at about $5.60 psf.

Assuming the building is fully let at this rate, the net yield based on the $110 million valuation works out to around 2.9 per cent. The building is said to have been completed in the 1980s.

Over the weekend, Mr Buxani's uncle Asok Kumar Hiranandani was also in the news for an office transaction. BT reported on Monday that Royal Group Pte Ltd, controlled by Mr Hiranandani and his son Bobby, clinched two adjacent 999-year leasehold office blocks at Phillip Street for a total of nearly $283 million or an average price of $2,350 psf on net lettable area (NLA). The buildings are being sold by Aviva group.

One Phillip Street, with NLA of 38,194 sq ft, is being sold for $2,050 psf, and Commerce Point (at 3 Phillip Street), which has NLA of 82,191 sq ft, at $2,490 psf.

Mr Hiranandani also revealed that he received $3,050 psf on NLA for the sale of his 50 per cent share of the 999-year Royal Brothers Building at Malacca Street nearby earlier this month to RB Capital, controlled by his elder brother Raj Kumar's son Kishin. The office block has around 59,000 sq ft of NLA.

Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400

New index tracks price rises via online sales

Straits Times: Thu, Oct 27
A NEW index that uses online sales data to measure price rises will be launched next year.

The sales figures will be collected and converted into the index in around three days, giving economists, public institutions and the private sector an up-to-date snapshot of the retail sector.

Professor Roberto Rigobon, who helped found the process, told a media briefing on Tuesday that the index, many versions of which are already in use overseas, is uncannily similar to official inflation data.

'In Singapore, the level of accuracy is down to three decimal points,' he said.

Price data from Singapore has been compiled since last year, and the index will be released in the middle of next year.

Prof Rigobon, who is based at the Massachusetts Institute of Technology (MIT), noted that unlike the official inflation data, his price tracker does not take into account services like health care.

'While there are limitations on access to the cost of education, health care and real estate, the trends (as shown by the price indices) should be closely related to the official inflation data,' he said.

One surprising finding is that even in emerging markets, where online retailers are not a dime a dozen, the data collection is still an extremely accurate indicator of a country's inflation.

Prof Rigobon cited Ghana, which has only two online retailers. 'In poorer countries where there is less activity online, the closer our index tracks inflation, because the pricing systems are less sophisticated. The online prices are a function of the prices in store,' he added.

The approach to the index began in 2007 as a research project by Prof Rigobon and fellow MIT professor Alberto Cavallo.

They tracked and collated the prices of millions of items sold by online retailers in the United States, and then converted the numbers into indices that have a lag of only three business days.

Earlier this year, they entered into a partnership with financial services provider State Street Global Markets to form a venture called PriceStats. Data is now supplied to countries such as the US, Britain, Germany and France.


Team Marshe
Martin Koh/ Sherry Tang
9383-3992/ 9844-4400