The green route to en bloc redevelopment

Demolition is wasteful and not environmentally friendly, says Hillcrest MD

THE property boom here prompted Hong Kong- based Hillcrest Capital to buy the 34-unit Anderson Green in February for $112 million in February. But instead of tearing it down to build a new condo, it will gut it, then reuse the existing structure.

Hillcrest managing director Lyon Lau says: ‘It is not environmentally friendly to demolish a perfectly fine building only to rebuild something similar.

‘Although the concept of alteration and addition might be new to Singapore, in Hong Kong it has been practised widely.’

More than 160 residential buildings have been sold en bloc for redevelopment here in the past two years, but many are still structurally sound.

Architect Tai Lee Siang, president of the Singapore Institute of Architects (SIA), says: ‘Buildings are designed to stand for as long as the materials they are built of allow them to stand. This can be hundreds of years or less than a week – think of cardboard houses.’

Most of the buildings that have been sold are about 20 years’ old, but the sites they sit on can house bigger and taller projects, so it makes business sense to demolish them.

Anderson Green, which will be relaunched for sale as 21 Anderson, is already built up to its maximum potential, so strictly speaking the decision to not demolish was not completely for the love of the environment.

But perhaps what is really not sustainable are periodic increases in plot ratios.

The National University of Singapore’s Assistant Professor Hee Limin (Department of Architecture, School of Design and Environment) says: ‘In a way our planning system encourages this redevelopment.’

According to her, it’s a shame that economic forces ‘control’ the landscape. And these economic forces do not take all factors into consideration.

There is also a cost implication in the ‘embodied energy’ in buildings, she says. This refers not only to the energy it uses once it is up and running, but the resources exhausted to build and possibly recycling it.

The study of a ‘life cycle’ of a building is still relatively new. But considering US National Institute of Standards and Technology figures, which reveal that building construction consumes 40 per cent of the raw stone, gravel and sand used and 25 per cent of the virgin timber used worldwide each year, the price of a new building is actually considerably higher.

City Developments Ltd (CDL) recently won the Building and Construction Authority’s Green Mark Platinum award and is probably the greenest developer in Singapore. Its general manager Eddie Wong concedes: ‘While there are negative environmental and social impacts from en bloc redevelopment, we must also be mindful of the tremendous positive effects of such redevelopment’.

He highlights a reduction in long-term energy consumption through more energy-efficient buildings.

CDL does recycle some building debris, but recycling or reusing a whole building is a different matter.

The most environmentally friendly solution would be to not demolish buildings at all, but ‘economic forces’ are not likely to support this.

Pioneer architect Tay Kheng Soon of Akitek Tenggara says the simplest solution would be to allow the transfer of development rights.

‘Owners of a site that has been given increased plot ratio should be able to sell to a developer who wants higher plot ratio on another site. This would also require a masterplan that allows for plot ratio increases above those pegged at a certain level. All in all, it requires a more sophisticated planning process than the present one.’

Other ways suggested by Mr Tay include rating existing buildings based on heritage. ‘The lower the rating, the more demolition is permitted. Correspondingly, a higher-rated property will enjoy a property tax rebate to balance out the benefits.’

SIA’s Mr Tai adds: ‘The attitude of keeping and maximising the value of old buildings for urban renewal requires a complete change of mindset. This is not always possible as it is human nature to yearn for growth, change and improvement.’

The Building and Construction Authority is encouraging the use of recycled materials in construction.

It promotes the use of Eco-concrete made from recycled material used in pilot projects for non-structural works such as pavement slabs in housing estates, linkways and park connectors.

 

Source: Business Times 11 Sept 07

KepLand in deal to develop luxury homes in Jeddah

It will hold 51% stake in the project, with an investment cost of $387.6m

KEPPEL Land and Saudi Arabian wealth management company Saudi Economic and Development Co (Sedco) will invest $760 million to jointly develop about 1,000 luxury apartments in Jeddah, Saudi Arabia, the two companies said yesterday.

KepLand will hold a 51 per cent stake in the project, with an investment cost of $387.6 million. Sedco will own the other 49 per cent.

The development, on a 3.6 ha site along the corniche waterfront in Jeddah, will comprise three high-rise towers with sea-facing apartments.

Development will be undertaken in phases according to demand. The project will target high-end buyers and is expected to be launched in 2008.

‘We are excited that our first foray into Saudi Arabia is a landmark waterfront development in Jeddah,’ said Kevin Wong, KepLand’s managing director.

‘This development will enable Keppel Land to quickly establish its track record and open other opportunities in Saudi Arabia and other fast-growing markets in the Middle East.’

Located on the west coast of Saudi Arabia by the Red Sea, Jeddah, with a population of 3.4 million, is the gateway to the two holy mosques of Makkah and Medinah.

The development site is a five-minute drive from Red Sea Mall – a 240,000 sq m shopping mall being developed by Sedco and other partners, which will be the largest retail hub in Saudi Arabia when completed at end-2007.

‘With strong economic growth and accelerated economic reforms in Saudi Arabia, Jeddah has enjoyed high growth in the real estate sector in recent years,’ said Ang Wee Gee, KepLand’s director for regional investments.

KepLand’s shares closed five cents lower at $7.70 yesterday. The company’s stock has climbed 11.6 per cent so far this year.

 

Source: Business Times 11 Sept 07

Japan economy in shock Q2 contraction

Revised data stokes fears of growth recession; Nikkei takes a hit with 2.2% fall

IN TOKYO

JAPAN’s economy shrank by a bigger than expected 0.5 per cent in the second quarter of this year, according to revised official data published yesterday.

The news sent Tokyo stock prices plunging and reinforced concerns that the long-lasting recovery in the economy has finally come to an end. It also appeared to rule out any early rise in interest rates.

Initial figures had suggested that gross domestic product expanded 0.5 per cent in the second quarter, but revised data released last week showed that corporate capital expenditure in the April-June period fell by more than 12 per cent. That led economists to re-do their GDP calculations – but even so, the 1.2 per cent annualised decline announced yesterday caught analysts off-guard.

Finance Minister Fukushiro Nukaga tried to put a brave face on the situation. ‘The GDP data showed that consumption is growing moderately,’ he said.

‘Capital spending fell but corporate earnings have been improving. Overall, I don’t think there has been a big change in the economy. I expect the economic recovery to continue.’

But the market delivered a more bearish verdict on the news. The Nikkei 225 stock average fell a hefty 357.19 points or 2.2 per cent to 15,906.52.

The yen, meanwhile, continued its climb against other major currencies, casting doubts on the future strength of exports, which have been a mainstay of the economy, along with corporate capital spending.

With personal consumption remaining stagnant and government spending set to contract further in 2008, some economists are now beginning to acknowledge the possibility of a ‘growth recession’ (declining rates of growth) or even an absolute recession (where the economy contracts for two consecutive quarters) by next year.

Some analysts are also saying that the Bank of Japan may be unable to raise interest rates this year given the clouds on the economic horizon and the prospect of continuing turbulence in global financial markets.

The bank’s policy board, due to meet next week, is likely to hold its short-term policy lending rate at 0.5 per cent rather than raise it to 0.75 per cent, as had been expected earlier.

 

Source: Business Times 11 Sept 07

Horizon Towers canvassing for sales committee

(SINGAPORE) Some majority sellers of Horizon Towers who have been trying to find volunteers to form a new sales committee are understood to have found five – just enough to meet the quorum needed.

With a handful of willing candidates, they are trying to arrange for a meeting to be held on Sunday to discuss the election of a new committee, a source said.

The remaining three members of the previous sales committee of nine quit in a meeting last Friday. The others quit in the days leading up to the meeting as pressure mounted, along with threats of legal suits. If the majority sellers succeed in getting a new committee together, it will be the third for the Horizon Towers sale.

At the meeting on Friday, the majority sellers were supposed to decide on how to respond to a lawsuit brought by Hotel Property Ltd (HPL) and its partners after the en bloc sale of their Leonie Hill property fell through last month.

The Strata Titles Board (STB) refused to grant a collective sale order, saying that Horizon Towers had filed a defective application.

HPL and its partners are suing the majority sellers for failing to file properly.

However, sellers that BT spoke to said that the meeting was more focused on the issue of finding enough volunteers to form a sales committee, rather than deciding on the next course of action.

A lawyer that BT spoke to said that under the current Land Titles (Strata) Act, which governs en bloc sales, there is no mention of needing a sales committee for a collective sale to go through.

He said that having a sales committee is more of a practical issue, as it would be impossible to manage such a big en bloc sale without one.

However, under proposed new rules, an en bloc sales committee must be set up and its members elected at an extraordinary general meeting convened by the estate’s management corporation.

This will apply to all projects which have yet to obtain the required majority consent from owners at the time the amendments are passed by Parliament, most likely this quarter.

HPL and its partners have given the majority sellers up to today to extend the en bloc sale completion deadline to Dec 11 and ‘do everything necessary to obtain the collective sales order’.

Should they lose their case, each of the 255 owners of 173 units who signed off on the en bloc sale may be liable for about $4 million.

 

Source: Business Times 11 Sept 07

Lifestyle hub at one-north could boost housing prices, retail rents

THE upcoming integrated development at one-north is expected to generate more interest in the area and drive up housing prices and retail rents there, market watchers said.

On Sunday, property giant CapitaLand and New Creation Church’s Rock Productions said they will be investing some $660 million to build a lifestyle hub in one-north, JTC Corporation’s science hub. The project will be located right next to Buona Vista MRT station.

The hub, which will be the biggest retail development by far in the area once it comes up by 2011, will push up residential prices and rents as well as rentals for retail space in the vicinity, experts said.

‘You probably will see residential and retail prices going up in the area,’ said Mavis Seow, CB Richard Ellis’ executive director for retail services.

‘The Holland area is already a very much sought after location. Once the project is developed, it will only get better.’

Rents in the Holland Village area are now between $8 and $15 per square foot per month (psf pm), she said.

CapitaLand, which will invest some $380 million, will own the retail and entertainment component of the project, which will have some 180,000-200,000 sq ft of net lettable area.

Rock Productions will invest $280 million. The company, which is the business arm of the 16,000-strong New Creation Church, will manage the hub’s civic and cultural zone, which will include a 5,000-seat stateof-the-art theatre. The civic and cultural zone will have a gross floor area of some 323,000 sq ft in all.

Pua Seck Guan, chief executive of CapitaLand’s retail arm, said that in line with the developer’s asset-light strategy, the retail and entertainment component could eventually be injected into the developer’s listed real estate investment trust (Reit) CapitaMall Trust.

‘The hub will not be a traditional shopping mall,’ he said. ‘As the developer, we will take the risk – until investors are convinced it is sustainable – before selling.’

The mall will have mostly F&B and entertainment units as is the case with Clarke Quay, Mr Pua said. The retail component will be smaller than in CapitaLand’s other malls.

Possible tenants could include a gourmet supermarket, trade services catering to people living and working in one-north, and even a dance club, he said.

The hub is however guaranteed some footfall from New Creation Church’s congregation, said Matthew Kang, director of Rock Productions.

New Creation Church will be the theatre’s ‘anchor tenant’ and will hold both its Sunday and weekday service there.

At present, the church uses the Rock Auditorium at Suntec City, which seats about 1,400 people.

‘We wanted to look for a place to move to; the congregation was getting bigger,’ Mr Kang said.

 

Source: Business Times 11 Sept 07

Aussie prime mortgage arrears decline on jobs

Higher interest rates are likely to affect arrears in third quarter, says Fitch

(HONG KONG) Delinquencies on Australian prime mortgages fell in the second quarter as unemployment declined to a 33-year low, according to Fitch Ratings.

Non-conforming home loans that were at least 30 days in arrears declined to 1.48 per cent of mortgages used to secure bonds, from 1.54 per cent in the first quarter, the credit assessor said yesterday.

‘Despite the disruption to international capital markets, increasing interest rates and contrary to press reports of local mortgage stress, Australian residential mortgage-backed securities continue to perform well,’ Sydney-based Ben McCarthy, head of Fitch’s Australian structured finance team, said in a statement.

Australian employers hired almost twice as many extra workers in August as economists had forecast after mining companies expanded to meet soaring demand for commodities for China and retailers opened new stores. The jobless rate was 4.3 per cent.

Fitch expects higher interest rates to affect arrears in the third quarter. The Reserve Bank of Australia raised the overnight cash rate target by 25 basis points on Aug 8 to an 11-year high of 6.5 per cent.

The ‘buoyant Australian property market has ensured that even those under stress have been able to avoid mortgage default through refinancing or sale’, Mr McCarthy said.

Delinquencies for so called ‘low-doc’ low-home loans which require less documents and income proof than standard mortgages increased to 4.54 per cent from 4.45 per cent. Borrowers in the loans, ‘being primarily self-employed borrowers, are more affected by shifts in the economy such as interest rate movements’, said Jason Hughes, a senior analyst at Fitch.

‘What we’ve seen is house prices go up,’ said David Verschoor, a Hong Kong-based trader of Australian credit default swaps at BNP Paribas SA. ‘When that’s the case, if someone can’t afford their house any more, they sell it.’

Moody’s Investors Service said on Aug 27 arrears on Australian home loans made to borrowers with poor credit histories rose to a record of 6.5 per cent in the second quarter.

The average household’s debt-to-income ratio has more than doubled to 158 per cent in the past decade, according to Moody’s. 

 

Source: Bloomberg (Business Times 11 Sept 07)

Asia still looking rosy in medium term: Tharman

(SINGAPORE) The repricing of risk sparked by the crisis in sub-prime debt in the US is not over, but there is no reason to downgrade Asia’s economic prospects in the medium term, said Tharman Shanmugaratnam, Second Minister for Finance. Speaking yesterday at the opening of SG Private Banking’s new office, he pointed out that the current turbulence does not alter the basic story of an ‘ascendant Asia’.

‘It introduces significant near term uncertainty, both for the markets and for economic growth, but it does not alter the picture of an increasingly dynamic and resilient Asia in the coming years and decades.’

He said that the growth of SG Private Bank, along with that of the private banking industry, reflected a few fundamentals. One of these is the emergence of Asia as the big story in the global economy. ‘Global investors have good reason to believe Asia will continue to outperform other regions for at least another two decades to come.’

Mr Tharman said the fallout in Asia has so far been limited. MSCI Asia ex-Japan is down 1.6 per cent since mid-July and is still up 24 per cent in the current year. Excluding China, Asian markets are up 22 per cent since the start of the year, and 45 per cent since the middle of last year.

Credit bond spreads in Asia have widened but the correction has been healthy and spreads remain below their historical levels. Average credit spreads in Asia recently rose by 100 basis points over US Treasuries to reach about 234 basis points currently. But they remain well below the 400 basis points seen between 2000 and 2003.

He said that there is increased uncertainty over the US near-term outlook, which could impact Asia. But Asian producers will continue to make productivity strides, and Asian consumers will provide an independent growth engine. ‘Global investors will, therefore, continue to seek out higher returns in Asia.’

Steve Forbes, Forbes magazine publisher, said in an address that Forbes has a great affinity with private banking as it monitors private wealth. Forbes publishes annual listings of the world’s wealthiest individuals. Asia’s 160 billionaires, he said, now account for 17 per cent of the world’s wealthiest, compared with a share of 14.5 per cent a year ago. This represents several hundred individuals, with assets of over US$650 billion. ‘The current crisis is a temporary one. We had a far worse one 10 years ago. The long-term dynamics are very positive,’ he said. Forbes is hosting its Global CEO conference in Singapore, bringing together top CEOs with a combined net worth of US$130 billion.

SG’s new office is at One Raffles Quay. SG chief executive for private banking Pierre Baer said the move is part of efforts to stay ‘at the forefront of this robust trend (in wealth creation), but at no compromise to our service quality’. The office is also its regional hub.

 

Source: Business Times 11 Sept 07

Shui On to double China land bank

(SINGAPORE) Chinese developer Shui On Land will double its land bank in China over the next three years from 12 million square metres, said its founder and chairman yesterday. ‘China’s property market is still strong despite the macroeconomic controls by the government. Market demand is tremendous because the economy is growing,’ said Vincent Lo.

He began his career in construction as head of Shui On Construction and made a name for himself by turning some century-old houses in Shanghai into the trendy Xintiandi bar and dining area.

 

Source: Reuters (Business Times 11 Sept 07)

Hang Lung may see China returns rising 25% in 2 yrs

It plans to spend US$5b in mainland over next 10-15 years

(SINGAPORE) Hong Kong’s Hang Lung Properties could see its investment returns from its China projects hit 25 per cent in two years time, its top executive said yesterday.

‘We are currently getting 20 per cent returns unleveraged (on our China properties). Starting in 2009 and 2010, our new projects will hit the market,’ said Ronnie Chan, the firm’s chairman.

The company, Hong Kong and China’s third largest real estate firm by value, has two developments in Shanghai and plans to spend US$5 billion in mainland China over the next 10-15 years.

Mr Chan said the firm has earmarked US$2 billion so far for its investments. It plans to spend a further US$3 billion building retail and office complexes in China.

‘Frankly, I don’t know why people want to build residential (properties) for sale (in China). It’s a fool’s game. The government wants a harmonious society and high residential prices are a great way to destroy social harmony,’ he said.

He added that the firm would not need to raise debt for its China investments.

Mr Chan, who also heads the developer’s parent Hang Lung Group, said that China property stocks were overvalued. ‘I say there is no bubble in the real estate market but there is a bubble in the real estate stock market.

The average China real estate company (stock) is selling at 70-80 times PE (price-to-earnings ratio). Now that’s a bubble. No stock market in the history of mankind can sustain that PE,’ he said.

Mr Chan also ruled out divesting its Chinese properties into a listed real estate investment trust . ‘Why would you want to tie your hands?’ he said.

 

Source: Reuters (Business Times 11 Sept 07)

Bulls may resume charge soon?

THE next bull market in equities is just around the corner despite the current turmoil in financial markets, a top US investment manager said here yesterday.

According to Ken Fisher, founder and chief executive officer of private money management firm Fisher Investments, which looks after US$35 billion of assets, investors should be ‘aggressive’ in buying shares.

He recommends that the materials, industrials and energy stocks but not big blue chips. And he expects ‘a big up-move ahead later in the year tied to takeovers and share buy-backs’.

He also reckons the current uncertainty in the financial markets is encouraging companies and investors to hoard cash, which ‘at some point comes out’.

Mr Fisher, who writes a regular investment column for Forbes magazine, is in town for the three-day Forbes Global CEO Conference which started yesterday.

Another guest speaker at the conference, Prof Michael Spence, who won the 2001 Nobel Prize for economics, said that the problems in the US sub-prime mortgage market are unlikely to have an ‘excessive impact’ on the global economy or Asia. ‘I don’t think Asian countries are particularly vulnerable now,’ he told reporters.

Mr Fisher argued that despite fears of a credit crunch, the cost of borrowing for an average company with a triple-B credit rating is still cheaper than in June, before the current financial market turbulence started.

‘The only part of the world where the rates have gone up is at the junk-end.’

On average, corporate earnings yields, or a company’s earnings per share as a proportion of its share price, are still above 6 per cent for a typical company that trades at 15 times earnings per share, he said. This compares with after-tax borrowing costs of about 4 per cent for an average company with a triple-B credit rating.

The difference in borrowing costs and earnings yields still makes it highly attractive for companies to issue debt and buy back their own shares or acquire other companies, which Mr Fisher predicts will drive the next round of share price increases once investor confidence returns, which he expects will happen by Christmas.

Meanwhile, with investors demanding higher returns for staking money on ‘junk’ or high-risk bonds, smaller companies with poor credit ratings will be less able to defend themselves against a takeover by borrowing to raise cash, he said. ‘Sub-prime actually sets the stage for the next level of takeovers.’

Rather than buying blue chip shares, he advises investors to look at ‘companies that seem a little junkier’ because these are the most likely to see their share price rising when the takeover wave resumes.

 

Source: Business Times 11 Sept 07

Sub-prime crisis may envelop whole of US economy

Central banks say they will remain alert but won’t bail out bad investors

(BASEL) The crisis in the US housing market risks spreading to the whole of the nation’s economy, European Central Bank chief Jean-Claude Trichet said yesterday on behalf of world central bankers.

He was speaking in his capacity as head of the G-10 group of central bankers from industrialised and emerging economies, who met at the Bank for International Settlements here.

‘There is a probability of fallout on the real economy in the USA,’ Mr Trichet said. ‘We will have to follow very carefully what happens particularly in the USA. We will remain . . . alert, (there is) no time for complacency,’ he added.

Mr Trichet said central banks had an interest in securing market stability but this did not extend to giving lifelines to imprudent investors who have got their fingers burned in the recent turbulence.

‘It’s certainly the sentiment of central bankers who are around the table that bailing out bad investors would be the worst thing to do,’ he said.

US Federal Reserve chairman Ben Bernanke, Bank of Japan governor Toshihiko Fukui, Bank of England governor Mervyn King, Zhou Xiaochuan from the People’s Bank of China and Bank of Canada Governor David Dodge were among those who attended the meeting.

Mr Trichet stressed the relative good health of the rest of the global economy outside the US, and of emerging markets in particular. ‘The global economy has solid fundamentals,’ he said. ‘Very significant progress has been made in the emerging world. The fundamentals have been considerably improved, progress has been made in fostering local financial markets,’ he added.

The ECB last Thursday voted to keep its interest rates on hold amid financial market and credit jitters. The US Federal Reserve is widely expected to trim borrowing costs at a scheduled Sept 18 meeting.

The US home loan trauma has prompted banks to choke off lending to each other as they strive to calculate exposure to the sector, forcing central banks to pump emergency funds into the financial system.

Official figures yesterday showed that Japan’s economy shrank more than expected in the second quarter. The 0.3 per cent fall was bigger than forecasts for a 0.2 per cent contraction.

That followed data on Friday showing US payrolls shrank in August for the first time in four years. The twin reports hardened prospects that the Bank of Japan will hold interest rates steady and the Fed will cut them to temper the worst effects of the crisis.

 

Source: AFP, Reuters, Bloomberg (Business Times 11 Sept 07)