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Buyers paying less cash for HDB resale flats

Posted by luxuryasiahome on November 30, 2008

Some deals may be done at valuation but no drop in prices; big flats moving slowly

THE private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away.

Yet, the HDB resale flat market remains active and prices are still fairly strong.

However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown.

While prices have not dropped, the cash amount that buyers typically pay on top of the flat’s valuation has fallen more significantly, experts said.

This cash-over-valuation sum – or what the market refers to as the COV – is usually a must for most transactions, especially in a booming market.

Now that the HDB market outlook is less upbeat, some deals are even likely to be done at valuation, which means no COV is required.

‘We started to see the impact of all the bad news only in the past month,’ said C&H Realty managing director Albert Lu.

‘News of the stock market falling and retrenchments impact buyers’ sentiment. Now, they are saying: Maybe we should wait.’

To entice those sitting on the fence, sellers have lowered their COV expectations by as much as 50 per cent, said Mr Lu.

Most COVs now roughly range from $5,000 to $30,000 for selected areas, according to Mr Eugene Lim, associate director of ERA Asia Pacific.

‘Until recently, a COV of $5,000 was almost unheard of.’

A property agent said she is finalising a deal for an executive flat in Hougang in which the seller is willing to sell at valuation, without any COV.

‘I noticed that there are more ads asking for zero cash,’ she said. ‘Old flats that need a lot of renovation could be sold for zero cash.’

The Housing Board’s third quarter data showed that COVs mostly ranged from $10,000 to as much as $50,000. The overall median COV was $19,000, down from $20,000 in the second quarter and $21,000 in the first.

It rose to a high of $22,000 in last year’s fourth quarter, from $17,000 in the third quarter and just $7,000 in the second.

‘In view of the current sentiment, HDB resale flat valuations should stay flat going forward,’ said Mr Lim. ‘So if COV is coming down, prices will eventually come down.’

Prices, however, will not plunge as there is a large base of potential buyers, he said.

Within the HDB market, the segment for small flats will likely be busier than the one for bigger flats. Already, property experts say the market for bigger flats – five-room flats and executive flats – have started to slow down.

This led Mr Lu to project that prices of bigger flats could fall by 1 to 2 per cent in the fourth quarter.

ERA’s Mr Lim expects prices of these flats to drop by around 5 to 8 per cent in the first half of next year.

Prices of smaller flats, they said, could remain steady.

While prices are likely to fall, sales volume may hold or even rise going forward, said Mr Lim.

Demand remains strong as there are newly-weds and permanent residents looking for HDB flats.

The demand is evident from HDB’s build-to-order (BTO) flat sales. Recently, the sales of its new premium-quality BTO flats at Punggol Arcadia appeared to have met with fairly strong demand, even though they were priced from $356,000 to as much as $416,000 for a five-room unit. There were three times as many subscribers as the number of units available.

HDB said they are cheaper than other comparable HDB resale flats nearby, which cost between $375,000 and $462,000.

‘New flats are sold according to what they would fetch on the open market, but with a generous discount which is the subsidy that buyers enjoy,’ said an HDB spokesman.

‘When the market goes up, HDB prices also move up. But when the market goes down, new flat prices are reduced.’

In any case, HDB flat prices are largely more manageable than the price of a private home.

‘In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option’ than private homes, according to a recent ERA study.

It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units.

‘Many people were downgrading from private properties to HDB flats,’ explained Mr Lim.

It is a scenario that could happen again next year as the economy weakens further, he said.

As to the extent of the price or volume movements for the whole of next year, that will depend on the state of the economy, experts said.

Flat trend

‘In view of the current sentiment, HDB resale flat valuations should stay flat going forward. If COV is coming down, prices will eventually come down.’ – MR EUGENE LIM, associate director of ERA Asia Pacific

Source : Sunday Times – 30 Nov 2008

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goodbye expat, Hello nopat

Posted by luxuryasiahome on November 29, 2008

Fast disappearing are the generous perks offered to people willing to relocate overseas for work stints

EXPATS live the good life, according to popular perceptions. Company-provided housing in Districts 10 or 11, children’s school fees, cars, home leave and more do indeed make the expat lifestyle alluring.

A predominance of Western and North Asian expats in past years has given way to ever more nationalities enjoying the same perks.

In reality, these perks are more complex. Even though expatriates are most often employees assigned abroad for two to three years with benefits enabling them to live as well abroad as they did at home, the sizes of their packages vary tremendously.

There are also long-term expats, many of whom stayed on long after their initial 2-3 year assignment to continue to receive expatriate benefits even after living in Singapore for a decade or more. There are also foreigners who voluntarily choose to relocate to Singapore and find an expat package waiting when they were hired.

While reports of fewer expat packages have circulated for years and many foreigners have received reduced packages or nothing extra at all, headhunters confirm that the recent economic downturn has speeded up the shift away from expat packages; fewer now enjoy the pampered expat lifestyle. When they’re cutting benefits or even eliminating jobs, companies are hard pressed to continue paying the large packages for a select few.

As Ms Linda Eunson of the University of Chicago in Singapore puts it, more businesses have moved from hiring expats to employing “lopats” or “nopats”.

Instead of offering a full package of expat benefits, some companies have moved to offering lower level – “lopat” -benefits that may only include support for housing or children’s schooling. An increasing number of companies are now offering only “nopat” terms whereby foreign employees receive the same compensation as Singaporeans and have no expatriate benefits.

One headhunter reiterated this trend, saying his US and European clients are specifically requesting that he first look for candidates willing to accept local rather than expatriate packages, even at senior levels. Global hiring freezes by some multinationals have also meant that the pool of expat jobs is also shrinking.

Another reason for the shift away from expat benefits is that more people in New York or London and other hard-hit markets are turning to Asia for jobs. Search firms, companies and career offices at universities are being flooded with resumes from talented people wanting to work in Singapore even on local terms, just so they can have a job. When companies receive this many resumes from people abroad willing to relocate on local terms, there’s little reason to offer expat packages.

Added to that, companies are able to find more local employees with the right skills. This abundance of local talent also makes it harder to justify paying more for expatriates.

TOP JOBS REMAIN IMMUNE

One manager at a multinational company estimated that it would cost him three times more to bring in an American from the head office as it would to hire someone locally.

Even though the American might have valuable skills and head-office knowledge, the hiring of one or two well-qualified Singaporeans at a lower cost seemed preferable to importing one expensive expatriate.

All these changes don’t mean that the days of high-level expat packages are over. Search firms say they still expect top management at the president or managing-director level to be offered expatriate packages. There is still a shortage of top company leaders, said Mr Charles Moore of search firm Heidrick & Struggles, so these executives can continue to expect generous packages.

Companies will also need to dangle expat benefits to lure staff with specialised skills in still-growing economic sectors. Increasingly, though, all but staff at the very top levels or with highly specialised skills seem likely to become nopats or at most lopats, on a package with only limited benefits.

The existing expats, too, are likely to remain on their current packages as the changes primarily affect new hires. However, some companies are renegotiating packages downwards, though, according to Mr Moore.

While high rentals continue to cause more expats to move from District 10 to outlying areas when they renew their leases, and they now fly home in economy rather than business class, companies seem reluctant to eliminate packages entirely for their current staff.

To wit, international schools still have waitlists, even if they’re shorter; and clubs report that they’ve seen little drop in membership so far.

While these patterns could change if the economic downturn deepens, the full effects of the reductions in expat packages are likely to become visible only over the next two or three years.

As more new staff below the very top levels are offered local terms and more staff who want to stay on after the end of their initial assignment are only given a choice of staying on a local package or returning home, the number of expats looks set to drop.

So, while expat packages are far from totally redundant, expect to say “bye-bye expat” and “hello, nopat” more often.

The writer is a consultant who has lived in Singapore since 1992.

Source : Today – 29 Nov 2008

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Jurong East ‘white’ site joins reserve list

Posted by luxuryasiahome on November 29, 2008

But market watchers say that like the Bukit Chermin site, it is not likely to be triggered anytime soon

FOR the second day running, the Urban Redevelopment Authority has made available for application a reserve list site in an attractive location, despite the inopportune timing.

Its latest offering is a 1.9-hectare ‘white’ site next to Jurong East MRT Station. At least 30 per cent of the 1.15 million square foot maximum gross floor area must be set aside for office use and the rest for additional office use or other uses permitted under the white site zoning such as commercial (like retail and entertainment), hotel and residential uses.

The 99-year leasehold plot is the first sale site being offered in URA’s Jurong Gateway precinct since Singapore’s planning authority unveiled plans for the Jurong Lake District earlier this year.

On Thursday, URA went ahead with the scheduled release of a plum hotel site at Bukit Chermin on hilly terrain overlooking the coastline.

Market watchers yesterday gave the Jurong East site the same verdict that they did for the Bukit Chermin site – it’s not likely to be triggered anytime soon.

‘Given the current uncertain business environment, it’s unlikely there will be any interest in the Jurong East site. There’s also difficulty in getting funding. Investors would rather go for completed, income-generating assets that can give immediate returns than to embark on a fresh development with higher risks,’ DTZ executive director Ong Choon Fah said.

Market watchers also note that substantial office supply is expected to be completed from 2010.

Colliers International director Tay Huey Ying: ‘It’s unlikely the Jurong East site will be triggered for launch until the market picks up significantly. The land parcel is quite attractively located next to an MRT station and in an area within a growth centre.’

URA said: ‘Given its strategic location, it is vital that the proposed development on the first sale site in Jurong Gateway is a well-designed landmark development with appropriate quality.

‘Hence, the design of the proposed development will be reviewed by a Design Advisory Panel (DAP), chaired by URA.

‘The DAP will work with and guide the development team in the design of the development after the tender has been awarded.’

Reserve list sites are launched for tender only upon successful application by a developer with an undertaking of a minimum bid acceptable to the state.

The tender for the Jurong East site will be awarded on the basis of land price.

Source : Business Times – 29 Nov 2008

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Property exposure of banks well below limit

Posted by luxuryasiahome on November 29, 2008

MAS does not expect sliding real estate market to affect lenders as their loan portfolios are generally well diversified

EVER since the market gathered steam in 2005, property-related loans have grown steadily. In fact, they were the key drivers of non-bank loan growth over the past two years, according to the Monetary Authority of Singapore (MAS), which released its Financial Stability Review yesterday.

Now, as a chill settles over the market again, concerns are being voiced over banks’ exposure to the property sector. Brushing aside these worries, the MAS said that the overall property exposure of banks stands at just 18 per cent, well below the regulatory limit of 35 per cent. Of course, some banks may be closer to the threshold. ‘Most banks’ property exposures were well below the limit, with a few banks’ property exposures closer to the limit,’ MAS said.

Home loans are not included in the regulatory limit as they are typically very low risk. They accounted for 28.4 per cent of non-bank loans.

Banks’ exposures to building and construction (B&C) firms are generally well-diversified with no bank having exposures concentrated in any particular property firm, it said. Lending to the B&C sector accounted for 18 per cent of total domestic banking unit (DBU) non-bank loans in September 2008. The asset quality of B&C loans has remained high, with the non-performing loan (NPL) ratio remaining low at less than one per cent.

‘Going forward, the NPL ratio of B&C loans is expected to rise, given the economic downturn and ongoing corrections in the property market,’ MAS said.

However, it does not expect this to affect the financial soundness of the banks as their loan portfolios are generally well diversified.

MAS said that the leverage ratio of the property sector has remained at almost the same level as before the Asian financial crisis, at around 60-80 per cent.

‘Generally, the small property developers are more highly geared than the large property developers, with the small developers’ debt to equity ratio at 76 per cent, compared to the large developers’ 62 per cent in Q2 2008,’ it said.

While there has been a substantial moderation in the interest coverage ratio since Q2 2007 for both small and large property developers, their earnings are still more than adequate to cover their interest liabilities in Q2 2008 with earnings at about 8.6 times of interest expense, it said.

On housing loans, the MAS said that they ‘typically turn in low single-digit NPL ratios and have a low risk profile with 75 per cent of housing loans accounted by owner-occupied residential properties’.

In addition, Singapore banks’ mortgage exposures are currently in the form of direct loans. Unlike in the US, there has been no securitisation of mortgages and repackaging into complex products, which had contributed to lax lending standards and the mispricing of risk, it said.

It added that the growth of property-related loans has tapered off recently, reflecting falling home demand and property transactions.

Source : Business Times – 29 Nov 2008

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Cost is a hurdle for developers going green

Posted by luxuryasiahome on November 29, 2008

Studies show property players are less likely to pay a premium for green office space now

REAL estate players in Singapore and the region want to go green but the cost of doing so is proving to be a barrier, studies show.

Corporate property executives are less likely to pay a premium for green office space now than they were a year ago, even though more of them see energy and sustainability as a business priority, according to a survey by CoreNet Global and Jones Lang LaSalle (JLL).

Another survey, by Singapore-based construction information services firm BCI Asia, shows similarly that perceived high upfront costs are proving to be a big barrier to green building in Singapore and other South-east Asian countries.

BCI polled 1,200 building professionals across the Asia-Pacific on their attitude to green building. The main hindrance across the region is the expected upfront cost premium. Some 58 per cent of respondents from South-east Asia think a green building will cost 10 per cent or more than a conventional one. And some 27 per cent of respondents believe the premium could be 20 per cent or more.

‘Despite the government’s efforts, the biggest barrier to green building in Singapore is perceived high upfront costs, which is a major issue across the survey region,’ BCI Asia said in its Q3 publication.

There is resistance to forking out more, despite increased awareness of the need for sustainable development. In the survey by CoreNet and JLL, 69 per cent of more than 400 corporate property executives surveyed said that sustainability is a critical issue for their property departments. In contrast, just 47 per cent felt that way in 2007. But despite the greater importance placed on sustainability, the number of companies willing to pay more for it has dropped since 2007.

According to Chris Wallbank, JLL’s Asia-Pacific head of energy and sustainability services, Asia is repeating many of the trends that accelerated the growth of green building industries in Europe and North America. ‘If you look across Asia at many of the higher-quality commercial developments, you’ll find that most are being designed and built with sustainability as a major consideration.’ he said. ‘This shift towards sustainability suggests that those in the industry are recognising its value going into the future.’

In some mature markets such as Hong Kong and Singapore, the opportunity to implement sustainability is limited by the availability of land that can be developed, Mr Wallbank pointed out.

BCI’s survey also showed that Singapore lags regional neighbours Australia and Hong Kong when it comes to a serious commitment to green building. Some 10 per cent of respondents from Singapore reported ’significant’ green building commitment, lower than the 23 per cent in Hong Kong and 29 per cent in Australia.

In Singapore the two main drivers of green buildings are rising energy costs and regulation by the government, which has been pushing its Green Mark system. The government has also created a $50 million R&D fund to boost development of green building technology.

The message seems to have got through. ‘Sustainable development is not a choice. We just do not have the luxury as a small country to ignore it. The faster we get there, the better it is for us all,’ Simon Cheong, president of the Real Estate Developers’ Association of Singapore (Redas), said at the industry group’s annual dinner on Wednesday. Redas members received 42 Green Mark awards this year, up from 17 in 2007.

Singapore is expected to have a blueprint for sustainable development for the next 10-15 years by February next year. An inter-ministerial committee on sustainable development, set up in February this year to come up with a national strategy, will release its recommendations then.

National Development Minister Mah Bow Tan has acknowledged that those bearing the cost of green buildings (such as developers) are not the same as those who will benefit (such as tenants). This disparity has to be addressed, he said at a public forum on Nov 6.

Analysts told BT that anecdotal evidence shows the upfront premium for a green building compared with a conventional one is unlikely to be as high as many players here think. For example, for City Developments’ $200 million City Square Mall, going green added only 2-5 per cent in construction costs.

Source : Business Times – 29 Nov 2008

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IOI aborts proposed purchase of Citicorp Tower

Posted by luxuryasiahome on November 29, 2008

ANALYSTS have applauded plantation and property company IOI Corporation’s decision to walk away from a RM756 million (S$316 million) purchase of a building in Kuala Lumpur. Even so, the firm was re-rated downwards by Fitch Ratings for wholly different reasons.

On Thursday night, IOI told the stock exchange that it was pulling out of its proposed purchase of Citicorp Tower from three vendors – Citicorp (50 per cent), Singapore’s CapitaLand (30 per cent) and Malaysia’s CapitaLand (20 per cent).

Aborting the deal will cost IOI RM75 million in forfeiture fees. But analysts said that it was better to walk away now, given that the company could very probably pick up property assets at much cheaper rates going forward.

In fact, they compared IOI’s decision with Maybank which went ahead with its over RM7 billion purchase of Bank International Indonesia which most analysts agreed was overpriced. ‘RM73 million is nothing compared with its (IOI’s) cash flows,’ said one analyst who tracks the firm closely. Still, the firm said that it was seeking legal advice on the propriety and quantum of the forfeiture.

IOI’s decision reflects the company’s recognition of the worsening economic outlook and the need to conserve cash and reduce borrowings at a time when commodity prices are falling. Ironically, it was for those same reasons that Fitch downgraded the stock. But it will be bad news for the company: analysts estimated that its funding costs could go up by at least 50 basis points.

The agency yesterday downgraded the firm’sbonds to ‘BBB+’ from ‘A-’ because a rise ‘in its business risk stemming from  significant investments in property that is not expected to contribute to cash flows over the short to medium term’.

Fitch cited, in particular, IOI’s luxury condominium projects in Singapore and IOI’s overly generous returns over the last 18 months to shareholders (RM3.2 billion), both of which had increased its debt load. The firm has delayed the launch of its first development phase in Sentosa.

Fitch said that IOI’s debt is now RM4 billion – up sharply from about RM400 million last year – and could get worse as cash flows from its plantation, property and refining arms weaken. Still, the agency tempered its downgrade by tacking on a ’stable’ outlook to the firm’s rating in a nod towards its superior management.

Source : Business Times – 29 Nov 2008

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M&C’s Seoul hotel sale falls through

Posted by luxuryasiahome on November 29, 2008

CITY Developments’ London-listed hotel subsidiary, Millennium & Copthorne Hotels (M&C), announced yesterday that the agreement for the disposal of Millennium Seoul Hilton to Kangho AMC Co has been terminated with immediate effect.

The buyer was unable to finalise its financing arrangements by the extended completion date of Nov 28 amid the global financial turmoil. This will have implications on M&C and CDL bottomlines as the two had been expected to book profit from the disposal in Q4 2008. CDL controls about 53 per cent of M&C.

When the 580 billion Korean won (S$596 million) disposal of the hotel was announced in June, M&C had said it would book a pre-tax profit of £pounds;155 million (S$359 million) from the divestment. But on the flip side, M&C will get to keep the 59 billion won non-refundable deposits it has collected so far from Kangho, a Korean real estate and architectural services group.

Following the termination of the disposal, M&C will continue to manage the hotel. The chain has faced labour problems as well as escalating labour costs operating the hotel since it bought the freehold property in 1999 for US$228.5 million.

Following the June 24 announcement of the proposed disposal by M&C, on Sept 19 M&C announced that Kangho had asked the company for an extension of the completion date originally scheduled for Sept 30, 2008, whilst it finalised the terms of its financing arrangements. On Sept 29, M&C announced that the company and Kangho had agreed, among other things, to the amendment of the completion date of the disposal from Sept 30, to Nov 28, 2008.

In its release yesterday, M&C said: ‘While the company was ready, willing and able to complete the disposal, Kangho has, in the current difficult financial markets, been unable to finalise its financing arrangements and, consequently, the remainder of the purchase price remains unpaid.

‘The agreement for the disposal has therefore terminated with immediate effect.’

Source : Business Times – 29 Nov 2008

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For tender: First site in Jurong’s revamp

Posted by luxuryasiahome on November 29, 2008

But analysts do not see much enthusiasm for mixed development plot

THE planned transformation of Jurong into Singapore’s Lake District was set in motion yesterday as the Government released sales details of its first site for tender.

However, market analysts say the current economic downturn and weak property market mean the site could receive a lukewarm reception at best.

Up for grabs is a 1.9ha ‘white’ or mixed development site, attractively located next to the Jurong East MRT Station, with 30per cent of gross floor area (GFA) set aside for office use.

The rest of the maximum GFA of about 1.15millionsqft is for commercial, hotel or residential use, said the Urban Redevelopment Authority (URA) yesterday.

This plum 99-year 19,124sq m site is the first in a series of developments in a grand masterplan unveiled for Jurong in April by National Development Minister Mah Bow Tan.

The proposed dramatic makeover is set to help Jurong shed its industrial image and morph into Jurong Lake District – a mini metropolis of homes, hotels, shops, eateries and offices linked to the MRT via walkways and waterways.

The 360ha district is the size of Marina Bay and consists of two precincts. The first is the 70ha Jurong Gateway, with new offices and entertainment spots set around the Jurong East MRT station.

The second is Lakeside, which is being developed as a destination for young families, with tourist attractions and parks complemented by water activities, set around the Chinese Garden and Lakeside MRT stations.

The URA said yesterday that developers interested in the white site can now apply for it, but property experts say response is likely to be muted, given the economic conditions.

Savills Singapore director of marketing and business development Ku Swee Yong feels that tendering for the site now ‘is a waste of time at this moment’.

‘In today’s market, frankly, it’s not about the attractiveness of a site any more. It’s about whether credit is available.’

Developers are likely to be cautious, and if infrastructure works by the Government for Jurong, such as upgrading the lakes or waterways is delayed, the pace of remaking the area might slow down, leaving little incentive for developers, he added.

When contacted, URA said the plan for Jurong Lake District ‘will still proceed as planned’.

Various infrastructure works such as roads and utilities to support the growth of the area will be implemented.

However, the actual pace of development will depend on market demand, it added.

Still, DTZ executive director Ong Choon Fah said the site is unlikely to be triggered for tender until the outlook becomes clearer, and bank credit is more available. ‘Developers are likely to look at income-generating assets, instead of going into a development situation.’

Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan, said the site was not likely to attract any bids at this time, which is a pity as it is a ‘good and attractive’ site.

From a long-term perspective, the site is a prime one which major developers such as CapitaLand and City Developments will be eyeing, he added.

DTZ’s Mrs Ong said it would not be surprising if Jurong Lake District’s development now had to take a back seat.

But she added: ‘Economic cyclones will always exist, but we must not lose sight of the vision for that area for the long term.’

CREDIT MATTERS, NOT ATTRACTIVENESS

‘In today’s market, frankly, it’s not about the attractiveness of a site any more. It’s about whether credit is available.’ - Savills Singapore director of marketing and business development Ku Swee Yong

Source : Straits Times – 29 Nov 2008

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Recession? New outlets, malls still opening

Posted by luxuryasiahome on November 29, 2008

Retailers remain upbeat and are thinking of new ways to pull in shoppers

THE recession may have induced a round of belt-tightening, but industry players are still investing in new outlets and even opening new malls.

Sports chain Nike, for example, opened its $5 million flagship store in Orchard Road’s Wisma Atria yesterday.

The 8,000 sq ft store is Nike’s first flagship store in South-east Asia and the first here operated and owned by the brand itself. Till now, Nike stores have been opened with local partners.

NTUC FairPrice is opening another hypermarket, and a third retail mall is coming up in Tampines, which already has Century Square and Tampines Mall.

Nike’s country marketing manager here, Mr Glenn Heng, said the sportswear giant had wanted to open a flagship store for some time, but the right location was not available. The opportunity came four months ago when Topshop closed its Wisma Atria outlet. It was too good a chance to pass up, said Mr Heng, who added that, despite the gloomy outlook, ‘we are still quite positive’.

The increased interest in sports here, along with Singapore’s clinching of the bid to host the first Youth Olympic Games, will only help the brand, he said.

Retailers hoping to sow some seeds for growth during this downturn include the biggest supermarket chain here, FairPrice, which will open its third hypermarket in Jurong Point next month and at least two more outlets next year.

FairPrice managing director Seah Kian Peng said: ‘Even in the downturn, our customers will still need essential items for their daily needs.’

Mall owner AsiaMalls, which reopened the refurbished Liang Court this month and will open the Tampines 1 mall in March, remains confident of attracting shopper traffic to its malls. The group’s assistant general manager Stephanie Ho said ‘tactical promotions’ which reward spending and reach out to target shoppers were the way to go.

Tampines 1 has secured 90 per cent of its tenants, including first-time entrants to the suburbs Topshop and Promod.

Orchard Central has signed up 60 per cent of its tenants, while Mandarin Gallery, which is being renovated, has signed up half.

A spokesman for Overseas Union Enterprise, which owns Mandarin Gallery, said: ‘Leasing activities are still active as there are smart retailers who see downtimes as opportunities to get good space at viable rents.’

Mall owners who have snagged these retail tenants are working more closely with them to offer promotions and organise mall events to beat the effects of the economic slump. Far East Organization’s deputy director of retail management Susan Leng said the yet-to-open Orchard Central will be open till 11pm daily to ‘cater to tourists on tight schedules and true-blue shopaholics’.

Source : Straits Times – 29 Nov 2008

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M&C’s sale of Seoul Hilton hotel scuttled

Posted by luxuryasiahome on November 29, 2008

FINANCING problems amid the credit crunch have derailed the 580billion won ($594million) sale of the Millennium Seoul Hilton hotel by City Developments’ (CDL) hotel arm Millennium & Copthorne Hotels (M&C).

This came after buyer KanghoAMC could not raise the funds necessary to complete the deal, even after an extension had been granted by M&C.

In a statement yesterday, M&C said that while it was ‘ready, willing and able to complete’ the deal, Kangho could not.

‘Kangho has, in the current difficult financial market, been unable to finalise its financing arrangements and, consequently, the remainder of the purchase price remains unpaid.’

The sale agreement has therefore been terminated with immediate effect, it said.

CDL first announced the sale of the hotel in late June. The deal, to have been completed on Sept30, was to have resulted in a pre-tax profit on disposal of &pound155million (S$358million) for M&C.

The sale was to have put an end to the reportedly difficult relationship M&C has had with the hotel. It had been affected by labour problems and rising labour costs.

CDL chairman Kwek Leng Beng had said in June that the price was too good to refuse. He had purchased the hotel in 1999 for US$228.5million (currently around S$345million).

The hotel was initially valued at 580billion won which in June was worth about S$777million. The sale price for all the issued share capital of CDL Hotels (Korea) – which owns the hotel – was at 468.6billion won or about S$627.9million back then, after taking into account other net liabilities of the firm.

The only consolation is that Kangho had paid M&C a non-refundable 10per cent deposit of 58billion won on June 24.

It also paid an additional one billion won in two instalments last month, in accordance with the terms and conditions of the sale agreement.

Kangho had on Sept19 asked M&C for an extension of the completion date while it finalised the terms of its financing arrangements given difficult credit markets.

On Sept29, M&C announced that both parties had agreed to change the completion date from Sept30 to Nov28.

Kangho was to have paid the remaining 410.62billion won for the purchase but it could not do so.

It was also to have paid an extra nine billion won as reimbursement of costs and expenses to M&C as part of a post-closing adjustment payment.

Milleninium Seoul Hilton will continue to be managed by M&C.

Source : Straits Times – 29 Nov 2008

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