A confused message from the G-7?

WHAT are we to make of it when spokesmen for the world’s most powerful economies and financial institutions begin to contradict each other in public – or make remarks which appear less than consistent with reality?

Today, the finance ministers and central bankers of the G-7 – namely the countries of the US, Britain, Canada, France, Germany, Italy and Japan – hold their semi-annual get-together in Washington, in the runup to this weekend’s International Monetary Fund and World Bank meetings.

Very public attempts to influence today’s agenda were already taking place early last week, with the leaders of France and Italy appearing to have become particularly vociferous this time. Grumbling that a too-strong euro hurts Europe’s growth and exports, they have tried to lead joint European demands for the US to reiterate its ’strong’ US dollar policy.

In short, the Europeans are getting annoyed that the euro has once again scaled fresh post-launch highs versus the US dollar over the past week, but the yen and yuan have not been contributing their fair share of upside adjustment in response to the fast-falling greenback.

They do have a point. Since the end of last year, the euro has risen some 17 per cent versus the US dollar, while the yuan has only strengthened 7 per cent, and the yen has actually weakened by 5 per cent. Yet, even within Europe, not all appear as flustered on this currency issue. North Europeans like the Germans and the Dutch, for example, have been far less vocal or upset, at least in public, on the subject.

To be sure, it does get a little surreal when the US is asked to reiterate a strong US dollar policy at a time when the US dollar is sliding across a broad front in the real world – and when economic logic suggests that more US dollar downside is needed to correct its record current account deficit with the rest of the world. Over the past fortnight, we have in fact seen the US currency slide to lows not seen in 10, 23 and 31 years versus currencies like the Singapore, Australian and Canadian dollars – on top of recording fresh post-launch lows versus the euro.

To calm jittery financial markets, US Treasury Secretary Henry Paulson has deemed it necessary to come out and help out the Europeans by reiterating – both last week and this – that a strong US dollar is indeed in his country’s interest.

Yet, even as he tried to carry that message across, the International Monetary Fund’s managing director Rodrigo Rato decided to warn this week that the US dollar is in fact still overvalued – despite trading at near record lows. And that it needs to fall even further.

The key message here is that all involved stand to lose out if the US dollar should suddenly collapse; there is a need to manage its fall. When you stop to think about it, isn’t that exactly what Asian countries like China have been trying to do in terms of the US dollar’s slide against their own currencies over the course of 2007?

 

Source: Business Times 19 Oct 07

Property booms, busts make economy vulnerable

SINGAPORE ECONOMIC POLICY CONFERENCE

Bubble cuts private spending, raises reliance on volatile foreign demand

PROPERTY price booms and busts make Singapore’s economic growth more vulnerable to volatile factors and should be prevented, an economist at a think-tank said here yesterday.

While the impact of a spike in property prices on overall GDP growth is ‘quite subdued’, a property price bubble causes private consumption expenditure to shrink, making the economy more dependent on foreign demand and business spending which are much more volatile, said Tilak Abeysinghe.

The deputy director of the Singapore Centre for Applied and Policy Economics (Scape) at the National University of Singapore, was speaking at the inaugural Singapore Economic Policy Conference organised by Scape at Four Seasons Hotel.

His team’s research found that while higher property prices spur construction investment, an accompanying dip in private consumption means overall economic growth does not change much as a direct result of property price inflation.

But the overall effect is still undesirable as it makes the economy far more dependent on business spending and foreign demand for its exports, both of which are more volatile than domestic consumption, he said.

The consumption expenditure share of Singapore’s GDP has fallen from more than two-thirds in 1997 to about 40 per cent today. ‘If consumption expenditure in Singapore falls further, GDP growth will be very vulnerable to external demand and investment demand,’ he said.

Research found that in contrast with economies such as the US, higher housing prices here do not seem to encourage more personal spending.

In Singapore, ‘housing wealth is relatively illiquid,’ he said. ‘You just can’t sell your house and move to a suburban house.’ This means the ‘wealth effect’ of housing price inflation seen in countries such as the US – when people spend more as the value of their homes rise – is much less noticeable in Singapore.

Also, ‘when housing prices go up, mortgage payments also increase, so people have less to spend on consumption,’ he said.

He believes policymakers here should ‘do their best’ to prevent a property price bubble because of its effect on private consumption spending and its tendency to widen the income gap between the rich and poor.

‘It should be possible’ to prevent another bubble from building by identifying the main cause of the recent run-up in property prices – likely to be people buying properties for investment rather than owner-occupiers – and introducing measures to dampen demand from this source, he said.

But he also cautioned against flooding the market with a vast supply of new homes, which could trigger a price crash and set the conditions for a new bubble.

 

Source: Business Times 19 Oct 07

Tuas Power is first Temasek genco to go on sale

Offer open to all including overseas bidders; no cap on foreign ownership

(SINGAPORE) Singapore yesterday kicked off its ‘beauty parade’ of power companies when investment agency Temasek Holdings put Tuas Power up for sale.

Tuas is the smallest and youngest of the three generating companies to be sold by Temasek, each of which is expected to fetch more than $2 billion.

Tuas was chosen to lead the sale because it ‘has drawn the strongest investor interest’, Temasek’s managing director of investment Wong Kim Yin told a news conference. But there has been more than enough interest in the companies to ensure that ‘all three will go’, he said. ‘We’ve done our homework in assessing investor interest and liquidity to support the transactions.’

The sale will be open to all, including foreign utility players like Marubeni, Tokyo Electric, Australia’s Babcock & Brown, UK’s International Power and Hong Kong’s CLP Holdings and even foreign funds. No foreign ownership cap has been imposed. Local Temaseklinked players Semb Corp, KepCorp and City Spring Infrastructure are also likely to bid.

Tuas has 2,670 megawatts (MW) of generating capacity versus Senoko Power’s 3,300 MW and PowerSeraya’s 3,100 MW. But it also has the newest plant, with the last of its stage two gas-fired generators commissioned just two years ago.

Mr Wong, whose team has worked hard for the past 18 months to prepare the sale, said Temasek has not decided yet which company will go on sale after Tuas. It will see how the Tuas sale goes to see how best to sell Senoko and PowerSeraya. ‘For example, when we sell the first company we want to make sure the sale has the highest degree of completion, including financial,’ he said. ‘Otherwise it will affect the subsequent sales.’

Each company is expected to be sold to different buyers to prevent too few players having too much market power.

Mr Wong would not comment on the market’s $2 billion-plus estimate for each company, saying Temasek has not set reserve prices. Tuas has assets with a book value of more than $1 billion, but ‘cashflow generating capability is more important than size’, he said.

Tuas produced 26 per cent of Singapore’s electricity last year, enjoyed revenue of $2.28 billion and made a net profit of $177 million for the year ended March 2007.

The bigger PowerSeraya, with revenue of $2.62 billion, made a net profit of $168 million in the same period, underscoring Mr Wong’s remark that profits from power generation may vary from year to year.

Temasek yesterday said it will divest Tuas through a two-stage ‘trade sale’ that will take three to five months. The process starts with the immediate dissemination of an information pack to potential investors, who are expected to come back with indicative proposals so Temasek can draw up a shortlist by December.

The second stage will cover full due diligence, site visits, access to the Tuas data room and management presentations. Investors will then make binding offers, and Temasek will select the winner by the first quarter of 2008.

Mr Wong said Temasek will chose the winner based on integrity, transparency and price.

The launch of Tuas for sale comes eight years after an earlier aborted sale of 60 per cent of the company. The government decided then that it needed to allow the just-liberalised electricity market at the time to develop further.

‘Today’s sale launch is a key step in liberalisation of the electricity and gas markets here,’ Mr Wong said.

Coincidentally, the Energy Market Authority yesterday launched trials for an Electricity Vending System that will eventually allow the power companies here to compete to supply electricity to an up-to-now uncontested market segment – Singapore’s 1.2 million households.

Mr Wong said conditions – including a favourable M&A environment and strong economy – are favourable to selling generating companies right now. But the market can turn volatile, and if need be, Temasek may vary the timing of the sale of the two remaining companies. ‘Barring no macro-shocks’, it expects to complete the sale of all three generating companies by the first half of 2009, he said.

 

Source: Business Times 19 Oct 07

CapitaRetail China Trust in $336m deal

CAPITARETAIL China Trust (CRCT) – the first pure-play China retail real estate investment trust (Reit) in Singapore – has entered into a deal to buy a mall in Beijing for $336 million from CapitaRetail China Incubator Fund (CRCIF).

Located in Xizhimen in Xicheng district, Beijing, Xizhimen Mall is part of Xihuan Plaza, and has a gross rentable area of 73,857 sq metres. This is CRCT’s first acquisition since its listing on the Singapore Exchange in December 2006.

CRCIF is a US$450 million private equity fund sponsored by CapitaLand Limited to buy completed malls in China. CapitaLand holds a 30 per cent stake in the fund, while the remaining equity is held by pension funds, insurance companies and corporations. CRCT enjoys the first right of refusal to purchase malls held by CRCIF.

Commenting on the purchase, Lim Beng Chee, CEO of CapitaRetail China Trust Management (CRCTM), said: ‘Sitting atop one of Beijing’s only two key transportation hubs with an average commuter flow of 300,000 on weekdays and 600,000 on weekends, Xizhimen Mall is well-positioned to capture the tremendous daily pedestrian traffic to the mall.’

He added that Xizhimen Mall along with the trust’s other retail malls will position CRCT favourably to capture the city’s strong retail growth opportunity which has averaged about 12 per cent annually in the last decade. CRCTM is the manager of CRCT.

Post-acquisition, CRCT’s portfolio asset size will grow from its current portfolio of seven properties valued at $763.7 million to $1.16 billion.

The other properties are Wangjing Mall, Jiulong Mall and Anzhen Mall in Beijing, Qibao Mall in Shanghai, Zhengzhou Mall in Zhengzhou, Jinyu Mall in Huhehaote, and Xinwu Mall in Wuhu.

Xizhimen Mall was valued at $338.4 million and $340 million respectively by two independent property valuers, Colliers International (Hong Kong) Limited and Knight Frank Petty Limited.

Hsuan Owyang, chairman of CRCTM, said the trust is on track to achieve its target portfolio size of $3 billion by 2009.

Xizhimen Mall is expected to achieve a net property income yield (NPI yield) of 5.7 per cent next year, based on an average mall occupancy rate of 88.7 per cent, and an NPI yield of 6.4 per cent in 2009, assuming 100 per cent committed occupancy rate.

The proposed acquisition, which is subject to conditions including unitholders’ approval, includes a conditional agreement for CRCT to buy the planned extension of the current Basement 1 of the mall from the original developer of Xihuan Plaza – Beijing Finance Street Construction Development.

The extension would increase the GRA of Xizhimen Mall by 15.6 per cent and would provide direct pedestrian connectivity to the underground Mass Rapid Transit station. The extension is expected to increase overall shopper traffic and enhance shopper flow within the mall.

To help fund the purchase, the trust said it is looking to raise about $280 million from an equity fund raising. It expects to fund the remaining purchase consideration through borrowings.

 

Source: Business Times 19 Oct 07

A-Reit in development projects totalling $277m

ASCENDAS Real Estate Investment Trust (A-Reit) yesterday announced new investments for development projects at Changi Business Park and in Jurong totalling $277 million, including about 42,000 square metres of built-to-suit (BTS) business park space at Changi Business Park pre-committed to a ‘leading international financial institution’.

The trust did not identify the party but market watchers said that it may be Citibank.

Giving details of A-Reit’s new investments, the trust’s manager Ascendas-MGM Funds Management said that they include the development of Changi Business Park’s Plot 8 into three business park buildings – two BTS buildings and a multi-tenant block with an amenity podium. These buildings are on land of 29,864 sq m with 30 + 30 year tenure and will have a combined gross floor area of 74,660 sq m (803,633 sq ft).

The BTS portion pre-committed to the financial institution will be built in two phases, the first slated for completion in the first quarter of 2009 and the second in Q4 2010.

The multi-tenant building, with a gross floor area of about 33,000 sq m, will have about 6,000 sq m of amenity space to cater to the increasing population at Changi Business Park. The project is expected to be ready in second-half 2009.

The total cost for all phases of the development is $191 million.

Over at Pioneer Walk in Jurong, A-Reit will develop industrial space on a 36,600 sq m plot with a 30-year tenure.

On completion, the project will have 80,609 sq m of lettable floor area in two blocks of six-storey, rampup high-specification space.

Costing $86 million, the development will be built in two phases and is scheduled for completion in Q3- Q4 next year.

Eighty per cent or 28,376 sq m of phase 1 space has been pre-committed and 40 per cent or 18,396 sq m of phase 2 is under offer.

A-Reit also said yesterday that it renewed and signed new leases, including expansions, for a total net lettable area of 71,433 sq m in the quarter ended Sept 30. The overall portfolio occupancy rate increased to 98.3 per cent as at that same date, from 97.2 per cent a year earlier.

 

Source: Business Times 19 Oct 07

Greenspan: No $ plunge if China offloads Treasuries

Markets are clever enough not to over- react, he says

(SEOUL) Alan Greenspan doesn’t expect a rapid decline in the dollar should China sell more of its holdings of US Treasuries, according to people attending a forum here yesterday.

‘When asked whether there will be a plunge in the dollar in case China offloads its US Treasury holdings, Mr Greenspan said it’s already-known information that won’t trigger any rapid drop in the US dollar,’ according to Kong Dong Rak, an analyst with Hana Daetoo Securities. ‘His view is that markets are clever enough not to overreact.’

The former Federal Reserve chairman was speaking via satellite from Washington and media were excluded from his presentation. The conference was hosted by Maeil Business Newspaper.

Japan, China and Taiwan sold US Treasuries at the fastest pace in at least five years in August as losses linked to US sub-prime mortgages sparked a slump in the dollar.

Japan cut its holdings by 4 per cent in August to US$586 billion, Treasury Department figures showed. China’s holdings fell by 2.2 per cent to US$400 billion and Taiwan’s slid 8.9 per cent to US$52 billion.

Kim Gyung Rok of Mirae Asset Investment Management, confirmed Mr Greenspan’s remarks on the dollar.

‘Foreign exchange markets have already priced in bit by bit’ the possibility of an unloading of US Treasuries, he said.

Mr Greenspan is ‘of the opinion that holdings of foreign exchange reserves tend not to be moved easily’, Mr Kim said.

The dollar has fallen 7.5 per cent against the euro this year after the Fed cut interest rates last month to support the housing market, reducing the yield advantage of US fixed-income assets.

The US currency slumped to a record low against the euro on speculation that the growth outlook in the US will push the Fed to make another reduction at the end of the month.

The dollar declined 0.6 per cent to US$1.4294 per euro, after earlier reaching an all-time low of US$1.4305 in early New York trading. It fell one per cent to 115.46 yen. It earlier reached 115.29, the lowest since Oct 2.

The New York Board of Trade’s dollar index touched 77.5, the weakest since the index began in 1973.

Eisuke Sakakibara, Japan’s former top currency official, said that the US currency may ‘plunge’ in 2008 should US economic growth ‘fall below one per cent’. He spoke in an interview yesterday in Tokyo.

On Wednesday, the International Monetary Fund cut its forecast for US growth next year to 1.9 per cent. IMF officials said the dollar is overvalued compared with its medium-term fundamentals. According to the Financial Times, Simon Johnson, chief economist of the Fund, said the weakening dollar was part of a normal process of economic rebalancing and was positive for the global economy provided that other currencies also adjust.

However, Mr Greenspan said the slowdown is unlikely to lead to a US recession, though it will still have a negative effect on Asia’s economies, according to Maeng Young Jae of Samsung Securities. ‘Greenspan seems more optimistic about the US economy than pessimistic.’

Mr Greenspan said China’s policy on the yuan ‘could cause long-term instability in the Chinese economy’, according to Ben Arber, head of global payments and cash management at HSBC Holdings in Seoul.

 

Source: Bloomberg (Business Times 19 Oct 07)

No bubble in property market: NUS study

DESPITE Singapore’s red-hot property prices, no bubble is forming in the property market here, according to a study by National University of Singapore (NUS) economists.

In fact, the rise in home prices is below the market’s long-run ‘equilibrium’ level, based on factors such as income and property supply, preliminary findings of the ongoing study show.

In other words, the pace of housing price rises is still below the level that would be expected based on market fundamentals, according to the study conducted by a team led by Associate Professor Tilak Abeysinghe.

This is unlike the case in the early 1980s and mid-1990s, when property price inflation shot up above its longterm equilibrium levels, the study noted.

Early findings from the study, still a work-in-progress, was presented to a small audience at the Singapore Economic Policy conference yesterday.

House-price inflation is expected to hit 18 per cent this year, before easing to 13.7 per cent next year, and then to 3.2 per cent in 2009 and 3.4 per cent in 2010, the NUS team’s model predicted.

Factors used to determine the equilibrium price level include disposable income per person, housing stock and the new supply of property.

The study also found that it takes a long time for property price inflation to adjust to its long-run equilibrium.

And a rise in property price inflation would lead to a spike in construction investment a year or so down the road, but its effect fades after that.

The study concluded that price bubbles should be avoided, as they affect private consumption as well as income redistribution, among other things.

Prof Abeysinghe is the deputy director of the Singapore Centre for Applied and Policy Economics at the NUS, which organised yesterday’s meet.

The one-day conference also saw speakers examine issues ranging from fertility, migration and labour market trends, to CPF savings and the elderly.

The paper, entitled Singapore’s Property Market And The Macroeconomy, can be viewed at http://nt2.fas.nus.edu.sg/ecs/cent/ESU/conference.htm

 

Source: The Straits Times 19 Oct 07

Bleak house – Recession fears grow as US property slump worsens

WASHINGTON – THE risk of an outright recession is mounting for the United States as the housing slump heads towards ‘perfect storm’ conditions, say economists.

The cloudy US housing picture has become even grimmer, as housing starts sank 10.2 per cent last month to a 14-year low, government data revealed on Wednesday.

The report also showed the pace of new home construction at an annualised rate of 1.191 million units, the lowest since July 1993, and much weaker than the average forecast of 1.3 million.

The September report showed building permits, a sign of future construction activity, fell 7.3 per cent to a weaker- than-expected annual pace of 1.226 million.

The figures highlight the horrific slump in US real estate after a sizzling market turned suddenly cold last year.

Economists say the slump is the main drag on US growth.

‘The contraction in the housing sector is transitioning from an average downturn to among the worst in the post-World War II history of the US economy,’ said Mr Michael Gregory, economist at BMO Capital Markets.

‘As the current downturn probes deeper depths, the risk of outright  recession will mount.’

Mr Brian Bethune, economist at Global Insight, said: ‘The housing market is now navigating through ‘perfect storm’ conditions – a downward spiral involving reductions in demand, repetitive slashing of output, downward pressure on prices, tightening credit conditions and rising foreclosures.’

He saw the downturn persisting: ‘It is likely that the peak of this storm will have an impact on the economy in the fourth quarter of 2007 and first quarter of 2008.’

Over the past 12 months, US housing starts were down 30.8 per cent and permits down 25.9 per cent.

The massive declines highlight the fact that builders have a big inventory of unsold homes that are keeping prices down.

But potential buyers are having a harder time getting mortgages, and companies have reported cancellation rates of 50 per cent or more on sales contracts.

Consumers are also beginning to ignore the builders’ incentives and are waiting for even better deals as the housing crunch worsens.

Some analysts say the extended decline in housing will prompt the Federal Reserve to cut rates further after last month’s half- point cut.

‘The main concern that declining housing activity presents going forward is that the longer it persists, the greater the risk that it could spread to other areas of the economy such as consumer spending,’ said Mr Paul Ferley, economist at RBC Financial Group.

Source: AGENCE FRANCE-PRESSE (The Straits Times 19 Oct 07)

Marina Bay’s key selling points

Its ‘live-work-play’ concept makes it an attractive location for home-buyers.

MARINA Bay is not just well on the way to becoming Singapore’s new financial hub, it is also shaping up as an attractive location for home-buyers.

Property analysts say that since the first residential project there – City Developments’ The Sail – was launched in late 2004, interest in the area has spiked, sending prices climbing.

Prices at The Sail averaged $970 per sq foot in 2004 after the project was launched in November that year.

But since then the average price – taking into account new sales, resales and sub-sales – climbed to $1,060 psf in 2005 and $1,300 psf in 2006, says Knight Frank’s director of research and consultancy Nicholas Mak.

And for the first nine months of 2007, units at The Sail went for an average of about $1,600 psf, he says.

He reckons prices could hit $1,800-$1,900 in about two years. The 1,111-unit development is fully sold.

‘The project was launched in 2004, which means it was just in time to rise on the property market upturn,’ he said.

Analysts say the upside for other residential projects in the area may not be as great because they were launched at higher prices. But they could still benefit from the ‘buzz’ now associated with the area.

Two projects have been launched since The Sail – Marina Bay Residences and One Shenton.

Marina Bay’s biggest selling point, analysts and developers agree, is its ‘live-work-play’ concept.

For one, office space there has been a huge hit with banking and financial institutions.

The top office draw at the moment is the massive Marina Bay Financial Centre (MBFC).

Two office towers in MBFC’s first phase will add about 1.7 million sq ft of lettable area when they come up in 2010. And the office tower in the second phase is expected to offer a further one million-plus sq ft of space.

Nearby One Raffles Quay, completed last year, has slightly over 1.3 million sq ft of office space.

In addition to this, the government has indicated that it intends to progressively release plots in the area.

Two parcels – known as Land Parcel A at Marina View and Land Parcel B at Marina View – will add at least 1.7 million sq ft of office space. Parcel A has been awarded, while the tender for Parcel B closes on Nov 13.

The authorities are also moving to increase the area’s vibrancy. And one eagerly anticipated project is Gardens by the Bay.

The waterfront is set to be home to three distinct gardens, each with its a unique look, the National Parks Board revealed last year.

The gardens will range in size from 10 to 54 hectares. It is estimated that $300 million-$400 million could be spent on them.

Perhaps most significantly, the $5.2 billion Marina Bay Sands integrated resort (IR) will come up in 2010 – significantly changing the look and feel of the place.

Besides drawing more tourists, the retail and F&B facilities at the IR could attract home buyers, market watchers say. All these goings-on have translated into greater local and foreign interest in homes in the area, analysts and developers point out.

‘We are seeing a keen appetite among investors confident in Singapore and interested in the live-work-play destination of Marina Bay,’ said Kan Kum Wah, head of residential marketing for Marina Bay Suites.

More residential projects are likely to be launched in the coming months.

For a start, Land Parcel A and Land Parcel B are ‘white’ sites, which means the successful bidders can use some of the gross floor area to build homes.

The Urban Redevelopment Authority is also setting aside some 60ha of land at Marina South for a landmark residential district.

Some 11,000 housing units are planned, with a mix of commercial, hotel and community facilities.

URA expects to start launching sites in the residential district within the next year, and interest is expected to be keen.

But the next project in the area to hit the market is likely to be Marina Bay Suites.

The 223-unit development, which is the second and last residential block at MBFC, will be launched early next year.

MBFC’s developers – Keppel Land, Cheung Kong Holdings/Hutchison Whampoa and Hongkong Land – expect strong interest in the project, as well as high prices, on the back of then-record prices achieved by Marina Bay Residences.

Last December, when Marina Bay Residences was launched, all 428 units were snapped up within days, with one penthouse fetching $3,450 per square foot (psf) – a record for private homes prices at the time.

‘Marina Bay Suites will be a fitting, even more upscale, sister development to the 428-unit Marina Bay Residences,’ said Mr Kan.

However, homes in the area still have some catching up to do before they reach the prices fetched by residential units in the traditional prime districts 9 and 10.

At Orchard Residences, CapitaLand and Sun Hung Kai Properties are said to have sold a penthouse on the 53rd storey for about $5,600 psf. In contrast, prices at Marina Bay have only hit $3,450 psf.

But home prices in the area could hit $3,500-$4,000, said Ku Swee Yong, Savills Singapore’s director of marketing and business development.

‘Once the casino is up – and perhaps with more traffic congestion due to the vibrant economy – younger high-flying execs in financial services, legal services, etc will come to appreciate inner-city living,’ Mr Ku said.

 

Source: Business Times 18 Oct 07

Sites in Jurong, Holland, Orchard up for sale

2 prime freehold sites could fetch $670-$700m each in collective sales

THREE sites for residential development were launched for tender yesterday – a 99-year leasehold, traditional suburban mass-market housing plot next to Lakeside MRT Station in the Jurong area, as well as two freehold, prime district sites offered through the collective sales of Villa delle Rose off Holland Road and Elizabeth Towers at Mount Elizabeth.

Villa delle Rose, with a land area of 297,132 sq ft, has a guide price of $700 million, which reflects a unit land price of $1,758 psf of potential gross floor area, inclusive of an estimated $31 million development charge. The site is zoned for residential use with a 1.4 plot ratio (ratio of maximum potential gross floor area to land area) and a four-storey maximum height under Master Plan 2003.

Its marketing agent CB Richard Ellis conducted an expression of interest for the property which ended in August and is said to have received offers of up to slightly over $1,600 psf per plot ratio (psf ppr). The EOI exercise had been launched before approval from majority owners was secured, which CBRE recently obtained.

CBRE executive director Jeremy Lake said in a news release yesterday that ‘a few parties have approached us with keen interest, but the owners would like a transparent public tender to achieve the best results’.

Villa delle Rose, developed by Pontiac Land and Keck Seng, comprises 104 units ranging from 2,800 sq ft to 3,200 sq ft. All but a handful of units are rented out, CBRE said.

Over in the Orchard Road area, Elizabeth Towers’ owners are looking at $673 million for their 54,318 sq ft site.

This works out to $2,666 psf ppr. No development charge is payable. Planning approval has been obtained from the Urban Redevelopment Authority to build up to a plot ratio of 4.647, translating to a maximum gross floor area of 252,416 sq ft.

In Jurong, URA has launched the tender for a 2.2-hectare site flanked by Lakeside MRT Station and LakeHolmz condo. Property consultants reckon the site can be developed into around 680 apartments averaging 1,200 sq ft.

CBRE executive director Li Hiaw Ho estimates the site to be worth about $300 psf ppr, translating to a breakeven cost for a new condo at about $650 psf and an average selling price of about $700-750 psf.

Knight Frank, which predicts the site will draw between four and eight bids, estimates the site’s land price at $325- $375 psf ppr, or a breakeven cost of around $650-$720 psf.

The firm’s managing director, Tan Tiong Cheng, said developers will take into account the fact that the ‘Jurong area has traditionally been a slower-moving market compared with other suburban/mass market locations’.

CBRE said that units in The Lakeshore condo a short distance away from the latest site are currently being marketed by its developer at around $800 psf.

In the subsale market, Lakeshore units have been sold recently at $650-750 psf, while apartments at The Centris one MRT station away have been changing hands at about $600-650 psf.

The Lakeholmz, a completed development, has been seeing sales in the $550-600 psf range, according to CBRE research.

 

Source: Business Times 18 Oct 07

SingPower Building on sale for expected $990m

Market watchers say leasehold property likely to fetch $1,800 psf

THE office market can be expected to continue teeming with deals, with the latest offering said to be the Singapore Power Building behind Somerset MRT Station. The 30-year-old building, once known as PUB Building, is being marketed through an expression-of-interest exercise, BT understands.

Market watchers expect the leasehold property to fetch about $1,800 per sq ft of net lettable area (NLA), which works out to $990 million based on the 17-storey building’s NLA of around 550,000 sq ft.

SingPower Building, completed in 1977 and refurbished last year, is on a site with a remaining lease of 67 years.

The building is being put up for sale by owners SingPower and Public Utilities Board. The latter moved out earlier this year. SingPower occupies some 200,000 sq ft, while the rest of the space is leased to other tenants.

SingPower is expected to structure a deal to lease back the space it occupies from the new buyer Industry sources say SingPower Building’s existing gross floor area reflects a 7.0 plot ratio – the ratio of maximum potential gross floor area to land area. This exceeds the 4.9 plot ratio indicated in Master Plan 2003. The site area is about 110,000 sq ft.

However, there may be a possibility of redeveloping the property in the medium term by building a more efficient modern structure, after existing leases expire.

SingPower Building has two basements with a total of 530 parking lots. There is also an auditorium for public use.

The building was originally developed for $32 million. It was clad in silvery metal when refurbished last year.

The building was described as a ‘ground-scraper’ – two parallel slab blocks facing north and south connected by a lift and stair core – in an article in The Straits Times in August this year. Between the two blocks is a landscaped court.

If SingPower Building changes hands for around $990 million, it will be one of the biggest office deals so far this year, along with the $1.04 billion sale of Temasek Tower to a fund managed by Macquarie Global Property Advisors in March, and the sales of separate one-third stakes in One Raffles Quay to K-Reit Asia and Suntec Reit for $941.5 million each.

In late August, CapitaLand, IP Property Fund Asia and NTUC Income Insurance Co-op sold the leasehold Chevron House, formerly Caltex House, at Raffles Place, for $730 million or a record $2,780 psf of NLA. The buyer is understood to be a Goldman Sachs-linked fund.

The Goldman Sachs group is also understood to be finalising a deal to buy the next-door Hitachi Tower, a 37- storey office tower on a 999-year leasehold site facing Collyer Quay.

The price is expected to be around $3,000 psf.

Hitachi Tower is 50:50 owned by CapitaLand and National University of Singapore.

 

Source: Business Times 18 Oct 07

Sept exports disappoint with 2.2% growth

Showing falls short of forecast 8.1% and pales against August’s 10.9% pace

(SINGAPORE) After expanding stronger than expected in August, Singapore’s non-oil domestic exports sprang another surprise last month – this time it was a dismal showing with meagre 2.2 per cent growth from a year ago, falling far short of the 8.1 per cent gain analysts have forecast.

The disappointment on the export front is all the more stark, coming soon after the government announced last week that the economy on the whole grew a blistering 9.4 per cent in the third quarter (Q3), trumping analysts’ projections.

The weak performance in September’s non-oil domestic exports (NODX), following the surprisingly robust 10.9 per cent expansion in the previous month, dampened Q3’s export growth to 6.2 per cent.

So the NODX’s growth has continued to trail overall economic growth, breaking from past patterns, and seems out of step with an export-led economy.

For the full year, International Enterprise Singapore, the government’s trade promotion arm, has trimmed NODX’s growth forecast from 7-9 per cent to 4-6 per cent.

The Ministry of Trade and Industry has, on the other hand, upped its growth projection for the economy from 4.5- 6.5 per cent to 7-8 per cent.

Yet the NODX has put up a stronger showing in 3Q, following a measly expansion of 1.5 per cent in Q2.

 ’In trend terms, looking at the 3-period moving average, NODX has been improving since February 2007 – in line with our Asean-4 export lead indicator,’ says Prakriti Sofat, an economist at HSBC Bank.

And the improvement is in tandem with the overall advance in the economy, which expanded 6.5 per cent in Q1, 8.7 per cent in Q2 and 9.4 per cent in Q3.

Weak electronics domestic exports dragged down NODX growth in September. Electronics shipments fell sharply by 10.6 per cent, the eighth straight monthly contraction.

‘The decline of electronics domestic exports was due to the lower domestic exports of parts of PCs (personal computers), ICs (integrated circuits), telecommunications equipment and disk drives,’ said IE Singapore when it released the latest trade figures yesterday.

Last month’s growth in the NODX was largely propped up by nonelectronic exports, which rose 14 per cent. Even then, non-electronic shipments were not as strong as August’s 22 per cent growth.

Compared with the previous month, the NODX in September dipped 1.5 per cent to $14.7 billion.

Year-on-year, total trade in September inched up 0.7 per cent to $71.4 billion, after growing by the same amount in August.

Domestic exports to the United States, Taiwan, China, Indonesia and Malaysia fell last month. Shipments to the US, Singapore’s second largest market, declined 8.3 per cent after rising 2.9 per cent in August.

The European Union, Singapore’s largest market, was among the biggest contributors to the NODX’s growth in September. But shipments to the EU, which jumped 41.7 per cent in August, rose just 13.2 per cent last month.

Hong Kong and South Korea were the other big contributors to September’s NODX growth, according to IE Singapore.

 

Source: Business Times 18 Oct 07

HDB expects stock of unsold flats to drop to 2,200 units by year-end

THE stock of unsold Housing and Development Board (HDB) flats, which stood at about 10,000 three years ago, is now down to 3,500, and the board expects the stock to fall to 2,200 units by the end of the year.

Speaking at a press conference to release the HDB Annual Report 06/07 on Tuesday, HDB CEO Tay Kim Poh said: ‘Positive growth has resulted in strong demand for HDB flats.’

Indeed, according to the figures in the latest annual report, demand appears to have outstripped supply.

For the financial year ended March 31, HDB sold 5,712 new flats, down from 10,100 flats in the previous year, a drop of over 40 per cent. But the number of flats completed in the year was also down, to just 1,764, a decline of nearly 60 per cent from the 4,378 flats of the 2005-06 period, perhaps explaining the recent spike of 6.5 per cent in HDB’s Resale Price Index (flash estimate) for open market flats.

As at March 31, 14,212 flats were under construction, compared to 12,571 in the previous year. These flats have already been launched, and Mr Tay said: ‘BTO (Built-to-Order) subscription is also very high.’ HDB’s latest bi-monthly balloting/walk-in sale exercise also suggests that demand is high, with the 489 flats offered now almost 10 times oversubscribed. Four thousand and eight hundred online applications have been received so far.

New supply of about 6,000 flats from BTO exercises and the Design, Build and Sell Scheme is expected over the next six months but managing supply and demand will be a challenge.

HDB said that a projected 6,300 flats will be completed in FY07-08, followed by 1,700 in FY08-09, 4,000 in FY09-10, and 13,000 in FY10-11.

Savills Singapore director (marketing and business development) Ku Swee Yong said: ‘Assuming about 5,000 to 7,000 flats are completed between 2008 and 2009, we are at best even on supply and demand.’

Mr Ku said improved economic conditions and population growth could have some impact on this balance.

It is, of course, difficult to predict future demand. A case in point would be the backlog of 10,000 unsold flats just three years ago.

Knight Frank director (research and consultancy) Nicholas Mak said that in the past, HDB built flats ’speculatively’, hence the backlog. But, with the current practice of BTO exercises, the building programme has become more ‘market responsive’.

For now, any unsatisfied demand will have to be supplied by the resale market. ‘The resale market is very big and has great capacity to increase demand,’ added Mr Mak, but he also cautioned: ‘If the economy and job market continues to expand, we can expect demand for new flats to spill over into the resale market and this could impact prices.’

While resale prices have gone up, the HDB said that the number of resale applications actually fell 7 per cent in FY06-07. This could be because HDB buyers are still very price sensitive.

HSR Property Group senior vice-president Donald Yeo said that he does not believe a supply crunch is imminent because many potential buyers already own HDB flats. Based on feedback from HSR property agents, Mr Yeo said that about eight out of 10 buyers already own flats, so even if there is a desire to buy a new flat – regardless of whether it is to upgrade or downgrade – there is no dire need to.

‘Buyers who find resale prices too high are also prepared to wait for new flats rather than buy from the resale market,’ he added.

 

Source: Business Times 18 Oct 07

HDB expects stock of unsold flats to drop to 2,200 units by year-end

THE stock of unsold Housing and Development Board (HDB) flats, which stood at about 10,000 three years ago, is now down to 3,500, and the board expects the stock to fall to 2,200 units by the end of the year.

Speaking at a press conference to release the HDB Annual Report 06/07 on Tuesday, HDB CEO Tay Kim Poh said: ‘Positive growth has resulted in strong demand for HDB flats.’

Indeed, according to the figures in the latest annual report, demand appears to have outstripped supply.

For the financial year ended March 31, HDB sold 5,712 new flats, down from 10,100 flats in the previous year, a drop of over 40 per cent. But the number of flats completed in the year was also down, to just 1,764, a decline of nearly 60 per cent from the 4,378 flats of the 2005-06 period, perhaps explaining the recent spike of 6.5 per cent in HDB’s Resale Price Index (flash estimate) for open market flats.

As at March 31, 14,212 flats were under construction, compared to 12,571 in the previous year. These flats have already been launched, and Mr Tay said: ‘BTO (Built-to-Order) subscription is also very high.’ HDB’s latest bi-monthly balloting/walk-in sale exercise also suggests that demand is high, with the 489 flats offered now almost 10 times oversubscribed. Four thousand and eight hundred online applications have been received so far.

New supply of about 6,000 flats from BTO exercises and the Design, Build and Sell Scheme is expected over the next six months but managing supply and demand will be a challenge.

HDB said that a projected 6,300 flats will be completed in FY07-08, followed by 1,700 in FY08-09, 4,000 in FY09-10, and 13,000 in FY10-11.

Savills Singapore director (marketing and business development) Ku Swee Yong said: ‘Assuming about 5,000 to 7,000 flats are completed between 2008 and 2009, we are at best even on supply and demand.’

Mr Ku said improved economic conditions and population growth could have some impact on this balance.

It is, of course, difficult to predict future demand. A case in point would be the backlog of 10,000 unsold flats just three years ago.

Knight Frank director (research and consultancy) Nicholas Mak said that in the past, HDB built flats ’speculatively’, hence the backlog. But, with the current practice of BTO exercises, the building programme has become more ‘market responsive’.

For now, any unsatisfied demand will have to be supplied by the resale market. ‘The resale market is very big and has great capacity to increase demand,’ added Mr Mak, but he also cautioned: ‘If the economy and job market continues to expand, we can expect demand for new flats to spill over into the resale market and this could impact prices.’

While resale prices have gone up, the HDB said that the number of resale applications actually fell 7 per cent in FY06-07. This could be because HDB buyers are still very price sensitive.

HSR Property Group senior vice-president Donald Yeo said that he does not believe a supply crunch is imminent because many potential buyers already own HDB flats. Based on feedback from HSR property agents, Mr Yeo said that about eight out of 10 buyers already own flats, so even if there is a desire to buy a new flat – regardless of whether it is to upgrade or downgrade – there is no dire need to.

‘Buyers who find resale prices too high are also prepared to wait for new flats rather than buy from the resale market,’ he added.

 

Source: Business Times 18 Oct 07

Economy’s solid growth to spill into 2008: NTU

It cites uptick in world electronics demand, sizzling construction activity

THANKS to the sustained health of the global economy, an uptick in world electronics demand and sizzling construction activity here, the rosy picture for Singapore’s economy will persist into next year, Nanyang Technological University economists said yesterday.

Singapore’s gross domestic product is expected to grow 8.3 per cent this year and 7.5 per cent in 2008, the Econometric Modelling Unit (EMU) of the Economic Growth Centre at NTU said in its bi-annual forecast for the economy.

‘The expected growth in 2008 is due to external demand conditions, mainly the world economy is expected to remain healthy, China and India are expected to drive growth in Asia and the aggressive policies of the Federal Reserve with regard to the sub-prime mortgage market in the US would likely contain the credit squeeze in the US,’ said NTU Associate Professor Joseph Alba.

Based on leading indicators for the electronics cluster, the upturn in global electronics demand will likely gather pace in 2008, while construction activity amid buoyant property prices and spillover effects from the building of the two integrated resorts here will provide further stimulus, he added.

The forecasts were made barring additional risks in the Middle East that could cause oil prices to spike further, but assumed high oil prices of US$80 a barrel.

Assoc Prof Choy Keen Meng, who has been spearheading the macro-economic forecasts since 2001, said the impact of oil price spikes on economic growth is not discernable as there are offsetting factors.

‘Historically, the impact of oil price increases on the Singapore economy has been ambiguous,’ said Assoc Prof Choy.

For the fourth quarter of this year, EMU expects Singapore’s economy to grow 8.6 per cent after the government’s advance estimates showed the economy growing 9.4 per cent in Q3.

Giving a sectoral breakdown, Assoc Prof Alba said growth in manufacturing, hotels and restaurants, transport and storage and information and communications is expected to accelerate in 2008 from 2007. But sectors like construction and financial services could see slightly slower growth in 2008 given the high base of comparison in 2007.

EMU also projects that one-off impact of the two percentage-point hike in the Goods and Services Tax will likely blow over by 2008, with the Consumer Price Index (CPI) to be 2.6 per cent in Q4, 1.6 per cent for the whole year and 2.4 per cent in 2008.

This falls within the official CPI forecast by the Monetary Authority of Singapore of 1.5-2 per cent for 2007 and 2- 3 per cent for 2008.

The buoyant economic outlook is expected to put more pressure on inflation as labour costs increase, EMU said, but added that these wage pressures may moderate in 2008 as productivity growth accelerates or employment is allowed to grow through Singapore’s flexible foreign labour policy.

It estimates that job creation will reach a record of 200,000 this year, after an all-time high of 176,000 last year.

EMU’s projected job creation would take the unemployment rate to 2.3 per cent for 2007 and 2 per cent for 2008 – the lowest level in a decade.

 

Source: Business Times 18 Oct 07

CDL in US$125m Moscow hotel venture

JV will develop conference and business facilities on adjacent site

CITY Developments Ltd (CDL) has teamed up with a company owned by Sudhir Gupta of Amtel Group for a US $125 million joint venture in Moscow that involves investing in a hotel that will be repositioned as a Copthorne (under CDL’s Millennium & Copthorne Hotels chain). The tie-up will also develop conference and business facilities, among other things on a vacant site next door.

‘CDL is also looking at more residential developments and hotel investments in the Russian cities of Moscow and St Petersburg,’ a CDL spokesman said.

Under the agreement inked yesterday, CDL will take a 50 per cent stake in Soft Proekt, which owns the Iris Congress Hotel and a nine-storey serviced apartment building in Moscow. The remaining 50 per cent in Soft Proekt is held by Golden Orchard Hotels Pte Ltd, which is linked to Dr Gupta, who is founder and chairman of the Amtel Group of Companies.

The eight-storey Iris Congress Hotel has over 200 rooms and facilities, including 13 conference rooms. The joint venture also plans to build a mixed-use development complex on a vacant plot adjoining the existing hotel. The complex will include conference and business facilities, food and beverage areas, and a car park. Details are being finalised.

The combined land area of the site of the joint venture is 287,547 sq ft. It is located along Korovinskoye Chaussee, about 15 km north of Moscow city centre and 16 km south-east of Sheremetyevo Airport.

CDL said that Moscow is experiencing an acute shortage of hotel rooms due to its economic boom, and recorded among the highest revenue per available room growth in Europe last year.

Yesterday’s agreement is CDL’s maiden investment in Russia, although the group has been marketing some of its upmarket Singapore condos in the country for a while.

‘We look forward in great anticipation to exploring further opportunities in our investments and developments in Russia and Eastern Europe,’ CDL executive chairman Kwek Leng Beng said in a release yesterday.

India-born Dr Gupta, who was educated in Russia and is now a Singapore citizen, is no stranger to CityDev. He bought three floors and a penthouse at The Sail @ Marina Bay in 2005.

CityDev also indicated in its release yesterday that M&C, its London-listed hotel arm, will soon be launching the Grand Millennium brand as its most prestigious brand in key cities.

First off will be the former Regent Hotel in Kuala Lumpur, which has just been reflagged as a Grand Millennium.

Ongoing refurbishments at the property are expected to be completed soon.

M&C’s three other brands are Millennium, Copthorne and Kingsgate.

Dr Gupta’s Amtel Properties Development also has a joint venture with The Ascott Group, a subsidiary of CapitaLand, to acquire and develop international-class serviced residences in strategic business districts in Moscow and St Petersburg.

 

Source: Business Times 18 Oct 07

ProLogis to double Japan investment

CEO expects firm to own or manage 1.2t yen of assets in Japan by 2010

(TOKYO) ProLogis, a US property firm that operates distribution centres, aims to double its investment in Japan despite concern about the impact of sub-prime problems on the economy, its CEO said yesterday.

‘One thing about our business is that when the economy is not good companies focus on cutting costs, and a great place to cut costs is within the supply chain by reconfigurating the supply chain, which drives demand for logistic space,’ ProLogis chairman and chief executive officer Jeffrey Schwartz said.

The global property market has come under pressure as investors’ risk appetite dwindles due to the US sub-prime mortgage crisis, but Mr Schwartz said that his firm has gained from investors’ recent move to look for quality assets, especially in the United States.

‘Today, people are looking for the safest, best, highest quality assets, and we have been the beneficiary of that,’ he said. ‘Our business is not a sexy business. It’s not like building high-rise offices or five-star hotels. But it doesn’t become obsolete and it’s a great cash flow business.’

Indeed, ProLogis, the United States’ biggest industrial real estate investment trust (Reit), has seen its stock price rise 15 per cent this year, outperforming the MSCI US Reit index which has fallen 6.5 per cent.

ProLogis expects 88 per cent of its organic growth to come from outside the US and is aggressively expanding geographically, increasing development in existing markets and developing more large warehouse centres.

The value of the assets it owns and manages globally will grow to 7.2 trillion yen (S$90.2 billion) by 2010 from the current 3.6 trillion yen, with Japan’s investment doubling to 1.2 trillion yen.

‘Our expectation is that in the next three years we will be able to double the size of our business in Japan,’ Mr Schwartz said.

Since 2001, ProLogis has steadily built its foothold by tying up major Japanese corporations. Last month, ProLogis said that it bought 17 large warehouses in Japan from Matsushita Electric Industrial Co for about 85 billion yen.

After tapping into Japan, South Korea and China, ProLogis is looking into India as its next potential market, although Mr Schwartz declined to give specific plans.

 

Source: Reuters (Business Times 18 Oct 07)

Japan Reit to test sub-prime impact

Industrial & Infrastructure Fund is first to list in eight months

(TOKYO) Industrial & Infrastructure Fund Investment Corp may find its upside potential capped by US sub-primerelated concerns after it goes public today in the first Japanese Reit listing in eight months.

The new real estate investment trust (Reit) is the first to own infrastructure assets and will serve as a touchstone for the six-year-old market, which is the world’s fifth-largest and is struggling to move up in rank.

Industrial & Infrastructure Fund will be offering 76,000 units in the fund at 480,000 yen apiece, with a greenshoe option to offer a further 4,000 units.

It will have initial assets of 66 billion yen (S$825 million), 75 per cent of which comprises distribution centres, and 25 per cent of which is accounted for by one infrastructure facility – a centre controlling building heating and airconditioning in a commercial area of Kobe, western Japan.

Most tenants at such facilities have leasing contracts of up to 20 years, compared with two years for regular offices, so the fund may see slow rent growth but steady cash flows.

‘You can’t expect rent increases, but at a time like this when the market is in a downturn trend, some investors may like stability,’ said Hiroshi Torii, a Reit analyst at Daiwa Institute of Research Ltd.

The last Reit listing was in February when Nomura Real Estate Residential Fund went public, and the market looks ready for a new offering after an eight-month break.

‘The stock will likely rise at first, and once the dust settles yields and rents will come under scrutiny,’ Mr Torii added.

The Japanese Reit market is still reeling from the US sub-prime mortgage crisis. The Tokyo Stock Exchange Reit index has dropped 27 per cent since touching a life-time high in May. For the year-to-date, it is down 3 per cent, compared with a fall of 3.3 per cent in the Topix index. Still, foreign investors, who account for about a quarter of Japan’s five trillion yen Reit market, have become net buyers since August following sharp sell-offs in June and July.

The new fund’s pricing seems to be fair, one analyst said.

Industrial & Infrastructure Fund plans to pay a dividend of 9,461 yen per unit for the six months to June 2008.

Based on the IPO price, that means a dividend yield of 3.9 per cent, higher than about 3 per cent at Japan Logistics Fund, which owns warehouses, and an average weighted yield of 3.3 per cent for all Japanese Reits.

The average yield’s spread over 10-year Japanese government bonds (JGB) has widened from less than 100 basis points in June, when interest rate-hike expectations pushed up JGB yields, to 200 basis points, so Reits offer decent premiums at the moment.

As Industrial & Infrastructure Fund cannot count on rent growth, analysts say its external growth strategy will be key.

Some are optimistic that many Japanese firms are overhauling their businesses and offloading distribution centres and other non-core assets.

‘They can grow faster than Japan Logistics because the targeted assets are not only warehouses but other industrial properties,’ said Deutsche Securities analyst Machio Honda.

But then again, Japanese property prices have already gone up and the market for quality assets has grown competitive.

Furthermore, the low returns on infrastructure assets is also a concern. The tenant at the new Reit’s Kobe site is a local gas company, but this facility has a cap rate – a rate of return on property investment – of around 4 per cent, compared with 5-6 per cent on other warehouses, dragging down overall returns.

‘The financial risks may be low, but when you look at it as a property investment, you will wonder about the returns,’ said Mototsugu Ota, chief fund manager at STB Asset Management Co.

The Reit’s asset management company, Mitsubishi Corp-UBS Realty Inc, a joint venture between trading firm Mitsubishi Corp and UBS AG, aims to buy a range of facilities from factories to airports to research and development centres.

In addition, investor risk aversion stemming from the US sub-prime crisis could limit the upside potential for the Reit market as a whole.

Goldman Sachs analyst Sachiko Okada, who gives the Reit sector a neutral rating, said investor appetite for Reits remains subdued.

‘I would think the Reit index can only go up to 2,200 at best’, which is 14 per cent above Tuesday’s close.

‘It all depends on if foreign investors’ money will flow back into the Japanese property market after the sub-prime woes,’ Ms Okada said.

 

Source: Reuters (Business Times 18 Oct 07)

Limitless to invest in Bakrie unit

(JAKARTA) Dubai may invest about 2 trillion rupiah (S$323 million) in a unit of PT Bakrieland Development, Indonesia’s biggest property developer by value, through the Gulf sheikhdom’s Dubai World investment holding.

Limitless, Dubai World’s property arm, agreed to buy a 30 per cent stake in PT Bakrie Swasakti Utama, the two companies said yesterday in a statement. Limitless hasn’t decided on the exact investment, which may be about 2 trillion rupiah, said Nuzirman Nurdin, a Bakrieland spokesman. Rebecca Rees, a Limitless spokeswoman, declined to confirm or deny the amount.

The stake will help Limitless expand in South-east Asia’s largest economy, which will grow as much as 6.8 per cent next year, according to government forecasts. The two companies will develop Bakrieland’s Rasuna Epicentrum project in central Jakarta, which Limitless can help market to overseas investors.

‘South-east Asia is one of the most exciting regions for us in our global expansion strategy,’ Ms Rees said in an interview from Dubai. ‘Jakarta’s golden triangle is a key part of that.’ Bakrieland’s shares rose 4.7 per cent to 670 rupiah, the highest close in 10 years.

The investment in Indonesia will be Limitless’s second foray into South-east Asia. Limitless said last month that it will develop a US$220 million residential and tourism project in Vietnam.

Rasuna Epicentrum will include offices and a residential complex as well as a shopping centre in Jakarta’s Kuningan area. Under current rules, foreigners can lease and use property in Indonesia for 25 years.

 

Source: Bloomberg (Business Times 18 Oct 07)

Japan Reit to test sub-prime impact

Industrial & Infrastructure Fund is first to list in eight months

(TOKYO) Industrial & Infrastructure Fund Investment Corp may find its upside potential capped by US sub-primerelated concerns after it goes public today in the first Japanese Reit listing in eight months.

The new real estate investment trust (Reit) is the first to own infrastructure assets and will serve as a touchstone for the six-year-old market, which is the world’s fifth-largest and is struggling to move up in rank.

Industrial & Infrastructure Fund will be offering 76,000 units in the fund at 480,000 yen apiece, with a greenshoe option to offer a further 4,000 units.

It will have initial assets of 66 billion yen (S$825 million), 75 per cent of which comprises distribution centres, and 25 per cent of which is accounted for by one infrastructure facility – a centre controlling building heating and airconditioning in a commercial area of Kobe, western Japan.

Most tenants at such facilities have leasing contracts of up to 20 years, compared with two years for regular offices, so the fund may see slow rent growth but steady cash flows.

‘You can’t expect rent increases, but at a time like this when the market is in a downturn trend, some investors may like stability,’ said Hiroshi Torii, a Reit analyst at Daiwa Institute of Research Ltd.

The last Reit listing was in February when Nomura Real Estate Residential Fund went public, and the market looks ready for a new offering after an eight-month break.

‘The stock will likely rise at first, and once the dust settles yields and rents will come under scrutiny,’ Mr Torii added.

The Japanese Reit market is still reeling from the US sub-prime mortgage crisis. The Tokyo Stock Exchange Reit index has dropped 27 per cent since touching a life-time high in May. For the year-to-date, it is down 3 per cent, compared with a fall of 3.3 per cent in the Topix index. Still, foreign investors, who account for about a quarter of Japan’s five trillion yen Reit market, have become net buyers since August following sharp sell-offs in June and July.

The new fund’s pricing seems to be fair, one analyst said.

Industrial & Infrastructure Fund plans to pay a dividend of 9,461 yen per unit for the six months to June 2008.

Based on the IPO price, that means a dividend yield of 3.9 per cent, higher than about 3 per cent at Japan Logistics Fund, which owns warehouses, and an average weighted yield of 3.3 per cent for all Japanese Reits.

The average yield’s spread over 10-year Japanese government bonds (JGB) has widened from less than 100 basis points in June, when interest rate-hike expectations pushed up JGB yields, to 200 basis points, so Reits offer decent premiums at the moment.

As Industrial & Infrastructure Fund cannot count on rent growth, analysts say its external growth strategy will be key.

Some are optimistic that many Japanese firms are overhauling their businesses and offloading distribution centres and other non-core assets.

‘They can grow faster than Japan Logistics because the targeted assets are not only warehouses but other industrial properties,’ said Deutsche Securities analyst Machio Honda.

But then again, Japanese property prices have already gone up and the market for quality assets has grown competitive.

Furthermore, the low returns on infrastructure assets is also a concern. The tenant at the new Reit’s Kobe site is a local gas company, but this facility has a cap rate – a rate of return on property investment – of around 4 per cent, compared with 5-6 per cent on other warehouses, dragging down overall returns.

‘The financial risks may be low, but when you look at it as a property investment, you will wonder about the returns,’ said Mototsugu Ota, chief fund manager at STB Asset Management Co.

The Reit’s asset management company, Mitsubishi Corp-UBS Realty Inc, a joint venture between trading firm Mitsubishi Corp and UBS AG, aims to buy a range of facilities from factories to airports to research and development centres.

In addition, investor risk aversion stemming from the US sub-prime crisis could limit the upside potential for the Reit market as a whole.

Goldman Sachs analyst Sachiko Okada, who gives the Reit sector a neutral rating, said investor appetite for Reits remains subdued.

‘I would think the Reit index can only go up to 2,200 at best’, which is 14 per cent above Tuesday’s close.

‘It all depends on if foreign investors’ money will flow back into the Japanese property market after the sub-prime woes,’ Ms Okada said.

 

Source: Reuters (Business Times 18 Oct 07)

Possible 2008 recession in US will hit Asia: Stephen Roach

Asia needs to take events in US more seriously, he says

IN SEOUL

THE United States could face a consumer-induced recession next year, which will also hit Asian economies, said Morgan Stanley’s chairman for Asia, Stephen Roach.

Speaking at the World Knowledge Forum in Seoul, Mr Roach – well known for his bearish views – presented what he called a ‘decidedly sub-prime outlook’ for the US economy.

The so-called sub-prime mortgage crisis is ‘the tip of a much bigger iceberg’, he said. It has started to hit the American consumer.

Mr Roach, who has long predicted a US economic slowdown, pointed out that the US consumer is facing the toughest times in 30 years, and the impact on the economy could be acute.

He noted that in the first half of this year, US consumption accounted for a record 72 per cent of GDP, or about US $9.5 trillion.

‘The US consumer is about to take a long rest,’ he said, ‘and if the US consumer goes, there’s nobody on the demand side who can fill the void.’ Even China’s total consumption is only about one-ninth that of the US, he noted.

Mr Roach suggested that the US consumer is at risk because the consumption binge of the last seven years has been underpinned, not so much by rising incomes but by a wealth effect which has, in turn, been driven by ‘an extraordinary property market’.

In short, ‘the US consumer has turned his home into an ATM machine’, he added.

But now, with the US property bubble deflating, the wealth effect, based on rising home values, ‘is over, is done, is finished’.

In fact, next year, home prices for the whole of the US could decline for the first time in history, he predicted, which would severely diminish US consumers’ ability to extract equity from their homes.

In the face of this, Mr Roach said that the risk of recession ‘is quite high’.

Although sub-prime mortgage assets account for only 14 per cent of all securitised assets, the sub-prime crisis has already spread.

Moreover, ‘the big story gets written in the real economy, not in the financial markets’, he said.

And worth noting here, he added, is that US consumption is about five times the size of US capital spending, which triggered the US recession of 2001.

Mr Roach, who is based in Hong Kong, said that Asia needs to take developments in the US more seriously.

‘What’s worrying is a complacency in Asian markets, based on a belief that Asia has ‘decoupled’ from the US,’ he pointed out.

But the decoupling thesis is fanciful, he said, noting that the US absorbs 21 per cent of China’s exports, 22.5 per cent of Japan’s and about 14 per cent of Asean’s. ‘If the US consumer goes down, Asia will feel it,’ he said.

 

Source: Business Times 18 Oct 07

Foreigners sell record US financial assets in Aug

(WASHINGTON) International investors sold a record amount of US financial assets in August as tightening access to credit threatened economic growth and spurred an exodus from American equities.

Total holdings of equities, notes and bonds fell a net US$69.3 billion after an increase of US$19.2 billion in July, the Treasury Department said on Tuesday in Washington. Including short-term securities such as Treasury bills and non-market trades such as stock swaps, foreigners sold a net US$163 billion, compared with a gain of US$94.3 billion a month earlier.

Demand for US stocks overseas declined as the deepening housing recession and credit market turmoil threatened investment and hiring, slowing the economy.

‘There is acute uncertainty in the market,’ said Gabriel De Kock, chief currency economist at Citigroup Global Markets Inc in New York, before the report. ‘There are lots of people who are reducing their risk and taking money off the table.’

Economists predicted that international investors would buy a net US$60 billion of long-term securities in August, based on the median estimate in a Bloomberg News survey.

The Treasury’s reporting on long-term securities captures international purchases of US government notes and bonds, stocks, corporate debt and securities issued by US agencies such as Fannie Mae and Freddie Mac, which buy mortgages.

International holdings of US stocks fell a net US$40.6 billion, compared with net purchases of US$21.2 billion in July. The Standard & Poor’s 500 Index rose 1.3 per cent in August, while the Dow Jones Industrial Average gained 1.1 per cent.

International demand for Treasuries decreased by US$2.6 billion, compared with a loss of US$9.4 billion the previous month. The yield on the benchmark 10-year note in August averaged 4.73 per cent, compared with 5.04 per cent in July.

Holdings of agency debt increased a net US$9.6 billion after a US$8.7 billion net gain the month before.

US investors bought a net US$34.5 billion of overseas assets in August, after buying US$5.5 billion in July.

Private investors sold a net US$10.6 billion, compared with a net US$20.6 billion in purchases a month earlier. Official purchases, including those by central banks, fell by US$24.2 billion after an increase of US$4.4 billion in July.

Foreigners sold a net US$1.2 billion of corporate bonds, compared with a US$4.5 billion increase in July.

Some economists said that the difference between the US trade gap and securities purchased by foreigners is an indicator of how easily the nation can finance its external obligations. The trade deficit in August shrank 2.4 per cent to US$57.6 billion, the smallest since January, as exports climbed to a record, the Commerce Department said on Oct 11.

The US current account deficit, a broader measure of trade that includes investment income and transfers, narrowed to US$190.8 billion in the second quarter.

 

Source: Bloomberg (Business Times 18 Oct 07)

CEO survey finds 37% chance of US recession

(WASHINGTON) Leading Wall Street chief executives predicted a 37 per cent chance of a US economic recession in the next 12 months, according to a Financial Services Forum survey released yesterday.

The forum is a policy group made up of the chief executives of 20 of the world’s largest financial institutions, including Citigroup Inc, Morgan Stanley, Goldman Sachs and MetLife.

The executives said they expect slower US economic growth over the next year due to the housing slowdown, credit market turmoil and higher energy prices, according to the survey.

In predicting a 37 per cent chance of a US recession in the coming 12 months, the executives also cut their expectations of economic growth.

The forum’s US economic growth index fell from 2.03 in April, when the last bi-annual survey was taken, to 1.27 in October. The growth survey represents sentiment on a scale ranging from -5 for strongly negative growth to 0 being no growth and 5 being robust growth.

Former Federal Reserve chairman Alan Greenspan this month put the odds of a recession at less than 50 per cent. A Reuters survey of 56 private economists earlier this week found the majority saw the chance of a US recession at somewhere between 21 per cent and 30 per cent.

The Financial Services Forum executives also indicated that the credit market problems are not finished.

On a scale of 1 to 5, with 5 being significant turmoil still to come, the chief executives on average answered 2.9, according to the survey.

The survey found the executives expect a Federal Reserve interest rate cut of 25 basis points before the end of the year.

In September, the Fed cut benchmark rates by a hefty half-percentage point to 4.75 per cent amid concerns about increasing mortgage delinquencies and financial market disarray.

In assessing the stock market, the executives predicted the Dow Jones Industrial Average (DJIA) would finish the year at 14,137, according to the survey. On Tuesday, the DJIA closed at 13,912.9.

 

Source: Reuters (Business Times 18 Oct 07)

US leading economic indicators rebound

WASHINGTON – A forward-looking gauge of US economic activity rebounded in September, pointing to ’slow but steady’ growth, the Conference Board reported on Thursday.

The business research group said its index of leading economic indicators, a gauge of activity in the coming six to nine months, increased 0.3 per cent to a reading of 137.9 after a revised fall of 0.8 per cent in August.

The reading, in line with Wall Street forecasts, was the third rise in the past six months as the index swung back and forth between gains and losses.

‘While the financial markets gyrated and the slump in housing intensified, the economy continued to perform at a slow but steady pace,’ said Conference Board economist Ken Digesting.

‘The leading index has increased in two of the past four months, suggesting that this slow pace of economic activity could continue into the early months of 2008.’

Other indexes in the survey were higher. The coincident index of current activity increased 0.2 per cent following a 0.1 per cent increase in August. The lagging index advanced 0.5 per cent following a 0.3 per cent gain in August.

 

Source: AFP (Business Times 18 Oct 07)

US homebuilders’ sentiment at record low

Bigger discounts and sweetened incentives have yet to revive demand, survey finds out

(WASHINGTON) CONFIDENCE among US homebuilders fell to a record low in October as declining prices, higher mortgage rates and loan restrictions scared off buyers.

The National Association of Home Builders/Wells Fargo index of builder sentiment fell to 18, more than economists had forecast, from 20 in September, the Washington-based association said on Tuesday. Levels lower than 50 mean most respondents view conditions as poor. The index averaged 42 last year.

Bigger discounts and sweetened incentives have yet to revive demand as buyers wait for even bigger bargains, builders said. The report underscores Federal Reserve Chairman Ben Bernanke’s warning this week that the housing slump will constrain economic growth into next year.

‘The contraction in housing is going to be deeper and more prolonged than many people thought,’ said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who correctly forecast the decline. ‘It doesn’t look like home sales are reacting to discounted prices. A lot of buyers will wait until the market hits bottom.’ The confidence index was forecast to drop to 19 this month, according to the median estimate of 38 economists surveyed by Bloomberg News. Projections ranged from 17 to 21.

Treasury Secretary Henry Paulson on Tuesday said the decline in the housing market is ‘the most significant current risk’ to the economy and called for an ‘aggressive plan’ by mortgage lenders to head off foreclosures.

The homebuilders’ group started tracking sentiment in 1985. The survey asks builders to characterise current sales as ‘good,’ ‘fair’ or ‘poor,’ and to gauge prospective buyers’ traffic. The survey also asks participants to assess the outlook for the next six months.

The group’s measure of single-family home sales fell to 18, from 20 in September. A measure of sales expectations for the next six months held at 26, while the index of buyer traffic fell to 15 from 17.

A meltdown in subprime-mortgage lending during August probably extended the real-estate slump for many more months, economists said. Reports last week highlighted housing’s dim prospects.

New-home sales may decline 24 per cent to a 10-year low of 804,000 and existing home sales will fall 11 per cent, the National Association of Realtors said last week. The report marked the 10th time this year the Chicago-based group lowered some portion of its housing and economic forecast. The median new-home price may decline 2.1 per cent to US$241,400, the group said.

Dallas-based Centex Corp, the fourth-largest US homebuilder, on Oct 12 said it will generate less cash from sales than forecast, and Moody’s Investors Service cut the credit ratings of Lennar Corp, Centex and Pulte Homes Inc to junk. Moody’s cited the rising inventory of unsold homes, tighter mortgage lending standards and falling property prices.

‘We expect the housing environment to remain challenging,’ DR Horton Inc chairman Donald Horton said in a statement on Tuesday. ‘Buyers continued to approach the home buying decision cautiously.’ Fort Worth, Texasbased DR Horton, the second-largest US homebuilder, said orders in the fiscal fourth quarter plunged to the lowest in almost six years as customers cancelled and banks restricted lending.

Cancellations are adding to already swollen supplies of unsold homes. A government report last month showed inventories rose to 8.2 months at the August sales pace, nearly double the average of the past decade.

The confidence index fell in three of four regions this month. It declined four points in the West, to 14 from 18.

The index dropped to 26 in the Northeast and to 21 in the South, both a point lower than in September. It rose to 15 from 13 in the Midwest, the first gain for the region since February.

Construction companies are delaying new projects. The Commerce Department said on Sept 19 that builders began work on the fewest homes in 12 years during August. Building permits also dropped to the lowest since 1995.

Some builders have boosted discounts to attract buyers. Red Bank, New Jersey-based Hovnanian Enterprises Inc held a three-day sale last month to reduce the glut of unsold homes. The builder said the event exceeded expectations and increased traffic at its developments nationwide.

‘Builders in the field are reporting that, while their special-sales incentives are attracting interest among consumers, many potential buyers are either holding out for even bigger deals or hesitating due to concerns’ about reports of falling home prices, Brian Catalde, president of the builders group, said in a statement.

 

Source: Bloomberg (Business Times 18 Oct 07)

US mortgage volume likely to dip to a low next year

(BOSTON) Mortgage originations will fall next year to the lowest levels since 2000, forcing job losses for at least 30,000 more home finance professionals, according to a forecast released yesterday by the Mortgage Bankers Association.

Inventories of homes for sale will remain high as tighter lending standards across the industry reduce available credit for prospective home-buyers, said Doug Duncan, the MBA’s chief economist.

Foreclosures as a result of increasing payments on adjustable-rate loans or poor underwriting will exacerbate the problem, he said.

‘We have not yet seen fully the impact of the credit shock to the US and world economies, and the severity of that impact will depend on how long it takes for the markets to return to normal functioning,’ Mr Duncan said at the annual meeting of the Mortgage Bankers Association.

Total mortgage originations will likely decline 18 per cent to US$1.89 trillion, the lowest volume of purchase and refinance loans since US$1.14 trillion in 2000, according to the forecast.

Loan volume will slide another 6 per cent in 2009, it said.

Reduced volume means less business for mortgage bankers, who have already seen their ranks thinned by 60,000 to 70,000 people in the housing downturn, Mr Duncan said.

It’s ‘tough times’, he said. ‘Continued consolidation is to be expected in the industry.’ Housing will be a drag on US gross domestic product through the second quarter of 2008, Mr Duncan said.

Existing home sales will probably fall 12 per cent this year to a 5.72 million unit pace, and another 10 per cent in 2008, the MBA predicted. It said sales will rebound in 2009 by 5 per cent.

 

Source: Reuters (Business Times 18 Oct 07)

US home building hits 14-yr low as inflation kicks up

Data seen by some as sign of continuing headwinds for the economy

(WASHINGTON) US home construction starts fell in September to their lowest level in more than 14 years, while consumer prices rose at the sharpest rate in four months, separate reports showed yesterday.

Weak housing data boosted US government bond prices and the US dollar slipped versus euro and yen as some investors saw the data as a sign of continuing headwinds for the economy.

The International Monetary Fund yesterday cut US economic growth this year and next to 1.9 per cent saying the housing correction will continue well into 2008, and warned that a sharper decline would weaken household balance sheets, hurt consumption and mean a loss of jobs.

‘Against this backdrop, risks of a recession have risen, although the Federal Reserve would be expected to respond quickly by easing monetary policy further,’ the IMF said.

The 2008 outlook compares with a July estimate of 2.8 per cent, the IMF said in its bi-annual World Economic Outlook. The fund had previously estimated US growth this year of 2 per cent. The world’s largest economy expanded 2.9 per cent in 2006.

Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson both warned this week that the worst housing slump in 16 years is the greatest risk to economic growth. The Fed lowered its benchmark interest rate by a half point to 4.75 per cent on Sept 18, the first cut in four years, to revive credit markets and stave off a recession.

‘Ongoing difficulties in the mortgage market are expected to extend the decline in residential investment, while higher energy prices, sluggish job growth and weaker house prices are likely to dampen consumption spending,’ the report said.

‘We knew housing was weak, but these numbers show another pretty big drop, so the sector remains soft overall,’ said Shaun Osborne, senior currency strategist at TS Securities in Toronto.

US home construction starts fell 10.2 per cent in September, while building permit activity, a sign of future construction plans, also dropped to the lowest level since mid-1993, a Commerce Department report yesterday showed.

It said housing starts set an annual pace of 1.191 million units in September, lower than the 1.285 million units expected by economists. It was the lowest pace for housing starts since the March 1993 rate of 1.083 million units.

‘There is no end in sight,’ said Kurt Karl, chief US economist with Swiss Re in New York. ‘The builders didn’t realise how many cancellations they are going to face. If we hit 1.0 million start range, it’s consistent with recessions in the past. And we are heading in that direction.’

Building permits fell 7.3 per cent, the sharpest decline since January 1995, to an annual rate of 1.226 million.

Economists polled by Reuters had forecast September permits to fall to a 1.298 million rate from the 1.322 million rate of August.

US consumer prices rose at the sharpest rate in four months during September, the government reported yesterday, as energy costs picked up after three months of decline.

The Labor Department said the Consumer Price Index (CPI) rose at a 0.3 per cent rate last month after declining 0.1 per cent in August. The September rise in overall CPI was slightly ahead of Wall Street economists’ forecast for a 0.2 per cent rise and was the largest since a 0.7 per cent jump in May.

So-called core prices that exclude food and energy costs were up 0.2 per cent in September, in line with economists’ expectations.

 

Source: Reuters, Bloomberg, AP (Business Times 18 Oct 07)

CDL makes first venture into Russia

Its $92m stake in Amtel unit will allow it to capitalise on acute hotel shortage in Moscow

PROPERTY developer City Developments (CDL) is using a joint venture to make its entry into Russia.

It will pay US$62.5 million (S$91.7 million) for a 50 per cent stake in Soft Proekt, a company that owns land and properties in Moscow, CDL said in a statement yesterday.

The Amtel Group, which has diverse businesses within the Commonwealth of Independent States, is the other owner of Soft Proekt.

Soft Proekt owns a nine-storey service apartment building and the Iris Congress Hotel in Moscow. There are plans for CDL’s London-listed hotel arm, Millennium & Copthorne, to manage the 200-room hotel and rebrand it as a Copthorne property.

The CDL-Amtel venture also plans to build a complex on an empty plot next to the hotel. It will house conference and business facilities, food and beverage areas, and a carpark, CDL said.

The land owned by the venture occupies about 287,550 sq ft at a site on Korovinskoye Chaussee, 15km north of Moscow’s city centre.

‘Russia is fast becoming an important East European market and Moscow is the perfect place to establish our first footprint,’ said Mr Kwek Leng Beng, CDL’s executive chairman.

‘There is strong interest in the tourism and business sectors, so it is a good time to invest in hospitality and real estate.’

An acute shortage of hotels in Moscow has led to soaring rates and ‘greater demand than supply’ for rooms, CDL said. Revenue per room for Moscow hotels is among the highest in Europe, it added.

‘CDL strongly believes that there is a ready market of hotel guests who are willing and able to spend on upscale accommodation.’

CDL is Singapore’s second-largest developer after CapitaLand. The latter also recently entered Russia, to develop logistics parks.

CDL yesterday said it is also interested in building homes in Moscow and other key Russian cities, including St Petersburg. It is likely to focus on mid-tier and luxury residences, which are already its strengths in Singapore.

The joint venture is not the first time CDL and Amtel have been linked. Amtel’s founder and chairman, Dr Sudhir Gupta, bought three floors and a penthouse at CDL’s Sail @ Marina Bay in 2005.

Dr Gupta, an Indian-born businessman, has also bought other luxury homes in Singapore, including a Marina Bay Residences penthouse and a Binjai Park bungalow.

He was ranked by Forbes magazine as Singapore’s 13th-richest man last year, but he dropped off the list this year.

 

Source: The Straits Times 18 Oct 07

Two collective sale sites eyeing high selling prices

THE collective sale frenzy may have cooled somewhat but a number of new sites have hit the market since new rules on these sales took effect earlier this month.

The latest are two sites in posh parts of town which were put up for sale yesterday – both are aiming for hefty sale prices.

One of them, Villa delle Rose, located off Holland Road, has an indicative price of $700 million.

Owners of the other site, Elizabeth Towers, in the more central location of Mount Elizabeth, are hoping for a price of $673 million.

In the past two weeks, a string of other collective sale sites have been put on the market, including Westwood Apartments on Orchard Boulevard, The Estoril on Holland Road and Royalville off Sixth Avenue.

Some of the latest sites for sale, such as Elizabeth Towers, still come under the old collective sale rules as the required minimum owner consent was obtained before Oct 4.

Property consultants have said that collective sale activity is likely to continue at a somewhat slower pace than the frenzy of sales seen earlier this year and last year.

They say there are several reasons, including the fact that the new rules will make the process more transparent and, as a result, probably more cumbersome.

Still, owners continue attempting to sell their estates en bloc.

Villa delle Rose’s guide price works out to $1,758 per sq ft of potential gross floor area. A development charge of about $31 million is payable.

The estimated breakdown is between $2,200 per sq ft (psf) and $2,300 psf.

Developers can expect to build 208 units, assuming an average size of  2,000 sq ft each, said CB Richard Ellis, which is marketing the site.

The 104-unit Villa delle Rose sits on 297,132 sq ft of land. Its sale tender closes on Nov 16.

In the Orchard area, Elizabeth Towers, a freehold 54,318 sq ft site, is up for sale at $2,666 psf of potential gross floor area. No development charge is payable.

The site can be built up to a plot ratio of 4.647, which would give it a gross floor area of 252,416 sq ft, said Newman & Goh, which is marketing the site.

Newman & Goh’s head of investment sales, Mr Jeffrey Goh, said the site can be redeveloped into 101 apartments with an average size of 2,500 sq ft each and could fetch well above $4,000 psf. This is because nearby developments such as Scotts Square and Hilltops are selling well at $4,200 psf and above, he said.

The tender for Elizabeth Towers closes on Nov 21.

 

Source: The Straits Times 18 Oct 07

URA launches tender for Boon Lay condo site

A PRIME residential site on Boon Lay Way has been released for sale, just days after news emerged that a nearby condominium unit had fetched a record price of $1,080 per sq ft (psf) last month.

Property pundits expect keen interest in the 2.2ha land parcel next to Lakeside MRT station. The Jurong West HDB estate and Jurong Point shopping mall are nearby.

The Urban Redevelopment Authority (URA) launched the 99-year leasehold site yesterday by public tender, stipulating that it has a maximum permissible gross floor area of 77,003 sq m.

CB Richard Ellis (CBRE) research executive director Li Hiaw Ho said the site is expected to attract significant attention. He noted: ‘Given recent signs of recovery in the suburban market, we expect developers to be keen to bid for this site to beef up their land bank. Demand is likely to be from HDB upgraders and people working in western Singapore.’

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, agreed the site would be popular. ‘It’s definitely quite attractive as there are quite a lot of things happening in the west. For example, the Canadian International School is going to move nearby soon.’

URA said this week that a unit in Far East Organization’s The Lakeshore, near the new site, had set a new benchmark of $1,080 psf last month – surprising most analysts as it had been on the market for more than two years.

CBRE’s Mr Li said the Lakeshore site had been purchased by the developer at $197 psf per plot ratio (psf ppr) in August 2002. He noted: ‘The subject site will be able to fetch bids around $300 psf ppr, which translates into a selling price of $700 to $750 psf for the new project on-site.’

Knight Frank’s director of consultancy and research, Mr Nicholas Mak, said about 660 to 700 units could be built on the site. ‘This site would be attractive to major developers such as Far East Organization, Frasers Centrepoint and other listed developers. The number of bids could range from four to eight.’

URA said that a tender period of about eight weeks will be allowed for the site. The tender will close at noon on Dec 12, and selection of the successful tenderer will be based on the tendered land price only.

 

Source: The Straits Times 18 Oct 07

Foreign investors dump US assets at record rate

Sales hit high of $102b in August, when credit woes were most intense

NEW YORK – FOREIGN investors dumped United States stocks, bonds and notes by a record amount as the credit squeeze intensified, according to the latest US Treasury figures.

Until now, US policymakers have appeared relatively relaxed about the US dollar’s decline, since there has been little sign to date that this has been triggered by a broader global aversion to US assets.

However, that attitude could change if signs emerge in the coming months that non-US investors are becoming more nervous about holding dollar assets because of the recent credit squeeze.

‘The bad news is that the data plainly shows how vulnerable the dollar is to a continuation of the credit crunchrisk averse environment,’ said Mr Alan Ruskin, the chief international strategist at RBS Greenwich Capital.

He added: ‘There is no way to get away from the lack of corporate bond inflows, the foreign selling of US equities and the countervailing strong US purchases of foreign equities and bonds.’

The Treasury said net sales of US market assets – including bonds, notes and equities – were US$69.3 billion (S $101.7 billion) in August, exceeding the previous record decline of US$21.2 billion in March 1990. July had a revised inflow of US$19.5 billion.

Some analysts said on Tuesday that the August data might turn out to be an aberration, since it occurred during the most intense period of this summer’s credit squeeze – when investors were arguably most uneasy about the market outlook.

Consequently, some said they hoped that the outflows would have been reversed last month.

‘There was clear panic- selling of equities in August, but given the market’s subsequent rebound, those flows should have reversed,’ said Mr Dominic Konstam, the head of interest rate strategy at Credit Suisse.

‘If foreign investors return to buying equities, it is not obvious that there will be a capital flight from the US that will lead to a dollar crisis.’

However, others suggested that the scale of the swing in August indicated that more fundamental pressures were now bubbling – not least because the dollar continued to decline last month.

The greenback has declined by 7 per cent this year, to a record low against the euro, as the Federal Reserve cut interest rates last month to support the housing market, making holding US assets less attractive.

A breakdown of the data showed that one key reason for the outflows was that there were net foreign sales of US equities of US$40.6 billion in August, which more than reversed the purchase of US$21.2 billion in July.

Reflecting the pressure on US markets and the dollar, US residents purchased a net US$34.5 billion of long term foreign securities.

In the debt world, there were net sales by foreign investors of US corporate bonds – but overall holdings of US government debt remained relatively balanced.

Source: FINANCIAL TIMES (The Straits Times 18 Oct 07)

Home starts dive to 14-year low; consumer prices up

WASHINGTON – HOME construction starts in the United States fell last month to their lowest level in more than 14 years.

Meanwhile, consumer prices in the US rose at the sharpest rate in four months, separate reports showed yesterday.

‘We knew housing was weak, but these numbers show another pretty big drop, so the sector remains soft overall,’ said TS Securities senior currency strategist Shaun Osborne in Toronto.

Yesterday, US stocks rose in early trade. The Dow Jones Industrial Average was up 61.29 points, or 0.44 per cent, at 13,974.23. The Nasdaq Composite Index climbed 31.03 points, or 1.12 per cent, to 2,794.94.

US home construction starts fell 10.2 per cent last month, while building permit activity, a sign of future construction plans, also dropped to the lowest level since mid-1993, a US Commerce Department report showed.

It said housing starts set an annual pace of 1.191 million units last month, lower than the 1.285 million units expected by economists. It was the slowest pace for housing starts since March 1993.

‘There is no end in sight,’ said Mr Kurt Karl, the chief US economist with Swiss Re. ‘The builders didn’t realise how many cancellations they are going to face. If we hit the one million start range, it’s consistent with recessions in the past. And we are heading in that direction.’

US consumer prices rose at the sharpest rate in four months as energy costs picked up after three months of decline.

The US Labour Department said the Consumer Price Index, the most broadly used gauge of inflation, rose at a 0.3 per cent rate last month after declining 0.1 per cent in August.

The September rise in the overall index was slightly ahead of economists’ forecast for a 0.2 per cent rise and was the largest since a 0.7 per cent jump in May.

Source: REUTERS (The Straits Times 18 Oct 07)