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Property investment sales value hits record low in Q4 2008

Posted by luxuryasiahome on January 20, 2009

The value of property investment sales in Singapore hit a record low in the fourth quarter of 2008.

In its latest report, real estate consultancy Colliers International said total investment sales in the three months to December fell by 93 per cent on-year to nearly S$577 million.

This is the lowest since the property market picked up four years ago. It also represents a drop of 68.8 per cent from the third quarter.

Colliers said this is indicative of the weak economic outlook caused by the global financial turmoil as well as declining property prices. Investors are also more cautious about where they park their funds.

The industrial property sector held the lion’s share of investment sales for the quarter, accounting for 56.6 per cent of the total.

It also saw the largest transaction in the quarter with the purchase of a 4.7-hectare site Changi Business Park by Ascendas Land and Frasers Centrepoint for S$151 million. The site will be developed into an integrated retail, hotel and business park project.

However, the office sector was hit in the fourth quarter as rentals fell 20 per cent. Colliers said this brought an end to 18 consecutive quarters of rental uptrend in the office sector.

For the whole of 2008, investment sales amounted to S$17 billion – a drop of 58 per cent from the record high the year before.

Analysts expect investment sales value to remain thin over the coming quarters. But they added that the rough financial climate may cause firms to offload their properties to improve balance sheets.

There could also be higher foreclosure sales which may offer attractive investment propositions for potential investors.

Source : Channel NewsAsia – 20 Jan 2009

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CapitaCommercial Trust to pay 11 cents per unit in FY2008, up 26% on-year

Posted by luxuryasiahome on January 20, 2009

CapitaCommercial Trust (CCT) will pay 11 cents per unit for its full year 2008, up 26 per cent from the previous financial year.

The trust reported distributable income of S$153 million for its financial year ended 31 December 2008.

CCT said it performed well in 2008 because of higher rental reversions and the addition of the One George Street property to the portfolio.

The trust has also refinanced S$580 million worth of commercial mortgage-backed securities ahead of the debt maturity in March 2009.

But things are expected to be challenging going forward due to the adverse economic climate.

CCT said it will focus on retaining its tenants and on being proactive in containing costs.

The trust said it expects to be able to deliver its 2009 forecast distribution per unit of 12.34 cents. It also has no immediate plans to raise equity.

Source : Channel NewsAsia – 20 Jan 2009

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Developers want measures in Budget to boost market

Posted by luxuryasiahome on January 20, 2009

Property players have suggested many measures to support the market as Budget 2009 has drawn closer. But it’s anyone’s guess as to what the government will announce come Thursday.

‘The government has so far remained silent on specific measures,’ says Leonard Ong, executive director at KPMG Tax Services.

Developers want a property tax rebate on all residential, commercial and industrial projects, including those under construction. They are also asking for deferral of stamp duty payment for projects under construction until temporary occupation permit (TOP) is obtained.

Tenants have their own requests. The Association of Small and Medium Enterprises (ASME) hopes for rebates and rent reductions on commercial properties owned by JTC Corp and HDB. The Singapore Retailers Association is also looking for cheaper rents.

Some of these wishes may be granted, analysts say. A property tax rebate is seen as one of the more likely measures as it would have an immediate effect by reducing property companies’ cash costs, says Mr Ong.

The government could also take this a step further and introduce tax exemption for projects under development to ease the cash burden on developers, many of whom may want to defer construction, he says. But this is seen as less likely.

Analysts also say that if measures are introduced to ease developers’ cash flows, the savings should be passed on to tenants in the form of rent rebates to benefit more businesses.

Some type of concession allowing the deferral of stamp duty payment for projects under construction – similar to one introduced in 1998 and removed in 2006 – is a possibility, consultants reckon.

And analysts believe JTC and HDB rent cuts are likely. ‘On the part of these government agencies, we expect tiered cuts in rents for factories and warehouses, as well as reductions in utility, property taxes,’ said OCBC economist Selena Ling.

But market observers point out that with the government having privatised much of its property in the past few years, rent cuts for state-owned property are not likely to have much of an impact. In 1998 when the Asian financial crisis broke, the government froze rents for land and factories owned by JTC and HDB and gave a 15 per cent tax rebate on commercial and industrial properties. But as one industry player said: ‘Tenants need more this time round.’ He suggested that any property tax rebates given to landlords come with the condition that these landlords cut rents for tenants.

Taking a longer-term view, some analysts say the government should take a measured approach to aid stakeholders in the property industry.

‘It is best not to interfere too much with the market as policy measures to alleviate or cool it could have the inadvertent effect of exacerbating swings when the cycle changes and cause a different set of problems later,’ said DTZ’s senior director for research Chua Chor Hoon.

‘If policy measures are implemented, they should be given a definite expiry date and extended only if necessary. There has to be a balance between tactical measures to bring us through this unprecedented period and strategic long-term goals.’

Source : Business Times – 20 Jan 2009

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MAS gives Reits a New Year gift

Posted by luxuryasiahome on January 20, 2009

Reit managers here have been given more breathing space on borrowing limits by the Monetary Authority of Singapore (MAS), which has clarified how downward revaluations of properties should be treated.

Basically, MAS has said that Reits need not worry if their leverage has increased because properties have been revalued and are now worth less.

Under MAS’s Property Fund Guidelines, an S-Reit’s total borrowings and deferred payments (the ‘aggregate leverage’) should not exceed 35 per cent of its deposited property. This maximum limit is set at a higher 60 per cent if the Reit obtains a credit rating and publicises it.

In a circular to Reit managers and trustees earlier this month, MAS confirmed that if the aggregate leverage has gone up because of a decline in property values, it will not amount to a breach of leverage limits. MAS also made the important point that refinancing of existing debt by a Reit is not to be construed as incurring additional borrowings.

‘So if at the point of refinancing, a Reit has to revalue its assets (which lenders will require), and so long as the refinancing is of existing debt, MAS will not consider this as additional borrowing and hence the Reit will not be in breach of the statutory leverage limit,’ says Giam Lay Hoon, group general counsel of Oxley Capital Group, which owns a stake in the manager of Cambridge Industrial Trust.

MAS also said that it will permit Reits to raise debt for refinancing purposes earlier than the actual maturity of the debt to be refinanced, without having to include such funds raised in the aggregate leverage limit. However, this is ‘provided that the funds are set aside solely for the purpose of repaying the maturing debt’.

‘The trustee must place these funds in a separate trust account which shall be drawn on only to repay the maturing debt,’ MAS said in its circular.

Oxley Capital’s Ms Giam welcomed MAS’s responsiveness to tight credit market conditions. The CFO of a Reit manager told BT that the MAS clarifications would ‘give some breathing space for some Reit managers with high gearing and with properties in danger of being substantially depreciated’.

This, he said, would ease the pressure on these Reits to recapitalise through raising fresh equity and reduce pressure on the unit price of these Reits.

‘However, ratings agencies will continue to be nervous about property depreciation as that may reflect sliding rents and occupancies and a rise in tenant-default rates,’ he added.

Stan Ho, Fitch Ratings’ senior director and head of Non-Japan Asia structured finance, stressed that ‘any downward revaluation of the underlying property would raise the loan-to-valuation ratios as far as banks lending to Reits are concerned, and this would need to be considered in our ratings for Singapore Reits’.

Kathleen Lee, vice-president and senior analyst at Moody’s Singapore, also pointed out that while a downward revaluation may not breach MAS’s statutory aggregate leverage limit for S-Reits, ‘lenders to Reits can set their own covenants and a downward revaluation could trigger a breach of some of these covenants and that could also lead to a re-rating of the Reit’.

In a separate development, MAS is understood to have sought feedback recently on whether the current minimum distribution payout ratio for S-Reits should be lowered, from 90 per cent of distributable income currently to, say, 75-80 per cent. Some Reit managers are lobbying for the cut. ‘Cash is a premium today and Reits may want to conserve their cash for a host of reasons, including servicing loans, reducing debt or just as general ammunition,’ an industry player said.

However, a rival disagreed, arguing ‘this would go against the fundamentals of why the S-Reit market was created’.

Reits have a high degree of transparency and investors have a high level of certainty of distributions from Reits. ‘So when you give more flexibility to the Reit manager in terms of how much of distributable income it has to pay to unit holders, it creates more uncertainty for the investor. Investors like clarity,’ he added.

Source : Business Times – 20 Jan 2009

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Home prices still falling, study shows

Posted by luxuryasiahome on January 20, 2009

HOME prices here largely continued to be eroded at the end of last year, according to early indications.

A Knight Frank study of a sampling of property options signed mostly last month showed that the prices of many condominiums fell in a quiet month.

In developments which had registered more than one recent sale, prices fell by 4.6 per cent to 10.9 per cent, it said. However, prices of a few developments remained steady or even rose.

Knight Frank compared individual options of a development with median prices of caveats lodged in the previous three quarters. There may be a time lag for caveats lodged, as lodging a caveat is voluntary, it said.

The consultancy was unable to identify a general trend by locality or wider region as the number of options was limited. Also, the characteristics of a particular unit, such as which floor it is on, can influence prices.

At the 910-unit City Square Residences near Farrer Park MRT station, for instance, prices of recent options signed ranged from lower to largely flat from the third quarter at $789 to $964 per sq ft. While its prices have gradually come down from the second quarter, they were way above the April 2005 soft launch price of $560 psf on average.

Overall, home prices are expected to weaken further in the next three to six months, with a bigger plunge in prices of high-end projects than mass market ones, said Knight Frank director of research and consultancy Nicholas Mak. ‘There is a fair bit of latent demand, but these buyers are all waiting to come in at the bottom.’

Individual sellers in the resale market are likely to drop their prices at a faster rate than developers in the primary market, he said.

Home prices will likely continue to fall gradually for a few months, but there is a difference between the previous downturns and this one, said Chesterton Suntec International head of research and consultancy Colin Tan. ‘Usually, when prices go down, sales will go up.

But now, prices have started to come down, but sales have not improved.’

One possible reason for the low volume is that some investors cannot afford to sell now, said Mr Tan.

If they were to sell low now, they would have to top up their loan in cash, he said, and cash is a scarce commodity in a credit crunch.

The slower the prices come down, the longer the property market recovery will take, said Mr Tan.

Source : Straits Times – 20 Jan 2009

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Healthy leasing at SEB’s Ubi property

Posted by luxuryasiahome on January 20, 2009

A HI-TECH development at 67 Ubi Avenue 1 has been 63 per cent leased less than two months after receiving its temporary occupation permit (TOP).

The property, owned by SEB Asset Management and marketed by Colliers International and CB Richard Ellis, has a net lettable area of about 400,000 square feet.

An anchor tenant, understood to be in the infocomm industry, has taken up 55 per cent of the net lettable area. Also, Boustead is taking up about 30,000 sq ft under a sale-and-leaseback arrangement with the park’s German owner SEB.

Boustead, through associate company GBI Realty, developed and later sold the property to SEB in June 2008 for $200 million.

The development comprises one six-storey block and one seven-storey block with units ranging from about 2,000 sq ft to 140,000 sq ft.

Tan Boon Leong, director of industrial at Colliers, said: ‘Zoned for Business 1 use, the units are suited for businesses in the IT and electronics sectors, backroom operations, and display and service centres among others.’

The asking rent is $3.80 per sq ft per month. Existing rents in hi-tech buildings are understood to be $4 to $4.50 psf per month.

Moray Armstrong, executive director of office services at CB Richard Ellis, said: ‘We have seen many leases in hi-tech and business park buildings, as occupiers get quality space at competitive rents. Notably, 46 per cent of the next three years’ total supply at business parks is pre-let.’

The Ubi Ave park is SEB’s first industrial property acquisition in Singapore. It has made several office acquisitions: a 55 per cent stake in the freehold 79 Anson Rd, 12 floors of Springleaf Tower in Anson Rd, and SIA Building in Robinson Rd.

Source : Business Times – 20 Jan 2009

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Govt projects seen lifting listed builders

Posted by luxuryasiahome on January 20, 2009

SEVERAL contractors listed on the Singapore Exchange are expected to benefit from the government’s plan to step up construction of smaller public sector projects, analysts said.

Analysts also issued fresh ‘buy’ or ‘neutral’ calls on several construction stocks late last week.

On Jan 14, National Development Minister Mah Bow Tan said that the government would be rolling out public sector projects of up to $50 million each to help the industry weather the economic downturn. The projects will come onstream from 2009 and will be targeted at small and medium-sized construction firms. They will also include some of the $4.7 billion worth of projects deferred earlier.

The government will also introduce several credit assistance measures to help construction firms facing a credit squeeze and cash-flow problems.

For instance, public-sector agencies will make frequent, prompt and full progress payments for completed and certified building jobs.

The amount of security deposits for government construction jobs will also be lowered from 5 per cent to 2.5 per cent or less. Details will be announced on Budget Day on Jan 22.

Analysts said that the measures would ease some of the problems now faced by smaller contractors.

‘Earnings visibility is exceedingly poor beyond 12 months, even for the larger firms. However, with the government pump-priming, much uncertainty is removed,’ said CIMB analyst Lawrence Lye.

‘We continue to like the sector on the back of continued infrastructure spending, in particular the following companies which are leaders in their areas of expertise.’

He issued ‘outperform’ calls on four construction stocks on Jan 15 – CSC Holdings, Tat Hong Holdings, Tiong Woon Corporation and Yongnam Holdings.

DMG & Partners Securities analyst Selena Leong, likewise, said that the measures announced by the government may be a safety net for the smaller construction firms that are ‘likely to be experiencing significantly higher cost of borrowings or even having difficulties obtaining funding for their working capital and asset enhancement needs’.

In particular, BBR Holdings is expected to benefit as its exposure to the public sector is around 76 per cent based on its order book as at November 2008, she said.

She issued a fresh ‘neutral’ call on BBR on Jan 15, and also has a ‘buy’ call on Tiong Woon.

Credit Suisse on Jan 16 issued an ‘outperform’ call on Tat Hong, and ‘neutral’ calls on Hong Leong Asia, Tiong Woon and Yongnam.

‘We maintain that the construction sector will remain a pillar of strength in 2009. Tat Hong is our top pick, given the company’s operational scale, clear growth strategy, balance sheet strength, undemanding valuations and liquidity,’ said analyst Su Tye Chua.

Source : Business Times – 20 Jan 2009

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Lawyer fails in bid to quash conviction

Posted by luxuryasiahome on January 20, 2009

A VETERAN lawyer has failed in his appeal against his conviction for helping a Housing Board flat owner make a false claim in court five years ago.

However, Bachoo Mohan Singh, a lawyer for more than 30 years, did have his three-month jail term reduced to one month by the High Court and was ordered to pay a $10,000 fine.

Singh was found guilty in the lower court in 2007 of helping to file a claim which stated that the five-room Redhill flat was to be sold for an inflated price of $490,000 in April 2004.

In the High Court yesterday, his lawyer, Senior Counsel Michael Hwang, said that Singh, 60, did not break the law by acting for a flat owner to sue a buyer after a sale fell through.

He did what any reasonable lawyer would have done and acted on his client’s instructions, said Mr Hwang.

If the conviction was allowed to stand, lawyers here would have to investigate and pass judgment on the truth of all clients’ claims before filing them in court, said the senior counsel, who is also president of the Law Society.

Mr Hwang also said defence lawyers could threaten opposing lawyers by saying that the claims they filed were false, reporting these to the police and thus delaying hearings while police investigated these allegations.

But Justice Tay Yong Kwang said the issue in Singh’s case was not whether a lawyer has to verify the truth of facts stated by a client, as described by Mr Hwang.

‘In this case, the lawyer had knowledge that the sales and purchase agreement contains a false inflated price and nevertheless, proceeded with a claim based on this false price…’ the judge said.

Singh is said to have instructed law firm K.K. Yap & Partners to file a writ of summons on behalf of Mr Koh Sia Kang and his wife against a couple who had failed to buy their five-room Redhill flat after agreeing to do so.

The district court found that although the agreed selling price for the Kohs’ flat was $390,000, the price had been inflated by $100,000 in the purchase agreement, and it was this false amount that was stated in the claim.

Singh maintained he had no idea that the price had been inflated but was found guilty and sentenced to three months’ jail in September 2007 after a 50-day trial.

Deputy Public Prosecutor Lee Sing Lit reminded the High Court that the property agents involved in the scam had testified that Singh was aware that the parties to the sale had inflated the purchase amount.

Both agents were fined $8,000 for their role in 2006.

Asking for a lighter sentence for Singh, Mr Hwang said it was his client who blew the whistle on the scam. ‘The person who instigated the investigation was himself prosecuted,’ he added.

Singh is intending to take his case to the country’s highest court, the Court of Appeal, after seeking the High Court’s permission.

He is currently out on bail of $125,000 put forward by his sister Ivy Singh-Lim, a former head of the netball association here.

About 30 observers, made up of family members, friends and lawyers attended yesterday’s appeal hearing.

About the case

BACHOO Mohan Singh, 60, was convicted in a district court and jailed for two years ago for helping Mr Koh Sia Kang, 55, a Housing Board flat owner, make a false declaration.

The lower court heard that although the agreed selling price of Mr Kang’s Redhill flat was $390,000, the price had been inflated by $100,000 as part of a so-called ‘cashback’ scam.

It involves a property seller declaring a higher price in order to get a higher loan for the buyer. The cash difference between the prices is either kept by the buyer or split with the seller.

These scams were rife before the relevant law was tightened three years ago.

Mr Koh, a taxi driver, was to hand the difference to the agent who had arranged the scam. The deal fell through, and Mr Koh went to court, claiming unspecified damages. He received only $380,000 for his flat after the initial buyers pulled out. The buyers paid him $70,000 to settle the matter.

Property agent Kereen Teo Pei Pei, 29, was convicted and fined $8,000 in 2006 for trying to cheat DBS Bank by inflating the price of Mr Koh’s flat. Her manager was also fined.

Mr Koh has yet to be charged with any offence.

Source : Straits Times – 20 Jan 2009

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Evergro Properties full-year earnings more than double

Posted by luxuryasiahome on January 20, 2009

EVERGRO Properties, a unit of Keppel Land, posted a net profit of $545,000 for the full year ended Dec 31, 2008 – against just $196,000 for the preceding year. The improved performance was helped by higher interest income and a turnaround in an associated company.

Its revenue for the year grew 9.8 per cent to $43.63 million, with contribution of $36.8 million from projects in Changzhou and Tianjin. Its two golf courses contributed a gross profit of $5.4 million, up from $3.6 million in 2007.

Gross profit grew to $13.2 million from $2.9 million, but due to administrative and other expenses, Evergro still marked an operating loss of $586,000, albeit lower than 2007’s $3.65 million deficit.

An interest income of $1.33 million (FY2007: $407,000) and a $771,000 share of profit from an associated company (against a $327,000 share of loss for FY2007) helped the property player stay in the black. Earnings per share rose to 0.07 of a cent in 2008 from 0.04 of a cent in 2007.

Excluding exceptional items and tax, the group recorded a profit of $1.45 million, compared with a loss of $3.85 million for 2007.

Evergro saw a surge in cash and cash equivalents to $139.76 million at end-2008, up from $19.94 million at end-2007. Its cash hoard includes proceeds of some $137 million from a rights issue.

‘The next two quarters will be a trying time for all businesses and we do not expect our sales to improve,’ Evergro said in its financial statement yesterday.

It noted that measures by the Chinese government to cool its property market has resulted in a slowdown in the property sector from the second quarter last year. The slowdown was made worse by the global financial meltdown and recession which affected China’s economic growth.

‘The economic downturn has affected sales of our properties and golf memberships,’ Evergro said.

‘Many businesses were adversely affected and potential buyers, especially businessmen and entrepreneurs who purchase properties for investment purposes, continue to delay their intended purchases,’ it added. ‘This is especially felt for the sales of our Phase 2 project in Tianjin where less than 10 per cent of the properties have been sold after the launch.’

Evergro said that it expects the four trillion yuan (S$864.4 billion) stimulus package by the Chinese government and measures to stabilise the property market, such as the removal of restrictions on the second property purchases will improve market conditions gradually.

But in the meantime, it will continue to promote sales of its properties in Changzhou, Jiangyin and Tianjin and sales of golf memberships to generate cashflow and profit.

Source : Business Times – 20 Jan 2009

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K-Reit Asia’s Q4 distributable income soars to $17.4m

Posted by luxuryasiahome on January 20, 2009

KEPPEL Land’s listed office trust, K-Reit Asia, yesterday reported a distributable income to unitholders of $17.4 million for the fourth quarter ended Dec 31, 2008 – a 152 per cent jump from a year ago.

This followed a 68 per cent year-on-year increase in net property income to $11.8 million, due to lower property expenses and higher rental income.

Investment properties held directly by K-Reit achieved an average gross rental rate of $6.08 psf in December last year, compared with $4.65 psf in December 2007.

Despite the higher earnings, K-Reit’s distribution per unit (DPU) in Q4 2008 was 2.67 cents, lower than the 2.8 cents in the same period last year.

This was due to K-Reit’s rights issue in May last year, which added more than 390 million new units to the market.

On an annualised basis, K-Reit’s DPU in Q4 was 10.62 cents, generating a distribution yield of 15.2 per cent based on its unit closing price of 70 cents as at Dec 31, 2008. K-Reit last closed unchanged at 67 cents yesterday.

For FY2008, K-Reit reaped a net property income of $39.7 million, 40 per cent higher than in FY2007. This led to a 167 per cent surge in distributable income to $58.1 million.

DPU for FY2008 was 8.91 cents, marginally higher than the 8.82 cents a year ago. This translates to a distribution yield of 12.73 per cent.

For the period July 1, 2008 to Dec 31, 2008, K-Reit will pay out 5.07 cents per unit on Feb 23 this year. This will bring the total DPU payout to 13.04 cents for the period Jan 1, 2008 to Dec 31, 2008.

Trust manager K-Reit Asia Management sought to reassure investors about K-Reit’s financial strength yesterday. Having raised proceeds of $551.7 million from the rights issue in May 2008, K-Reit has a low aggregate leverage level of 27.6 per cent as at end-December 2008 and has no debt refinancing needs until 2011, said CEO of the trust manager, Tan Swee Yiow.

K-Reit also established a $1 billion multi-currency medium term note programme yesterday as an additional source of funding.

Mr Tan added that it would take a more than 54 per cent drop in K-Reit’s portfolio value for the leverage level to exceed 60 per cent. Under current rules, a Singapore-listed Reit’s aggregate leverage should not exceed 60 per cent of its deposited property if it obtains a credit rating and publicises it.

And while the year ahead could be challenging, K-Reit is still keeping an eye out for selective asset acquisitions across Asia. The Reit will adopt a ‘cautious and prudent’ approach to this, said Mr Tan.

Source : Business Times – 20 Jan 2009

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