Friday, June 22, 2007

U.S. workers must find new ways to cope

U.S. workers must find new ways to cope
By John Schenkenfelder

Global competition has rendered manufacturing-related unions in America virtually powerless. On the other hand, trade unions such as plumbers and electricians have no foreign competition and enjoy some collective bargaining benefits.
American manufacturers face ever-increasing pricing pressures from low-cost producing nations such as China, Vietnam and Mexico. Such competition restricts collective bargaining demands for increased wages and benefits. When worker demands are fiscally unreasonable, plants are shuttered and moved offshore or to states that favor a nonunion work force.
Global competition for jobs has successfully stifled wage increases in this country. In fact, despite inflationary pressures in oil, housing and food, middle income wages have stagnated. The American worker is long overdue a pay raise. Just ask any family trying to survive on two incomes.
Ironically, most small business owners complain that hard-working, loyal employees are hard to find. The reason is low wages. A logical mantra would be to pay them handsomely and they will come.
Competition in every industry squeezes prices at all levels, forcing businesses to keep a tight grip on costs. Over time, wages are the primary company expenditure, exceeding major capital expenditures, such as machines and technology,
Currently, American workers operate under constraints that make large salary increases nearly impossible. As a result, to earn a higher wage the average employee must continually upgrade educational and technological skills, move to a competitor or change careers.
Baby boomers should take particular note of this low-wage dilemma. Succeeding generations of underpaid young workers will find it difficult if not impossible to increase their standard of living. Moreover, inflated real estate values are beyond the earnings power of most young middle-class shoppers. Consequently, home prices will most likely plateau or decline, unless salaries increase sufficiently to make higher priced homes affordable.
In general, labor unions no longer wield sufficient authority to compel companies to change. As a result, American workers will have to find other ways to cope if they hope to get ahead financially.

US Real Estate Investment Trusts (REITs) Bubble Rolling Over! Foreign Financials Flying!

US Real Estate Investment Trusts (REITs) Bubble Rolling Over! Foreign Financials Flying! / Housing-Market / Global Stock Markets
Jun 22, 2007 - 09:30 AM

By: Money_and_Markets

Mike Larson writes : Just a couple weeks ago, I told you that the bond market had suffered a critical break. Now, we're seeing Real Estate Investment Trusts (REITs) roll over, too.

The benchmark exchange-traded fund for this sector, the iShares Dow Jones U.S. Real Estate Index Fund (IYR) , just broke through critical technical support. In other words, investors are voting with their feet and saying the bubble in commercial real estate is finito.

Just look at the chart!

This should come as absolutely no surprise to you …

In September 2006, I first started warning about how overvalued many REITs were. I suggested you exercise caution, saying, "If you're hip-deep in commercial real estate holdings, this may be a good time to step away from the table and call it a day."

Then, earlier this year, I singled out apartment REITs as being in particular trouble. My take was that many of the flippers and speculators who snapped up homes and condos during the boom wouldn't be able to sell them. Instead, they would dump their units onto the rental market. And that would hurt traditional apartment landlords.

By early May, I ratcheted my warnings up a notch . I said takeover mania in the sector had gone too far. I pointed out that commercial mortgage lenders had gone bonkers, just like their residential counterparts did during the housing bubble.

Lastly, I highlighted the underperformance of REIT shares, and said it was time to "jump off the REIT bandwagon."

Look what's happened since: The IYR is already down 16% from its early February high.

And I'm expecting even deeper losses in the months ahead. What will fuel such a move? Tighter debt and financing markets, that's what.

As I've said before, commercial lenders lost their marbles during the commercial real estate boom …

They financed anyone and everyone who wanted to buy an office building, shopping mall, or industrial park, using aggressive assumptions about rent growth and valuations in the process …

And they were aided and abetted by a dramatic influx of liquidity from the "secondary market" for commercial mortgages. That's where bundles of commercial loans are sold off, or "securitized," as a form of bond to investors.

In the past few weeks, however, lenders and investors have started finding religion. They're scrutinizing borrowers more closely and getting skittish about the performance of commercial mortgage bonds. That's draining liquidity from the system, and lowering valuations for commercial property.

As a great Wall Street Journal story, "Skyscraper Prices Might Start Returning to Earth," put it on June 2:

"Driving the boom were low interest rates and easy loan terms — similar to the home-buying boom — that allowed buyers to borrow as much as 95% of the value of the building, compared with roughly 75% historically.

"In recent weeks, lenders have become worried that prices have gotten so high that buyers wouldn't be able to raise rents high enough to pay off their loans. In response, the interest rates that buyers have to pay have risen, and banks have demanded that buyers put up bigger portions of the purchase price."

Bottom line: Yet another real estate bubble appears to be starting to deflate here in the U.S. If you jumped off these high-flyers when I told you to, congratulations! You dodged this carnage, and you're in great shape to ride the profit waves that are unfolding in other sectors, industries, and countries.

Let me tell you about one area that I like right now …

Plenty of Opportunities in Foreign Financial Firms

The real estate industry and overall economy is suffering here in the U.S. But it's an entirely different story overseas.

Think about it: Who gives credit cards and consumer loans to upwardly mobile citizens in India? Who lends funds to the Brazilian companies that are building telecommunications networks and hydroelectric plants, or extends credit to citizens in emerging markets like Eastern Europe and Turkey? Who provides the money to build all those Chinese office towers and factories?

The banks, that's who! And as long as the underlying economies where they operate continue to boom — like they are — they're the ones who are going to mint money.

Heck, I've been seeing juicy opportunities everywhere I look …

India: A few weeks ago, for instance, I recommended that my Interest Rate & Currency Trader subscribers target one of the titans of the Indian financial industry.

The stock recently shot up to a fresh all-time high, before pulling back to consolidate those gains. I think even more upside lies dead ahead!

Reason: Indian economic growth is off the charts. Gross domestic product in the $854-billion economy surged 9.2% last fiscal year. And we're likely to see another 8% or 9% rise in the current fiscal year.

That growth stems from the country's rapid industrialization and the emergence of a vibrant consumer class, one that's spending like never before. We're also seeing a massive surge in development projects designed to modernize the entire country.

One prominent banking official expects India to spend $500 billion on infrastructure and manufacturing projects over the next three years. Longer-term, Prime Minister Manmohan Singh recently estimated that India will shell out $320 billion just on roads, airports, and ports through 2012.

Again, the important question to ask is: "Who's funding all those improvements?" And the answer is, India's leading banks. Loan volume for these guys is on track to rise 25% or more annually for the next few years.

Europe: Safe Money Report subscribers hit paydirt earlier this year when Dutch financial giant ABN Amro got swept up in a takeover battle with multiple suitors. But I think there's more money to be made in European financial shares. Why?

For one thing, more intra-Europe takeovers are likely. The region's banks and insurers there are trying to cut costs, boost efficiency, and gain scale. Combining with each other allows them to do these things quickly.

Plus, these companies are riding a wave of international expansion into higher-growth markets. That's boosting their earnings potential.

One European giant I like just announced a $2.7 billion takeover deal in Turkey. It's snapping up a bank there because economic growth in Turkey has been averaging more than 7% for the past few years. Consumer bank loans are surging, up more than 20-fold since 2003!

China: It's the same story. Insurance companies and banks are seeing business boom along with the economy. Chinese bank loans are growing by more than 15% and Chinese insurance premiums surged 24% year-over-year in the first four months of 2007.

I just recommended call options on one of my favorite plays in that market. Yesterday, they soared in value after the insurance company struck a partnership deal with a U.S. private equity firm. The two companies are going to explore ways for the insurance firm to participate in the boom in Chinese real estate, a move that should boost returns.

How You Can Ride the Global Financing Wave

Investing in overseas financials isn't risk-free. We're still talking about stocks, after all. And foreign markets can be volatile, trading wildly on the latest news in the currency, bond, and stock markets — even while you sleep!

But for a portion of your more speculative funds, I think investing in foreign financial firms can really pay off. And you have at least three ways to play this trend …

Choice #1: You can buy a global financial mutual fund or exchange-traded fund. One ETF that comes to mind is the WisdomTree International Financial Sector Fund (DRF) . It holds more than 200 of the world's top financial firms, with companies based in the U.K., France, and Austria topping the list.

One caveat, though: Interest rates are rising in many countries right now, which means this kind of "shotgun approach" to buying global financial firms may not be the best way to go.

Choice #2: You can try zeroing in on individual global financial stocks. For example, you could look into the American Depository Receipts (ADRs) of foreign firms.

A great place to get started is the NYSE Euronext exchange's search tool , which allows you to research foreign companies that trade on the U.S. exchange. Many banks and insurers are represented there.

Choice #3: If you're looking for even bigger gains and strictly limited risk, consider trading options on interest rates and global financial firms. Again, this is something you can research on your own.

Or, for more guidance and specific names, give my Interest Rate & Currency Trader a try. I'll tell you exactly what options on interest rate instruments and leading global financial firms look best poised for gains. Not all positions will be winners, of course. But as I mentioned, we've had some nice successes in global financial stocks already, and I'm expecting even more in the months ahead.

Until next time,

Mike Larson

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Lend Lease leads field for USAF housing deal

Lend Lease leads field for USAF housing deal
Florence Chong
June 21, 2007

ACTUS Lend Lease, the US subsidiary of Lend Lease Corp, is the preferred tenderer for a $US400 million ($475 million) US Air Force housing project.
The contract is worth $US50 million more than anticipated, a spokeswoman said.

Lend Lease has been in exclusive negotiations with the US Air Force for the second phase of the family housing project at Hickam Air Force Base in Hawaii.

The negotiations are expected to be finalised next financial year.

The latest contract involves developing, constructing, renovating and managing about 1120 houses over 50 years.

The project has an initial development value of about $US400 million over seven years.

Actus Lend Lease is already working on the first phase, which involves about 1350 houses and has an ongoing five-year initial development expenditure of $US240 million.

Actus was selected in March as the preferred bidder to develop military family housing at three US Air Force bases in California and Colorado.

So far, it has secured between 23 per cent and 30 per cent of the contracts to come out of the $US20 billion military privatisation program.

It owns and manages more than 38,000 houses in the US, valued at about $US5 billion, under 50-year concessions.

Super rush may coincide with city investor influx

Super rush may coincide with city investor influx
Majella Corrigan
June 23, 2007

JUNE 30 is nearly here, and as the window closes on the chance to put large sums of money into superannuation, it could also herald the much-mooted return of the investor to capital city markets.
In trying to make decisions, however, investors face mixed signals.

Yes, rents are rising and yes, there's a shortage of rental property in many eastern seaboard capital cities.

The big questions are where the strong capital growth will be, and how far away is that growth? According to valuers Herron Todd White, if interest rates remain static, or better still, fall, Melbourne's residential market is likely to outperform its eastern capital city counterparts.

Demographic and population change, yield growth combined with falling vacancy rates, and lagging building approvals are all good news for Melbourne.

So it should see the best growth of any capital city in the next few years.

"First homebuyers and investors should take notice and position themselves accordingly with the market poised to begin its growth cycle again within the next 12 months," HTW's review says. The big factor in Melbourne's favour generally is that last year its population grew by nearly 70,000 - more than any other capital city.

Not only is Melbourne a big destination for skilled migrants, but it no longer suffers a net loss in interstate migration, HTW says.

In the inner city and Docklands the apartment glut, synonymous with Melbourne for so long, has been mostly absorbed, the valuer says.

Any recovery is expected to be led by investors, who are now seeing vacancy rates dip to a 25-year low of 1.2 per cent (partly because those who can't afford to buy must rent) and returns increase for the first time in eight years.

While rents rose in 2006, so did interest rates, meaning there was no impetus for investors to buy.

Stable or lower rates will further improve cash flow, making it easier for investors to take the plunge.

Despite this, HTW says the average yield is still 4 per cent across the entire residential sector, so at least two years of rental growth of 10 per cent or more is needed to push yields up to their pre-boom levels.

Meanwhile in inner Sydney some agents are reporting zero vacancies, and rents have broadly risen 5 per cent. In the inner west, the rental increase is probably much higher.

In Sydney's outer west, the rental market is described as "red hot", because of a lack of investors. Units near transport are getting close to 10 per cent yields, but HTW says it's hard-pressed to point to any capital value growth areas in this apartment sector.

This is probably a good point for investors to remember.

There are dual reasons for investing - yield and price growth - and they both can't go up dramatically at the same time.

Buyers governed solely by yield could find capital growth elusive if they haven't chosen wisely.

Property investors are in ATO's sights

Property investors are in ATO's sights
Nicki Bourlioufas
June 23, 2007

PROPERTY investors need to watch out because they are probably on the Australian Taxation Office's hit list this year for a tax check.
More than 1.4 million people claimed more than $21 billion in rental deductions in their 2005-06 tax returns.

This financial year, the ATO has written to 45,000 individuals considered at risk of not complying, reminding them to check the accuracy of their claims before lodging returns.

According to the ATO, it will examine about 6000 at-risk cases.

It will check the accuracy of capital gains declared by investors and match the data against records from state and territory revenue and land-title offices.

It will also check figures provided by investors to third parties such as banks.

Yet, the fact remains, the opportunity for deductions in investment properties are often greater than for borrowing to invest in shares because of the number of deduction possibilities.

For a margin loan, the main expense is interest but there are two categories of rental property expenses that investors can claim.

First, expenses in the year they are paid: council rates, repairs, maintenance, insurance, land tax and property management fees, as well as interest costs on an investment loan.

Second, expenses deductible over several years: borrowing transaction costs, the costs of depreciating assets and capital works deductions on structures.

Getting it right

FROM 2007-08, the ATO will issue pre-prepared returns.

Taxpayers will be able to go online to access an income-tax return prepared by the Commissioner of Taxation and based on past data that will include income from salary and wages, interest and dividends.

"That just shows you how much information they now have on individual taxpayers and how much they are collecting," PricewaterhouseCoopers tax partner Mike Forsdick says.

If an investor's tax-deductible expenses on a property exceed the rental income, the loss can be offset against other income, such as salary, to reduce tax payable. In this way, negative gearing is most beneficial to investors who pay tax at the highest marginal rate of 45 per cent because the ATO covers almost half their loss.

"Borrowing costs are tax-deductible, but only over several years, Mr Forsdick said.

"These costs, which include loan establishment fees, mortgage insurance and stamp duty on the loan, must be deducted over life of the loan or five years, whichever is shorter.

Investors can't claim costs associated with buying or selling a property, although these elements may form part of the cost base of the property for capital gains tax purposes.

When deductions are made, the property must be available for rent.

"You can only claim expenses if the property is available for rent," Forsdick says. "If a property is sitting empty, you can still claim expenses if it is available for rent, but if it isn't available, you can't claim expenses for that period."

The higher the expenses on a property investor's tax return, the more likely they would be checked by the taxman, so it was important to keep good records, Forsdick says.

"It's not uncommon for the ATO to send out questionnaires to people who own investment property, particularly if there are large deductions," he says.

A common sticking point is repairs.

Those related to the wear and tear of assets in the building are tax-deductible, but repairs or renovations carried out to get a property ready for rent or for capital improvements are not expenses.

"One of the traps is spending money getting a property into shape before renting it out," Forsdick says.

"Expenses incurred to get a property ready for letting are capital expenses and must go on the cost base of the property for capital gains tax purposes."

Depreciation allowances can enhance after-tax returns.

Investors can depreciate capital works deductions for the construction cost of residential buildings built after July 1985 and for structural improvements, and depreciation can be claimed for wear and tear on fixtures and fittings in the property. Buildings are depreciated at a rate of 2.5 per cent or 4 per cent a year, depending on when they were built.

The cost of a house built in 1990, for example, can be claimed at 2.5 per cent for 40 years until 2030, provided it is used as an investment property.

According to property depreciation specialist Depreciator, up to 80 per cent of property investors don't correctly claim depreciation on their investment properties.

Depreciator general manager Scott Brunsdon estimates that depreciation deductions on a new house can amount to $10,000 a year, and those for a seven-year-old house could be between $3000 and $4000.

"Deductions on new units in large complexes can, in many cases, be around $14,000 per year for the first couple of years," Brunsdon says.

Napier and Blakeley tax depreciation services regional manager David Liddelow says, investors generally would get more deductions for a new high-rise development than for a house because there were more plant depreciation allowances.

"With a house, you can depreciate the structure and depreciable assets, but you don't have the shared facilities," he says.

Liddelow says investors who buy into strata properties can claim depreciation allowances for common property.

"When you buy into a strata property, you are entitled to a share of the depreciation, usually based on the unit entitlements of the strata plan," he says.

A tax depreciation schedule is an important element of owning an investment property.

It lists all items in an investment property that are falling in value, as well as annual depreciation allowances, including capital works deductions.

Some new properties come with a TDS, but investors would be prudent to get their own report prepared, Liddelow says. "We are a little bit wary of a free TDS as it may not list all deductions you're entitled to," he says.

Although a TDS is prepared by a quantity surveyor, the numbers are often used by an accountant to complete a tax return.

NSW push for APEC tourism

NSW push for APEC tourism
Glenda Korporaal
June 22, 2007

REGIONAL areas of NSW are planning promotions to attract Sydney tourists during the APEC meeting in September, Sydney Chamber of Commerce executive director Patricia Forsythe said yesterday.
September 7, a Friday, has been declared a public holiday for workers in the Sydney area, as APEC leaders arrive in the city for their meeting over the weekend.

Ms Forsythe said the Hunter Valley was already gearing up to attract people from Sydney on three-day packages.

"One of the economic spin-offs from APEC could be that there will be a boost to tourism in other regions," she told an APEC seminar in Sydney.

Ms Forsythe said the APEC meeting would be a boost for the state despite the fact that Sydney businesses would bear the cost of the extra holiday.

A public holiday in NSW would cost the state an estimated $327 million.

She predicted that regional shopping centres would benefit as Sydney workers stayed away from the CBD over the weekend and shopped closer to home.

"The Friday may well be a bumper trading day for shopping centres outside the Sydney CBD."

Ms Forsythe said she hoped that extensive international media coverage of APEC-associated meetings - which will take place over the week starting September 2 and bring in more than 1500 media personnel from the 21 APEC countries - would provide a net gain to Sydney business.

While there would be little conventional business done over the weekend, the event would be a chance to showcase the city and encourage more international businesses to set up offices there.

Ms Forsythe said Sydney had become a centre for international business and finance in Australia.

Some 400 international business leaders will be coming to a two-day summit ahead of the APEC leaders meeting.

"It will be an opportunity for them to see what Sydney does well," Ms Forsythe said.

Olam bags Qld Cotton as French rival gives up fight

Olam bags Qld Cotton as French rival gives up fight
Geoffrey Newman
June 22, 2007

SINGAPORE-based food trader Olam International has denied any deal with the rival bidder for Queensland Cotton, to sell off parts of the business in exchange for it dropping out of the takeover race.
Olam yesterday announced that French commodities trader Louis Dreyfus had agreed to accept its increased offer of $5.90 a share for Queensland Cotton Holdings (QCH), ending a takeover battle between the two that began in March.

Louis Dreyfus, the world's largest cotton trader, agreed to sell its 20 per cent stake in QCH, Australia's largest producer, to Olam.

Olam denied it had offered any inducements, despite revealing that Louis Dreyfus had expressed an interest in QCH's warehouse in Eloy, Arizona, and that Olam was considering selling any assets outside Australia that were "non-core".

"No agreement, undertaking or understanding exists with anyone to sell any assets," the three parties said in a joint statement. "Louis Dreyfus' stated intention to accept the Olam takeover offer is not conditional on any sale or any other matter."

Olam also said it was considering partnering in non-cotton products in other countries.

Olam lifted its offer for QCH to $5.90 per share from its prior offer of $5.65, valuing QCH at about $166.45 million.

Louis Dreyfus's last offer was $5.85 a share.

With the Louis Dreyfus stake now in hand, Olam has an interest of 28.5 per cent in QCH - becoming the largest single shareholder.

The latest Olam bid was unanimously recommended by the QCH board. All QCH shareholders who had already accepted Olam's prior offer of $5.65 will receive an extra 25c a share. Olam has a presence in 52 countries and its businesses include cotton, dairy, cocoa, coffee, cashews, sesame, rice and teak wood.

It has said it is also interested in using QCH, which also has a substantial US presence, to expand into other Australian agricultural sectors such as wheat, dairy and nuts.

"We were surprised that Louis Dreyfus has decided to throw in the towel," said Tom Elliott, whose Melbourne-based hedge fund MM&E Capital has built an 8 per cent stake in QCH since Olam's first bid, and hasn't decided to sell.

"They must have other plans with the money they will make from selling their stake. Other stocks in the agriculture sector could come under attention."

QCH shares closed 2c lower at $5.88.

Additional reporting: AAP, Bloomberg

Household debt hits record levels in Australia

Household debt hits record levels
David Uren, Economics correspondent
June 22, 2007

HOUSEHOLDS are spending, on average, a record 11.9 per cent of their income servicing debt following the interest rate increases late last year.
Reserve Bank figures released yesterday showed the interest burden had risen by two percentage points since the last federal election, as higher interest rates were levied on increased debts.

John Howard said the heavier debt burden reflected rising affluence.

"It is the case that people are buying ever more expensive houses, and they are doing that because of a number of factors," the Prime Minister said. "One of them is that interest rates are lower and people can borrow more."

Labor Treasury spokesman Wayne Swan said the rising interest burden showed that Mr Howard was out of touch in his claim that families had never been better off.

"Eight interest rate rises despite his promise to keep rates at record lows are hitting Australian families hard."

The average household is now supporting debts that are 58.7 per cent greater than their total annual income, whereas at the last election, debts were 41.3per cent more than a year's income.

However, the Reserve Bank's figures on household finances show that assets are rising faster than debt. Households now have assets, including housing, superannuation and other investments, that are equal toeight times their annual income.

This is a capital gain over the past three years equivalent to 60 per cent of a full year's income.

It is not only housing debt that is rising. Margin lending to buy shares has soared 40 per cent over the past year to reach $30.2 billion in March.

Credit card debt rose at its fastest rate in three years, increasing by 8 per cent to just under $40 billion.

"The data suggests that Australians are more confident about their ability to take on more debt, as well as meeting the greater servicing burden," CommSec economist Martin Arnold said yesterday.

"Debt levels are rising, but we are choosing to use the debt more productively to buy assets that traditionally rise in value, like shares and property."

J Holland sells resorts

J Holland sells resorts
Fiona Cameron
June 22, 2007

JOHN Holland has sold out of three north Queensland resort developments to focus on its core construction engineering business.
John Holland, a subsidiary of Leighton Holdings, announced yesterday that it had sold its interests in the developments for an undisclosed sum to its joint venture partner, Queensland-based Satori Resorts.

Satori is owned by Warren Witt of the Queensland-based Witt Property Group and businessman Rod Lamb, an executive director with Sedgman Ltd.

The joint venture owns sites at Little Cove and Mission Beach, where it has development approvals for planned resorts with end values of $108 million and $104 million respectively.

It has not finalised its purchase of the Ella Bay site, but settlement is due once development approval is granted.

Myer sale pays for privateers

Myer sale pays for privateers
Turi Condon, Property editor
June 22, 2007

PRIVATE equity group Newbridge Capital looks set to reap a startling $300 million profit on the sale of the iconic Melbourne Myer store, just a year after it helped to buy the Myer department store chain out of the languishing Coles Myer empire.
The trophy site, which will be redeveloped over the next two years and reopened in 2009 after a $1.2 billion revamp, was yesterday bought by the Commonwealth Bank's retail property trust and giant Singapore investor GIC for a record-breaking price of almost $600 million.

The revamp will see the structure, whose facade will remain, backed by buildings designed like wrapped parcels and a giant glass dome above the historic Bourke Street emporium, in a project to be developed over five years.

The Commonwealth Bank's $4.8 billion CFS Retail Property Trust, in which Melbourne billionaire John Gandel has a 20 per cent stake, and its partners beat development heavyweight Lend Lease in the final round of bids, and exclusive negotiations are expected to be finalised in two to three weeks. The agreement was signed late yesterday afternoon.

The sale price shot up from over $500 million in the first round of bidding run by agent CB Richard Ellis.

Coles finally raised the white flag on the department store chain last year, selling it to Newbridge and the founding Myer family (which has about 8 per cent) for $1.4 billion.

Newbridge is thought to have paid as much as $300 million of the purchase price for the site, valued at $200 million two years ago. It was unsuccessfully offered for sale last year.

The CFS trust became the front runner in recent weeks, with the deal believed to hinge on Myer not losing income by trading thoughout the development process.

Myer will move into the new 42,000sqm Bourke Street store when it is completed in late 2009. The balance of the development of the new Lonsdale Street buildings, intersected by Melbourne-style laneways, then gets under way in earnest.

Darren Steinberg, head of listed property for the Commonwealth Bank's Colonial division, flew to Singapore this year to tempt that Government's real estate head Seek Ngee Huat to join its bid.

Yesterday, Mr Steinberg said Colonial had forged strong relationships in the investment community and, with its partners, would deliver an impressive building with an end value of $1.2 billion.

GIC, which manages more than $100 billion of foreign reserves - about 10 per cent invested in real estate - is already a big investor in Australian property, paying $717.5 million for a half-stake in Westfield's Parramatta shopping centre last month.

Myer is expected to account for 40 per cent of the income of the new development, leasing the Bourke Street store for up to 20 years.

Damac to expand property investments in the Far East

Damac to expand property investments in the Far East

21 June 2007

DUBAI — Damac Properties, one of the leading real estate developers in the UAE and whole Middle East, will announce within the next 12 months, new property investments in Malaysia and Singapore to expand its portfolio in the Far East.

Peter Riddoch, CEO of Damac, said the planned investment in the two Southeast Asian countries would be in addition to the company's project in the Far East — the Dh4.41-billion ($1.2 billion) mixed-use twin-towers in China's Tianjin Province.

A part of Damac Holding, Damac Properties is rapidly expanding its residential, leisure and commercial development projects in the Middle East, North Africa, Egypt, Morocco, Jordan, Lebanon, Qatar and the Far East.

Earlier, Damac announced its current projects in the UAE and other countries worth $30 billion including, among others, the $16-billion property development in Egypt and the $120-million in Lebanon.

Yesterday, the company unveiled its first branded tower, Damac Heights, located at Dubai Marina overlooking the Palm Jumeirah. The launch of the 90-storey tower is part of the company's promotion during the annual Dubai Summer Surprises (DSS), the 72-day long shopping and retail extravaganza that kicks off today.

Company officials said the Dh2.5-billion project, whose design is being finalised, would be completed during the first-quarter of 2011. The projects designer is the international architectural firm, Aedas.

Damac Heights will have 60 floors of one-, two- and three-bedroom apartments and 25 floors of duplexes and townhouses while the first five levels would house the parking space, restaurants, gym, swimming pool and other luxury lifestyle facilities.

"This lifestyle has my signature on it," said Hussain Sajwani, chairman of Damac Holding, of Damac Heights. "We have created a very special series of limitless luxury residences that carry the unmistakable signature of the Damac standard in luxury."

In a statement, Damac said that a purchase of Dh350,000 worth of property at any of its projects would entitle the buyer to enter into a fortnightly raffle draw during the DSS period. Five luxury cars are at stake — one Bentley Continental, two Aston Martin V8 Vantage Coupes and two Lamborghini Gallardo Coupes. It added that those interested get 14 days to pay 20 per cent of the price of any Damac apartments to be eligible for the raffle draw.

In the recent annual Dubai Shopping Festival (DSF), Damac announced an Dh87-million promotion that included one brand-new Eclipse 500 Jet, worth Dh5.5-million, given to one of the first 700 buyers of Damac Properties during the celebration.

Singapore fund GIC in JV wih Runwal for Ghatkopar realty

Singapore fund GIC in JV wih Runwal for Ghatkopar realty


MUMBAI: Government of Singapore Investment Corporation (GIC), which manages more than $100 billion worth of funds, has formed a joint venture with Mumbai-based real estate firm Runwal group to develop a commercial property project in central Mumbai suburb Ghatkopar with a total investment of Rs 250 crore.

GIC Real Estate, the property arm of GIC, and the Runwal group have floated a 50:50 JV, which will develop a 8.5-lakh sq ft mall in Ghatkopar. The mall will be part of the Runwal group’s R-town development on the 20-acre plot that belonged to Wyeth Laboratories.

The GIC JV is Runwals’ second FDI project in Mumbai. Last year, the group had tied up with Singapore-based CapitaLand to develop a residential project.

When contacted by ET, Sandeep Runwal, director, Runwal group, declined to comment on the deal.GIC Real Estate, one of the world's top 10 real estate investment companies, had said that its has plans to invest “hundreds of millions of dollars” in shops and homes in India and Brazil.

The 24-year-old company, which owns Chicago’s AT&T Corporate Center, Tokyo’s Shiodome City Center, Seoul’s Star Tower and Sydney’s Chifley Tower and Plaza, is widening its reach to other emerging countries as the US residential property market slows down, and competition pushes up prices in markets such as Japan.

Last year, Asia’s leading property firms, CapitaLand group and Runwal group had formed a JV to develop residential projects with an investment of Rs 450 crore.The Runwal group has so far developed over 35 residential and commercial projects in Mumbai.

KL, Jakarta Should Collaborate In Islamic Finance And Halal Market

KL, Jakarta Should Collaborate In Islamic Finance And Halal Market

By Mohd Nasir Yusoff

JAKARTA, June 18 (Bernama) -- Malaysia and Indonesia should strengthen their collaboration in advancing the agenda to further develop Islamic finance and the halal market for the benefit of the international community, Malaysian Minister in the Prime Minister's Department Datuk Seri Effendi Norwawi said Monday.

Addressing some 700 captains of industry at the Malaysia-Indonesia Investment and Finance Summit here, he said that would provide both countries with the strategic avenues for partnership where they have distinct advantage.

"This will create a niche for both nations to secure a competitive advantage not only in the regional markets but also globally," he said, adding that Malaysia and Indonesia must not be perceived as separate, individual markets but rather as gateways to a larger global economic and financial environment.

He said the vast business and commercial potential of the halal sector is beyond doubt, with a captive market of 1.6 billion Muslims and an estimated market size of more than US$600 billion (US$1 = RM3.44).

The opportunities in that regard are tremendous, not merely in the context of the global Muslim community but also the non-Muslim world as halal products and services are readily accepted everywhere, as long as they meet global standards and quality, product and service integrity, and conform to safety standards and care for the environment.

Effendi explained that the Malaysian government has outlined holistic strategies to intensify the development of the halal industry towards achieving the vision of making Malaysia a global halal hub. These include setting up the Halal Industry Development Corporation last year to spearhead and coordinate the development of the halal sector.

"Both local and international investors are welcome to take advantage of the various programmes being offered in Malaysia," he said, adding that among the projects are the creation of dedicated halal industrial zones to tap the growth of the global halal market.

As for Islamic finance, he said it opens tremendous opportunities in enhancing the economic and financial linkages between Malaysia and Indonesia, as well as other regional economies, to promote growth and development in the region.

Financial institutions and companies from Malaysia and Indonesia can establish strategic alliances to raise funds and channel them for development via issuance of sukuk (Islamic bonds) or the setting up of private equity funds based on Syariah principles, he added.

He pointed out that in the global Islamic bond market, the issuance of Islamic instruments is on the increase and has already surpassed the US$50 billion mark with more governments, including from among the G8 (Group of eight industries countries), and multinational corporations exploring the possibility of issuing sukuk for their fund raising exercises.

Effendi said Malaysia aims to be a global centre for the origination, distribution and trading of Islamic financial instruments, Islamic fund and wealth management as well as a centre for takaful and re-takaful, and has already accorded a number of incentives to accelerate the growth.

On Malaysia-Indonesia trade, he said both countries have not adequately taken advantage of the opportunities that each side has to offer, especially as statistics showed that in terms of Malaysia's exports to the major Asean countries, Indonesia accounts for only 12 percent of the total.

The percentage of Malaysia's exports to Indonesia in relation to its total exports to world markets is even smaller, at only 3.1 percent, with exports to the developed economies taking up the major portion, he added.

He hoped the investment and finance summit, organised by the Labuan Offshore Financial Services Authority (LOFSA) will blaze the trail in exploring new growth areas and investment opportunities in various forms, including joint ventures with equity considerations, strategic alliances or technological collaborations.

Effendi, together with Indonesian Minister for Economic Coordination Dr Boediono and accompanied by LOFSA chairperson Tan Sri Zeti Akhtar Aziz, who is also Bank Negara Malaysia governor, later witnessed the signing of two memoranda of understanding.

One was between Malaysian government-owned trustee company Amanah Raya Bhd and PT Gapura Prima to establish a real estate investment trust (REIT) through a joint venture company.

The other was between the AmanahRaya-Gapura Prima consortium and PT PP, one of the largest state-owned general contractors in Indonesia, on the inclusion of the East Point Shopping Mall Surabaya in the REIT.


Overseas Union Enterprise (OUE), controlled by Indonesia’s Lippo Group and Malaysian tycoon Ananda Krishnan to buy Grangeford

Overseas Union Enterprise (OUE), controlled by Indonesia’s Lippo Group and Malaysian tycoon Ananda Krishnan, is believed to have inked a conditional put-and-call option to buy The Grangeford for $592 million or $1,810 per square foot (psf) of potential gross floor area, say sources.

The $1,810 psf per plot ratio (ppr) unit land price is inclusive of $87.8 million that the developer will have to pay the state to top up the site’s remaining 66-year lease to 99 years.

CB Richard Ellis (CBRE) is brokering the deal.

The put-and-call option is subject to approval for the collective sale by owners controlling at least 80 per cent of share values in the District 10 property along Grange Road, just opposite the Indian High Commission.

BT understands that so far, approval from owners with 75 per cent share values has been secured. It will take another 10 owners to give the nod before the 80 per cent threshold is reached. In all, the development has 193 units. The option is valid for four weeks, BT understands.

The option can be exercised by both sides. That means that upon the minimum 80 per cent consent level being secured, either OUE can make the vendors sell The Grangeford or the vendors can make OUE buy.

The $1,810 psf ppr top price achieved for The Grangeford is the highest achieved on the island for a 99-year leasehold residential site. For a freehold site, the current benchmark, set late last week, was for SC Global’s acquisition of The Ardmore for $2,337 psf ppr.

The $1,810 psf ppr OUE has offered for The Grangeford also surpasses the $1,735 psf ppr it offered in December last year for the freehold Parisian at Angullia Park.

Based on OUE’s bid price for Grangeford, market watchers reckon the breakeven cost for a new condo on the site could be around $2,400 to $2,500 psf. OUE is part of the Lippo Group, which has demonstrated a flair for developing high-quality residential projects like Newton One and Trillium.

Market watchers reckon the $1,810 psf ppr offer by OUE will also be closely watched by owners of the next door Horizon Towers, also a leasehold estate and which was sold for $800 psf ppr earlier this year and which is currently mired in uncertainty.

As for The Grangeford, if the deal with OUE is finalised, owners of two-bedroom units will receive $2.7 million per unit (or $2,302 psf based on the existing strata area of the apartment), while owners of three-bedders will walk away with $3.43 million or $1,955 psf. Market watchers note that based on the sales proceeds of $1,950 to $2,300 psf of existing strata area, The Grangeford’s sellers have a good spread of replacement properties in the vicinity to pick, including The Imperial, Cosmopolitan and Trillium. Property agents reckon that resale units in these developments - all of which are freehold and new - can be bought for $1,700 to $2,150 psf range.

The Grangeford has a land area of 130,982 square feet and under Master Plan 2003, is zoned for residential use with a 2.8 plot ratio and a 36-storey height limit. However, the assumption being made is that the authorities will allow a new development on the site to retain the current existing gross floor area of 375,466 sq ft, which reflects a 2.87 plot ratio.

CBRE has previously said that even if the developer builds an additional 10 per cent gross floor area allowed for balconies, no DC is payable as the development baseline is high - at 547,926 sq ft or an equivalent plot ratio of 4.18.

The Grangeford’s reserve price has been revised upwards several times since last year from $280 million in 2006 to $350 million in Q1 this year to $550 million when the latest expression of interest was launched in April. That exercise closed in late May attracting four bidders, who were invited to resubmit bids. OUE emerged as the highest bidder.

Source: The Business Times, 22 June 2007

Singapore’s construction spending is forecast to hit $55 billion by 2011

Singapore’s construction spending is forecast to hit $55 billion by 2011, buoyed by contracts to be awarded for the integrated resorts (IRs), and petrochemical plants at Jurong Island, Goldman Sachs said in a report yesterday.

Total contracts awarded this year should come in at the high end of a $17-$19 billion range forecast by the Building and Construction Authority, indicating a 20 per cent jump this year from $16.1 billion in 2006, said the investment bank.

Goldman Sachs added that construction orders are set to reach a high by mid-2008, surpassing the previous cyclical peak of $23 billion in 1997.

‘The construction sector is on a full swing to recovery and we expect a multi-year acceleration in activities,’ said Goldman Sachs analysts Chee Yoke Fong and Rick Loo.

Developers of the two integrated resorts at Marina Bay and Sentosa - which will cost a total of $10.25 billion to build - are set to award contracts over the next three to six months, along with the developer of a new sports facility.

The Sports Hub is due for completion in 2011, at a cost estimated at between $650 million and $800 million.

ExxonMobil, the world’s largest oil company, may also award construction orders for a US$4 billion petrochemical complex at Jurong Island, known as the Singapore Parallel Train project.

While Exxon will only finalise its plans for the plant in about a month’s time, Goldman Sachs said ‘preparation works may have started in anticipation of construction commencing in mid-2008′. Another petrochemicals company, Shell, started construction of a US$3 billion project on Jurong Island in March. Goldman Sachs expects building activities to peak in 2008-09.

The hot property market is likely to churn out more contracts for residential developments as well, while the new Marina Bay Financial Centre should bring in more building orders, Goldman Sachs said.

The US investment bank’s customised basket of construction-related stocks has risen 41 per cent since it was introduced at the end of March, and Goldman expects further upside with the construction boom.

Goldman named crane rental company Tat Hong Holdings and structural steelworks company Yongnam Holdings in the same report, saying both subcontractors hold higher pricing power due to their niche market positions.

‘They (Tat Hong and Yongnam) will emerge as front runners among their peers, and enjoy higher margins in the current environment of buoyant demand and tight capacity,’ said the analysts.

Tat Hong is currently supplying more than 30 cranes to the Marina Bay casino project and could rent out more, given that it is possible that up to 80 cranes would be needed for both casinos during peak periods, the analysts said.

Meanwhile, Yongnam, a bidder for the Marina Bay casino project, expects the first set of structural steelworks contracts to be announced in August.

Goldman Sachs had a ‘buy’ rating for both stocks, with a 12-month price target of $2.21 for Tat Hong, and a price target of $0.46 for Yongnam.

At the end of yesterday’s trading, Tat Hong shares closed 1.4 per cent higher at $2.20, while Yongnam’s rose 1.2 per cent to finish at $0.425.

Source: The Business Times, 22 June 2007

Major investment deals in Singapore’s property sector since January have totalled $21.4 billion

Major investment deals in Singapore’s property sector since January have totalled $21.4 billion, thanks to a roaring collective sale market.

The figure is 48 per cent higher than that a year ago, and investment sales are on track to hit a record this year, according to a report by property consultancy CB Richard Ellis (CBRE).

‘At this halfway point, there is every reason to expect that investment sales for the whole of 2007 will surpass the $30.5 billion set last year and may hit $35 billion,’ said Mr Jeremy Lake, CBRE’s executive director for investment properties.

But the value of deals done in the April to June period dipped slightly from that recorded in the preceding three months. The figure came to $9.7 billion, down from $11.7 billion in January to March.

Investment deals tracked by CBRE are sales of properties done at a value exceeding $5 million. They include land sales, collective sales and sales of strata-titled properties.

Of the sales so far this year, the private sector accounted for 86 per cent, or $18.5 billion, said CBRE. Government land deals, including the recent sale of a Dakota Crescent site for $229 million, made up the rest.

The lion’s share of the deals this year remained with the residential sector, which made up 68 per cent of all investment sales. A total of 67 collective sales have been recorded since January, to the tune of $7.9 billion, said CBRE.

Office deals took second place, accounting for 23 per cent, or $4.8 billion, of the pie.

For the second half of the year, Mr Lake predicts that sales from the public sector will ‘contribute significantly’, given the release of sites in the government land sales programme.

Source: The Straits Times, 22 June 2007

Koh Brothers Group, Heeton Holdings, KSH Holdings and Lian Beng Holdings forked out $243 million for Lincoln Lodge off Newton Road.

A group of four property and construction firms has paid a benchmark price for a site in Newton, betting that home prices in the area will surge over the next two years.

The consortium of Koh Brothers Group, Heeton Holdings, KSH Holdings and Lian Beng Holdings forked out $243 million for Lincoln Lodge off Newton Road.

Owners at the 98-unit estate will each get between $1.89 million and $3.07 million.

The consortium’s price works out to $1,449 per sq ft per plot ratio (psf ppr) for the 59,984 sq ft site - a record land price for the Newton area, said Newman & Goh, which marketed the estate.

The previous record was held by Gilstead View, which was sold for $1,070 psf ppr last month.

Newman & Goh’s head of investment sales, Mr Jeffrey Goh, believes that a new development on the Lincoln Lodge site could fetch $2,500 psf.

This bullish projection is ‘riding on the announcement of SC Global’s The Marq, which is targeted to fetch $4,000 psf’, he said.

SC Global said on Tuesday that its latest project at Paterson Hill in the prime Orchard Road area will be sold at average prices of $4,000 psf.

But although Newton homes are still considerably cheaper than those in Orchard, Mr Goh is confident that their prices are set to soar.

‘Already, we have heard that some upcoming launches in the Newton area will be priced above $2,000 psf,’ he told The Straits Times.

‘Going forward, 18 months down the road, it shouldn’t be a problem for a new project on the Lincoln Lodge site to fetch $2,500 psf, and maybe even up to $2,700 psf.’

The record for homes in the Newton area is believed to be held by Scotts HighPark. The project, at Scotts Road next to Newton MRT Station, has fetched slightly more than $2,000 psf for a handful of units.

But closer to Lincoln Lodge, which is on Khiang Guan Avenue near Goldhill Plaza, most newer condominiums sell for only between $1,100 psf and $1,450 psf.

Units at the neighbouring Newton Suites, for instance, have changed hands for an average of $1,300 psf in the past two months. Nearby, Park Infinia at Wee Nam is selling for $1,200 psf and above.

Lincoln Lodge’s break-even price is expected to be about $2,000 psf ppr, said Mr Goh.

A 36-storey project with 120 apartments of 1,600 sq ft each can be built on the site, said Koh Brothers yesterday.

The shares of all four partners, which own equal stakes in the project, rose yesterday.

Koh Brothers was up 1.5 cents at 55.5 cents; Heeton Holdings advanced 0.5 cent to 98.5 cents; KSH Holdings added four cents to 87 cents; and Lian Beng increased 2.5 cents to 44 cents.

Source: The Straits Times, 22 June 2007
Merrill Lynch & Co plans to raise funds to invest in real estate and infrastructure, chasing rivals Goldman Sachs Group and Morgan Stanley in offering clients alternatives to takeover funds.

‘There’s no doubt the infrastructure space is an opportunity that’s clearly evolving,’ Ahmass Fakahany, co-president of Merrill, said yesterday at a news conference in Dubai, United Arab Emirates. The size of the funds ‘depends on the opportunities’, Mr Fakahany said, declining to be more specific.

The New York-based company, the world’s third-largest securities firm by market value, aims to invest its own and clients’ capital in the funds, Mr Fakahany said. Pension funds, other institutional investors and wealthy people are putting more money into real estate, which can produce better returns than investing in corporate buyouts.

They are also pouring money into funds that invest in toll roads and other infrastructure as more governments around the world sell assets to private investors. Morgan Stanley, the largest property investor among Wall Street banks, is raising US$8 billion for its sixth high-return real estate fund, which will invest mainly in Asia and Europe.

Source: The Business Times, 21 June 2007

The Indian Hotels Co Ltd may take on partners for some of its international properties to free up cash for other acquisitions

The Indian Hotels Co Ltd may take on partners for some of its international properties to free up cash for other acquisitions, a senior company official said.

India’s largest hotels operator, which owns the Taj group of luxury hotels and resorts, has bought hotels in the United States and Australia in recent months, and has said it was looking to also expand in China, South Africa and the Middle East.

‘We don’t need to fully own all our assets internationally, and we are in talks with like-minded partners to co-own some of them,’ said chief financial officer Anil Goel.

‘It is an idea we want to explore as it will release liquidity that’s key to our growth,’ he told reporters on Tuesday after reporting the company’s fourth-quarter earnings.Indian Hotels will hold the majority stake in a partnership with real estate or hospitality firms, he said.

The Mumbai-based company, a part of the Tata Group, in April bought the Hotel Campton Place in San Francisco for US$60 million. Last year, it bought The Ritz-Carlton Boston hotel and renamed it the Taj Boston.

Indian Hotels, which also has a management contract for The Pierre in New York, is building a Taj Exotica resort and spa in Doha, the capital of Qatar, as well as in Dubai and Phuket, all scheduled to open next year.

A Taj luxury hotel in Cape Town will also open next year, Mr Goel said.

The company, which also owns the Ginger chain of budget hotels in India, owned 81 hotels in the year to March 2007, adding up to 9,901 rooms.

Net profit for the January-March quarter rose 71 per cent to 1.35 billion rupees (S$51.1 million) from a year earlier, helped by higher average room tariffs as demand for hotels was boosted by a buoyant economy and more tourists, Mr Goel said.

About 4.6 million tourists visited India in 2006/07, a 15 per cent increase from the previous year, Mr Goel said. This helped push up average room rates by 15-44 per cent in major cities.Revenue per available room rose by an average of 30-49 per cent.

‘There’s been a fair amount of supply at lower price points, but that hasn’t affected demand for luxury hotels,’ Mr Goel said.

Demand would remain buoyant this fiscal year, as demand still exceeded supply, he said.

Source: The Business Times, 21 June 2007

Henderson Global Investors, owner of more than US$8 billion of European retail properties, will cut investment spending in the UK this year

Henderson Global Investors, owner of more than US$8 billion of European retail properties, will cut investment spending in the UK this year because of slowing rental growth and falling values in some parts of the country.

The UK will account for about 10 per cent of the three billion euros (S$6 billion) of European investments that Henderson funds plan for this year, compared with 60 per cent in 2006, said Patrick Bushnell, the head of European investment.

By the end of 2007, non-UK holdings will rise to half its assets from 30 per cent.

‘The UK is looking vulnerable and we’re aiming to build our portfolio elsewhere in Europe,’ Mr Bushnell said last week. Henderson will focus on Germany, Greece and Italy, he said.

Real estate investors are looking outside the UK for properties offering both valuation gains and rental income growth. The value of some UK retail-related property has fallen, a sign that the 11-year unbroken run of price gains for UK commercial real estate may be about to end.

Rental growth for some retail real estate was the slowest in a decade at the end of last month, according to consultant Colliers CRE, after higher borrowing costs curbed consumer spending, reducing retailers’ margins.

The price of secondary outlets, less valuable than other properties because of their location or quality, has dragged down the UK retail market. Secondary properties have lost 10 per cent or more of their value since the third quarter of 2006, Colliers CRE estimates.

The slowdown has been led by retail warehouses dealing in bulk goods, such as Kingfisher plc’s B&Q home improvement chain, the UK’s largest. B&Q’s gross profit margin was unchanged in the first quarter from a year earlier, when it fell three percentage points.

Europe’s largest real estate investment trust, Land Securities Group plc, and Capital & Regional plc, which jointly owns one in eight malls in Britain, have in the past two months reported lower values for some retail-related properties.

‘We’ve been worrying about people over-valuing secondary retail,’ Mr Bushnell said. Some investors ‘have been buying indiscriminately, paying aggressive prices, and they will be disappointed’.

London-based Henderson sold the Staples Corner retail park in north London because of its limited scope for additional rental growth. Investment in the UK will focus on the money manager’s £1 billion Central London Office Fund, which targets what is now the best-performing segment of commercial real estate in the UK, or on development.

Mr Bushnell said that investments by the UK Shopping Centre Fund, one of more than a dozen of Henderson’s funds in which professional money managers invest, will focus on developments or refurbishments such as Princes Quay in Hull and Buchanan Galleries in Glasgow.

The largest project is the £184 million investment a year ago in Edinburgh’s St James Centre, an ‘eyesore’ mall in the centre of the Scottish capital, which is being refurbished before a ‘major renovation’, Mr Bushnell said.

‘We continue to find good assets to buy that are considered secondary, but can be turned into prime with a bit of work,’ he said.

Henderson last month started a German retail fund in a venture with developer Management fuer Immobilien AG to tap ‘the underprovision of shopping centres’. Henderson’s Herald fund in March spent 85 million euros acquiring the Shopping Cite centre in Baden-Baden.

The fund manager is also looking at shopping centres in southern Italy and is ‘very interested’ in Greece, where international retailers are looking for outlets and rental income is an attractive proportion of purchase price, Mr Bushnell said.

Over the last three years, 93 per cent of Henderson funds exceeded their investment targets.

Henderson Global Investors is a unit of Henderson Group plc, which manages about £61.9 billion of assets. Europe accounts for about US$16 billion of Henderson Global Investors’ real estate investments.

Source: The Business Times, 21 June 2007

Hoping to ride the current property wave, developer Novelty Group will soon launch a River Valley project that is asking for around double the prices

Hoping to ride the current property wave, developer Novelty Group will soon launch a River Valley project that is asking for around double the prices in the area.

Named Luma, the 75-unit freehold development will be priced at above $2,500 per square foot (psf) when launched next month, said Novelty’s chief operating officer Manoj Kalwani.

That would surpass the nearby 2RVG, which sold for about $1,100 psf of late, according to caveats lodged. A condo at Ardmore Park recently fetched around $2,100 to $2,600 psf.

“To justify a doubling of the price, the developer needs to have something very special,” said Knight Frank’s research director Nicholas Mak.

Novelty believes its brand-name imported finishes will call out to “connoisseurs” of “uber- premium living”. Some agents were so bullish as to market Luma at $3,015 psf.

Luma, meaning “shrubs of small trees with evergreen foliage”, sits on the land of the razed 50-unit Eng Tai Mansion, which was sold collectively for $810 psf late last year. The new development comprises 27 floors of one- and two- bedroom units of 743 sq ft to 1,173 sq ft each.

“It’s for anyone with money and who appreciates the finer things in life,” said Mr Kalwani.

Targetting the super rich has become the norm, said Cushman and Wakefield’s managing director Donald Han. To come up with fresh ideas, developers have been travelling to fashion capitals to suss out novelties, he added.

The latest to hit the market with a unique feature is The Marq on Paterson Hill by SC Global Developments. The builder said yesterday that it expected an average $4,000 psf for the 66-unit freehold project, which is marketed as “ultra luxurious” with a Singapore-first — a 15m private heated lap pool jutting out of every apartment.

Should anyone buy the biggest units — each around 6,195 sq ft — for up to $30 million as SC Global hopes, the selling price would work out to a record $4,843 psf. That would beat the benchmark set last month, when someone paid $4,653 psf or $28 million for a penthouse at St Regis Residences along Tanglin Road.

But records these days tumble fast. The latest peak was reached shortly after a unit at Parkview Eclat at Grange Road fetched the then-record $4,200 psf.

But not everyone hits the headlines. “It is easy to say I’m gonna sell at X dollars, but not everyone can do it. You need to have the right developer’s acumen and branding. You must have the track record and the snob appeal,” said Mr Han.

Source: Today, 21 June 2007

As the property market is booming, more people will join the ranks of property agents to make a quick buck.

As the property market is booming, more people will join the ranks of property agents to make a quick buck. However, I wonder if the level of professional service will be the same, even if buyers and sellers are willing to pay a commission for their service.

I have recently completed my resale application for a unit in Sengkang. The agent who serviced me left me wondering how many agents are like him.

According to the Institute of Estate Agents (IEA), the buyer has to pay 1 per cent to the agent for his service. However, my agent was willing to lower his commission to help his brother sell the flat quickly. He also asked us to give up our agent who recommended us to the flat because he had an argument with her.

Before signing the option to purchase (OTP), he made several promises to us, including allowing us to bring the contractor after the OTP was sign and driving us to HDB Hub for our two appointments as we have three children and no car. His sincerity persuaded us to sign on the dotted line.

However, then things started to change. The things he promised were not delivered. After the second appointment, he did not even tell us the owner had kept the letterbox keys. Even worse, the house was full of defects that were not easily spotted during the final inspection.

One may wonder: Since I am paying less commission, am I asking too much? Let me put it this way. If you go to a fast-food restaurant and only buy a drink that costs $2, do you expect less service than someone who buys a $10 meal?

Corresponding with the agent’s agency was futile as they were only interested in collecting my commission and only believed their agent’s words.

I wonder if there any way to register our complaints other than with the IEA, and how the IEA protects people like us.

Source: The Straits Times, 21 June 2007

The Media Development Authority (MDA) has up investments

The Media Development Authority (MDA) has upped the ante for the Singapore media industry and now expects it to achieve value-added contribution of $10 billion and add 10,000 new jobs by 2015.

Permanent Secretary of the Ministry of Information, Communications and the Arts and MDA chairman Tan Chin Nam revealed these new targets at a press conference yesterday, as part of Singapore’s latest masterplan for the media industry dubbed Media Fusion 2015.

The latest plan supercedes MDA’s Media 21 plan which was first unveiled in 2003. Media 21 planned to add 12,000 jobs to the 38,000 in the media industry, and increase the industry’s contribution to Singapore’s gross domestic product (GDP) to 3 per cent from the then 1.57 per cent, by 2012. Based on Singapore’s GDP for 2006, which was about $210 billion, the media industry would have needed to contribute $6.3 billion in 2006 to meet the previously targeted 3 per cent of GDP.

Researchers in the interactive and digital media (IDM) industry here will also soon be getting about $20 million from the MDA to fund their research projects.

Yesterday, MDA’s IDM International Review Panel (IRP) announced that out of the more than 50 IDM research proposals received earlier this year, an initial batch of 15 projects have received the stamp of approval from the panel to get the funding, which are expected to be disbursed in the next quarter.

This is part of the $500 million set aside by the National Research Foundation last year, to boost research in the IDM industry. Announcing this at a press conference held yesterday was Paul Saffo, consulting associate professor at the school of engineering at Stanford University, and a member of the IRP. The projects recommended for funding cover primary research in games, computer graphics and image processing, virtual augmentation and mixed reality.

The five-member IDM IRP are also part of MDA’s 10-member International Advisory Panel (IAP) which is chaired by Dr Tan and counts filmmaker Shekhar Kapur and John Seely Brown, a visiting scholar at the University of Southern California, as members.

Yesterday, the IAP also gave the Singapore media industry and MDA a pat on the back for the progress made since the panel first met two years ago. Declaring that ‘Singapore’s arrived’, Mr Saffo said he felt that Singaporeans were sometimes ‘too hard on themselves’ and that there was indeed creativity in the media industry here.

The IAP also released its recommendations for the Singapore media industry, which were the product of two days of meetings over the previous two days.

Some of the IAP’s key recommendations include exploiting the music and publishing sectors, which it felt held good growth potential for Singapore.

The IAP also made other recommendations where some recommendations, such as enhancing the use of IDM technologies in sectors like education, medicine and science, were already being implemented.

Other recommendations include enhancing Singapore’s reputation as a ‘hospitable environment for creative talents to meet and exchange ideas’, as well as positioning Singapore as a place for co-creation of intellectual property.

Speaking to BT after the press conference, MDA’s chief executive Christopher Chia noted that while the IAP had commended Singapore’s progress in the media industry, there was still more work to be done especially in the area of promoting Singapore media companies in the global media marketplace.

Source: The Business Times, 21 June 2007

The shortage of office space on the island that has led to spiralling office rents and capital values has at the same time drawn more foreign investme

The shortage of office space on the island that has led to spiralling office rents and capital values has at the same time drawn more foreign investment into Singapore office blocks.

So far this year, foreign investors, including private equity groups and non-listed funds, have picked up about $2.4 billion worth of en bloc office buildings and sizeable strata office properties.

This surpasses the $1.9 billion for the whole of last year, which in turn was more than double the $733 million in 2005, according to latest data from CB Richard Ellis.

Also, the $2.4 billion of office buildings bought by foreign investors gave them a 69 per cent share of the $3.5 billion total in major office deals so far this year. The latter figure, for the period Jan 1 to June 8, 2007, is higher than the $3 billion chalked up for the whole of last year.

Big office acquisitions by overseas buyers this year include Macquarie Global Property Advisors’ $1.04 billion purchase of Temasek Tower in March, the $525 million sale of SIA Building on Robinson Road to German Pension fund SEB, the $260 million purchase of Vision Crest’s office block and The House of Tan Yeok Nee in the Penang Road/Clemenceau Avenue area by German fund manager Union Investment Real Estate AG (formerly known as Difa Deutsche Immobilien Fonds).

Local buyers have bought around $1.1 billion of office space so far this year, with the biggest deal being the $600 million collective sale of UIC Building at Shenton Way to United Industrial Corp. The mainboard-listed company itself owns 78.8 per cent of the property.

However, Singapore real estate investment trusts, or S-Reits, have not made any purchases of office blocks so far this year, after making acquisitions of over $700 million in each of the preceding three years.

CBRE excluded the Raffles City transaction in 2006 from its analysis as the apportionment of the value of the office space in the mixed development was not made public. The Raffles City complex also includes two hotels, convention facilities and a shopping centre, besides an office tower. Raffles City was purchased jointly by two Reits - CapitaCommercial Trust and CapitaMall Trust - for $2.1 billion. In its analysis, CBRE also excluded small strata office transactions.

Commenting on the big jump in the acquisition of office blocks by foreign buyers and falling purchases by S-Reits, CBRE executive director Jeremy Lake observed that while S-Reits are still bidding for office blocks in Singapore, they have not had much luck clinching acquisitions as the prices they can offer are constrained by the need for the acquisitions to be immediately yield-accretive to unit holders. Otherwise, there is a risk of the unit price of the Reit falling on the stock market.

On the other hand, foreign buyers, which are mostly private equity and unlisted funds, can bid more aggressively as they are looking at a total return story, Mr Lake said.

For instance, foreign buyers can offer a higher price for an office building that may reflect an initial yield, based on the building’s existing rental income of, say, only 2 or 3 per cent, with the knowledge that as leases come up for renewal at higher market rents, the yield may then go up to, say, 5 per cent. Also, these players may be looking at selling the assets and crystallising a capital appreciation a few years down the road, Mr Lake said.

Looking ahead, Mr Lake expects foreign buyers will continue to remain dominant buyers of office blocks in Singapore. He also reckons that the office en bloc market on the whole will remain very active for the rest of the year. Asked if there is a sufficient stock of office buildings for sale, he said: ‘When the market is strong, surprises come along the way. People whom you do not expect to sell their buildings will sell.’

CBRE data show that the average Grade A office rental value in prime locations has shot up 82 per cent over the past 12 months to $12.40 per square foot a month in Q2 this year.

The average capital value of prime office space has more than doubled over the past year to $2,500 psf in Q2, from $1,150 psf in the same period last year. At the trough of the current cycle, which stretched from Q3 2003 to Q2 2005, the figure was $980 psf.

DTZ Debenham Tie Leung data released yesterday evening also show that the average monthly prime rent in Raffles Place rose 20 per cent quarter-on-quarter to $13.10 psf in Q2.

Average rents in the Raffles Place and Marina Centre areas have more than doubled from a year ago.

Source: The Business Times, 21 June 2007

Lippo Group’s Stephen Riady could be teaming up with Kechapi Pte Ltd to build a resort in Changi. Kechapi is controlled by the Chua Family

Lippo Group’s Stephen Riady could be teaming up with Kechapi Pte Ltd to build a resort in Changi. Kechapi is controlled by the Chua Family who formerly held Cycle & Carriage here.

It was announced yesterday by the Urban Redevelopment Authority (URA) that HG Properties, a company linked to Mr Riady, emerged as the top bidder for a redevelopment site for a recreation club, hotel or holiday chalet at Fairy Point Hill in Changi.

Only two bids were received, with HG Properties offering $25.5 million - $144 per square foot per plot ratio for the 449,894 sq ft site.

The other bid of $10.68 million came from a Sino Land-linked entity called Precious Treasure. Sino Land, the Hong Kong sister company of Far East Organization, owns the Fullerton Hotel here.

Mr Riady and Kechapi could not be reached for comment but it is understood that HG Properties is 40 per cent owned by Kechapi and 60 per cent owned by Haggai Institute for Advanced Leadership Training Ltd (HIALTL) in which Mr Riady is a shareholder.

It is understood that HIALTL is an executive training and evangelical institute.

The site has a permissible gross floor area of 179,337.3 sq ft and a height restriction of about three storeys.

Industry sources say that the site can support a hotel with about 300 rooms or possibly 100 chalets.

If HG Properties does get awarded the site, HIALTL’s involvement could however see the site developed as a recreation club for its members or alumni.

Kechapi’s experience in the hospitality sector could also be useful. Kechapi sold the Garden Hotel to City Developments Ltd in 1999 for $108 million.

Kechapi still operates the hotel but the site is slated for redevelopment.

Source: The Business Times, 21 June 2007

A conservation bungalow at 781 Mountbatten Road is going under the hammer on June 29 with an indicative price of $10 million.

A conservation bungalow at 781 Mountbatten Road is going under the hammer on June 29 with an indicative price of $10 million.

The freehold property has a land area of 20,222 square feet and the single-level bungalow with an outbuilding has a total floor area of 3,444 sq ft.

The main building has five bedrooms, while the outbuilding has two bedrooms.

‘The existing bungalow has to be restored but there’s sufficient vacant land for the new owner to build additional residential buildings,’ said Knight Frank auctioneer Mary Sai, who is handling the sale of the property that has been offered by the administrator of the estate of Teo Koh Seng, also known as Teo Keng Seng.

Ms Sai drew a parallel between 781 Mountbatten Road and Simon Cheong’s ‘5 Legends of Mountbatten’ development.

Mr Cheong bought the 55,000 sq ft sprawling grounds on which Chansville - the former home of the late champion swimming trainer Chan Ah Kow - was located, at 745 Mountbatten Road, for $11.05 million in 2004.

He restored Chansville and built four more new bungalows on vacant space on the property.

All five bungalows have been sold. Chansville, with a 22,979 sq ft land area, fetched $13 million or $566 psf. The other four bungalows fetched between $5.1 million and $6.3 million, or $619 to $965 psf.

Chansville was sold this year while most of the other four houses were sold last year. All five bungalows are two-storeys high, have roof terraces and come with pools in lush landscaping.

The project was designed by award-winning architect Mok Wei Wei of W Architect.

781 Mountbatten Road is classified as an ‘Early Bungalow’ characterised by a simple facade and a building constructed on brick piers.

The property, like Chansville, is one of just 15 bungalows along Mountbatten Road gazetted for conservation by the Urban Redevelopment Authority in 1993.

Knight Frank could not confirm just how old 781 Mountbatten Road is but an index of lands register shows that the earliest entry for the property, at the time with an address of 785 Grove Road, was in 1927.

Names of parties registered include Charles James Lacey, Robert Dunman, Meyer-Hyeem Sassoon, and Richard Lake.

Sometime in the 1950s, ownership of the bungalow passed into the hands of Mr Teo. The property is currently being sold by the administrator of his estate. Knight Frank’s June 29 auction at Carlton Hotel begins at 2.30 pm.

Source: The Business Times, 21 June 2007

The Strata Titles Board (STB) has not changed the September date for the appearance of objectors to the $500 million Horizon Towers en bloc sale

The Strata Titles Board (STB) has not changed the September date for the appearance of objectors to the $500 million Horizon Towers en bloc sale which is after a crucial Aug 11 deadline.

Philip Fong, senior partner at Harry Elias, hired last week by five objectors to the en bloc sale, told BT yesterday that ‘no fresh directions have been given from last Friday’.

The STB last Friday had pencilled in an appearance of objectors to the sale in September, which was moved from initial tentative dates of July 25-29. This came after Mr Fong had told the registrar he needed more time for discovery and preparation.

But representation has since been made to move the date back to July, a very reliable source told BT.

Drew & Napier, which is handling the collective sale, is understood to have made the representation as the agreement with the buyer - Hotel Properties and two partners - says that the sellers have to apply for STB approval by Aug 11.

Under the agreement, if STB approval is not given by Aug 11, which is six months after the signing of the agreement on Feb 12, 2007, there is a provision for an extension of another four months which can be given by the sellers at their discretion.

If the sellers, who are represented by Horizon Towers’ sales committee, refuse to grant an extension, the deal could be off.

Said Mr Fong: ‘Due process must be given. The objectors are really defending a legitimate interest which is their homes and they should be allowed to fully air their issues before the board, and should not be hurried,’ said Mr Fong.

Meanwhile, a female security guard at the posh condominium has filed a police report against a resident for inappropriate behaviour.

The guard, Ms Tamilmani, told BT last night she has now been banned from Horizon Towers. ‘My boss told me that I will be transferred temporarily for safety reasons. It is very unfair, I am the victim,’ she said.

A police spokesman told BT that ‘a police report was lodged on 13 June 2007 at 8pm about a case of inappropriate behaviour by a man at an apartment along Leonie Hill.

‘Police investigations are ongoing,’ he added.

Source: The Business Times, 21 June 2007

Prime office rents in prestigious Raffles Place rose again last month and are now almost double what they were just 12 months ago.

Prime office rents in prestigious Raffles Place rose again last month and are now almost double what they were just 12 months ago.

That is according to the latest figures from property consultancy Cushman & Wakefield, which says that average rents in Raffles Place are now at a record $11.92 per sq ft (psf), as the current supply squeeze takes a continuing toll.

Property consultants say some prime office tenants whose leases expire this year face a trebling of their rents.

These escalating rents are forcing some tenants to pull out of some of the best corporate addresses in town - to seek office space elsewhere.

But there are plenty of takers even at the high rents.

Cushman & Wakefield managing director Donald Han said: ‘Many buildings in Raffles Place are enjoying full occupancy…and may not have space until next year.’

At the top end of the market, deals for premium Grade A space in buildings such as Republic Plaza Tower 1, UOB Plaza, Singapore Land Tower and 6 Battery Road have already been done at record highs of $15 psf to $16 psf.

Singapore is suffering a severe supply crunch in the office sector that is likely to ease only in 2010, when more space will be ready.

About 330,000 sq m of gross floor area of new office space is set to be completed between now and 2009. But it will not be enough, property consultants say.

Demand remains strong as businesses expand, while supply is still falling as ageing office buildings such as One Shenton Way are torn down.

Prime office rents in the rest of the so-called Golden Shoe area, including Anson Road, Cecil Street, Robinson Road and Tanjong Pagar, have climbed to $8.91 psf, up 83 per cent from a year ago, Cushman & Wakefield said.

Elsewhere, rents in the City Hall, Marina Centre and Bugis areas have risen to $11.04 psf on average, or 82 per cent up from a year ago, it said. Centennial Tower and Millenia Singapore, for instance, are almost full.

Office rents in the Orchard Road area have also climbed, though not as sharply as the traditional business areas, and are now about 36 per cent higher than a year ago, it said.

‘We’re seeing more tenants take up space in various locations because they can’t find space to expand in the same building,’ said Knight Frank’s director of business space, Ms Agnes Tay.

Tenants in prime office space are paying a lot more for the same area. ‘In the past, for every three-year renewal, tenants were looking at a rise of 30 to 50 per cent,’ said Mr Han.

But tenants whose leases expired last year were met with a rude shock - they had to pay double the rent to renew their leases, he said.

Worse still for those that are renewing their leases this year - their rent could treble, he added.

Some tenants have bought their own space to avoid paying these astronomical rents.

Property consultants say some firms have moved out to non-conventional office space such as shophouses and business parks. This trend should continue, they add.

Some tenants have already pulled out of Raffles Place, while others are weighing their options, they say.

They face a tough choice as some businesses thrive on the prestige of the Raffles Place location, they add.

Even if they do move out, others ahead of them may have already contributed to the rise in rents of alternative space. Office rents in high-tech business parks are revisiting the record highs of the 1996 peak, said Mr Han.

They are now ranging from $3.20 psf to $3.50 psf, up from about $2.50 psf a year ago, he said.

Meanwhile, the Government has said it will make available land for transitional offices to help ease the tight supply.

Source: The Straits Times, 21 June 2007

UK mortgage lending unexpectedly rose the most in six months in May, the British Bankers’ Association (BBA) said.

UK mortgage lending unexpectedly rose the most in six months in May, the British Bankers’ Association (BBA) said.

Net lending climbed to £5.8 billion (S$17.74 billion) from a month earlier, the biggest increase since November, the London-based BBA, which represents the nation’s biggest banks, said in an e-mailed statement. That compared with 5.1 billion in April. From a year ago, borrowing fell 6 billion.

The figures are at odds with recent reports showing that the Bank of England’s four interest rate increases since August are cooling the UK’s property market.

The BBA said lending last month may have been distorted by the anticipated introduction of new property advertising rules, which have since been put on hold.

‘The recent trend in mortgage lending had been downward, so the stronger demand in May was somewhat surprising,’ David Dooks, director of statistics at the BBA said. ‘The cost of borrowing has increased because of interest rate rises, and that would moderate demand in future months.’

Mr Dooks said in an interview that last month’s increase may be due to banks taking market share from building societies.

The government last month delayed plans to introduce rules requiring homeowners to give buyers more information about their property after a legal challenge by the Royal Institution of Chartered Surveyors. The introduction of HIPs, originally planned for June, will be phased, and will begin on Aug 1 for four-bedroom and larger houses.

Separate reports yesterday gave conflicting signals on the outlook for UK mortgage demand. The Building Societies Association said approvals fell 13 per cent in May from a year ago while the Council of Mortgage Lenders said gross lending jumped 12 per cent last month from April.

HBOS plc, the nation’s biggest mortgage lender, said on June 7 that UK house prices rose at the weakest monthly pace of the year in May.

The Bank of England has lifted borrowing costs a percentage point since August to a six-year high of 5.5 per cent.

Yesterday’s BBA report also showed consumers were becoming more reluctant to add to their record £1.3 trillion of debt.

Net consumer credit fell £463 million, with borrowing through personal loans and overdrafts declining by £54 million and credit card lending decreasing by £409 million.

Source: The Business Times, 21 June 2007

Thursday, June 21, 2007

Thank you for your report, “Butterfly House escapes wrecker’s ball” (June 19). To me, this is an important issue concerning the way Singaporeans think

Thank you for your report, “Butterfly House escapes wrecker’s ball” (June 19). To me, this is an important issue concerning the way Singaporeans think about our material history. This issue is not something that merely concerns “architecture buffs”; it should worry all Singaporeans.

There is important historical value in this house not only because of its designer, age or even its unique architecture. For many residents of Katong like myself, it has gained a life of its own.

During my childhood, my brother and I saw it as an abandoned, haunted house. In my teenage years, I found out that a good friend of my grandparents grew up in the house during the 1930s. This gentleman, Mr Lee Kip Lee, set much of his memoirs — a published book titled Amber Sands — in the house. As I read the book, it opened my eyes to the important human value embodied by this structure.

Recently, I have begun to see the Butterfly House as a reminder of a Katong gradually lost to high-rise developments. Today, it is a grand old dame ageing with quiet dignity.

To lose the house would be akin to losing an actual human being. Looking at the artist’s impression of the projected development soon to rise up around it, I cannot help but agree with the Historic Architecture Rescue Plan’s (Harp) view that we need to protect distinctive buildings vital to our heritage.

When will our current craze for integrating the old and the new in such a draconian, absurd fashion end? When will we, as a country, without the help of groups such as Harp, realise the need to preserve the very tangible structures that remind us of our past?

Source: Today, 21 June 2007

Singapore’s sizzling economy, set to expand as much as 7 per cent this year, could prove a headache for the government as the city-state risks

Singapore’s sizzling economy, set to expand as much as 7 per cent this year, could prove a headache for the government as the city-state risks becoming less competitive than rival business centres such as Hong Kong. The labour market is tight, with demand for top bankers far outstripping supply, while property prices, a topic that dominates headlines and dinner parties, have gone crazy.

A penthouse at the luxurious St Regis Residences - butler optional - was recently resold for $28 million, up a whopping 84 per cent from its initial price in August, The Straits Times reported. Prospective buyers queue up overnight for new property projects, while rents are up 30-70 percent.

‘Demand is high not only for private bankers, but for all private-banking-related jobs,’ said Michel Longhini, regional head of BNP Paribas Private Bank in Asia. ‘Costs in Singapore are definitely going up. With such high inflation, particularly in real estate, the cost of relocating staff is going up.’

Economists such as ING’s Tim Condon credit Singapore’s micro-managing government for the strong economic performance, citing recent corporate tax cuts and a shift away from churning out gadgets to services such as private banking and tourism. ‘The government has put in place policies to restructure the economy, and it’s working. Singapore wants to be the Switzerland of Asia,’ he said. ‘Cutting the corporate tax rate encourages new businesses to start up, and opening up the services economy, with casinos and financial services, is what you need when the electronics sector is hit by the kind of shock it’s had.’

Electronics exports down

Electronics exports in May fell 16.1 per cent from a year ago, according to data published on Monday, dropping for the fourth month in a row due to weak demand from the United States.

It’s not just residential property that’s perking up. The long-ailing construction industry has had a much-needed fillip, thanks to several big projects - two casinos likely to cost some US$7 billion, a public sports centre, and a new financial district - giving a lift to gross domestic product.

With its focus on financial services, Singapore now serves as the Asian headquarters for private banks including UBS, Citigroup and Credit Suisse, as well as a centre for hedge funds such as Tudor Capital and Man Investments. Given a jobless rate of just 2.9 per cent, according to data released last Friday, the city-state is particularly keen to attract rich professionals, such as private bankers, hedge fund managers and others in the financial services sector to alleviate a shortage of qualified workers.

But the government is clearly worried that rising property prices could make Singapore far less competitive in terms of business and living costs than its long-time rival Hong Kong. ‘It is very important for us to make sure that the prices do not overshoot or race ahead of the real growth in the economy,’ Mah Bow Tan, the minister for national development, told The Straits Times at the weekend. ‘I think it is not sustainable in the long run and, of course, it is also not good for our competitiveness if prices and rentals go up too fast.’

An American Chamber of Commerce survey found that 61 per cent of the 95 senior US executives polled were dissatisfied with housing prices, up significantly from 42 per cent last year.

On Thursday, the government’s land department announced its biggest-ever land sale in a bid to increase supply, particularly in the residential sector, and douse the price rise.

‘The focus on the residential sector is a preemptive measure to head off any run-up in mass private housing prices,’ said Chua Yang Liang of Jones Lang LaSalle. ‘Office rentals are a small percentage of total operating cost for businesses so the concern is more for housing costs for expatriate employees.’

Curbs on speculators?

Some analysts said that the authorities may consider further measures, such as curbs on speculators, as happened back in 1996 in the last property frenzy. At the very top end, residential property is now more expensive than in Hong Kong. Developers such as CapitaLand and City Developments have bought up and demolished many old blocks in prime districts, taking hundreds of flats out of the market, including some of historic interest.

But as many of the new developments won’t be ready for occupation for another three or four years, the shortage is likely to persist and could become even more acute given the government’s plan to increase Singapore’s population by another two million people, to 6.5 million. Foreigners, many lured by Singapore’s affordable, spacious housing and abundant greenery have seen rents squeezed up. ‘There are so few places to rent now where you are close to nature,’ said Renate von Roda, adding that her landlord wanted to raise the rent by 40 per cent earlier this year. ‘Everybody is on a greed trip.’

Source: The Business Times, 20 June 2007

US investment bank Merrill Lynch said on Wednesday that it has sold the company’s flagship office building in London to the Government of Singapore

US investment bank Merrill Lynch said on Wednesday that it has sold the company’s flagship office building in London to the Government of Singapore Investment Corporation (GIC) for 480 million pounds (US$954.05 million).

The Merrill Lynch Financial Centre (MLFC) is located in the City of London and features two of the largest trading floors in Europe, as well as a 150-seat auditorium plus other amenities, the bank said in a statement.

GIC’s property arm, GIC Real Estate, said acquiring the London office was within company plans to maintain a diversified portfolio.

Merrill Lynch will lease the office building for 15 years with the right to renew it beyond the initial term.

GIC is one of two investment vehicles of the Singapore government, the other being Temasek Holdings.

It manages the country’s foreign exchange reserves while Temasek is a holding company with interests in a diverse range of local and overseas firms.

GIC Real Estate has been expanding its portfolio in the world’s major cities including Tokyo, Munich, Sydney and Seoul.

Source: The Business Times, 20 June 2007

Housing starts in the US fell for the first time in four months in May as interest rates rose, suggesting no early end to the recession in residential

Housing starts in the US fell for the first time in four months in May as interest rates rose, suggesting no early end to the recession in residential real estate.

Builders broke ground on new houses at an annual rate of 1.474 million, down 2.1 per cent from the prior month, the Commerce Department said yesterday. Building permits increased 3 per cent to 1.501 million.

The worst housing recession in 16 years is restraining economic growth even as inflation is too high for the comfort of Federal Reserve officials. A jump in mortgage rates and a glut of unsold properties may further reduce demand in coming months, economists said.

‘There is still some more downside to the housing market,’ said Nariman Behravesh, chief economist at Global Insight Inc in New York. ‘Mortgage rates started up again and there is still a shakeout going on in subprime.’ Mr Behravesh came closest to predicting the drop in starts among 68 economists surveyed by Bloomberg News.

The housing industry is also wrestling with soaring foreclosures among subprime borrowers - those with poor or incomplete credit histories. Lower prices and more incentives have failed to spur interest as buyers wait for bigger bargains.

Economists surveyed by Bloomberg News forecast starts would fall to a 1.472 million pace, from a previously reported 1.528 million in April, according to the median forecast of economists surveyed. Permits were forecast to rise to 1.47 million.

The average rate on a 30-year fixed rate mortgage rose to 6.74 per cent last week, the highest in almost a year, according to figures from Freddie Mac, the No2 buyer of US mortgages.

The increase reflected expectations of faster global growth and fears inflation would accelerate. The rate averaged 6.22 per cent last month and 6.18 per cent in April. Starts were down 24 per cent in the 12 months ended in May.

‘The trend down is still intact,’ said Kevin Logan, senior market economist at Dresdner Kleinwort who forecast a fall to 1.47 million units. ‘The housing contraction is going to be a drag for the rest of the year.’

Source: The Business Times, 20 June 2007

Rising interest rates and a new wariness by lenders have slowed the US buying spree in commercial

Rising interest rates and a new wariness by lenders have slowed the US buying spree in commercial real estate, leaving some property experts to suggest the sector’s multi-year run may be over.

While currency-strong foreign buyers and real estate investment trusts (Reits) may yet enter the market, private equity firms and property tycoons facing the new lending environment are pulling back.

‘The total landscape has changed and the days of borrowers making a phone call to a particular bank and getting 90 percent financing is really not happening anymore,’ said Howard Michaels, founder and chairman of Carlton Group, which helps buyers finance their deals.

US borrowers have been hit with a one-two punch in just the last few weeks. First, the lending market, which heavily relies on buyers of commercial mortgage-backed securities, created from slicing and dicing pools of mortgages, have begun to reject pools containing risky mortgages. Rating agencies have chimed in with demands for more safety for the highest-rated bonds.

On top of that, yields on the 10-year Treasury note, which influence mortgage rates, have jumped as much as 0.37 percentage points in a week from 4.96 per cent to 5.33 per cent on June 13 and were 5.15 on Monday, making the cost of borrowing and buying property more expensive.

That is a dramatic shift from the last several years when private equity buyers, such as the Blackstone Group, snatched up billions of dollars worth of real estate by accessing the commercial mortgage-backed securities markets and other sources to finance their deals.

They justified the prices because they have been able to sell their buildings relatively quickly at higher values. But those values could start to slide as higher interest rates push up capitalisation rates - the initial yield investors make on their property. Just like a bond, higher yields mean lower prices.

‘We are starting to see a modest increase in cap rates,’ Mr Michaels said. Last week, Stifel Nicolaus analyst David Fick lowered his rating the Reit sector to a ‘negative bias’, after he spoke to some of those people who funded Blackstone’s largest deals.

‘What we were hearing is that many of the transactions that had occurred would not have been able to happen today based on the revised interest rate assumptions as well as tightening credit due to the rating agencies’ changing stance,’ he said.

In the latest big deal, debt costs prompted Tishman Speyer and Lehman Brothers to lower their bid for apartment Reit Archstone-Smith Trust to US$60.75 from the originally proposed US$64 per share.

While the current environment may ease the pace of buying US commercial real estate among the major US players, don’t expect a tumble like the US housing market.

The turmoil in the residential subprime market spooked the commercial lending market, prompting commercial standards to tighten before a crisis emerged.

‘The subprime issue asked the question: Have you thought about what is inside the pools that you’re buying?’ said Leonard Cotton, vice-chairman of Centerline Capital Group, a unit of Centerline Holding Co, and president of the Commercial Mortgage Securities Association.

More importantly, the commercial real estate market has not experienced an oversupply of buildings, as in past downturns. ‘What we have today verses the 70s and 80s is very few overbuilt markets,’ Mr Cotton said. ‘Now we have a lot of office buildings in New York that people overpaid for that are full.’

On the demand side, tighter lending standards may also help real estate investment trusts, who have been outbid by private buyers, and foreign buyers armed with valuable currency could step in to help support the market.

John Kriz, managing director of Moody’s Real Estate Finance, said at a real estate investors conference in early June that Reits could shine as buyers because they have good credit and do not rely as much on debt to finance their transactions.

Foreign buyers may also become a force, said Marjorie Tsang, assistant deputy controller of the New York State Common Retirement Fund, which has US$154.5 billion of assets under management.

‘I get an e-mail or phone call every single week from major investors that are the equivalent of our pension fund in Japan, in Germany, in Canada and everyone is looking to see how they can get into the United States in a big way,’ she said. ‘Not sticking their toe in, but in a big way.’

Source: The Business Times, 20 June 2007