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DBS Bank (HK) moves to Quarry Bay; Morgan Stanley, Kowloon
IN HONG KONG
BLUECHIP tenants are retreating from Hong Kong’s central business district as rents climb beyond reach.
The latest move away from the high-rent Central area is by lender DBS Bank (Hong Kong), which has just leased more than 220,000 square feet of office space in the Quarry Bay district, a 30-minute subway ride from Central.
The bank signed a 10-year lease for 11 floors at One Island East, a Grade A office block developed by Swire Properties. Relocation from DBS’s existing Central and Wanchai locations will be in phases, to be completed by the end of 2009.
Investment bank Morgan Stanley recently turned heads with its decision to relocate from Exchange Square in Central to the International Commerce Centre across the harbour in Kowloon.
It is leasing 10 floors for its Asia-Pacific headquarters, double the existing 150,000 sq ft it occupies in Central.
The decisions to move come as Central continues to command exorbitant rents, due to hot demand and tight supply. Rents in the area have gone up by more than four times since 2003.
The iconic International Finance Centre 2 building, which dominates the city’s skyline, is now fetching a record HK $160 (S$30) per sq ft (psf). When the building opened in 2003, rents were just HK$20 psf.
The shift to cheaper office space also reflects a demand for more space as many companies have benefited from a capital markets boom and seek to expand.
Simon Lo Wing-fai, director of research and consultancy for Colliers International, estimated that rental growth in Central will be up to 20 per cent in 2007.
But he expected the monthly figure to start falling if companies move out in search of cheaper rents.
‘Rental growth is tapering off quite substantially, especially after Morgan Stanley decided to move,’ he said.
‘Current rental growth is about one per cent a month. Next year, there might be a downwards adjustment.’
With no new supply coming online in Central, numerous building owners are preparing to renovate to expand their space and lure new tenants.
According to property firm Savills, Grade A office buildings in Central have risen for the past 15 consecutive quarters, surging 6 per cent in the second quarter of 2007.
However, new supply such as One Island East in Quarry Bay and some key buildings in Kowloon will continue to put pressure on prices, Savills reckoned. The One Island East project takes up a massive 1.5 million sq ft and has 70 storeys.
New developments in Kowloon, such as One Kowloon and Enterprise Square, are beginning to attract a critical mass of tenants. Both have hit an occupancy level of 70 per cent.
Meanwhile, other financial institutions are moving to the periphery of Central. China Construction Bank, for example, has taken up around 17,000 sq ft of Two Pacific Place in the nearby Admiralty district, according to Savills.
Sun Hung Kai Securities has likewise leased space in Admiralty Grade A buildings.
The overall office space vacancy rate in Hong Kong remains low, at just 5.3 per cent in July.
Source: Business Times 22 Oct 07
Steps include tighter IMF scrutiny of state investment funds
(WASHINGTON) Global finance chiefs on Saturday called for a more broad-based effort to calm financial markets, including tighter scrutiny by the International Monetary Fund and other institutions of increasingly powerful state-owned investment funds.
This year’s fall meetings of the International Monetary Fund and World Bank come amid a slowing pace of global growth and heightened risk from recent turbulence in world credit markets and soaring oil prices.
That has particularly affected Group of Seven rich nations whose finance ministers and central bankers met on Friday and concluded that their growth will suffer because of ongoing turmoil in markets.
By contrast, developing countries that are well represented among IMF members have been emboldened at these meetings by the fact that their growth rates are thriving and have used the opportunity to flex their economic muscle.
‘The irony of this situation: countries that were references of good governance, of standards and codes for the financial system, these are the very countries that are facing serious problems of financial fragility putting at risk the prosperity of the world economy,’ said Brazilian Finance Minister Guido Mantega.
After years of hearing from developed countries about the importance of prudent economic policies, developing nations felt they clearly had the upper hand, with China and India leading world growth and rich countries’ economies slowing.
Meanwhile, developed countries called on the IMF to increase its monitoring of growing state-backed wealth funds that hold surplus reserves mainly from oil exporters and China.
Those funds are investing amounts which cause some nervousness among rich members of the Group of Seven industrial nations, which want to ensure the investments are for profit-making reasons only and are not politically motivated.
US Treasury Secretary Henry Paulson said he considered the IMF ‘uniquely positioned’ to identify model behaviour for these Sovereign Wealth Funds.
His point man for international matters, Under Secretary David McCormick, told Reuters there was general agreement that some code of principles was needed to ensure the funds did not rouse such resentment that countries put up barriers to stop the funds from investing.
Belgian Finance Minister Didier Reynders said it was too early to know how the financial sector difficulties would affect economies in the end, saying central banks should stand ready to lower interest rates, or to postpone rate increases, without damaging inflation.
Developing countries also took the opportunity to push for a greater say in the voting power of institutions like the IMF.
Brazil warned bluntly that under-represented countries were likely to ‘go their own way’ unless they get a greater stake. ‘Developing countries, or many among them, would go their own way, were the perception to arise that reform will not happen or that we will be left with a purely cosmetic form,’ Brazil’s Mr Mantega said.
Some countries saw signs of progress in negotiations among IMF members on how to increase the voting powers of the developing world but others were far from optimistic.
German Finance Minister Peer Steinbrueck said no progress had been made by countries trying to agree on a formula that would rebalance the voting system to reflect the rise of countries like China or India.
Intense political sensitivities are involved in trying to divvy up voting power more frequently. Some old powers like Britain and France potentially could see China move past them in voting status if an intensely negotiated formula truly acknowledges China’s fast-growing economic might.
Also, developing countries insist any overhaul in votes must be large enough to transfer significant additional power to them and to make clear they are not simply being given a pat on the head.
Source: Reuters (Business Times 22 Oct 07)
Inflation is becoming a thornier problem than volatile stock markets and rising oil prices
CONSIDERING Wall Street’s massive 2.64 per cent sell-off last Friday, Asian and European markets can count on a torrid week ahead.
Before the US’s humongous sub-prime issues could be tackled, crude oil futures breaching US$90 a barrel – with talk of it soaring to over US$100 by year-end – had stoked inflationary and earnings fears, and worries of a general slowdown in the economy.
Despite local firms continuing to show better corporate earnings growth and little, if any, exposure to the US’s subprime problems, the impact on the Malaysian market appears inevitable.
External volatility is beyond one’s control. Where the stock market is concerned, any sharp tumbles would be unfortunate given that Malaysia was very late, years behind other markets in fact, getting onto the bull. Those who remember the days what the ringgit was worth often observe that in ringgit terms, the benchmark KL Composite Index (KLCI) is still nowhere near its peak of the early 1990s. If one considers the KLCI’s 1994 high of 1,332 was achieved when the local unit was about RM2.50 to the US dollar, its present day level of 1,376 at RM3.36 to the US dollar isn’t too much to shout about.
Nonetheless, compared to its moribund years after currency controls were imposed in 1998, there is much to be thankful for.
On the economic front, hefty expansionary budgets will likely result in the projected 5-6 per cent growth over the next two years, albeit slightly weaker if global growth slows.
The greater concern is inflation. Despite government assertions that inflation is a mere 2-plus per cent – many items in the basket of goods by which inflation is measured is price controlled – the average Joe Blow is far from convinced.
Many expenses such as tolled roads which are an essential feature of city life, particularly in the Klang Valley, are not included in the basket. Even attempts to curb the cost of items in the basket are beginning to backfire. In the past years, commodity prices have soared on the back of expanding global demand.
Malaysian builders have screamed about the shortage of steel bars and billets, fingering steel millers who, they claim, prefer to export them if builders do not pay above ceiling prices.
Because of the expansive drought in Australia, the price of wheat flour has also shot up by an enormous 80 per cent since April. If the government does not give flour millers a price increase, millers warn that there is little incentive to import the wheat, which is a main ingredient in bread, noodles and Indian rotis.
The price increase in innocuous items such as corrugated cartons has been surprising. In January, the Malaysian Corrugated Carton Manufacturers’ Association (MCCMA) raised prices of corrugated carton and its related products by 15 per cent. Last month, it announced another 15 per cent hike, adding that paper costs had spiked, as had production costs, ‘due to the rise in prices of fuel (up 70 per cent), electricity (13 per cent), transportation (30 per cent) and labour cost (5 per cent)’. MCCMA has warned of another hike as paper prices are likely to spiral further in the next six months.
On a more ‘essential’ front, Malaysia’s public transport operators have submitted proposals to the government for fee hikes of 100-600 per cent next year, saying that they can no longer bear the burden of higher operating costs.
Toll increases are scheduled for a number of operators next year.
The government gave the country’s one million-odd civil service a pay rise of between 7.5 and 42 per cent in July – the first since 1992 – but with inflationary forces so unrelenting, it will be interesting to see how Malaysia deals with a problem that, falling markets aside, is a thornier problem and one that is unlikely to go away anytime soon.
Source: Business Times 22 Oct 07
Last week’s 4% slide due more to recent sharp run-up than to fear of another crisis
IN NEW YORK
AS STOCKS plummeted on earnings outlooks and renewed credit worries last Friday on the 20th anniversary of Black Monday, Wall Street forecasters couldn’t help but draw parallels to that record-setting dire day of October 19, 1987, when the Dow Jones Industrial Average crashed by more than 500 points, and more impressively, a whopping 23 per cent, in a single day.
But in truth, last Friday’s sell-off, which caused the bluechip index to give up on a percentage basis only a tenth as much as investors lost in the infamous Black Monday crash 20 years ago, was more reminiscent of much more recent history, namely the early weeks of last August, when the unknowns of the ramifications of the burgeoning global credit crisis were turning investors’ euphoria over new record highs in the US equity markets into fear, uncertainty and the risk aversion that goes with it.
‘It’s easy to invoke Black Monday on its 20th anniversary as we’re experiencing a sell-off, but there really is no parallel with today,’ observed Hugh Johnson, the chief investment officer at Johnson Illington Advisors.
‘Back then, the markets had been churning their way down for a while, and you could sense the vulnerability as fear on the trading floor built higher and higher over the course of a few weeks. But in the case now, you have to remember that, just last week, investors – and Wall Street economists – were talking about having a Goldilocks economy, a soft landing,’ he said.
Federal Reserve chairman Ben Bernanke started to burst that bubble last Monday when he said that the drag from housing was worsening, and would hit growth in the fourth quarter and in 2008, and his warning was soon echoed by corporate profit outlooks.
Leading companies such as Caterpillar, 3M and Schlumberger beat third quarter estimates, but offered cautious earnings forecasts for the fourth quarter, leading to renewed concerns over the spread of the credit crisis beyond the financial sector.
But while the previous weeks’ euphoria seems to have clearly been out of touch with the realities of what remains a stock market still vulnerable to the unknowns surrounding the impact of last summer’s credit crisis, to say nothing of skyrocketing oil prices that have risen to potentially crippling levels and have oil analysts speculating on when the price of a barrel of light sweet crude might hit triple digits, many other of the market’s fundamentals appear far too solid to invoke the spectre of anything resembling a Black Monday-like panic.
‘Last week’s downturn was more a function of the sharp run-up in share prices over the past several weeks and over stretched positive expectations than fear that we’re about to get into crisis mode again,’ said Tobias Levkovich, Citibank Smith Barney’s chief investment strategist.
‘Various measures of credit market distress have eased lately, including increased functionality in commercial paper and even high-yield debt markets,’ he noted. And unlike the last period of severe turmoil in credit markets in the fall of 1998, commodity prices are rising and economic activity abroad is strong, Smith Barney chief economist Steven Weiting wrote last week.
So, while Wall Street traders were quick to dismiss the potential for a crash of epic proportion, investors’ newfound caution and sober outlook is likely to result in more selling and bearish risk aversion, with the potential for a 10 per cent sell-off such as the market experienced in the month between July 16 and Aug 16.
‘I think everyone was just a little too eager to say that we’d put the liquidity crisis behind us and the worst was over,’ said Richard Maclemore, a money manager at Goodman Securities. ‘Then, when we get a few of our major companies saying that it’s not just going to hit the third quarter earnings, but that the fourth quarter isn’t going to look too good either, you get a quick ‘uh-oh’ reaction, which is what we saw on Friday,’ he said. Uh-oh indeed.
The Dow Jones Industrial Average sank 366.94 points, or 2.64 per cent, to 13,522.02 on Friday. The S&P 500 was off 39.45 points, or 2.56 per cent , at 1,500.63, and the Nasdaq Composite plunged 74.15 points, or 2.65 per cent, to 2,725.16. Friday’s firesale brought an abrupt end to the major averages’ five-week winning streak.
For the week, the Dow and the S&P 500 each lost 4 per cent, and the Nasdaq gave back 2.9 per cent. It was the worst downturn for the indices in two months. The only things that rose last week were negative indicators. The CBOE Volatility Index, often called the fear index, added 24 per cent on Friday to a reading of 23, its highest in a month. Oil surged briefly to a record US$90 a barrel and gained 6 per cent for the week, while two-month Treasury bills rallied the most since Sept 11, 2001.
This shows that investors have re-embarked on a flight-to- quality trade. The week’s wave of earnings reports could offer some relief, as several major names from outside the disastrous financial sector announce their third-quarter results and offer outlooks for coming quarters.
‘It would set a lot of minds at ease if some of these companies say that next quarter isn’t looking too bad,’ said Mr Johnson. As many as 163 more S&P 500 companies are scheduled to report this week, including six Dow components.
Thus far, with 121 S&P 500 companies having reported over the past week, growth expectations for the thirdquarter earnings season have sunk to negative 0.1 per cent, compared with expectations for earnings to grow 3.6 per cent on Oct 1, according to Thomson Financial.
Source: Business Times 22 Oct 07
PROPERTY developer GuocoLand has bought Toho Garden, a condominium near Serangoon Gardens, for $62.5 million through a collective sale.
The acquisition price works out to $594 per sq ft per plot ratio, including a development charge of $9.8 million.
Toho Garden is located on Yio Chu Kang Road, near the junction of Ang Mo Kio Avenue 3 and Hougang Avenue 2.
It is the smallest of five major residential land purchases made in Singapore by GuocoLand in the past two years.
The purchase price comes below its March acquisition of Palm Beach Garden in the East Coast area for $75 million.
The company’s other land purchases are:
The former Casa Rosita site on Bukit Timah Road, where the firm is building Goodwood Residence;
Sophia Court, near the Dhoby Ghaut MRT Station; and
Leedon Heights, off Holland Road.
All five plots are freehold sites and bring GuocoLand’s land bank in Singapore to just below two million sq ft.
They give GuocoLand ‘a strong and interesting pipeline of projects on freehold land’, said GuocoLand Singapore managing director Trina Loh.
Toho Garden sits on a 86,900 sq ft plot and has a plot ratio of 1.4, giving it a gross floor area of 121,600 sq ft.
GuocoLand plans to build a mid-range five-storey condominium comprising about 100 apartments on the site.
The plot is located in an area of mostly landed properties and is near the Central and Seletar expressways.
GuocoLand’s luxury condominium, Goodwood Residence – which has not been launched yet – recently won Singapore’s highest accolade for green buildings.
The developer clinched the Building and Construction Authority’s Green Mark Platinum Award for its high environmental standards.
Shares of GuocoLand ended unchanged at $5.55 last Friday.
Source: The Straits Times 22 Oct 07
CAPITALAND has secured a piece of prime commercial land in Hangzhou, China for $202.8 million.
The 40,355 sq m site in Qianjiang New Town was acquired through a government land tender.
The price tag works out to about $715 per sq m per plot ratio.
CapitaLand plans to build a mixed development on the site under the Raffles City brand – its fourth in China.
To be called Raffles City Hangzhou, the development will comprise a Grade A office tower, a retail mall, a fivestar hotel and residences. It is expected to be completed by 2011.
The site is located at the heart of the new central business district in Hangzhou and will be linked to a proposed subway interchange to be completed in 2010.
With the relocation of the municipal government office to Qianjiang New Town, the district housing Raffles City Hangzhou is expected to be transformed into a bustling commercial area with quality offices, high-end residences and trendy retail shops, as well as dining and entertainment hubs.
CapitaLand chief executive Liew Mun Leong said the group is confident that Raffles City Hangzhou will become a new landmark in the city.
CapitaLand’s three other Raffles City projects in China are in Beijing, Shanghai and Chengdu.
Source: The Straits Times 22 Oct 07
About 30 new condos may be launched by early next year, at least half of them in Orchard, Bukit Timah and Holland
SALES of new homes took a dive last month, but they might pick up soon as developers prepare to launch a string of projects over the next few months.
Almost 30 new condominiums could come on the market by early next year, said property consultancy Knight Frank.
‘Market sentiments are gradually picking up following the United States sub-prime crisis, and launches could also increase in tandem,’ said Mr Nicholas Mak, Knight Frank’s director of research and consultancy.
He estimates that more than half of the launches will be in the prime districts of 9, 10 and 11 – Orchard, Holland, Bukit Timah and Newton – as well as in luxury enclave Sentosa Cove.
If all these projects are launched as planned, about 2,000 high-end homes could flood the market over the next six months, added Mr Mak. Broadly speaking, these are properties that will cost at least $2,000 per sq ft (psf), with a three-bedroom unit going for at least $2.5 million, he said.
‘We are definitely counting on foreigners to come in and help absorb these homes, so we don’t end up with an oversupply problem in the top tier,’ he said.
Residential areas likely to be in the spotlight include Bukit Timah, Thomson, Holland Village and East Coast.
This is because prices in these areas have not moved as much as those in areas such as River Valley, Newton and Orchard.
Colliers International also predicted benchmark prices for two upcoming projects: the Ritz-Carlton Residences in Cairnhill and the development on the former Asia Hotel site. Prices at these projects could hit $4,500 psf on average, said Mr Vincent Chong, Colliers’ residential sales director.
Mr Mak believes there will be few launches in the closely-watched mass-market segment until the middle of next year because developers started acquiring sites only recently.
‘Most launches will come in nine to 18 months’ time, and they are likely to be priced on the high side at $800 to $900 psf,’ he said. ‘Until then, most activity will be in the resale market, where a lack of new launches could push prices up significantly.’
Source: The Sunday Times 21 Oct 07
NEW YORK – THE Dow Jones Industrial Average dropped more than 360 points on the 20th anniversary of the Black Monday crash, as lacklustre corporate earnings, renewed credit concerns and rising oil prices spooked investors.
The major stock indexes on Friday turned in their worst week since July after construction equipment giant Caterpillar Inc soured investors’ mood with a discouraging assessment of the United States economy.
Investor sentiment took another hit when Standard & Poor’s downgraded a batch of residential mortgagebacked securities, adding to unease about credit quality. The reduction followed a similar move earlier in the week affecting more than 1,400 classes.
Oil prices also appeared on some investors’ list of worries, after briefly moving above the psychological barrier of US$90 (S$132) per barrel for the first time.
The Dow Jones Industrial Average plummeted 4.05 per cent to 13,522.02, retreating from its Oct 9 high of above 14,000 points.
The broad market Standard & Poor’s 500 index sank 3.92 per cent to 1,500.63 and the tech-heavy Nasdaq tumbled 2.87 per cent to 2,725.16.
Still, Friday’s pullback paled in comparison to what investors had to contend with 20 years ago on Oct 19, 1987 – Black Monday – when the Dow plunged 23 per cent.
A decline of similar proportion today would mean a drop of some 3,100 points.
Friday’s decline is the third-biggest point and percentage drop this year and the ninth- biggest point drop in the Dow since Black Monday. But there is a ray of hope, as many on Wall Street expect the Federal Reserve to respond with another rate cut this month.
Bond prices rallied in the past week as investors flocked to safety. The yield on the benchmark 10-year Treasury note, which moves inversely to the price, fell to 4.4 per cent from 4.5 per cent late on Thursday.
Source: AP, AFP (The Straits Times 21 Oct 07)
THE 6.5 million population used as a guide for planning purposes in Singapore is not within reach in the next 50 years, an academic said yesterday. Saw Swee Hock of the Institute of Southeast Asian Studies said 5.5 million is a more achievable target.
Prof Saw – the second Singaporean after former deputy prime minister Goh Keng Swee to be elected an honorary fellow of the London School of Economics – was speaking at the soft launch of the second edition of his book The Population of Singapore.
His comments are consistent with those of Minister Mentor Lee Kuan Yew, who indicated in August that Singapore’s population is unlikely to touch 6.5 million.
Prof Saw said yesterday that for the population to hit 6.5 million by 2050, Singapore needs an influx of 1.85 million newcomers after 2015, assuming the non-resident population rises from 0.8 million in 2005 to 1.01 million in 2015.
The proportion of newcomers arriving after 2015 would constitute 40.5 per cent of the total population in 2050 – the highest ever.
But for the population to hit 5.5 million in 2050, the number of newcomers entering Singapore after 2015 would be 1.63 million and they would make up a smaller 29.6 per cent of the population.
‘The 5.5 million target is not only more achievable viewed in terms of the type of newcomers we want, but also more conducive to the maintenance of a harmonious multiracial society,’ Prof Saw says in his book.
The figures were generated assuming the total fertility rate stays constant at 1.31, which will result in the resident population growing from 3.55 million in 2005 to a peak of 3.64 million in 2015, before shrinking steadily.
The challenge, said Prof Saw, is to get newcomers to stay to make up for the declining resident population.
Alongside a contracting resident population, the resident labour force is estimated to decline from 1.74 million in 2005 to 1.15 million in 2050.
Workers aged 60 and over are projected to make up 13.6 per cent of the workforce in 2050, up from 4.4 per cent in 2005. And workers aged 30-39 are expected to account only for 19.3 per cent of the work force in 2050, down from 28.7 per cent in 2005.
Source: Business Times 20 Oct 07
IT’S usually possible to pinpoint a theme or two that drove prices throughout a week just past. Sometimes it’s a play on the banks, other times it’s property, shipping or China. This week though, is remarkable for the fact that there really is no single unifying theme that could be readily identified – except for heightened volatility of course.
In almost all five trading days, the Straits Times Index underwent wild swings, opening sharply lower or higher, depending on Wall Street’s overnight close, then reversing direction quickly afterward.
One hundred point moves were thus common, depending on how Hong Kong, China and/or the US futures market performed.
What this meant was that structured warrants were the favoured investment vehicles since these instruments thrive on volatility. In play were mainly those written on the Hang Seng and STI, while China shipyard Cosco Corp’s push to new highs ensured its warrants were also in heavy demand.
On Wednesday, when the STI underwent its wildest ride of the week, traversing 130 points from low to high, $312 million was traded in the warrant segment, roughly three times the recent average.
Increased volatility also meant increased nervousness, a situation not helped by the fact that yesterday was the 20th anniversary of the crash of Oct 19, 1987.
Put a nervous market that had reached giddy new heights together with the superstition associated with that Black Monday date, then throw in a 75-point drop in the December futures on the Dow Jones Industrial Average, and perhaps yesterday’s 61.71-point drop in the STI to 3,747.98 comes as no surprise.
For the week, the index lost 110 points or 2.9 per cent.
The biggest index losers in yesterday’s sell-off were the Singapore Exchange, the banks and SingTel.
SGX’s 80-cent loss at $14.90 cut 12 points off the index while the banks’ loss accounted for a total of 23 points.
It wasn’t just the index that experienced a volatility spike. In the second line, Japanese-owned finance company Uni-Asia Finance exhibited violent moves to the downside early in the week when broking firms imposed trading restrictions on its shares, in most cases limiting the quantity of Uni-Asia that could be bought and/or requiring cash payment upfront for purchases.
After having ended last Friday at $2.50 (it touched an intra-day high of $2.79 that day) Uni-Asia’s shares yesterday ended at $1.59, a loss of 36 per cent for the week. It listed in August at an offer price of 55 cents and the bulk of its rise since then came earlier this month.
Other second liners that saw activity to varying degrees were mainly China-based, the outcome of a belief that China stocks listed here – dubbed S-shares – should command the same lofty valuations as those listed on the mainland.
Low-priced issues have always been popular in the local market and this week was no different. Ei-Nets and Memstar have been in play after the entry of Jade Technologies’ boss as a strategic shareholder, while construction issues such as Lian Beng and Yongnam have been the subject of various broking upgrades because of the obvious property boom angle.
Source: Business Times 20 Oct 07
QUEK Leng Chan’s Singapore-listed property arm GuocoLand has posted a group net profit of $27.7 million for the first quarter ended Sept 30, 2007, up from $8.1 million for the corresponding year-ago period, as revenue more than doubled from $88.2 million to $191 million.
The improved showing was due mainly to higher contribution from the group’s property development projects in China, especially from West End Point condo in Beijing.
GuocoLand’s bottom line also received a fillip from other income, which jumped from $9.2 million to $15.8 million, mainly due to higher net foreign exchange gains arising from the revaluation of US dollar bank loans.
However, finance costs rose by 74 per cent to $12.6 million due to an increase in bank loans and the convertible bonds.
Cash and cash equivalents increased from $1.09 billion as at June 30 to $1.53 billion as at Sept 30, largely because of net proceeds of about $555 million received from a renounceable 1-for-3 rights issue at $2.50 per share in July this year.
GuocoLand also gave an update of its various projects. In Singapore, it achieved sales of 86 per cent for Le Crescendo in Paya Lebar and 91 per cent for The View @ Meyer as at Oct 18. The group has also sold 97 per cent of the 337 units launched in The Quartz condo in Buangkok.
In Beijing, the 810-unit West End Point is 96 per cent sold.
Piling for the group’s development sites situated in Nanjing’s Qixia District (Ascot Park Phase 1) and Shanghai’s Putuo District (Changfeng Phase 1) has been completed. Construction has started for Changfeng Phase 1. Resettlement for the development site in Nanjing’s Xuanwu District (Hillview Regency) is largely completed.
The group’s 65 per cent-owned subsidiary GuocoLand (Malaysia) Berhad has eight ongoing mixed residential development projects in the Klang Valley. Earthwork and piling for an integrated commercial development project in Damansara Heights is in progress.
In Vietnam, the master plan for the group’s integrated development project next to Vietnam Singapore Industrial Park near Ho Chi Minh City has been submitted to the authorities.
‘Given the robust economies in the countries in which the group operates, namely, Singapore, China, Malaysia and Vietnam, the group believes that demand for quality residential properties and well-located commercial properties in these countries will remain sustainable,’ GuocoLand said.
In Singapore, GuocoLand is expected to launch the 210-unit Goodwood Residence in the prime Bukit Timah area in the next few months.
GuocoLand’s earnings per share rose to 3.62 cents for Q1 ended September 2007, from 1.32 cents for the year-ago period. Net asset value per share stood at $2.37 as at Sept 30, seven cents higher than in June 30.
On the stock market yesterday, GuocoLand closed unchanged at $5.55.
Source: Business Times 20 Oct 07
INDONESIA’S Lippo Group will be raising up to $587.4 million with the planned Singapore listing of a real estate investment trust (Reit) based on its retail properties in Indonesia.
The Lippo-Mapletree Indonesia Retail Trust (LMIR) will offer 645.5 million units at 78 to 91 cents a unit, according to the trust’s preliminary prospectus which was lodged with the Monetary Authority of Singapore yesterday.
Separate from the offering, Lippo will subscribe for 287.7 million units in the trust while Singapore’s Mapletree Investments will subscribe for 127.3 million units. This means that Lippo and Mapletree will hold stakes of at least 27.1 per cent and 12 per cent in the trust once it is listed.
Of the 645.5 million units that will be part of the share offering, 625.5 million units will be placed out to institutional and other investors, while 20 million units will be offered to the public.
The trust will be the first Reit in Singapore to provide exposure to Indonesia’s growing retail sector.
Two other SGX-listed Reits have significant exposure to overseas retail markets – CapitaRetail China Trust, which owns retail properties in China, and Fortune Real Estate Investment Trust, which holds retail properties in Hong Kong.
LMIR’s initial property portfolio will comprise seven retail mall properties and seven retail spaces located within other retail malls, all of which are located in Indonesia.
Source: Business Times 20 Oct 07
It has acquired a 40,355 sq m site for $202.8m
CAPITALAND has acquired a site in the Chinese city of Hangzhou for $202.8 million and says that it will be the location for its sixth Raffles City after those in Singapore, Shanghai, Beijing, Chengdu and Bahrain.
The 40,355 sq m Hangzhou site is in Qianjiang New Town, Jianggan District, and has a gross floor area of 283,568 sq m. The price works out to be about $715 per sq m per plot ratio.
This will be CapitaLand’s fourth Raffles City in China. The development will comprise a Grade-A office tower, a retail mall, a five-star hotel as well as residential units, and is expected to be completed by 2011.
On the expansion of the Raffles City brand, CapitaLand Group CEO and president Liew Mun Leong said: ‘With growing interests from many countries to have CapitaLand develop a Raffles City in their respective cities, we aim to have a total of 10 Raffles City developments within the next five years.’
CapitaLand is building Raffles City Beijing, targeted for completion in 2008. It is also developing Raffles City Bahrain and has acquired a prime commercial site in Chengdu, the provincial capital of Sichuan, to build Raffles City Chengdu. Both will be completed in phases from 2010.
Mr Liew said: ‘Given the site’s excellent location, we are confident Raffles City Hangzhou will become a new landmark in the city, attracting consumers, tourists and business travellers from all over China and beyond.’
He added: ‘Last year, we also acquired our first residential site in Hangzhou to build about 1,200 homes. We will look for further opportunities in China to expand our footprint into cities where there are strong real estate opportunities supported by urbanisation and rising income levels.’
Hangzhou is a two-hour, 180 km drive from Shanghai and was ranked by Forbes magazine in 2004, 2005 and 2006 as the top city in China for business.
CapitaLand believes that with the relocation of the municipal government office to Qianjiang New Town, the construction of several subway linkages and the establishment of a new cultural and civic centre, this area of Hangzhou will be transformed into a bustling commercial district.
The Raffles City Hangzhou site will be linked to a proposed subway interchange serviced by Metro Line 1, to be completed in 2010. Metro Line 1 connects directly to the high-speed Maglev train service, which is expected to start operating between Hangzhou and Shanghai by 2010.
Source: Business Times 20 Oct 07
EQUATION Corp has clinched a state property at Bukit Ho Swee for the stately rent of $90,000 a month.
The Singapore Land Authority (SLA), which manages the property, said that this is twice the guide rent when the former community centre was put up for tender in June.
The building is on 40,892 sq ft of land and has a gross floor area of 27,361 sq ft. At $90,000 a month, the rent works out to $3.30 per sq ft (psf) per month. Deloitte & Touche Management Services put in the second highest bid of $54,700 a month.
Equation Corp – formerly Heshe Holdings – could not be reached for comment. But another company that clinched two other state buildings – a former childcare centre in Balestier and a former school at Toa Payoh – said that it is likely to offer these as office space.
Vita Holdings chief financial officer Kwek Siew Hwee said that her company has leased about a dozen state buildings and rented out 80 per cent of the space to tenants. Vita, through its subsidiary Whitehouse Holdings, bid $101,788 a month for the former school at Toa Payoh. After refurbishing the building, it hopes to achieve rent of $5-6 psf per month. ‘We expect to recover our cost in about six years,’ Ms Kwek said.
Whether Equation Corp plans to rent out the former community centre at Bukit Ho Swee is not known, but Savills Singapore director (commercial) June Chua reckoned that the space could fetch $8-9 psf a month after it is refurbished. Proximity to Tiong Bahru MRT station is its main attribute, she said, adding: ‘This site could fetch a premium because it’s an established office location.’
The rent may seem high considering that average prime office rent is $12-13 psf a month. But the supply crunch is exerting increasing upward pressure on rents, Ms Chua said.
Rents for some prime buildings in Raffles Place have now hit a record $18 psf per month. ‘It would not be impossible for some of these prime properties in Raffles Place to cross the $20 psf a month barrier next year,’ she said.
Other bids received by SLA include $288,999 a month or $1.30 psf per month from RichZone Properties for a former school in Alexandra Road, and $200,000 a month or $1.25 psf per month from Hean Nerng Investments for the former Gan Eng Seng School at Raeburn Park.
Source: Business Times 20 Oct 07
ASCENDAS Real Estate Investment Trust (A-Reit) said yesterday its second-quarter distributable income rose 15 per cent to $46.4 million, from $40.5 million a year earlier, as demand for the trust’s business space grew.
The better performance lifted A-Reit’s distribution per unit (DPU) to 3.51 cents, up 11 per cent from 3.16 cents paid for the previous corresponding period.
Net property income for Q2 ended Sept 30, 2007 increased 16 per cent to $60.1 million, from $51.9 million a year earlier.
A-Reit said its better performance was due to higher revenue resulting from higher occupancy and rents.
The occupancy rate for A-Reit’s portfolio reached 98.3 per cent in Q2. And rents at business and science parks and hi-tech industrial properties rose 32 per cent and 15 per cent respectively from Q1.
‘This can be attributed to the spillover effect from the tight CBD office market and our active asset management initiatives,’ said Tan Ser Ping, chief executive of the Reit’s manager.
For the half-year ended Sept 30, A-Reit’s distributable income rose 14 per cent to $91.1 million, while DPU rose 10 per cent to 6.88 cents.
Going forward, A-Reit said that with the economy strong, demand for business and industrial space, especially at business and science parks and hi-tech industrial properties, is likely to remain healthy.
The trust said: ‘A-Reit expects to be able to deliver a return for the second half of the current financial year that is in line with its performance in the first half of the financial year.’
A-Reit’s shares closed three cents lower at $2.39 yesterday. The stock price has fallen 10.5 per cent since the start of the year, compared with a 25.5 per cent climb in the Straits Times Index.
Source: Business Times 20 Oct 07
New 3,205 sqft flat cost HK$34,000 psf: report
(HONG KONG) A new Hong Kong apartment has sold for a record US$14.1 million, a report said yesterday, as the city’s booming market for luxury homes continues to strengthen.
The 3,205 square foot duplex apartment on Hong Kong island fetched HK$109 million (S$20.56 million), or HK $34,000 per square foot, according to a report in the South China Morning Post.
The sale broke the record of HK$33,300 per square foot for a flat in the distinctive The Arch development on the opposite side of Victoria Harbour, which was sold in March.
The apartment, in the four-tower The Legend development, features a rooftop swimming pool with gold-plated fixtures and a view of the famous harbour, the paper said, quoting Louis Ho, property director at the sales agent, Centaline.
‘These features attracted the buyer to pay an aggressive price for the unit,’ he said.
The record is not expected to last long as the developer, Cheung Kong (Holdings), part of Asia’s richest man Li Ka-Shing’s business empire, plans to raise prices for the remaining duplexes in the building, the report said.
Earlier in the week, a prime piece of development land in Hong Kong was sold for HK$5.71 billion, smashing analysts’ expectations on the back of rising demand for luxury housing in the territory.
Source: AFP (Business Times 20 Oct 07)
THE Singapore Land Authority (SLA) has launched another site for short-term office use, a move aimed at relieving the supply crunch.
The property is the former Upper Aljunied Technical School on Upper Aljunied Road. It has a land area of 19,704 sq m and a gross floor area of 7,722 sq m.
It comes with a guide rental of $74,100 a month or $9.60 per sq m, with the tenancy renewable up to 2012.
The SLA says property and leasing companies have already expressed interest.
It has put out various state properties as interim sites this year, including former childcare centres, and more are being identified in suburban areas or away from the Central Business District.
This was a response to the tight office market and soaring rents in prime areas, which are driving some tenants to seek cheaper locations further from town.
In the residential market, two more collective sale sites have been put on the market.
The bigger plot is Cavenagh Gardens on Cavenagh Road, near the Istana. Owners at the estate, a 130,000 sq ft freehold site, want $619 million, or $2,308 per sq ft of potential gross floor area.
PropNex, which is marketing the site, has applied for permission to amalgamate a piece of state land.
If this is allowed, the combined site will cost $770 million, excluding about $72.8 million for the state land.
The cost will be higher in this case because whoever buys the combined site will be able to build a bigger project.
If the amalgamation is not allowed, developers will be restricted to a smaller project of up to seven storeys, said PropNex.
PropNex said the buyer could instead keep and revamp two existing blocks, which have 13 storeys each, but they would have to apply for permission to retain them. The tender closes on Nov 23.
The agent also put up the freehold Novena Hill in Novena for sale yesterday at a price of $56 million to $60 million, or up to $1,777 per sq ft of potential gross floor area. The tender closes on Nov 16.
Source: The Straits Times 20 Oct 07
GUOCOLAND yesterday said its first-quarter net earnings have soared to $27.68 million, up from $8.1 million a year ago.
Revenue for the three months ended Sept 30 rose 117 per cent to $190.98 million.
The key driver of the bumper result was the strong profit contribution from sales of GuocoLand’s West End Point project in Beijing. It has already sold 774 of the development’s 810 units.
GuocoLand continues to sell three residential projects in Singapore and will launch Goodwood Residence on Bukit Timah Road in the current financial year.
It has sold 86 per cent of Le Crescendo, a condominium in Paya Lebar that has already obtained its temporary occupation permit.
It has also sold 91 per cent of The View@Meyer in Meyer Road which was launched in January.
And about 97 per cent of the 337 launched units of The Quartz in Buangkok have been snapped up. This project, launched in the middle of last year, has 625 units.
GuocoLand said it expects to report satisfactory results for the next quarter due to buoyant demand across the region.
Earnings per share for the first quarter were 3.62 cents, up from 1.32 cents a year ago. Net asset value per share was at $2.37, up from $2.30 at the end of June.
The developer said it believes demand for quality residential projects and well-located commercial properties in the countries where it operates – Singapore, China, Malaysia and Vietnam – will be sustained.
Source: The Straits Times 20 Oct 07
TWO large real estate investment trusts (Reits) yesterday reported higher quarterly distributable income amid a positive economic climate.
CapitaMall Trust (CMT), Singapore’s first and largest reit, said distributable income was $53.2 million in the third quarter ended Sept 30. This is 17.2 per cent higher than forecast and a 29 per cent rise from a year ago.
The retail Reit said the sum includes a capital distribution of $1.5 million from its 20 per cent investment in CapitaRetail China Trust.
Distribution per unit reached 3.4 cents in the third quarter. Net property income was $76.8 million, up 21.7 per cent from forecast.
Compared with the third quarter of last year, annualised distribution per unit rose 19.3 per cent to 13.49 cents.
CMT owns 13 retail malls here, including Plaza Singapura, Tampines Mall and Rivervale Mall.
Its rental renewal rates for the first three quarters of this year registered 12.1 per cent growth over preceding rates, and 5.5 per cent over projected rates.
Mr Pua Seck Guan, the chief executive of the trust’s manager, said assets had registered good organic growth and the Reit is also actively seeking yield-accretive acquisitions to grow its target local asset size to $8 billion by 2010.
CMT, which has assets worth about $5.8 billion, is enhancing several assets. At Tampines Mall, for instance, several new tenants, including skin and hair-care firm Kiehl’s, will set up shop by December.
CMT is also applying for permission to add about 95,000 sq ft of office space at the mall. This will entail a cost of $25.9 million.
Ascendas Real Estate Investment Trust (A-Reit) too delivered a favourable set of results, with distributable income for its second quarter that ended Sept 30 rising 15 per cent year on year to $46.4 million.
Distribution per unit was at 3.51 cents, up 11 per cent from a year ago.
The industrial Reit has benefited from increased demand, due to the take-up of space by tenants forced out of the tight office market.
Property occupancy reached a high of 98.3 per cent, up from 97.2 per cent three months ago.
Mr Tan Ser Ping, the chief executive of A-Reit’s manager, said net income rose 15.9 per cent to $118.2 million on the back of positive economic performance and increasing demand for quality business space.
A-Reit achieved a 32.3 per cent rise in rental rates for its business and science park space compared with the previous quarter, and a 15.5 per cent increase for high-tech industrial space.
A-Reit said it has secured over $270 million in new investments in development projects and acquisitions.
Source: The Straits Times 20 Oct 07
