Hayden to build first Ritz-Carlton condo in Asia

Prices for the 58-unit development in Cairnhill have not been fixed yet

HAYDEN Properties has clinched the rights to build the first Ritz-Carlton Residences in Asia, after pursuing the luxury brand for months.

Hayden director Ong Chih Ching said that negotiations between the two parties stretched over nine months, with over 600 e-mails sent.

Speaking at a press conference to announce the partnership yesterday, she added in good humour that the negotiations had been ‘hard work’.

There are currently 16 Ritz-Carlton Residences in the world and Ms Ong said that to be branded one, stringent requirements have to be met, including limiting the number of units an individual can buy.

Prices for the 58-unit development in Cairnhill have not been fixed yet but Ms Ong said it will be priced ‘at the top end of the market’.

Ritz-Carlton’s regional vice-president (sales and marketing) Asia-Pacific, Simon Manning, said that unlike some other branded residences here, the Hayden development will be completely managed by Ritz-Carlton.

This will involve training and managing the staff who will provide housekeeping, 24-hour concierge, sommeliers and doormen services. It will not, however, have an equity stake in the development.

A relatively new player in the real estate industry here, boutique developer Hayden has already scored a couple of firsts in the market.

Not only has it secured the Ritz-Carlton brand for its Cairnhill property (formerly Horizon View), it earlier announced that it would be the first to provide living room-carparking for its 56-unit Scotts Road condo development, formerly the Hotel Asia.

Launch dates for both developments have not been fixed.

Hayden is a 50/50 joint venture between Singapore-based KOP Capital and Emirates Investment Group-linked Emirates Tarian Capital (ETC).

Hayden director Kunalan Sivapuniam, who is also managing director at ETC, said it was looking for more development opportunities in the region.

Middle-East investors have been increasingly making their presence felt in Singapore recently and Mr Sivapuniam puts this down to a need to ‘diversify’.

He also said there is a lot of liquidity in the Middle-East and exposure to the US sub-prime market and the credit crisis is minimal.

‘Post 11 September 2001 (9/11), a lot of Middle-East investments were made away from the US,’ he explained.

Emirates Investment Group’s real estate portfolio is worth over US$500 million and includes Palazzo Versace Gold Coast in Australia.

 

Source: Business Times 4 Sept 07

Mapletree fund acquires 2 industrial properties

MAPLETREE Industrial Fund Ltd is acquiring a factory building in Tech Park Crescent for $12.48 million, and has also bought a light industrial building at 19 Tai Seng Drive for $12.5 million.

In a statement, the company said it has signed a sale-and-leaseback agreement with Centillion Environment and Recycling for the three-storey Teck Park property.

The factory has a gross floor area of about 9,800 square metres and is located within the Tuas Industrial Estate, which houses a wide range of industries from bio-medical to food, manufacturing and warehousing industries.

Separately, the fund also bought a six-storey light industrial building, with a gross floor area of about 8,600 square metres. Located in Tai Seng Industrial Estate, the building currently serves various functions such as a telephone exchange, mobile telephone switching centre and international gateway network management centre. StarHub is taking out a long lease on the property, the statement added.

Both properties will be managed by Mapletree Industrial Fund Management (MIFM) – a wholly owned subsidiary of Mapletree Investments.

Phua Kok Kim, CEO of MIFM, believes that these acquisitions will enhance the fund’s portfolio value given their choice locations and the ’strong demand for industrial space on the back of the continued firm growth of the manufacturing sector’.

 

Source: Business Times 4 Sept 07

Property stocks sink on news of higher DC charges

Higher development costs likely to cool en bloc fever

PROPERTY stocks fell yesterday after Friday’s news that the government will increase development charge (DC) charges as much as 112 per cent.

Analysts said the revised DC rates will push up costs and also discourage developers from paying ever-increasing prices for collective sale sites.

The Singapore Property Equities Index – a weighted index of all stocks in the Singapore Exchange’s property sector – lost 9.2 points or 0.6 per cent to end at 1,447.6 points yesterday.

The fall was led by Singapore Land which slid 40 cents or 4.0 per cent to close at $9.50.

Guocoland fell 14 cents or 2.9 per cent to end at $4.62 and City Developments lost 10 cents or 0.7 per cent to close at $14.80.

Other property stocks that slipped include Allgreen Properties, Ascott Group, Wing Tai, Wheelock Properties, MCL Land, UOL Group, Ho Bee and SC Global.

The government announced what is possibly the sharpest hike in DC rates, payable for enhancing the use of some sites or building bigger projects on them.

On average, the DC rate for non-landed residential use was raised 58 per cent.

While the move is not expected to derail the rise in housing prices, analysts reckon it will affect developers because the overall cost of redeveloping sites will go up.

‘We estimate the revised DC rates could increase average redevelopment costs by 3-4 per cent from July 2007 levels,’ said CIMB analyst Donald Chua.

This in turn means that developers will be less willing to fork out record dollars for sites.

‘For future en bloc purchases the sentiment is likely to be negative as break-even cost is likely to be higher,’ said OCBC Investment Research analyst Winston Liew. ‘We do not anticipate any more benchmark prices to be reached.’

CIMB’s Mr Chua said developers will be more selective with land-banking, especially in the prime districts, where surging property prices could cause even greater cost pressure. As a substitute, government land sale sites could now attract more interest, he said.

Phillip Securities Research said the DC hikes could affect home prices. It expects they will continue to increase, but at a slower pace from now on compared with the first half of 2007.

‘First, the rises in DC rates are likely to slow en bloc sales and reduce the demand for replacement homes,’ the firm said in a research note. ‘Second, both local and foreign investors are likely to be more cautious when they select homes after the recent steep price increases.’

Also, the credit tightening in US and the economic slowdown there will affect sentiment among buyers here, who may have lost money in global equity and bond markets, Phillip added.

 

Source: Business Times 4 Sept 07

Apollo Centre up for sale for over $200m

Price tag amounts to $1,345 psf of net lettable area

APOLLO Centre, a commercial building in Havelock Road, is for sale for more than $200 million, the property firm marketing it said yesterday.

The 99-year leasehold property is being sold by Singapore-listed Apollo Enterprises.

And since the sale was announced, there have been many enquiries from potential investors, said marketing agent Knight Frank.

‘Given the lack of similar investment buildings in the market and the many interests expressed, a transaction price in excess of $200 million is not unexpected,’ it said.

At $200 million, the price would work out to $1,345 per square foot (psf) of net lettable area.

By comparison, almost a whole floor of nearby Chinatown Point was sold recently for about $1,250 psf of net lettable area.

The Apollo Centre, a seven-storey office and retail building, has a land area of about 54,600 sq ft, and a gross floor area of around 217,500 sq ft. At present, the net lettable area is 148,700 sq ft.

There are shops in the basement and on the first and second storeys and offices on the upper floors.

Because of the limited supply of office space in the central business district, Apollo Enterprises has obtained inprinciple approval to change the use of the building’s second storey from retail to office.

If the whole floor is converted to office space and targeted at a single occupier, the lettable floor area could increase by about 11,000 sq ft, Knight Frank said.

It said rents in the area range from $7.50-$8.00 psf per month (psf pm) for office space and $8.00-$8.50 psf pm for retail space.

The tender for the Apollo Centre is open until 3pm on Oct 16.

 

Source: Business Times 4 Sept 07

Aussie home-building approvals rise sharply

Unexpected increase attributed to rising employment, wages and immigration

(SYDNEY) Australia’s home-building approvals unexpectedly increased to a five-month high in July as rising employment, wages and immigration encouraged investment in property.

The number of approvals to build or renovate houses and apartments advanced 0.4 per cent from June to 12,980 the Bureau of Statistics said yesterday in Sydney.

The median estimate of 24 economists surveyed by Bloomberg News was for a 2 per cent drop.

Australia’s lowest jobless rate in 33 years and near-record consumer confidence is boosting an economy in its 16th year of expansion.

Property investors are returning to the market as rents increase after a construction slowdown last year cut the supply of housing just as rising immigration boosted demand.

‘The signs are there for a lift in construction activity in the next 12 months,’ said Michael Blythe, chief economist at Commonwealth Bank of Australia, the nation’s largest mortgage lender.

‘We will see that at some point, with vacancy rates low and rents high,’ he added.

The Australian dollar advanced to 82.26 US cents at 4.46pm in Sydney from 82.07 cents immediately before the report was released.

The yield on the benchmark 10-year government bond was unchanged at 5.94 per cent. The S&P/ASX 200 Index rose 0.3 per cent.

Building approvals surged a revised 6.9 per cent in June. Approvals were 7.5 per cent lower in July than a year earlier, yesterday’s report said.

Australia’s jobless rate has fallen to 4.3 per cent, the lowest since 1974, after employers hired 250,000 extra workers in the 12 months ended July 31.

The wage-price index gained 1.1 per cent in the second quarter, equalling the strongest increase since the series began in 1997.

‘There are several good reasons to expect residential construction will increase over the coming year,’ said John Edwards, chief economist at HSBC Bank Australia Ltd in Sydney.

‘Immigration is high; there have been substantial gains in employment and incomes,’ he added.

More than 3,450 people arrived in Australia every week in the year ended June 30, 2006, the Immigration Department reported last year.

In the subsequent six months to Dec 31, more than half the immigrants who arrived were either professionals or tradespeople, the department said in April.

Also encouraging property construction, rental vacancy rates have fallen to decade lows, and are less than 2 per cent in Australia’s six largest cities, according to the Real Estate Institute.

That has driven up rents by an average 10 per cent for a two-bedroom apartment, the institute said.

‘We’re really at the bottom of the Australian housing cycle,’ Rod Pearse, chief executive officer of Boral Ltd, said on Aug 15. ‘We’re in good position for when this market comes back.’

Boral, Australia’s biggest seller of building materials, posted a 21 per cent drop in second-half profit on waning demand for new homes and reduced sales in the United States.

Demand plunged in New South Wales, Australia’s most populous state.

‘New South Wales has been at the bottom of the league table,’ Mr Pearse said. ‘There will be a strong recovery in the next five years.’

Still, higher borrowing costs may stifle housing demand.

The Reserve Bank of Australia raised the overnight cash rate target a quarter percentage point to 6.5 per cent, the highest in almost 11 years, on Aug 8.

That followed increases in February, August and November 2006.

The four rate adjustments have added about A$160 (S$200) a month to repayments on the average home mortgage of A$250,000, according to the Housing Industry Association.

About 23 per cent of homeowners have had to cut spending to pay their mortgages, according to a survey of 2,500 consumers conducted in March by JPMorgan Chase & Co.

Home-building contributed just 0.1 percentage point to the first quarter’s economic growth rate of 1.6 per cent from the previous three months.

Australia’s economic expansion probably slowed to 0.6 per cent in the second quarter as residential construction declined and exports eased, according to a Bloomberg News survey of economists.

The growth report will be released today.

Approvals to build private houses rose 0.7 per cent to 8,646 in July. Approvals for apartments or renovations dropped 6.5 per cent to 3,726.

 

Source: Bloomberg (Business Times 4 Sept 07)

Pan Hong sues land owner for non-completion of sale

Non-completion has significant impact on Chinese developer’s financial numbers

CHINESE property developer Pan Hong Group is suing a company which owns four parcels of land in Beihai City, Guangxi province, for not completing a deal to sell.

The non-completion of the deal has a significant impact on the Singapore-listed company’s financial numbers as the group has recognised a profit of 77.8 million yuan (S$15.7 million) – that’s 84 per cent of its first-half net earnings – as gains from the appreciation of the land value in its first-quarter results.

In a statement yesterday, Pan Hong said its wholly owned subsidiary, Loerie Investments, had on Dec 14, 2006 agreed to buy a 90 per cent share in Ever Sure Industries for HK$101.5 million (S$19.8 million) from Liu Hong Shu.

Upon signing the agreement, Pan Hong had paid Liu Hong Shu HK$30 million as a deposit. The legal completion was to have been on Aug 31.

Following its due diligence of Ever Sure, Pan Hong sent a bank draft for the balance of the purchase price of about HK$71.5 million to Mallesons Stephen Jaques, the firm of solicitors which sealed the agreement.

‘However, on Aug 31, 2007 the vendor failed to fulfil his obligation which required the transfer of legal ownership of 90 per cent of Ever Sure to Loerie. After seeking legal counsel in Hong Kong, Pan Hong is of the view that it has a strong legal case against the vendor,’ Pan Hong said.

It said it was advised that Liu Hong Shu does not have grounds to walk away from the transaction and has accordingly committed a material breach of the agreement.

Ever Sure is an investment company incorporated in Hong Kong whose sole investment is a 100 per cent interest in China company, Beihai Southern Paradise Land Industries Development Co Ltd.

This company owns four parcels of land in Beihai City, Guangxi province.

Pan Hong had planned to develop the land, which has an aggregate area of about 358,296 square metres and a planned gross floor area of about 381,000 sq m, into residential and commercial properties.

Real estate values in Beihai have been rising rapidly this year. Pan Hong said that since it had been given two board seats on Ever Sure and was deemed to have control over the group, it had accordingly consolidated Ever Sure into its accounts.

Pan Hong said there may be an impact on its financial performance and net asset value for FY2007 if the claim against the vendor is not successful or if specific performance of the agreement is not granted to it by the courts in Hong Kong and damages awarded are not commensurate with the gain in value of the shares in Ever Sure, or if it is subsequently determined that Ever Sure should not be included in the group’s financial reporting in view of the legal proceedings.

Pan Hong shares yesterday slipped two cents to 69 cents.

 

Source: Business Times 4 Sept 07

Plaza Centers to invest 50b rupees in India

Israeli group will build entertainment, commercial centres

(MUMBAI) Israeli-owned property company Plaza Centers said yesterday that it would invest 50 billion rupees (S$1.87 billion) over the next 5-7 years to build entertainment and commercial centres in fast-growing India.

Plaza Centers, a subsidiary of Elbit Medical Imaging Ltd, will build 50 malls and multiplexes in Indian cities, some in ventures with local Indian developers, said Abraham Goren, executive vice-chairman, Elbit Imaging Group.

‘We have been very active in central and eastern Europe for the last 10 years, and when we started thinking about where else we wanted to be, we thought of India,’ he told a news conference.

‘We think India has a lot of potential, and we plan to be here for a very long time,’ he said.

Plaza Centers picked India over China because of the widespread use of the English language, a familiar legal system and the openness to new ideas in India, he said.

‘India was an obvious choice over China,’ he said.

Plaza Centers has begun construction of a mall in western Pune city in a venture with an Indian developer, and has picked sites in Bangalore, Chennai, Kochi and Trivandrum.

Mr Goren said the first centre would open by end-2008 or early 2009.

India’s fragmented US$350 billion retail industry is forecast to double by 2015.

But the expansion of large Indian firms and the entry of foreign retailers has led to protests by traders, farmers and owners of small shops, who fear massive job losses.

The protests are a natural reaction to change, Mr Goren said. ‘India’s not the first to see protests against retail,’ he said.

‘Everywhere, retail goes through a process of evolution, and everywhere, human nature is the same. It is natural when there is a change from one system to another,’ he said.

Indian developers including DLF Ltd, Unitech Ltd and Peninsula Land Ltd also develop malls, office and residential complexes.

 

Source: Reuters (Business Times 4 Sept 07)

Indian developers eye mass market as prices fall

Property stocks depressed on worries about housing market

(MUMBAI/HONG KONG) After a two-year surge, home prices in India have dropped as much as 20 per cent because even the most upwardly mobile tech graduates can no longer afford to buy, forcing developers to consider building for the poorer masses.

‘We’re at a point where growth in salaries has not kept pace with property price increases,’ said Hari Krishna, of Kotak Realty Funds, a unit of Kotak Mahindra Bank that has been raising US$350 million for property joint ventures in India.

‘Many developers are rationalising prices across the country, and certain sets of people are saying there’s a need to focus more on either the luxury or the mass market.’

Since India eased rules on inward property investment in early 2005, the country has swept into a dusty frenzy of construction, causing land prices to double in major cities.

Drawn by a thriving, 1.1 billion-person economy, where a new batch of graduates swarm out of technology parks eager to shop and go home to modern apartments, global property investors such as Citigroup and Morgan Stanley have rushed in.

A raft of developers such as DLF Ltd and Parsvnath Developers Ltd have listed on the Mumbai stock market to raise funds for expansion drives.

Annual property investment is projected to double to US$90 billion by 2010.

But a drop of around 20 per cent in residential transactions since January – as rising interest rates and soaring prices put India’s new rich off buying – has persuaded many developers to take a second look at their business models.

Prices have fallen 15-20 per cent in the New Delhi area and Punjab state, and have paused in Mumbai after sharp rises.

Most developers have been targeting the roughly one million families bringing in US$25,000-50,000 a year – for example, middle level accountants or software programmers.

Another million families are expected to join their ranks over the next three years, according to an economic thinktank, while the number of ’super-rich’ families with an annual income of more than US$250,000 is set to nearly triple to 141,000.

But with fierce competition to build high-margin apartments for the rich, some investors are starting to target the 53 million families earning US$2,500-5,000 a year – where the much-vaunted figure of a 20 million home shortfall originates.

An estimated 22 million families should be lifted out of poverty and into this segment of society by 2010.

Gross margins for the mass market are around 20 per cent, rather than the 30 per cent for high-end housing.

But developers can forge healthy businesses by building huge townships on non-prime land that is more easily acquired.

‘Our view is that building residential units for the lower middle class in that part of the world is pretty recession proof,’ said Alastair King, chief executive of Eredene Capital, which is listed on London’s Alternative Investment Market (AIM).

‘These are people taking out mortgages for the first time,’ he said, citing bank clerks, junior civil servants and hotel chambermaids as examples.

Bank exposure to housing loans tripled in three years to around US$60 billion in 2006, but that was only about 6 per cent of gross domestic product (GDP) – so industry players are unconcerned about any US-style mortgage default crisis.

Mortgage debt in the US and Britain is equal to about 50 per cent of annual GDP.

Eredene has invested an initial £pounds;16.4 million (S$50.3 million) in a joint venture that plans to build 185,000 units in Panvel, where a planned train link aims to cut the 90-minute commute to Mumbai by half.

Mr King said that blocks could also be sold en masse to Indian developers working on slum redevelopment projects in central Mumbai who are obliged to find new homes for people they evict.

Some investors are steering clear of residential homes altogether. ‘The residential market has taken a bit of a beating, but commercial prices are super buoyant and will continue to rise,’ said Vikram Mehta, associate director at Coldwell Banker, a unit of US real estate brokerage Realogy Corp.

‘Multinationals and Indian companies – everybody wants to expand.’

Worries about the housing market and recent stock market turmoil have depressed property stocks.

Yesterday, Puravankara Projects, the latest developer to list, was trading nearly 6 per cent below its issue price by 0549 GMT after making its market debut last Thursday.

The country’s biggest listed developer, DLF, has seen its stock fall 12 per cent from a peak reached a week after its July 5 market debut.

But analysts said the firm, which raised US$2.25 billion in its initial public offering (IPO), is undervalued and a planned move by the company into mass housing should be positive.

‘DLF is going into mass housing two years down the line, and that’s a good thing,’ said JPMorgan analyst Gunjan Prithyani, which has an ‘overweight’ recommendation with a price target of 725 rupees (S$27), or a 21 per cent upside.

‘Like Chinese companies, it’s a volume game rather than a margin game, but it has huge potential.’

 

Source: Reuters (Business Times 4 Sept 07)

Sub-prime market is thriving in India

Estimated US$10-11b market for unsecured credit growing at 25-30%

(NEW DELHI) Like the US, India too has a sub-prime market and it is booming. The success of early entrants like Citi Financial and GE Money has encouraged several others to enter the consumer lending business – nearly half of which is a sub-prime market, says a report in Business Standard.

These include players like HSBC (Pragati Finance), Stanchart (Prime Financial), Fullerton India, DBS Cholamandalam and Indiabulls.

Many more are coming. Industry sources said Barclays, Deutsche Bank and AIG are eyeing the segment, which includes private lenders like ICICI Bank and HDFC Bank, which entered in 2004.

What is attracting them is an estimated US$10-11 billion market for unsecured credit, which is growing at 25-30 per cent, according to Citi Financial managing director Sandeep Soni. The smaller players are growing at 50 per cent or more.

‘The non-banking finance companies, or NBFCs, are riding on the aspirations of people who were under-served by banks,’ said Mr Soni.

‘It’s an untapped market. There’s an opportunity to expand the market like in telecom,’ said Rajeev Yadav, head of personal loans at GE Money. Sub-prime has become a dirty word, so many multinationals in India call it a nearprime market and refuse to draw parallels.

A typical sub-prime customer is the self-employed, neighbourhood retailer or a trader who needs credit to buy goods and grow his business. He may be filing a tax return – most show an income of 70,000 rupees (S$2,604) to 80,000 rupees – but it does not truly reflect his cash flows.

‘Many of these people do huge business in cash; there’s no way it can be registered on paper. We use a lot of surrogates to estimate their income or cash flows,’ said Biju Pillai, business head, personal loans, HDFC Bank.

Take a car mechanic, who comes to borrow, say, 25,000 rupees. Lenders like GE Money will look at surrogates like his bank balance or his credit card records or visit his shop to estimate his income.

‘If he maintains an average bank balance of 2,000-3,000 rupees and that’s increasing or services an EMI of 1,500 rupees on credit card or another loan, it shows he has cash flows. Banking tells us about a guy’s character, about his cash flows. His ability to service an existing loan or an EMI indicates his credit-worthiness,’ Mr Yadav added.

‘You can’t expect people to have either of the two where only 30 million people file tax returns and most of the economy runs on cash,’ said a senior executive with an NBFC.

To expand their pool of customers, companies like GE Money run pilots to test various surrogate programmes (based on income, quality of bank statements, earlier loan or field verification). At any given point, these companies have five to six surrogate programmes running.

Customers for NBFCs also include salaried people and professionals like doctors and chartered accountants, who are prime customers.

A salaried employee could be a business process outsourcing executive earning 8,000-10,000 rupees a month who wants to buy a bike, a mobile phone or a personal computer. The customer could also be a blue-collar worker who wants to do up his house or buy a refrigerator or TV. Many of these are first-time borrowers.

In the absence of credit history, companies like Citi Financial have built a database of customers by providing loans for two-wheelers, television, washing machines, TV and mobile phones, on which they do not make much money. ‘This is the best way of getting customers on board and creating a pool of tested customers,’ said Mr Soni.

The average ticket size for these loans is 25,000 rupees but could go up to 100,000 rupees. They come with a term of 25 months and interest rates of 45-50 per cent. But the high cost of operations and sourcing (10 to 15 per cent) and defaults (5 to 15 per cent) partly negate the margins.

 

Source: Business Times 4 Sept 07

Sub-prime rout less severe than in ‘98: BIS

Swiss body’s view contrasts with grim outlook of S&P

(BASEL, Switzerland) The market fallout from the sub-prime mortgage slump is less severe than in 1998 after Russia’s default and the collapse of Long-Term Capital Management (LTCM), the Bank for International Settlements said.

The assessment from the BIS, which monitors financial markets for central banks and regulates lenders, contrasts with analysis from Standard & Poor’s, which last week said that the outlook for securities firms is worse than in 1998.

‘Some investors began to draw parallels with the autumn of 1998, when the collapse of LTCM had triggered fears of instability in the banking system as a whole,’ the BIS in Basel, Switzerland, said in a report published yesterday.

‘However, the recent rise in US 10-year swap spreads was less sharp than at the time of the LTCM crisis.’

Investors are demanding a yield premium over 10-year Treasury notes of 70 basis points to swap floating-rate interest payments for fixed rates, up from 54 basis points in May. The premium, which increases as the perception of risk deteriorates, had more than doubled in 1998 to 97 basis points.

Bank stocks dropped as much 17 per cent this year, half the 35 per cent decline in 1998, according to the Standard & Poor’s Banks Index.

Declines in stock markets ‘largely reflected investors’ anticipation of losses related to speculation in the sub-prime market and other credit products, as well as expected declines in bank profits due to lower M&A-generated fees’, the BIS said.

‘Despite such losses, the overall decline amongst US banks had not by late August been as severe as in 1998.’ Bank Revenue S&P, based in New York, last week said that revenue from investment banking and trading may fall 47 percent in the final six months of this year, compared with a 31 per cent decline nine years ago. Moody’s Investors Service on Aug 16 said that a hedge fund collapse on the same scale as LTCM was possible.

LTCM, the Greenwich, Connecticut-based fund run by John Meriwether, failed after Russia defaulted on US$40 billion of debt in August 1998 and investors sought the safest securities, including US Treasury notes.

LTCM had been betting on financial markets becoming less risky, borrowing from Wall Street banks to make wagers of about US$125 billion that global bond prices would converge, according to accounts of the debacle including When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein.

The BIS, formed in 1930, polled 62 institutions for its semi-annual report.

Separately, China said yesterday that none of its massive foreign exchange stockpile was invested in the teetering US sub-prime mortgage sector, while a top EU official predicted the crisis would not choke off economic recovery.

European Union Economic and Monetary Affairs Commissioner Joaquin Almunia told newspaper El Pais that lower credit growth and tighter credit conditions were ‘very possible’ but that Europe’s economic recovery would continue.

‘There is no reason that financial turbulence … will put an end to a phase of economic recovery which is solidly based,’ he said.

A senior Chinese foreign exchange agency official helped sentiment by saying none of Beijing’s US$1.33 trillion stash of foreign exchange reserves – the world’s largest – was in US sub-prime mortgage-backed securities, underscoring China’s earlier assertions that it had only limited exposure.

 

Source: Bloomberg (Business Times 4 Sept 07)

Ritz-Carlton Residences in Singapore a first in Asia

Premier hotel brand will build 58 high-end homes in Cairnhill on former Horizon View site

WELL-HEELED fans of the Ritz-Carlton’s luxury accommodation will soon be able to buy homes in Singapore that come stamped with the five-star hotel brand.

Asia’s first Ritz-Carlton Residences will be launched for sale in Singapore late next month, with 56 apartment units and two penthouses up for grabs.

The 36-storey tower will be built in Cairnhill Road on the former Horizon View site, and will be completed by early 2010.

Residents will enjoy a 24-hour concierge service, housekeeping and sommelier service. All the staff will be trained and managed by Ritz-Carlton.

While the apartment prices have not yet been finalised, Ritz-Carlton’s vice-president of international hotel development, Mr Shawn Hill, said the hotel’s branded apartments usually fetch up to 50 per cent more than comparable non-branded homes.

‘Typically, comparing against non-branded residential properties, we see a 20 to 50 per cent premium over the highest-end homes in each market,’ he told The Straits Times.

There are currently 32 other Ritz-Carlton Residences around the world, including in New York, Boston, Hawaii and the Bahamas. Similar projects are in the pipeline in Europe and the Middle East, Mr Hill said.

In Asia, Singapore was chosen for the residences’ debut over cities such as Kuala Lumpur and Tokyo, where Ritz-Carlton has service apartments.

‘We chose Singapore because we consider it to be a pace-setter in the region, and it’s a highly sought-after city to live in,’ explained Mr Hill.

‘Singapore, as a city, has some of its own branding and a very strong international appeal. It represents a high quality of living as well as stability.’

But the group is also looking at building more of such homes in other ‘gateway cities’ in Asia, including Hong Kong, Shanghai, Tokyo, Ho Chi Minh City and Jakarta, Mr Hill added.

The Singapore project is a partnership between Ritz-Carlton and Hayden Properties – a 50:50 joint venture between real estate firm KOP Capital and Emirates Investment Group unit Emirates Tarian Capital.

Hayden, which was set up last October, is also the developer behind the luxury project at 37 Scotts Road that boasts a garage in every apartment.

The Ritz-Carlton Residences in Singapore will offer units in three sizes. The three-bedroom units will be 2,800 sq ft while the four-bedders will be 3,100 sq ft and the penthouses will weigh in at more than 5,000 sq ft.

Each unit will have designer fittings and appliances. The property will also have a lap pool, library, wine cellar, and a kitchen and entertainment area managed by the Ritz-Carlton.

Monthly maintenance fees for the apartments may add up to between $2,000 and $3,000, said Ms Ong Chih Ching, Hayden’s founder and lead director.

She said the trend of hotel-branded residences is set to grow in Asia, as homebuyers become more affluent.

‘Apart from the luxurious hardware that you will see in buildings, the other thing that buyers will look for is service. A lot of the hotel chains have good reputations for their service.’

Other hotel-branded residences in Singapore include Four Seasons Park and St Regis Residences.

Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, agreed that more cobranded apartments will emerge, and not just involving hotels.

‘The co-branding trend includes architects, designers, fashion labels such as Armani and Versace, and these will put Singapore on the world map.’

He expects foreigners to make up most of the buyers of the Ritz-Carlton apartments. These could ‘definitely fetch a minimum’ of $4,000 per sq ft, which is at least 20 per cent more than current prices in Cairnhill, he said.

Luxury living

• Ritz-Carlton Residences in Singapore will offer 56 apartment units and two penthouses.

•  The 36-storey tower in Cairnhill will be completed by early 2010.

• Residents will enjoy a 24-hour concierge service, housekeeping and sommelier service.

• Similar projects are in the pipeline in Europe and the Middle East. 

• The group is also eyeing other ‘gateway cities’ in Asia such as Hong Kong, Shanghai, Tokyo, Ho Chi Minh City and Jakarta.

 

 

Source: The Straits Times 4 Sept 07

How far will the Fed chief go?

In a speech last Friday, US Federal Reserve chairman Ben Bernanke gave his first detailed analysis of the turmoil in financial markets and what actions the Fed could take. Ann Williams summarises what he spoke on.

The sub-prime crisis and the fallout

MR BERNANKE begins by explaining why the sub-prime crisis happened and admits that the fallout has been more severe than expected.

He acknowledges that the turmoil in mortgage markets had caused a broader credit crunch that could damage the fundamental economy.

In doing this, the Fed chief is also setting out to reassure investors that the United States central bank understands the severity of the crisis.

Mr Bernanke starts by saying the housing downturn has been ’sharp’ and has been responsible for reducing the annual rate of US economic growth by about three-quarters of a percentage point over the past 11/2 years. The downturn, he says, looks set to continue.

He talks about how this has had an impact on the mortgage market, particularly the fate of sub-prime borrowers – those with poor credit histories – who borrowed during the housing boom and are now struggling to hold on to their homes as rates have risen.

‘With many of these borrowers facing their first interest rate resets in the coming quarters, and with softness in house prices expected to continue to impede refinancing, delinquencies among this class of mortgages are likely to rise further.’

Mr Bernanke also discusses how, as a result of problems in the secondary market for mortgage-backed securities, borrowers currently faced ‘noticeably tighter terms and standards’ for nearly all housing loans.

Worse, the ‘financial stress has not been confined to mortgage markets’ but has spread to credit and equity markets: There were ‘pronounced declines in investor demand’ for asset-backed commercial paper, a ‘flight to quality’ in the Treasury market, a widening of credit spreads and ’sharp’ swings in stock prices.

Mr Bernanke acknowledges that ‘global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans’.

These losses reflect more than concerns that weakness in US housing will restrain overall economic growth.

They reflect investor uncertainty that ‘has increased significantly, as the difficulty of evaluating the risks of structured products that can be opaque or have complex payoffs, has become more evident’.

‘Liquidity dried up as uncertainty, the higher cost of capital and fears that credit risks might be larger and more pervasive than thought previously, deterred new loans and investment.’

Additional Fed actions

MR BERNANKE then says that ‘the Fed stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets’.

While noting it is not the Fed’s role to protect investors from losses, he makes clear that the central bank has a stake in maintaining smoothly functioning financial markets.

‘Developments in financial markets can have broad economic effects felt by many outside the markets, and the Fed must take those effects into account when determining policy.’

His basic position – that the Fed will not cut rates to help investors but will take into account the effects of market turmoil on the economy when setting monetary policy – is the same one laid out in its inter-meeting policy statement a fortnight ago.

What is new is his detailed discussion of what is happening in the financial markets and the ways in which these developments can have an impact on the economy, particularly the housing sector.

Mr Bernanke’s speech does appear to nudge the Fed in the direction of a cut in its key federal funds rate because it does not deter investors from their expectation of such a move. But it falls short of committing to that cut.

He also spells out a much tighter and more explicit link between the next decision on interest rates and what happens in the housing market.

This is important because the Fed has traditionally focused on the health of the overall economy rather than on individual sectors.

‘Obviously, if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the rest of the economy. We are following these developments closely.’

In an added attempt to soothe investors, Mr Bernanke also suggests that the central bank will focus less heavily than usual on incoming economic data, which has yet to signal a clear downturn.

‘Economic data bearing on past months or quarters may be less useful than usual for our forecasts.

‘As a result, we will pay particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts around the country.’

 

Source: The Straits Times 4 Sept 07