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THE Singapore Land Authority has confirmed a BT report yesterday that it plans to sell The Atrium @ Orchard – the first state sale of a Grade A prime commercial building.
‘The government does not own other commercial buildings of the same grade and category as The Atrium,’ an SLA spokeswoman said. ‘It is not in the government’s strategic interest to continue to own a well-developed and pure commercial asset like The Atrium @ Orchard.
‘It is best to let the private sector take over its commercial utilisation. Given the buoyant market conditions, the government has decided that now is a good time to divest it with best value for the state.’
SLA has appointed CB Richard Ellis (CBRE) sole marketing consultant to advise on the planned sale.
CBRE was chosen from a short list of five firms, SLA said. It clinched the job based on its competitive bid and strong track record under a two-stage selection process, SLA said without elaborating.
Market watchers suggest the other contenders were likely to have been Colliers, DTZ Debenham Tie Leung, Jones Lang LaSalle and Knight Frank.
‘On the mode of sale, the government expects CBRE to recommend a sale strategy that is consistent with the prevailing best market practices for selling large commercial buildings, to enable the state to obtain the best price for the property in a level playing field for all interested buyers,’ SLA said.
The Atrium @ Orchard, next to Plaza Singapore and above the Dhoby Ghaut MRT Station, comprises two towers of seven and 10 storeys with a total net lettable area of about 375,000 sq ft. The building’s basement carpark has 100 lots. The project received Temporary Occupation Permit in April 2002.
SLA did not indicate how much the property is worth, but in yesterday’s BT report a market observer suggested a range of $2,500 to $3,000 psf of net lettable area, which would work out to $937.5 million to $1.13 billion.
A plus point is that SLA is expected to sell The Atrium on a fresh 99-year lease.
Source: Business Times 2 Nov 07
It plans to build about 70-80 loft apartments on the freehold site
BRAVO Building Construction group, which bought Tulip Garden and Pender Court a few months back, has now clinched Makeway View in the Newton area for $162.8 million through a collective sale.
The price works out to a land cost of $1,583 per square foot (psf) of potential gross floor area including an estimated $21.5 million development charge (DC).
The breakeven cost for a new project on the site will be about $2,100 psf, a Bravo spokeswoman said.
‘We’re planning about 70-80 loft apartments, with sizes ranging from 1,500 sq ft to 1,800 sq ft,’ she said. ‘The project, which could be about 23-24 storeys high, may be ready for launch around Q3 or Q4 next year.’
Makeway View is on a freehold site of 41,582 sq ft that is designated for residential use with a 2.8 plot ratio under Master Plan 2003.
Knight Frank brokered the sale through a private treaty after a tender that closed last month.
The deal is subject to approval by the Strata Titles Board.
The buyer is Makeway Residences Pte Ltd, which is related to Bravo Building Construction.
‘At the purchase price of $162.8 million, Makeway View owners will receive gross sale proceeds of about $3.7 million to $10.4 million per unit,’ Knight Frank said yesterday.
Makeway View’s existing 32 apartments and penthouses range in size from 1,442 sq ft to 5,307 sq ft.
Bravo’s spokeswoman also told BT the group plans to develop the freehold Pender Court site off West Coast Highway, which it bought in July, into 48 cluster terrace housing units.
‘We’re in discussions with an overseas fund which is keen on buying the entire development for about $180 million, or about $3.8 million per unit on average,’ she said. ‘Each house will come with a private pool.’
Bravo’s acquisition of Tulip Garden, also in July, was for $516 million or $1,018 psf per plot ratio. No DC is payable.
Bravo is a five-year-old property and construction outfit that has bought more than a dozen sites in Singapore since September last year, including Castle Court on Changi Road, Regent Court in Serangoon and Koon Seng House in the Still Road area.
Source: Business Times 2 Nov 07
New premises will house back-office operations; can take up to 4,000 staff
SOARING rents downtown are pushing multinationals to house their back-office support operations away from central areas.
And Citi is spending $220 million to consolidate its back-office operations at Changi Business Park – the first bank to do so at this location.
Previously the bank’s support functions were spread over its locations at Tampines, downtown Millennia and Centennial towers and Capital Square.
Citi said it is giving up its space at Tampines and consolidating all support services at Changi. Without divulging the rent, it said the investment includes capital, relocation, rental and operating costs.
‘We’re scaling out,’ Citi’s Singapore country officer and head of Asean markets & banking Piyush Gupta said yesterday.
‘Instead of paying $15 per sq ft in the central area, we build scale without having to pay costs in the Central Business District.’
Office rents have surged 40.7 per cent so far this year, rising 14.8 per cent in the third quarter alone.
In the Urban Redevelopment Authority’s prime office category – which includes Raffles Place and Marina Centre and Orchard Planning Area – the median rent for new leases was $11.89 per sq ft (psf) per month in Q3, up from $10.33 in Q2. In the general category, which makes up 80 per cent of office space, the median rent for Q3 was $5.29 psf a month, up from $4.60 in Q2.
The support units of the local banks are also located out of town. OCBC and United Overseas Bank are at Tampines and DBS is at Chai Chee.
Citi’s new premises at Changi – two built-to-suit office buildings with a total of 400,000 sq feet – can house 4,000 employees, representing almost half of Citi’s total staff strength of 8,500 in Singapore. About 1,100 staff will move to Changi in Q1 2009 and 2,000 more in Q4 2010.
Citi will locate its International Technology Office, Markets & Banking Asia-Pacific Operations & Technology and Asia Pacific Technology Infrastructure divisions at Changi.
These divisions are responsible for activities like transaction services, funds administration and technology functions. These divisions support not just Citi’s Singapore business but that in the region and globally, Mr Gupta said.
For example, the technology division supports international consumer business in more than 40 countries, with Singapore serving as global headquarters.
The transaction services processing division serves corporate clients in 16 countries. And the technology infrastructure division provides desktop, voice and network services to the region.
‘The move will allow us to consolidate our operations, technology and support services under one roof, providing for greater synergies, as well as catering for future business growth,’ Mr Gupta said.
Source: Business Times 2 Nov 07
Project expected to break even within a year
FAR East Organization and a group of doctors are investing $8 million to set up a clinic called Novena Surgery, in response to what they say is an increasing need for outpatient surgery for Singaporeans and international patients.
Lim Beng Hai, director and senior consultant hand surgeon for the Centre for Hand and Reconstructive Microsurgery, Singapore, who is chairman of Novena Surgery, said that many local patients were opting for surgery as outpatients.
‘This demand is augmented by the rising number of international patients seeking treatment in Singapore,’ he said.
Novena Surgery, which takes up 8,000 sq ft, will be located on the eighth floor of the $257 million Novena Medical Center. It is expected to open its doors on March 1 next year.
It will be used by doctors practising at the centre and those from other hospitals, medical centres and clinics in the area.
Novena Surgery, which aims to provide ambulatory care and surgery facilities, will have three operating theatres and two endoscopy suites, with private rooms and common areas for patients to recover after surgery.
The facility will offer surgical specialties including eye surgery, ear-nose- throat and obstetrics and gynaecology.
Surgeons can look forward to a concierge service, which will arrange for patients to be picked up and arrive on time for surgery.
Patients will be able to use touch-screen monitors in the wards to make requests from nurses, to access the Internet and to send e-mail.
The board of directors is expecting Novena Surgery to break even in the space of a year, and bring in annual revenues of more than $10 million after three years.
The number of cases per day could reach a maximum of 100, they said at a press conference.
Heah Sieu Min, who is on the board of directors, described Novena Surgery as a ’seamless, convenient service which will be value for money’.
GL Yap, executive director of Far East Organization, said that Far East would be interested in tendering a bid for the hospital site at Novena Terrace/Ir- rawaddy Road launched this week by the Urban Redevelopment Authority.
Source: 2 Nov 07
Developers could be turning cautious, say analysts
(SINGAPORE) In a sign that developers are turning cautious after the withdrawal of the deferred payment scheme, a state tender for a 99-year residential site at Enggor Street behind the Icon development drew just two bids yesterday.
The higher bid by Far East Organization was 55 per cent above the only other offer by GuocoLand.
Far East offered $233.8 million or about $852 per square foot of potential gross floor area for the 32,681 sq ft plot near Tanjong Pagar MRT Station. GuocoLand’s $150.98 million bid works out to around $550 psf per plot ratio.
All eyes are now on a tender for the residential site next-door closing on November 15.
Far East’s breakeven cost for a new condo project is understood to be in the $1,340 to $1,400 psf range. That still leaves it with a profit margin based on current prices being achieved at Icon.
Caveats show that mid-level units (on the 20th to 22nd levels) of Icon have been changing hands in recent months in the $1,500 to $1,600 psf range in the subsale market, although units above the 40th storey have been sold by Far East at above $2,000 psf.
The property giant is understood to have sold a penthouse on the 46th floor recently for about $2,300 psf. It is now left with about 30 units in the 646-unit project, and its prices range from $2,000 to $2,400 psf.
For the latest site, called Land Parcel A at Enggor Street, BT understands Far East’s scheme is for a 62-storey tower with about 200 apartments – likely to be a spread of unit types like Icon – and is targeting to launch the project around end-2008 or early 2009.
Far East will develop retail space on the project’s ground level to be linked to Icon Village, the street-level retail component of its earlier project.
While property market watchers attributed the thin participation at yesterday’s tender to developers turning cautious following the withdrawal of the DPS scheme, some were puzzled by the disparity between the two bids.
‘Far East has crunched their numbers and know what they are in for, based on their experience with selling Icon units,’ a seasoned property consultant said.
However, some analysts could not help but suggest that Far East’s significantly higher offer may also have been partly motivated by a need to support property prices, including the values of sites it bid earlier. In September, the property giant clinched a prime condo plot next to Ang Mo Kio Hub for $601 psf per plot ratio – a record for suburban 99-year leasehold condo land. That tender attracted a whopping 14 bids. Another state tender for a condo site next to Kovan MRT Station that closed in early October drew six bids.
‘Developers are a bit concerned after the DPS withdrawal. It looks like they’ve chickened out of this tender,’ a seasoned property consultant said, when explaining yesterday’s thin bidding.
However, another property consultant, CB Richard Ellis executive director Li Hiaw Ho suggested that another reason for the lukewarm response yesterday could be due to the site’s location.
‘It is behind Icon and is sandwiched between a commercial site that has been awarded and another residential site (Parcel B) whose tender will close on Nov 15. Nevertheless, the site is about five minutes’ walk from Tanjong Pagar MRT Station,’ he added.
Source: Business Times 2 Nov 07
Financial sector devt will continue here; Asia must press on
(SINGAPORE) Singapore is not going to be deterred by the US sub-prime mortgage meltdown and will press on with developing its financial sector, Senior Minister Goh Chok Tong said yesterday.
Asia was relatively untouched by the sub-prime crisis because it has yet to move into sophisticated structured credit financing in a big way, said Mr Goh, who is also chairman of the Monetary Authority of Singapore (MAS).
‘However, I believe that Asia should press on with its efforts to develop its capital markets in order to complement the banking system and improve the robustness and efficiency of its financial system.’
Speaking at British banking group Barclays’ Asia Forum here, he said Singapore will not relent in its efforts to develop its financial sector.
The island is already a key centre for asset management and trading of financial products like foreign exchange and derivatives, he said. And it is making good progress as a regional centre for innovative equity products, business trusts, exchange-traded funds and project finance.
‘We envision Singapore as a centre of excellence for financial training, education and research,’ Mr Goh said.
‘Hence we are deepening specialists’ capabilities in fields such as risk management, financial engineering and actuarial science.’
But market players and regulators must refine their understanding of risk as more sophisticated products are introduced. They should be familiar especially with how shocks can be transmitted through these products, he said.
‘We must then develop tools to manage such risks. Much of the recent financial dislocation stemmed from opacity in the distribution and pricing of risks for derivative products.
‘The key lessons include the need to monitor off-balance-sheet exposure and institute better management and supervision of liquidity risks.’
SM Goh acknowledged that these are tough issues to tackle because they have to be dealt with without imposing excessive regulatory burdens on market players or stifling financial innovation.
The sub-prime crisis has brought home the reality of growing inter-dependence, he said. Central banks, financial regulators and guardians of the public purse must work in close coordination. ‘They must also work with key counterparts in other jurisdictions.’
Another key issue that requires special attention is the setting up of crisis management and resolution frameworks to lessen systemic fallout when financial institutions run into trouble, Mr Goh said.
Source: Business Times 2 Nov 07
(CHICAGO) The Federal Reserve’s decision on Wednesday to cut interest rates for a second consecutive meeting could buy policymakers a few months’ grace to watch incoming US economic data before deciding whether to move rates again. The Federal Open Market Committee, as expected, lowered its target for the federal funds rate to 4.5 per cent from 4.75 per cent, taking the benchmark rate back to early – 2006 levels.
In their statement, policymakers said that upside risks to inflation now roughly balance downside risks to growth.
‘The data and the circumstances suggest to me that the Fed need not commit itself and it probably has time to see what direction the data will go in,’ said Marvin Goodfriend, a professor at Carnegie Mellon University in Pittsburgh.
After reading the statement, dealers shifted their bets to guess that the Fed is more likely to hold rates steady than to cut them at its next meeting on Dec 11 as it evaluates how the growth and inflation outlook is evolving.
Short-term rate futures, which measure market expectations on Fed policy, knocked the implied chances of a December rate cut as low as 40 per cent from 64 per cent overnight.
Already hanging over the market before the FOMC decision was Wednesday’s surprisingly strong reading on third-quarter gross domestic product which rose at a solid 3.9 per cent annual rate. ‘There will be no additional rate cuts unless the economic outlook deteriorates further,’ said Chris Low, chief economist at FTN Financial in New York.
In the immediate term, the Fed decision probably will not do much for banks struggling with rising credit losses as the housing market retreats.
The cut will lower a variety of rates pegged to short-term market rates. Yet, because rate cuts typically take six months to work into the economy, the latest reduction and even the cut in September would need time to have their full effect.
Source: Reuters (Business Times 2 Nov 07)
Asia, though not much affected so far, must be vigilant
(SINGAPORE) Interest rate cuts by the US Federal Reserve – which have amounted to 75 basis points since Sept 18 – are unlikely to defuse the US sub-prime mortgage crisis, according to the influential economist Eisuke Sakakibara.
Mr Sakakibara, formerly Japan’s vice-minister for finance and international affairs and now a professor at Tokyo’s Waseda University, also warned that global financial markets are likely to face further bouts of volatility. What we have seen thus far ‘is only the tip of the iceberg’, he said, adding that the problem will probably linger for 6-18 months.
Speaking at a lunchtime forum organised by newly listed Uni-Asia Finance Corporation, Mr Sakakibara pointed out that interest rate cuts by the Fed were likely to be ineffective in addressing the problems emanating from the US sub-prime mortgage sector because the cost of funding is not the key issue; rather it is the uncertainty surrounding the valuations of sub-prime assets and other structured products held by many financial institutions.
He indicated, however, that the ’superfund’ proposed by some major American banks (including Citigroup, Bank of America and JPMorgan) to buy sub-prime assets could be helpful, as might a move to provide government financial support to distressed borrowers, which is being discussed in the US Congress. But such initiatives would take time to work.
Mr Sakakibara, who was Japan’s vice-minister for finance during the Asian crisis of 1997/98, cautioned that although Asia has been relatively unaffected by the US sub-prime woes thus far, it needs to be vigilant. He recalled that during the Asian crisis, US policymakers thought that the American economy would be relatively insulated – until they were shocked by the Russian bond default of 1998 and the ensuing collapse of a large hedge fund.
The world economy is highly integrated now, he said, and it is highly possible that the US – still its primary engine – will slow down sharply or even go into recession. In such an event, Asia cannot be unaffected.
While Asian economies are doing well and will account for an increasing share of the global economy, right now, Asian asset markets are ’somewhat bubbly’, Mr Sakakibara said. ‘The situation in Asia seems too good, and usually a ‘too good’ situation doesn’t last.’
When it does turn, the decline could happen ‘very abruptly’.
Of all the Asian markets, China is ‘the biggest bubble’, Mr Sakakibara added, with both investment and GDP growth expanding at breakneck speed.
Chinese policymakers know they have to tighten monetary policies sooner or later, and a major adjustment in China’s asset markets is inevitable, perhaps in 2008, after the Olympics. If China’s economy slows down in tandem with the US, that would exacerbate the problems for the global economy, Mr Sakakibara warned.
The economist – who was known as ‘Mr Yen’ when he was a policymaker because his statements were viewed as affecting currency markets – said that as long as the Bank of Japan is unable to raise interest rates, the Japanese yen will remain undervalued. The bank actually did want to raise rates in September, he added, but refrained from doing so on account of the US sub-prime mortgage problem.
With near-zero interest rates at home, Japanese investors are continuing to seek higher-yielding investments overseas, and while this trend persists the yen will probably continue to trade within the range of 110-115 to the US dollar, he said. But if, owing to some trigger such as a dramatic US slowdown, the outflows from Japan dry up or reverse, the yen would rebound sharply from its ‘really cheap’ current level, he said.
Source: Business Times 2 Nov 07
It is the first public tender to close since the deferred payment scheme was scrapped
A WEAK response to the tender for a residential site in Enggor Street suggests market sentiment might have turned cautious, analysts say.
The 99-year leasehold site at Tanjong Pagar had attracted only two bids by the time it closed yesterday, said the Urban Redevelopment Authority.
The top bid for the site was put in by Far East Organization’s Bishan Properties at $233.8 million, or $852 per sq ft per plot ratio (psf ppr).
The only other bid was almost half that – $151 million, or $550 psf ppr – and was tendered by First Capital Holdings.
This is the first public tender to close since the Government announced last week that it was scrapping the deferred payment scheme with immediate effect.
The scheme allowed buyers to fork out a down payment of only 10 or 20 per cent when purchasing a new home; the rest came due upon completion, which could sometimes be as long as three years later.
Analysts that The Straits Times spoke to said the Enggor Street bids reflected a more cautious attitude among developers.
Singapore’s spectacular property bull-run has, in recent times, seen up to 10 or more bids for public tenders.
‘The mood has turned cautious and the bids reflect this,’ said Chesterton International’s head of research and consultancy, Mr Colin Tan.
CB Richard Ellis (CBRE) Research executive director Li Hiaw Ho said this change could be due to the DPS announcement.
Mr Nicholas Mak, the director of research and consultancy at Knight Frank, agreed.
He pointed to uncertainty in the market, and added that developers are monitoring the behaviour of homebuyers before committing to buying more government land.
However, another reason for the weak response could be the location.
The site, with a gross floor area of 274,522 sq ft, is behind Far East’s Icon condo, and is sandwiched between a commercial site and another residential site whose tender closes on Nov 15.
But as it is only a five-minute walk from the Tanjong Pagar MRT station – at the heart of the Central Business District – the site remains attractive, say analysts.
Estimates for the project, launched for sale on Sept 4, indicate that it could provide 330 to 360 small units and a handful of large four-bedroom units, said Mr Mak.
CBRE’s Mr Li said the top bid was ‘reasonable’ and should translate into a break-even price of $1,300 psf for the future project.
Its units are likely to be priced at $1,500 to $2,100 psf when launched for sale – similar to the prices fetched at Icon recently.
Source: The Straits Times 2 Nov 07
AN UNRENOVATED 32-year-old five-room flat in Marine Parade, on a high level with a full sea view, has been sold for $730,000 – a new record for an HDB flat.
This trumps the previous record of $720,000, set in June by a fairly new five-roomer in Kim Tian Place.
The buyer, who declined to be interviewed, did not bother to wait for the flat’s valuation when he negotiated the price down from $750,000, said the seller’s property agent, Ms Joyce Lau, of agency ERA.
She said the deal was inked in half a day on Oct 13. The buyer viewed the 18th-floor flat in the daytime and confirmed the buy that night.
Mr Ken Ng, the 48-year-old son of the flat’s seller, said the flat has been vacant since his parents moved out to live with him some four years ago. His father agreed to sell recently.
‘I actually like the flat. I jacked up the price so high, thinking it is a crazy price. If nobody wants, I can withdraw it,’ he told The Straits Times.
‘But the first person who saw it liked the full sea view and wanted to buy it.’
The flat is in a prized point block with four flats per level.
The record sale comes as HDB resale prices have registered significant increases in a buoyant property market.
The HDB market has also benefited from spill-over demand. The dramatic spate of collective sales in the past year has created a pool of eager buyers, some of whom are downgrading to HDB flats.
The buyer of the run-down Marine Parade flat is believed to be in his 50s and an owner of more than one property.
It is understood that he may use the flat as his retirement home. He will have to pay $130,000 in cash for his flat, which is valued at $600,000.
This is well above the median cash-over-valuation sum of $85,000 for Marine Parade in the third quarter.
In the third quarter, the median resale price of five-room flats in the same town was at $560,000 – the second highest median price for the flat type after Queenstown.
But deals have been done at prices of up to $710,000.
Last month, a 30-year-old high-floor five-room Marine Drive flat sold for $710,000, while another five-roomer in the same block sold for $695,000 in September.
PropNex’s chief executive Mohamed Ismail said the difference lies in the lifestyle a home in the area offers.
‘It’s not too congested, near town and East Coast Park.’
But paying record prices or large cash amounts for it will not become a norm.
‘Those who pay such large cash amounts are private property downgraders or people who have profited from en bloc sales,’ said Mr Ismail.
‘Typical HDB buyers cannot afford such prices.’
Source: The Straits Times 2 Nov 07
Region can learn about risk and crisis management from recent US sub-prime turmoil
ASIA has escaped relatively unscathed from the recent global credit crisis, as it has not yet developed newfangled complex financial instruments, said Senior Minister Goh Chok Tong yesterday.
But Asia can glean some lessons about risk and crisis management from the recent credit market turmoil, he said.
He was giving the keynote address at the one-day inaugural Barclays Asia Forum at the Shangri-La Hotel yesterday, attended by almost 400 Barclays clients from institutions and corporations across the region.
‘The current sub-prime crisis shows that we cannot afford to be less than vigilant in the financial industry.
There are some lessons we can learn here,’ said Mr Goh.
Asia was relatively shielded from so-called sub-prime crisis, which involves United States housing loans with relatively high risks of default – which were rolled into complex financial instruments.
The main reason for this is that Asia has yet to move into sophisticated structured credit financing in a big way, said Mr Goh.
But rather than shy away from such instruments, Asia should ‘press on with its efforts to develop the capital markets’ and create robust and efficient systems, he said.
Asia will inevitably see more sophisticated products coming to the fore, he said.
‘So market players and regulators alike must refine their understanding of the attendant risks,’ he said.
They need to understand how shocks can be transmitted through these products and develop tools to deal with these risks.
The central bank, the financial regulator and the guardian of the public purse must also work closely together to set up frameworks that minimise damage to the system in case financial institutions run into trouble.
Mr Goh said Asia’s growth is unlikely to be derailed by ‘potential wild cards in the region’ such as North Korea’s nuclear programme, tense cross-strait relations between Taiwan and mainland China, and instability in Myanmar.
Indeed, Asia’s share of the world’s economy has been rising steadily, increasing from 19 per cent in 1980 to 36 per cent today, and is expected to reach 45 per cent by 2010.
But Asia faces key challenges to its growth, such as global financial imbalances arising from large capital inflows to Asia, noted Mr Goh. This has created inflationary pressures and asset bubbles in the stock and housing markets.
He also noted that Asean countries will get a competitive boost when Asean evolves into a single market and production base with free flow of goods, services, investment and skilled labour by 2015.
‘Challenges remain but I see none which are insurmountable,’ concluded Mr Goh.
Source: The Straits Times 2 Nov 07
