En bloc effect pulls up HDB resale prices

Private home prices also up smartly; govt may make more sites available

(SINGAPORE) The property price boom seen in the past two years has filtered down to the heartlands. The Housing & Development Board’s Q3 2007 flash estimate for its resale flat price index was 6.5 per cent higher than in the preceding three months. This is the biggest quarter-on-quarter jump in the index since Q2 1999, when it rose 8.1 per cent.

Market watchers say the key factor driving the increase this time around is the army of en bloc sellers downgrading for their replacement property.

Meanwhile, the party continues in the private housing market. The Urban Redevelopment Authority’s (URA) flash estimate shows that the official price index for private homes jumped 8 per cent in Q3 over the previous quarter, after rising 8.3 per cent in Q2. To ensure that prices do not run ahead because of a shortage of supply, the URA indicated that more sites could be made available through the Government Land Sales programme.

For now, the gains appear pretty evenly spread across regions. The URA said its price index for non-landed private homes in the Core Central Region – which includes the prime districts, Downtown Core and Sentosa – increased 8.3 per cent quarter-on-quarter in Q3, followed by an 8.1 per cent rise for Outside Central Region, which covers suburban mass-market locations like Woodlands, Yishun and Jurong, and 7.7 per cent for Rest of Central Region, including places like Bukit Merah, Toa Payoh and Katong.

The big price disparity among the three areas at the beginning of the year is clearly dissipating, notes PropNex CEO Mohamed Ismail. DTZ Debenham Tie Leung executive director Ong Choon Fah said yesterday’s official property data is ‘not such a bad thing. Everybody should feel a little richer’. CB Richard Ellis executive director Li Hiaw Ho says the URA’s Q3 flash estimate shows that ‘confidence in the residential market was unshaken despite periods of volatility in global stock markets caused by the sub-prime mortgage problems’.

‘While it’s not surprising that the high-end market continued to lead the way as more and more projects were marketed at above $3,000 psf, it was a big step made by several suburban projects that were launched at $850- 1,000 psf,’ he added.

The URA’s flash estimate for its Q3 overall private home price index reflects a 22.6 per cent gain in the first nine months of this year, since Q4 2006.

Mr Li reckons the gain for the whole of this year may come in at 25 to 30 per cent. The uptrend will continue as there are more high-end projects to be rolled out in Q4, including Hilltops, Ritz-Carlton Residences, Grange Infinite, Phase 2 of Marina Bay Financial Centre and projects on Sentosa Cove, he noted.

Mrs Ong notes that other factors driving private home prices include still-strong liquidity, the trend of tenants deciding to become home owners, and the appeal of buying apartments for investment, given the tight rental market.

As for the HDB resale price index, Mr Ismail predicts the full-year increase will reach 15 per cent, considering that the increase in the first nine months alone amounted to 11 per cent. ERA assistant vice-president Eugene Lim forecasts an increase of 13 to 16 per cent for the whole of this year. He laments the unrealistic prices sought by many owners who are still riding on the euphoria created by record prices achieved for some five-room resale flats in the Bukit Merah area. HDB homebuyers are beginning to show some resistance and this could translate into lower resale volumes later down the road.

Mr Ismail estimates that transacted prices of HDB resale flats in Q3 reflect premiums over valuations ranging from $10,000 to $50,000. ‘A year ago, for the smaller three and four-room flats, the premium could have been $10,000- $15,000, while for bigger flats in outlying areas, many were not fetching any premium over valuation at all,’ he added. He reckons that for the next year, HDB’s resale flat price index could go up 10-12 per cent. Mr Ismail does not expect HDB resale flat prices to run away as they did in 1996, when the index rose 34.3 per cent, as the authorities will step up supply quickly to prevent public housing prices from becoming unaffordable.

HDB said it will continue to monitor the market closely to ensure ‘an adequate and affordable supply of flats’. It will be increasing its supply of new flats with plans to offer about 4,500 units under the Built-To-Order system over the next six months, after offering about 2,700 BTO flats from January to September. In addition, HDB plans to release three new sites under the Design, Build and Sell scheme that can generate about 1,500 HDB flats in central and eastern Singapore in the next half year.

As for the private housing market, the URA also gave a clear signal yesterday on its intention for the Government Land Sales programme for H1 2008, which it is currently reviewing. ‘The government will make available more sites for private residential development through the GLS programme next year if the demand continues to remain strong,’ it said.

Click here for URA’s News Release 

 

Source: Business Times 2 Oct 07

Balestier hotel site taken out of reserve list

URA to review plot’s land use; Rangoon site goes to S’pore Healthpartners

A HOTEL site at Balestier Road/Ah Hood Road is to be withdrawn from the reserve list of the Government Land Sales (GLS) Programme for the second half of this year, the Urban Redevelopment Authority (URA) said yesterday.

The URA intends to review the land use plan of the site together with the other vacant land in the vicinity.

This site was on the reserve list since Oct 26 last year, being slated for hotel development on a 99-year lease.

The URA declined to indicate what plans it was considering for the site, saying that it would release details when they are finalised.

‘We are unable to reveal if we have received applications for the site,’ a URA spokesman said.

‘However, from time to time, the government receive inquiries for the site.’

Under the reserve list, the government will release a site for sale only when an interested party submits an application for a site to be put up for tender with a minimum purchase offer price that is acceptable to the government.

Separately, URA yesterday awarded the tender for the white site at Race Course Road/Rangoon Road to Singapore Healthpartners Pte Ltd (SHP).

The company submitted the highest bid of $265.27 million or $4,635.47 per square metre of gross floor area.

Singapore Healthpartners has a total of 38 shareholders, including prominent doctors Charles Chan, Leslie Lam and Maurice Choo.

A major shareholder is Berjaya Leisure (Cayman) Ltd, which is said to be linked to Berjaya Leisure Capital led by Malaysian businessman Vincent Tan.

Directors of SHP contacted by BT last week declined to comment on the company’s plans for the 13,625 sq m site but a medical centre-cum-hotel appears to be in the offing.

The 99-year leasehold white site has a maximum permissible gross floor area of 57,225 sq m and at least 40 per cent of this must be used as a hotel.

 

Source: Business Times 2 Oct 07

URA aims to conserve up to 228 Katong/Joo Chiat buildings

More developers, owners expending resources to buy and restore their old buildings: Mah Bow Tan

THE East Coast may be a hive of new construction activity right now, but the Urban Redevelopment Authority (URA) is also working to keep some old buildings conserved for posterity.

Minister of National Development Mah Bow Tan revealed yesterday that the planning authority was looking at conserving up to 228 buildings in the Katong/Joo Chiat area. The URA is seeking feedback from the owners.

The area already has 700 gazetted conservation buildings. Most of the additional buildings under consideration are shophouses or terrace houses. The addition will make Katong/Joo Chiat one of the larger clusters of conserved residential buildings.

Mr Mah said: ‘The aim of this conservation proposal is to complete conservation of the street block and add to the critical mass of heritage buildings and rich architectural diversity in Katong and Joo Chiat.’

Mr Mah was speaking at the presentation ceremony of the URA

Architectural Heritage Awards (AHA) 2007. Awards were presented to the owners, architects, engineers and contractors of six buildings. These were:

• National Museum of Singapore;

• The 1930s holiday home on Pulau Ubin of the former chief surveyor, Landon Williams;

• Amara Sanctuary Resort Sentosa;

• National University of Law, Bukit Timah Campus;

• 13 Martaban Road, Balestier;

• and 62 Niven Road, Mount Sophia.

  Since the awards’ inception in 1995, a total of 77 buildings have received the AHA.

  Mr Mah said: ‘Increasingly, more and more enlightened developers and owners have willingly expended resources

to buy and restore their conservation buildings for the benefit of the larger society and our future generations.’

One such person is Lyn Lee, who together with her husband bought a house on Tembeling Road six years ago for about $800,000 and then spent another $500,000 on restoring it. This house and others like it on the same road are now being considered for conservation – and Ms Lee is all for it.

Getting conservation status will increase the value of the building as its future is guaranteed. But more important for Ms Lee is that the conservation status means owners who want to alter their homes beyond conservation guidelines will not be allowed to do so.

‘Right now, there is a beautiful symmetry to the street,’ she explained. This sense of identity of place is exactly what URA hopes to do by restoring or creating ‘markers’ in housing estates as well. Mr Mah also said that apart from plans to rejuvenate Queenstown, the government is proposing to build a 4.9km promenade to link Punggol Point and Sungei Serangoon to enhance the ‘rustic coastal character’.

Other areas being looked at include Woodlands, Siglap Village and Upper Serangoon Road. Mr Mah said these projects could be completed by around 2009-2010.

Click here for Mr Mah’s Speech

Source: Business Times 2 Oct 07

Horizon Towers owners, buyers argue against STB’s decision

Court allows buyers, 13 owners to intervene in appeal

(SINGAPORE) The majority owners and the buyers of Horizon Towers joined forces for the first time in months yesterday, to argue against the dismissal by the Strata Titles Board (STB) of the development’s collective sale application.

This was after Supreme Court Judge Choo Han Teck allowed the buyers – HPL and its partners – and a group of 13 majority owners to intervene in yesterday’s appeal.

The appeal at the High Court was originally meant to involve only the majority owners, who consented to the en bloc sale of Horizon Towers in February, and the minority owners, who oppose the sale. But HPL and the group of 13 who wanted separate representation applied to participate in the proceedings, on the grounds that they had a stake in its outcome.

Judge Choo heard their submissions and ruled yesterday morning that it was ‘just and convenient’ to allow both parties in. He also said that ‘prudence requires that HPPL (HPL and its partners) be heard’, as the outcome of this appeal would have a bearing on their allegation that the majority owners breached the sales contract.

HPL and its partners – Morgan Stanley Real Estate-managed funds and Qatar Investment Authority – have sued the majority sellers for up to $1 billion in damages, alleging that the owners failed to do everything in their power to effect the collective sale.

This came after the STB in August dismissed the majority owners’ application for a collective sale order, on the grounds that it was defective because it was missing three pages.

The STB said the statutory declaration provided by the sales committee was ‘false’ because it stated that the collective sale agreement was appended when, in fact, three pages – containing the signatures of three consenting owners – were missing from it. The board also said that it had no power to amend the application and threw it out, without considering its merits.

HPL’s suit against the majority owners has been stayed, pending the outcome of this appeal.

Yesterday, majority owners and the buyers alike sought to convince the High Court that the STB had erred in its decision to throw out the application. They argued that there were no material instances of non-compliance in the application, only a minor technical one – which the STB has the power to amend.

Senior Counsel Chelva Rajah of Tan Rajah & Cheah, who represented the majority owners, and Senior Counsel Andre Yeap of Rajah & Tann, who represented the group of 13 owners, both argued that the missing pages had been a mere oversight.

‘It was only due to a clerical error that the pages weren’t included … and these missing pages were brought to the STB’s attention during the course of the hearing,’ Mr Rajah said.

Mr Yeap also argued that the missing pages had no material effect on the application. It was a point Mr Rajah agreed with – he pointed out that, even without these three signatures, the application would still have the signatures of more than 80 per cent of the owners. According to collective sale rules for older developments, the owners of more than 80 per cent of the units must agree to the sale.

Both also said that STB had the right – under Rule 12 of the Building Maintenance and Strata Management Regulations – to amend any application submitted to the board, and could have done so instead of dismissing it.

Senior Counsel K Shanmugam of Allen & Gledhill, representing HPL and its partners, echoed the spirit – if not the tone – of the majority owners’ submissions.

Mr Shanmugam said his goal was also to convince the High Court that STB had erred in throwing out the collective sale application, without considering its merits. But he warned that there were competing interests among the majority owners.

He cited examples of how some of the majority owners had tried to scupper the en bloc sale, after neighbouring developments started to fetch much higher prices. He related instances of how the sales committee had been equivocal about setting STB hearing dates and how anonymous flyers had circulated around the development, encouraging sellers to renege on the deal.

‘So I want to be joined to this action (this appeal) to ensure our interests are safeguarded,’ he said.

The hearing continues today, when the minority owners will present their objections.

 

Source: Business Times 2 Oct 07

Transforming Singapore’s hotel industry

Global players are injecting new brands and product concepts into the local hotel scene

SINGAPORE’S hotel sector is currently enjoying a new surge of energy and opportunities brought about by the government’s efforts to reinvigorate tourism.

Complementing efforts by the Singapore Tourism Board (STB) to raise visitor numbers to 17 million by 2015, the government had in recent years released more sites for hotel development under its Government Land Sales (GLS) programme to meet the anticipated accommodation needs.

The state land tenders have generally been met with keen industry interest, buoyed by the strong trading conditions that have prevailed with the current strong demand and tight room supply. This is a stark contrast to the 1990s when the government announced a hotel safeguarding policy in 1997 to check the creeping trend of hotels being converted to residential use.

Latest numbers from the tourism authority showed a total of 225 hotels and 36,891 rooms in Singapore’s accommodation market as at end-2005. There is no existing star-rating system in Singapore and the current hotel stock is sub-divided into 103 gazetted hotels (30,445 rooms) and 122 non-gazetted hotels.

Jones Lang LaSalle Hotels estimates that around 81 per cent of the gazetted 30,445 rooms fall within the upper-tier four-star and five-star hotel segments.

Geographically, the majority of these upper-tier hotels are concentrated along the traditional hotel belt: Orchard Road, City Hall, Suntec City/Marina Centre, Bras Basah/Bugis and the CBD/Boat Quay/Clarke Quay.

Familiar international brands found within these localities include the Ritz-Carlton, Marriott, Grand Hyatt, Hilton, Shangri-La, Four Seasons, Raffles, Swissotel, Traders, Pan Pacific, Conrad, Meritus, Novotel as well as The Oriental Singapore which was re-named the Mandarin Oriental Singapore from Sept 25.

Outside of these locations, a cluster of smaller, self-managed budget or boutique hotels have emerged in the Chinatown, Little India and Geylang/ East Coast/Joo Chiat areas.

Sentosa Island is now home to a handful of mid- to high-end hotel properties such as The Sentosa Resort & Spa, Shangri-La’s Rasa Sentosa Resort and the new Amara Sanctuary Resort Sentosa.

A more exciting local hotel scene is unfolding with a new cast of players, additional brands and creative product concepts. Riding on the opportunities presented by the renewal of the tourism industry, international hotel management companies such as Accor, Starwood Hotels & Resorts and the InterContinental Hotels Group (IHG) are growing their presence in Singapore by bringing in other brands from their portfolios that are currently not in this market.

Ranging from boutique to mid-tier to luxury establishments, many of these new hotel developments are being established in non-traditional hotel locations such as Tanjong Pagar, One-North, Labrador Park and Novena areas.

A new 320-room Crowne Plaza, a brand from the IHG family, is scheduled to open at the Singapore Changi Airport next year.

United Engineers, a local developer with a strong focus on the residential sector, has announced plans to build a business hotel at Singapore’s biosciences hub at South Buona Vista.

With the latest GLS programme for the second half of 2007 including sites like Jalan Bukit Merah/Alexander Road, Outram Park and Kampong Glam for hotel development, more hotels can be expected to spring up outside of the typical hotel hot spots.

The two upcoming mega integrated resorts (IRs) at Marina Bay and Sentosa will also be the launch-pads for new hotel brands and concepts. While Sands @Marina Bay will offer 2,500 rooms in the upper-tier sector in 2009, Resorts World @Sentosa will add another 1,830 rooms in six hotels in 2010.

The latter will comprise a Hard Rock Hotel, the Hotel Michael boutique hotel, the Festive Hotel with a Hollywood theme, an iconic Maxims Residences, the Equarius Hotel with a lush greenery theme and the ESPA Villas.

Resort and villa-type establishments, too, are making a stronger statement in Singapore. Apart from the ESPA Villas, Villa Raintree @Labrador Nature Reserve (a refurbishment project) as well as the recently opened Amara Sanctuary Resort and the upcoming Capella Singapore at Sentosa fall under this category.

Meanwhile, the luxury hotel segment will soon witness the opening of the 299-room St Regis Hotel at end-2007.

Sino Land plans to open a new 120-room boutique hotel at Collyer Quay in 2009, while a new 320-room W Hotel at Sentosa Cove is expected to be operational by the end of 2010.

The entry of these new hotels will up the ante in Singapore’s luxury hotel segment, which currently comprises the Four Seasons, Shangri-La, Ritz-Carlton and The Fullerton.

The present lack of quality branded mid-tier accommodation options has created opportunities for new niche developments that are targeted at specific market segments. For example, Far East Organization’s upcoming hotel at Sinaran Drive next to the Tan Tock Seng Hospital will cater to the needs of the growing inbound medical tourist segment.

Similar opportunities are available at a government ‘white’ site on the current Reserve List that is located at Outram Road/Eu Tong Seng Street to develop a 555-room hotel near the Singapore General Hospital.

The proliferation of low-cost carriers in Asia has also fuelled the growth of lower-tier segment, with the new Ibis Hotel scheduled to open at Bencoolen Street in 2009 a case in point. More recently, the Hong Leong Group has linked up with Istithmar PJSC and Tune Hotels.com to open around 30 budget hotels in South-east Asia, including Singapore.

The completion of the Marina Bay and Sentosa IRs as well as supporting infrastructure and tourist attractions in the Marina and Sentosa vicinities will collectively cultivate an environment conducive for the entry of differentiated quality and luxury hotel products to the Singapore marketplace.

The arrival of new brands and new-generation properties such as W, Westin, Fairmont, emerging Middle East Groups like Jumeriah and from the Indian sub-continent, groups like Taj and Oberoi, will provide synergy for the broader local hotel market and is anticipated to generate a wider geographical capture and mix of tourist traffic to Singapore.

In the longer term, new hybrid products such as condotels (or condo-hotels) that are established in the US but still relatively untested in Asia, may be introduced, although the success of such products will hinge on the regulatory framework.

In the meantime, with a wider selection of accommodation offerings to suit the different budgets and expectations of visitors, guests can look forward to a more varied and interesting stay experience in Singapore.

 

Source: Business Times 2 Oct 07

Greenspan: Home market long way from stabilising

But he says lending crisis is ending as demand for more risky assets grows

(LONDON) The US housing market has a long way to go before stabilising after the sub-prime crisis, spelling bad news for consumers in the world’s biggest economy, former Federal Reserve chief Alan Greenspan said yesterday.

Mr Greenspan, who has been outspoken throughout the credit crunch, said more house price declines were likely given a surfeit of supply but pointed to signs the lending crisis could be coming to an end as demand for more risky assets grows.

However, he warned that any speculative market fever must be allowed to run its course to enable a full recovery.

‘As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,’ Mr Greenspan told an audience at Reuters in London.

‘There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery, or by extension, the economic impact on the rest of our trading partners.’

The US housing market remains extremely fragile after a crisis in low-end mortgage borrowing spread fear of a global economic slowdown and put a squeeze on lending conditions.

The Fed has slashed US interest rates by half a percentage point to try and stabilise markets and encourage banks to increase their lending to each other.

But official data shows a US housing recovery is some way off with new home sales falling more than expected in August to notch their slowest rate in seven years and prices recording their sharpest annual fall since 1970.

Analysts said those figures largely reflected conditions before the mid-August market turmoil set in.

‘All that I conclude is that the process of inventory adjustment has just started and we have a long way to go before residential housing and mortgage markets stabilise in the US,’ Mr Greenspan said.

Mr Greenspan said likely victims of sustained weakness in the housing market would include the consumer and, consequently, the world’s biggest economy.

‘Recent declines in home prices are already eating into home equities and unless stock prices resume their pace of increase of earlier this year, US consumer spending and GDP will be under pressure from declining household wealth,’ he said.

But he said signs were emerging the credit crisis could be coming to an end.

‘To be sure, lenders in recent days have been reaching out for longer term, lesser quality assets and that is a good sign,’ he said. ‘Is this August-September credit crisis about to be over? Possibly.’

 

Source: Reuters (Business Times 2 Oct 07)

Yanlord projects draw strong response

It pre-sells 1b yuan worth of properties for three of its developments

YANLORD Land Group, China’s high-end real estate developer, yesterday said it has pre-sold nearly one billion yuan (S$197 million) worth of properties in the month of September for three of its projects.

The company, which was included in the PrimePartners China Index (PPCI) yesterday , said it released and presold a total of 31 duplex apartment units for the second phase of Yanlord Riverside City in Shanghai last Friday.

All the units, representing a total gross floor area (GFA) of 15,113 sq m, were taken up on the day of the launch.

This grossed Yanlord 527.8 million yuan in pre-sale proceeds. The average selling price for this project surged 44 per cent to 34,924 yuan per sq m from 24,289 yuan per sq m achieved in July 2007.

Also on the same day, Yanlord released a total of 150 apartment units of Bamboo Gardens (Phase three) in Nanjing. Of that, 104 apartment units were sold on the day of the launch. That’s a take-up rate of 69 per cent. Total GFA of 13,474 sq m was pre-sold, grossing an aggregate of 144.5 million yuan in pre-sales proceeds.

The average selling price for this development increased 26 per cent to 10,726 yuan per sq m from 8,500 yuan per sq m in May 2007.

The third project is in the southern city of Zhuhai. Yanlord said it released a total of 228 apartment units under the first phase of Yanlord New City Garden on Sept 16. Of that number, 180 apartment units were sold on the first day. The take-up rate was 79 per cent. Total GFA of 27,984 sq m was pre-sold, grossing an aggregate of 257.4 million yuan in pre-sale proceeds.

The average selling price for this development rose 15 per cent to 9,200 yuan per sq m, from 8,000 yuan per sq m achieved in May 2007.

Yanlord said the strong response to its projects reflects the robust underlying demand for quality accommodation.

This is underscored by the strong economic performance, rising affluence of its population and the increasing urbanisation in mainland China.

Yanlord is one of investors’ favourite China stocks listed on the Singapore Exchange. Since news about its inclusion in the PPCI late last week, and in anticipation of the liquidity inflows from China following the set-up of new Qualified Domestic Institutional Investor funds, its share price has been chased up by 23 per cent to $4.22 yesterday.

 

Source: Business Times 2 Oct 07

KepLand in 5th Viet project this year

KEPPEL Land has announced its fifth residential project in Vietnam this year – a 1,500-unit condominium in Ho Chi Minh City – adding to its portfolio of over 20,000 homes there.

The total investment capital for the latest project is estimated at US$136 million.

Through wholly-owned subsidiary Corredance Pte Ltd, Keppel Land has signed a joint venture agreement with Vietnam-based Hong Quang Co Ltd to develop the 5.1ha waterfront site. Corredance is expected to take up a 60 per cent stake amounting to US$24.6 million of the total registered capital of US$41 million in the JV company while Hong Quang, a property developer, will subscribe for the rest.

Keppel Land director of regional investments Ang Wee Gee is bullish on Vietnam. He said: ‘We will continue to be on the look-out for more prime residential sites in Vietnam to ride on the market upswing and to further capitalise on our strong reputation as a choice developer.’

The latest project is close to the Thu Thiem New Township, which has been earmarked as the new downtown to complement Ho Chi Minh City’s CBD. The sales launch of the first phase is slated for early 2009.

Keppel Land’s next launch is expected to be for The Estella, a residential project comprising 1,600 upmarket apartments in the An Phu Ward, Ho Chi Minh City. The soft launch is targeted for Q4 ‘07.

Other projects being developed in Ho Chi Minh City include Saigon Sports City, a 64-ha integrated township development, and Saigon Centre, a mixed development comprising office buildings, serviced apartments and retail component.

It is also developing two waterfront residential developments fronting the Saigon River, while in Hanoi, two memorandums of understanding have been signed with local joint venture partners to develop residential townships.

Keppel Land is also developing a 509ha waterfront township in Long Hung, Long Thanh, Dong Nai.

 

Source: Business Times 2 Oct 07

HK man wins payout for China house

Local paper says amount was about 12m yuan, a record compensation

(HONG KONG) A Hong Kong man whose refusal to sell his house in China held up a massive property development has won a record payout.

Choi Chu-cheung and his wife held out for more than a year for more compensation for their house, blocking the construction of an 88-storey skyscraper in the heart of the southern Chinese boomtown of Shenzhen.

Despite repeated intimidation from developers and an eviction order from the local government, Mr Choi rejected a 5.06 million yuan (S$1 million) offer, which he said was just a third of the plot’s value.

After watching all his neighbours move out, the 57-year-old finally won what he called a ‘reasonable’ payout for his six-storey house in an out-of-court settlement with the developers.

‘The offer was reasonable and we accepted it. It’s worth it. Without the law and our determination to fight for the compensation, there was no way we would have done it,’ Mr Choi told AFP.

‘We had a lot of sleepless nights in the past year but we are happy now.’

Although he would not reveal the exact amount he received, Mr Choi said the figure was ‘very near’ the 14 million yuan he had demanded, and the couple have already spent one million yuan on a new house nearby.

Wen Wei Po, a Beijing-backed newspaper here, said the amount was about 12 million yuan, a record compensation for properties in the fast-growing city.

Mr Choi had said he was inspired by a couple in the southwestern city of Chongqing whose house attained almost iconic status because of their three-year refusal to move for a huge property project.

Wu Ping’s struggle against the developers earned her the nickname ‘Stubborn Nail’ as her two-storey brick house sat in the middle of an excavated construction pit.

The house was finally demolished after a court said the couple would be given a new home nearby and 900,000 yuan in damages.

Property disputes are rife in China, often involving illegal land grabs by developers in collusion with the government.

The national parliament passed a landmark law solidifying private property rights earlier this year partly to combat such disputes.

 

Source: AFP (Business Times 2 Oct 07)

4-year-old case dragged up in Horizon Towers saga

Dragon Court case cited to persuade judge to overturn the STB decision

THE tangled Horizon Towers case has become even more complex as a controversial collective sale four years ago was dragged into the proceedings.

In their High Court appeal yesterday, lawyers for the majority sellers of Horizon Towers cited the case of Dragon Court, where a lone owner fought against the estate being sold en bloc in 2003.

They argued that the Dragon Court ruling sheds some light on the ongoing legal tussle over the Leonie Hill estate, as it is also related to an issue of missing disclosure.

In the Horizon Towers case, the Strata Titles Board (STB) dismissed the owners’ application for a collective sale in August over a technicality: Pages bearing three consenting owners’ signatures were missing from the submitted application.

The majority owners want the High Court to overturn the STB dismissal.

Their lawyer – Tan, Rajah and Cheah’s Mr Chelva Rajah – said the STB knew those three owners signed the sale deal, and that the Board had the power to amend the application to include the missing pages.

Mr Rajah argued that even without those three signatures, the rest of the owners who had consented to the sale still held 82.51 per cent of share values – comfortably above the 80 per cent minimum requirement.

Mr Rajah also told the court that the missing pages were a ‘clerical error’.

He then cited the High Court’s ruling that upheld the STB’s decision to allow the Dragon Court sale in 2003, despite more ‘material’ information not being disclosed in the application.

Dragon Court unit owner Koh Gek Hwa tried to block the sale, arguing that a conflict of interest between the majority sellers and the buyer had not been highlighted. Nine of the estate’s 14 units were owned by a single company linked to the condominium’s buyer, she said.

But the STB, noting that there was only one bidder for that sale, decided there was no reason to suggest that the buyer was unfairly chosen. The High Court backed that ruling, saying the STB had known of the seller buyer relationship prior to its decision.

Yesterday’s Horizon Towers hearing was somewhat quieter than Friday’s lively session, when comments from the public gallery peppered the lawyers’ speeches. The room, though, remained packed, with more than 20 lawyers from six firms and at least 40 people in the public gallery.

Justice Choo Han Teck kicked off proceedings by deciding to allow the estate’s buyers to participate, ending a row that had taken up the whole of last Friday.

The buyers – led by Hotel Properties and represented by Allen & Gledhill’s Mr K. Shanmugam – had asked to join the proceedings in order to protect their own interests. They have said that they will sue the majority owners for breach of contract if the $500 million sale does not go through.

Their request for inclusion, however, proved unpopular with the condominium’s majority sellers.

Justice Choo said yesterday he would allow the buyers’ participation as they were pursuing their commercial interests. He said it will not be ‘unjust or inconvenient to hear two more voices’, as long as he can ‘mute’ them if they prove disruptive.

Things heated up in the afternoon, when Mr Shanmugam took the court through a long retelling of the Horizon Towers saga.

 

Source: The Straits Times 2 Oct 07

Flipping homes in the US – it’s a flop

NEW YORK – MS SHERRILL Zenie said all she wanted was a piece of the American Dream. But what she got was ‘a kick in the rear’.

Ms Zenie is one of a legion of a relatively new type of home owner, a flipper, who sought fast money by rapidly buying and selling homes to capture a profit on each as prices soared.

Speculators who bought multiple homes like Ms Zenie were once a boon to the United States economy when they pushed home prices to record levels over a five-year period.

Now their unsold homes are the bane of a sickly housing market.

Many are stuck with unoccupied properties they cannot sell and mortgages that are bigger than the appraised value of the home, a situation known as being ‘upside down’.

The glut of unsold homes comes as lenders are making it harder for borrowers to get loans, causing defaults to escalate and home prices to decline further.

‘Investors that initially purchased a property with no money down or a very low down payment could now find themselves upside down, and without prospects of selling the property soon, may opt to just walk away,’ says

Mr Greg McBride, senior financial analyst, Bankrate in North Palm Beach, Florida.

The Federal Reserve’s half percentage point interest rate cut will do more to stimulate inflation than to slice long-term mortgage rates, providing scant relief, some economists say.

‘Nobody is looking, either to rent or to buy,’ says Ms Zenie, 60, of Delray Beach, Florida, who is stuck with two unsold condominiums there after profitably selling two others.

She owns the condominiums outright, as well as her own home, part of a vacation home in Vermont.

But taxes, maintenance and a home equity credit line cost over US$2,000 (S$2,982) a month for the two condominiums alone, a stretch for Ms Zenie, who is out of work on disability.

‘I wanted to follow the American Dream,’ she says. ‘I wanted to be an entrepreneur and make some money – not a killing, but some money.’

Her husband has found a job in another state to help pay the bills.

‘Am I panicking? I would be hysterical if my husband weren’t in Mississippi working.’

Said Mr Barry Habib, chief executive of Mortgage Market Guide: ‘That’s the American way. Speculators add jet fuel both on the way up and on the way down.

‘Nobody was saying ‘hey, the speculators were bad’ on the way up, when people were selling their homes and making lots more money.’

Source: REUTERS (The Straits Times 2 Oct 07)

Another KepLand waterfront home project in Vietnam

PROPERTY developer Keppel Land (KepLand) is joining forces with a Vietnamese company to build a US$136 million ($202.8 million) luxury waterfront residence in Ho Chi Minh City.

The company announced yesterday that its wholly owned subsidiary Corredance will take a 60 per cent stake in a joint-venture firm developing the 51,000 sq m site near the city’s District 2.

Local firm Hong Quang will own 40 per cent.

The as-yet-unnamed project, the fifth Vietnamese residential development by KepLand this year, is expected to yield a gross floor area of nearly 250,000 sq m.

Facilities include swimming pools, tennis courts, a clubhouse and round-the-clock security.

Another attraction will be its access to the city centre, via the East-West Highway and Saigon River Tunnel, both of which are expected to be completed in 2009 – the same year units in the 1,500-unit complex will be on sale.

KepLand director Ang Wee Gee said there was pent-up demand for middle to high-end residences like the ones it was building.

The company has built more than 20,000 homes since it entered the Vietnam property market more than a decade ago and will ‘continue to be on the lookout for more prime residential sites in Vietnam to ride on the market upswing’, added Mr Ang.

According to estimates by the Asian Development Bank, Vietnam’s economy will grow by 8.3 per cent this year and 8.5 per cent next year.

Property prices are also on the rise. High-end homes in Hanoi average US$177 per sq ft (psf) and US$270 psf in Ho Chi Minh City, the country’s business hub.

A Ho Chi Minh City condominium, The Lancaster, was resold at a record price of US$465 psf recently. It was launched at US$185 psf just three years ago.

KepLand shares rose 10 cents to $8.40 yesterday.

Kepland Waterfront Project In Vietnam

Source: The Straits Times 2 Oct 07

Property boom spreads to mass market

Suburban, HDB homes post best quarterly price growth in years

NEW government figures released yesterday will bring cheer to the average Singaporean homeowner.

This is because prices for so-called ‘mass market’ properties – comprising mainly suburban condominiums and HDB homes – have posted their best quarterly growth in years.

This has brought the prices of both public and private homes to their highest level in a decade.

The flash estimates for the third quarter, which are based on home sales in July and August, show that private home prices rose 8 per cent, while prices of HDB homes jumped 6.5 per cent for the same period.

The numbers show that the effects of Singapore’s property recovery, which have been largely focused on highend luxury apartments for the last year or so, are finally filtering down to the typical homeowner.

Most significantly, prices of non-landed private homes outside the central region – in areas such as Clementi and Bedok – surged 8.1 per cent, almost on par with the increase of 8.3 per cent for homes in the core, or central, area.

Growth in prices of homes located in prime areas like districts 9, 10, 11, downtown and Sentosa have far outstripped that of suburban homes since 2004, the earliest period for which price changes in different districts are available. But the gap in price increases has now narrowed to just 0.2 percentage points.

Property analysts say the figures show a confident local market generally unshaken by the recent volatility in the stock market – due to the sub-prime mortgage crisis in the US.

Savills Singapore’s director of marketing and business development Ku Swee Yong said future growth is now likely to be fuelled ‘from the bottom up’ by mass market homes.

CBRE Research’s executive director Li Hiaw Ho also marked this quarter as a ‘big step’ for suburban projects, which were launched at $850 to $1,000 psf.

Suburban projects were usually defined as those costing around $600 psf – but projects like The Parc Condominium in West Coast, for example, fully sold all 659 units in August at a median price of $880 psf, said Mr Li.

Meanwhile, HDB home prices are also driving the mass market recovery. The 6.5 per cent jump in prices is the highest since 1999, and comes on the back of a 3 per cent rise in the last quarter.

‘HDB home prices have languished in the doldrums for many years so it’s heartening for homeowners to see them pick up pace now,’ said property firm Propnex’s chief executive Mohamed Ismail.

The bullish figures have prompted some analysts to revise their forecasts. Property experts say private home prices have increased 21.1 per cent so far this year, already surpassing their forecasts of between 20 and 25 per cent.

Knight Frank’s director of research and consultancy Nicholas Mak gave a revised forecast of between 23 and 32 per cent.

As for HDB homes, Mr Mohamed expects the HDB price index to rise 15 per cent for the whole year.

Last year, in comparison, HDB’s price index only rose 2 per cent for the whole year, while for private homes, it was about 10 per cent.

The Government also highlighted that about 43,000 new private homes are expected to be completed from now till 2010, and almost half are still unsold.

Separately, the HDB also said it plans to launch up to 6,000 new homes in the next six months, subject to market demand.

The Urban Redevelopment Authority and HDB’s official third-quarter statistics will be released at the end of this month.

 

Source: The Straits Times 2 Oct 07

Govt to boost supply of homes

Observers view supply increase as a signal to calm market amid high property prices

THE Government has sent its strongest signal yet that it plans to increase the supply of homes and residential sites – a move that comes amid soaring real estate prices.

It will offer 6,000 new Housing Board flats over the next six months and might release more land for private homes next year if necessary.

The initiative comes as lower-end homes see a price spurt that is finally starting to match that in luxury homes.

Property consultants said the increased supply is the latest Government move to calm the market.

‘The Government is seeing a very strong take-up for homes, and it wants to avoid panic buying,’ said Mr Nicholas Mak, the director of research and consultancy at Knight Frank. ‘So it’s just telling potential buyers there is a lot of supply out there.’

Prices of entry-level private homes in suburban areas were 8.1 per cent higher in July to September than in the previous three months. The pace about matched that set by more expensive homes in the central region, going by initial estimates out yesterday.

In the same period, prices of HDB resale flats jumped by 6.5 per cent. This is double the 3 per cent rise in the previous quarter and is by far the biggest quarterly jump since 1999.

Given the recent ‘good response for new flats’, HDB will release a slew of new units in the coming months. Of these, 4,500 will come under the Build-to-Order (BTO) system. Another 1,500 units will be in three new Design, Build and Sell Scheme (DBSS) sites in central and eastern Singapore.

So far this year, HDB has released 2,700 BTO flats – about the same number as for the whole of last year. In the same period, it has sold a DBSS site at Boon Keng and launched another at Ang Mo Kio. The two combined can host at least 1,100 units.

HDB also said it ‘will continue to monitor the market situation closely, to ensure that there is an adequate and affordable supply of flats’.

A similar reassurance was issued by the Urban Redevelopment Authority (URA) with respect to private homes.

It reiterated that it ‘will continue to monitor prices closely’.

In an unusual move, the agency added that it is reviewing the Government Land Sales scheme, launched every six months, for the first half of next year. It said it ‘will make available more sites…if the demand continues to remain strong’.

Experts interpreted this to mean that the URA intends to put out more sites for private home development, especially under its confirmed list.

The confirmed list system offers sites for sale outright, while the other option – the reserve list – follows a more cautious approach. Reserve sites are put out only when a developer submits a minimum acceptable bid.

While consultants believe the new HDB flats can be absorbed easily, some question the need for more land for private homes.

‘I don’t think there would be a glut on the HDB side,’ said Knight Frank’s Mr Mak. ‘If there is any risk of oversupply, it would be with private homes, three to four years from now.’

He noted the record run in collective sales in the past two years. Even if developers can sell all the new homes on these sites, those buying to rent out might not be able to find enough tenants when all the homes are finished.

This could bring rents and prices down, said Mr Mak. But for this year, he expects a record take-up of 15,000 new homes, compared with 11,000 last year and 7,500 in an average year.

On the other hand, collective sales will remove about 9,000 homes from the market, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

‘If job growth continues to be strong, absorption may not be the problem; actually, there may not be enough to go around,’ he said.

The URA also removed a hotel site in Balestier from its land sales list yesterday. The 0.86ha site has been on the reserve list for a year or so, but the URA is reviewing its land use together with that of other vacant plots nearby.

 

Source: The Straits Times 2 Oct 07

Citigroup seeks buyer for Manhattan tower

Deal could fetch US$1.8b; company to lease back property: executive

(NEW YORK) Citigroup is seeking a buyer for the former Travelers Group headquarters in lower Manhattan. The deal could fetch US$1.8 billion.

The 40-storey tower at 388 Greenwich St that once carried the red neon umbrella logo of Travelers is being marketed with a connected 10-storey property, said Richard O’Day, a director of Citigroup’s real estate investment banking unit.

The complex has a total of 2.7 million square feet of space and is about 10 blocks north of the World Trade Center site.

The buildings are among at least three offerings in Manhattan that will test whether the most expensive US office market is holding value as borrowing costs rise.

Prices last year rose above US$1,000 per square foot for the first time on sales of such buildings as 5 Times Square and 666 Fifth Ave.

‘The market is still robust for trophy assets in Manhattan,’ Mr O’Day said. He estimated that the Greenwich Street buildings could sell for US$1.6 billion to US$1.8 billion.

Mr O’Day compared the value of 388 Greenwich to 60 Wall St, Deutsche Bank’s New York headquarters, which the bank sold in June to Paramount Group for US$1.18 billion, or US$732 per square foot. That transaction set a record for a lower Manhattan office tower. Paramount is the US real estate investment unit of Germany’s Otto Group.

Citigroup’s global markets unit is advising the company on the sale and Cushman & Wakefield has been hired as a broker, Mr O’Day said. Citigroup plans to remain in the building and lease the space back from the new owner, he said. ‘We’re committed to staying in Manhattan,’ he said.

The sale and leaseback is part of a long-term strategy to get company-occupied properties off its balance sheet, Mr O’Day said. In the last two years, Citigroup has sold office buildings it owned at 333 West 34th St and 250 West St.

In 2002, Citigroup sold Travelers Property Casualty Corp and, in 2005, announced plans to sell Travelers Life & Annuity and substantially all of its international insurance businesses to MetLife Inc. Sanford Weill had his office at Greenwich Street when he ran Travelers.

Citigroup is selling just as several Manhattan properties may be coming onto the market.

Paramount Group said in a statement that it may sell 1177 Avenue of the Americas, a 47-storey, one million sq ft tower at West 45th Street, three blocks south of Rockefeller Center.

‘We have been approached by a couple of potential investors and a sale is under consideration,’ said Paramount spokeswoman Kathleen McMorrow.

Altria Group Inc, owner of the world’s biggest cigarette company Philip Morris USA, is selling its headquarters at 120 Park Ave, according to Real Estate Weekly. The company has hired CB Richard Ellis Group, an Altria spokeswoman said. She declined to say if the building was for sale.

The 26-storey, 554,000 sq ft property sits across East 42nd Street from Grand Central Terminal. In March 2003, the company said that it would move Philip Morris’s headquarters to Richmond, Virginia.

The two mid-town buildings have similar characteristics to towers that have sold for more than US$1,000 psf.

They have locations that could appeal to hedge funds and financial firms that have bid rents beyond US$100 psf.

While the market for securitised commercial mortgages remains constricted, New York skyscraper values should hold up, said Peter Hauspurg, president of Eastern Consolidated, a New York-based commercial broker.

Foreign buyers and US investors who intend to back their purchases with equity may replace those that bought primarily with debt, he said.

‘If there were eight or 10 bidders at the top, now two or three are gone,’ Mr Hauspurg said. ‘There’re still guys with real equity who would rather accept a 3 per cent return on a Manhattan asset like that than a 4-point-something on a US treasury bill. Manhattan is on fire and underpriced, according to the rest of the world.’

 

Source: Bloomberg (Business Times 1 Oct 07)

S’pore’s private home prices soar to 10-year high in Q3

Prices went up by 8% in July to Sept, more land may be released to meet demand

PRICES of both public and private homes in Singapore, continuing the upward trend, reached their highest level in a decade, early government estimates for the period July to September showed on Monday.

The Urban Redevelopment Authority (URA) said the price index for private residential properties rose 8 per cent, while that for HDB homes jumped 6.5 per cent for the same period.

The third-quarter gain for private homes follows an 8.3 per cent rise in the last quarter, and comes amid moves by the government to stabilise the property market by revising development charges, and tightening rules of collective sales.

Prices of non-landed private homes in the core region – which includes districts 9, 10 and 11 – went up 8.3 per cent, while in the rest of the central region it rose 7.7 per cent, and in the Outside Central Region, by 8.1 per cent.

The URA also said that about 43,000 new units of private housing are expected to be completed in the second half of 2010. Of these, about 19,000 units of these (46 per cent) have not been launched for sale by developers yet.

The URA is currently reviewing its Government Land Sales (GLS) Programme for the first half of next year and will announce details by year end.

It assured home buyers that there is an ‘ample pipeline supply of private housing’ and advised them to take this into consideration in their property decisions.

‘The government will continue to monitor prices closely,’ the URA said, adding that ‘the government will make available more sites for private residential development’ next year if demand remained strong.

Separately, the HDB also said on Monday that it will be increasing the supply of new flats, with 4,500 new units under its Build-To-Order system to come on stream in the next six months.

The jump in HDB home prices comes after a 3 per cent rise in the last quarter – which was until now, the biggest quarter-on-quarter increase since 1999.

The HDB added that it plans to release three new Design, Build and Sell Scheme (DBSS) sites with a combined yield of about 1,500 units in central and eastern Singapore over the same period – subject to market demand.

The advance estimates are compiled from transaction prices lodged during the first 10 weeks of the quarter as well as data from new apartments that have been booked.

URA and HDB’s official third-quarter statistics will be released at the end of October.

 

Source: The Straits Times 1 Oct 07

Home loan growth hits 29-month high

HOME loans shot up at the fastest pace in over two years as more en bloc sellers bought existing properties and foreigners opted to buy instead of rent.

Home loans in August expanded 2.6 per cent compared to the previous month, and grew 10.7 per cent from the same period a year ago, according to monthly data released by the Monetary Authority of Singapore (MAS).

The 10.7 per cent rate is the fastest in 29 months. This is the first time in over two years that it has entered double-digit territory. July’s growth figure was 8.1 per cent.

Bankers noted that one big factor driving mortgage growth was the growing number of borrowers who, having cashed in on en bloc deals, snapped up replacement properties, especially on the outskirts of the central part of Singapore.

One local banker noted that the average size of mortgages taken out in August dipped, possibly because some borrowers flush with cash from en bloc sales were taking out smaller loans or had downgraded to smaller homes.

Another group of borrowers were foreigners who had previously leased properties but were now opting to buy their own homes, given how high rentals have climbed.

Foreigners ‘are still interested in buying properties in district 9, 10, 11 and the central area’, said Standard Chartered Singapore general manager for mortgage and auto loans Elaine Heng.

But some, such as Chinese and Indian nationals, have shown more interest in district 15 (Katong, Joo Chiat and Amber Road area), as well as other areas on the outskirts of the city, she added.

The amount of home loans held by banks grew by $1.77 billion in August, making up a total of $69.1 billion of mortgages on their books.

Total lending for August grew 10.8 per cent compared to a year ago, as stronger mortgage and credit card growth offset a decline in building and construction loans.

Analysts expect home loans growth to pick up further in the third quarter of this year and beyond. They point to more home buyers on deferred payment schemes taking up loans, as the date of completion of their developments draws near.

But bankers say that the robust home loans growth is currently driven more by secondary market sales of existing properties, which make up about 60 per cent of total transactions.

Stanchart’s Ms Heng said monthly home loans growth could continue at this 10 per cent rate in coming months provided market sentiment remains positive.

But some investors and potential home buyers may adopt a ‘wait-and-see attitude’ from how the United States sub-prime mortgage crisis pans out, she added.

 

Source: The Straits Times 1 Oct 07

Prices and rentals rising fast in Upper East Coast

Spillover demand from nearby districts and rumours of collective sales push prices up

THE buzz in the property market these days is all about the price recovery in the suburban areas.

Cheaper private homes on the outskirts of town are seeing a rebound in prices and rentals, as the strong market sentiment at the top end filters down.

Homebuyers have started turning out in force for these entry-level condominiums. Many have sold en bloc and are seeking replacement units.

Apart from the central Orchard Road area, a popular collective sale district is the East Coast, which has seen nearby Upper East Coast Road become one of the biggest hot spots for home seekers.

Some projects in the district, which stretches from Upper East Coast Road to Bedok North Avenue 4, have rocketed in price, by up to 65 per cent, since January.

Figures from consultancy Savills Singapore show that overall home prices in the area climbed by 20 per cent to 65 per cent between January and August, depending on the specific street.

This compares with a rise of about 10.3 per cent for all suburban areas in the first six months of this year, according to the Urban Redevelopment Authority.

But Savills’ director of business development and marketing, Mr Ku Swee Yong, was quick to add that some of the Upper East Coast projects have seen such large jumps in price because of ‘collective sale rumours’.

‘The general price increase is nowhere near 65 per cent overall,’ he said.

Rentals in the Upper East Coast have also soared, supporting the price increases. Average asking rents jumped 13.7 per cent in July and August, on top of a 4.7 per cent rise in the previous three months, said

Savills. They average $3.07 per sq ft (psf), or about $3,000 for a 1,000 sq ft unit.

Mr Ku noted that the Upper East Coast is benefiting from a spillover in demand from nearby Districts 14 and 15, which include Marine Parade, Katong and Telok Kurau.

Several estates there have gone en bloc, forcing the sellers to seek new homes. Many of them have been priced out of the increasingly expensive East Coast properties, so they have shifted their focus to cheaper homes further east.

This situation is similar to that in town, where city-fringe areas such as Newton and Novena have benefited from the record number of collective sales in the Orchard Road area and its surroundings, said Mr Ku.

He added that even more developments in the vicinity are expected to go en bloc soon. These could include Ocean Park, Rich East Gardens, Bagnall Court and the two Eastern Lagoons.

Apart from the collective sale draw, Mr Ku noted that the Upper East Coast profits from its proximity to Changi Airport and East Coast Park, as well as various golf courses, including Tanah Merah Country Club and Laguna National Country Club. All these are attractive to ‘mobile professionals’, he said.

He predicts that by the end of next year, new benchmark prices will be achieved for the area. These could go up to $1,100 psf for the Bedok South Avenue 3 and Bedok Camp areas, and up to $1,700 psf from Siglap Centre to Bedok South Avenue 1.

 

Source: The Sunday Times 30 Sept 07

Why the financial world wobbled and what it means for funds

2 recent papers pick over the causes and conclusions of the recent market turmoil

(NEW YORK) Smart investors love crises. People panic, everything gets out of whack, securities get cheaper, and the world gets more interesting.

Academic types also love crises because they produce data, which prompt questions and every once in a while produce some answers.

August, the month in which everything went awry on Wall Street, offered up fascinating data.

The financial world trembled, which it does every so often, and even though everyone seemed to know it was coming, everyone seemed surprised.

Two recent papers, one academic and one written for investors, examine the August unwind.

They reach similar conclusions about risk (there is more of it) and the cause of the collapse (an unknown multibillion-dollar fund unwinding), but they differ slightly on what it means for the types of hedge funds that were most affected.

In separate papers, Andrew Lo, a professor of finance at the Massachusetts Institute of Technology who just sold his hedge fund, AlphaSimplex, and Clifford Asness, the founder of AQR, a US$37 billion hedge fund, concluded that the market craziness started when a large multi-strategy fund or a proprietary desk suddenly started to dump its positions in early August.

That set off a wave of de-leveraging, or selling, that in turn caused stocks to do strange things.

Specifically, cheap stocks, or value stocks, got pummelled, and expensive stocks, or popularly shorted stocks, rose.

This caused a lot of pain on the street, especially among quantitative hedge funds, or quants.

Prof Lo’s research, which builds a very basic quantitative model and then tests what would happen to it during the August unwind, concludes that the proliferation of hedge funds using similar investment strategies has led to more risk in the system.

If this seems obvious, be mindful that a lot of people have argued otherwise, and Prof Lo is trying to prove it, not grandstand about it, which is unusual when it comes to any topic related to hedge funds.

According to his analysis, assets in certain strategies – quantitative and long/short equity, both of which generally try to buy cheap stocks and sell expensive ones – have soared and returns have plummeted (these are data points, not conclusions).

From 1995 to 2007, assets in two strategies – equity market neutral (a quantitative model) and long/short equity – skyrocketed to US$160 billion from about US$10 billion. Over the same period, yearly average daily returns of Prof Lo’s portfolio fell to 0.13 per cent from 1.3 per cent.

So to achieve the returns that investors expected, his fund had to increase leverage to about nine times from about two times.

When the unwind came, all those funds with all that leverage resulted in a lot of panic.

‘Now that we have so many boats in the harbour, you can’t whiz by at 50 knots without rocking a few boats,’ Prof Lo said in an interview.

‘In the middle of the ocean, your wake has no impact, but in a crowded harbour, a fast exit can cause quite a disruption.’

In his paper, Mr Asness reached a similar conclusion. ‘I have said before that ‘there is a new risk factor in our world’, but it would have been more accurate if I had said ‘there is a new risk factor in our world and it is us’,’ he wrote in his Q&A letter to investors.

However, he drew a slightly different analogy than Prof Lo. Mr Asness conceded that the harbour is more crowded, but he argued that the problem was not that there were too many boats but that all the boats raced for the same exit. The upshot: There is still room for sailing, which in this analogy means there is still room to make money.

Asness argued that the spread between expensive and cheap stocks, what he called the ‘value spread’, was not that tight before the August unwind and is now wider than the historical norm.That suggests there is room to make money.

‘If too much capital had been attracted to these strategies, then that spread should have been tighter,’ he wrote.

‘Since it hasn’t, it is reasonable to believe that the growth in these strategies has at least been matched by the growth in the behaviour that makes them work.’

Put another way: ‘The growth in the quants seems to be reasonably balanced by those who want to take the other side of the quants,’ Mr Asness said. In other words, there is always someone on the other side, willing to sell cheap stocks and buy expensive ones.

So is the harbour half-empty or half-full? Since hedge funds are not particularly transparent, and no one has particularly useful data on them, no one really knows.

One thing is clear: The harbour, after the August unwind, is less full than it was – a lot of boats have been wiped out.

‘I agree with Andy that these strategies will make less money going forward,’ Mr Asness said.

‘But as of now they are cheap strategies.’ In other words, smooth sailing until the next storm.

 

Source: NYT (Business Times 29 Sept 07)

US real estate firm closing its doors on mortgage slump

(MELVILLE, New York) Foxtons, the one-time 800-pound gorilla of the 2 percent market place in the New York area, said it might file for bankruptcy and close its business, explaining it ‘can’t stand in the way of a hurricane’ that has come about as a result of the decline in the home mortgage industry.

The New Jersey-based company, which once rocked the real estate industry by selling homes for as little as 2 per cent commission – compared with commissions of up to 6 per cent at other brokers – said in an announcement that it is ‘releasing’ 350 of its 380 employees ‘and may be filing for bankruptcy protection in order to close the business in an orderly fashion’.

No one answered the phone at the company’s headquarters on Thursday.

In a statement, John Blomquist, Foxtons senior vice-president and general counsel, said the company had been ‘well run, very efficient’ and had ‘a great team that has pioneered a new model in the real estate business – a model which has proven itself and, we believe, will have lasting influence on our sector’.

But, he added, ‘The plain fact is that we have been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern.

‘We understand the impact of the action we are taking, but there comes a point where you can’t stand in the way of a hurricane, and it is a property hurricane we are facing.’

The company said it has about 4,400 listings and plans to ‘preserve the value of these listings to minimise customer disruption and to dedicate the anticipated revenues to pay creditors’.

Robert Campbell, a professor of real estate finance at Hofstra University, said the low-price agency might have been underpricing its services and working in narrow financial margins, a move that could have hurt the company in the weaker market.

Prof Campbell added that sellers in a struggling market also want an agency to devote more time and resources to selling their home, something he said Foxtons could not do with such low commission rates.

Foxtons’ website said the agency opened in March 2000 in North America and in the early years had more than 1,000 employees and more than 10,000 homes for sale.

 

Source: LAT-WP (Business Times 29 Sept 07)

Q3 rents for high-tech industrial space up 15%

THE average monthly rent for high-tech industrial space has increased by 15 per cent in this quarter to $3.45 per square foot per month, real estate consultant DTZ Debenham Tie Leung reported.

High-tech industrial space includes business park and science park space such as Changi Business Park and International Business Park, and rents there now range from $3 to $4.50 psf per month. The monthly asking rent for the newly completed Eightrium @ Changi Business Park is also in the vicinity of $4 psf.

DTZ executive director (consultancy and research) Ong Choon Fah attributed the increasing rents to the continuing spillover demand for conventional office space.

The latest figures showed that business parks experienced a 5 per cent drop in occupancy in the second quarter of this year due to the completion of Eightrium @ Changi Business Park and Xinlinx Asia Pacific’s business park development at Changi Business Park Vista.

Mrs Ong added: ‘Notwithstanding the dip in occupancy rate, demand for business parks remains strong.’

HSBC will take up 10,000 square feet of space at the Comtech, she noted.

Islandwide, private industrial stock, which includes factory and warehouse space, rose one per cent to 295 million sq ft in the second quarter. The average occupancy rate of private factory space rose marginally by 0.1 of a percentage point quarter-on-quarter to 90.7 per cent in the second quarter while islandwide occupancy rate of warehouse space stood at 89 per cent.

Separately, JTC Corporation launched a 20,867 square metre land parcel at Jalan Tepong for sale yesterday. Industry executives expect this site, which is the second of the two industrial sites for the year to be launched under the Government Land Sales Confirmed List, to go for between $380 and $400 per sq m per plot ratio. The site has a plot ratio of 1.4 and can be used for light industry, general industry, warehousing, utilities or telecommunications.

Demand for high-tech space could see new entrants into the market building their own facilities.

Jones Lang LaSalle (JLL) associate director (industrial markets) Tahlil Khan said that his firm is working with a number of organisations and is looking at public tenders and direct allocation of sites ‘depending on the preferences, accommodation needs and objectives of the occupier’.

David Wilton, JLL regional director and head of industrial (Asia) said that users were unlikely to find space at what he called ‘the existing business park or high-tech inventory’.

He said that these users were left with three options: purchase land to occupy; commission a leased facility; or negotiate with owners/developers on facilities under development or construction.

 

Source: Business Times 29 Sept 07

MAS tightens rules for Reits to protect retail investors

No more discounts for institutional investors at listing time

THE Monetary Authority of Singapore (MAS) has tightened up the rules for property funds to improve the odds for retail investors.

Institutional investors or the big boys will no longer have discounts for subscriptions made at the time of the listing of a real estate investment trust (Reit) under new guidelines for Reits issued by MAS yesterday.

Another change limits what’s allowed under fixed-term management contracts to five years.

These fixed-term management contracts have been used by fund managers as a poison pill to entrench their positions and to provide an obstacle to takeovers, as it makes it expensive to fire them.

In a statement, MAS said the revised rules ‘are intended to improve safeguards for investors and to provide greater clarity and flexibility for commercial transactions’.

MAS said a majority of the respondents to its public consultation exercise in March raised objections to disallowing discounts to institutional investors.

They felt that the discounts are justifiable because such investors enter into binding subscription agreements prior to the launch of the initial public offering (IPO); institutional investors were also said to have helped ensure the success of a Reit offering, particularly in difficult markets, by providing a useful signal to the retail market about the quality of the Reit.

Those who wanted to retain the discounts suggested full disclosure, putting a cap on discounts and/or a moratorium or the sale of the Reit units.

But MAS said: ‘As a matter of policy, there does not seem to be any good reason why different groups of investors should be permitted to pay different amounts for the same interests in these assets at the time of the IPO.’

MAS said it is prepared to allow discounts that are given to investors who assume equity risks different from those of IPO investors, for example if they are willing to underwrite the listing.

On management contracts which have been a contentious issue, the new guideline said the term of a compensation provision should not be more than five years and the compensation amount payable to the Reit manager should not exceed the sum of the fixed component of unearned management fees (excluding variable or performance fees) over the remaining term of the provision.

Industry players had argued that entrenchment clauses in management contracts were to help professional Reit managers who do not hold large stakes in a Reit and ‘would be discouraged from establishing Reits in Singapore if there is no flexibility to implement measures to obtain appropriate compensation if they are removed as managers’.

But MAS said: ‘We continue to be concerned with entrenchment arrangements that impede the market for corporate control and place significant restrictions on the ability of unit-holders to terminate management contracts.’

Ronnie Tan, chief executive of Bowsprit Capital, the manager of First Reit, said he supported not giving discounts to institutional investors.

‘It’s not fair for the small investors,’ he said.

He added that if demand is an issue, ‘Reit issuers should look at pricing rather than use discounts as a (sales) mechanism’.

‘Removal of the poison pill (means) the takeover rules would be similar to other listed companies,’ he said on the new rule which makes it easier to fire the Reit manager.

 

Source: Business Times 29 Sept 07

Mass-market sector rebounded in ‘06: CBRE

Non-landed projects in non-prime areas turn in strong sales volume

MASS-MARKET property sales actually staged a recovery last year, earlier than widely believed, said property consultant CB Richard Ellis (CBRE) yesterday.

In a study of the take-up rates of new non-landed projects in non-prime areas, CBRE found that the mid-tier and mass-market projects turned in strong sales volume in 2006, although prices for these segments only began rising this year.

‘Until now, the market had perceived that these segments trailed the luxury segment in their recovery, and had begun to recover only in early-2007, in terms of volume and price,’ it said.

An analysis of the new units launched last year and the corresponding take-up volumes ’shows otherwise’, it said.

It found that 68 per cent of the new projects launched last year in the West Coast, in districts 5 and 21, were taken up. Similarly, take-up rates for projects in districts 15 and 16 were about 90 per cent – ‘not far’ from the take-up rates of 74 per cent for projects in the prime districts 9 and 10 and 96 per cent for those in the downtown and Sentosa Cove areas.

‘Of course, in terms of pricing, the mass market and mid-tier projects have only begun to inch up in the previous two quarters of 2007,’ said Joseph Tan, executive director for residential property at CBRE.

‘But the strong sales of non-prime projects since a year ago show the return of buying power for upgraders and private homeowners, who, at that time, saw good investment value in the projects, while anticipating the upside in prices later on.’

Since then, the number of projects on the market has increased dramatically.

The number of new units launched in the west has tripled from a year ago, with the launch of One-north Residences, One Rochester, Botannia and The Parc Condominium, it said.

Meanwhile, the number of new units launched in the Newton/Novena area has doubled from 578 units in 2006 to 1,351 units so far this year. Take-up rates have been ‘very healthy’ at 90 per cent, said CBRE.

In districts 15 and 16 in the east, the take-up rate so far this year has been ‘equally strong’ at 85 per cent.

Residential rents have also risen sharply ‘due to the shortage of apartments for lease following the slew of collective sales of existing developments in the past two years’, said CBRE.

After rising 18.7 per cent on average in the first half, rents are expected to increase by another 8-10 per cent in the third quarter.

Rents in the popular areas of Tanjong Rhu, Meyer Road, East Coast, Dunman, Joo Chiat and Siglap have gone up 40.9 per cent since the fourth quarter of 2006, with median rents now at $2.62 per square foot per month.

The next biggest increase in rents were for apartments in the Orchard Road, Grange Road, Tanglin and Bukit Timah areas, where rents have gone up by 37.5 per cent to $3.74 per square foot per month on average.

The residential market is likely to remain active in the final quarter of this year, amid strong growth in the economy, CBRE said.

 

Source: Business Times 29 Sept 07

China tries to cool property market

Downpayment for second homes, commercial properties raised

(SHANGHAI) China has announced another package of measures to cool the country’s red-hot property market, including raising the the down payment requirement for second homes to 40 per cent.

‘Domestic property prices are rising quite fast and there are obviously irrational factors behind this,’ the central bank and the China Banking Regulatory Commission said in a joint statement released late on Thursday.

The statement said commercial banks were facing ’significantly higher risks’ and if property prices became too volatile, a surge in bad loans was likely to follow.

As part of the new measures, which take effect immediately, the down payment requirement for people buying a second home was raised to 40 per cent from 30 per cent.

The down payment required for commercial properties such as offices was also raised to 50 per cent from 40 per cent.

Further, mortgage rates for second homes and commercial properties must now be at least 1.1 times the benchmark lending rate, the statement said.

Previously the minimum was equal to the benchmark rate.

The statement said banks were banned from providing loans to developers that had been found hoarding land or houses, and that real estate vacant for more than three years must not be accepted as collateral for bank loans.

China has, since 2005, taken many steps, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.

Interest rates have been hiked five times this year alone, most recently on Sept 15, with apparent little effect.

Property prices in 70 major cities across the country rose 8.2 per cent in August from a year earlier, the fastest so far this year, according to official data.

Property prices in Beijing were up 12.1 per cent in August year-on-year and 20.8 per cent in southern Shenzhen, a booming city just across the border from Hong Kong.

 

Source: AFP (Business Times 29 Sept 07)

China’s central bank raises growth forecast for 2008

Economy may grow 11.6%; inflation seen rising by 5%

(SHANGHAI) The People’s Bank of China’s research department raised its economic growth forecast and said inflation will probably accelerate.

The economy may grow 11.6 per cent this year, according to the report published in the China Securities Journal, faster than the agency’s June estimate for a 10.8 per cent expansion. Inflation this year will rise by 5 per cent, up from 3.2 per cent forecast previously, and the trade surplus will widen to about US$250 billion this year, from US $177.5 billion in 2006.

The forecasts puts pressure on People’s Bank of China governor Zhou Xiaochuan to raise lending and deposit rates for the sixth time this year to cap surging asset prices and cool the overheating economy. The bank on Thursday raised interest rates on some home mortgages and increased minimum down payments in an effort to cool property prices gains.

The government is concerned that a surge in lending is creating a bubble, which would drive up bad loans should it collapse. Investment in real-estate development jumped 29 per cent in the first eight months of this year. The statement also said the maximum mortgage for commercial property is half of its value, and the term can’t exceed 10 years.

The decision by the central bank and the China Banking Regulatory Commission is ‘to prevent credit risks and protect the borrower’s repayment ability’, according to the statement on the People’s Bank of China website.

‘It’s clear they know they’re behind the curve, in a hole, at risk of people taking more of their money out of bank deposits and going into other assets where there is already frothiness,’ said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington.

Until now, banks were barred from charging less than 90 per cent of the benchmark rates for mortgages. Interest rates on loans for first homes are unchanged.

China raised its one-year lending rate for the fifth time this year on Sept 14, to 7.29 per cent. Those increases have failed to damp demand for property as China’s economic growth raises incomes and people prefer fixed assets amid inflation at a 10-year high of 6.5 per cent.

China’s economy, the world’s fourth largest, expanded 11.9 per cent in the second quarter from a year earlier, the fastest pace in more than 12 years.

The World Bank on Sept 12 raised its 2007 China growth forecast to 11.3 per cent from a May forecast of 10.4 percent.

 

Source: Bloomberg (Business Times 29 Sept 07)

Charged atmosphere at Horizon appeal hearing

Gallery boos buyers’ application to intervene

(SINGAPORE) It was an animated session – to say the least – in the High Court yesterday as the owners of Horizon Towers gathered to appeal against the Strata Titles Board’s (STB) dismissal of their collective sale application.

Court 6C was packed to the hilt with at least 35 lawyers from no less than five law firms representing the buyers and different groups of owners. It made for a charged atmosphere.

The appeal had been filed by the former sales committee of Horizon Towers, which had filed the application for a collective sale order, and was to be attended by themselves and the minority sellers who had objected to the sale.

But numerous other parties turned up yesterday, on the grounds that they also had a stake in the outcome. One such group comprised the buyers of Horizon Towers: Hotel Properties Ltd (HPL), Morgan Stanley Real Estate-managed funds and Qatar Investment Authority. Represented by Allen & Gledhill, they applied before the High Court to intervene at the appeal.

Their application was greeted by boos from the gallery. Senior Counsel K Shanmugam was interrupted so often that Justice Choo Han Teck, who presided over the hearing, had to ask the crowd for restrain.

The buyers’ unpopularity with the majority sellers stemmed from the fact that HPL and its partners have sued the sellers for breach of the collective sale agreement.

The majority sellers’ application to the STB was rejected by the board in August, on the grounds that it was defective: specifically, because certain key pages were missing from the application.

STB’s decision, coming just days before the sale completion deadline, effectively scuppered the en bloc sale. The buyers then sued the majority sellers, claiming damages arising from a loss of profit of up to $1 billion.

That suit was stayed on Thursday, after the majority sellers agreed last week to extend the sale completion deadline to Dec 11.

Yesterday also saw another group of 13 Horizon Towers owners – who form part of the majority that agreed to the collective sale – applying to intervene in the appeal. This group, which includes local singer Ho Yeow Sun and her husband Kong Hee, are represented by Rajah & Tann.

Both these applications to intervene were met with strong objections. The minority owners – represented by several law firms, including Harry Elias and Tan Kok Quan Partnership – said, among other things, that allowing these two parties in would unnecessarily increase the time and costs involved.

Such proceedings yesterday meant that there was not even time for the STB appeal to be heard. The session will resume on Monday, when Judge Choo will rule on whether to allow HPL and its partners and the group of 13 owners to intervene in the appeal. He will then hear the appeal and decide whether to set aside STB’s decision.

 

Source: Business Times 29 Sept 07

My HDB flat’s a condo – Dawson Estate in Queenstown will be the new face of public housing – flats done condo-style by top homegrown architects

GROUND-LEVEL parks extend to the doorsteps of residents’ homes and flats come with ceilings tall enough for lofts to be built.

These perks are not the latest offerings of swanky condo projects but new ideas for public housing in Queenstown.

Conceived by top local architects and unveiled at the Housing Board’s (HDB) ongoing Remaking Our Heartland exhibition, the new concepts also promise to bring high-rise communities closer and promote an environmentally sustainable lifestyle.

At the heart of all this future action is Dawson Estate, a 60ha district in Queenstown bounded by Margaret Drive, Tanglin Road, Alexandra Road, Commonwealth Avenue and Queensway.

This former housing and entertainment hot spot was developed in the 1950s by the HDB’s predecessor, the Singapore Improvement Trust.

It now has just 3,000 flats and tracts of land ripe for redevelopment after blocks of flats were cleared in the 1980s and 1990s.

It is expected to house about 10,000 more apartments in the future.

To bring a fresh spin to public housing, the HDB took the unprecedented step of commissioning Surbana International Consultants, Woha Architects and SCDA Architects earlier this year to conceptualise three separate precincts comprising 3,100 homes.

The brief: to introduce flats with seamless access to greenery, waterscapes and surrounding facilities, and promote closer ties, all on a tight budget.

While the HDB was tight-lipped about the construction budget it gave the architects to work with, SCDA’s design principal Chan Soo Khian estimated that he had to design flats that could be built with roughly half of what it would cost to put up luxury condos fully fitted with items like wardrobes and cabinets.

Most HDB flats do not come with fittings.

The HDB said it will work closely with the private architects to develop a cost-effective design.

Each firm had its own ideas: Surbana extended a future linear park into a winding landscaped path around the blocks; SCDA gave the bigger flats enough vertical space for lofts; and Woha envisioned a block facade reflecting individual home owners’ tastes.

Said Mr Chan: ‘Doing a public-housing project means you have to work within tighter constraints. It means, in a modern way, your design is purer.

‘You don’t depend on embellishments to make it a good project. You’re not worried about the inside, what kind of fitting is going where. In some (private) projects, you spend so much time just worrying about the kitchens and fittings.’

But certain private-housing elements are likely to pop up in the Dawson projects.

Woha, which recently won a prestigious Aga Khan Award for Architecture for its private project 1 Moulmein Rise, wants to offer the monsoon window it introduced there as one of the options for Dawson home buyers.

This contraption is a bay window with a horizontal opening that lets the breeze in but keeps out the rain.

Woha’s founding director Richard Hassell said: ‘It’s not going to be expensive housing, just smarter in design.’

Work on the first of these Dawson flats is expected to begin in the next three to four years.

The upcoming estates will give new families a higher chance of living near the city centre, said head of HDB’s urban design unit Kathleen Goh.

Currently, new flats near the central areas tend to be built only when existing residents in the vicinity are being resettled, leaving a limited number for newcomers.

The upcoming 3,100 homes in Dawson are likely to be fully available to new families.

Ms Goh revealed that families buying separate homes in the same housing estate would be able to buy adjoining units.

These units could also be combined sideways or even vertically to encourage different generations to live together. Their layouts will be flexible so that families can make adjustments if their needs change.

So far, the exhibition has drawn 62,000 visitors. One of them is architect Khoo Peng Beng, who designed the first 50-storey public-housing blocks here, now under construction in Tanjong Pagar.

Back in 2002, when his firm ARC Studio Architecture + Urbanism proposed having high-rise gardens and sky bridges link seven towers for the international design competition for that project, such ideas were still relatively novel.

He said: ‘HDB has come a long way. For a long time, the evolution of HDB design was very functional. This time, I think there is a more emotional and integrated approach to how we look at public housing.’

If the Dawson proposals are well-received, the HDB will consider inviting private architects again to conceptualise future public-housing projects.

 

Source: The Straits Times 29 Sept 07

LATEST US DATA – August consumer spending up 0.6%, betters forecasts

1.8% core inflation slowest since 2004; construction also up

(WASHINGTON) Americans shrugged off a rash of bad news to spend more than expected in August while a key measure of inflation eased to its slowest pace in 31/2 years. Construction activity also rose above expectations.

The Commerce Department reported yesterday that consumer spending rose by 0.6 per cent in August, the best showing in four months and better than the 0.4 per cent increase that had been expected. Incomes rose by 0.3 per cent, slightly lower than had been expected.

A closely watched gauge of inflation was up just 1.8 per cent in August, compared to the same period a year ago, the smallest increase since a similar rise in February 2004.

In another report, construction spending posted a surprising 0.2 per cent gain in August as strength in nonresidential construction offset a continued plunge in home building. Analysts had been forecasting that overall construction spending would fall by 0.2 per cent.

The Commerce Department said that the increase pushed total spending to a seasonally adjusted annual rate of US $1.166 trillion and reflected a 2.3 per cent rise in spending on office buildings, shopping centres and other nonresidential projects, the biggest increase in this category in six months.

Spending on home building fell by 1.5 per cent, the 18th straight drop in this area, with more weakness expected in coming months as builders scramble to cut back production in the face of slumping sales and a record number of unsold homes.

While the worst slump in housing in 16 years and the severe credit crunch that developed in August have raised worries, the good news on consumer spending should bolster the view that the economy will be able to escape the current slowdown without going into a recession. Consumer spending accounts for two-thirds of total economic growth.

The Federal Reserve last week cut a key interest rate by one-half point, a bigger drop than had been expected, in an effort to make sure that the housing and credit problems did not push the country into a recession.

Analysts are hoping that the rate cut will be just the first in a series of reductions as falling inflation pressures give the central bank the leeway to focus on weakening growth.

The 1.8 per cent rise in core inflation over the past 12 months, which excluded energy and food, is within the Fed’s comfort zone for core price increases of between 1 per cent and 2 per cent.

 

Source: AP (Business Times 29 Sept 07)

Little India site fetches $265m top bid

A PLOT in Little India drew two bids when its tender closed yesterday.

Singapore HealthPartners put in the higher offer for the 1.36ha site at $265.3 million.

This works out to $431 per sq ft (psf) of gross floor area and is 11 per cent more than the other bid submitted by Hiap Hoe Superbowl, which offered $238 million, or $386.40 psf of gross floor area.

The Government firmly pushed out the site – located at the junction of Rangoon and Race Course Roads – earlier this year after it received little interest from developers.

It was first offered as a ‘white’ site in August last year, which meant it could be used to build homes, shops, offices or hotels.

The site, however, failed to attract takers eight months after it was first offered, prompting the Government to

extend its use to hospital development.

The Government stipulated that 40 per cent of the site’s total floor area – potentially 615,965 sq ft – should still be given over to hotel rooms.

Even then, no developers came forward. This prompted the Government to offer the site for sale outright in July.

Property consultants said yesterday it is likely that the winning bidder will build a development with both hotel rooms and hospital rooms or medical suites on the site.

At least 550 hotel rooms can be built on it, estimated Mr Li Hiaw Ho of property consultancy CB Richard Ellis.

These rooms can ‘complement the hospital or medical suites’ by serving medical tourists, foreign medical consultants or family members accompanying patients, he said.

Mr Li added that this hospital-hotel hybrid model is likely to prove successful, given Singapore’s twin aims of boosting tourism and health care.

 

Source: The Straits Times 28 Sept 07

Katong Mall goes on sale amid controversy

Minority owners say process to sell en bloc too fast; no chance to air views

KATONG Mall is up for a collective sale but angry minority owners claim they have been left out of the process.

More than 35 disgruntled owners said the sale agreement was drawn up so fast that they did not get a chance to air their views.

They are also upset that the sale process was conducted under the old rules and not the stricter ones due to kick in next month.

Owner Jeannette Aruldoss, 44, a lawyer, told The Straits Times that the process was ‘done too quickly. We welcome the idea of the sale, but we want it done by the new rules’.

The revised law requires sale committee members to be elected at a general meeting and allows a five-day cooling off period for owners after signing a sale deal.

Three firms own 72 per cent of the 258-unit mall at the junction of East Coast and Joo Chiat Roads – Elysium, a holding company, and property developers Nustavino and Habitat Properties. The three have common investors. The rest of the mall is divided among about 100 owners.

The majority owners backed a sale and needed only a further 8 per cent for the required 80 per cent. This was confirmed on Wednesday.

The first time minority owners heard of a sale initiative was in a July 6 letter from property firm Jones Lang LaSalle (JLL) stating that five owners, holding about 74 per cent of the shares, had already volunteered for a sale committee.

At an Aug 6 meeting to discuss the sale, JLL said a process for collecting signatures would start the next day.

Minority owners met JLL on Sept 6 to express their concerns and to set up a meeting with the sale committee.

They did not hear from JLL until Sept 11, when it told them that the required 80 per cent level had been reached.

They were unconvinced and tried repeatedly to arrange a meeting with the sale committee – personally and through JLL – but to no avail.

JLL marketing agent Stella Hoh told The Straits Times yesterday that she did tell minority owners on Sept 11 that they had achieved the 80 per cent ’subject to lawyer’s verification of signatures’.

Confirmation came only on Wednesday.

Owner Lim Earn San, 60, said he was shocked at the speed of the sale, adding that the minority owners were not given any room for negotiations over the terms of the sale agreement.

The appointment of the marketing agent and lawyers was also done by the majority owners without consulting the minority owners, he said.

Mr Lim, who also owns a unit at Katong Shopping Centre, said the approach to the sale of the two malls, ‘couldn’t be more different’.

Owners at Katong Shopping Centre are following the new rules, having known of the changes since March, he said, adding: ‘Why can’t Katong Mall do the same?’

Some minority owners also fear a conflict of interest as two majority owners are in the property industry. But Ms Hoh said JLL had told the owners that the sale will be done by public tender and that any interested buyers related to the collective sale agreement ‘are required by law to declare their interests’.

Three sale committee members declined to comment.

The 99-year leasehold mall has a plot ratio of 3.6 and a site area of 78,158 sq ft. An independent expert estimated its sale price to be between $600 per sq ft (psf) and $650 psf, valuing the mall at about $175 million.

JLL figures show that units have sold at a range of $300 psf to $800 psf this year.

All eyes are now on its upcoming sale launch. ‘We’ll see how it goes, but if we’re not convinced the sale was done in good faith, we’ll take our concerns to the Strata Titles Board,’ said minority owner Robert Ong.

Hearing for Horizon Towers lawsuit adjourned

THE lawsuit against the owners of Horizon Towers has been put on the backburner for now, after they extended the deadline for the estate’s collective sale.

The consortium behind the suit, led by developer Hotel Properties (HPL), had the High Court hearing adjourned yesterday.

Its move followed a decision by the owners last week to extend the sale deadline until Dec 11 – a move that has taken some of the heat out of the stand-off, although another legal challenge looms today based on the initial sale process.

The consortium – comprising HPL, Morgan Stanley Real Estate-managed funds and Qatar Investment Authority – signed a deal in February to buy the 99-year leasehold Leonie Hill estate for $500 million. But some owners complained that the price was too low, and their mounting opposition culminated in the Strata Titles Board (STB) throwing out the sale deal, albeit over procedural errors, on Aug 3.

That decision comes under scrutiny today, with the owners asking the High Court to overturn the STB ruling.

The consortium has also filed an affidavit asking that it be allowed to participate in the appeal hearing.

If the appeal succeeds, the STB might have to reassess the Horizon Towers deal. If the STB’s original decision is allowed to stand, it could spell the end of the sale.

The stakes are high. The HPL-led group, represented by law firm Allen & Gledhill, claims that the owners of 177 units who backed the deal have breached the sale contract. It has sued the sellers for $800 million to $1 billion in lost profits arising from the alleged breach. This means that if a sale is not eventually completed – under the original terms – the owners of each unit would have to cough up more than $5 million.

The consortium had indicated that it would drop the case once the sale goes through at the $500 million price.

The deadline extension has raised hopes that this might be achieved as it would allow any errors to be corrected and a fresh application to be filed.

 

Source: The Straits Times 28 Sept 07