Investors eye real estate after tough 2007

Business Times – 11 Mar 2008

Asian property and niche sectors are attracting assets

(LONDON) Many investors in alternative assets plan to invest more in real estate after poor returns from the sector in 2007, a PricewaterhouseCoopers (PwC) survey showed yesterday.

John Forbes, UK real estate leader at PwC, said some investors had been lured back to UK property after prices fell sharply.

Growth areas such as Asian property and niche sectors such as student housing were also attracting assets, he said.

PwC’s global survey, which polled 226 institutional investors and alternative investment providers in the fourth quarter of 2007, showed a gross 41 per cent of investors plan to increase real estate allocations over the next three years.

That compares with 40 per cent for private equity, 35 per cent for commodities and 33 per cent for hedge funds.

However, 21 per cent of investors planned to reduce their allocations to real estate, compared with  6 per cent for hedge funds, 15 per cent for commodities and 11 per cent for private equity.

Forbes said: ‘UK real estate capital values are down perhaps 20 to 25 per cent from the top of the market. For some types of investors that will discourage them.

‘But for opportunistic investors, who have been out of the UK market for the past two to three years, the UK is starting to look cheap so they are coming back.’

UK commercial property delivered a total return, which combines rental income and capital growth, of -3.4 per cent in 2007, as the credit crisis bit and investor sentiment soured.

The survey also showed less than half of respondents were satisfied with the performance of hedge funds, while nearly a fifth were dissatisfied.

That compares with private equity, where two- thirds were satisfied and only 7 per cent dissatisfied, or real estate, where 57 per cent were happy with performance and 11 per cent unhappy.

The survey follows a strong year for hedge funds. According to Credit Suisse/Tremont they returned 12.56 per cent in 2007.

Rob Mellor, UK financial services tax leader at PwC, said hedge funds had to become better at managing investor expectations and explaining how they achieved returns, especially when conditions turn.

Some may have feared the credit crisis would hit hedge fund returns harder than it eventually did, he said\. \– Reuters

Opportunistic investors recoil from Asia property

Business Times – 11 Mar 2008

They see more scope for picking up cheaper properties in US, Europe; loans in Japan tougher

(HONG KONG) Opportunistic investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe, and loans are harder to get in Japan, one of their favourite markets.

Hedge funds have stopped dabbling in property in the region, fund managers say. And although private equity players will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

‘Six months ago, it was quite straightforward. We didn’t have to answer questions about why to invest in Asia,’ Guy Cawthra, Asia fund strategist at Morley Fund Managers, told a recent conference in Hong Kong. ‘Now investors say ‘we might not want to invest in Asia; we want to invest in Europe, the UK and the US’.’

In the wake of the 1997-98 economic crisis, Asia – in particular, Japan and South Korea – drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as Carlyle Group .

Many made fat profits on a revival by Asian property markets, which are now mostly strong because of a shortage of new supply and still buoyant economies.

Researchers at consultants Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump in 2007, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities now lie elsewhere for investors who think they can spot a market trough and  ride a recovery.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their 2007 peak, JPMorgan analysts forecast, causing losses of about US$120 billion, including on commercial mortgage-backed securities.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through 2009.

‘I think a lot of investors will return to home markets,’ said Bart Coenraads, head of real estate at Fortis Investments. ‘Some will try to buy distressed core and refinance it. They could make good returns.’

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion – a sixth of the global total – with about half invested in Japan, which has been popular for its rock- bottom interest rates.

However, Japanese banks are getting cold feet on property, analysts say, giving loans worth only 60- 70 per cent of a building’s value, compared to 80-90 per cent a couple of years ago.

Lower debt gearing is likely to crimp returns for equity investors. But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia, said Tim Bellman, global head of strategy for ING Real Estate.

Many, such as Morgan Stanley Real Estate Funds, no longer see themselves as ‘opportunistic’, and are in Asia for the long haul.

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ Mr Bellman said. ‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

Morgan Stanley is building housing in China and taking stakes in Indian developers in a high-risk, high-return strategy. But the US investment bank also bought the Tokyo headquarters of Citigroup last month, indicating it is still interested in ‘core’ assets that are low risk but give modest returns\. \–Reuters

Property investors set sights on market trough in US, Europe

March 11, 2008

HONG KONG – OPPORTUNISTIC investors are pulling back from Asian property because they see more scope for picking up distressed assets in the United States and Europe.

Hedge funds have stopped dabbling in property in the region, fund managers say.

Although private equity firms will continue to develop property in India and China, they are more likely to buy buildings on the cheap in the West than in Asia.

In the wake of the economic crisis from 1997- 1998, Asia, in particular Japan and South Korea, drew a raft of investment from funds run by the likes of Morgan Stanley, General Electric and private equity firms such as the Carlyle Group.

Many have made fat profits on a revival by Asian property markets, which are now mostly strong.

Researchers at Jones Lang LaSalle forecast Tokyo office prices will steady this year after a 28 per cent jump last year, while Seoul, Hong Kong, Singapore and Shanghai are still on the up.

Better opportunities, however, now lie elsewhere for investors who think they can spot a market trough.

Because of tight credit and a worsening economy, US commercial real estate values could fall by 20 per cent in the next five years from their peak last year.

London office values have dropped 12 per cent from a peak in the middle of last year, and they will be pressured further by forecasts of a 10 per cent decline in rental values through next year.

‘I think a lot of investors will return to home markets,’ said Mr Bart Coenraads, head of real estate at Fortis Investments.

‘Some will try to buy distressed core and refinance it. They could make good returns.’

Last year, total direct investment in the Asia-Pacific region jumped 27 per cent to US$121 billion (S$167.8 billion) – a sixth of the global total – with about half invested in Japan, which has been popular for its rock-bottom interest rates.

However, Japanese banks are getting cold feet on property, only giving loans worth 60 per cent to 70 per cent of a building’s value, compared to 80 per cent to 90 per cent years earlier.

But having spent years setting up teams, private equity funds are unlikely to withdraw completely from Asia.

‘Funds have been raised and platforms are set up, and they don’t want to unwind them overnight,’ said Mr Tim Bellman, global head of strategy for ING Real Estate.

‘But at the margin, opportunistic investors who looked at Asia are finding those opportunities back home.’

REUTERS

Source: The Straits Times

KepLand to launch US$206m Vietnam project in Q4

AFTER announcing eight new development projects in Vietnam last year, Keppel Land plans to launch one of these in the fourth quarter of this year.

In a statement released yesterday, Keppel Land said that it has been awarded the investment certificate by the Ho Chi Minh City People’s Committee for its new waterfront residential development in Vietnam.

The joint-venture project, to be developed in phases, is a 2,400-unit condominium development in District 7 fronting the Ca Cam River in Ho Chi Minh City. The first phase, comprising 700 units, is expected to be launched in the fourth quarter.

The total investment capital for the project is estimated to be US$206 million. Riviera Point, the joint-venture company undertaking the project, will have a registered capital of US$62 million. Keppel Land, through a wholly owned subsidiary, Elaenia Pte Ltd, will take a 75 per cent or US$46.5 million stake in Riviera, with Tan Truong Co Ltd taking the remaining 25 per cent.

Keppel Land International executive director and CEO Ang Wee Gee said that its earlier projects in Vietnam, like the fully sold Villa Riviera and Phase One of the 1,500-unit The Estella, have been well received.

‘With rising affluence and exposure afforded by travel overseas, Vietnamese home-buyers have become more discerning about quality and the lifestyle associated with their homes,’ he added.

The luxury condominium to be developed will sit on an 8.5-ha site. It will have recreational facilities including a clubhouse, a swimming pool and tennis courts and 24-hour security.

The news of the launch of this development comes after Keppel Land recently revealed plans for its Saigon Centre, a retail and financial complex of three towers, with its tallest tower of 88 storeys expected to be among the world’s tallest.

Keppel Land also has a pipeline of over 25,000 homes in the Vietnamese cities of Ho Chi Minh City, Hanoi and Dong Nai.

Source: Business Times 5 Mar 08

China property shares cut to ‘underweight’

BNP slashes 2008 earnings growth for industry to 31%

(HONG KONG) Investors should cut their holdings in Chinese property because of a slowdown in housing starts and home prices that will crimp earnings growth, BNP Paribas said.

The bank downgraded China real estate shares to ‘underweight’ from ‘overweight’, and slashed the 2008 earnings growth forecast for the industry to 31 per cent from 47 per cent, Hong Kong-based BNP analyst Andy So wrote in a research report published today.

‘Housing starts, bank loans and prices all showed signs of slowing down,’ Mr So said in his report. He named Hong Kong-listed Shimao Property Ltd as his top pick in the sector.

Home prices in some of China’s biggest cities including Shanghai and Shenzhen fell in the first two months of 2008 as government efforts to curb the soaring property market started to bite. The government sought to restrain the industry after home prices in 70 major cities surged 10.5 per cent in November and December from a year earlier, the most since the index began in July 2005.

Mr So reduced his price estimates for companies including Beijing Capital Land Ltd, China Overseas Land & Investment Ltd and Guangzhou R&F Properties Co.

Some smaller developers may struggle to maintain profit growth and be forced out of business as banks continue to tighten lending, Standard & Poor’s said in a Feb 28 report.

Source: Bloomberg (Business Times 4 Mar 08)

SHK results may not reflect HK property frenzy

Company holding back most project launches, analysts say

(HONG KONG) An upswing in Hong Kong home sales and prices is boosting big developers but will hardly register in earnings to be reported by Sun Hung Kai Properties this week, as the firm held back on project launches.

With rising wages and falling interest rates sparking one of the city’s legendary frenzies for property, analysts are mostly upbeat about the likes of top developer Sun Hung Kai and rival Cheung Kong (Holdings).

A correction has made stock valuations more attractive after a share price surge last year inspired by the US Federal Reserve’s aggressive rate cuts. Sun Hung Kai is trading at a 20 per cent discount to forecast end-2008 net asset value (NAV), compared to an average historical discount of about 10 per cent.

However, analyst forecasts for underlying earnings for the six months to Dec 2007 are spread widely and evenly between HK$4.7 billion (S$841 million) – which would be down 11 per cent on a year ago – and HK$6.1 billion.

‘They had no new launches except for Harbour Place,’ said Eva Lee, whose forecast for the interim half-year earnings was at the low end of the range. ‘So probably we can expect second-half sales to pick up.’

The 1,000 apartments put up for sale at the Harbour Place project, in the city’s Kowloon district, were quickly snapped up, but the profits will be booked in the second half of Sun Hung Kai’s financial year, which starts in July.

Sun Hung Kai’s earnings announcement, due on Thursday, will be the first time executives will have faced the media since the company’s chairman stepped down temporarily early this month.

Analysts have said Walter Kwok’s decision is unlikely to affect the company’s future performance.

Sun Hung Kai’s share price soared 76 per cent in the second half of calendar 2007, as Hong Kong’s currency peg led authorities to follow US interest rate cuts despite rising inflation and a local economy spurred by booming China.

But the stock has fallen 20 per cent this year and was trading at HK$133.60 at the close yesterday.

JPMorgan analyst Raymond Ngai, who expects an interim profit of HK$6.1 billion, has an overweight rating on the stock with a year-end price target of HK$159.

He expects full-year net profit to rise 35.7 per cent to HK$15.16 billion as apartment sales rise.

But Goldman Sachs analysts Anthony Wu is much more cautious, and has a neutral

recommendation, believing that apartment prices may have already peaked, having gained 10 per cent in the first two months of this year.

‘The rising risk of a prolonged global economic slowdown leads us to believe that the property market up-cycle has probably ended,’ Mr Wu wrote in a recent note.

‘Negative ripple effects will likely hurt Hong Kong’s wage growth, which is far more important than interest rates in driving property demand.’

Hong Kong apartment sales have picked up in the last few months as owning is almost as cheap as renting, and people expect tight supply to lift prices.

According to CLSA analysts, only about 14,000 new apartments will hit the market in each of the next three years, compared to an annual take-up of 20,000 when the economy was in a downturn between 1998 and 2003.

Affordability is back to 2005 levels because of interest rate cuts. So someone who rents a flat worth HK$5 million would pay on average HK$16,700, while a mortgage on 70 per cent of the value would typically mean a monthly repayment of HK$19,000.

Source: Reuters (Business Times 4 Mar 08)

Hong Leong Bank eyes 10% home loans growth

It is confident of hitting target for cash-back product

(KUALA LUMPUR) Hong Leong Bank is aiming for 10 per cent growth this year in its housing loans segment, which currently has about 130,000 clients.

As part of its efforts, the bank yesterday introduced a cash-back home loan product which it said enables customers to save more on interest payment.

Chief operating officer for personal financial services, Moey Tan, said the bank was confident of achieving the target of RM1 billion (S$436 million) receivables for the new product by year-end as it was the only one in the local market to give cash rebates to home loan customers.

‘The 10 per cent cash-back will automatically be credited into the customer’s savings or current account annually from year six onwards,’ she said. Ms Tan said for a RM200,000 loan, the first payment is RM1,000 and each year the customer will receive a percentage of the cash-back amount until the end of loan tenure.

The cash-back home loan features include a repayment option and up to 90 per cent margin of financing, applicable for completed properties with a minimum loan amount of RM200,000.

Hong Leong Bank’s group managing director Yvonne Chia said housing loans today accounted for 58 per cent of total household debt and the commitment was long term, averaging from 20 to 30 years.

‘The cash-back concept was tested and validated through independent research. . .’ she said.

Source: Bernama (Business Times 4 Mar 08)

HK Reits get a new lease of life

Major acquisition, hotel trust listing may help revive investor interest

(HONG KONG) Hong Kong’s neglected real estate investment trust (Reit) market is stirring to life and may finally do what it’s supposed to – give investors stability, a decent yield and, possibly, clear prospects for growth.

A high-profile acquisition by office landlord Champion Reit, and the imminent listing of a hotel Reit by developer Far East Consortium, may help revive investor interest.

The reputation of Hong Kong’s Reits has been sullied by investor perceptions that they were used by wily developers to offload second-rate assets at inflated prices, and marred by the byzantine financial engineering that accompanied their deals.

As new Reit markets emerged across Asia, with investors enjoying fat dividends from rental income and capital gains from rising property prices, Hong Kong Reits were given the cold shoulder.

‘It seems like a lot of Reits are like a second concubine – it’s whatever leftover product you have,’ said Far East Consortium chief executive David Chiu.

‘But we’re saying to the market that we’re putting all the hotels we have in,’ he said about the group’s latest offering, a listing of its hotel Reit. ‘You either like it or not, but it’s all of them.’

After a year’s lull in new Reit listings, Far East has lined up an initial public offering (IPO), packaging all seven of its hotels in the city into the Hong Kong Hotel Trust, and moving away from complex financial engineering.

Earlier this month, Champion Reit said it would dismantle the complicated financial structure linked with its IPO, and also bought a 56-storey block in Hong Kong’s Kowloon district.

Hong Kong’s biggest developer, Sun Hung Kai Properties, is also considering resurrecting a planned office trust, while Swire Pacific wants to spin off its Festival Walk shop and office complex, bankers say.

Hong Kong’s Reit market made an explosive start in late 2005 when investors flocked to a US$2.4 billion IPO by Link Reit, drawn by pledges to revamp and squeeze more profit from 151 government-owned malls.

But the city’s six other Reits, including two with mainland Chinese assets, have fared worse on the secondary market, with their yields pushed up to between 8 and 10 per cent now from 5 to 6 per cent at their IPOs.

However, their share prices stabilised despite turbulent markets in the last six months, while Japanese and Singapore trusts slumped, and they now offer big and steady spreads over the 3.1 per cent yield given by 10-year bonds.

Comparable spreads for Reits in Japan and Singapore are much lower, at around 3.5 percentage points.

But high yields and cost of capital mean Hong Kong Reits often struggle to find acquisitions that are ‘yield accretive’ – or lift investor returns.

However, by using loans, a convertible bond issue, and new equity raising, Champion’s Reit has managed to buy Langham Place from the Reit’s sponsor, Great Eagle (Holdings), for US$1.6 billion.

The deal is getting a belated thumbs-up from analysts after initial suspicions the trust was paying too much.

‘Don’t overreact, this is a positive deal,’ wrote BNP Paribas analyst Andy So, when Champion’s share price slumped 5 per cent a day after the deal was announced.

He said the purchase would lift distribution per unit, despite dilution from the share sale, and praised the unwinding of financial engineering that had been unpopular with investors.

The trust had employed interest rate swaps and a dividend waiver by Great Eagle, that artificially lifted yields at the time of the IPO.

It now wants to unwind and simplify that structure.

With Champion embarking on a global roadshow to raise equity for the deal, a banker who worked on the transaction predicted it would herald a new beginning for Hong Kong Reits.

Source: Reuters (Business Times 28 Feb 08)

Keppel Land unveils Viet project plans

KEPPEL Land, one of the largest property developers in Vietnam, on Tuesday presented the concept plans for its Saigon Centre in Ho Chi Minh City to a group of delegates led by Singapore President SR Nathan and Vietnam Deputy Prime Minister Hoang Trung Hai.

Located in the central business district of Ho Chi Minh City, Saigon Centre is a mixed-use development on a two-hectare site fronting Le Loi Boulevard, the city’s main thoroughfare.

Phase One, completed in 1996, is a 25-storey building that includes a three-storey retail podium and 89 units of service apartments. KepLand said that it and local partners Sowatco and Resco would develop an iconic landmark integrating subsequent phases of Saigon Centre.

Source: Business Times 28 Feb 08

Room for growth in M’sian market: govt

(KUALA LUMPUR) Prospects remain good for the country’s property market with room for further growth, the directorgeneral of the Finance Ministry’s Valuation and Property Services Department, Abdullah Thalith Md Thani, said yesterday.

The market is, however, currently in a cautious mode in view of rising crude oil prices and the slowing down of the US economy, he said in a presentation at the Malaysian Property Summit here.

Mr Abdullah said higher prices would result in people concentrating on more important needs like food and transportation, with an impact on demand in the property market.

He called on developers to keep abreast with changes that influence market performance in order to avoid a mismatch between supply and demand.

He also said that the residential property sector has received a boost from the government’s move to allow Employees Provident Fund (EPF) contributors to make monthly withdrawals for the financing of their houses.

Source: Bernama (Business Times 28 Feb 08)

CapitaLand plans US$300m Vietnam fund

It has also formed a partnership with a Vietnamese investment company

CAPITALAND, South-east Asia’s largest property developer, plans to set up a US$300 million property fund in Vietnam.

The company also said yesterday it has forged a partnership with Vietnamese firm Nam Thang Long Investment Joint-Stock Company to seek investment opportunities in Vietnam.

With the new business initiatives, the developer aims to strengthen its presence in Vietnam, which it has identified as one of its key Asian markets.

The news sent CapitaLand’s shares up as much as 27 cents – or 4.2 per cent – yesterday. The stock closed the day 16 cents up at $6.56.

In its filing to the Singapore Exchange, CapitaLand said it will leverage on its real estate and fund management capabilities to set up its first property fund to invest in Vietnam. It intends to take a 30 per cent stake in the fund, which has a target size of US$300 million.

To secure other investors in the fund, CapitaLand has signed a memorandum of understanding with Citi Private Bank, one of the world’s largest wealth managers which serves high net worth individuals with more than US$10 million in net worth each.

The partnership with Nam Thang Long Investment Joint-Stock Company, on the other hand, will allow CapitaLand to seek further business opportunities in Vietnam with a real estate focus. The two companies hope to develop residential properties and commercial and residential mixed developments together.

CapitaLand already has a significant presence in Vietnam, mainly in the residential and service residences sectors in Hanoi and Ho Chi Minh City.

‘Our aim is to deepen CapitaLand’s presence in Vietnam to become a significant long term real estate player here,’ said CapitaLand chief executive Liew Mun Leong.

‘We’re confident of doubling our residential pipeline in Vietnam from the present 2,800 homes to about 6,000 in the next three years and we’re also looking for opportunities in the office, retail, and integrated leisure, entertainment and conventions sectors.’

Source: Business Times 28 Feb 08

India’s Primary Real Estate plans US$500m fund

(HONG KONG) Indian fund manager Primary Real Estate Advisors is planning to launch a fund worth as much as US$500 million, probably in the second half of this year, but said it will tread carefully as the country’s property boom stutters.

Foreign investors have taken advantage of such funds to rush into property development in India since it eased rules on inward investment in the construction industry in early 2005, sparking rampant land speculation and a near quadrupling in prices.

But despite signs of a slowdown – home sales volumes have fallen by one-fifth in Mumbai and 40 per cent in Bangalore in the last year – the head of Primary Real Estate, Ashwin Ramesh, is convinced that North American and European investors will invest.

‘There are certainly cowboys out there,’ Mr Ramesh said. ‘But our style is more focused for a risk averse environment. We would typically underperform in a raging bull market but overperform in a flattish market.’

Mr Ramesh expected to launch the new fund within six months to a year, and hoped to raise between US$300 million and US$500 million.

‘At the moment there’s interest in North America and London, but we’re in touch with people all over the place,’ he said, adding that he was busy expanding a team that is now investing a US$32 million fund closed in mid- 2007.

Primary Real Estate would aim for internal rates of return of 15-20 per cent, Mr Ramesh said, below the usual 20-25 per cent often advertised by funds in Asia’s up-and-coming property markets of India, China and Vietnam.

Rival India-based funds include Trikona Capital and Kotak Mahindra Investments, while Citigroup Property Investors and Morgan Stanley Real Estate have been at the forefront of a wave of global funds entering the country.

The demographic fundamentals for India’s real estate boom touted by analysts appear compelling for many investors.

But developers have crammed projects into a few cities and certain building types, Mr Ramesh said.

Primary Real Estate, which will team up with developers – ‘high-quality people, that’s our first filter’, Mr Ramesh says – has identified a big township project outside Mumbai and will seek out projects in emerging cities.

 

Source: Reuters (Business Times 21 Feb 08)

Invesco eyeing real estate in China, Japan

Global fund firm poised to make first direct investments in Asia property

(HONG KONG) Global fund firm Invesco hopes to make its first direct investments in Asian property this year,  with Chinese housing and Japanese offices at the top of its wish list as global economic uncertainty throws up new buying opportunities.

Cheng-Soon Lau, who heads Invesco’s Asia property investment unit, said his patient approach to buying in Asia could pay off.

‘The markets have pulled back, so for those who have not invested in the last year, this year might be better,’ he said.

He declined to comment on fund raising, but Reuters reported last year that the unit of Anglo-US fund manager Amvescap was raising a US$300 million, seven-year, closed-end fund for Asian property.

Because of a stock market slide, some Western investors suddenly found that their allocations to physical property were higher than expected, Mr Lau said. But many were still keen on Asian markets that lag Western property cycles.

‘Investors who want high returns see these markets as attractive,’ Mr Lau said in an interview. ‘There’s appetite, but people are still re-evaluating at this point.’

He pointed to poorly performing Japanese real estate investment trusts (Reits) as an example of new buying opportunities.

Reits, which pay most of their rent as dividends, have been popular since they were introduced to Japan six years ago because they yielded more than bonds, while an upturn in property values and rent often produced fat share price gains.

But although the Tokyo property market remains strong, the US sub-prime crisis and global credit crunch provoked a sell-off in Japanese Reits, and many are trading below net asset value (NAV) and could be willing to offload buildings to lift investor returns.

Japan’s Reit index has dropped 15 per cent this year, compared to an 8.5 per cent fall in the broad market.

‘I think some of them will be looking to sell some assets,’ Mr Lau said of Japanese Reits. ‘Smaller ones are under pressure.’

Housing Reits such as Nippon Residential Investment and Japan Single Residence are trading at 30 per cent discounts to NAV, while some commercial trusts, such as Top Reit and Creed Office, are at discounts of 10-20 per cent.

Reits tend to trade above NAV because of favourable tax treatment and a premium for liquidity – units in trusts are easier to buy and sell than whole buildings.

With competition for top-notch Tokyo offices driving up prices and making assets scarce, Mr Lau said he liked Bgrade office blocks that could be revamped to give higher returns.

He was also upbeat about residential development in China, saying that a raft of government measures to cool markets would probably drive many developers out of business and open the field to new players such as Invesco.

‘There’s a fair bit of consolidation going on,’ Mr Lau said, adding that Invesco wanted to invest in Dalian and Tianjin, as well as in the country’s biggest cities Shanghai, Beijing and Guangzhou.

‘Notwithstanding this speed bump, over the long-term, second-tier cities will do pretty well.’ With average home prices doubling since 2002 and high-end apartment prices rising much further, Beijing has tried to cool markets with curbs on supply and demand.

China has raised interest rates regularly, imposed taxes on capital gains and land appreciation, stopped nonresidents buying apartments, told banks to curb loans to developers and employed a ‘use it or lose it’ policy to deter land speculation.

The measures hit housing market transactions in some cities at the end of last year, including Guangzhou, Shanghai and Shenzhen.

With many developers struggling to recycle money from apartment sales to finance new projects, analysts believe thousands could go bust.

 

Source: Reuters (Business Times 19 Feb 08)

Chinese developer bond risk rises to a record

(HONG KONG) The risk of Chinese real estate developers defaulting on their debt soared to a record on concern they will seek to sell securities after Country Garden Holdings Co completed its first convertible bond sale.

Three-year credit-default swaps on Country Garden traded at 1,100 basis points at 4:27pm in Hong Kong, according to BNP Paribas SA prices. Five-year contracts on Shimao Property Holdings Ltd rose 75 basis points to 975 basis points while swaps on Agile Property Holdings also increased 75 basis points to 1,000 basis points. A basis point is 0.01 percentage point.

The first public bond sale by a Chinese real estate developer since November showed investors are becoming more confident in the long-term outlook of the sector’s biggest companies. House prices in China shrugged off government curbs on lending to rise 10.5 per cent in December from a year earlier, maintaining the fastest pace since records began in 2005.

‘It’s generally a good thing for Country Garden to be able to raise the funds, but the deal also opens the gate for other debt fund-raising from Chinese real estate companies,’ said Arthur Lau of JF Asset Management Ltd in Hong Kong, who helps manage US$128 billion of assets. ‘People are worried that bond sales will scramble to come to the market, not just from Country Garden but also from other developers.’

Country Garden’s share price jumped as much as 15 per cent yesterday. The stock closed up 12 per cent at HK$7.48 in Hong Kong.

Country Garden, China’s most profitable property developer, last week raised 3.6 billion yuan (S$709.3 million) selling convertible debt maturing in 2013. Investors can hand over the bonds for Country Garden’s shares at HK$9.05 apiece, which is 37 per cent more than the average price as weighted by volume on Feb 15, according to an e-mail sent to investors.

Country Garden’s 2.5 per cent convertible bonds now trade at 104.15 per cent the face value, according to Nomura Holdings Inc prices. Country Garden’s debt is rated the lowest investment grade at BBB- by

Standard & Poor’s. Moody’s Investors Service ranks it one step lower at Ba1.

Credit-default swaps on Greentown China Holdings Ltd rose 50 basis points to 1,175 basis points.

Contracts on Hopson Development Holdings Ltd jumped 50 to 1,250 basis points, according to BNP Paribas. That means it costs US$1.25 million a year to protect US$10 million of Hopson’s debt from default for five years. It implies a more than 65 per cent chance of default in the next five years, according to a valuation model by JPMorgan Chase & Co.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

New bond sales increase the risk of default as they add more debt to the companies.

The credit risk of Chinese real estate developers has exceeded that of their troubled peers in the United

States on concern that China’s government will announce new measures to more effectively rein in rising property prices, and that developers will need to sell more debt to fund expansion or risk losing market share to rivals.

High-yield bonds of US home builders hurt by the sub-prime loan crisis now trade at an average 10.55 percentage points more than US Treasuries, according to a Merrill Lynch & Co index that tracks 93 securities. Greentown’s 9 per cent US$400 million bonds maturing in 2013 trade at a record 12.56 percentage points above US government bonds, up 64 basis points from Friday, according to ING Groep NV prices. Hopson’s 8.125 per cent US$350 million securities due in 2012 widened 90 basis points to a record 12.78 percentage points over US Treasuries.

Investors should price in more risk on the bonds of Chinese property developers to reflect the weak structures of the deals and the untested legal system for defaults in China, analysts led by Hong Kong based Pradeep Mohinani at Lehman Brothers Holdings Inc said in a research note on Feb 15.

‘We reiterate a more defensive investment strategy and recommend investors to avoid this highly volatile sector in the near term because of rising industry and supply risks,’ the Lehman analysts wrote in the report.

Bonds of Chinese developers should trade at between 150 to 180 basis points more than their US peers,

the analysts said.

Source: Bloomberg (Business Times 19 Feb 08)

Property trusts may soon debut in India

Move will encourage foreign real estate funds to partake in construction boom

(HONG KONG) India could follow other Asian countries this year in creating a market for real estate investment trusts (Reits), making it easier for investors to buy into the country’s sparkling new office blocks and shopping malls.

The move would encourage foreign property funds, which are keen to join India’s construction boom but are not allowed to own finished buildings.

Reits or domestic funds could buy the assets they develop, offering them an easier way to exit the projects and take profits on their investments.

In December, market regulator Securities and Exchange Board of India (Sebi) issued draft guidelines for Reits, which pay most of the rent from their buildings to investors as dividends.

But people in the industry say that unless tax breaks are also offered by the government in its upcoming budget, a local Reit market would be a non-starter.

The Sebi proposal contained no mention of the kind of tax breaks that kick-started other property trust markets, but it could be fleshed out in the federal budget due on Feb 29.

‘It should’ve happened five years back,’ said Nayan Shah, chief executive of private developer Mayfair Housing Ltd, which wants to create a property trust of rental housing in Mumbai as soon as Reit regulations are in place.

‘Unfortunately, the government was never able to get over its regulations and set up a proper market,’ he said.

Arshdeep Sethi, head of capital markets at developer RMZ Corp, said he expected a market to be up and running within a year, adding that RMZ would also look to sell buildings into a trust.

‘We wouldn’t mind exploring it. It’s an instrument that will be interesting for investors and developers,’ Mr Sethi said.

Property trusts, long established in the United States and Australia, have caught on in Asia in the last five years, with investors enjoying stable yields that are higher than government bonds, and share price rises when rents and property values rise.

However, they have not been immune from global stock market turmoil, with Singapore’s Reit index , for example, dropping 20 per cent in the second half of last year and a further 13 per cent so far this year, in line with the broader market.

Reits would be riskier in India’s immature market, where a three-year building boom sparked by easing of foreign investment rules barely masks crumbling colonial-era infrastructure.

Overbuilding in some areas worries investors. For example, around 50 malls are being built in the New Delhi suburb of Gurgaon. With the information technology industry thriving, around 100 million sq ft of office space is to be built over three years, equal to all the office blocks in Washington DC.

An economy growing at around 9 per cent per year has helped push up Mumbai office rents by a fifth in the last year, but as new developments pop up in India’s main cities, old areas can also quickly go out of fashion.

Reits would help cut risks for property investors in the country by improving information flows – as listed securities they provide a constant stock market valuation of buildings and must divulge rental and other data.

As they hanker for new assets to lift investor returns, Reits would also give foreign funds new buyers for their buildings.

Although rules were eased on inward investment in the construction industry in early 2005, overseas investors are still not allowed to own finished buildings.

The likes of Citigroup, Warburg Pincus and Morgan Stanley have preferred to build and sell housing, but could now be tempted into commercial property.

Office yields are about 9-10 per cent in India.

Lacking a home market, a couple of Indian firms are looking to list Reits in Singapore, with the country’s most valuable developer, DLF Ltd, working on a US$1.5 billion initial public offering scheduled for the second quarter of this year.

As well as having an established Reit market, Singapore is attractive to Indian developers as its 10-year bonds trade at 2.3 per cent compared to India’s 7.5 per cent. So trusts, which need to draw investors with a premium to bond yields, can be sold to investors at higher prices in Singapore than in India. Reits in Singapore and Japan now offer yields of about two percentage points above domestic bonds.

But some analysts expect the Reserve Bank of India to push domestic listings by restricting the sale of more Indian assets into Singapore-listed trusts, in an effort to curb capital inflows that threaten to overheat the property market.

‘It might be too much for the RBI,’ said Param Desai, an analyst at India Infoline. ‘In the near future they might come up with a policy to restrict the flow of assets to Singapore.’

For an Indian Reit market to take root, DLF chief financial officer Ramesh Sanka said the government must waive stamp duty and introduce the tax ‘pass through’ that made Singapore’s US$19 billion Reit market popular.

Trusts there do not pay corporate tax but investors pay tax on dividends at their personal rate.

Sebi’s guidelines stipulated that Reits should pay at least 90 per cent of annual income as dividends and borrow no more than 20 per cent of gross assets, but no mention was made of tax.

 

Source: Reuters (Business Times 14 Feb 08)

New Zealand property prices, sales slip in Jan

(WELLINGTON) New Zealand house prices fell and sales dropped in January as the previously hot market continued to cool, the Real Estate Institute of New Zealand (Reinz) said yesterday. The Reinz national median house price fell 1.4 per cent to NZ$340,000 (S$379,000) from December, but was 4 per cent higher than a year earlier.

Institute members sold 5,186 houses in the month compared with 5,597 the month before, a fall of 7.3 per cent. The figure was down 31.5 per cent on a year earlier, and was the lowest since January 2001.

National President Murray Cleland said the fall in the number of house sales meant lower prices could be expected. ‘Although we would prefer to see the next two months trends first, it is obvious that people need to be prepared for prices to move back in 2008,’ he said in a statement.

The New Zealand housing market had now turned to buyers’ advantage, Mr Cleland said. ‘It is clear from the days to sell and low sales volumes that there is a growing tension between the prices vendors are seeking and what buyers are offering – buyers have been quick to sense that the market is weakening and they are ready to take advantage of that situation.’ The median number of days taken to sell a house rose to 49 days from 36 in December and 38 days a year ago. It was the longest period to sell in eight years.

The Reserve Bank of New Zealand left its official cash rate unchanged at 8.25 per cent last month, saying that the housing market, one of its major inflation worries, was continuing to slow. The latest Reuters poll has most of the 16 economists surveyed expecting no change to rates until later this year.

Prices fell in seven of the Reinz’s 12 regions and rose in five. Prices in Auckland City, the country’s biggest population and commercial centre, fell 6 per cent and by just under one per cent in the capital Wellington.

Government agency Quotable Value reported on Monday that house prices grew 8.9 per cent in the year through January, compared with 10 per cent in December. It was the fifth-straight month that growth in house prices eased.

 

Source: Reuters (Business Times 14 Feb 08)

Ayala Land bullish on Philippine housing market

(MANILA) Ayala Land, the Philippines’ biggest developer, plans to sell more homes this year, betting that housing demand will shrug off the impact of an economic slowdown in the US, the Philippines’ largest export market.

The company will sell more than the 4,404 lots and condominiums that it sold last year, chief financial officer Jaime Ysmael said yesterday in an interview in Manila. Ayala will offer 5,622 residential properties for sale this year, up from 5,182, he said. He declined to discuss sales and profit forecasts.

‘The domestic market could neutralise the negative effects’ of a US slowdown, Mr Ysmael said. The government last month said that the Philippine economy expanded 7.3 per cent last year, the fastest pace in 31 years.

The US is the source of half the remittances from overseas nationals, which make up a tenth of the Philippine economy. Sales to Filipinos abroad and the families that they support at home make up about a third of Ayala Land’s residential sales, Mr Ysmael said. Many of those customers are Filipinos living and working in the US, he added.

Last Friday, Ayala Land said that its 2007 profit rose 13 per cent to 4.4 billion pesos (S$154 million). Its sales were little changed, at 25.7 billion pesos. The developer said that it would boost capital spending by 60 per cent, to 24.3 billion pesos. About 20-30 per cent of that will fund new projects, Mr Ysmael said.

The company will probably sell more than two billion pesos of bonds this year to pay that amount of debt maturing in the fourth quarter, he added.

Mr Ysmael also said that an Asian property fund co-founded by Ayala Land may invest in Vietnam and expand its investments in China after closing itself to investors.

ARCH Capital Management Co, the fund’s management company, raised US$330 million, compared with the US$200 million targeted when Ayala Land and two partners set up the fund in 2006.

A US or global economic slowdown ‘may close some doors but the deal flow is still quite robust’, Mr Ysmael said. ‘There might be an impact but Asia is big. There are opportunities out there despite the possible slowdown.’

Ayala Land joined with its parent company Ayala Corp and Hong Kong-based Great ARCH Co to set up ARCH Capital Management. The fund is authorised to invest in Asian countries except Japan and the Philippines. ARCH Capital’s projects in Bangkok and Macau, China, comprise a fifth of available funds, Mr Ysmael said.

Source: Bloomberg (Business Times 12 Feb 08)

New Zealand house price growth slows as demand cools

(WELLINGTON, New Zealand) House prices in New Zealand rose at the slowest pace in a year last month as record-high interest rates and rising living costs curbed demand for property.

Prices climbed 8.9 per cent in January from a year earlier, moderating from a 10 per cent increase in December, Quotable Value New Zealand Ltd, the government valuation agency, said in a report released in Wellington yesterday.

A cooling property market will further slow an economy that expanded at the slowest pace in a year in the third quarter.

Reserve Bank of New Zealand governor Alan Bollard raised the benchmark interest rate four times last year to 8.25 per cent, straining the budgets of lower-income homeowners and forcing some property investors to renegotiate finance.

‘Over the course of the year, we will see prices drop on a national basis,’ said Nick Tuffley, chief economist at ASB Bank in Auckland. ‘Sales are slowing but the number of houses on the market is rising, so many sellers are going to have to look at the price they are willing to accept.’

The number of house sales in December slumped 32 per cent to a seven-year low, the Real Estate Institute said on Jan 16.

Mr Tuffley said that people are seeking to sell properties that they had been using as an investment, while buyers are ‘on the sidelines’ because of the increasing cost of home loans.

The average price of a New Zealand house was NZ$390,636 (S$437,500) in January, yesterday’s report showed.

In December, the interest rate on a two-year fixed mortgage was 9.38 per cent, up from 8.18 per cent a year earlier.

The cost of mortgage repayments on a median-priced New Zealand home was about 82 per cent of the nation’s average income in December, a measure of housing affordability that is close to the record low, according to the website interest.co.nz.

‘Higher mortgage interest rates are affecting property owners on low discretionary incomes,’ said Blue Hancock, a Quotable Value spokesman. ‘There are increasing reports from our valuers of properties going to mortgagee sale, with the number of these sales likely to increase.’ Property price growth has already stalled in some parts of the country, Mr Hancock said.

Source: Bloomberg (Business Times 12 Feb 08)

Growth in S-E Asia property market sustainable: DTZ

THE property markets of South-east Asia are expected to sustain the buoyant growth seen in 2007, says DTZ Debenham Tie Leung.

DTZ said that residential markets in the region are expected to continue to grow, ‘driven by steady economic expansion, increasing affluence and increasingly attractive projects as developers strive to refine concepts’.

In Vietnam, DTZ noted that demand for residential properties, which was already growing fast, was bolstered by the recent relaxation in rules for housing ownership, allowing foreign land ownership terms to increase from 50 to 70 years. DTZ said this also encouraged foreign developers to build residential properties there.

In Malaysia, DTZ said take-up was encouraging for high-end condominiums in Kuala Lumpur, with a complete sell-out for several luxury projects. This was supported by the relaxation of rules for foreigners to buy residential properties and the waiver of real property gains tax last April. While monthly average gross rents remained unchanged at RM4 (S$1.25) per square foot, average capital values increased 3 per cent year-on-year to an average RM500 (US$152) psf.

The residential market in Thailand is also expected to recover, as the political situation improves and developers are encouraged to launch projects which have been withheld.

In the office sector, DTZ says demand for office space in Vietnam is expected to continue to be underpinned by limited potential supply. It said that in Vietnam, most potential supply comprises nonprime office buildings, ‘which will lead to greater competition for prime office space’. Occupancy remains high, at above 95 per cent, while Grade A rents average US$3.70 psf per month in Hanoi and US$4.37 psf per month in Ho Chi Minh City.

The office market in Kuala Lumpur was also active, with increasing demand by the services, oil and gas, information technology and financial sectors. Together with limited new supply, prime office rents rose 7.8 per cent year-on-year to RM62.65 (US$18.16) psm.

Jakarta also saw office occupancy rates of over 90 per cent. Rents did, however, remain at about US$0.76 psf per month amid fluctuations in exchange rates.

The Bangkok office market was the only one that was subdued, with a negative net absorption for H1 2007. DTZ said this was due to a less favourable operating environment which affected investors’ confidence.

 

Source: Business Times 5 Feb 08

US economic woes, rate cuts fuelling HK property boom

Analysts see prices revisiting the heady 1997 peak

(HONG KONG) When first- time buyer Judy Kwan heard a flat was for sale in a street she admired in Hong Kong’s Wanchai district, she snapped it up within 24 hours without even seeing it, inheriting a tenant she had never met.

Now she wants to buy another as the property market surges from a strong economy and mortgages become cheap as local interest rates drop in line with rate cuts in the United States.

Ms Kwan hopes property investment will allow her to retire in five years’ time, aged 50.

‘The price was right and the market’s going up,’ said Ms Kwan, an accountant, who paid US$282,000 for the boxing ring-sized flat in November.

The apartment’s value has risen 10 per cent since then and analysts predict that falling interest rates and rising salaries will propel prices back to a heady 1997 peak.

Hong Kong’s economy is riding on the coat-tails of China’s boom, but its currency peg with the US dollar forces the territory to officially track US interest rate cuts. Local banks have more leeway but have still slashed rates by 100 basis points in the past two weeks as the US federal funds rate has fallen to 3 per cent.

So the housing downturn and mortgage crisis that threatens the US economy has indirectly bolstered Hong Kong property.

Monthly transactions for mass market housing in the final three months of last year were on average 63 per cent higher than in the rest of 2007, hitting their highest level for a decade.

Real Hong Kong mortgage rates are now negative, below inflation of 3.8 per cent and it has become cheaper to buy than rent, analysts say.

A Merrill Lynch property analyst has predicted a 50 per cent rally in property prices in the next two years, prompting several Hong Kong employees at the bank to go on an apartment hunting spree. UBS has the same forecast.

Geoff Lewis, head of investment services at JF Asset Management, said property might ‘catch fire’.

The expected boom fed a price rally late last year in Hong Kong’s biggest developers, including Sun Hung Kai

Properties, Cheung Kong Holdings and Henderson Land Development, but Hong Kong’s property sub-index has see-sawed this year.

Several Hong Kong developers are also expected to get an extra kick from their fast growing mainland China businesses.

But many analysts say buying an apartment is better than buying shares, as equity markets will probably stay volatile. Others suggest investors suffering share losses might have less cash to invest in real estate.

New housing supply in the next three years is forecast at half levels seen during the 1990s boom, and interest rates could fall further while inflation heads above 4 per cent, economists say.

With no control over monetary policy and inflation on the rise, a 50 per cent appreciation in flat prices could pose a risk for an economy that saw property prices nosedive 65 per cent when the last property boom burst 10 years ago.

Economists, however, are not worried about an asset price bubble just yet.

They think a strong property market will create wealth, spur consumer spending, and enable the territory to still notch up 4-5 per cent economic growth even if the US economy tips into recession and hits exports from one of the world’s busiest ports.

Hong Kong’s gross domestic product (GDP) has grown an average 7 per cent annually in the last four years.

‘Mass market property prices are still 35-40 per cent below their peak in 1997,’ said Nicholas Kwan, Asian head of research at Standard Chartered Bank.

‘So even if they rise 30-40 per cent, prices would only be what they were 10 years ago,’ he said. ‘It’s hard to argue that would be a bubble.’

Hong Kong home prices slid after the 1997 Asian economic crisis. Home prices were rocked by the bursting of the dotcom bubble and they slumped in a 2003 outbreak of the Sars respiratory disease, before rebounding about 80 per cent in the last four years.

Clifford Lam at Credit Suisse believes a steady Hong Kong economy could send home prices up 15-20 per cent this year but warns against complacency.

‘If the US goes into recession and China’s economic growth slows, Hong Kong businesses, including exporters and high rollers in the financial industry, are going to get hit,’ he said. ‘Some of the home buyers that are jumping into the market on the assumption property prices will rise 40-50 per cent will be disappointed.’

Prices for luxury property, on a four-year roll, have already returned to 1997 levels, with an Indonesian fund paying US$30 million for a house on Hong Kong’s iconic mountain, the Peak, last month – an Asian record on a per sq ft basis.

With the pegged Hong Kong dollar’s weakening, property has become attractive to foreigners and mainland Chinese.

For Judy Kwan, buying an apartment allows her to diversify out of a Hong Kong stock market that surged 39 per cent in 2007, and get a yield on her investment of 5.6 per cent a year. Bank deposit rates range between 0.75 per cent and zero.

‘I don’t believe in putting money in the bank, inflation is rising,’ said Ms Kwan, who has doubled her money on some mutual fund investments over the past four years. ‘You need to diversify your investments and rental income will cover my mortgage. It’s a win-win situation.’

 

Source:  Reuters (Business Times 5 Feb 08)

Real estate firm’s offices smashed after closures

Customers and staff lash out; company blames China govt policies for its woes

BEIJING – EMPLOYEES and customers of a leading real estate company have smashed its offices after the closure of some 1,000 of its branches across China.

Chuanghui said it had closed more than half of its 1,800 outlets since October.

A company official blamed the company’s woes, including an 80 per cent drop in its Shanghai business, on government policies to cool the real estate sector and rein in credit growth.

‘The market has taken a turn for the worse and our deals have dropped a lot,’ Mr Zhang Min, Chuanghui’s corporate planning director, told the media from the company’s headquarters in Shenzhen.

A second official, quoted in the local media, said Chuanghui’s problems stemmed from a costly expansion in Shanghai.

There was no word on how the company will compensate affected employees and customers.

New rules preventing people from obtaining mortgages on second homes, coupled with a government freeze on new bank lending at the end of 2007, have begun to hit China’s real estate market.

Prices fell 20 per cent in December alone in both Beijing and Guangzhou, the state media reported, without specifying whether they were referring to new or existing homes.

The authorities have previously sounded the alarm about surging prices, asking developers to build more affordable housing.

‘The government is obviously keenly aware that most people’s big investments are in residential property, so they’re very sensitive to it and don’t want big price moves,’ said Mr Michael Hart, managing director of property services firm Jones Lang LaSalle in Tianjin.

‘There is no good way to have a perfect balance, so that’s the government’s challenge,’ Mr Hart said.

All of Chuanghui’s offices in four Pearl River Delta cities, including Guangzhou, were closed on Tuesday, while dozens more in Shenzhen and two other southern cities were also shut, local media said. The company has announced plans to withdraw from Shanghai on Jan 11.

Mr Zhang added that Chuanghui’s cuts would help it stay afloat. But speculation that Chuanghui could face bankruptcy has panicked its employees and customers.

One photo on a newspaper website showed people standing in front of locked doors with a sign reading: ‘Chuanghui, give us back our hard- earned money.’

The People’s Daily reported in its online version that some of Chuanghui’s offices in southern Guangdong province were smashed. Computers and printers were missing from the offices, said other reports.

A teacher with the surname Liang said she had paid Chuanghui more than 10,000 yuan (S$2,000) for an apartment, but had not got her title deed.

An employee, identified by his surname Wang, returned to his former office to collect pay arrears only to find it empty.

 

Source: REUTERS (The Straits Times 17 Jan 08)

HK’s Far East to spin off hotels into US$513m Reit

It’ll own up to 75% of the trust and expects HK$1.22b gain from the move

(HONG KONG) Far East Consortium International Ltd plans to spin off its hotels into a property trust worth at least US$513 million to raise funds to repay loans and start new property projects.

The planned initial public offer (IPO), announced by the firm in a statement on Tuesday, could struggle to draw investors, who have been sceptical about real estate investment trusts (Reits), preferring listings by Chinese developers who promise fast earnings growth.

But Reits, which give bond-like returns by paying most of their rent to investors, can be good defensive plays at a time when markets are choppy.

‘Given Hong Kong’s low interest rate environment, Reits act as high yield plays, which can attract investors’ interest,’ said Ginger Capital analyst Meko Zhu.

Far East did not say how much its trust was likely to yield, but Regal Reit, the only hotel portfolio of Hong Kong’s six listed property trusts, is forecast to give a 10 per cent dividend yield for 2008 at its current share price – or more than seven percentage points over local 10-year bonds.

Reits in Singapore and Japan are trading at around 2.2 percentage points more than domestic bonds.

Regal had to scale down the size of its share sale last March and is trading at 20 per cent below its IPO price. But this year, the trust’s share price is little changed, compared to a 10 per cent drop in the Hang Seng Index.

Far East said that it would hold up to 75 per cent of its hotel Reit, which will own seven hotels in Hong Kong, including Cosmopolitan Hotel, Cosmo Hotel and Lan Kwai Fong Hotel.

The trust will have an option to buy another three hotels in Hong Kong and two in the Chinese provinces of Sichuan and Hubei.

For investors, a hotel Reit is typically different from investing in a hotel operator in that it offers a guaranteed base rent – from the lease to the hotel operator – with a share of extra income if there is high room occupancy.

This gives investors a stable income, and protection from downturns, but only limited upside if the business flourishes.

In the last five years, landlords across Asia, particularly in Japan and Singapore, have been keen to spin off buildings into Reits to fund expansion at a low cost of capital.

In most places, investors liked their high dividends and potential for income growth as property markets and rents rose.

Hong Kong’s Reit market kicked off in November 2005 when the city’s first property trust, the Link Reit, launched a hugely popular IPO.

But investors quickly became wary as developers such as Cheung Kong (Holdings), Henderson Land Development and Great Eagle Holdings Ltd employed financial tricks to artificially lift the yield of their Reits.

Critics accused the firms of using the securities to sell buildings at above-market prices.

Far East Consortium said that it expected to realise a net cash inflow of HK$3.72 billion (S$682.4 million) from the Reit spin-off, and a gain of HK$1.22 billion.

The firm added that it would now focus on developing hotels outside Hong Kong and China, as well as property development.

The company has appointed HSBC and Deutsche Bank as sponsors, with Somerley Ltd and Kingsway Group as financial advisers for the deal.

 

Source: Reuters (Business Times 17 Jan 08)

UEM Land wants govt to ease limits

(KUALA LUMPUR) UEM Land Sdn, overseeing Malaysia’s biggest property project, wants the government to ease limits on foreign purchases to aid the company’s plans to attract Singaporeans seeking cheaper homes outside the city-state.

Foreigners can now only own half of the properties in any Johor resort development, and the limit is 20 per cent for other residential projects, UEM managing director Wan Abdullah Wan Ibrahim said yesterday in an interview in Kuala Lumpur.

‘We’ve got a backlog of foreign buyers who want to buy but we cannot sell’ to them, Mr Wan Abdullah said. ‘The prime minister wants the region to be investor friendly and international in content, so how are you going to attract international investors if you have quotas?’

UEM is the biggest developer of the 24,000-acre Nusajaya city project in the southern Malaysian state of Johor, which the government is redeveloping to boost economic growth and woo RM382 billion (S$167.6 billion) of investments to the region in two decades.

Private home prices in Singapore soared 31 per cent last year to the highest in 11 years, the city-state’s Urban Redevelopment Authority said on Jan 2.

The government last year sought to bolster the Johor projects by relaxing investment rules, accelerating approvals and making it easier for foreigners to buy properties in the country. The quotas are still a drag on Johor, Mr Wan Abdullah said.

About 60 per cent of UEM’s foreign buyers are Singaporeans and most of the rest are expatriates who work and live in Singapore, he noted. ‘Because of spiralling prices in Singapore, they start to look somewhere else near,’ Mr Wan Abdullah added.

 

Source: Bloomberg (Business Times 15 Jan 08)

Limitless launches US$1.2b loan

(LONDON) Government-owned Dubai property company Limitless has launched syndication of a US $1.2 billion, two-year Islamic loan, which will be used to finance international projects, the borrower announced.

A bank meeting was held on Sunday in Dubai and further roadshows will be held in Singapore, Kuala Lumpur and London, the company said, adding that Emirates Bank and Emirates Islamic Bank are initial lead arrangers.

A banking source told Reuters Loan Pricing Corp (RLPC) that Arab National Bank and National Bank of Abu Dhabi joined the deal as mandated lead arrangers prior to the syndication launch.

The banker added that the deal pays a margin of 125 basis points (bps) over the London Interbank Offered Rate (Libor).

 

Source: Reuters (Business Times 15 Jan 08)

M’sian property uptrend seen to continue

(KUALA LUMPUR) Malaysia’s real estate sector is expected to remain on the upside for the next few years, backed by positive interest in the market, says a report in Malaysia’s Business Times.

Malaysian Annual Real Estate Convention 2008 (Marec) organising chairman Siva Shankar said that the scenario is likely to continue despite the escalating prices of houses in the country, especially in prime locations.

‘We believe the property market will remain bullish and the uptrend will continue for the next two to three years,’ he told reporters after the opening of Marec 2008 in Kuala Lumpur last Saturday.

There are more than 3.9 million residential units, 320,570 shops, over 8.12 million square feet retail space offered by 596 complexes and 14.7 million sq ft office space still unsold in the country.

Marec 2008 was officiated by Housing and Local Government Minister Ong Ka Ting.

Also present was Malaysian Institute of Estate Agents president K Soma Sundram.

Mr Siva noted that since January last year, demand for properties has shifted to the high-end and this has helped increase their value by 30-40 per cent.

‘High-end properties within the vicinity of the Kuala Lumpur City Centre (KLCC), Mont’Kiara, Bangsar and Damansara are doing well.

‘In the KLCC area, for instance, some properties there were transacted for a premium of some 30 to 40 per cent higher,’ he said, noting that the properties were usually priced from RM1 million (S$439,000) and above.

Meanwhile, Mr Soma urged Malaysian real estate agents to form smart partnerships with their foreign counterparts to tap the regional property scene.

‘Instead of focusing only on the local market, real estate agents should take the opportunity to tap other regional markets and form strategic alliances with them (foreign real estate agents), thus creating a regional brand,’ he said.

‘Take Vietnam and Cambodia, for instance. They need good real estate agents. We can go and set up operations there and market the properties for them to both local and foreign buyers.

‘At the same time, we could lend our expertise in the field to the real estate agents there.’

Mr Soma said that Vietnam’s real estate sector was experiencing a property bubble, partly because of the rapid economic growth it had been experiencing for the past few years.

 

Source: Business Times 15 Jan 08

KL moots star rating for housing projects

Move will allow buyers to assess environmental risk

(KUALA LUMPUR) Housing projects in Malaysia could be given a rating of one to five stars, depending on their level of risk to the environment.

Natural Resources and Environment Minister Azmi Khalid said on Monday that the move was to discipline developers to exercise care and emphasise safety for property buyers and dwellers. This proposal, however, was still being studied, he added.

‘It is suggested that all commercial and housing projects be given star ratings, perhaps a rating of one to five. A five-star rating means the project is risk-free while a one-star rating denotes high risk. It is up to the people whether they want to buy the property or not.

‘If they still want to buy property in an area with a high environmental risk, then they will have to face the consequences.’

Mr Azmi was speaking to reporters in KL after launching the International Year of Planet Earth (IYPE) celebration and the Petroleum Geology Conference and Exhibition, organised by the Geological Society of Malaysia and Petronas.

He said most housing developers were too profit-oriented such that they neglected safety aspects and the effects of their projects on the environment.

‘There are those who build houses after cutting off parts of hills and covering up the water channels. This can cause flash floods and other disasters,’ said Mr Azmi.

Earlier in his speech, he said the main aim of the IYPE celebration was to promote the potential of geological science in creating a safe, healthy and prosperous society and its effective use, such as in the petroleum industry.

Fifty-two technical papers are being presented and discussed at the two-day conference, attended by about 1,000 local and foreign participants.

The exhibition, meanwhile, is participated by 35 organisations including petroleum companies, service companies and local and foreign universities.

 

Source: Bernama (Business Times 15 Jan 08)

Home-buying move may spur EPF withdrawals

RM9.6b will be unleashed yearly if all members take up KL’s offer: CSFB

IN KUALA LUMPUR

A GOVERNMENT initiative to boost home ownership is expected to ‘free up’ billions of ringgit from a national social security fund, and boost property sales.

Beginning January, members of Malaysia’s Employees Provident Fund (EPF) are allowed monthly withdrawals to fund mortgage payments for one property under the scheme which was proposed in last year’s national budget.

The EPF is a national compulsory savings scheme funded by contributions from both employers as well as employees. Thirty per cent of such contributions are maintained in a separate account called Account II.

Members can now withdraw from Account II for such a purpose, the significance of which has been underestimated by the market, according to stockbroker Credit Suisse First Boston Malaysia (CSFB). Should EPF’s entire estimated membership of 5.4 million take up the offer, an estimated RM9.6 billion (S$4.2 billion) would be ‘unleashed’ annually for home purchases, CSFB observed.

Mass-market developers are likely to benefit the most, it said in a report which pointed out Singapore properties received a shot in the arm when a similar proposal was implemented for its Central Provident Fund (CPF) housing scheme. The main difference was the maximum withdrawal permitted – under Singapore’s CPF, members could take out 22 per cent of total salary compared with 7 per cent under the EPF scheme.

While the impact of the EPF initiative would be less, property players expect it to help spur demand. With inflation rising, the initiative would ‘lighten the burden’ of borrowers, particularly lower-to-middle income end users as opposed to investors, said Gamuda Land senior general manager Angela Tham. ‘Most buyers can come up with the 10 to 15 per cent downpayment, but have difficulty funding the rest,’ she said.

Ms Tham’s observations gel with statistics which show that nearly 80 per cent of property transactions involve units costing less than RM200,000. Those costing RM50,000 to RM100,000 account for slightly over a quarter of total transactions.

Home ownership in Malaysia is about 67 per cent, CSFB said, adding that RM9.6 billion is equivalent to a third of 2006’s residential property transactions by value. The amount is also double the estimated residential property stock overhang in the country of RM4.2 billion. Of the 25,300-odd units unsold, Johor has the largest, or nearly a third, of total overhang.

December was a good month, according to Johor Real Estate Housing & Developers’ Association chairman Steven Shum. Mr Shum told BT higher sales were registered because home buyers were worried prices would shoot up further this year owing to raw material cost increases as well as rising inflation.

Although too early to gauge the scheme’s effect, Mr Shum believes there could be an almost immediate effect on two main groups: those who already have an existing housing loan and those that might want to upgrade.

Generally, EPF withdrawal rates have averaged 40-plus per cent while the bulk of members may not act on it, a developer who is less bullish about the initiative observed. Nonetheless he said: ‘The impact is small but the psychology is big.’

Michael Geh of Raine & Horne, Penang believes the EPF scheme, coupled with attractive financing packages, would continue to drive real-estate sales, especially once members see how they can take advantage of the scheme.

 

Source: Business Times 10 Jan 08

Hektar Reit aims to quadruple mall portfolio

Trust is focusing for now on Malaysia with its growing retail market

MALAYSIA-LISTED Hektar Reit (H-Reit) plans to quadruple its mall portfolio in about four to five years as it rides on Malaysia’s growing retail market, a senior member of the trust’s management team said.

Zalila Mohd Toon, chief financial officer of the trust’s manager, told BT that there is plenty of room for growth in the retail sector in Malaysia.

Right now, the real estate investment trust (Reit) has two malls – Subang Parade in Selangor and Mahkota Parade in Melaka – worth some RM560 million (S$245.7 million) in total.

‘Our target is to grow it (the portfolio) to RM2 billion,’ Ms Zalila said.

While the Reit is not restricted to investing only in Malaysia, for now it will focus its attention on buying malls in the country, she said.

‘We are not restricted, but we think there are still a lot of opportunities in Malaysia,’ Ms Zalila said. ‘For now, we are concentrating on Malaysia.’

Retail sales in Malaysia are estimated to have grown some 8 per cent in 2007, data from a leading industry body shows. In line with this, foot traffic at H-Reit’s malls have also gone up, Ms Zalila said.

At Subang Parade, foot traffic in the first quarter of 2007 was about 2.3 million, up 79 per cent over the previous comparable period. And at Mahkota Parade, visitor numbers in the first quarter of last year was about 2 million, up 10 per cent compared with the same three months in 2006.

Occupancy rates at both malls are also high, with Subang Parade recording an occupancy of 99.1 per cent as of Sept 30, 2007 and Mahkota Parade 93.9 per cent.

To ride on Malaysia’s retail story, Singapore-listed Frasers Centrepoint Trust (FCT) paid $46.6 million to buy 27 per cent in H-Reit in May 2007, kick-starting its overseas expansion.

Under the strategic partnership, FCT’s parent company Frasers Centrepoint Limited (FCL) also acquired 40 per cent of H-Reit’s manager Hektar Asset Management Sdn Bhd. FCL will gain board and exco representation in the management company some time this year.

Going forward, Ms Zalila said that the two companies will look at possible collaboration in real estate projects, which will provide a steady acquisition pipeline for H-Reit.

Source: Business Times 10 Jan 08

China probes foreign investment in property

(BEIJING) China has launched a nationwide probe into foreign investment in the red-hot real estate market, state media said yesterday, while mulling new measures should existing limits prove ineffective.

The State Administration for Industry and Commerce at the end of November had ordered branches across the country to carry out the probes, the Shanghai Securities News reported.

It is a sign of problems in the enforcement of previous restrictions, the report said, citing an unnamed industry insider who participated in a recent government seminar on limits on foreign investment.

New tightening measures are highly likely to be introduced this year if the probes prove that existing limits were ineffective, the source added.

Foreign investment in China’s real estate market surged in 2007 despite a series of measures introduced since 2006 tightening approvals and stepping up supervision of direct foreign participation in the industry.

Latest official figures showed that the total value of foreign investment in the market soared by 71.9 per cent in the first 11 months of 2007 to 53.9 billion yuan (S$10.6 billion), stoking fears that a bubble may be emerging.

The State Administration for Industry and Commerce declined to comment on details of the investigations .

 

Source: AFP (Business Times 8 Jan 08)

Yanlord acquires site for residential devt in Shanghai

REAL estate developer Yanlord Land Group is extending its presence in Shanghai through the purchase of a residential development site for 600.4 million yuan (S$118.7 million).

Yanlord subsidiary Shanghai Renjie Hebin Garden Property Co acquired the 117,459 square metre site in Qingpu District in a government auction last month.

Commenting on the acquisition, Yanlord chairman and chief executive officer Zhong Sheng Jian said: ‘Shanghai remains a key focus in our expansion strategy.’

He said the acquisition, together with the acquisition last November of the New Jiangwan Urban Area site in Shanghai Yangpu District, shows the company’s continued confidence in the potential of the Shanghai real estate sector.

‘This latest acquisition not only replenishes our land bank in Shanghai, in which we have been the early entrants since 1993. More importantly, this newly acquired site also allows us to further establish our foothold in the rapidly emerging Qingpu District where our Shanghai Yunjie Riverside Garden Phases 1 and 2 are located,’ he added.

The site has a view of Yangli Jing River, Dingpu River and Daying Harbour. With a plot ratio of 1.0, the site cost 5,112 yuan per sq metre of gross floor area. Yanlord plans to develop the site into a high-end residential development comprising low-rise and townhouse apartment units.

Yanlord Land is based in China and focuses on developing high-end integrated residential projects and integrated property development projects in high-growth cities in China.

Yanlord entered the China market about 15 years ago and developed a number of large-scale residential property developments with international communities of residents, such as Yanlord Gardens, Yanlord Riverside Gardens, Plum Mansions and Orchid Mansions.

 

Source: Business Times 4 Jan 08

M’sian building sector set for 5.8% growth

Driving expansion are oil pipeline, rail, water, undersea power cable projects

(KUALA LUMPUR) Malaysia’s construction sector is expected to grow for the second consecutive year by 5.8 per cent compared with 4.7 per cent last year, fuelled by stimulus measures outlined to boost domestic activities, says research company Inter-Pacific Research Sdn Bhd.

In its economic and market outlook report released here yesterday, the research house said the positive outlook will help boost investors’ confidence by yielding the desired multiplier effect that will enable the domestic economy to withstand any adverse shocks arising from the external front.

The country’s construction sector was in recession for three consecutive years from 2004.

Inter-Pacific said some of the high impact projects expected to contribute to the growth will be the Trans-Peninsular oil pipeline (RM25 billion or S$10.8 billion), double tracking rail projects (RM19 billion), Pahang-Selangor water transfer (RM9 billion) and the Bakun undersea cable and overhead transmission (RM9 billion) projects.

Following the slight decline in government development expenditure by 2.1 per cent to RM40 billion this year from RM40.9 billion last year, private finance initiative projects are also expected to play a more meaningful role this year.

However, Inter-Pacific said in its report that there was a disturbing trend in the utilisation of development expenditure. ‘A total of RM200 billion has been allocated under the Ninth Malaysia Plan and only 29.1 per cent or RM58.2 billion has been utilised so far.

‘For instance, the actual projection for development expenditure in 2007 is RM40.9 billion but only RM22.3 billion were utilised until third quarter.

‘On an annualised basis, our estimates showed gross development expenditure would reach RM30 billion in 2007, a shortfall of RM10.9 billion. This trend is somewhat disturbing.’

Citing the importance of the current development of economic zones in the country where huge funds have been allocated, it said: ‘If it persists, it raises our scepticism as to whether there will be another construction boom. The last time we experienced a boom was between 1994 and 1996 driven by buildings and transport-led projects. This time around, we expect growth to come from rail, water, oil and gas and regional developments. Hence, we hope for greater development expenditure in 2008.’

Meanwhile, the building materials industry is also expected to benefit from the improving construction activities, with cement and steel being the two sub-sectors to see significant gains.

‘Whilst taking advantage of improving domestic construction/infrastructure activities, we expect pick up in property activities, strong demand from Singapore for their resorts built and a healthy export market (Middle East construction boom) to further lend support for higher demand of cement. We expect cement demand to grow by about 6 per cent per annum over 2008 and 2009,’ Inter-Pacific said.

It said the stable cement price averaging RM215 per tonne coupled with better utilisation rate, should help to partly offset the rising operation costs from electricity, paper bags, fuel and raw materials.

Steel, meanwhile, is envisaged to exhibit better performance supported by domestic construction activities, higher selling prices, and stronger export market.

Steel prices are expected to remain firm in the near term, mainly supported by strong demand from the single largest consumer namely China, said Inter-Pacific.

The International Iron and Steel Institute has projected the global demand for steel this year to grow by 6.1 per cent, while demand from China, which consumes 35 per cent of the total world steel, is set to expand by an additional 10 per cent this year.

 

Source: Bernama (Business Times 3 Jan 08)

Ho Chi Minh City frets over property investment

(HO CHI MINH CITY) Around 85 per cent of foreign direct investment (FDI) in Ho Chi Minh City last year has flowed into the property sector, worrying experts and authorities, Vietnam News Agency (VNA) reported yesterday.

HCM City had attracted US$2.5 billion in the first 11 months, the highest in the country along with Hanoi and Dong Nai province, Thai Van Re, head of the city’s Department of Planning and Investment, said.

Over US$2.1 billion had been invested in real estate, mainly apartment and office blocks, he added.

Do Thi Loan, general secretary of the HCM City Real Estate Association, said her association had been contacted by many companies from the US, Australia, Canada, Italy, Singapore, China and Japan about investing in the city’s property market as well as elsewhere in Vietnam. They said other Asian markets were nearly saturated while Vietnam was in the first stage of urbanisation, she said.

But the deputy head of the Economics Institute, Nguyen Thieng Duc, warned that haphazard construction would affect the city’s visual appeal and environment. He added the administration should improve infrastructure to prevent traffic jams and floods, and make it appealing for foreigners to invest in other sectors.

 

Source: Bernama (Business Times 3 Jan 08)

Ascendas in $144m Viet industrial park deal

DEVELOPER of industrial and business parks Ascendas has teamed up with Vietnam’s state- owned Protrade to jointly develop a US$100 million (S$144 million) industrial park.

It will mark Ascendas’ first major development project in Vietnam.

The ambitious project involves developing a 500ha industrial park in Binh Duong province which will cater to light and clean industries.

Such industries could include those in the food and beverage, precision engineering, electronics and healthcare sectors.

Called the Ascendas- Protrade Singapore Tech Park, it will be developed in three phases. The first phase – of 150ha – is set for completion in December next year.

In three years, when the project is completed, it is expected to cater to about 40,000 people working at the industrial park.

The park will offer businesses the options of prepared land and built- to-suit as well, as ready- built facilities, to give a hassle-free start-up.

The investment of US$100 million – with Ascendas being a 70 per cent joint-venture partner – is for the preparation of the land and necessary infrastructure for the whole project.

Ascendas president and chief executive Chong Siak Ching said: ‘Singapore is one of Vietnam’s top trading partners. The new park will incorporate the best features and lifestyle concepts from similar projects that Ascendas has done in Singapore, China and other markets in Asia.’

Ascendas already has a presence in Vietnam as a shareholder of the Vietnam-Singapore Industrial Park.

The new industrial park will be a key part of a new 1,350ha An Tay Industry and Service Complex – an integrated township offering living and recreational facilities for people.

Protrade is a Vietnam state-owned company with about 5,000 employees. It has businesses in food and beverage, health care, golf courses, and service apartments.

The project was announced last Saturday in Binh Duong province at a ceremony officiated by Senior Minister Goh Chok Tong and Vietnamese Deputy Prime Minister Hoang Trung Hai.

 

Source: The Straits Times 17 Dec 07

Potential and problems in Ho Chi Minh City

IN HO CHI MINH CITY

BUSINESSMEN, some of them Singaporean, shared their optimism about Vietnam’s economy with Senior Minister Goh Chok Tong over lunch yesterday when he arrived in Ho Chi Minh City on the final leg of his week-long visit to the country.

But the businessmen, among them executives from Singapore’s Keppel Land and Kim Eng Securities, also spoke of the problems they face in doing business there – which Mr Goh later conveyed to Le Hoang Quan, chairman of the People’s Committee in Ho Chi Minh City.

The businessmen complained about infrastructure bottlenecks and the shortage of skilled workers, among other issues.

In his hour-long meeting with Chairman Quan in the evening, Mr Goh suggested that Vietnam, with the help of foreigners, could set up a technical institute to train more skilled workers which, in turn, would attract more foreign investors to the country.

Mr Goh, who has urged Vietnam to shoot for double-digit economic growth during his current trip, is upbeat about Vietnam, especially Ho Chi Minh City.

He told Mr Quan that the city is obviously doing very well.

Mr Goh, who was last in Ho Chi Minh City in 1996, said that as he was driven from the city to the downtown hotel where he is staying, he noticed there were many cars on the road, many of them new.

Indeed, he said, traffic congestion is now a problem.

Shops were filled with branded goods, Mr Goh observed. There were also new buildings, including those built by Singaporean companies like Keppel Land. And Mr Goh said he was impressed with the Saigon South City project, which he was given a viewing of in the afternoon. The city project is built by Central Trading Development, a Taiwanese company.

According to him, these signs suggest that Vietnam’s economic growth took off only in recent years. But Mr Goh expressed concern about rising inflation in Ho Chi Minh City, which Mr Quan pointed out was also a worldwide problem. Mr Quan said inflation would be tackled at the national level in Vietnam.

 

Source: Business Times 15 Dec 07

Sabah’s @ease boutique hotel expects 60% occupancy

It’s part of RM450m Sandakan Harbour Sq integrated project

(KUALA LUMPUR) @ease boutique hotel, a hotel in Sandakan, Sabah, and owned by Sara-Timur Properties Sdn Bhd, expects to draw an occupancy rate of up to 60 per cent in line with the industry’s average rate.

The hotel, built at a cost of more than RM40 million (S$17.4 million), is part of the Sandakan Harbour Square, a RM450 million integrated, commercial, retail and recreational development project.

At a media briefing on @ease boutique hotel, the operator of the hotel, Value Hospitality Group, said the peak season of tourists in Sandakan would be almost throughout the year from April to December.

‘Sandakan itself has been earmarked as a new growth hub for Sabah whereby commercial and tourism activities are increasing over here,’ said Value Hospitality’s area GM, East Malaysia, John Augustin. Value Hospitality is also managing the Prescott and Everly hotels.

The @ease boutique hotel, which had its soft launch on Nov 26, is scheduled to be officially launched on Dec 23.

‘We are looking at opening eight more hotels in the peninsula as well as East Malaysia in the future,’ said Sara-Timur Properties’ joint managing director, Rosita Hamden.

A property developer with various projects in the country, the company is also the main contractor for Phase I and Phase II of the Sandakan Harbour Square.

Ms Hamden said the company was looking at having the same concept of boutique hotel for the eight hotels it plans to build. However, ‘the cost of investment is yet to be decided’.

The @ease boutique hotel features 138 deluxe rooms and suites, a modern business centre, banquet and state-of the-art meeting facilities that businessmen and tourists alike will find convenient and affordable.

Meanwhile, the developer of Sandakan Harbour Square, ICSD Ventures Sdn Bhd, said many have even dubbed the Harbour Square as the ‘Little Hong Kong of the East’ with great potential to grow into a much-sought-after commercial ‘hot spot’ and tourist destination.

Its joint MD, Kenneth KY Tiong said the hotel would be complemented with Harbour Square’s features which include a three-storey central market, jetty, water esplanade and shopping complexes. Harbour Square is scheduled to be completed in early 2010.

 

Source: Bernama (Business Times 13 Dec 07)

Banyan Tree’s Vietnam project grows in size

Bigger-scale resort project estimated to cost less than US$900m

BANYAN Tree’s plans in Vietnam just got bigger, with the company confirming reports yesterday that investments at its massive resort project in central Thua Thien-Hue province will increase from an earlier reported US$270 million to just under US$900 million.

The first phase of construction for what will become an integrated resort project will begin with an Angsana Resort and a Banyan Tree Resort in the first half of next year and is expected to be completed by 2010. The whole project will eventually include seven four and five-star hotels; about 1,000 resort residences for sale; a championship 18-hole golf course; meetings, incentive travel, conventions and exhibitions (MICE) facilities and a retail and spa village featuring the group’s award-winning spas, said Banyan Tree Holdings group managing director Ariel Vera.

‘The initial estimated total project cost for all components of the integrated resort, including the resort residences for sale, is less than US$900 million,’ said Mr Vera. The increase in investment was due to the initial estimates factoring in only five hotels compared to seven now. The hotels were also of a smaller scale and the earlier plan did not include MICE facilities and the golf course. The number of resort residences for sale was also significantly less than the 1,000 being built under the new plans, a spokesman told BT.

Work on phase two of the Laguna Vietnam resort in the Chang May-Lang Co Economic Zone will begin in the second half and all three phases are expected to completed by early 2014.

The about 300 ha site located in Co Du, Danang, 30 minutes from Danang airport, has a three km stretch of beach backed by mountains, Mr Vera said.

He confirmed that funding for the project will come from various sources including bank debts, proceeds from property sales and equity to be injected from a new private equity fund to be set up and managed by Banyan Tree.

The project is not expected to have a material financial impact on the group’s earnings and net tangible assets for the year.

Banyan Tree will be handling the facilities management of the integrated resort development but will not be managing all the hotels and resorts in the property, said Mr Vera. He declined to name the other five participating hotels as the group is still in discussion with other international hotel chains.

 

Source: Business Times 12 Dec 07

NZ home price rise slowest in 6 months

Prices up 11.4% in Nov as higher rates curb demand

(WELLINGTON) New Zealand’s house prices rose at the slowest pace in six months in November, adding to signs that higher borrowing costs are curbing domestic demand.

House prices gained 11.4 per cent from a year earlier, according to a report released yesterday by Quotable Value New Zealand, the government valuation agency. That’s less than the 12.7 per cent annual pace in October and the slowest since May.

Reserve Bank governor Alan Bollard, who raised the benchmark interest rate four times between March and July to a record 8.25 per cent, said last week the housing market has slowed and will remain in decline as home loan interest rates increase. Home sales slumped 23 per cent in October from a year earlier, according to the Real Estate Institute.

‘The market continues to slow as the number of property sales decline and the time to sell increases,’ said a Quotable Value spokesman. ‘Buyers seem content to take their time before committing and sellers are reducing asking prices accordingly.’

In Auckland, listings of homes for sale are increasing, according to realtor Barfoot and Thompson. At the end of November, the company had more than 6,000 listings, the most since January 2002, it said.

‘Properties need to be priced realistically to sell within a reasonable timeframe,’ director Peter Thompson said.

Mr Bollard last week said he expected the benchmark official cash rate will stay at a record high for longer because of pressure on inflation. He said the effective mortgage interest rate faced by borrowers will rise further. The average interest rate on a two-year mortgage was 9.1 per cent in October, up from 8.1 per cent a year earlier, according to central bank figures.

 

Source: Bloomberg (Business Times 11 Dec 07)

Pawn one property to buy another

(BEIJING) As bank loans for property dwindle, an increasing number of prospective buyers are turning to pawnshops to finance their plans.

Wang, a 40-year-old Beijinger, owns an apartment worth about 700,000 yuan (S$136,000) in the capital.

His desire to move to a larger second-hand apartment worth about one million yuan hit a snag when the owner demanded payment in full. Wang, however, only had slightly more than 600,000 yuan.

People who have already bought houses with a bank loan are required to make a downpayment of 40 per cent of the purchase price. And the loan interest rate should not be lower than 1.1 times the central bank’s benchmark rate.

With the new rules blocking his dream, Wang turned to a pawnshop. He chose to mortgage his first apartment for 400,000 yuan with Beijing Huaxia Pawnshop Co.

He then registered with a real estate agent to sell his first apartment. He soon made a deal where the buyer agreed to give him a downpayment of 400,000 yuan. With the money, Wang paid off his pawnshop loan and ended up buying the larger apartment without a bank loan.

Li Tiejun, a Beijing Huaxia Pawnshop Co manager, said that since the banks had tightened the rules for loans on second apartments, real estate loan volume at his pawnshop had soared 40 per cent.

Likewise, Xu Yunpeng, manager of Beijing Bao Rui Tong Pawnshop, claimed its trade volume in real estate had risen 30 per cent since September.

Some pawnshops advertised for potential customers by claiming that they would give out money for mortgages within three to five days.

 

Source: Xinhua (Business Times 8 Dec 07)

Beijing to probe steep housing prices

Teams will be sent to check if policies to calm market are being enforced

(BEIJING) China’s cabinet will send teams to major cities next week to investigate whether policies to cool the sizzling property market are being enforced properly, sources said.

Beijing has introduced a series of policies over the last few years to curb surging prices and provide more affordable housing but apparently to little effect, as prices have continued to rise steeply, especially in big cities like Shenzhen.

Sources said that the investigation would last about two weeks and would focus on the twin issues of price and supply.

‘Investigative teams will be sent around the country on Monday and will cover key cities that have had rapid property price increases in every province,’ said a source.

According to official figures, housing prices in China’s major 70 cities jumped 9.5 per cent in October this year from a year earlier, accelerating from an 8.9 per cent rise in September and 8.2 per cent in August.

Housing prices are not only a financial issue but also, increasingly, a political one. Chinese Premier Wen Jiabao said during his visit to Singapore last month that housing was his biggest concern regarding Chinese people’s livelihood.

The investigative teams will draw officials from different ministries, including the Ministry of Construction, the National Development and Reform Commission and the Ministry of Finance, sources said.

China conducted a similar investigation in September 2006, covering 11 provinces.

 

Source: Reuters (Business Times 8 Dec 07)

Allgreen takes on 7 China developments

It will work with Kerry Holdings, Kerry Properties on the commercial, residential projects

ALLGREEN Properties of Singapore is set to move into China in a big way with seven commercial and residential developments together with Hong Kong publicly listed companies Kerry Holdings and Kerry Properties. All the companies are controlled by Malaysian tycoon Robert Kuok.

The projects, which have a total investment amount of 29.3 billion yuan (S$5.73 billion), will be in the cities of Hangzhou, Chengdu, Qinhuangdao and Shenyang.

In a statement released yesterday, Allgreen said that this was in line with the group’s strategy to expand regionally, especially in China, which it views as a ‘long-term growth market’ providing ‘growth and recurrent income’.

Allgreen said: ‘In addition, the group will also be able to better allocate assets to ride out any downturn in the Singapore economy.’

The projects will mostly be residential but hotel, offices and commercial properties can also be expected. These projects also represents the group’s fourth investment in China.

Allgreen appointed Savills while Kerry Properties appointed DTZ Debenham Tie Leung to carry out valuations of the sites and the agreed property value was about 8.64 billion yuan.

Based on the agreed property value, the outstanding land cost and the non-property net asset value of the joint venture companies, the aggregate consideration payable by Allgreen for its acquisition of the equity interests in the joint venture is estimated to be about 967 million yuan.

Allgreen said that the group will fund the project by internal funds and/or external borrowings.

The statement also noted that the group’s aggregate maximum total investment amount in the joint venture is 6.98 billion yuan, representing about 96.2 per cent of its latest net tangible assets as at Dec 31, 2006.

No development time frame was given for the projects.

There is a mixed-use development planned, comprising hotel, offices, retail podiums and apartments on a 67,374 sq m site near West Lake in Hangzhou with a total investment amount of 5.34 billion yuan and Allgreen will hold a 10 per cent stake.

Also in Hangzhou will be a residential development on a 104,521 sq m site at Xiacheng District with a total investment amount of 1.83 billion yuan, of which Allgreen will hold a 35 per cent stake.

Another residential development is slated for Chengdu’s Hi-Tech Industrial Development Zone. To be built on a 46,130 sq m site, it will have a total investment amount of 1.38 billion yuan, of which Allgreen will have a 25 per cent stake.

Allgreen will also hold a 25 per cent stake in a second residential development on a 38,617 sq m site in Chengdu’s Hi-Tech Industrial Development Zone with a total investment amount of 1.16 billion yuan.

In Qinhuangdao, Allgreen will hold a 10 per cent stake in a mainly residential development on a 113,393 sq m site in the West Section of Hebei Street, Haigang District with an investment amount of 2.2 billion yuan.

Also in Qinhuangdao is another residential development on a 92,250 sq m site at the West Section of Hebei Street, Haigang District with an investment amount of 1.35 billion yuan, of which Allgreen will have a 10 per cent stake.

A mixed-use development has been planned for the 172,694 sq m site on the East Side of Qingnian Street, Shenhe District in Shenyang with a total investment amount of 16 billion yuan. Allgreen will take a 30 per cent stake in this project.

 

Source: Business Times 7 Dec 07

China developer buys Sentosa Cove plot

Firm pays $216m, plans ultra-posh marina enclave with jumbo units

A CHINA developer has ventured overseas for the first time and paid a higher-than-expected $216 million for a landed plot on Pearl Island in Sentosa Cove.

The deal is another indication that, while Singapore developers are taking a cautious approach in the wake of the sub-prime crisis, foreign firms are happy to muscle in.

Ximeng Land beat six other bidders, which were not named, to the 14,840 sq m plot, which has a maximum gross floor area (GFA) of 11,872 sq m and can accommodate 19 villas.

It paid about $1,350 per sq ft (psf) for the plot. This is more than double the prices chalked up on the nearby Sandy Island but still below those paid for some individual seafront bungalow plots, which have sold for as much as $1,696 psf.

In September, a landed plot was sold to a developer for $1,099 psf of potential GFA.

Ximeng Land is owned by the majority shareholders of Ximeng Asset Holdings, the parent company of luxury developer Beijing Ximeng Real Estate. The company has built projects in Beijing and two other mainland cities, Yantai and Jinan.

The foreign factor also cropped up late last month when Malaysia’s YTL Corp bought Westwood Apartments in Orchard Boulevard for $435 million. The $2,525 psf per plot ratio (psf ppr) price was a record for a collective sale.

‘These foreign developers have displayed great confidence in the strength of the property market in Singapore,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

While up to 19 villa units with private berths can be built on the Pearl Island plot, Ximeng said it might build just nine large bungalows, which it expects to fetch record prices.

Property consultants said the nine houses would each be at least 14,000 sq ft, a size not yet available in Sentosa Cove. For the project to be viable, each would need to sell for at least $30 million.

A Ximeng spokesman said it was attracted by the success of Sentosa Cove and its own success in Singapore will provide a springboard for expansion in the region and beyond.

It wants to develop Pearl Island into an ‘ultra-luxurious, world-class marina enclave for the privileged few’ and therefore plans to retain an internationally renowned architect for the project.

Pearl Island is the last of five island sites in Sentosa Cove, all slated for landed homes. There is just one condo plot left – the tender closes next Wednesday; the results are expected to come out early next year – and two individual sea-facing bungalow sites.

Prices at the 99-year leasehold Sentosa Cove have climbed significantly since sales began in 2003, when the property market was still in a slump.

Last month, two seafront bungalow plots were sold at a high of $1,696 psf, said master planner Sentosa Cove.

Some bungalow owners are now asking $1,800 to $2,000 psf when some freehold good-class bungalows sell for only half that price.

 

Source: The Straits Times 6 Dec 07

CapitaLand to expand into offices in Vietnam

CAPITALAND could double the number of homes it is building in Vietnam to about 6,000 units in the next three years – from about 2,800 homes now – chief executive Liew Mun Leong told reporters in Vietnam yesterday.

The Vietnam market also presents opportunities for CapitaLand to expand beyond its present service apartment and residential portfolio to include offices, retail and integrated leisure, entertainment and conventions projects, Mr Liew said.

For offices, CapitaLand is looking to build the equivalent of its Capital Tower and Raffles City projects in Vietnam as well – provided it can find suitable sites. And as for retail, there are opportunities to grow the business segment as there is a lack of an organised retail scene in Vietnam, Mr Liew said.

For CapitaLand’s fledgling integrated leisure, entertainment and conventions business segment, the developer is now prospecting for sites in Vietnam. When the opportunity arises, CapitaLand will also look into setting up private real estate funds for its businesses in Vietnam.

‘Overall, as a long-term player, CapitaLand sees tremendous growth potential in Vietnam as it is one of the fastest growing economies in Asia,’ the company said.

Channel News Asia, reporting from Vietnam, said that CapitaLand is exploring the idea of creating a US $300 million development fund which could invest in a range of Vietnamese properties. It also reported Mr Liew as saying that the US sub-prime woes may not have a huge impact on the Singapore property market.

 

Source: Business Times 5 Dec 07

Landed homes look a better bet than condos on Thai market

Low interest rates fuel demand for houses; flats suffer from supply glut

(BANGKOK) For those looking to invest in Thai construction, housebuilders look a better bet than companies putting up high-rise condominiums.

Housebuilders like Land & House and Preuksa Real Estate are set to benefit next year as low interest rates fuel demand, while condo builders suffer from a glut of high-rise residential buildings.

Analysts say Bangkok has a relative shortage of detached housing, while overbuilding of low-priced city condos means a rally in the share prices of firms like Asian Property and LPN Development is fizzling out. ‘We prefer lowrise developers due to the more favourable supply outlook,’ Bualuang Securities senior analyst Chaiyaporn Nompitakcharoen said. The number of single detached houses built in Bangkok fell to about 16,700 last year from 24,000 in 2005 and 26,600 in 2004.

But plans to extend Bangkok’s ‘Skytrain’ and underground railway networks should boost demand for houses in the city’s suburbs, and analysts say low mortgage rates will spur middle-income buyers of homes in the 2 million to 5 million baht (S$94,000- S$236,000) range, even though economic growth is set to slow this year.

In the last two years, housebuilders have sacrificed profitability for sales, eating into earnings. But big firms with economies of scale, like Land & House, are benefiting as smaller rivals succumb to rising fuel and construction costs.

Since a credit crunch froze global debt markets in August, Thai banks have become cautious, favouring mortgages for homes built by bigger firms. The rate of rejections for home loans has risen to 25-30 per cent from 10-15 per cent a couple of years ago.

Land & House, rare among Thai developers because it sells completed rather than off-plan homes, has seen its gross profit margin creep back up to 31 per cent this year, having dropped to 30 per cent from 35 per cent between 2004 and 2006.

Some analysts believe a Dec 23 general election could help revive consumer confidence, which has fallen from a peak in 2004 to a five-year low.

After a battering during the 1997-98 Asian economic crisis, which put thousands of developers out of business, Bangkok’s residential market has thrived since 2001, with house prices up 25 per cent on average in the last six years. The recovery has also played out in rival Southeast Asian capitals Manila and Kuala Lumpur, but laggard Singapore has seen a 21 per cent jump in home prices in January-September.

While Bangkok’s housebuilding sector is perking up, developers expect city condo sales to slow after a period of frenzied buying.

‘Buyers should be more selective,’ Asian Property chief executive Anuphong Asavabhokin said. ‘Overall, I don’t expect these hot sales to be repeated anytime soon.’ Asian Property, which sold out three condo projects recently, plans fewer similar projects next year, but wants to build more terraced ‘townhouses’ and detached houses.

About 30,000 new condos were put on the market in 2006 and another 24,227 in the first eight months of this year – or 60 per cent of new residential projects – according to Thailand’s Agency for Real Estate Affairs.

But the take-up rate – sales as a proportion of new units for sale – dropped to 51 per cent in January-September from 70 per cent last year.

The oversupply was stoked by the emergence of several small developers seeking to tap demand for city homes, as residents baulk at soaring oil prices and Bangkok’s traffic jams.

Condominium developers are spending heavily on marketing campaigns, triggering concerns about their costs and margins.

Shares in condominium firms are losing their lustre. Sector leader LPN has fallen nearly 13 per cent from a peak in July, following a 43 per cent rise in the first half. The Thai property and construction sector sub-index has dropped 15 per cent since a July 26 peak, while the benchmark stock index is down just 5.4 per cent.

‘It’s riskier now,’ a Finansa Securities analyst said. ‘Sales are slowing. The condo boom in the past two years is fizzling out and some developers will be hurt by slowing cash flow.’ In contrast, Macquarie Research analyst Patti Tormaitrichitr said shares in townhouse developer Preuksa could rise by a third over the next year, while Land & House, valued at more than US$2 billion, had a potential upside of 24 per cent.

 

Source: Reuters (Business Times 4 Dec 07)

WCTE makes takeover bid for its property unit

RM503.6m offer for remaining 118.4m shares in WCT Land

IN KUALA LUMPUR

MALAYSIA’S civil engineering and construction firm WCT Engineering (WCTE) has made a voluntary takeover offer for the remaining 118.4 million shares of its 64.83 per cent property subsidiary WCT Land (WCTL) for some RM503.6 million (S$216.4 million).

The offer for WCT Land shares is at RM2.09 a share and to be effected on the basis of 0.524 new subdivided shares of WCTE at the issue price of RM3.985 per WCTE share.

As with an earlier proposal this week by the Eastern & Oriental (E&O) group to fold its property unit E&O Property into the group to form a single-tier entity in the RM609 million share-swap deal, WCTE also said it does not intend to maintain the listing status of WCTL.

The corporate exercises this week – albeit privatisation through a merger – reflect a trend of controlling shareholders to privatise and delist their property units, mainly because they are little traded and undervalued.

Khazanah Nasional decided to take UDA Holdings private last year via a cash offer, and since then state investment fund management company Permodalan Nasional has done likewise with two of its listed entities, Petaling Garden and Island & Peninsular. The Selangor state government’s Perbadanan Kemajuan Negeri Selangor is also in the midst of taking Worldwide Holdings private.

In WCTE’s case, it said the merger would complement its construction business, and rationalising WCTL’s resources would realise potential cost savings and operational efficiencies. Integrating its workforce would also allow it to expand its business by bidding for more construction and property developments nationally and internationally, added the company whose total orderbook now tops RM6 billion.

WCTE is one of Malaysia’s biggest players in the Middle East. Its projects there are beginning to contribute significantly to its earnings as evidenced by the 77 per cent year-on-year surge in its profit to just shy of RM39 million for the nine months to end-September on higher construction profits, analysts said.

WCTE has also offered to take over all WCTL’s registered debt securities not held by it amounting to some 61.3 million at the offer price of RM4.18 a share on the basis of 1.049 new subdivided WCTE shares. It owns the bulk of the registered debt securities which, if fully converted, would result in it increasing its stake in WCTL to 75.52 per cent.

WCTE’s takeover offer could result in the issue of up to 126.4 million subdivided WCTE shares worth RM503.6 million. Earlier this month, the company had proposed a share split of its RM1 share into 2 of 50 sen each. It expects the share split exercise to be completed before issuing the new subdivided WCTE shares pursuant to the takeover offer.

 

Source: Business Times 1 Dec 07

Asia may take a hit in ‘Act Two’ of sub-prime crisis

Stanchart S-E Asia chief says turmoil will hit export-driven regional economies

A TOP banker just posted to Singapore has warned that ‘it’s only the end of the beginning’ of the global credit crisis.

The world is still reeling from US$50 billion (S$72.3 billion) in losses linked to sub-prime home loans in the United States, Standard Chartered’s (Stanchart’s) new chief executive (CEO) for South-east Asia, Mr Ray Ferguson, said.

Asian economies, particularly Singapore and Hong Kong, are likely to be hit by the deepening crisis, he said at a luncheon hosted by the British Chamber of Commerce’s Professional Services Business Group.

Some analysts believe, on the other hand, that the sub-prime fallout will be limited in Asia. Last week, Henderson Global Investors’ director of economics and asset allocation, Mr Tony Dolphin, said while the shortterm outlook appears shaky, the Asian stock-market bull run would continue next year.

Several weeks ago, Senior Minister Goh Chok Tong also said Asia had emerged relatively unscathed from the crisis.

Mr Ferguson likened the crisis to a three-act play: ‘Act One has just ended, and the level of losses we have seen will look small compared to Act Two.’

He highlighted some analysts’ estimates that write-downs for sub-prime loans might eventually hit US$400 billion. He cited US reports suggesting 1.5 million to two million Americans could lose their homes next year.

All this is expected to undermine US consumer and investor confidence and take a toll on export-driven Asian economies still ‘very dependent’ on US consumption.

Mr Ferguson, who served as Stanchart’s US country CEO, rejected an emerging view that Asia’s growth has been decoupled from the US.

‘Asia will be affected… While the direct exposure of banks in the region to sub-prime loans is relatively limited, Asian debt markets have slowed and credit criteria have been tightened.’

Oil price hikes and a weaker US dollar are set to dent US consumer confidence, so Asia will ‘feel the force of a decline in the US economy’.

‘Singapore and Hong Kong, being small and export-dependent, will feel far more impact’, than other markets, such as India and China.

Still, ‘the feel-good factor in Raffles Place is not just based on the US’, he said. Singapore’s strategy of diversifying its economy away from electronics exports to the financial, biomedical and other sectors will help it to weather market volatility.

‘Act One has just ended, and the level of losses we have seen will look small compared to Act Two.’

MR FERGUSON, who likens the crisis to a three-act play

 

Source: The Straits Times 30 Nov 07

ING Real Estate plans second China fund

It is also looking to buy and privatise battered Reits in mature markets

(HONG KONG) The world’s biggest property fund manager ING Real Estate plans a second China fund next year, worth about US$700 million, in response to growing enthusiasm for Asian property at a time when Western markets are suffering.

With a global credit crunch depressing activity in European and US commercial property markets, ING Real Estate is pushing further into Asia. But the unit of Dutch financial services firm ING Groep NV is also looking to snap up and privatise battered real estate investment trusts (Reits) in mature markets.

‘On the one hand you see part of the world slowing down, triggered by the credit crunch,’ ING Real Estate chairman and chief executive George Jautze told Reuters in an interview. ‘And then you see another part of the world – China, Japan, and even Australia – where there are lots of opportunities.’

ING Real Estate, which has a global portfolio worth more than 100 billion euros (S$214.4 billion), set up two pan- Asian funds this year worth a combined US$1.6 billion in equity.

A new fund for Japan is in the works for next year, and after spending most of the US$350 million raised at the end of 2006 for residential development in China, the firm plans a follow- up fund about twice that size.

The fund will be marketed in the first half of next year, according to ING Real Estate’s Asia head, Robert Lie, and could invest in some commercial property as well as housing.

But tougher competition among developers, which has led to higher land prices, could mean that investors will have to lower their expectations slightly from the 20 per cent internal rates of return notched up by ING Real Estate’s first China fund.

Mr Jautze said that he expected global property yields to edge up in the next year, as investors find borrowing harder to obtain and more expensive.

Highly leveraged investors have faded away, and without the prospect of huge private equity deals, the US commercial property market has come to a standstill.

Even in Japan’s arena of rock-bottom interest rates, the number of bids for any building has halved to four or five as leverage for deals has fallen to around 60 per cent from 80-90 per cent since the US sub-prime crisis unfolded early this year.

 

Source: Reuters (Business Times 29 Nov 07)

Cheung Kong wins HK$7b MTR property project

(HONG KONG) Cheung Kong (Holdings), the property flagship of tycoon Li Ka-shing, has won a tender from Hong Kong subway operator MTR Corp Ltd to develop a residential project with an investment cost of HK$7 billion (S$1.29 billion).

MTR said in a statement that it would sign a formal agreement with Cheung Kong for the third phase of the Lohas Park project in Hong Kong’s Tseung Kwan O district within the next few weeks.

Property prices in Hong Kong have jumped more than 70 per cent since a trough in 2003, when the Sars respiratory disease ravaged the city’s economy.

Some analysts expect prices to rise another 50 per cent in the next two years because supply of apartments is falling short of demand at a time when Hong Kong is mimicking US interest rate cuts.

But if prices fail to meet those expectations, developers could see their margins squeezed because of soaring land prices at recent auctions.

Cheung Kong could cut costs in its new project as it is also developing the first two phases of Lohas Park, said Charles Chan, the managing director of Savills Valuation and Professional Services.

‘They can duplicate the design and lower labour costs,’ he said.

The first phase of the Lohas Park is selling at HK$5,000-6,000 per square foot, but Cheung Kong could lift prices by as much as 40 per cent for the third phase, Mr Chan said.

‘The third phase could ask for HK$7,000-8,000 a square foot when it is ready for sale three years later,’ he said.

 

Source: Reuters (Business Times 29 Nov 07)

Wharf posts HK$3.12b Q3 profit

Earnings more than double on higher rental income from office and retail properties

(HONG KONG) Wharf Holdings Ltd, the Hong Kong landlord and port operator that owns a pay-television company, more than doubled its third-quarter profit as rental income from office and retail properties rose.

Net income for the three months ended Sept 30 rose to HK$3.12 billion (S$578 million) from HK$1.21 billion a year earlier. Profit in the first nine months of the year was HK$7.55 billion, or HK$3.08 a share, compared with HK

$7.47 billion, or HK$3.05, in the same period in 2006, Wharf said yesterday in a statement to Hong Kong’s stock exchange.

Wharf is investing in Chinese property to tap wealth in the world’s fastest-growing major economy as it seeks to diversify from Hong Kong. Rental profit from the group’s Hong Kong commercial properties, which accounts for 70 per cent of total assets, surged 20 per cent in the first nine months compared with a year earlier.

‘Wharf is a relative latecomer in the China market compared with its peers,’ said Kenny Tang, a research director at Hong Kong-based Tung Tai Securities Ltd. ‘Key for them will be whether they can at least catch up with the big boys in the second-tier cities, where they have been very aggressive in acquiring land.’ The quarterly figures were derived by Bloomberg News by subtracting first-half profit from the nine-month profit released by the company yesterday.

Wharf plans to increase its land bank in China to 100 million square feet, from 70 million square feet now, according to the statement. The company is competing against other Hong Kong developers including Henderson Land Development Co and Cheung Kong Holdings Ltd in acquiring property in the country.

The company, a unit of Hong Kong-listed developer Wheelock & Co, said it will boost investment in China, seeking a 50-50 weighting in assets between the mainland and Hong Kong in the next five years.

The company has bought 14 sites in China since the middle of 2005, it said.

Wharf and its subsidiaries have acquired at least 10 development sites in Chinese cities including Chengdu, Hangzhou and Chongqing between August and November, it said in yesterday’s statement.

Earlier this month the company bought land in the southwestern Chinese city of Chongqing for 7.5 billion yuan (S$1.46 billion) through a public tender held by the city’s municipal government. The project will be jointly developed with China Overseas Land & Investment Ltd.

In October, Harbour Center Development Ltd, a Hong Kong- listed subsidiary, and its partner bought land in Suzhou, a city west of Shanghai.

Wharf currently operates several commercial properties in the country including the Beijing Capital Times Square, Shanghai Times Square and the Chongqing Time Square.

Excluding property revaluation gains, nine-month net income rose 30 per cent to HK$4.02 billion, Wharf said.

Wharf jumped 5.1 per cent to HK$40.55 at the 4pm close in Hong Kong, the biggest daily gain in almost a month.

The stock earlier climbed as much as 7.9 per cent.

Wheelock, the property developer controlled by the family of Hong Kong billionaire Peter Woo, said profit in the six months ended September rose 8 per cent to HK$4.03 billion, with sales gaining 67 per cent to HK$13.9 billion, according to a statement to Hong Kong’s stock exchange today. Its shares surged 8 per cent to HK$24.30.

 

Source: Bloomberg (Business Times 29 Nov 07)

Keppel Land to build 140 Viet waterfront villas

It forms 60-40 joint venture; project’s investment capital seen at US$55.2m

KEPPEL Land will build 140 waterfront villa homes in Ho Chi Minh City, its eighth residential development in Vietnam this year.

In a statement yesterday, Keppel Land said that it had formed a joint venture, through wholly owned subsidiary VN Investment Pte Ltd, with Vietnamese property developer Hung Phu Real Estate Investment Corporation (Hung Phu), to develop a 9.7-hectare site into waterfront landed housing in District 9 of Ho Chi Minh City.

The total investment capital for the project is estimated at US$55.2 million. Upon receiving the investment certificate and obtaining the relevant government approvals, VN Investment will take up a 60 per cent stake in the joint venture company and Hung Phu, the remainder.

Citing reports by The World Bank Group, Keppel Land highlighted that the rate of urbanisation in Vietnam is projected to reach 40 per cent by 2020, up from 23.5 per cent in 2000. This translates into more than 31 million people of the country’s population living in urban areas, compared with 19 million in 2000.

Said Keppel Land director of regional investments Ang Wee Gee: ‘There is growing demand for luxury homes in Vietnam. We will continue to capitalise on Vietnam’s rising property market with premier developments in prime locations.

‘Villa developments, in particular, are limited in Ho Chi Minh City, and demand for villas is expected to be very strong.’

The villa homes are expected to be launched in early 2009 and will be targeted at wealthy locals, expatriate communities and overseas Vietnamese (Viet Kieus).

This latest development follows two recently formed joint ventures to develop luxury villas and condominiums, also in Ho Chi Minh City’s District 9.

To date, Keppel Land has an existing pipeline of more than 25,000 homes in Vietnam.

 

Source: Business Times 29 Nov 07

Emerging markets losing lustre

Pictet Asset Management now banking on green investments

A PIONEER in emerging market investments and environmental funds is sounding caution on emerging markets, even as he hails the green theme as the wave of the future.

Renaud de Planta, chief executive of Pictet Asset Management, says emerging markets could underperform mature markets in the near term. In the last four years, emerging markets have delivered stellar returns amid massive inflows as institutions and individuals search for higher yields. ‘Globally, as much as we’re a pioneer and forceful defender of emerging markets investment, in the last few months, we’ve become bearish relative to developed markets.

‘We think the core developed markets of the US, Japan and parts of Europe will outperform the emerging markets over the next two years,’ says Mr de Planta, who is also a managing partner with Pictet & Cie.

The firm looks at a number of metrics in its research, including price earnings and price to book value and price to cash flow multiples, as well as price to capacity which is a proprietary indicator. ‘All the signals tell us that emerging markets are over-extended, but they’re less over-extended in Asia compared with Eastern Europe and Latin America.’

Pictet Asset Management manages a total of US$130 billion in assets. Of this, US$20 billion are in emerging equities. Another US$40 billion are in environment-related investments, including utility and thematic funds like clean energy.

The Singapore office looks after Asian fixed income, and the funds marketing office is based in Hong Kong.

Mr de Planta is convinced that socially responsible investing (SRI) will take root and flourish. So far, while private banks and some retail fund managers are pushing environmental themes like climate change and clean energy, Asian institutions have been cool to funds in the SRI space. One of the most common reservations is that SRI investments will suffer in returns compared with investments without any SRI screen.

Mr de Planta is unperturbed about Asia’s lukewarm response. As for returns, the proof is in Pictet’s pudding. The firm pioneered what it says is the world’s first water fund about seven years ago. On a cumulative basis, the PF (Lux) Water-P Cap fund has returned 61 per cent since inception in 2000 compared with the MSCI World’s minus 4.33 per cent. On an annualised basis, the fund has delivered 6.33 per cent against the MSCI’s minus 0.57 per cent.

The fund has some 4.33 billion euros (S$9.3 billion) in assets.

Earlier this year in May, the firm launched a Luxembourg-domiciled clean energy fund. In about five months up to end-October, the fund has returned 29 per cent against the MSCI World index’s 6.42 per cent. The fund has US $756 million in assets.

‘When we started about 10 years ago we were one of the first with SRI funds. We were convinced it would be a fundamental change which is long-lasting because the environment is being destroyed at an unprecedented pace and the growth of the emerging world makes this even more visible.

‘The solution to environmental destruction and emissions is not only government, but the real business world.

There will be massive investment needs in new air filtration and water filtration technology, fuel efficient cars, alternative energy and so on. Investors are now very sensitive to this.’

Over the past couple of years, the firm has polled 200 institutional investors. About 70 per cent indicated that they wish to allocate assets to SRI or environmental themes. Of these investors, half are likely to invest through thematic funds like water, clean air and energy funds.

Mr de Planta says the question of whether SRI funds suffer in performance is much debated. ‘In the energy sector, if you impose good corporate governance and environmental practice, you do avoid the big accidents. Big chemical companies that are not properly managed and do not invest in safety can have huge disasters that wipe out the company.’ In this respect, Union Carbide with its Bhopal gas leak disaster comes to mind. Poor corporate governance also sank Enron.

In its SRI stable, Pictet offers broad-based and focused funds. For its broad-based funds, it pursues a best-in-class approach where its managers pick the companies which rank the highest in environmental as well as social factors, including how employees are treated and whether the company uses child labour. For the focused funds, the firm screens for companies that are ’significantly active’, deriving 20 to 100 per cent of profits from activities like clean water and energy.

The focused funds, however, are not screened for social or governance factors. ‘If we impose too many constraints, the universe becomes too narrow. We could miss out on interesting companies with leading technologies. They may be young companies and may not yet have the best corporate governance or the most social human resource policies, but they’re on the way towards these goals.’

Meanwhile, in the emerging markets space, the firm is, interestingly, sceptical of the BRIC concept. BRIC spells Brazil, Russia, India and China. First articulated by Goldman Sachs in a 2003 report, the concept has since taken on a life of its own. BRIC, says Mr de Planta, appears to be a marketing concept to simplify the emerging markets for the US public. ‘In the short term it’s self-fulfilling if you promote the theme well. Let’s see in five years if anyone still talks about BRIC.’

One of the screens the firm uses in its emerging markets research is its own proprietary measure, price to capacity, where it examines the production capacity of companies based on interviews and industry reports. The metric can yield insights on the relative attractiveness of a country or currency against the rest of the region and against developed markets.

‘We think emerging market equities at this juncture are over-rated. We’ve seen in history that every time the emerging market metrics exceed the developed markets, it signals a turning point. On the debt side it’s slightly different. This is because the re-rating potential of some currencies in the region is substantial. The recent crisis of the dollar is a catalyst for changes in the currencies.’

 

Source: Business Times 28 Nov 07

IPO lifts Indian property baron’s fortune by $6.3b

Shares of Mundra Port & SEZ more than double on debut on back of infrastructure boom

MUMBAI – INDIAN property magnate Gautam Adani has just added US$4.4 billion (S$6.34 billion) to his personal fortune.

His company, Mundra Port & Special Economic Zone (SEZ), more than doubled on its first trading day in Mumbai, boosting the value of his family’s 81.3 per cent stake to about US$8 billion.

Real estate ‘has caught the fancy of investors’, said Mr Jayesh Shroff of SBI Funds Management. ‘We could see many more billion-dollar property tycoons as investors pay a premium to own real-estate stocks.’

India’s 10 richest property investors have more funds than Mr Donald Bren, Mr Donald Trump, Mr Samuel Zell and the next seven wealthiest United States real-estate investors, Forbes Magazine reported.

Mumbai has the world’s second-highest office rents after London’s West End, according to data compiled by real-estate broker CB Richard Ellis. Rents in Mumbai rose 55 per cent in the past year to US$189.51 per sq ft, almost double the costs in mid-town Manhattan, CB Richard Ellis reported.

Mr Adani, 45, is among eight Indian developers whose wealth exceeded US$1 billion each for the first time this year, Forbes reported. A government plan to spend US$500 billion on ports, roads and airports has drawn investors to developers focusing on infrastructure.

Mr Adani’s Mundra Port, India’s largest cargo terminal outside government control, rose as much as 710 rupees to 1,150 rupees on the Bombay Stock Exchange (BSE) and finally ended 521.7 rupees, or 118.6 per cent, higher at 961.7 rupees.

The initial public offering (IPO) raised 17.7 billion rupees (S$642.5 million) this month with shares sold at 440 rupees each. The IPO attracted US$52 billion of bids, 116 times the stock for sale.

‘There was lot of interest from investors since this is the first port and SEZ company to be listed,’ Mr Adani said at a listing ceremony at the BSE yesterday. ‘Infrastructure stocks are in favour right now.’

Mundra Port is about 70km from the airport at Bhuj in the western state of Gujarat. The port can cater to companies including Reliance Industries, which is constructing the world’s biggest refinery in the state.

The port will handle 30 million tonnes of cargo this year, up from about 20 million tonnes last year, Mr Adani said.

A state-backed plan for private companies to build SEZs, or business enclaves with their own power, roads and commercial buildings, is also lifting developers’ shares.

Mr Anand Jain, who is building an economic zone near Mumbai with his school buddy Mukesh Ambani, joined the Forbes list with a US$4 billion fortune after his Jai Corp soared seven- fold this year, giving it a market value of US$45 billion.

Mr Jain’s family members last month reaped US$568 million selling a stake to investors including units of Merrill Lynch, Goldman Sachs and Morgan Stanley. The family still holds about 75 per cent in Jai after the sale.

Source: BLOOMBERG NEWS (The Straits Times 28 Nov 07)

Lippo sees top Jakarta property value triple by 2014

Group plans to invest up to US$10b in domestic real estate projects by that time

(JAKARTA) Indonesia’s Lippo Group, which runs hospitals and property firms, said it would spend up to US$10 billion on domestic real estate projects by 2014, and expects prime Jakarta property to double or triple in value by then.

The group, which has listed units in Jakarta, Singapore and Hong Kong, expects to benefit from strong economic growth and rising incomes in Indonesia and other parts of Asia, chief executive James Riady told Reuters in an interview yesterday.

‘We are going through an unprecedented period of growth and prosperity, and now there is a supply issue, a great shortage of supply’ of commodities and assets which will drive prices even higher, Mr Riady said.

The Lippo Group has about 70 per cent of its assets in Indonesia, where its listed units include Lippo Karawaci and Lippo Cikarang, two satellite town developments near Jakarta with their own hospitals, universities, malls, housing, offices, even golf courses.

‘Indonesia is lagging behind the rest of Asia. Property in Indonesia is extremely cheap, it’s possibly the best value,’ Mr Riady said.

Kemang Village, which is Lippo Karawaci’s latest residential development in one of Jakarta’s most popular, upmarket districts, has already sold out all 460 units in the first development phase at US$1,400 per square metre, Mr Riady said.

A comparable property in Shanghai would cost US$17,000 per square metre, or US$25,000 per square metre in Singapore, he added.

‘Over the next five to seven years, residential, commercial and retail property in prime locations in Jakarta will double or triple,’ he said.

But, despite a drop in interest rates, property prices in some parts of Jakarta have shown little appreciation, reflecting the city’s poor infrastructure and traffic jams. For many low or middle income Indonesians, it is difficult to obtain a mortgage, whereas wealthy customers simply pay for cash.

Shares of Jakarta-listed Lippo Karawaci, which has a stock market value of US$1.1 billion, have risen 57 per cent this year, beating a 45 per cent rise in the Jakarta index .

They trade at a forward 2008 price-earnings ratio of 22.3 times, compared with 15.3 times for the overall index.

Mr Riady said that the group’s property expansion in Indonesia would be funded mainly from the cash from presales, with the remainder raised from bonds and real estate investment trusts , or Reits.

Lippo has two Singapore- listed Reits, and plans to issue more to free up capital from its portfolio of hospitals, shopping malls and housing.

First Reit, which is backed by Lippo’s Indonesian hospitals, raised US$64 million in its initial public offering (IPO) last year. The shares have fallen 0.7 per cent this year, in contrast to the Straits Times Index which is up 11 per cent.

Lippo-Mapletree Indonesia Retail Trust, a joint venture with a unit of Singapore state investor Temasek Holdings, raised US$356 million in its IPO this month and is backed by Indonesian shopping malls. The shares are trading at 15 per cent below the IPO price.

Lippo group also controls Indonesian retailer PT Matahari Putra Prima, Singapore retailer Robinson & Co, and Indonesian multimedia company PT First Media Tbk, which provides Internet services.

Both healthcare and Internet services offer extremely attractive gross margins, Mr Riady said, of 60 per cent and 65 per cent respectively.

Lippo, which currently has four hospitals, plans to build 15 more over the next five years to meet a shortfall in the country’s medical facilities.

‘Healthcare still has a long way to go,’ mainly because of an acute shortage of doctors and poor training facilities, he said.

 

Source: Reuters (Business Times 27 Nov 07)

Topshop to open China store next year

(SHANGHAI) British fashion retailer Topshop plans to open its first China store early next year, following rivals such as Inditex’s Zara and Hennes & Mauritz AB in setting up shop in the world’s fastest growing major economy, sources familiar with the situation said yesterday.

Topshop had signed a deal to rent space in the Shanghai Superbrand Mall in the city’s financial district, said the sources, who declined to be identified.

The mall, in which Zara and H&M already have shops, is managed by a property arm of Charoen Pokphand group, Thailand’s biggest agricultural business conglomerate. ‘Topshop is definitely not coming to China for just one store,’ one of the sources said.

‘It is also looking at many other Chinese cities, such as Beijing and Hong Kong.’ Other sources confirmed Topshop was in talks with several property developers in the former British colony of Hong Kong in the hope of launching Topshop stores in the city next year. Topshop could not immediately be reached for comment.

China’s fashion retail market is booming alongside changing lifestyles and income growth. Retail sales in general are expected to grow about 15 per cent in 2007, analysts have said.

 

Source: Reuters (Business Times 23 Nov 07)

Shimao to shun debt markets for up to a year

(HONG KONG) Shimao Property Holdings Ltd, a developer owned by Chinese billionaire Hui Wing Mau, said it will shun debt markets for up to a year as yields on its dollar bonds rose to a record.

The Hong Kong-listed company doesn’t plan to sell foreign- currency bonds or convertible debt in the next six to 12 months, it said in an e-mail to Bloomberg News.

‘We have strong sales proceeds from pre-sales and we have a big portfolio of investment properties that can help us raise bank loans in China more easily than other pure residential property developers,’ Shimao said in the e-mail.

Investors are asking for record high risk premiums to hold Chinese real estate developers’ bonds as concern that the US economy may enter into recession drives asset managers away from high-risk, high yield debt.

Country Garden Holdings Co, China’s most profitable developer, earlier this month scrapped a plan to raise US$1 billion from its first overseas bond sale.

‘There was quite bit of speculation that other Chinese developers, including Shimao, were thinking about selling dollar bonds,’ said Lawrence Koo, a Hong Kong-based director of credit trading at hedge fund Tribridge Investment Partners Ltd. ‘It would take a bit of pressure off Shimao’s existing bonds if they announce there is no such plan, but it won’t help too much unless other developers also decide not to sell debt.’

The spread, or extra yield, investors demand to hold Shimao’s US$350 million of 8 per cent bonds maturing in 2016 rather than Treasuries widened to a record 590 basis points at 3:53pm in Hong Kong, according to Merrill Lynch & Co prices. A basis point is 0.01 percentage point.

Credit-default swaps on Shimao’s debt were unchanged at 480 basis points, according to Barclays Capital.

That means it costs US$480,000 a year to protect US$10 million of Shimao’s bonds from default for five years.

The debt is rated BB+, one level below investment grade, by Standard & Poor’s (S&P).

The developer plans to increase its land bank to as much as 35 million square metres at the end of 2008 from 21 million square metres, according to the e-mail.

It said it plans to fund the estimated 10 billion yuan (S$2 billion) cost of buying land from planned property sales of 17 billion yuan next year.

Many Chinese real estate developers will be forced to seek other funding avenues for their rapid expansion until credit market conditions stabilise, S&P said in a report on Nov 15.

Small developers with limited capital are likely to find the market conditions too tough to survive while bigger companies will become more reliant on internally generated cash and bank loans until they can tap debt markets, the rating assessor said.

‘The increasing ambition of many developers to aggressively grow, both in size and geographic coverage, creates high execution risks,’ according to S&P.

‘If growth is heavily debt-funded, the financial health of developers will come under pressure.’

 

Source: Bloomberg (Business Times 23 Nov 07)

Japanese Reits likely to be takeover targets

Those trading at less than their net asset value are likely to be bought out

(TOKYO) Japanese real estate trusts and asset managers may be ripe for takeovers after share prices plunged and stricter compliance guidelines raised costs, said property managers including a local real estate executive at Morgan Stanley.

Regulations to boost investor protection went into effect on Sept 30, raising compliance costs which may make it difficult for smaller real estate managers to survive.

Real estate investment trusts (Reits) trading at less than their net asset value are likely to be takeover targets.

‘Consolidation is imminent,’ said Marcus Merner, managing director for real estate at Morgan Stanley Japan Securities Co, at a conference on Wednesday. ‘All the arrows are pointed in the right direction for that to happen.’

The Tokyo Stock Exchange Reit Index has fallen even as land prices advanced.

The index has dropped about one-third in the past six months, eroding gains earlier in the year, after rising defaults of sub-prime mortgage loans in the US prompted some investors to sell stock to make up for losses elsewhere.

Japan may see buyouts of property holders similar to some of those in the US, said Alan Miyasaki, managing director of the Blackstone Group Japan KK.

Blackstone Group LP bought Equity Office Properties Trust (EOP), the biggest US office landlord, for US$23 billion in March, and may have made as much as US$2 billion in profit by selling off properties in EOP’s portfolio, according to Bloomberg calculations. ‘Growth fundamentals in the market place are appropriate to have similar M&A here in Japan,’ Mr Miyasaki said.

Thirty out of 40 Reits listed on the Tokyo Stock Exchange (TSE) trade below their net fixed asset value, according to Bloomberg calculations.

The share declines may have prompted LaSalle Investment Management Inc, a unit of the world’s second-largest commercial real estate broker, to take control of eAsset Investment Corp, the first ever takeover in Japan’s 4.9 trillion yen (S$64.6 billion) Reit market.

LaSalle, a subsidiary of Jones Lang LaSalle Inc, bought the asset manager of eAsset on Nov 19 and plans to expand the trust.

Earlier this month, Goldman Sachs Group Inc and Aetos Capital LLC bought property manager Simplex Investment Advisors Inc for 154.1 billion yen.

Goldman plans to invest about 200 billion yen this year in Japanese property, betting that real estate is short of its peak after a two-year rally.

Tighter regulations under the Financial Instruments and Exchange Law have increased administration costs for compliance standards, and the burden could turn smaller funds into takeover targets, said Yasuhiko Amino,

operating officer and chief marketing officer of Japan at GE Real Estate Corp.

‘The number of opportunities will increase,’ Mr Amino said.

As land prices recover, property values on some companies’ books are increasing at a faster pace than their market worth.

Property assets generated more profit last year for Sapporo Holdings Ltd, Japan’s third-largest beermaker, than its alcohol business did.

Sapporo formed a property alliance with Morgan Stanley on Oct 30 as it seeks to fend off a hostile bid from Warren Lichtenstein’s Steel Partners Japan Strategic Fund, which wants the brewer to sell off its real estate.

Mitsubishi Estate Co and Sumitomo Realty & Development Co, Japan’s second and third-biggest developer by revenue, are among builders that have set up takeover defences this year.

 

Source: Bloomberg (Business Times 23 Nov 07)

Average Grade A office rents here on par with HK

But top rents in HK are 1.8 times higher than in comparable buildings here

AVERAGE island-wide Grade A rents are currently just a shade under those of Hong Kong, but the highest rents achieved by Hong Kong Grade ‘AAA’ office buildings are still about 1.8 times higher than the top rents achieved in comparable buildings here.

A report by Savills reveals that in the CBDs of Hong Kong and Singapore, Grade A rents are now the equivalent of $9.80 and $9.70 psf respectively.

However, top rents in Hong Kong’s Grade ‘AAA’ buildings like the International Financial Centre, Chater House and AIG Tower are closer to $32 psf while those in Singapore’s Republic Plaza, One Raffles Quay and 6 Battery Road are at about $17.50 psf.

Rising business costs have come under scrutiny recently and Savills Hong Kong senior director (research and consultancy) Simon Smith does say that there is the perception that Hong Kong and Singapore are in direct competition to attract businesses for this segment of the property market. However, he added: ‘I have not come across any financial institutions that have chosen to relocate from Singapore to Hong Kong yet.’

Indeed, Mr Smith believes that the financial institutions that are so important to the economies of both cities are more likely to set up offices in both cities to service different markets.

In terms of new supply of office space, Mr Smith does point out that Hong Kong will see some ‘AAA’ space become available next year in areas like West Kowloon where the 2.5 million sq ft International Commerce Centre (ICC) is set to open. The ICC is said to have attracted some major financial institutions already.

In contrast, Savills notes that the recently awarded commercial development sites including those at Marina View and Beach Road are expected to generate a combined 3 million sq ft of office space, scheduled for completion between 2010 and 2012.

But competition actually could come from more unlikely quarters.

Savills’ survey of regional office rents includes the emerging Vietnamese cities of Hanoi and Ho Chi Minh City and already average Grade A office rents in both cities have outpaced those in Shanghai and Beijing (but are still less than Tokyo, Hong Kong and Singapore).

Mr Smith believes that rising rents and 100 per cent occupancies in Hanoi and Ho Chi Minh City are largely due to the shortage of quality buildings in these cities, and hence adds: ‘There is a huge potential there for developers.’

Giving an insight into the pace of development there, he said: ‘Vietnam is much like China was in the 1990s, where companies were running their businesses out of hotel rooms. But when the market matures, rents will settle down.’

Savills believes the outlook for Singapore office sector remains positive, with rents continuing to rise, although at a slower pace for Grade A space due to ‘resistance from tenants’.

‘Demand from multinational companies for offices in suburban areas and high-tech space is expected to increase, especially by those who are more conscious of their bottom-line,’ it said.

 

Source: Business Times 22 Nov 07

Viet firm to raise funds for 11 projects

(HANOI) Saigon Thuong Tin Real Estate Joint-Stock Co, part of the same group as the only bank listed on the Ho Chi Minh City Stock Exchange, will sell bonds and shares this year to raise capital for investments.

The Ho Chi Minh City-based property developer aims to raise funds for 11 property projects, Dang Hong Anh, chairman and general director, said in an interview in Hong Kong on Tuesday. The company will get 2 trillion dong (S$181 million) from a bond sale, and 125 billion dong from selling shares, he said.

‘We have many good opportunities and projects and we need more capital,’ Mr Anh said. ‘The difficulty for an issuer in selling bonds is creating opportunities for use of the proceeds, but Sacomreal has a lot of projects now.’ The company will pay a coupon of as much as 10.5 per cent on the securities, with an ‘interest rate that is still lower than borrowing from a bank,’ Mr Anh said. The company sold 1 trillion dong of 10 per cent five-year notes on Nov 15.

The minimum price for the sale of shares to strategic investors will be 100,000 dong, Mr Anh said. Viet Capital Securities Joint-Stock Co will advise on the sale, he said. ‘Strategic partners need to commit not to sell the shares at least in the next three years,’ he said. ‘They will be expected to provide us support in terms of management, human resources and experience.’ The developer was created in 2004 from the real estate interests of Saigon Thuong Tin Commercial Joint-Stock Bank, or Sacombank, the third-biggest company on the Ho Chi Minh City Stock Exchange. Mr Anh’s father is the chairman of Sacombank.

Sacomreal, which has interests in property development, brokerage and sales, forecasts profit this year will be 192 billion dong, compared with 17.9 billion dong in 2006.

 

Source: Bloomberg (Business Times 22 Nov 07)

World’s most expensive office rentals in London, Mumbai

Singapore rents grew the fastest at 83%, says survey by CB Richard Ellis

(SEATTLE) London and Mumbai tenants paid the most for high-quality offices this year, while Singapore rents grew the fastest as economic growth lured international banks to Asia, said CB Richard Ellis Group Inc, the world’s largest commercial real estate broker.

London’s West End led with average annual rents of US$328.91 per square foot (psf) this month, compared with US$180.80 for the UK capital’s main financial district.

Mumbai had the second-most expensive leases at US$189.51, CB Richard Ellis said in its semi-annual Global Market Rents survey.

Asia’s booming economies drove up demand for financial and computing services in the region, catapulting Mumbai to second spot and fuelling Singapore’s 83 per cent growth in rents.

The US currency’s decline also drove up costs in dollar terms, while a dearth of new space bolstered London rents, CB Richard Ellis said.

‘Markets that moved up that quickly had the highest growth rates based on the economy’ as well as a scarcity of space, said Ray Wong, director of research operations for the Americas for Los Angeles-based CB Richard Ellis.

‘In the most expensive markets, if they’re close to their peak, the expectation for increase is marginal, but other markets, especially resource sectors, are enjoying an increase in demand so they’re going to move up a lot quicker.’

Mumbai’s rents rose 55 per cent, driven by computer related tenants, according to CB Richard Ellis.

Midtown Manhattan was the most expensive North American market, with rents averaging US$100.79 psf, 12th highest worldwide. Downtown New York ranked 46th globally at US$53.47.

Moscow rents jumped 65 per cent after crude oil prices tripled in the past five years, bolstering the economy of the world’s second-biggest exporter of the fuel.

Rents in the oil hub of Edmonton, Canada, rose 43 per cent, the ninth- fastest worldwide, as energy companies leased more space to house expanding workforces, the survey showed. Edmonton did not rank in the top 50 markets by rental prices.

Eighty-five per cent of the 171 cities included in the survey saw rental increases in the year ended Sept 30, according to CB Richard Ellis. This bodes well for investment returns, Mr Wong said.

The survey measures the most expensive rents based on US dollars. Rental growth rates were measured in local currency terms.

 

Source: Bloomberg (Business Times 22 Nov 07)

Lone Star to sell Japanese hotel operator Solare

(TOKYO) Lone Star has hung a for sale sign over its Japanese hotel operator Solare Hotels and Resorts Co Ltd, sources familiar with the matter said, in a deal which could raise 150 to 200 billion yen (S$2.6 billion).

The US investment fund has engaged real estate services firm Jones Lang LaSalle to handle the sale process. Blackstone is believed to be among several parties interested in Solare, the sources said. Lone Star and Blackstone declined to comment.

Lone Star has two ways to cash out; it has paved the way to list a hotel real estate investment trust (Reit) which could include Solare. This would be managed by Star Hotel Reit Management Co Ltd, which Lone Star has recently set up.

But with the Japanese Reit market under pressure amid the US sub-prime mortgage crisis, they may instead seek to sell Solare to a trade buyer or another fund in an auction.

Dallas-based Lone Star took over hotels owned by real estate developer Chisun Co which filed for bankruptcy protection in 2002 and created Solare. Solare now has 55 locations nationwide with a total of 10,823 rooms as at August. The group includes hotels, spas and a ski resort. The firm operates roadside hotels under the Chisun brand and upscale hotels under the Solare Collection banner.

 

Source: Reuters (Business Times 22 Nov 07)

China needs to levy property tax: official

(BEIJING) China should levy a general property tax to discourage speculation and rein in runaway real estate prices, according to a member of the central bank’s monetary policy committee.

Fan Gang’s comments in the latest issue of a Chinese Academy of Social Sciences magazine echo concerns voiced this week by Premier Wen Jiabao that China’s soaring housing market must be brought under control.

‘Realty investors don’t care whether their houses can be rented out or not,’ Mr Fan said in an interview. ‘If a continual and incremental tax is imposed on real estate, investment in the sector will cool down.’

Mr Fan, one of China’s best-known economists, has previously called for an annual tax on homeowners based on the value of their property but had previously said that technical obstacles stood in the way. His latest comments described the reforms as urgent.

‘Demand will continue to expand unchecked if realty investors are not required to pay anything to compensate for the housing price hike,’ he said.

China has adopted a number of measures to cool the real estate sector, such as increasing capital gains taxes on property and tightening land-use rules.

But property prices have resumed their surge, up 9.5 per cent year-on-year in October and even more in major cities, after briefly calming earlier in the year.

Mr Fan, who is also director of the National Institute of Economic Research, added that authorities must crack down on insider trading and illegal loans in the stock markets, or ‘the consequences will be unthinkable’.

However, he was optimistic about China’s potential for stable growth at around 11 per cent a year, saying that the country would continue to benefit from low labour costs, a high savings rate, capital inflows and advances in education and technology.

The challenge, he said, was for China to fix its economic problems from its current position of strength, so that it would be better able to withstand international financial crises.

He also said that the profitability of Chinese businesses was exaggerated because of artificially low resource prices, tiny social security outlays and lax environmental rules.

 

Source: Reuters (Business Times 22 Nov 07)

Ascott buys another KL serviced residence

THE Ascott Group is adding another serviced residence in Kuala Lumpur – its sixth property in Malaysia.

The group said yesterday it has signed a conditional agreement to buy a 208-unit serviced residence from HSC Properties (HSCP) for RM112.5 million (S$48.3 million).

The property will be named Somerset Ampang when it opens in the first half of 2010.

Somerset Ampang is in Kuala Lumpur’s ‘Golden Triangle’ – the business, shopping and entertainment district marked by Jalan Ampang, Jalan Sultan Ismail and Jalan Bukit Bintang.

When completed, the serviced residence will be part of an integrated development that will house one of Malaysia’s leading medical, heart and diagnostic centres, HSC Medical Centre. The high-end medical centre will be separately owned and managed by HSCP. It will occupy five levels of the 23- storey development, with amenities such as a medical spa, restaurant and cafe.

Ascott’s deputy CEO for finance and investment Chong Kee Hiong said: ‘Demand for international-class serviced residences, especially in the capital of Kuala Lumpur, is expected to remain strong. Given its excellent location in Kuala Lumpur’s business and lifestyle district, Somerset Ampang will enable Ascott to capture a larger share of the serviced residence market.

‘Somerset Ampang will cater not only to business travellers but also to visitors to the medical centre who require post-treatment accommodation, as well as their families and friends.’

Somerset Ampang’s facilities will include a swimming pool, gymnasium and children’s playground, Ascott said.

Its portfolio in Malaysia will increase to more than 760 units when Somerset Ampang opens. Ascott’s other properties in the country are Ascott Kuala Lumpur, Somerset Seri Bukit Ceylon in Kuala Lumpur, Somerset Gateway in Kuching and two corporate leasing properties in Kuala Lumpur.

‘Somerset Ampang is our second Somerset-branded serviced residence in KL,’ said Ascott’s deputy CEO for operations Gerald Lee. ‘Having more serviced residences in the city enables us to leverage on economy of scale and brand awareness for better operational efficiency and cross-selling. Adding more properties in Malaysia also means that our customers can choose from a wider portfolio.’

The group operates three brands – Ascott, Somerset and Citadines. Its portfolio spans 53 cities in 23 countries, 11 of which are cities where Ascott’s serviced residences are being newly developed.

 

Source: Business Times 22 Nov 07

GuocoLand to develop 1st project in Vietnam

The 17.5 ha integrated development will cost US$58 million

GUOCOLAND yesterday broke ground on a US$58 million development in Vietnam – its first project in the country.

The 17.5 ha site will be home to The Canary – an integrated development which will house some 1,200 residential apartments, a hotel, a trendy retail mall and an international school.

GuocoLand said that the first phase of the residential apartments will be launched soon. This will be followed by the development of the first phase of the retail mall.

The entire development is scheduled to be completed in five to six years’ time, the developer said. ‘However, the actual progress will depend on market conditions in Vietnam,’ said Lawrence Peh, GuocoLand’s general manager for Vietnam.

The Canary is located near the Vietnam-Singapore Industrial Park, near Ho Chi Minh City. The project will be the first fully integrated development in Vietnam’s Binh Duong Province, GuocoLand said.

‘When The Canary is completed, it will add vibrancy to Binh Duong Province, which is a leading recipient of foreign direct investment among Vietnam’s provinces,’ said GuocoLand in a statement.

Besides GuocoLand, many other Singaporean developers – including Keppel Land, CapitaLand, Frasers Centrepoint and Allgreen Properties – have of late made forays into Vietnam’s booming property market.

GuocoLand’s shares closed five cents down at $5.20 yesterday. The company’s stock has climbed 128.5 per cent since the start of the year.

 

Source: Business Times 21 Nov 07

Nina’s estate set to go to administrators

Feng shui expert files application to preserve assets of HK$100b estate

IN HONG KONG

THE stage is set in Hong Kong for a feisty probate battle over the fortune of Nina Wang Kum Yu-sum, once Asia’s richest woman, and control of the sprawling Chinachem property empire.

The estate of Ms Wang, who died in April this year, is likely to be put in the hands of court-appointed administrators pending the outcome of what is expected to be a protracted legal fight over her estimated HK$100 billion (S$18.6 billion) fortune.

Feng shui expert and businessman Tony Chan Chun-chuen claims to be the sole beneficiary of the deceased tycoon’s estate and is set to square off with the Chinachem Charitable Foundation, which claims a 2002 will left everything in its name. The foundation is headed by family members of Ms Wang.

This week, Mr Chan made a bid to have independent administrators appointed to preserve the assets of Ms Wang’s estate. The application has been adjourned until Dec 10.

The administrators will establish who owns the shares in the Chinachem companies – one of Hong Kong’s biggest private developers – as well as other types of assets, according to John Lees, director of forensic accountant and corporate restructuring firm John Lees & Associates.

‘They would look after these to make sure the right people are dealing with them … both sides would be putting together a set of orders the court would have to approve,’ he said. Administrators may force the company to put further developments on hold pending the outcome of the court case.

This is not the first time that the assets of Chinachem have come under the spotlight. The group of companies was at the heart of a protracted legal battle between Ms Wang and her father-in-law, following the death of Chinachem founder Teddy Wang The-huei.

Teddy Wang vanished in 1990 at the hands of kidnappers. For the next nine years, Ms Wang insisted that her husband was still alive, until a court finally declared him dead in 1999 upon the wishes of his father, Wang Dinshin.

For the next eight years, Ms Wang and her father-in-law waged a bitter war over the estate of Teddy Wang. Nina Wang stayed at the helm of Chinachem throughout, but was accused by her father-in-law of faking a will to inherit his son’s estate. The will – signed ‘one life, one love’ – contradicted another that the tycoon had made in 1968 which would see his fortune bequeathed to his father.

During the trial, it emerged that the elder Wang had told his son that Ms Wang was having an affair. The court heard that Teddy was so angered by the infidelity that he had made the 1968 will, rescinding an earlier one that split his estate equally between his father and wife.

Although the High Court sided with the father-in-law, Ms Wang won at the top court, also stymieing any criminal proceedings against her. The total legal bill came to HK$562 million, but that was not an end to the affair: it had long been suspected that there were other individuals financing Mr Wang, and he defied a court order to reveal their identities.

Chinese press reports named various property personalities as being behind the litigation. Had Ms Wang lost, the Chinachem property fortune could have ended up in the hands of her rivals.

The elderly Mr Wang described these individuals in the Chinese-language press as ’sympathetic and righteous lenders’, but refused to reveal their identities. In Hong Kong, third parties are barred from funding litigation on another’s behalf.

Ms Wang was ranked as the 154th richest person in the world by Forbes magazine last year. The litigation over her estate has left most of Hong Kong mystified: she battled for so long over her husband’s fortune that many are baffled as to how she herself could have had anything but a watertight legacy.

 

Source: Business Times 21 Nov 07

GuocoLand looking out for more project sites in Vietnam

It breaks ground on its first development in the country – an $84m integrated complex

HO CHI MINH CITY – SINGAPORE developer GuocoLand Group yesterday broke ground on its maiden development in Vietnam – The Canary – and says it is already on the lookout for further development sites.

The US$58 million (S$84 million) investment in The Canary reflects a high level of investor confidence in Vietnam’s booming economy, said a Singapore agency official at the ground-breaking ceremony yesterday.

The 17.5ha development will boast residential, commercial, hotel and educational facilities. It is the first integrated project to be built by a foreign investor in Vietnam, outside the commercial centre Ho Chi Minh City and the capital Hanoi.

It is being built in affluent Binh Duong province, 17km north of Ho Chi Minh City, near the Vietnam- Singapore Industrial Park (VSIP).

The flagship industrial zone was started in 1996 by a consortium of five Singapore firms led by SembCorp Parks, in a venture with Vietnamese state-owned Becamex IDC.

With a gross floor area of 290,000 sq m, The Canary is expected to yield 1,200 homes, in addition to a shopping mall with 85,000 sq m of retail space, a hotel, an international school and a sports complex. Homes will also face the popular 27-hole Song Be golf course.

Centre director Chiong Woan Shin of IE Singapore’s Ho Chi Minh City office told The Straits Times that the project reflects the level of confidence of Singapore companies.

Construction of the residential area’s first phase is under way and due for completion in 2009.

The two- to four-bedroom apartments, ranging from 85 sq m to 160 sq m, will be targeted at locals and expatriates alike, said Mr Lawrence Peh, general manager of Guoco- Land Vietnam.

GuocoLand’s international investment general manager Ho Sing added that the group is looking for more locations in Vietnam for further projects.

CBRE Vietnam’s managing director, Mr Marc Townsend, said he expected the project to be well-received. ‘With so many people working at the VSIP, it will be time- and cost-efficient to live there,’ he said.

The project will be launched for sale next year. He estimates that the homes will be priced at a premium above US$800 per sq m, or S$108 per sq ft – a price fetched by a residential project nearby.

IE Singapore’s Ms Chiong added that more Singapore companies were venturing into Vietnam.

But fast-rising home prices are also proving to be the bane of ordinary Vietnamese and even some expatriates. This is exacerbated by speculators flipping properties for a quick profit.

Property prices have jumped 50 per cent in Vietnam since the start of this year, and in Hanoi and Ho Chi Minh City, they have tripled.

The result is that owning homes in the cities is far beyond the means of most ordinary Vietnamese. The issue is a hot topic in the country’s legislature.

 

Source: The Straits Times 21 Nov 07

M’sia property drawing Middle Eastern money

Over RM6b invested in past two years in Klang Valley, IDR and Penang projects

IN KUALA LUMPUR

MORE than RM6 billion (S$2.58 billion) from the Middle East has been invested in Malaysian property in the past two years – and more is set to follow. Analysts say that Islamic funds will continue to flow into Malaysia’s property sector, drawn by the country’s reasonable economic growth, the strengthening ringgit and low capital values.

RHB Islamic Bank chairman Vaseehar Hassan believes that most of the money will go into property and infrastructure projects slated for implementation under the Ninth Malaysia Plan.

Big ticket projects on the drawing board or coming on stream – like the Iskandar Development Region (IDR) in Johor and Penang Global City – are likely to arouse Middle Eastern interest.

The Klang Valley has raked in almost RM2.4 billion of Arab funds, but now lags the RM4.2 billion committed by four Middle Eastern groups to the IDR.

However, the deals to develop various lifestyle and financial clusters in the IDR are conditional. The conditions have not been publicly revealed but are believed to include having physical infrastructure put in place before Mubadala Development, Millennium Development, Aldar Properties PJSC, and Kuwait Finance House (KFH) proceed with their plans.

Leading the charge is KFH, which this week said that it intends to put up a building taller than the 452-metre Petronas Twin Towers. Its managing director Salman Younis told The Edge Financial Daily that the project has been approved and will be constructed in a joint venture with the property arm of a local bank. He declined to elaborate but said that work will start next year.

Middle East interest could also surface in E&O Property’s multi-billion ringgit Sri Tanjung Pinang in Penang – a two-phase multi-island and headland development spanning 15 years and involving 980 acres of land reclamation.

Arab interest is relatively small in the first phase, with Al-Salam Bank a joint venture partner in developing a number of seafront bungalows worth RM200 million.

But in the second phase E&O Property plans to reclaim land for two or three man-made islands linked by a bridge.

Real estate players have said that the developer of The Palm Jumeirah in Dubai, Nakheel Partners, is interested in constructing a hibiscus-shaped island there.

E&O Prop has told BT that it is being courted by several Middle Eastern partners as well as regional ones for joint venture possibilities in both phases of Sri Tanjung Pinang. Its managing director Terry Tham has said that he is amenable to selling part of the company but wants a good price.

In September, E&O Property’s major shareholder E&O sold its 51 per cent interest in Bursa Malaysia listed master developer Putrajaya Perdana to Swan Symphony – an Abu Dhabi-Kuwait-Malaysian consortium – for RM190 million.

Middle Eastern private equity groups were also in a consortium that snapped up Berjaya Land’s KL Plaza for RM470 million. And they have invested RM400 million in the CIMB Mapletree Real Estate Fund.

Recently KFH, with local real estate investor Prestige Scale, agreed to pay RM557 million for the yet-to-be-built Glomac-Al Batha 40-storey office block in Kuala Lumpur. The price has set a RM1,120 per square foot benchmark for office space.

In Kuala Lumpur, KFH already owns part of the RM1.3 billion Pavillion KL and one of the two office tower blocks. It also has a small stake in SunCity’s Sunway South Quay project.

By JP Morgan’s estimates, a third of high-end purchases in Malaysia – mainly around the Kuala Lumpur city centre – are by foreigners, with a perceptible rise in Middle Eastern buyers.

 

Source: Business Times 17 Nov 07

Keppel Land to develop big housing project in Shanghai

It buys company with 26.4ha Nanhui site for $13.6m

KEPPEL Land is embarking on a large-scale residential project in Shanghai.

The Singapore-based developer announced yesterday that it has, through two subsidiaries, acquired full ownership of Shanghai Hongda Property Development for about $13.6 million.

Shanghai Hongda owns a 26.4-hectare residential site in Xinchang Town, in Nanhui District in south-eastern Shanghai. With the acquisition, Keppel Land said it is ‘poised to capitalise on the urban expansion and growing real estate market of Shanghai’. Keppel Land already has three residential developments in Shanghai.

‘Shanghai is positioned as a global financial hub,’ said Ang Wee Gee, Keppel Land’s director of regional investments. ‘Its property market is poised for continuing good prospects.’

Nanhui District has in recent years received significant attention from the government, owing to its strategic location adjacent to China’s largest port facility, the Yangshan Deep Water Port off Hangzhou Bay.

The Shanghai government has pumped money into infrastructure and real estate development in the district. It also has plans to develop the south-eastern tip of Nanhui District into a harbour city to support the activities of Yangshan Port and trade-related industries and services, said Keppel Land. The harbour city will house 800,000 people and several industrial parks by 2020.

‘Earmarked as one of key housing zones in Shanghai, Nanhui District has taken off rapidly with a surge of public and private real estate investments,’ Mr Ang said. ‘Our latest project is well-timed to capture Nanhui’s growing housing demand, which is expected to be underpinned by strong owner-occupiers’ demand over the next few years.’

According to Keppel Land, more residents are expected to be drawn into Nanhui District by increasing economic activities and opportunities pouring into the area.

The project in Nanhui District is aimed at middle-income buyers. Keppel plans to build it in phases over five years into a mixed residential enclave of 3,000 homes ranging from terrace houses to low and mid-rise apartment blocks. The development will include a club house and retail shops.

‘Keppel Land has been present in Shanghai for more than a decade, during which we have established ourselves as a quality developer with keen market knowledge and strong business networks,’ Mr Ang said.

‘We are confident that with our valuable experience and expertise, Keppel Land is well-placed to identify and tap new opportunities, and to meet the demand for quality homes in this market.’

Keppel Land said the latest acquisition is not expected to have any significant impact on its net tangible asset and earnings per share for the financial year ending Dec 31, 2007.

 

Source: Business Times 16 Nov 07

China’s housing price inflation hits new high

(BEIJING) Housing price inflation in China hit a new monthly high of 9.5 per cent in October despite government efforts to cool the boom, a state news agency reported yesterday.

The October rate was up 0.6 percentage point from September’s housing price inflation, the Xinhua News Agency said, citing the government’s National Bureau of Statistics. The communist government is trying to curb a sharp rise in real estate prices and guarantee adequate housing for the poor.

Regulators have raised interest rates, ordered developers to build more small, low-cost homes and imposed curbs on the purchase of second homes and foreign investment in real estate.

The monthly rise in housing prices in 70 Chinese cities ‘hit a new high despite the government’s efforts to curb surging property prices’, Xinhua said.

The price rise has been fuelled by an export boom that has sent cash flooding through China’s economy.

Chinese leaders worry that a frenzy of building could ignite a debt crisis if new shopping malls, luxury apartments and other projects fail to attract buyers and developers default on bank loans.

They also worry about the possible political fallout if housing prices rise beyond the reach of hundreds of millions of Chinese who have been left behind by the country’s boom.

Prices of luxury homes rose fastest in October, climbing by 12.3 per cent, Xinhua said. It said prices of low-cost housing rose 3.3 per cent. In Beijing, prices rose 17.8 per cent, Xinhua said.

The highest rate reported was 19.1 per cent in Ningbo, a booming port south of Shanghai in a major exporting region.

 

Source: AP (Business Times 16 Nov 07)

3 Chinese property firms plan to tap US$4b in HK floats

Investor interest high despite moves to cool market

 

(HONG KONG) Three big Chinese property firms plan to hit the Hong Kong market next year to raise a combined US$4 billion, tapping heavy investor demand despite government tightening measures aimed at cooling a scorching property sector.

 

Hengda Real Estate Group aims to raise US$1 billion to US$2 billion in a Hong Kong initial public offering, while fellow Guangzhou-based developer Star River Group plans to raise between US$800 million and US$1 billion, sources familiar with the deals said on Wednesday. Both plan listings in the first half of 2008.

Longhu Real Estate, a property firm based in the western Chinese city of Chongqing, also plans to raise more than US$1 billion in a Hong Kong IPO next year, sources said previously, with Morgan Stanley sponsoring the deal.

‘The flow of Chinese IPOs in Hong Kong will remain strong next year, especially for the property market,’ one of the sources said. A glut of IPOs is slated to list in Hong Kong by the end of this year, including Chinese oil rig manufacturer Honghua Group, which aims to raise about US$500 million and will soon seek approval from the Hong Kong Stock Exchange for its listing sponsored by Morgan Stanley, sources said.

With the Chinese government trying to cool the booming construction sector and banks restricting loans for land purchases, property firms have been tapping the public capital markets in order to raise funds.

So far this year, some 10 mainland property firms have raised about US$8 billion in Hong Kong IPOs. The central bank expects Chinese gross domestic product to grow by 11.6 per cent this year, and many fund managers favour property as a way to hedge against inflation, which reached a nearly 11- year high in October at 6.5 per cent.

‘There are already plenty of choices among listed property companies. Investors are looking for toptier property firms with large land banks,’ said Michael Chung, a fund manager at Iventure Investment Management Ltd.

Hengda has tapped Credit Suisse, Goldman Sachs and Merrill Lynch to sponsor its IPO, while Star River has appointed UBS and Morgan Stanley. In January, Merrill Lynch, Deutsche Bank and Singapore investment company Temasek Holdings invested US$400 million in Hengda, according to the official Shanghai Securities News. As for Star River, its properties located in Beijing and Guangzhou are focused on high-end residential customers.

Although the government unveiled further cooling measures in September, including a ban on lending to developers found to be hoarding land and raising down payment requirements on second homes, IPOs by property firms have attracted strong demand.

The October IPO by Beijing-based Soho China Ltd, which raised US$1.65 billion, was 169 times covered in its retail portion. Its shares are up 24 per cent since listing. A US$1.66 billion initial public offering in April by Country Garden Holdings Co, the biggest by a Chinese developer, was more than 270 times subscribed by retail investors, and its shares have more than doubled from its IPO price.

 

Source: Reuters (Business Times 16 Nov 07)

Housing prices in China shoot up

BEIJING – CHINA‘S housing prices rose at their fastest rate yet last month despite government efforts to cool the boom and ensure adequate supplies of homes for the poor, according to data reported yesterday.

 

The sharp gains of 9.5 per cent have inflated assets of Chinese who already own property, helping to produce dozens of new billionaires, but strained the ability of ordinary families to buy homes.

 

‘Housing prices are higher and higher and beyond belief,’ said Ms Zheng Jinping, a 23-year-old employee of a Beijing construction company.

 Ms Zheng said she and her fiance looked for a home this year but gave up when they found nothing affordable. ‘We will wait a year to see whether prices drop. But if they don’t, we will have no choice but to buy. We are getting married and we need a place to live,’ she said.

Last month’s gain was up from September’s 8.9 per cent rise, according to China’s main planning agency, the National Development and Reform Commission (NDRC). The official Xinhua News Agency said the October rate was the highest on record.

 Rising prices are fuelling a building frenzy, turning Beijing and other Chinese cities into forests of cranes as developers put up new apartments, shopping malls and office towers.

Housing prices in Beijing soared 17.8 per cent, figures showed.

 China’s leaders worry about the social impact if housing prices rise out of reach for hundreds of millions of Chinese who have been left behind by the country’s boom. Poor families are already struggling with a spike in inflation which saw food prices climb 17.6 per cent last month, compared with the same month last year.

At the same time, the number of mainland Chinese billionaires rose from 15 last year to 66 this year, many on the strength of property investments, according to business magazine Forbes.

Ms Li Ran, a 25-year-old employee of a state company, and her parents are looking for a two-bedroom apartment in Beijing.

 

They have 400,000 yuan (S$78,000) – a substantial sum in China. But even if they borrow another 250,000 yuan, they will have to settle for a place in the distant suburbs beyond the Fifth Ring Road which circles the capital, she said. ‘Incomes keep increasing, but they lag far behind housing prices. Still, people want to buy.’

 

As to whether the government can restrain prices, Ms Li said, ‘I don’t think the situation will change in the next 10 years. The trend is irreversible.’

 

Prices of luxury homes rose fastest last month, climbing 12.3 per cent, the NDRC said on its website, citing a survey of prices in 70 cities. It said prices of low-cost housing rose 3.3 per cent. The highest rate reported was 19.1 per cent in Ningbo, a booming port south of Shanghai in a major exporting region.

Real estate agent Ji Donghai said he has seen the volume of properties changing hands with ease lately, possibly due to the higher prices. ‘Some of my customers choose to rent a place and wait for a while,’ said Mr Ji, who works for the Beijing Di Jia agency. ‘But some other customers still choose to buy. They see the rising price, and they don’t think it is likely to fall.’

 

Source: ASSOCIATED PRESS (The Straits Times 16 Nov 07)

 

China house prices rise fastest in two years

Prices in 70 major cities surge 9.5% in Oct; property buys up as inflation soars

(HONG KONG) China’s house prices rose in October at the fastest pace since 2005 as inflation outpaced returns on bank deposits, encouraging households to invest in property.

Prices in 70 major cities jumped 9.5 per cent from a year earlier after gaining 8.9 per cent in September, the National Development and Reform Commission said yesterday on its web site. That was the biggest gain since records began in August 2005. Values climbed 1.6 per cent from September.

The acceleration is fuelled by the cash flood from China’s trade surplus, a record US$27 billion in October, prompting concerns about a possible property bubble.

China in September raised interest rates on some mortgages and increased minimum down payments to curb real estate speculation.

‘Price gains are understandable because the strong demand is still out there,’ said Liu Xihui, a Shenzhen-based analyst with Ping An Securities Co. ‘The reason prices are still accelerating is probably because September’s tightening measures haven’t yet had an effect.’

Prices soared 19.5 per cent in October from a year earlier in Shenzhen and 15.1 per cent in Beijing,

the commission said. New commercial housing valuations rose 10.6 per cent from a year earlier and second-hand prices increased by 8.7 per cent, it said.

Measures introduced by China on Sept 27 to damp property speculation included raising downpayments to 40 per cent from 30 per cent for housing loans, and to half a property’s value for commercial real estate.

The steps will slow property price increases in the balance of the year by crimping buying for investment purposes, said Ping An Securities’ Liu. Housing sold to buyers hoping to sell at anticipated higher prices accounts for a ‘big part’ of total sales, he said.

September’s measures came after new taxes, higher mortgage rates and downpayment ratios imposed since 2005 failed to cool the market. Investment in real estate development jumped 30.3 per cent in the first nine months of 2007, 6 percentage points faster than a year earlier.

China’s consumer prices rose 6.5 per cent last month from a year earlier, matching the decade high in August, as food costs surged. The benchmark one-year deposit rate is 3.87 per cent.

China has this year raised interest rates five times and ordered lenders on nine occasions to set aside larger reserves to curb inflation and contain bubbles in the property and stock markets.

 

Source: Bloomberg (Business Times 15 Nov 07)

China developer plans 3.9b yuan rights issue

(SHANGHAI) Shanghai Zhangjiang Hi-Tech Park Development Company said yesterday that it plans to raise 3.9 billion yuan (S$760 million) through a rights offer.

The developer of Shanghai’s major high-tech industrial park will use the proceeds from the rights issue to buy assets from its parent, develop property projects and supplement its working capital, the company said in a statement.

The company plans to make a 2.4-for-10 or 2.9-for-10 rights offer, based on the company’s total share capital of 1.215 billion shares at the end of September, it said.

The rights will be issued at a discount to its stock price, it said.

It added that the plan will require approvals from its shareholders as well as regulators.

Shares of the Shanghai company last traded at 21.98 yuan each.

This is a whopping rise of 335 per cent over the past 12 months.

 

Source: Reuters (Business Times 15 Nov 07)

Obayashi plans to invest 200b yen in real estate

It seeks to gain from rising property value, reduce dependence on building business

(TOKYO) Obayashi Corp, Japan’s second-largest construction company by market value, plans to invest 200 billion yen (S$2.6 billion) in property to take advantage of rising values and reduce its dependence on the building business.

The company’s construction operations have suffered from soaring raw material prices and intensified competition, said Yasuo Kodera, a finance manager at Obayashi, in an interview. The builder announced its five-year investment plan on Tuesday.

‘This is our first time to set an investment target for our real estate business,’ said Mr Kodera. ‘While construction and civil engineering will continue to be our core businesses, we would like to expand real estate operations, such as leasing, which will provide stable income.’

Public works spending was cut by 3.5 per cent this fiscal year, the sixth year of cuts. That’s increased competition among builders that have also been hurt by rising materials costs and public sanctions for bid rigging.

The Topix Construction Index is at the lowest level in three years.

Obayashi is seeking to profit from a rebound in real estate as Tokyo office rents stand at a 13-year high and nationwide commercial land prices rose this year for the first time since 1991.

Real estate operations accounted for a quarter of operating profit, or sales minus the cost of goods sold and administrative expenses, last year from 18 per cent a year earlier.

Obayashi’s operating profit from construction fell to 695 million yen in the six months ended Sept 30, from 7.98 billion yen a year earlier.

The Tokyo-based company expects net income for the year ending March to be 23 billion yen, a 43 per cent decline from last year.

Half of the company’s real estate investment in the next five years will be spent on property to be leased out, while the other half will go to buy land with the aim of reselling it at a higher price, the company said.

Shares of Obayashi, have fallen 33 per cent in the past six months.

 

Source: Bloomberg (Business Times 15 Nov 07)

NZ housing market slowing: central bank

Remarks seen as signal that bank won’t raise rates, now at record high

(WELLINGTON) New Zealand’s housing market is slowing in response to record-high interest rates, Reserve Bank governor Alan Bollard said, adding to signs the central bank won’t raise borrowing costs again.

‘We’re now seeing monetary policy having its impact on the housing sector in quite a significant way,’ Mr Bollard told a parliamentary committee in Wellington on Tuesday. ‘It’s having the sort of impact it needs to have.’

Mr Bollard raised the official cash rate four times between March and July to a record 8.25 per cent, sending home loans costs higher and crimping property sales. House sales fell 23 per cent in October from a year earlier, according to the Real Estate Institute.

‘The housing market is certainly going in the direction the Reserve Bank wanted,’ said Khoon Goh, senior economist at ANZ National Bank Ltd in Wellington. ‘There are a lot of upside risks to inflation, so they need to see housing slow even more.’

Just two of 16 economists surveyed by Bloomberg News say rates will rise before June 30 next year.

Eleven forecast no change and three expect a cut.

Mr Bollard said pressure on food and fuel prices globally meant inflation will be near the top of the 1-3 per cent range he is required to target.

In September, he forecast consumer prices will rise 3 per cent in the year ending Dec 31.

Inflation is ‘not dead unfortunately, not even sleeping,’ he said.

Because housing is slowing, Mr Bollard can ’sit back and maintain his wait-and-see stance,’ said Mr Goh. There is nothing in recent reports to make the central bank change from a neutral stance, he said.

House prices have surged 41 per cent the past three years to a record and are about six times the average disposable income. The rapid increase in this ratio suggests house prices are overvalued, the central bank said last week. The long-run average ratio is about three times.

Mr Bollard also said demand may be abating for the New Zealand dollar from investors who borrow cheaply in yen to invest in the nation’s higher-yielding assets.

‘The pressure has moved from the New Zealand dollar to other countries, I would say particularly to the Australian dollar and the Canadian dollar, which are both under quite considerable pressure from carry trades,’ Mr Bollard said. ‘They’re the ones having a tougher time at the moment.’

The New Zealand dollar has gained 15 per cent against the US currency in the past year. Mr Bollard said he shares concerns of exporters who have said the strength and volatility of the currency has crimped earnings.

Still ‘we don’t think the strength and volatility has been as damaging as some would say,’ he said. ‘Export volumes have held up.’

The parliamentary committee is concluding an inquiry into the framework of monetary policy following concerns that Mr Bollard was raising interest rates to curb the housing market at the expense of exporters being hurt by a rising currency.

 

Source: Bloomberg (Business Times 15 Nov 07)

JLL sees Asia as safe haven amid sub-prime debris

Region could benefit as investors reallocate funds from US, Europe

(LONDON) Asia provides a ’safe haven’ for property investors as returns decline on US and European assets because of sub-prime mortgage losses, said commercial real estate broker Jones Lang LaSalle.

‘The region could be a beneficiary of the fallout as investors reallocate funds from the US and Europe towards Asia-Pacific in search of higher growth opportunities on a risk-adjusted basis,’ Jane Murray, Asia-Pacific head of research at Jones Lang LaSalle, said yesterday in a report.

The world’s biggest banks and securities firms wrote down US$45 billion of assets this year and cut 10,000 jobs because of the collapse of the market for mortgages made to borrowers with poor credit.

Commercial real estate transactions fell in the UK and the US after defaults on subprime pushed up borrowing costs, creating turmoil in financial markets.

Global direct real estate investment in Asia gained 14 per cent to US$54 billion in the first half of the year, compared with the year-earlier period, Jones Lang LaSalle said. Asian deals are about a third of the volumes in the Americas or Europe.

‘Although regional investment volumes are still a comparatively low proportion of global direct property investment, interest levels are very high and we foresee the continuation of rapid growth in volumes,’ said Ms Murray.

Japan remained the dominant market in Asia for international investors in the first half, accounting for more than half of investment in the region, the broker said.

Capital values gained 8.7 per cent in Japan during the quarter to 3.96 million yen (S$52,075) per square metre.

Goldman Sachs Group bought the building that houses Tiffany & Co’s flagship store in Tokyo in August for 37 billion yen, or about 54.45 million yen per square metre, the highest price paid since the burst of the bubble economy in the early 1990s, according to Jones Lang LaSalle.

Average monthly rents for grade A office buildings advanced 3 per cent from the second quarter to 54,882 yen per tsubo (US$150 per square metre), the 13th-straight quarter of gains, Jones Lang LaSalle said.

Grade A office buildings are sites with total leasable floor area of more than 10,000 square metres and more than 800 square metres per floor, according to Jones Lang LaSalle.

The buildings should be no older than 25 years.

 

Source: Bloomberg (Business Times 14 Nov 07)

Bakrieland plans 1t rupiah bond issue

(JAKARTA) Indonesian property developer PT Bakrieland Development Tbk plans to issue 1 trillion rupiah (S$157.8 million) worth of bonds early next year, to finance the development of its property projects, a local newspaper reported yesterday.

Bisnis Indonesia said the bonds will have a maturity of 5-10 years and the funds will be used to develop an integrated residential and commercial complex in South Jakarta.

‘We are planning to issue 1 trillion rupiah worth of bonds in the first quarter of next year. Currently we are in the process of selecting the underwriter for the issue,’ Ferdinand Sadeli, Bakrieland’s finance director, was quoted as saying.

Bakrieland, which is controlled by the family of Indonesian chief social welfare minister Aburizal Bakrie, has a market capitalisation of US$1.24 billion.

 

Source: Reuters (Business Times 13 Nov 07)

NZ house sales down 23%

(WELLINGTON) New Zealand house sales fell 23 per cent in October from a year earlier, adding to signs the property market is slowing after interest rates rose to a record.

House sales dropped to 6,854 homes, from 8,857 a year earlier, according to a report from the Real Estate Institute of New Zealand Inc. Sales rose from a six-year low of 5,894 in September.

Reserve Bank governor Alan Bollard last month kept the benchmark interest rate at a record-high 8.25 per cent after four increases between March and July as he seeks to curb domestic demand. Last week, he said bank lending levels have dropped and there had been a ’sharp downturn’ in home-loan approvals.

‘Agents were having to work hard for vendors to get buyers across the line,’ Murray Cleland, national president of the Real Estate Institute, said in a statement. Still, ‘the beginning of spring helped the market regain some volume and there appears to be no great pressure on prices’.

 

Source: Bloomberg (Business Times 13 Nov 07)

JLL to take control of Japanese Reit eAsset

The Tokyo Stock Exchange Reit index has declined 11% this year

(TOKYO) Jones Lang LaSalle Inc (JLL), the world’s second-largest commercial real estate broker, will gain control of eAsset in the first takeover in Japan’s 4.9 trillion yen (S$63 billion) Reit market.

LaSalle Investment Management Inc will buy Asset Realty Managers Co, the asset manager of eAsset, for an undisclosed sum, giving it control of the Reit.

The Jones Lang unit will expand eAsset as part of its plans to invest 300-500 billion yen a year over the next few years, said Jack Chandler, chief executive officer of LaSalle Asia-Pacific.

Japanese Reits have declined this year at a time when land prices and rents are rallying.

LaSalle’s decision to take over eAsset may spur international property managers to follow suit, lured by higher returns than those available in North America and Europe after rising defaults on US sub- prime mortgages sapped investor confidence.

‘You’ve seen dramatic reduction in transaction activity in the UK and the US as capital values have declined,’ said Mr Chandler.

‘It is extraordinary how different the investment climate is here than in other regions.’

The Tokyo Stock Exchange (TSE) Reit Index is heading for its first decline since 2004 after rising defaults on US sub-prime mortgages prompted some foreign investors to sell stock.

The TSE Reit index has declined 11 per cent this year, after gaining by at least 8.2 per cent in each of the past three years.

‘J-Reits are having trouble finding properties because there are few available for sale,’ said Yoji Otani, a real estate analyst at Credit Suisse Group who expects further acquisitions of Japanese Reits’ asset managers.

‘Sponsorship and asset managers are very important for J-Reits because they are the main source of real estate.

Asset managers for some small Reits need to be replaced for Reit prices to gain.’

LaSalle Investment and other investors agreed on Nov 8 to pay 22.8 billion yen for a stake in eAsset, which will sell 57,000 new shares in the transaction. It had 64,000 shares outstanding as of October. eAsset will gain two shopping centres in Tokyo and Kobe, worth a combined 57.6 billion yen, from LaSalle as part of the transaction.

‘Tokyo is by far the largest office market in the world, a lot of that stock here is obsolete,’ Mr Chandler said on Nov 9 here.

‘Even with low growth, just obsolescence and replacement and some of the emerging areas in Tokyo will create a tremendous amount of opportunity.’

Japanese Reits are controlled through their asset managers. The trusts themselves lose corporate tax breaks if their three largest shareholders own more than 50 per cent of the Reit between them.

Asian Investment LaSalle, which plans to triple its investment in Asia to US$20 billion in three to four years, is seeking growth in a region that has seen the least effect from the sub-prime problem.

 

Source: Bloomberg (Business Times 13 Nov 07)

ART buys rental apartments in Tokyo

ASCOTT Residence Trust (ART) is acquiring more than 500 rental apartments in 18 blocks in Tokyo for 12.2 billion yen (S$158.6 million).

The properties, the subject of a conditional sales and purchase agreement, are being acquired from a private equity firm. There are a total of 509 units in eight wards in Tokyo – Shinjuku, Bunkyo, Meguro, Setagaya, Nakano, Suginami, Nerima and Taito Ku. They are all freehold and have an average age of 18 months. Total net lettable area is estimated at 13,318 square metres.

The newly purchased properties include purpose-built studio and one-bedroom apartment units which are popular with an increasing number of singles customers. Each of the 18 sites is within walking distance of the Tokyo subway, other public transportation, restaurants and supermarkets.

The apartments are currently managed under a mixture of four Japanese rental housing brands – Zesty, Joy City, Gala and Asyl Court.

All of them have broadband Internet, security access phones, air-conditioners, fully-fitted kitchens, builtin wardrobes and water heaters. ART said in a statement yesterday that the properties were acquired at an estimated annualised property yield of 4.1 per cent in the forecast year 2008.

The transaction will be funded by borrowings, which will bring ART’s gearing to 36.8 per cent, well within the 60 per cent gearing limit allowed under the Monetary Authority of Singapore’s property fund guidelines.

Upon legal completion, all 18 rental housing properties will be managed by Ascott International Management Japan (AIM Japan), a 60:40 joint venture between The Ascott Group and Mitsubishi Estate Co, a major real estate developer in Japan.

Chong Kee Hiong, ARTML’s chief executive officer, said: ‘The longer tenancy leases of the rental housing model and high average occupancy of 90 per cent across the 18 properties ART is acquiring provide good income stability and potential for organic growth in ART’s Japan and overall portfolio.

‘In addition, ART will be able to enlarge the customer base for its Tokyo portfolio as it now offers both serviced residence and rental housing options to cater to a wider range of budgets and customer needs.’

With the latest purchase, ART’s diversified portfolio now comprises 22 per cent rental housing units and 78 per cent serviced residence units. Its length-of-stay profile will improve from an average of seven months to eight.

ART’s existing properties in Japan are Somerset Azabu East and Somerset Roppongi, located in Tokyo’s Minato ward.

Upon completion of the acquisition, ART’s total portfolio value will stand at S$1.34 billion, comprising 3,463 units in 36 properties in 10 cities across seven countries.

 

Source: Business Times 13 Nov 07

HK property sector set to grow up to 30% in next 12 months

Flow of cash into city and cheaper financing options fuelling growth

IN HONG KONG

HONG Kong’s property market is tipped to see growth of up to 30 per cent over the next 12 months amid a flow of hot money into the city and a favourable interest rate environment.

This week saw HSBC cut its prime lending rate by a further 25 basis points to 7 per cent, following a rate cut only last week on the heels of one in the US. Other banks are expected to follow suit, fuelling a mortgage war among banks in the city.

As well as cheaper financing options for home buyers, the property sector is benefiting from a flow of cash into Hong Kong, in part due to an expectation that China will soon relax restrictions on capital inflows into the city.

This is expected to bring significant gains to Hong Kong’s stock market, which has already risen 55 per cent over the past two months in anticipation of fresh fund flows by mainland investors.

This week, Standard & Poor’s Equity Research outlined its bullish outlook on the residential property sector, reflecting what it sees as a return of confidence to the sector.

It cited recent record prices for luxury apartments, increased volume in residential transactions and the higher than expected bids for government land at auctions as indicators of confidence among developers and buyers.

The research arm of S&P said it expects a rise of 20 per cent to 25 per cent in the prices of residential properties over the next 12 months, as prices in large and small residential units remain well below 1997 prices.

But Colliers International director Ricky Poon believes property prices could increase by as much as 30 per cent.

‘The market is very different from 1997,’ he said. ‘There’s not too many people speculating.

‘Also, some people have been playing the stock market and have come out – and are investing in the property market.’

He said he had recently revised upwards projections of a 15-20 per cent rise over the next 12 months.

This would narrow the gap between the luxury sector, which has been powering ahead over the past few years, and the mass residential sector, which had been lagging.

‘The luxury sector has been going up a lot over the past two years,’ Mr Poon said. ‘It has even gone up by 10 per cent just in the past few weeks.

‘Now I think the market is moving to the mass residential sector – so the gap will be narrowing.’

Adding to the ‘feel good’ factor in the property sector were figures this week from the Hong Kong Monetary Authority on the number of residential mortgage loans in negative equity – where the property is worth less than the sum owing.

The number of these mortgages fell by about 1,200 cases to 3,500 cases in the three months to the end of September. They had an aggregate value of HK$6 billion (S$1.1 billion).

It represents a 97 per cent drop from the peak of the negative equity phenomenon which was in June 2003, just as Hong Kong was recovering from the Sars outbreak and an endemic slump in property values since 1997.

 

Source: Business Times 10 Nov 07

HSBC raises US$1.5b for fund, eyes Indian realty

(MUMBAI) Hongkong and Shanghai Banking Corp (HSBC), which recently raised US$1.5 billion, aims to invest 40 per cent of that in Indian realty, the Business Standard reported yesterday. This is in addition to its growth fund investments of about US$600 million in India, it said. ‘At the Asia PE (private equity) fund level, we have recently closed a US$1.5 billion fund. According to our estimates, 40 per cent of that is expected to be committed to India,’ HSBC India country head Naina Lal Kidwai told the paper.

Private equity firms The Carlyle Group, JP Morgan Chase & Co, and the private equity arms of Citigroup and Morgan Stanley have poured money into Indian property since rules on inbound investment were eased in 2005.

Ms Kidwai also told the paper the bank was in talks to lend US$500 million to Wipro Ltd, India’s third biggest software services exporter. HSBC and Citibank were expected to do the deal, the paper said, citing industry sources.

 

Source: Reuters (Business Times 7 Nov 07)

Ciputra Property slumps on trading debut

(JAKARTA) Shares in Indonesian property firm PT Ciputra Property Tbk plunged nearly 13 per cent on their debut yesterday, wiping out early gains, as investors feared interest rates might have reached bottom, dampening demand for new homes.

The stock hit an intraday low of 600 rupiah, compared to an initial public offering (IPO) price of 700 rupiah, before ending the session around 610 rupiah in a broader market that gained 1.2 per cent.

The stock had risen to a high of 750 rupiah at the opening.

Ciputra Property raised 2.11 trillion rupiah (S$336 million) by offering around 3 billion of its shares, with the proceeds earmarked to acquire a number of companies and fund new projects.

At its IPO price, Ciputra Property was valued at US$472.8 million, making it the sixth-largest property company by market capitalisation on the Jakarta bourse.

Investors grew cautious on interest-rate-sensitive stocks after Indonesia’s central bank on Tuesday left its key interest rate unchanged at 8.25 per cent for the fourth month in a row, wary that surging oil prices could spur inflation.

The central bank cut its benchmark rate from 12.75 per cent in early 2006 to 8.25 per cent earlier this year, supporting growth in the Indonesian housing and property sector.

‘Valuation-wise, it’s expensive. People are cutting their losses and moving to more attractive sectors such as commodities. Banking sectors and shares which are sensitive to interest rates like properties are going down today,’ one trader at a foreign brokerage house said.

Other firms in the Ciputra Group also succumbed to selling pressure, with Ciputra Development Tbk falling around 8 per cent and Ciputra Surya Tbk dropping about 2 per cent.

But the poor first-day showing did not worry the company, which said it expected a stronger performance in 2008 to help its shares.

Candra Ciputra, president director of Ciputra Property, said he expected sales to soar to 840 billion rupiah in 2008 from a forecast 278 billion this year, with net profit climbing to 230 billion rupiah next year from a forecast 48 billion rupiah in 2007.

‘The improvement will be supported by a higher number of property sales next year, with more properties being constructed,’ Mr Candra Ciputra told reporters. ‘I’m still confident with the current price. I believe in no time it can return to the IPO price or even reach 800.’

Indonesian companies have raised more than US$3 billion so far this year in IPOs and follow-on equity sales, according to Thomson Financial, marking a record for Jakarta’s stock market.

 

Source: Reuters (Business Times 8 Nov 07)

SP Setia to go into commercial, luxury projects

Group to sell 15 high-end bungalows at RM30 million each next year

(KUALA LUMPUR) Property developer SP Setia Bhd, which currently has 2,160 hectares of undeveloped landbank worth RM30 billion (S$13 billion) in gross development value (GDV), plans to focus on luxury and commercial development projects.

Its group managing director and chief executive officer, Liew Kee Sin, said the company was now shifting from being a purely residential developer to a full-range developer.

Mr Liew said SP Setia had been involved in developing its normal housing and eco-focused branding over the years.

‘This can sustain us for only a number of years. We want to expand to other parts of the business cake. We want to go into condominiums, super high-end brands like bungalows and commercial developments, and venture into Vietnam,’ he said.

The company, he added, planned to sell 15 high-end bungalows valued at about RM30 million per unit next year.

He was speaking to reporters after a signing ceremony for the proposed issuance of RM500 million nominal redeemable serial bonds with 168.15 billion detachable warrants between SP Setia, Aseambankers Malaysia Bhd and United Overseas Bank (Malaysia) Bhd here yesterday.

On overseas ventures, Mr Liew said SP Setia had joined forces with Vietnam’s top state-owned conglomerate, Becamex IDC Corp, to undertake a residential project with a GDV of RM2.1 billion.

He said the proposed township involved 200 hectares of land located in Ho Chi Minh City and was expected to be launched next year.

According to him, the project is expected to contribute about 10 per cent of SP Setia’s profit by 2010.

For the RM500 million bonds, SP Setia plans to utilise it to repay existing borrowings and to finance its operating activities, capital expenditure and working capital requirements.

Mr Liew said the bonds would allow SP Setia to diversify its funding sources and lock in fixed interest rate to rebalance the group’s current financing portfolio, which is mainly based on floating interest rates.

 

Source: Bernama (Business Times 6 Nov 07)

Dream of other shores for a villa by the sea

For those who find beachfront living in S’pore costly, there are options in Bali, Phuket

(SINGAPORE) Don’t let your dream of owning a beachfront home get washed away by rising prices.

Sure, an exclusive beachfront home at Sentosa Cove will cost anywhere in the region of $15 million to $20 million these days, but there are cheaper options.

Consider that a bungalow land parcel in Sembawang went for around $200 psf at an Urban Redevelopment Authority (URA) auction this week – cheap compared to Sentosa Cove, where a bungalow site recently sold for over $1,500 psf.

Unfortunately, only one parcel out of 12 in the auction was designated for bungalow development.

To find an affordable beachfront villa, one will really have to look overseas.

The Alila Villas Tanah Lot in Bali costs just under $3 million. For this, you get a three-bedroom villa designed by award-winning Singapore firm SCDA Architects on about 6,000 sq ft of prime beachfront real estate near the fabled Tanah Lot temple.

Fu Hui Ling, whose family is in the mining business in Indonesia, is one of the partners behind the venture.

The development comprises 12 three-bedroom villas and 38 one-bedroom villas and all have been sold, mostly by word of mouth, and sight unseen.

Ads for property in Bali are easily found on the Internet but buying a property overseas does require some nerve.

An unscrupulous developer will sell you a beachfront home that could be miles from the beach, say Ms Fu. She herself was talked into buying a beachfront property that was landlocked with no access from the road.

But such occasional pitfalls aside, property values are on the rise. Since 2005, prime property prices have increased 50-60 per cent, reckons Ms Fu.

‘And nothing beats nature,’ she enthuses.

Closer to home – just across the Causeway, in fact – nature is a little less expensive.

Bayou Water Village is the latest phase of the huge Leisure Farm Resort Residences in Johor developed by Mulpha International Berhad and waterfront bungalows there cost about $500,000. That is until they were all sold too.

There are still terrace units available and these cost about $215,000. The built-up area for all three-bedroom units is 1,777 to 2,234 sq ft.

Peter Lim, sales manager at Leisure Farm, says that half the buyers of the waterfront homes are either Singaporeans or Singapore PRs. They include professionals, businessmen, and people, ‘looking for a shortcut to their dream home’.

To give an idea of the capital appreciation, Mr Lim says that its The Pinggiran Bayou cluster homes were first launched at around $100 psf about four years ago while Bayou Water Village was launched at about $150 psf last year.

There are real challenges to buying property overseas, including restrictions and taxes pertaining to foreign ownership.

Mr Lim reveals that with the implementation of the special economic zone, the Iskandar Development Region, in Johor, certain obstacles are being removed. ‘Among the slew of incentives to entice foreign direct investment into the region is the removal of the property gains tax, which immediately connotes a capital appreciation element in investing in Johor and that has translated into many more sales inquiries and purchasing activities for us,’ adds Mr Lim.

Restrictions on foreign ownership vary.

Keppel Land, which is building luxury waterfront villas in Shanghai, says that foreign buyers have to provide proof that they have resided in China for one year with employment at the point of purchase. They are also required to declare that the property is their first in the city.

A Keppel Land spokesman also said: ‘There are different taxes imposed on different property types and they also vary from city to city. In general, there is sales tax, capital gains tax, stamp duty and income tax on rental.’

Keppel Land’s Villa Riviera, which is incidentally also designed by SCDA Architects, has waterfront bungalows that start at 6.5 million yuan (S$1.26 million) and go up to 13 million yuan, ranging from about 3,500 to 6,500 sq ft in size.

The development comprises 88 units of villas and 80 units of semi-detached and terraced houses, and so far, about 20 per cent of the buyers are Singaporeans. Keppel Land added: ‘Most of them purchase for own occupation while some are for investment.’

Phuket in Thailand is also where the wealthy are going to build their beachfront homes. At present, there is no tax in Thailand on the occupation of property or ownership.

Other restrictions on ownership do apply but this has not stopped about 2,000 foreigners from buying condominiums, apartments and villas, says CB Richard Ellis (Thailand).

According to CBRE, luxury villas weigh in at under $2 million while your entry-level villa will cost around $700,000.

Some people will want to know how much domestic help will cost – after all, you don’t want to be doing laundry in your own luxury villa, do you? But then, if you have to ask, you probably can’t afford it.

Nevertheless, the good people at CBRE estimate that full-time staff such as maids, cooks, drivers and gardeners can be hired at approximately $300-$600 per person per month.

 

Source: Business Times 3 Nov 07

KepLand’s 2 new Viet projects make it 7 for year

Latest joint ventures involve villa and condominium developments

KEPPEL Land has entered into two separate joint ventures (JV) to build a luxury villa development and a condominium development in Vietnam. This takes the number of projects in Vietnam announced by Keppel Land this year to seven.

In a statement yesterday, Keppel Land said that the two projects in District 9 of Ho Chi Minh City will be developed in phases and that the combined investment capital is estimated at S$319.5 million.

The JVs will be done through Keppel Land’s wholly owned subsidiaries, Dattson Pte Ltd and Sophia International Pte Ltd. Its Vietnamese JV partner is An Phu Corporation.

Keppel Land said that it expects to take up 55 per cent stakes in the JV companies while An Phu will subscribe for the remaining interest.

The luxury villa development will be built on a 13-hectare site and have about 200 homes while the condominium development, on an adjacent 6.8 ha site, will have about 1,940 apartments.

In 2005, Keppel Land launched Villa Riviera, its first luxury development in Ho Chi Minh City which subsequently sold out.

Ang Wee Gee, director of regional investments at Keppel Land said: ‘We are capitalising on our hallmark quality and success with Villa Riviera which has shown that our introduction of an exclusive gated community has been very positively received.’

He added: ‘Our first mover advantage and established network in Vietnam have enabled us to build up a strong portfolio of prime properties rapidly.’

The latest developments will be near Ho Chi Minh City’s Saigon Hi-Tech Park where Intel’s US$1 billion test and assembly plant is being built.

Construction of the villas and condominiums is expected to start when planning approval is obtained, with the sales launch of the first phase slated for early 2009.

Keppel Land is also jointly developing with An Phu waterfront condominiums fronting the Saigon River in Binh Thanh District, only four kilometres away from Ho Chi Minh City’s CBD.

These latest joint ventures follow Keppel Land’s announcement to develop a 5.1-ha waterfront residential site in District 2 last month.

The soft launch of The Estella, an up-market development comprising 1,500 apartments in the popular An Phu Ward of District 2, is slated for Q4 2007.

Keppel Land’s other developments in Ho Chi Minh City include three waterfront residential developments fronting the Saigon River in Binh Thanh District, Ca Cam River in District 7 and Ca Tre River in District 2.

 

Source: Business Times 3 Nov 07

$308.5M INVESTMENT – KepLand in 2 tie-ups to build Viet homes

KEPPEL Land (KepLand) has bought more residential sites in Ho Chi Minh City to ride on the rapid growth of Vietnam’s property market.

The developer announced yesterday that it has entered into two separate joint ventures with local developer An Phu to develop luxury villas and condominiums in an upmarket area of Ho Chi Minh City.

The combined investment capital for the two projects is estimated at US$213 million (S$308.5 million).

KepLand will take a 55 per cent stake in the joint-venture companies. Its partner An Phu will take the remaining share.

A 13ha villa site will yield about 200 residences, while an adjacent 6.8ha condo site will boast about 1,940 apartments when completed.

The sales launch for the first phase of the developments is slated for early 2009.

Said KepLand’s director, regional investments, Mr Ang Wee Gee: ‘Our first mover advantage and established network in Vietnam have enabled us to build a strong portfolio of prime properties rapidly.’

KepLand has fully sold out its gated waterfront villa project in the city’s District 2 called Villa Riviera.

The company is also preparing to soft launch a 1,500-unit condo project, called The Estella, in Ho Chi Minh City soon.

 

Source: The Straits Times 3 Nov 07

Mitsubishi Estate earnings down 14% in first half

(TOKYO) Mitsubishi Estate, Japan’s largest developer by market value, said first-half profit fell 14 per cent on rising costs at its office and commercial building segment and declining sales from development.

Net income was 25.4 billion yen (S$320 million) in the six months to Sept 30 from 29.4 billion yen a year earlier, the Tokyo-based company said yesterday. Sales fell 17 per cent to 317.8 billion yen.

The developer raised its full-year net income forecast 0.6 per cent to 85 billion yen. Sales may fall 17 per cent to 789 billion yen.

‘We expected a much higher upward revision,’ said Yoji Otani, a real estate analyst at Credit Suisse Group in Tokyo.

Operating profit, or sales minus the cost of goods sold and administrative expenses, fell 17 per cent in the first half to 58.3 billion yen.

Profit from Mitsubishi Estate’s urban development and investment business fell by more than half from last year, when the sale of its Kitanomaru Square building buoyed results. Operating profit at its office and commercial leasing business, which accounts for 60 per cent of all revenue, fell 8.4 per cent.

Under stricter rules enacted in June, building approvals were taking four times as long, raising concern sales may drop at construction, property and home equipment companies. The regulatory changes came in response to a 2005 scandal involving falsified earthquake-resistance data.

Mitsubishi Estate lowered its condo sales forecast by a quarter to 3,200 units because of the regulatory change.

The land ministry said on Tuesday it may relax the rules. Builders may modify blueprints that have already been submitted for checks, so long as the changes don’t degrade the function and safety of the buildings, it said.

Mitsubishi Estate owns more than a third of the buildings in Tokyo’s Marunouchi business district, an area one-third the size of New York’s Central Park that includes the headquarters of Japan’s largest banks.

Mitsubishi Estate gained 10 yen, or 0.3 per cent, to close at 3,420 yen yesterday. The shares have gained 11 per cent this year.

 

Source: Bloomberg 1 Nov 07

Indonesian firm to list retail Reit on SGX

Venture with M’sian firm to have 7 malls worth US$250m

INDONESIA’S eighth largest real estate developer, PT Perdana Gapuraprima, part of the Gapuraprima Group, is looking to list a retail real estate investment trust (Reit) on the Singapore Exchange in early 2008.

Speaking at a press conference here yesterday, president director Rudy Margono said that the Reit will be a joint venture with Amanah Raya Berhad, a company owned by the Malaysian government.

Mr Margono said that Gapuraprima is expected to inject five malls into the Reit, and Amanah Raya two. He also revealed that the assets have an estimated value of US$250 million. He expects the retail Reit to offer a yield of between 9-10 per cent. PT Perdana Gapuraprima’s real estate assets are worth about US$500 million, he added.

Mr Margono also revealed that the three-to- five-year-old malls outside Jakarta are in cities like Solo and Bandung.

In August, Amanah Raya, together with Kuwait Finance House, acquired two villa apartment blocks in Reflections at Keppel Bay for about S$286 million. For Gapuraprima, Mr Margono said the retail Reit is largely a way for the group to divest its properties and use the capital for further expansion in the real estate business in the region.

Mr Margono said: ‘Our vision is to be one of Asia’s largest property developers, with property development projects in various countries around the region.’

PT Perdana Gapuraprima was listed on the Jakarta Stock Exchange last week and shares last traded at around 345 rupiah, up 11.3 per cent on its IPO offer price of 310 rupiah a share. The new share issue forms about 30 per cent of PT Perdana Gapuraprima’s paid-in capital after the IPO.

Mr Margono said that in FY07, the group achieved a net profit of 46.9 billion rupiah (S$7.5 million) and 514 billion rupiah in revenue. He expects the yield of its Indonesian properties to be 8-9 per cent.

He added: ‘We have also seen a capital gain of 15-20 per cent for our properties in Jakarta annually in the past 10 years, which we hope will instil more confidence in our investors investing in the group.’

 

Source: Business Times 30 Oct 07

Sub-prime losses up to 30b yen: Mitsubishi UFJ

IN TOKYO

EVIDENCE of increasing international fallout from the US sub-prime mortgage crisis mounted yesterday as Japan’s biggest bank, Mitsubishi UFJ Financial Group, said it would need to write down the value of sub-prime-related investments by up to 30 billion yen (S$379 million) – six times more than previously announced.

The bank is expected to cut its profit forecast for this year by 25 per cent as a result. While small relative to the spectacular losses suffered by Merrill Lynch and other Wall Street houses as a result of the subprime crisis, Mitsubishi UFJ’s admission is likely to unnerve markets, analysts said.

Shortly after the market turmoil of August, the Washington-based Institute of International Finance, which represents several hundred of the world’s leading financial institutions, warned that fall-out in Asia and elsewhere from the sub-prime crisis could prove to be worse than generally expected.

Mitsubishi UFJ (MUFG) said that appraisal losses related to the sub-prime mortgage market had probably risen to 20 to 30 billion yen as at the end of September, compared with the five billion yen the group announced in August. But a spokesman for the bank declined to confirm reports that profits would be reduced sharply as a result.

MUFG is the latest of several Tokyo financial institutions to announce greater-than-expected losses from sub-prime investments during the past week. Nomura Holdings, Japan’s largest brokerage, posted its first quarterly net loss in four and a half years last week owing to losses on mortgage-backed securities.

MUFG’s exposure to sub-prime-related investments was 280 billion yen as at July, according to the latest figures available from the bank reported by Reuters. That compares with the 95 billion yen held by Sumitomo Mitsui Financial Group, Japan’s third-largest bank, by the end of September. Mizuho Financial Group, Japan’s second-largest bank, said in the summer that it had sold off almost all of its sub-prime investments.

Another leading Japanese bank, Shinsei, said yesterday that its exposure to the sub-prime housing market was largely unchanged since August, when it said it had about US$500 million in investments tied to US mortgages. The bank last week cut its full-year profit forecast by 14 per cent and said it would not pay a dividend for the first half because it was forced to write down the value of sub-prime investments.

The IIF report said that the immediate effect of recent turmoil on emerging markets has been diminished by global investor appetite for risk and a lowering of credit ratings. But it added that ‘other influences will take more time to play out – for example, the damage done to longer-term economic growth in emerging markets and whether US mortgage damage dampens growth of mortgage markets in emerging economies’.

So far, all the high-profile losses suffered by holders of securities linked to the US sub-prime mortgage sector have been in mature economies, but the institute warned: ‘Watch out for losses by asset holders domiciled in emerging economies that have not yet been publicly acknowledged.’

 

Source: Business Times 30 Oct 07

PROPERTY – Penang’s luxury homes market plays catch-up

Home values set to rise as big-name players race to build high-quality developments on Malaysian island

WHEN it comes to Malaysian property, foreign investors seldom set their sights beyond Johor, Kuala Lumpur (KL) and Malacca. But the island of Penang in the north is starting to come into its own.

Malaysia’s foreigner-friendly policy means that Singaporeans can buy properties freely in the country, as long as they are worth more than RM250,000 (S$110,000).

Home prices in Malaysia’s second-smallest state have been on the rise and property players say the area is drawing the attention of overseas buyers.

‘Prices are generally on the uptrend and properties located in prime areas have seen significant price increases of 10 per cent from a year ago,’ said Mr Tan Chai Liang, a consultant with Izrin & Tan Properties in Penang.

Still, the island’s properties remain affordable. In general, prices of Penang homes have ‘a lot of room for appreciation’, said Mr Michael Geh, a senior partner at property firm Raine & Horne.

In the high-end segment, homes are 30 to 50 per cent cheaper than those in KL, he added. Luxury condominiums in the KL city centre range from RM700 to RM1,500 per sq ft (psf), compared with RM400 or RM500 psf for Penang’s priciest condos.

But Penang is playing catch-up. The state’s government has been pouring money into large-scale infrastructure projects that are helping to boost home prices. Also, more developers are now investing in Penang. ‘For many years, there wasn’t much development in Penang. But now, bigger developers are coming in and bigger projects are being built,’ said Mr Geh.

Well-known developers from KL have begun to descend on Penang, lured by the lower land prices, which can be as little as a quarter of those in KL. Since 2004, these developers have announced projects worth about RM30 billion to be built in Penang over the next 10 to 15 years.

The big players include luxury developer E&O Properties and leading construction and property firm CP Group.

With their entry into Penang come more high-quality projects and the promise of escalating property values.

Indeed, their arrival has helped home prices in the southern and south-western districts of Penang shoot up by more than 20 per cent in the past year, according to Malaysia’s Star newspaper. For instance, a condo development called Coastal Towers is now selling units at RM235,000 each, compared with RM180,000 previously, said Mr Geh.

Attention is also on the northern coast, which hosts a 9km tourism belt. Districts to look out for include Gurney Drive, Tanjung Bungah and Batu Ferringhi, where a slew of resort condos and waterfront villas are being built, said Mr Tan.

For a three-bedroom condo in these areas, investors can expect to pay RM350,000 to RM650,000, he added.

Annual rental yields are 6 per cent to 8 per cent for quality condos in prime areas.

For ’super condos’ with large floor areas of 4,000 sq ft and above, prices range from RM1.5 million to RM2 million, Mr Tan said.

Some high-profile projects include CP Group’s 74-acre Queensbay development, with shops, homes and offices. On sale now is the 160-unit Bay Star condo, which is 70 per cent sold at prices ranging from RM450,000 to RM1.4 million. CP Group estimates rentals at RM3,000 to RM8,000.

Bay Villas, also a Queensbay project, will be previewed in Singapore next year. It has 86 freehold waterfront villas, each with a built-up area of 5,000 to 6,000 sq ft and priced at RM3.8 million to RM5 million.

Another Penang development being marketed in Singapore is Seri Tanjung Pinang, an integrated seafront development that its developer, E&O Property Development, says is similar to Sentosa Cove.

E&O, which opened its first overseas marketing office in Singapore last week, said it has received ‘keen interest’ for its Acacia semi-detached homes, priced from RM1.45 million each.

In December, it will launch its seafront villas – at RM2.5 million to RM6.5 million each – and may also sell the condo units in Singapore next year.

Other homes in the development include courtyard terraces, which start from RM735,000 and offer rental yields of 6 to 10 per cent.

Strong attraction

Since 2004, well-known developers such as luxury developer E&O Properties and leading construction and property firm CP Group from Kuala Lumpur, have announced projects worth about RM30 billion (S$13 billion) to be built in Penang over the next 10 to 15 years.

 

Source: The Sunday Times 28 Oct 07

M’sian US$200m Reit may list in Q12008

IN KUALA LUMPUR

A US$200 million real estate investment trust (Reit) of regional malls by Malaysia’s Amanah Raya and Indonesia’s Gapura Prima Group is likely to list on the Singapore Exchange in the first quarter of 2008, rather than by year-end.

Amanah Raya director Ahmad Kamal Abdullah Al-Yafii says Macquarie has been hired to look into listing the Reit.

Initial properties to be injected include five in Indonesia and one or two Malaysian malls, with assets in Singapore, Thailand, Vietnam and the Philippines to be added later.

The Asean-wide Reit – jointly managed by Amanah Raya, which is a trustee company owned by the Malaysian government, and Gapura Prima – will be based in Singapore.

The two companies signed a memorandum of understanding on the Reit in mid-June at the Malaysia-Indonesia Investment and Finance Summit. A dual listing on the Indonesian exchange is a possibility down the track.

Amanah Raya already has Malaysian-listed Amanahraya Reit (AR-Reit) which focuses on commercial, education, industrial and hospitality property.

Following the recent injection of five properties valued at almost RM309 million (S$134.24 million), ARReit now has 13 properties worth RM641 million. The aim is to reach RM1 billion by year-end, says Mr Al-Yafii, who is also AR-Reit’s deputy chairman.

Despite a general drop in foreign interest in Malaysian Reits after withholding taxes were not eased in the last Budget – foreigners are taxed at a relatively high 20 per cent – foreign institutions such as ABN Amro, Deutsche Bank and Bank of Scotland have agreed to take up 70 per cent of a proposed private placement of up to 100 million new units in AR-Reit.

At a placement price of 90-95 sen per unit, that is small change for foreign funds. But Mr Al-Yafii says Malaysia’s higher net yields are an attraction and AR-reit’s net yield will rise to 7.4 -7.5 per cent with the new assets, from 6.9 per cent.

 

Source: Business Times 27 Oct 07

Vietnam drafts law to control property prices

People having more than one home will be subject to annual real estate taxes

(HANOI) Vietnam is drafting a real estate ownership tax law to curb skyrocketing property prices and speculation amid scenes of people queuing overnight to join lotteries for apartments, property dealers said.

They said overall property prices have gone up about 50 per cent since the beginning of the year, mainly because investors diverted money from the stock market into property.

Speculation in land and equities in the emerging-market economy is becoming a concern for policy-makers and economists who want to avoid market bubbles and sustain Vietnam’s high growth rates for years to come.

‘In some areas in Hanoi and Ho Chi Minh City, especially in the luxury condominium sector, prices have tripled in the past year alone,’ Nguyen Xuan Dao, chief executive of property developer Vietnam Property Inc, said.

Dealers said most condominium projects in Hanoi and Ho Chi Minh City are sold out before they are even built.

Mr Dao said a 150- square-metre condominium in Hanoi’s Ciputra City, a development by Indonesian developer PT Ciputra Development Tbk, now sells for about US$240,000, compared with about US$80,000 last summer.

This in a country where the GDP annual per capita income is about US$835 this year, although economists believe it is five or six times higher in Hanoi and Ho Chi Minh City.

Property dealers said that according to the draft law, owners who have more than one home would be subject to annual real estate taxes. The law would come into effect in 2010.

Only transfer taxes are now levied on property sales and most transactions are paid in cash, making it difficult for the authorities to track them and collect taxes on capital gains.

Property dealers said that a government plan announced in July to allow Vietnamese living overseas and expatriates to own real estate on a freehold basis had also triggered speculators to buy more property for future resale.

‘Most people buy to re-sell and the people who really need a place to live cannot afford the price,’ said Tran Du Lich, director of Ho Chi Minh City Economic Institute.

In Ho Chi Minh City, where most overseas Vietnamese from the United States and Europe choose to resettle, prices have soared between 60 and 100 per cent.

A square metre at luxury project The Lancaster in the heart of business district 1 jumped from about US$3,000 last year to US$4,200 this month. Rents for luxury apartments are up by 20 per cent to about US$35-US$38 per sq m, property management firm CBRE Richard Ellis said.

Last week, hundreds of buyers camped overnight outside the sales office of Singapore’s CapitaLand, to pay deposits for The Vista project on the Saigon River with prices starting at about US$200,000 each.

Other developers, including Taiwanese developer Phu My Hung, asked prospective buyers to pay US$12,000 to participate in a lottery in which only 35 per cent would win the right to buy its apartments.

 

Source: Reuters (Business Times 25 Oct 07)

Global property investment expected to fall

Mortgage defaults in US may prompt lenders to tighten credit, says JLL

(TOKYO) Global direct real estate investment may fall this year as concerns about defaults on US mortgages prompted lenders to tighten credit, said Jones Lang LaSalle Inc, the world’s second-largest commercial real estate broker.

Asia may be the only market to experience an increase in investment in the second half of this year, Jane Murray, Asia-Pacific head of research at Jones Lang LaSalle, said in Tokyo yesterday. Global direct property investment rose 41 per cent in 2006 to US$699 billion, advancing for a third-straight year.

‘The highly leveraged players who were very active earlier in the year are certainly sitting on the sidelines at the moment,’ Ms Murray said.

The four-year boom in real estate is threatened after the US housing slump raised concerns about the value of mortgages and bonds linked to those loans. Investors are finding it harder to borrow money when they want to fund property acquisitions.

Japan, Singapore, China and India are among the markets offering the best opportunities for investors, according to Jones Lang LaSalle research.

Grade A office rents in Japan have gained 80 per cent in the past three years and have more than doubled in Singapore, Ms Murray said. Grade A buildings are no more than 25 years old, with total leasable floor area of more than 10,000 square metres and more than 800 square metres a floor, according to Jones Lang LaSalle.

Japan features strong economic growth in a large market and is the only country where returns on office buildings exceed local interest rates, also known as a positive yield spread, Ms Murray said.

Morgan Stanley raised a record US$8 billion for a real estate investment fund in June. In April the firm agreed to buy 13 Japanese hotels from All Nippon Airways in the country’s biggest real estate deal.

Japan offers a positive yield spread of 1.56 per cent, compared with negative spreads in other major cities including London, Paris, Frankfurt and New York, said Takeshi Akagi, local director in Japan for Jones Lang LaSalle.

Investment in China rose 23 per cent in the first half of the year even after the government sought to curb property investment to cool gains in housing prices. India, where more than half the population is under the age of 25, doesn’t have enough offices, shops and houses to meet demand, Ms Murray said.

‘It will require major additions to the stock base across every sector over the coming years to accommodate its rapidly growing services sector and the increasing wealth of its population,’ Ms Murray said.

‘When the Indian government begins to deregulate investment for foreign players, we will see a flood of money pouring into that market.’

 

Source: Bloomberg (Business Times 25 Oct 07)

Second busiest port: Shanghai may replace HK

Its box volume likely to top 25.5m TEUs in 2007, next only to S’pore’s 27.6m

(SHANGHAI) Chinese city Shanghai is expected to overtake Hong Kong as the world’s second-busiest container port this year, helped by rising throughput at the multibillion-dollar Yangshan deep-water port, a senior port official said yesterday.

The city port’s container volume is expected to top 25.5 million TEUs (twenty- foot equivalent units) this year, lagging only Singapore, whose volume is estimated to be 27.6 million TEUs this year, Xu Peixing, director-general of Shanghai Port Administration, told Reuters on the sidelines of an industry event.

He did not give a full-year estimation for Hong Kong, which moved 17.7 million TEUs of goods in the first nine months, according to statistics provided by the Hong Kong Port Development Council.

Shanghai International Port (Group) Co, China’s biggest port operator, controls the city port’s major assets.

‘Yangshan port has played a big role in boosting Shanghai’s container volume,’ Mr Xu said. ‘Its full-year container volume is estimated at 5.8 million TEUs.’

Yangshan’s capacity was at 4.3 million TEUs as of the end of 2006 when the first two phases were completed.

Construction of Phase 3 of the deep-water port is going smoothly, with four additional berths to be in place by the end of this year and three more by the end of 2008, increasing its total number of berths to 16, Mr Xu said.

He added that Phase 3, which would push up the port’s handling capacity to 15 million TEUs by 2012, remained open to outside capital but the name list of foreign investors has yet to be finalised.

He declined to name the potential investors. But local media has named Singapore’s PSA International and French shipping company CMA CGMere as potential candidates, along with local players China Ocean Shipping Group and China Shipping (Group).

 

Source: Reuters (Business Times 25 Oct 07)

Genting seeking $3.2b loan for Sentosa resort

GENTING International plc, a unit of Asia’s biggest casino operator by market value, is seeking to borrow a record S$3.2 billion to fund a casino resort in Singapore, three people with knowledge of the transaction said.

The overseas unit of Kuala Lumpur-based Genting Bhd is adding to S$2.17 billion raised in a rights offer in August, and S$450 million of convertible bonds it sold in April to partly fund the resort.

Genting International’s loan will push lending to Asia’s casino industry to about US$9.1 billion, more than double the total for last year, according to data compiled by Bloomberg. Lending to the region’s industry is set to grow as countries including Japan consider joining Singapore in lifting bans on casinos.

‘There are quite a few countries in Asia where gambling is banned,’ said Harsh Agarwal, a credit analyst with Lehman Brothers. ‘If more countries legalise gambling, we should see an increase in bank lending for casinos.’

Las Vegas Sands, the world’s largest casino operator by market value, hired eight banks last month to arrange a loan of about S$5 billion for its Singapore gaming resort.

Genting International’s loan will be a record for the Singapore-listed company. The gaming operator has yet to pick arrangers, said the people, who declined to be identified because the information is private.

Tan Hee Teck, chief executive officer of Resorts World at Sentosa Pte, Genting International’s S$5.2 billion casino project in Singapore, didn’t return calls made to his office yesterday.

The regulated gambling market in the Asia-Pacific region is expected to expand 15.7 per cent a year to US $30.3 billion in 2011, according to PricewaterhouseCoopers. The region will replace Europe, the Middle East and Africa as the second-biggest gaming market after the US by 2011, PwC says.

Genting International will be building the casino on Sentosa island, known for its golf courses and beaches. The resort will include South-east Asia’s first Universal Studios theme park.

Singapore’s government lifted a four-decade ban on casinos two years ago and issued licences to Genting International and Las Vegas Sands.

‘Bankers will take a lot of comfort in that Genting does have a history in casinos,’ Mr Agarwal said.

 

Source: Bloomberg (Business Times 24 Oct 07)

High rents drive big firms out of HK’s Central

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

CapitaLand buys China site for $203m

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

CapitaLand to build sixth Raffles City in Hangzhou

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

Luxury apartment sold for record HK$109m

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)

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)

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)

Bubble fears growing with HK’s prolonged bull run

IN HONG KONG

AS Hong Kong’s market continues to enjoy a bull run that has seen its benchmark Hang Seng Index (HSI) surge by more than 40 per cent in just two months, fears of a bubble are beginning to seep in.

The HSI is trading at nearly 20 times earnings, with the H-share index at 31.2 times earnings – a reflection of a sturdy appetite for mainland focused firms.

Yesterday, the Hang Seng toyed with the 30,000 mark before falling in the afternoon. The blue-chip index closed at 28,954.55, down 586.23 points, having hit an intraday record earlier of 29,920.25.

Some, however, fear that valuations are overstretched, with an asset bubble forming. And as punters continue to wade into the boom story, they worry a serious correction could have a potent effect.

The bull run first started gathering pace on the heels of an Aug 20 announcement from Beijing that it would allow mainlanders to invest directly in Hong Kong stocks. This prompted an expectation of a fierce flow of cash from across the border.

‘The market has gone up further and faster than anyone could have believed, so people worry about a correction – because it’s gone up so sharply, it could be a big correction,’ says Howard Gorges, vicechairman of South China Brokerage. ‘But the fact is they are not so worried because the market keeps going up.’

Commentators have been sounding alarm bells especially because daily fluctuations seem to suggest greater participation by day traders, who stand to get their fingers burned.

‘That’s why you see the market fluctuate during the day – if there are a lot of day traders really trying to get the market right for a quick possible movement,’ explains Mr Gorges.

Hong Kong has had major bull runs in the past. However, Mr Gorges stressed that it has never been on this scale before. The addition of China- based investors is also differentiating this run from previous ones, he said.

‘Previously, it was just overseas and Hong Kong (investors),’ he said. ‘And overseas investors are also looking at emerging markets and the China story.’

He said the most likely blips on the horizon are possible measures by the mainland to cool its economy, which could dampen market enthusiasm. However, Mr Gorges hopes any correction will be a healthy one that slows the run down a bit. ‘But there are no rules,’ he stressed.

While some commentators have warned of a knock-on effect to other sectors of the economy should there be a major correction, the city is still showing strong fundamentals. Economic growth continues to be steady, while the property market is picking up pace and unemployment remains at historic lows.

This week, the property market received a boost from a land auction that saw two residential sites fetch prices well above market expectations. An Aberdeen site was sold to a consortium that included Sino Land and Nan Fung Properties for HK$5.71 billion (S$1.08 billion), more than double the opening bid of HK$2.5 billion. It was expected to fetch a maximum of HK$4.4 billion.

Another site on Lantau island sold for HK$482 million, more than 90 per cent higher than the reserve price. The market had expected it to fetch up to HK$300 million. Both sales reflect stellar demand for luxury sites as tight supply sends prices soaring.

 

Source: Business Times 17 Oct 07

Plunge in Japanese housing starts set to cut Q3 growth

Slowdown will make it harder for Bank of Japan to justify raising interest rates

(TOKYO) A plunge in Japanese housing starts triggered by tighter building rules looks set to slash third-quarter economic growth, which would make it even harder for the Bank of Japan to justify raising interest rates.

The government and some economists say housing starts will rebound in the fourth quarter as operators become familiar with the new rules, introduced in late June, but industry officials warn the slowdown could last until the end of the year at least.

The problems – unrelated to the housing sector troubles in the US – stem from rules introduced by the government after a scandal in 2005 over falsified engineering data for apartment blocks.

They include heavier penalties for violations and a much stricter approval process for big buildings.

After a jump in June ahead of the new rules, housing starts fell by a quarter in July from a year earlier. The pain deepened in August, when 63,076 homes were started – little more than half the tally in the same month last year.

There are few hard forecasts as yet, but some economists say these sharp falls could leave gross domestic product growth in the July- September quarter as much as 0.3 percentage point below what it might otherwise have been.

A sharp slowdown in the construction sector, which employs one in every 10 Japanese workers, could ripple out into many other industries.

If GDP data to be released in mid-November shows the economy shrank during the the quarter, Japan will technically be in a recession after the 0.3 per cent contraction in April-June, although most economists are not forecasting that. ‘Should that happen, a rate hike will be out of the question for the time being,’ said Seiya Nakajima, chief economist at Itochu Corp.

To be sure, exports proved surprisingly solid in the quarter despite the US sub-prime woes and credit market troubles, which might offset weak housing investment to some extent.

But low economic growth will be almost as bad for the Bank of Japan as a recession. The BOJ has said that interest rates have to rise gradually because the current benchmark rate, 0.5 per cent, is too low in an economy expected to grow at about a 2 per cent annual pace.

‘There’s a possibility that Japan’s growth will fall well short of 2 per cent,’ said Hideo Kumano, an economist at Daiichi Life Research. ‘The whole rationale for raising rates could be lost.’

The BOJ could argue that Japan’s long-term economic prospects remain solid, and that the housing downturn is the result of temporary confusion over regulation changes, not a sudden weakening in demand.

The Land Ministry has said things will return to normal soon as architects and contractors become accustomed to the new procedures. The ministry said last month that construction approvals had already rebounded in August after a sharp fall in July.

Industry sources say that is misleading. Approvals are rebounding only for the small, wooden houses that are still common in Japan, they say; permits for big buildings, which have a much greater impact on the wider economy, have been virtually frozen.

The government patched together the new approval process in response to public outrage over the building scandals, in which the construction of dozens of buildings was found to have been based on falsified earthquakeresistance data to save costs.

Critics say the new process is too stringent and inflexible and does not allow applicants to make even minor changes in building plans. To make matters worse, the Land Ministry released detailed guidelines on the new rules only in August, meaning the process was paralysed for two months after the new law was enacted on June 20.

The new regulations have increased the workload both of those who seek permits and those who check them.

An official at the Japan Association of Architectural Firms said members now needed to prepare three or four times more documents than in the past.

‘I heard that for some big buildings there are so many documents to submit that people needed to rent a mini-truck to carry them.’

 

Source: Reuters (Business Times 16 Oct 07)

China plans to launch Reits on Shanghai bourse

BEIJING – CHINA plans to launch real estate investment trusts (Reits) on the Shanghai Stock Exchange as part of a bid to provide more financial products for investors, a senior official said yesterday.

Mr Zhu Congjiu, the general manager of the Shanghai Stock Exchange, did not specify when the Reits would come to market.

But he told a financial forum that his office was planning to launch some Reit products to let more investors reap gains from China’s soaring property prices.

Reits are a cross between bonds and equities, with regular dividends and capital appreciation gains. They invest in real estate directly, either through properties or mortgages, and can be sold like stocks on major exchanges.

‘There is huge potential for Reits in a big and rapidly developing country like China,’ Mr Zhu said, adding that his office would consider opening an international board for foreign firms to sell shares in China.

‘Some institutions have suggested we open such a board and there is also great demand for it. We will actively study it and launch it when the conditions are ripe.’

Mr Gui Minjie, the vice- chairman of the China Securities Regulatory Commission, said at the same forum that Beijing would steadily encourage domestic mutual funds to venture abroad under the Qualified Domestic Institutional Investor scheme.

He said China’s fund industry had significant potential for further growth, especially as the country’s pension funds would expand to around US$1.8 trillion (S$2.64 trillion) by 2030 as the population ages.

Source: REUTERS (The Straits Times 12 Oct 07)

World’s wealthy still eyeing property

They are undeterred by the market turmoil triggered by the US sub-prime crisis

(GENEVA) The wealthy have lost none of their appetite for property despite the market turmoil triggered by the sale of risky sub-prime mortgages in the US, according to some of the world’s top private bankers.

Clients of wealth managers are, however, on the lookout for the next big areas of growth and want products that will enable them to reduce their exposure to any one property or market.

‘We’re seeing heavy levels of investment in property in Hong Kong (and) throughout Asia,’ said Peter Flavel, global head of private banking at Standard Chartered. ‘You can’t get office space in Singapore, you can’t get it in Dubai.’

Speaking at the Reuters Wealth Management Summit, Mr Flavel said there was a ‘group of Asians that love real estate’ and that their ardour showed no sign of fading. ‘They’d see the situation in America as specific to America and the situation in the UK as specific to the UK,’ he added.

Samir Raslan, head of Citibank’s wealth management operations in central and eastern Europe, Middle East and Africa, said his clients also remained alive to potential opportunities in world real estate markets.

‘We haven’t seen any change in our clients,’ he told the summit held at Reuters offices here.

Nicolas Cagi Nicolau, global head of structured product solutions at SG Private Banking, said demand so far in 2007 had been particularly strong.

In Ireland, where fortunes have been made on the back of the country’s decade-long property boom, a fast-cooling domestic market and recent global market turmoil may have had a short-term impact, but investors’ love of property is intact.

‘All that we may be seeing is that people are just waiting to see what may well happen either domestically or internationally, but the appetite for further investment is undoubtedly there,’ said Mark Cunningham, managing director of Bank of Ireland Private Banking.

He said his main problem was persuading Ireland’s growing ranks of self-made millionaires to diversify into assets other than real estate. ‘The first love has always been property and will continue to be property for a lot of these people.’ In Spain, which like Ireland is experiencing a rapid cooling in its property market, the wealthy remain committed to real estate, although not necessarily in their own country.

Daniel de Fernando, head of asset management and private banking at Spain’s BBVA , said a new product offering clients a chance to invest in the Mexican property market had proved particularly popular. ‘People are asking us for more ideas on that front,’ he said of a fund bought into by 60 people within two weeks of its launch at a minimum investment of 2.5 million euros (S$5.2 million) each.

In the Netherlands, property also continues to be popular, according to Bernard Coucke, deputy chief of private banking at ING Groep. ‘On the contrary, more and more programmes are being set up, not only in residential but also commercial. Why? Because, for instance in the Netherlands, demand is high . . . and I think it will continue to go up.’

For some rich investors, however, there is a growing belief that other assets can offer better returns.

‘I think that the appetite for real estate is decreasing a lot,’ Paolo Molesini, head of private banking at Italy’s Intesa Sanpaolo said of a country where up until now the wealthy have held about 70 per cent of their assets in property.

‘Property costs a lot and gives you a very, very low revenue . . . There is no equilibrium from the price of the asset and the earnings that you can get out of it.’ Mr Molesini said his clients were looking to invest in foreign property, particularly in Germany, eastern Europe and Paris.

 

Source: Reuters (Business Times 11 Oct 07)

Citigroup buys stake in Nitesh Estates: report

(MUMBAI) Citigroup will pay around US$250 million for a minority stake in Indian real estate firm Nitesh Estates, the Economic Times said yesterday.

The deal would see Citigroup partner privately owned Nitesh in the Indian firm’s hospitality venture, which involves setting up at least five luxury hotels and possibly malls also, the newspaper said, citing sources close to the deal. Nitesh Estates declined to comment, the paper said.

The head of Citigroup Property Investors told Reuters in April that the unit was investing around US$400 million in India, and that it had tied up with seven Indian developers, including Nitesh, for a US$100 million luxury hotel in Bangalore.

A spokesman for Citigroup in India did not immediately return a call seeking comment on the report.

 

Source: Reuters (Business Times 10 Oct 07)

KL extends IDR incentives to developers

PM says ‘customised incentive packages’ for bigger investors with specific needs can be considered

IN KUALA LUMPUR

THE first section of Malaysia’s planned Iskandar Development Region, across the straits from Singapore, was yesterday identified for special incentives for approved companies.

It is called Node 1 and covers 96 million sq ft – 8.9 sq km – of greenfield waterfront land between the Johor state new administrative centre and the second crossing to Singapore.

The IDR-status companies for Node 1 must operate in six specific service sectors, as announced in March: creative industries, education, financial advisory & consulting, healthcare, logistics, and tourism.

The first package of incentives, which includes 10-year income tax exemptions for certain qualifying activities, will be extended to approved developers and approved development companies as well as IDR-status companies.

Approved developers are those acquiring sub-lease rights to lands within Node 1, while approved development managers are those sanctioned by the developers. In effect, these would be companies which acquire some interest in the building or management of components within the node.

The first node which has already attracted some Middle Eastern investment, is envisaged as a comprehensive development including leisure, residential, financial and high-end industrial components.

Yesterday, Prime Minister Abdullah Ahmad Badawi indicated that the government was also prepared to consider ‘customised incentive packages’ for bigger investors with specific needs.

Mr Abdullah told a press conference in Putrajaya after he co-chaired the third Iskandar Regional Development Authority board meeting: ‘If it is important to do that, we certainly can (consider). The point is we can have discussions with them to decide.’

Malaysia is actively promoting the IDR – which is intended eventually to cover an area about three times the size of Singapore – as a new economic zone for the country and surrounding region.

Some RM4.3 billion (S$1.8 billion) would be injected by the government into infrastructure development for Node 1, and with an estimated RM40 billion required in the first five years alone, huge levels of private investment are needed to drive the plan.

In August, the IDR received its first major boost when four Middle Eastern groups – Aldar Properties, Mudabala Development Company, Kuwait Finance House and Millennium Development International Company – committed about RM4.1 billion to develop the whole area of Node 1 into various themed zones that would include lifestyle, cultural and financial districts.

 

Source: Business Times 10 Oct 07

Gems in a booming Indonesian market

IN JAKARTA

WHEN the wind blows in Jakarta these days, you could well be blinded by a blast of sand and grit swept up from construction sites that seem to have sprung up everywhere.

Condominiums, offices, malls, mixed housing-retail-office complexes and even whole townships are in various stages of construction in the city – from the heart of downtown to suburban fringes.

Jakarta, as the eye can plainly see, is undergoing a building boom.

Powered by a steadily recovering economy and declining interest rates, the property market has been putting up a robust showing in the past year.

On the commercial front, landlords have been happily raising office rentals, riding on a swelling wave of demand as companies grow more confident, expanding into larger and better facilities.

In the first six months of this year, for instance, average gross rental rates outside the central business district (CBD) rose 14.2 per cent from the end of last year, according to the latest market review – for March to June – published last month by local property consultancy Procon Indah.

The same review indicated that the average occupancy rate of CBD office space scored a new post-Asian financial crisis high of 86.8 per cent, up from the previous quarter’s 84.5 per cent.

Outside the central business district, the average occupancy rate stood at 89.8 per cent for the first half of this year, up from 87.4 per cent at the end of last year.

Performance in the housing segment remained strong as well during Q2, even as more projects with competitive pricing flooded the market. The condominium market continued its growth trend of the first quarter, with cumulative sales rate reaching 94.2 per cent, said Procon Indah.

Meanwhile, land prices went up 6.7 per cent on average in Greater Jakarta residential estates. And with mortgage interest rates falling to an unprecedented 8.8 per cent, down from 12-14 per cent a few years ago, there is still potential for more sales growth, say analysts.

A similar story has been unfolding even more dramatically on the stock market, where property counters have been outpacing the general market bull.

In the last six months between the end of March and Friday last week, the Jakarta Composite Index rose 36.6 per cent, breaking through 2,500 points for the first time to close at 2,500.6 points.

But the property index did even better. Comprising some 30-plus counters, it scaled 72.1 per cent in the corresponding period to close at 246.5 points.

An important point to note here is that property shares remain the only channel for foreigners wanting some play in the sector, as they are barred from buying property directly.

But has the property market passed its peak? How much more upside can be expected for investors coming late into the game? Analysts acknowledge that it is unlikely for the sector to achieve similar breathtaking gains in the near future. Already, some are re-evaluating the net asset value (NAV) of several counters.

‘Popular listed developers like Summarecon Agung have already reached fair value,’ noted one analyst with a foreign brokerage. Several have even run ahead of their value, he added.

Still, there could be a few more gems waiting to be uncovered. Selected stocks like Ciputra Surya and Lippo Cikarang remain undervalued and have decent upside potential, say analysts. And should the government decide to open up property sales to foreigners – an idea that has been bandied about and discussed recently – another big boost can be expected. Such a major change, though, is not likely to happen this year.

‘But on the whole, much of the sales and planning have been done. We’re now moving into the construction phase,’ observed one analyst.

In that regard, it might be wiser and more profitable to look to the construction and raw materials sector, where the sun is just about to rise.

Analysts forecast a rise in construction activity in the next one to two years, based not only on the buzz in the private property sector, but even more so on an expected swell in state spending on sorely needed public infrastructure.

In the draft state budget for next year announced recently, the government raised the allocation for public works by 41 per cent, and that for transport by another 64 per cent.

The money will be spent on building new road networks, improving and constructing airports and railway lines.

As one analyst noted: ‘Elections are less than two years away. In that time, the government will want to demonstrate that it has done something to improve public infrastructure.’

Counters to watch include state-owned construction giant Adhi Karya, which is likely to land major government contracts, and Total Bangun Persada, a veteran brand-name in the industry. Investors are also eyeing the impending IPO of state-owned builder Wijaya Karya, due next month. Related sectors like cement production could be worth some attention too.

In short, there is still good gain to be had in the property and construction sector. It’s just a matter of knowing where to look. Take a cue from the sand and grit swirling in the city, for a start.

 

Source: Business Times 9 Oct 07

M’sia’s Equine may list associate

(KUALA LUMPUR) Small Malaysian property developer Equine Capital Bhd may list a property development associate that has secured building rights over a US$5.8 billion new-city project in northern Penang state.

‘Listing (Abad Naluri Sdn Bhd) is just one of the options we are mulling today,’ Equine executive chairman Patrick Lim said yesterday. ‘We create value when we can produce that product and show demand for that product.’

Equine, valued at about US$146 million, owns 25 per cent of Abad Naluri, an unlisted firm that has secured a deal to develop the project in Penang, which will include luxury homes, shopping centres, parks, and convention and performing arts centres.

 

Source: Reuters (Business Times 4 Oct 07)

RESEARCH HOUSE REPORT – S’pore leads Asia-Pac in homes price boom

SINGAPORE’S property market is setting the pace as real estate prices soar across the Asia-Pacific region.

The country posted a ‘remarkable house price growth’, year on year, of 21.05 per cent for the 12 months ended June, up from 6.08 per cent the previous year, an online research house, Global Property Guide, said yesterday.

That placed it fourth in the overall ranking of 42 countries and top in the region.

Singapore’s property market recovery from an ‘eight-year house price slump’ was ‘thanks to its booming economy’, the report added.

Top spot went to the Baltic state of Latvia while its neighbour, Lithuania, came in third. Bulgaria was second.

All three recorded price rises of 25 per cent or more for the year ended June compared with the same period a year ago.

Some other Asia-Pacific economies that made the rankings included the Philippines, which had price growth of 14.29 per cent, placing it seventh, and Hong Kong – in 14th position with 8.78 per cent growth.

Unlike most Asian countries, Thailand’s prices dropped by 3.47 per cent for the period after a rise of 3.92 per cent for 2006.

While prices in the Asia-Pacific are heating up, Europe’s price growth continues its moderate trend, said the report.

 

Source: The Straits Times 3 Oct 07

KepLand in 5th Viet project this year

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

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

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

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

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

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

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

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

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

 

Source: Business Times 2 Oct 07

HK man wins payout for China house

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Source: AFP (Business Times 2 Oct 07)

Another KepLand waterfront home project in Vietnam

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

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

Local firm Hong Quang will own 40 per cent.

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

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

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

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

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

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

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

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

KepLand shares rose 10 cents to $8.40 yesterday.

Kepland Waterfront Project In Vietnam

Source: The Straits Times 2 Oct 07

China tries to cool property market

Downpayment for second homes, commercial properties raised

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

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

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

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

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

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

Previously the minimum was equal to the benchmark rate.

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

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

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

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

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

 

Source: AFP (Business Times 29 Sept 07)

Istithmar plans Asian real estate vehicle

The joint venture with a global financial partner will be based in S’pore

FRESH from its recent $1.69 billion purchase of the prime development site at Beach Road, Dubai World Group’s (DWG) investment arm, Istithmar, said that it is planning to set up a major joint venture Asian real estate operation to be based in Singapore.

The group’s chief investment officer, Yu Lai Boon, said that the joint venture would be undertaken in partnership with a Singapore-based global financial company.

DWG has recently diversified its portfolio with several high-profile investments worldwide, including stakes in European aerospace giant EADS, the Barneys New York retail chain, and the MGM Mirage entertainment company and half of its CityCenter development.

Asked if the company’s one-third stake in the Beach Road site had to do with the softening of the real estate market in the Middle East, Dr Yu said that it had been invited to participate by its joint venture (JV) partner, City Developments Ltd (CDL). Dr Yu added: ‘Asia is the most important area of focus for us.’

Istithmar’s new real estate vehicle will be its second after the announcement in June of a US$50 million hotel joint venture with CDL, called Tune Hospitality Investments.

Istithmar also has a stake in the CDL Hospitality Trusts, and in the past year has made seven real estate investments in the region.

DWG’s real estate portfolio is currently worth US$60 billion in terms of asset and development value. In Asia, it is committing US$30 billion in India alone and expects to expend the same amount in China, Dr Yu said.

And apart from Singapore, it also has investments in Vietnam and Thailand.

The third partner in the South Beach development is the El Ad Group (EAG), run by Israeli billionaire Yitzhak Tshuva.

EAG may be an as-yet unfamiliar name here, but it is no stranger to CDL. Apart from buying The Plaza Hotel inNew York from CDL executive chairman Kwek Leng Beng and his partner in 2004, EAG is also a joint venture partner with CDL on its upcoming Leonie Hill luxury condo development.

With the global economy still in the throes of a credit crunch, real estate investments here had been expected to slow down. Yet, EAG president and CEO Miki Naftali said: ‘The quality and range of our properties have tended to insulate us from pressures associated with the so-called global credit crisis.’

He added that ‘credit remains available to us’.

EAG has a real estate portfolio worth over US$7 billion, and it expects to invest in Asia ‘as part of our worldwide strategy of adding value’.

Mr Naftali also said that it is seeking opportunities to introduce the iconic Plaza brand here, as well as in Tokyo, Shanghai and Beijing.

Other investors from the Middle East that have made an impression here this year include Emirates Investment Group, which has a stake in the upcoming Ritz-Carlton Residences in Cairnhill, and Kuwait Finance House, which bought two blocks at Reflections @ Keppel Bay.

 

Source: Business Times 28 Sept 07

Vietnam – the new hotspot

While its cost competitiveness in manufacturing is drawing in foreign investment, look at how Vietnam can boost its attractiveness to move up the value chain

VIETNAM, on the back of strong economic growth in recent years, has been attracting record levels of foreign direct investment (FDI) through 2006 and 2007.

Its entry into the World Trade Organisation and continued government commitment to deregulation has encouraged more foreign firms to invest and operate there. The effect of the accession has resulted in robust demand for office, retail and industrial space.

The question remains, however, whether this is part of an overall strategy by multinational firms to diversify out of existing markets or simply a labour arbitrage, with firms looking for the next low-cost location? Also, why are international firms choosing Vietnam over other low-cost locations in Asia?

There has been much discussion about the ‘China Plus 1′ scenario. At first glance, the logic seems clear. A firm operating in China becomes over-dependent on a single country and looks to diversify. This seems to be the case with Japanese garment manufacturer Uniqlo Co. Previously, the firm was producing 90 per cent of its garments in China. Now, this has been reduced to some 70 per cent. There is an intention to have 30 per cent of production in South-east Asia by 2009. However, although there is an advantage in the resulting diversification, this is often not a key driver.

Anecdotal evidence suggests that this need to expand to cheaper locations is one of the main drivers behind Vietnam’s FDI flows. Taiwanese investment into China, for example, has been trending down for some time, as has Singaporean investment. Firms, therefore, are not exactly pulling out of China. Instead, they are expanding elsewhere. The Taiwanese motorcycle firm Kymco, for example, owns assembly lines in China and Indonesia and is turning next to Vietnam; its rival, San Yang, decided on Indonesia.

Seoul-based Kookmin Bank, which during the 1990s assisted many Korean firms in establishing operations in the Pearl River Delta, is now seeing third- and fourth-generation operational expansions focusing on Vietnam.

The driving factor appears to be cost. It is well-known that the operational costs in China’s east coast cities have increased significantly in recent years. Producers there, many of whom have eagerly invested in China through the 1990s and 2000s, are looking to expand. However, the super profits that were previously readily available in China’s special economic zones no longer exist, with rising wages and rising land prices eating into margins.

When margins are eroded, producers are largely faced with two choices: move to China’s hinterland to access lower wages but place a logistical hurdle between them and their traditional port-based distribution channels. Or set up the next stage of their operations in another low-cost location.

When we look at FDI into Vietnam by sector type, we can see that much of it has been invested to take advantage of the cost arbitrage opportunity that is offered by Vietnam’s low-cost base.

As at end 2006, 68.7 per cent of all investment in Vietnam was in the industrial sector. This is typically the sector where investment decisions are most sensitive to labour rates and set-up costs. Of that industrial investment, only 17.1 per cent found its way into the light industrial sector, which is typically where the most tangible value-add can come from.

FDI into other key value-creating sectors, such as banking and finance, hotel and tourism, and transport and telecom, has remained in single digits in terms of portions of total FDI.

Vietnam clearly has a role to play in the roll-out strategies of MNCs investing in the Asia-Pacific region.

We need to ask, however, for what functions and business processes is Vietnam a favoured location, and for which activity is it still likely to take some time before Vietnam becomes a suitable choice?

Analysis undertaken around this topic shows that Vietnam is ideally suited to low-cost manufacturing where the key components are labour costs and availability.

When MNCs look to move up the value chain by undertaking more complex activities, especially ones that rely on high-quality human capital, Vietnam falls behind its competitors in the region.

That is not to say that MNCs have not been able to establish value add production facilities in the country. In fact, there are several case studies of firms that have taken highly complex processes to Vietnam. However, we note that in doing so, there has been considerable work involved in training local workers and bringing suppliers and real estate providers up to speed so that they deliver at the service level required.

In addition to the evolution of a skilled workforce, education of suppliers and development of supply chains in Vietnam, there are other areas that will need improvement. Significant work remains before there is an improvement in English penetration, tertiary qualification levels, the rule of law, security of private real estate ownership and deregulation of Vietnam’s commerce – especially in the areas of banking and finance.

Some progress has, of course, already been made. However, more needs to be done. As our experience in China proved, eventually wage rates will rise and MNCs will look to relocate. In China, however, as low-cost manufacturers have looked elsewhere to produce, constant investment in both hard and soft infrastructure has meant the country continues to be an attractive location.

Research and development, high-technology manufacturing and pharmaceuticals continue to see significant inflows of investment, even as foreign interests look elsewhere to make a quick dollar. That’s a lesson Vietnam seems ready to learn.

 

Source: Business Times 27 Sept 07

Property investors thrive in Malaysia

CHRISTOPHER BOYD sees more upside potential in the high-end residential market as demand pushes prices to ever-higher levels

THE residential market in Malaysia can best be described as well taken care of at the lower end, and, at long last, in a state of broad equilibrium at the middle levels. The excitement, such as it is, can mainly be found at the top end, which is the main focus of this article.

The Klang Valley these days covers an enormous area from Ampang in the northeast through Kuala Lumpur and on westwards towards Klang and Port Klang. It includes a great many suburbs within reasonable access of this eastwest axis and since the whole valley lacks a formal definition, it is reasonably susceptible to hijack by those suburbs on the fringes. By our calculation it contains about 1.4 million dwelling units, of which half are landed, and half high-rise.

Last year, turnover was (in KL and Selangor, pretty much the whole Klang Valley) 57,151 units (Malaysia in comparison: 144,224 units) and the year before 50,715 units (Malaysia:153,315.) About 7 per cent of this turnover was new dwellings. Across the board, as at Q1 2007, the Klang Valley (KL and Selangor) had some 236,998 new housing units under construction and another 186,572 approved but not started yet; an indication of the fast growth rate since an ‘overhang’ of unsold units is barely an issue.

The number of completed condos in the best residential areas and priced at over RM500 per square foot amounts to 4,479 units, with a further 9,872 under construction.

There has been some concern that these top-end projects may be in oversupply, but the majority have met with a ready market, spurred early this year by the suspension of decades-old real property gains tax.

Global draw

The luxury condominium market has international appeal and buyers include the Irish and Middle Easterners, as well as expatriates in Hong Kong. Meanwhile, the Koreans have recently come into the market quite strongly and, who knows, it may soon be the turn of the mainland Chinese. There are no restrictions on the purchase (or resale) of most Malaysian residential property; you get a clear title and loans are freely available locally.

The market has moved up quite strongly over the past two years. Buyers of One KL facing the Petronas Twin Towers who were lucky enough to pay RM1,000 psf last year can now resell their units at twice that value – and the building is still under construction! The project is a development carried out by Malaysian tycoon Chua Ma Yu.

Purchasers of the nearby Marc Residences, a development by Singapore’s CapitaLand, who paid RM600 psf three years ago, are now taking possession of their completed units and getting offers of RM1,200 psf. The developers of the luxury Troika, within the vicinity of the Kuala Lumpur City Centre area, sold for an average of RM1,000 psf at its launch in 2005. The balance of unsold stock was re-priced early this year with a price tag of up to RM2,000 psf to keep pace with the market.

Is there any more upside potential? Will the madness continue? We don’t see why not. Interest rates are low, demand is high and supply, although increasing, is limited. Yields may fall as values rise, but we do not see this as dragging values down. Our experience in the region has shown that yield expectations from top-end residential property are not high. A rental of RM25,000 (S$11,000) a month from a condominium worth RM6 million is still 5 per cent, better than the deposit rate and offering the possibility of growth.

A far greater threat to long-term value is the quality of the proposed management and investors should check this carefully.

In Penang, the mood is bullish and upbeat with the announcement of the Northern Corridor Economic Region and with it, the Second Bridge, Outer Ring Road and monorail. These government initiatives have shaken the cobwebs off a moribund market and given it a new lease of life.

Luxury developments such as The Sanctuary in Batu Uban, Moonlight Bay in Batu Ferringhi, and Seri Tanjung Penang, a reclamation project in Tanjung Tokong have all reported over 70 per cent sales. The proposed Penang Global City Centre, launched on Sept 12, will bring new focus to Penang Island and will inevitably benchmark residential values which, at the moment, are stuck at around RM400 psf for top-end condos.

Johor, much like Penang, was a stable, well-supplied market with no discernable trends until the recent unveiling of the Iskandar Development Region turned it on its ear. The recent announcement of a RM4.1 billion investment by a Middle East group in the region has created excitement and done much to convince the sceptics.

Property prices are reacting accordingly. A three-bedroom apartment in Danga Bay, facing Singapore, which would have sold for RM250,000 in 2005 is now worth RM300,000. Newly-launched detached houses in Casa Almyra overlooking the proposed Integrated Leisure Resort were recently snapped up at prices from RM900,000 to RM1.6 million.

The main growth areas are seen to be within the vicinity of the Second Link to Singapore and the area around Aeon Tebrau City known as the Tebrau Corridor.

Johor Bahru residents can look forward to the creation of a new class of residential accommodation in response to the international attention now focused on their city.

 

Source: Business Times 27 Sept 07

Penang – the next luxury destination

An overview of the island’s hottest developments and what’s in store for the future

THE island of Penang continues to have its own fascination – the food, its laid-back quality reminiscent of a Singapore 30 years ago, its frenetic night life. Whatever the reason, property continues to fly off the shelf as soon as it comes on to the market.

Even high-rise, low and medium-cost properties are fast selling. Standout example: Most of the newly launched schemes around the island’s north-east district were fully sold within a few months of their launch.

Meanwhile, high-rise apartments and condominiums are selling well as prices have shot up to record levels. That is also due to the fact that high-end properties around Gurney Drive, Tanjung Bungah and Batu Ferringhi (north-east district) are influenced by foreign buying into the market.

For all that, however, landed property is doing better than high-rise projects, with tremendous price escalations.

Consider the following examples. In Sungai Nibong, standard two-storey terrace houses have been transacted at around RM560,000 (S$244,730) for a plot size of 1,550 square feet. That is RM95,000 higher than in the first quarter of 2007.

Meanwhile, at Bukit Gambier – around the corner from Sungei Nibong – newly launched two-storey terrace houses are going for around RM700,000 for a 2,400 sq ft plot area with a built-up area of 1,400 sq ft. That is easily the price of a single storey semi-detached unit with a 7,600 sq ft plot area in the more established neighbourhood of Tanjung Bungah.

And prices will only go up once the Northern Corridor Economic Region (NCER) project, recently announced by Prime Minister Abdullah Ahmad Badawi, gets underway. So far, the announced projects under the NCER to promote Penang as a manufacturing, tourism, logistics and transportation hub are the Penang Outer Ring Road, the second bridge to the mainland and a monorail that will run around the island.

The NCER encompasses the four northern states of Kedah, Perlis, Penang and northern Perak, along the lines of the Iskandar Development Region that was launched earlier this year in southern Johor. Its aim is to transform and expand the agricultural, manufacturing, tourism and logistics’ sectors in the region.

Penang is poised to leverage on those developments by promoting new industries such as biotechnology and downstream agricultural activities amid the expansion of its existing electronics and electrical sector investments in Bayan Lepas.

Simultaneously, the island is being marketed as an international tourist attraction. The redevelopment of Pulau Jerejak, a former penal colony that is being rehabilitated, is expected to make Penang a destination for exhibitions and international conferences, as well as positioning it as a medical tourism destination. These strategies incorporating the ‘Malaysia My Second Home’ programme are expected to attract long-staying tourists to Penang’s property sector.

With all these things coming up, we estimate more development around the island’s south-west district, especially Batu Maung, Bayan Lepas and Sungai Nibong, to slake demand.

Coastal Towers, for example, offers renovated 803 sq ft apartments that are being transacted at RM235,000 a unit compared with RM180,000 previously.

The Curve Beach Condos (average unit: 5,820 sq ft), are selling for around RM1.45 to RM2.2 million. That’s already higher than 11 Gurney which was transacted at around RM1.75 million for similar sized units.

But perhaps the most ambitious development to date is the Penang Global City Centre, which is expected to be a top draw for investors to the island state. With an estimated gross development value of RM8 billion, the iconic development on 104 hectares on the existing Penang Turf Club is expected to be worth RM25 billion when it is completed in 18 years, its promoters say.

They also assure the ambitious ‘carbon zero development’ will see a significant jump in job opportunities and tourism upon the completion of the project. The Global City Centre will boast two iconic towers, a metropolitan park, the Penang Performing Arts Centre, high-end retail outlets, a convention centre and condominiums.

In summary, the island’s property development market is in a state of euphoria and is trending towards catering for the wealthy. Many projects in the pipeline are firmly upmarket and should position Penang as the luxury property and lifestyle destination in Malaysia.

Where should the canny investor put his money? Among the suggested places:

• Gurney Drive with yields of 5.5-9.1 per cent

• Tanjung Tokong, 6.8-8.1 per cent

• Batu Ferringhi, 8.6 per cent and above

• Gurney Park apartments – currently renting for around RM2,700 a month mainly by the Japanese

 

Source: Business Times 27 Sept 07

Marriott to double Beijing hotels

(NEW YORK) Marriott International Inc, the world’s largest hotel operator, said it plans to more than double the number of properties it has in Beijing by the 2008 Olympics.

It will open another 20 hotels in China through 2010, Marriott said on Tuesday in a statement. The expansion in China, which has about 12,000 hotels, is part of a push by Marriott and rivals such as Wyndham Worldwide Corp to double their rooms in Asia and take advantage of rising affluence and more travel. Two million people are expected to travel to Beijing for the Olympic games.

The JW Marriott Hotel Beijing, with 23 stories and 588 rooms, will be the company’s 3,000th property worldwide and is slated to open in November. The same month, Marriott’s 305-room Ritz-Carlton Beijing will also debut.

Marriott fell US$1.46, or 3.3 per cent, to US$43.25 at 4.01 pm in New York Stock Exchange trading.

 

Source: Bloomberg (Business Times 27 Sept 07)

China set to hike home rate

Expected mortgage rate rise to 8.613% aimed at reining in property prices

(BEIJING) China’s central bank is expected to increase the interest rate of mortgage loans to 1.1 times the benchmark one-year lending rate this week to curb the property market, state media reported yesterday.

If the rise goes ahead, the interest rate for five-year mortgage loans could be as high as 8.613 per cent, China Daily reported, quoting unnamed sources. The current five-year lending rate reached 7.83 per cent after the People’s Bank of China raised the interest rate for the fifth time this year on Sept 13.

The expected move is aimed at clamping down further on property speculation in a bid to curb soaring real estate prices, the report said.

‘With the expansion of mortgage loans, and as the central bank continuously raises interest rates, mortgage loans are beginning to face a high risk of default,’ said China Construction Bank, the lender with the highest mortgage loans in China, in its latest report.

Total non-performing mortgage loans in three major commercial banks – China Construction Bank, the Industrial and Commercial Bank of China, and Bank of China – rose to 19.2 billion yuan (S$3.82 billion) at the end of 2006, from 18.4 billion yuan in 2005, it said.

The central bank is also likely to announce a new policy raising mortgage downpayments to 40 per cent for secondtime home buyers before next week, the Shanghai Securities News reported, citing commercial bank sources.

Downpayments on commercial mortgages will also be raised, the report said, without elaborating. The minimum deposit for an apartment less than 90 sq m (970 sq ft) is currently 20 per cent, rising to 30 per cent for bigger apartments.

 

Source: AFP (Business Times 27 Sept 07)

Carlyle eyeing deals in India, Japan, China

It plans to focus on strategic partnerships as it expands in Asia

(HONG KONG) The Carlyle Group hopes to seal its first property deal in India this year and is buying homes for the elderly in Japan, as the private equity firm’s real estate arm looks to make inroads in Asia.

In an interview, Jason Lee, Carlyle’s head of Asia property investment, also said he would consider buying out underperforming real estate investment trusts (Reits) in Japan and taking stakes in Chinese and Indian developers.

With about US$410 million of equity already in Chinese and Japanese property, Carlyle is turning to India’s thriving economy – first partnering with developers on projects, with second-tier cities such as Chennai, Pune and Hyderabad favoured.

‘We’re working on a number of investments we hope will close,’ Mr Lee said. ‘Our strategy is really to focus on strategic partnerships, firstly and foremost.’ Like most foreign investors, Mr Lee is keen to help fill India’s estimated shortfall of 20 million homes. Internal rates of return on development are typically 20-30 per cent, and cash is easily regenerated through home sales.

Owning office blocks or malls is riskier in the immature property market because they can be difficult to sell.

India’s property industry has been buzzing since rules on inbound investment in the construction industry were eased in early 2005, prompting an influx of private equity funds such as those run by Morgan Stanley and Citigroup.

Property prices in major cities have doubled in the last two years, but have cooled in the last couple of months because the soaring market and rising interest rates started to pinch even the most upwardly mobile of India’s growing middle class.

‘In Mumbai, New Delhi and Bangalore, sure, there’s a general concern about pricing,’ Mr Lee said. ‘But when you move out to places like Pune, Hyderabad, Chennai … all these cities have great potential.’

In Japan, Carlyle is eschewing expensive Tokyo but hopes to tap growing demand for ’senior housing’ among a fastageing population by partnering with a unit of Tokio Marine & Nichido Fire Insurance Co in a joint venture that will buy and refurbish buildings for senior housing.

Mr Lee said the first deal in a 18- to 24-month acquisition programme would come ‘within the next several weeks’, with the portfolio likely to be finally worth US$500 million.

‘We’re looking at the demographics and trying to get into emerging sectors, where we think there’s tremendous growth,’ Mr Lee said.

Some estimates show Japan will have one person over 65 to every two of working age by 2025, a higher dependency ratio than any other major industrialised country. Now pensioners make up nearly a quarter of the 127 million population, and over-50s hold 75 per cent of Japan’s individual wealth.

Carlyle, which has spent US$170 million to build up a portfolio of shopping centres in Japan with asset management firm SOW Inc, would also consider buying Japanese Reits and taking them private.

Japan’s US$40 billion property trust market has ended a five-year bull run with a steep fall. Several Reits are down more than 20 per cent in the last month, and around half of the 41 trusts now trade at a discount to net asset value – with residential portfolios doing particularly badly.

‘We believe this is one area of opportunity in the near future,’ Mr Lee said. He added that non-recourse loans were easily available and only ‘marginally’ more expensive in Japan after the US sub-prime crisis sparked a credit crunch in many global markets.

In a strategy also employed by Morgan Stanley’s property arm, Carlyle is looking to take equity stakes in ambitious developers in China and India, once it develops a good partnership on individual projects.

In China, the company has five investments and is looking to partner developers in building more housing in secondary cities. For example, Carlyle recently partnered a local developer called Capland Property Development Group in Qingdao.

 

Source: Reuters (Business 27 Sept 07)

HK home prices may rise 33% by 2009: UBS

(HONG KONG) Hong Kong’s home prices may jump as much as 33 per cent between now and the end of 2008, extending gains as wages rise amid a lack of new housing, UBS AG said.

Housing prices are strong thanks to ‘rising pay increases, record low supplies, cheap mortgages and fund flows from mainland China’, UBS’ Hong Kong-based analyst Eric Wong said in a note yesterday. Prices rose 13 per cent in the first half of 2007.

Hong Kong lenders including HSBC Holdings plc last week followed the US Federal Reserve in cutting benchmark lending rates by half a percentage point. That will make mortgage lending rates lower than the inflation rate, which may ‘tip the balance’ in home prices, Mr Wong said.

Sino Land Co may gain the most among local builders from a rally in home prices after leading a group that bought a Tai Po residential site in a Hong Kong government auction last week, Mr Wong said. The group’s winning HK$4.6 billion (S$889.1 million) bid was higher than some analysts had forecast for the sale.

Mr Wong’s other ‘top picks’ include Sun Hung Kai Properties Ltd and Cheung Kong Holdings Ltd, the city’s two biggest builders by market value.

 

Source: Bloomberg (Business Times 26 Sept 07)

UPFRONT – Viet property boom a goldmine for S’pore firms

LE THI Phuong Thao, 51, never planned to get rich – very rich, in fact, by Vietnamese standards – by speculating on real estate.

Ms Thao, a home furnishings business operator, stumbled across buying and selling property almost by accident five years ago.

And she is now seizing the opportunity presented by an extraordinary boom in the top end of Vietnam’s property market with both hands.

Back in 2002, Ms Thao bought a shop in downtown Ho Chi Minh City for her business. But a year later, she realised its value had shot up dramatically, so she sold it.

‘It wasn’t planned,’ Ms Thao said. Emboldened by the success of her ‘accidental’ investment, she went on to buy more.

Last year, she teamed up with two friends to buy not one, but three houses in a Ho Chi Minh City waterfront gated development, Villa Riviera, developed by Singapore’s Keppel Land (KepLand).

They have since sold all three for a total profit of US$100,000 (S$150,059), and are now eagerly awaiting the year-end launch of KepLand’s condo, The Estella.

The Singapore developer said there is strong pent-up demand, given the booming economy and a shortage of mid- to high-end properties.

The Asian Development Bank projects that Vietnam’s economy will grow by 8.3 per cent this year and 8.5 per cent next year.

Already, high-end home prices average about US$177 per sq ft (psf) in Hanoi and US$270 psf in Ho Chi Minh City, the business hub.

Earlier this month, a 1,108 sq ft condo unit at The Lancaster in Ho Chi Minh City’s prime District 1 sold for US $515,000, or a record US$464.5 psf. The condo was launched three years ago at an average of US$185.8 psf, or about US$206,000.

Vietnam is also experiencing a shortage of quality office space – all the Grade A buildings in Ho Chi Minh City are fully leased, along with hotel rooms and retail centres. Service apartments are in great demand as well.

‘Investment funds are coming out of your ears,’ said Mr Tony Foster, who has been in Vietnam since 1994 and set up law firm Freshfields Bruckhaus Deringer in Hanoi.

‘Infrastructure work is booming. It has always been on the up, but the pace is going faster and faster. There is a huge amount of pent-up demand.’

The Vietnamese – young, hungry for success and hardworking – aspire to own their homes, especially landed ones, observers say. Viet Kieu, or overseas Vietnamese, have also been buying.

Foreigners are not allowed to invest outright in Vietnam unless they are residents, and even then, they can buy only on leasehold terms.

‘The market here is booming. It is just like Hong Kong 20 years ago,’ said Mr Bowie Leung, a Hong Konger who has lived in Ho Chi Minh City since 1989.

Vietnam’s population of 86 million is young – the average age is 24 – and also represents a growing consumer market.

‘The key is that the Vietnamese are spending money like Singaporeans,’ said Mr Marc Townsend, managing director of property agency CB Richard Ellis (Vietnam).

On the property front, Singapore developers such as KepLand, CapitaLand, Frasers Centrepoint, GuocoLand and Allgreen have entered Vietnam.

Said Mr Lui Chong Chee, CEO of CapitaLand Residential: ‘Vietnam is a vibrant Asian country and an important new market for CapitaLand.’ CapitaLand has plans to build 2,800 homes in Ho Chi Minh City.

Even smaller players want a share. Another Singapore-based developer, Chip Eng Seng, said last month that it would take a 5 per cent stake in a listed Vietnamese firm, marking the start of its growth into the country and overseas.

Yet another Singapore developer, Heeton Holdings, is looking for a site.

Developers from Malaysia, South Korea and Japan are also eyeing Vietnam’s potential.

Few Vietnamese have a bank account, so property purchases are almost always made in cash, though sometimes with gold tael bars.

‘Ho Chi Minh City has no lack of suitors,’ said an industry observer. ‘If you want to survive, go to the suburbs.’

As Ho Chi Minh City grows, surrounding provinces will ride on the upswing, she said. ‘The potential is there, the demand is there, but the supply is not.’

But while competition is rising, the market is in no danger of oversupply soon.

Resettling those occupying a proposed development site can also cause headaches as land compensation can be costly for developers, observers say.

Industry players also say the approval and development process in Vietnam can be cumbersome and drawnout.

‘Supply is affected by the difficulties of getting a licence for a project,’ said Mr Townsend.

This is where the experience of an established player such as KepLand comes in handy – it entered the Vietnamese property market about 13 years ago.

Said an industry observer: ‘Vietnam is a market where you need staying power. Don’t expect to come in to just do a project and run.’

Currently, the tallest building in Ho Chi Minh City – Saigon Trade Centre – is just 32 storeys tall. But the cityscape is set to change, with the next phase of construction set to bring buildings of 40 to 60 storeys, Mr Townsend said.

KepLand, for one, is ramping up its presence. ‘We’re now quickly selling more projects to ride on the upswing,’ said Mr Ang Wee Gee, its director of regional investments.

Frasers Centrepoint is also looking to scale up its activities in Vietnam, where it has two existing properties, said CEO Lim Ee Seng.

 

Source: The Straits Times 26 Sept 07

German fund manager eyes Asia properties

Union Investment looks to quadruple its regional portfolio over a 4-year period

GERMAN fund manager Difa Deutsche Immobilien Fonds (recently renamed Union Investment) is looking to quadruple its property portfolio in Asia over the next four years, its Asia-Pacific head has told BT in an interview.

‘Right now, we have 10 properties worth about 500 million euros (S$1,055 million) in Asia,’ said the group’s Asia- Pacific managing director, Steffen Wolf.

‘We would like to grow the portfolio value to at least two billion euros or so.’ he added.

Union Investment, which owns some 15 billion euros worth of real estate across the world, last year turned its attention to Asia in search of attractive acquisitions.

Since September last year, it has acquired 10 properties in the region, including six residential projects in Japan and two office properties in South Korea.

In Singapore, Union Investment has bought two properties.

In January, it acquired Vision Crest’s office block and the House of Tan Yeok Nee next door in the Penang Road/ Clemenceau Avenue area for a total of $260 million from mainboard-listed property group Wing Tai.

Union Investment is now working on more acquisitions in Japan, China and Singapore, Mr Wolf said.

‘We are also closely looking at Malaysia, India and Thailand,’ he added.

Right now, the group’s focus is on the key cities in all the countries, he said.

Asia, said Mr Wolf, is ‘very strategic’ to Union Investment.

The group has traditionally invested in Europe and the US, but has of late been building up its Asian team in Germany.

The logical next step was to set up a physical presence in the region, and so the group opened an office in Singapore in October 2006.

Right now, the office has just two people, but Mr Wolf wants to grow the team to six or eight by the end of the year, he said.

In Singapore, the group is looking at office properties as well as residential, retail and hospitality assets for acquisition, Mr Wolf said.

The group ideally has to acquire finished, freestanding and already leased-out buildings. It is, for example, not allowed to take on the risks involved with developing a greenfield project.

Its business model is based on collecting rents and distributing them to shareholders.

But Union Investment will not rush into acquisitions, Mr Wolf said.

The cash-rich company is in Asia for the long haul, and will be willing to wait for good acquisition opportunities to come by, rather than compete head-on with more aggressive bidders.

‘We can ride through market cycles,’ Mr Wolf said. ‘We are not affected by crises such as the sub-prime crisis. We have a lot of cash.’

 

Source: Business Times 25 Sept 07

Ciputra Property to tap up to US$150m in Jakarta IPO

Developer plans to use proceeds to acquire companies and subsidiaries

(HONG KONG/JAKARTA) Indonesian real estate developer PT Ciputra Property is planning to raise up to about US$150 million in a domestic initial public offering, according to a listing prospectus and a source familiar with the deal.

Ciputra Property, a mixed-use commercial property unit of PT Ciputra Development Tbk, plans to sell 40.19 per cent of its enlarged share capital ahead of a listing scheduled for Nov 12.

The company, which has holdings in shopping malls in Jakarta and Semarang, said it plans to use 521.9 billion rupiah (S$85.4 million) from the proceeds to acquire a number of companies and subsidiaries, and the remaining funds from the sale as working capital and for construction costs.

Registration and book- building for the deal are scheduled for Oct 9-19, with pricing due on Oct 22, and the public offering set for Nov 5-7.

The deal is being sponsored by Citigroup and Danareksa.

Indonesian companies have raised over US$3 billion so far this year in initial public offerings and follow-on equity sales according to Thomson Financial, marking a record for Jakarta’s stock market.

Initial public offerings, or IPOs, raised US$680 million.

The Jakarta stock market has risen 30 per cent so far this year on the back of strong foreign demand and an improving economy.

In May, the president director of the Jakarta Stock Exchange, Erry Firmansyah, told Reuters the bourse was aiming to double the number of new listings this year. During 2006, a total of four initial public offerings raised just US $278 million.

Some of the bigger listing candidates in Indonesia include state-owned toll road operator PT Jasa Marga, which hopes to raise roughly US$300 million this year, and coal miner PT Indo Tambangraya Megah, a unit of Thailand’s Banpu plc, which is looking to raise about US$100 million in an IPO.

 

Source: Reuters (Business Times 25 Sept 07)

Funding squeeze tightens as China reins in asset markets

Policy shift could spell trouble for stock, property markets: analysts

(SHANGHAI) A massive squeeze in China’s money market suggests the authorities are getting serious about reining in soaring asset markets to control inflation.

Funding squeezes have occurred a few times this year in response to initial public offers of equity and seasonal demand for money. But the current drought of funds is much harsher than previous ones and is set to last longer.

In contrast to past squeezes, this one is largely the result of initiatives by the authorities to cool the stock market and reduce the amount of funds available for bank lending, much of which is going into the property market.

In the past, the central bank balanced supply and demand for funds more carefully to limit spikes in short-term interest rates. This time, rates have largely been left to soar unchecked as the authorities soak up money from the market.

‘Authorities are shifting their focus to the stock market and to commercial banks’ lending growth, while putting less focus on short-term volatility in money market rates,’ said Chai Cipeng, a fixed-income trader at Daiwa SMBCSSC Securities in Shanghai.

The shift in policy priorities could spell trouble for the stock and property markets in coming months. It could also mean a difficult time for Chinese fixed-income investors until stock and property prices finally show signs of cooling down.

The weighted average seven-day repo rate, a key measure of short-term liquidity, surged to a multi-year high of 6.6942 per cent yesterday – far exceeding this year’s previous peak of 4.77 per cent, hit in April.

Because the squeeze is expected to last until early October, when money will return to banks after a long holiday period, the average one-month repo, usually more stable, also jumped yesterday, hitting a multi-year high of 7.2092 per cent against this year’s previous peak of 4.45 per cent.

Trade in bills and bonds almost halted this week as desperate banks lack the money to trade. While the central bank has reduced money market draining operations, the resulting net injection is dwarfed by the hundreds of billions of yuan that the market is being required to provide.

Net injections of that scale are ‘not enough in this environment’, said Shi Lei, an analyst at Bank of China.

The squeeze is largely due to the planned sale of big volumes of special bonds to the market this month, a form of monetary tightening, and by record IPOs in quick succession from China Construction Bank and Shenhua Energy, part of efforts to cool the stock market by boosting supply of equity.

The steps are being taken just a week after China announced August consumer price inflation jumped to a 10-year high of 6.5 per cent from July’s 5.6 per cent.

 

Source: Reuters (Business Times 21 Sept 07)

Sunshine to acquire China property firm for 61m yuan

Henan Jinjiang has 2 mixed-devt projects in Zhengzhou

SUNSHINE Holdings is buying a China property company for 61 million yuan (S$12.2 million).

The acquisition, Henan Jinjiang Real Estate Co Ltd, will be 90 per cent owned by Xinxiang Huilong Real Estate Co Ltd and 10 per cent by Henan Huilong Property Management Co Ltd. The latter two companies are wholly owned subsidiaries of Sunshine.

Sunshine said Henan Jinjiang is a property developer, with two projects in Zhengzhou.

Zhengzhou, the capital city of Henan province, has a population of 3.5 million and a gross domestic product of 165 billion yuan in 2005. The two projects – Zhong Mou Project (site area: 76,000 sq metres) and Yan Ming Hu Project (779,000 sq metres) – are mixed developments. Both are expected to see revenue contribution from FY2008.

Sunshine said the total planned GFA for the Zhong Mou project – strategically located near the Civic District – is about 97,000 square metres. About 80 per cent will be allocated for residences and the rest commercial development.

The estimated average selling price is between 2,500 yuan and 3,500 yuan per square metre for residential space and about 4,000 yuan per square metre for commercial space.

As for the Yan Ming Hu project, the total planned GFA is about 274,000 square metres and will comprise deluxe residential with facilities for business conferences. The estimated average selling price for residential space is about 10,000 yuan per square metre.

Sunshine said the purchase will be satisfied from internal resources and borrowings.

Listed on the Singapore Exchange mainboard in March 2006, Sunshine is one of the rapidly growing property developers in Henan province and has successfully carved a niche in developing properties in second and third-tier China cities.

Yesterday, the shares closed trading at 35 cents each, compared with its initial public offer price of 27.5 cents.

 

Source: Business Times 21 Sept 07

Kajima to invest $900m in Asia over 2-3 years

(SINGAPORE) Construction and property conglomerate Kajima Corp plans to invest around S$900 million in Asia over the next 2-3 years to further diversify outside of its Japan home base, a senior executive of the firm told Reuters yesterday.

The Asian arm of the group said it was also looking to double its contribution to overall revenue to 10 per cent in the next three years as it steps up investment in the region.

‘We would look to invest first in Jakarta, Phuket and Singapore,’ Masao Hashimoto, vice-MD of Kajima’s overseas arm in Asia, told Reuters in an interview.

Mr Hashimoto said the group was keen to develop a shopping mall in Singapore, where it already has about S$1 billion in assets, but had yet to find a suitable plot of land.

‘We would like to build an office, hotel and convention centre on our vacant land in Jakarta, which is almost five hectares,’ he said. The company also wants to develop villas and a hotel on its land in the Thai resort island of Phuket. Outside of Singapore and Japan, the group holds about US$600 million in Asian assets.

Like rival builders Obayashi Corp and Shimizu Corp, Kajima is facing a cut in public works spending in its domestic market as Tokyo looks to shore up its ailing finances. The group is targeting the Middle East and Africa to grow its construction business.

Kajima, which has a market capitalisation of US$3.8 billion, said yesterday that it had teamed up with US investment bank Lehman Bros to build a Singapore office building for S$450 million.

 

Source: Reuters (Business Times 20 Sept 07)

China property investment swells 29%

Investments total 1.4 trillion yuan in Jan-Aug 2007

(BEIJING) Investment in China’s property sector soared to 1.43 trillion yuan (S$285.5 billion) in the first eight months, 29 per cent up from the same period last year, according to the National Bureau of Statistics (NBS).

Of the total, 1.02 trillion yuan went to commercial housing, an increase of 30.9 per cent while 44.9 billion yuan went to economically affordable housing, an increase of 28.8 per cent.

By the end of August, China had 119 million square metres of vacant commercial buildings, down 2 per cent over the same period last year.

In the first eight months, developments on 162 million sq m of land were completed, an increase of 15.3 per cent, according to the NBS.

China’s real estate climate index rose to 104.48 points, up 0.48 points from last month and 1.17 points from a year ago.

The index, reflecting the nation’s current property market situation and development trends, includes sub-indices such as investment, sources of capital, floor space of marketable yet unsold buildings, areas of land developed and he floor space of buildings under construction.

The market is considered to be heating up when the index exceeds 100.

China’s housing price hikes accelerated last month despite a spate of government control measures.

Prices in 70 large and medium-sized cities were up 8.2 per cent in August over the same month last year, or 0.7 percentage points higher than the July rate.

 

Source: Xinhua (Business Times 20 Sept 07)

Japan commercial land prices inching up after 16-year slump

(TOKYO) Japan’s average commercial land prices rose in the year to July 1 for the first time in 16 years, led by office demand in the three biggest cities and reflecting the leading role big companies play in economic growth, a government report showed yesterday.

A recovery in land prices – after a long slide since Japan’s asset bubble burst in the early 1990s – has gradually spread out from major cities although the average price of residential land continued to fall, the survey by the land ministry showed.

Land price moves are closely watched by the Bank of Japan, which was blamed for causing the previous asset bubble by leaving rates low for too long, but a government official said current price rises were much more solidly based than in the bubble years.

The central bank left its policy target rate unchanged at 0.50 per cent yesterday as widely expected in the wake of turmoil in global financial markets.

Average commercial land prices in Japan rose 1.0 per cent in the year to July 1, the first such rise since 1991 when they saw a 3.4 per cent rise. Residential land prices fell 0.7 per cent on average nationwide, a smaller drop than the previous year but a 16th consecutive year of declines.

‘Overall, a recovery in land prices has shown signs of spreading as rises in the three major cities and other leading cities in local regions are spilling to surrounding areas,’ the Ministry of Land, Infrastructure and Transport said. ‘But prices are still falling in most local areas.’ Both commercial and residential land prices had their second straight year of gains in the three top cities – Tokyo, Osaka and Nagoya, where many corporations have their head offices – but the pace was far below that seen in the bubble era.

Commercial land prices in the three cities rose 10.4 per cent from a year ago and residential prices in those cities increased 4.0 per cent on average – their biggest rises since gains of 16.6 per cent and 22.3 per cent respectively in 1990.

But the pace of growth has slowed this year in many areas in Tokyo and Osaka that had seen strong gains until last year.’Investors are attaching greater importance to profitability of property,’ said Masayuki Kitamoto, director of the ministry’s land price research division. ‘That is making rises in land prices far more moderate now than the bubble era when they skyrocketed with people frantically buying real estate regardless of how to utilise the property.’

The report – based on polls conducted by prefectural governments and used for valuations in the real estate sector – is closely watched as it captures more current prices than other government surveys.

A survey released in August by the National Tax Agency – which evaluated land prices as of Jan 1 to calculate property tax – said land prices in Tokyo saw last year their biggest increase since Japan’s bubble years.

 

Source: Reuters (Business Times 20 Sept 07)

Frasers unit plans 10 service apartments in China

FRASERS Hospitality is set to open 10 new service residences in China by 2009.

Half of them will be ready before the Beijing Olympics next year, the Singapore-based service apartment operator said in a statement yesterday.

The company, a subsidiary of Frasers Centrepoint, will invest US$130 million (S$197 million) in one of the properties. The 23-storey building will be located in the heart of Beijing’s Central Business District, and boast 357 units.

Frasers bought the property in June and will open it in April as Fraser Suites Beijing, said Frasers Hospitality chief executive Choe Peng Sum.

The other nine residences will be managed by Frasers but owned by other companies, including property developer Yanlord Land Group, global private equity firm The Carlyle Group, and Chinese food company Cofco.

Besides Beijing, the 10 new service apartment properties will be located in the cities of Chengdu, Guangzhou, Hong Kong, Nanjing, Shanghai and Tianjin.

Two will open in November, one each in Beijing and Nanjing. Three more will open next year before the Olympics: Frasers Suites Beijing and two others in Shanghai.

Frasers already operates two properties in Shenzhen.

‘We will have more than 12 properties under the Fraser brand as we are still actively pursuing other suitable properties in China,’ said Mr Choe in the statement.

‘We expect that by 2010, Frasers will be operating more than 4,000 service residence units in over a dozen cities across China.’

Frasers is also talking to property owners in secondary cities like Chongqing, Dalian, Hangzhou, Suzhou, Wuxi and Xian.

 

Source: The Straits Times 20 Sept 07

WORLD HOUSING MARKETS – Bubble trouble

By Robert J. Shiller

THE future of the housing boom, together with the possible financial repercussions of a substantial price decline in the coming years, is a matter of mounting concern among governments around the world.

I learnt this first-hand while attending this year’s Jackson Hole Symposium in the remote wilderness of Wyoming where, ironically, there are almost no homes to buy. The howls of coyotes and bugling of elk rang out at night. But, by day, everyone was talking about real estate.

This conference has grown to be a major global event for government monetary policymakers, with governors or deputy governors of 34 central banks attending this year. Roughly two-thirds of these countries have had dramatic housing booms since 2000, most of which appear to be continuing, at least for the time being. But there was no consensus on the longer-run outlook for home prices.

Of all these countries, the United States appears to be the most likely to have reached the end of the cycle.

According to the Standard & Poor’s/Case-Shiller US National Home Price Index, US home prices rose 86 per cent in real, inflation-corrected, terms from 1996 to last year, but have since fallen 6.5 per cent – and the rate of decrease has been accelerating.

That looks like the beginning of the end of the boom, though, of course, one can never be sure. I presented a bearish long-run view, which many challenged, but no one obviously won the argument.

Nevertheless, an outside observer might have been struck by the weight given to the possibility that the decade-long boom might well suffer a real reversal, followed by serious declines.

Weaker standards

THERE seems to be a general recognition of substantial downside risk, as the current credit crisis seems to be related to the decline in US home prices that we have seen.

The boom, and the widespread conviction that home prices could only go higher, led to a weakening of lending standards. Mortgage lenders in the US seem to have believed that home buyers would not default, because rising prices would make keeping up with their payments very attractive.

Also, the boom resulted in some financial innovations, which may have been good ideas intrinsically, but which were sometimes applied too aggressively, given the risk of falling prices. Mortgage- backed securities were urged onto investors for whom they were too risky. As with homebuyers, all would be well, the reasoning went, on the premise that home prices continue to rise at a healthy pace.

At the Jackson Hole conference, Mr Paul McCulley of Pimco, the world’s largest bond fund, argued that in the past month or two we have been witnessing a run on what he calls the ’shadow banking system’, which consists of all the levered investment conduits, vehicles and structures that have sprung up along with the housing boom.

The shadow banking system, which is beyond the reach of regulators and deposit insurance, fed the boom in home prices by helping to provide more credit to buyers.

Bank runs occur when people, worried that their deposits will not be honoured, hastily withdraw their money, thereby creating the very bankruptcy that they feared. It is no coincidence that this new kind of bank run started in the US, which is the clearest example of falling home prices in the world today.

When home prices stop rising, recent homebuyers may lose the enthusiasm to continue paying their mortgages – and investors lose faith in mortgage-backed securities.

Loose policy

THE US Federal Reserve is sometimes blamed for the current mortgage crisis, because excessively loose monetary policy allegedly fuelled the price boom that preceded it. Indeed, the real (inflation-corrected) federal funds rate was negative for 31 months, from October 2002 to April 2005. The only precedent for this since 1950 was the 37-month period from September 1974 to September 1977, which launched the worst inflation the US had seen in the last century. What then helped produce a boom in consumer prices now contributed to a boom in home prices.

Loose monetary policy is not the whole story. The unusually low real funds rate came after the US housing boom was well under way. According to the Standard & Poor’s/Case-Shiller US National Home Price Index, home prices were already rising at almost 10 per cent a year in 2000 – when the Fed was raising the federal funds rate, which peaked at 6.5 per cent. The rapid rise thus appears to be mostly the result of speculative momentum before the interest-rate cuts.

Former Fed chairman Alan Greenspan recently said that he now believes speculative bubbles are important driving forces, but at the same time, the world’s monetary authorities cannot control bubbles. He is mostly right: The best thing that the monetary authorities could have done, given their other priorities and concerns, is to lean against the real estate bubble, not stop it from inflating.

Today’s fall in home prices is linked just as clearly with waning speculative enthusiasm among investors, which is likewise largely unrelated to monetary policy. The world’s monetary authorities will have trouble stopping this fall, and much of the attendant problems, just as they would have had stopping the ascent that preceded it.

The writer is professor of economics at Yale University and author of Irrational Exuberance And The New Financial Order: Risk In The 21st Century.

 

Source: The Straits Times 19 Sept 07

Hong Kong state land fetches HK$4.55b

Sale of Tai Po site at HK$6,368 psf seen boosting secondary property market

IN HONG KONG

THE government has reaped HK$4.55 billion (S$885 million) in one of the biggest land auctions of the year, with the plot selling at the high end of expectations and nearly 50 per cent more than the opening price.

Private property firm Nan Fung Group was the successful bidder of the Tai Po site, which is expected to be developed into a low-rise residential complex of both apartments and houses.

The price is 48 per cent above the opening bid of HK$3.08 billion and comes close to analysts’ top expectations of HK$4.6-4.7 billion. The price works out to HK$6,368 per square foot, with more than 714,000 sq ft to be developed.

Past land auctions this year have been towards the lower range of expectations, dampening hopes of a knock-on effect to the market at large.

‘They (the government) have done well,’ said Ricky Poon, a director at Colliers International. ‘It will affect the secondary market for sure.’

A string of land auctions this year have fetched tepid results for government coffers, with a record sale in December 2006 failing to translate into a run of stellar results in 2007.

That month, a new high was set with the sale of a Peak site to Sun Hung Kai Properties for HK$1.8 billion, making it the most expensive slice of land in the world.The price paid translates into HK$42,196 psf, the highest so far paid for land in Hong Kong.

In June, a residential site along the harbour was auctioned for HK$5.56 billion in a sluggish sale. The auction was tipped to fetch up to HK$7 billion and hopes were high that the sale would inflate prices and trigger buying activity in the mass residential sector, which has treaded water for the first half of 2007.

Developer Sun Hung Kai Properties bid successfully for the 122,200 sq ft site, which enjoys views of the city’s skyline. The minimum asking price for the plot of land had been HK$4.2 billion.

It had been eyed as a catalyst to bigger price movements in the mass market, with many sellers in the secondary market holding off in the hope of gleaning a better price after the auction.

In a previous land auction in May, two sites in the Tuen Mun area were sold for HK$1.74 billion, also below the top end of expectations.

Despite the auction result yesterday, property stocks were feeling the brunt of profit-taking in the sector, with all eyes on the US Federal Reserve today as it decides on future interest rates.

Developers will be hoping for a cut of more than 25 basis points. ‘It depends on the major (Hong Kong) banks,’ Mr Poon noted. ‘Are they going to follow and reduce the interest rate?’

Property firms will be hoping for movement in the mass market, which is still lagging the luxury sector by a wide margin.

While luxury sales saw an increase of about 5 per cent in 2006, Colliers expects growth of between 15 and 20 per cent this year, pushing the sector to new highs and widening the gap between the high-end and mass residential units.

 

Source: Business Times 18 Sept 07

China to raise downpayment for second homes: sources

(BEIJING) China will soon raise the downpayment requirement for people buying their second home to 40 per cent, in an effort to curb speculation in the red-hot property market, banking and regulatory sources said yesterday.

It will also raise to 50 per cent from 40 per cent the downpayment requirement for commercial property like offices and retail space, the sources told Reuters. They did not provide a specific date for the changes, but one official said they would be unveiled ‘very soon’.

‘In order to curb the excessive rises in property prices, the government will on the one hand increase the supply of low-rent flats and on the other hand raise the downpayment requirement,’ said one source.

Annual property price inflation in 70 major cities accelerated to 8.2 per cent in August, with prices going up 20.8 per cent in the southern boomtown of Shenzhen and 12.1 per cent in Beijing. State media said the nationwide rise was a record high.

After the changes, there will be three different levels of downpayment requirements for people seeking mortgages to purchase a home. Anyone buying a second or subsequent home will need to put down 40 per cent; those buying their first home will pay 30 per cent if it is larger than 90 sq m (969 sq ft); and those buying a first home that is for their own use and is smaller than 90 sq m will need to pay 20 per cent.

It will be the second time in about 15 months that Beijing has raised downpayment requirements to try to cool down the property market. The Cabinet raised it for home mortgages to 30 per cent from 20 per cent in June 2006 as part of a package of measures to deter property speculation, exempting smaller, owneroccupied flats.

 

Source: Reuters (Business Times 18 Sept 07)

CapitaLand sells its stake in Hong Kong’s AIG Tower

The developer will book S$260.7m gain on completion of the divestment

CAPITALAND has sold its entire 45 per cent effective stake in AIG Tower in Hong Kong in a deal that values the asset at HK$8.1 billion (S$1.6 billion).

Upon completion of the divestment – due on or around Nov 30, 2007 – CapitaLand will recognise a gain of about S$260.7 million in its group consolidated accounts.

The HK$8.1 billion valuation reflects a price of HK$22,042 per square foot (psf) based on AIG Tower’s net lettable area of 366,072 square feet. The Grade A office building at No 1 Connaught Road, Central has 999-year leasehold tenure and was completed in 2005. It was developed on the former Furama Hotel site that the former Pidemco Land bought a stake in from Lai Sun Group in 2000.

Pidemco, which later merged with DBS Land to form CapitaLand, subsequently sold half of its stake in the site to American International Assurance Company (AIA).

AIA is also the party that is buying CapitaLand’s 45 per cent effective stake in the building under the latest deal announced yesterday. This will boost AIA’s stake in the property to 90 per cent with Lai Sun holding the remaining 10 per cent.

Major tenants in the building, which is fully leased, include AIA, Bank of Tokyo-Mitsubishi, Royal Bank of Scotland and Wachovia Bank.

CapitaLand has also been divesting some of its Singapore office assets. Late last month, it sold its 50 per cent stake in Chevron House along Raffles Place in a deal that valued the asset at $730 million, or $2,780 psf of net lettable area.

Earlier last month, CapitaLand also paid $590.3 million for the remaining 50 per cent stake in Eureka Office Fund, which owns One George Street. This valued the award-winning office block at $1.2 billion, or about $2,700 psf.

In March, CapitaLand divested its effective 90.04 per cent stake in Temasek Tower, which was sold for $1.04 billion or $1,550 psf.

During the group’s first-half results briefing on July 31, CapitaLand Group president and CEO Liew Mun Leong stressed that the Singapore office sector will remain ‘a core holding’ to the group but that it will restructure its portfolio by divesting some existing office assets and investing in new developments.

He cited as an example of the latter the group’s bid for the former NCO Club and Beach Road Camp grounds. Last week, the Urban Redevelopment Authority awarded the site to a consortium led by City Developments.

 

Source: Business Times 17 Sept 07

Nomura eyes property to grow in Asia

It forms unit to develop Reit business in S’pore

(HONG KONG) Nomura Holdings, the top brokerage in Japan but a smaller player elsewhere in Asia, has launched a property investment business and is investing in companies before they go public to help build up its equities business in the region, a top banker said.

Philippe Espinasse, who joined Nomura as co-head of Asian equity capital markets two months ago, said that the brokerage wants to grow beyond selling deals to Japan’s vast investor base. ‘We’re definitely expanding the focus beyond the Japanese distribution channel,’ said Mr Espinasse, who was previously head of Asia equity capital markets at Macquarie Bank .

Nomura ranks far down the league table this year in 70th place for equity capital markets deals in Asia-Pacific outside Japan, well below its 16th and 15th place finishes for 2006 and 2005, respectively, according to Thomson Financial.

‘As one of the very top investment banks in Asia including Japan, definitely, I’d like to get back in the Top 10 for Asia ex-Japan ECM,’ said Mr Espinasse, who has spent a big chunk of his first months on the job flying around the region to meet clients.

Nomura is looking to put more of its own capital to work by investing in companies ahead of their initial public offerings (IPOs), which would put it in pole position for underwriting mandates. ‘You have to select your niches, go after transactions in sectors where you have a competitive edge,’ he said.

Powered by China and India, Asia is a growth engine for global investment banks and Nomura is battling established players in the region such as UBS, Goldman Sachs and Morgan Stanley, as well as banks that have been recently beefing up operations in the region, such as Lehman Brothers and Bear Stearns.

‘At the end of the day, it’s about being more aggressive and confident, going on the road and meeting clients and explaining how and where Nomura can add value,’ Mr Espinasse said.

Nomura, which has said that it is weighing acquisitions to enter the booming stockbroking business in India, was one of five banks to help India’s HDFC Bank Ltd raise US$698 million through an American Depositary Share issue.

Mr Espinasse said that while Nomura would continue to take advantage of its distribution capability in Japan, where cash-rich retail investors are increasingly buying overseas assets, the brokerage also wants to leverage its network of 340 global sales staff who focus on Asia outside Japan. ‘The key for my side of the business is to significantly expand the business beyond our highly successful Japanese primary equity distribution franchise.’

To that end, the brokerage in July started its Asia Asset Finance unit in Singapore, which will invest in property around Asia and develop a real estate investment trust (Reit) business.

‘That is something we are keen to do more of in Asia ex-Japan,’ said Mr Espinasse, who has Reit experience from his stint with securitisation specialist Macquarie. He said that the property arm would grow to about a dozen people.

Singapore is the top property trust market in the Asia-Pacific after Japan and Australia.

 

Source: Reuters  (Business Times 17 Sept 07)

China’s tallest tower caps Shanghai skyline

Final beam is laid for the skyscraper to be completed by 2008 Olympics

SHANGHAI – AFTER more than a decade of delays, China’s tallest building is slicing through Shanghai’s hazy, skyscraper-studded skyline – a new trophy built by Japanese property tycoon Minoru Mori.

The 101-storey Shanghai World Financial Centre, a 492m wedge-shaped tower with a rectangular hole at the very top, was topped out yesterday as its last beam was laid amid a drizzle which obscured the building’s panoramic view of the winding Huangpu River and endless highrises.

With China’s economy growing nearly 12 per cent a year and stock and real estate prices soaring, ‘the timing is just about the best it could be’, Mr Mori said on Thursday.

‘When I saw the building this morning, at its full height, I thought it’s really beautiful. I think we’ve really succeeded,’ he told reporters at Shanghai’s Jinmao Tower, a silver spire next door to the World Financial Centre that, at 421m, was China’s tallest building until now.

Mr Mori’s visions of a ‘vertical garden city’ have transformed the landscape of his hometown Tokyo with mammoth, mixed-use redevelopment projects such as Roppongi Hills, Ark Hills and Atago Green Hills.

The 115 billion yen (S$1.5 billion) Shanghai project by the developer’s flagship Mori Building Co, which is due for completion in time for the 2008 Beijing Olympics, is also evidence that despite the political tensions that flare up between China and Japan at regular intervals, business is business.

The developer acquired the land for the huge project, in the city’s Lujiazui financial district, in 1994. Piling work began in 1997, and then halted for six years after the Asian financial crisis wiped out demand for new office space.

By the time the project was revived in 2003, he had proposed and won approval from the Shanghai authorities to expand its size to make it the world’s tallest – a symbol of China’s growing affluence and economic might.

The tower, buttressed by a conference centre and shopping mall, will eventually house 70 floors of office space meant to accommodate 12,000 people, with a hotel, restaurants and an observatory at the top.

However, Taiwan’s Taipei 101, at 508m beat the building’s height, taking the tallest sweepstakes in 2004.

Developers of a skyscraper in oil-rich Dubai recently declared theirs the world’s tallest building when construction reached 512m – and the building is still far from completion.

After the Sept 11, 2001, terrorist attacks in the United States, the building was redesigned into a so-called ‘megastructure’ with four huge pillars to make it stronger, Mr Mori said.

Later, the builders altered another key design feature – a circular cutout near the top – after complaints that it resembled the rising sun on Japan’s flag, a symbol reviled by many Chinese because of Japan’s brutal occupation of the country during World War II.

Mr Mori obliged, changing it to a rectangle.

‘For us it wasn’t such a big deal to change it and it pleased the Shanghai authorities,’ he said.

Given strong interest from many international financial firms, Mori Building expects occupancy in the new building to be at 90 per cent by the end of next year, said Mr Hiroo Mori, the senior Mori’s son-in-law and a managing director of the company.

He said plans call for rents of more than US$3 (S$4.5) per square metre per day – possibly the highest ever for the city.

Higher than forecast profitability means that the company expects to recoup its investment within 15 years.

 

Source: ASSOCIATED PRESS (The Straits Times 15 Sept 07)

HK property deals surge to 2-year high in August

Number of deals in August soars to two-year high of 13,664

IN HONG KONG

A SURGE in property deals has fuelled hopes that Hong Kong’s mass market is poised to catch up with the city’s runaway luxury sector.

The number of deals surged last month to a two-year high of 13,664, an increase of 22.9 per cent from July and a rise of 58.3 per cent from August 2006. In the past six months, the figure has exceeded 10,000, signalling a consistent shift upwards.

The total amount paid for these sale and purchase agreements came to HK$44.2 billion (S$8.6 billion), an increase of 16.3 per cent over the previous month.

The figure represents a hefty 76.3 per cent increase compared to the amount paid in August 2006.

Hong Kong’s mass residential market has been a notable laggard over the past two years as the luxury sector took off. Sales in up-market locations such as the Peak and the South Side of Hong Kong Island have well outstripped 1997 levels.

Luxury residential sales in Hong Kong are expected to post double-digit growth this year as limited supply and an influx of capital to the city pushes up prices. Property firm Savills expects the luxury sector to post growth of 16 per cent in the 12 months to April 2008.

This follows stellar growth in 2006, in both sales and leasing.

However, the mass market has grown by just a few percentage points each year, and still remains below 1997 levels. This is against a backdrop of strong economic growth, the city experiencing GDP of 6.8 per cent last year and unemployment standing at just over 4 per cent.

While luxury sales are at 1997 levels or above, the mass sector is still about 20 per cent short. Residential property on Hong Kong island is 20-25 per cent below 1997 prices, while prices out in Kowloon and the New Territories could be as much as 40 per cent below.

Market players are hoping the latest transaction figures signal healthy buying power and renewed interest in buying a home.

Others are however sceptical. ‘The mass market is ticking over quite nicely,’ said Maggie Brooke of Professional Property Services. ‘But we don’t see anything major.

‘I know things are going well, but people are still nervous about buying . . . they really aren’t inclined to get in above their heads. It (the property downturn of 1997-98) is still in peoples’ minds.’

Many home buyers are still stinging from the Asian financial crisis, after which the value of their homes fell by up to 40 per cent, often to less than the level of the housing loans they took out to buy the homes.

Another factor potential buyers are taking into account is that developers have been reluctant to drop their prices, despite ample supply in the mass sector.

‘People buying have to ask themselves, ‘is it worth it?’ Ms Brooke said.

In its annual property review, the rating and valuations department of the government said it expects less property completions in 2007, reflecting a year of modest demand, but said they should bounce back again in 2008.

Take-up rates for domestic properties were down 6 per cent overall last year, while prices went up by just 3 per cent.

 

Source: Business Times 13 Sept 07

Jones Lang plans mall mgmt JV in China

(BEIJING) Global real estate services company Jones Lang LaSalle (JLL) is in talks with a shopping centre management firm to establish a 50-50 joint venture in China, a senior company executive said yesterday.

Managing director David Hand said the company ‘is looking at doing a merger – a joint venture with an overseas expert in shopping centre management’ to strengthen its hand in a market where the world’s top retail brands are swarming in.

If everything goes smoothly, ‘by the end of the year, we will be able to announce it’, he told reporters.

Mr Hand, who is also head of Jones Lang LaSalle’s China retail division, did not name the prospective partner.

He said the deal would make JLL the largest shopping centre management company in China and in Asia as well.

JLL provides management and leasing services to many shopping malls in China, including new developments in downtown Beijing. Its rivals include DTZ Holdings and CB Richard Ellis.

Mr Hand added that JLL would move its regional headquarters to China from Singapore to capitalise on Bejing’s drive to spur consumption in order to wean the economy off investment and exports.

He did not say when the move would occur. ‘In the future, China will be our strongest growth engine,’ he said.

Mr Hand said he expected Beijing to roll out more measures to rein in foreign investment in Chinese property.

China has ordered foreign investors to register onshore and put more of their own money into their China ventures.

Mr Hand said the process of investing in Chinese real estate had become more cumbersome, but added: ‘It’s not stopping money coming in and out.’

 

Source: Reuters (Business Times 13 Sept 07)

House prices in Chinese cities up 8.2% in August

The government has pledged to tame the wild property market

(BEIJING) House prices in 70 large and medium-sized Chinese cities were up 8.2 per cent in August compared with last year, as the rising trend continues to show no sign of stopping, according to latest statistics released yesterday.

The rise actually hit a new high and was 0.7 percentage points higher than the July figure, according to a report by the National Bureau of Statistics (NBS) and the National Development and Reform Commission.

The prices of newly-built commercial housing units were up by 9 per cent in August, 0.9 percentage points higher than the rise in July.

The prices of low-cost housing rose 3.1 per cent and the prices of luxury housing went up 10 per cent.

The cities of Beijing, Shenzhen, Beihai and Urumqi saw price hikes of more than 10 per cent, with Beihai the highest at 18.2 per cent.

The housing prices in Beijing went up 13.5 per cent and the prices in Shenzhen were up 17.6 per cent. Prices of second- hand houses in those cities were up by 7.8 per cent.

Rising house prices have been a major concern of the Chinese people in recent years as new houses are too expensive for most urban residents.

Ordinary consumers are often scared into buying a house for fear that they will pay even more if they keep waiting as prices continue to rise.

The Chinese government has pledged to tame the wild property market but house prices have rocketed over the last few years despite round after round of government measures including restrictions on housing ownership by foreigners. Speculation by domestic and overseas investors has been blamed as one of the main reasons for the price hikes.

China’s real estate investment soared 28.5 per cent from a year earlier to 988.7 billion yuan (S$200.3 billion) in the first half of 2007, according to the NBS.

Analysts attributed the rising investment to booming housing demand, excessive liquidity and robust housing price hikes.

 

Source: Xinhua (Business Times 13 Sept 07)

Ascott’s China service residences lauded

It plans to grow its China portfolio to 10,000 units by 2010

THREE service residences managed by The Ascott Group have been named ‘China’s Best Serviced Apartments’ by Forbes China magazine.

Ascott Beijing, Ascott Shanghai Pudong and Somerset Olympic Tower, Tianjin were among 15 winning projects chosen from 100 short-listed in Beijing, Dalian, Guangzhou, Shanghai, Shenzhen and Tianjin.

Ascott bagged the most awards in the service residence category, created this year to recognise excellence in service, stay experience, facilities and location.

The awards are part of Forbes magazine’s ‘China’s Best Business Hotels 2008′ awards.

Ascott’s CEO for China Ee Chee Hong said: ‘Winning three out of 15 awards is a validation of Ascott’s focus on delivering service and product excellence.’

Ascott is the largest international service residence owner-operator in China, with a total of about 4,000 units in Beijing, Dalian, Guangzhou, Shanghai, Shenzhen, Suzhou, Tianjin, Xi’an and Hong Kong.

The group plans to grow its China portfolio to 10,000 units by 2010. It has won numerous brand and property awards.

In April this year it clinched the China 2007 ‘Top 100 Serviced Apartments Award’ for the fourth year running.

 

Source: Business Times 13 Sept 07

Malaysia’s private sector will drive development projects: Abdullah

KL will not build fast train track to S’pore, neither will it stop firms from doing so

MALAYSIA will rely on the private sector to drive its developmental projects from now on, departing from its previous practice of putting government agencies and civil servants in charge, its Prime Minister said yesterday.

Prime Minister Abdullah Badawi told 400 captains of industry this when fielding a slew of questions from American publishing tycoon Steve Forbes, after he delivered the keynote address at the Forbes Global CEO Conference gala dinner at the One Degree 15 Marina Club in Sentosa Cove last night.

As an example of what he meant, he said his government will not build a bullet train track between Singapore and Kuala Lumpur, but will not stop the private sector from taking on such a project.

‘If you are going to spend your money on this, I will allow you to do it,’ he said. ‘You spend the money, you build the train, you decide on the fares.

‘We will not maintain it, because we are not in the business of running a train. We don’t want the train.’

Datuk Seri Abdullah added that, in any case, the government wanted to spend what money it did have on improving the quality of education in Malaysian schools, so that the country had better human capital ‘to go up the value chain’.

The Singapore-Kuala Lumpur fast train idea was mooted by Malaysian construction conglomerate YTL Corporation twice – in 1998 and again last year. But, for various reasons, YTL’s proposal ran into delays while awaiting the official go-ahead.

In his remarks yesterday, Datuk Seri Abdullah also sounded a word of warning to the private sector: If you fail in your projects, don’t expect the government to come running to your rescue.

‘If you have built this, and it doesn’t work…I am not bailing you out,’ he said. ‘You may need the money, but we are not bailing you out.’

He did not cite examples but in the past month, there was much talk that the government’s soft loan to the private-driven Port Klang Free Zone project was in effect a bailout. This was after the project’s costs ballooned from RM1.1 billion to RM4.63 billion (S$477 million to S$2.01 billion).

There were two caveats to Malaysia’s new push for private-led ventures for big projects.

First, the government will set aside money for a facilitation fund. Called the Private Financial Initiative (PFI), it could be used to acquire land, build roads and help link utilities to the projects, he said.

Second, if foreign firms needed workers, the Malaysian government will train them at its own cost.

When Mr Forbes asked Datuk Seri Abdullah about apparently prevalent cronyism in Malaysia, he replied: ‘I don’t understand this word cronyism now. Everyone has a chance.’

Datuk Seri Abdullah reiterated that ‘everyone has a chance’ when Mr Forbes asked him later whether Chinese and Indians had a place in Malaysia’s future.

Referring to Malaysia’s longstanding affirmative action policies to help the Malays, Datuk Seri Abdullah stressed: ‘All these policies that you say favour the Malays are government policies. They are a product of a decision taken by a multiracial Cabinet.

‘Nobody said ‘I’m out’. No one disagreed or said ‘I’m seeking an exception’. None.’

UP TO YOU

‘If you are going to spend your money on this, I will allow you to do it. You spend the money, you build the train, you decide on the fares.’ – DATUK SERI ABDULLAH, saying he will not stop the private sector from building a bullet train track between Singapore and Kuala Lumpur

ON YOUR OWN

‘If you have built this, and it doesn’t work…I am not bailing you out. You may need the money, but we are not bailing you out.’ – DATUK SERI ABDULLAH, sounding a word of caution

Source: The Straits Times 12 Sept 07

Shui On to double China land bank

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

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

 

Source: Reuters (Business Times 11 Sept 07)

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

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

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

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

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

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

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

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

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

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

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

 

Source: Reuters (Business Times 11 Sept 07)

Wing Tai leads 800m yuan development in Chengdu

Consortium to carry out 900,000 sq ft project due for completion in 2011

A CONSORTIUM led by Wing Tai Holdings will develop an 800 million yuan (S$161.1 million) real estate project in Chengdu, China.

Under a memorandum of understanding that Wing Tai signed yesterday with China’s Chengdu Jinli Group, the consortium will own ‘more than 60 per cent’ of the joint venture, which means its investment will be at least 480 million yuan.

The project, in Chengdu’s city centre, will have a gross floor area of about 900,000 sq ft. It will comprise hotel/ serviced apartment, residential, office and retail space.

This is the consortium’s first move to create a real estate development and investment platform in China after it was set up earlier this year.

Wing Tai said in May that it would lead a multinational consortium to invest in and develop about US$1 billion of real estate in China.

The company entered into a strategic relationship with Germany’s SEB Immobilien-Investment, Forum Partners of the US and Israel’s Eilam Group.

The consortium said then that it would inject a total of US$450 million into the venture.

Wing Tai said that it will lead the consortium in identifying business opportunities and managing the venture and its assets.

It also said that the venture with the three investors is in line with its strategy to embark on a pan-Asian drive to increase its overseas earnings.

The consortium is now looking at other Chinese cities to expand into. The Chengdu project is expected to be completed in four years.

‘I am confident that we will successfully develop a premier real estate model that will serve and benefit Chengdu in its rapid economic development and growth as one of China’s leading cities,’ said Wing Tai chairman Cheng Wai Keung.

Wing Tai’s shares closed six cents higher at $3.36 yesterday. The stock has climbed 47.4 per cent this year.

 

Source: Business Times 8 Sept 07

HK not hit by sub-prime woes: central bank

(HONG KONG) Information provided by locally incorporated banks indicates that their aggregate exposure to the US sub-prime mortgage market will not have systemic implications for Hong Kong’s banking sector, according to Hong Kong Monetary Authority chief executive Joseph Yam.

In his weekly Viewpoint column published on the Hong Kong central bank’s website on Thursday, Mr Yam said, however, that banks and other market participants should watch for risks and uncertainties.

‘Thanks in part to comparatively slower development of the credit derivatives market in Hong Kong, the risk arising from exposure to securities and credit derivatives with a sub-prime component is closely monitored by banks in Hong Kong,’ he said.

‘While some in the market are hoping for more government intervention in the form of interest-rate cuts or government-sponsored entities buying more mortgage-backed securities to keep the market going, others are projecting that the US mortgage credit quality will weaken further in the second half of 2007 or even well into 2008 as more sub-prime adjustable-rate mortgages reset to higher floating rates.’

He said the outcome of the sub-prime mortgage problem and its effect on the global economy are still unpredictable, and market participants should watch developments closely.

 

Source: Xinhua (Business Times 8 Sept 07)

Property bubble may burst: Daiwa House

A concerned CEO of Japan homebuilder aims to cut costs and expand in China

(TOKYO) Daiwa House Industry Co, Japan’s second biggest homebuilder by market value, wants to cut local costs and expand in China as the developer is concerned a property ‘bubble’ may burst, slashing land prices.

‘The property market has become dangerous,’ Takeo Higuchi, chairman of the Osaka-based homebuilder, said in an interview. ‘I wouldn’t be surprised if the real estate bubble goes bust.’

Land prices are key for Japanese homebuilders like Daiwa House because declines in population are shrinking the residential construction market. Housing starts in the first half of this year averaged about 23,000 a month fewer than they did 20 years ago.

Daiwa House wants to build condominiums in China and Vietnam and is increasing sales of cheaper steel-frame homes in Japan. The company is also investing in energy and research into rechargeable batteries.

The Ministry of Health, Labour and Welfare in December predicted Japan’s population would drop to 95.2 million by 2050 from 127.8 million in 2005 because people are marrying later in life and having fewer children. That compares with a January 2002 forecast for a 21 per cent decline in the population to 100.6 million by 2050.

The homebuilder’s overseas expansion plan is a positive move, considering the shrinking market at home, said Yoji Otani, an analyst at Credit Suisse Group. Even so, it may be difficult for Daiwa House to meet the needs of consumers in foreign markets, he said.

‘Homes are a highly local product,’ Mr Otani said. ‘It may be risky for a foreign builder to expand broadly into another country’s market.’

Annualised housing starts fell 23 per cent in July from a year earlier to 947,088, after surging 6 per cent to 1.35 million in June after changes to construction laws prompted companies to apply for building permits the previous month. Under the new rules, approvals can take as many as 70 days, compared with 21 days before the change.

Daiwa House, whose shares have dropped 27 per cent this year, plans to spin off a real estate investment trust (Reit) within a year as Japan’s real estate market rebounds from a 15-year slump.

The Reit will contain 100 billion yen (S$1.32 billion) worth of properties, including warehouses, rental apartments and commercial buildings, Mr Higuchi said. The properties will be mainly located in Tokyo, Osaka and Nagoya.

Japan’s land price growth quickened last year to 8.6 per cent from 0.9 per cent in 2005. The gain was the fastest since the National Tax Agency started to compile national land figures. The rapid gain in land prices has become worrisome for Daiwa House, Mr Higuchi said.

Osaka’s Midousuji, one of the city’s main streets for office centres, experienced the most rapid growth, with prices soaring 40 per cent to 6.96 million yen per square metre, the tax agency said on Aug 1.

Daiwa House forecasts profit will surge 25 per cent to 58 billion yen for the year ending March 2008, as sales are expected to advance about 5 per cent to 1.7 trillion yen.

The company is cutting costs by increasing sales if its ‘xevo’ line of two-story, steel-framed houses.

The company plans to sell 1,200-1,300 xevo houses a month this year, exceeding an earlier goal for 1,000 a month.

From next year, Daiwa House expects all of the new homes it sells to be based on xevo frames, up from about 85 per cent now, Mr Higuchi said.

Daiwa House will next month start selling 830 apartments in the seaport of Dalian, north-east China. The developer also plans to build 10 condominiums with 1,200 units in Suzhou, near Shanghai, seeking to meet its two trillion yen sales goal by 2010.

In Vietnam, Daiwa House plans to build 200 units of rental apartments near Japanese schools in Hanoi by 2010.

‘In the long run, it is impossible to achieve such growth if we only focus on the Japanese market,’ Mr Higuchi said.

The company is also looking to expand into energy. Daiwa House bought 52 per cent of Eneserve Corp, which makes electricity generators, for 2.51 billion yen in April.

In addition, it has invested an undisclosed sum in research on lithium-ion batteries, a type of rechargeable battery commonly used in consumer electronics, for residential usage to combat carbon emissions contributing global warming.

The homebuilder plans factories in the Tokyo and Osaka regions and may start producing rechargeable batteries for properties by 2009.

Daiwa House also plans to start producing power- assisted walking devices for the disabled from next year, Mr Higuchi said.

 

Source: Bloomberg (Business Times 6 Sept 07)

No sub-prime miracle cure, says OECD chief economist

Increased scrutiny; borrower education; pugnacious rating analysis needed

(MADRID) The surge in short-term rates caused by rising defaults of US sub-prime mortgages exposed ’serious imperfections’ in the way global credit and housing markets function, OECD chief economist Jean-Philipe Cotis said.

‘Recent developments have revealed serious imperfections in the functioning of US housing markets and, more broadly, in credit markets worldwide,’ said Mr Cotis, chief economist at the Organisation for Economic Cooperation and Development.

Mr Cotis suggested that increased supervision of US sub-prime mortgages, more information and education for borrowers, and more ‘pugnacious’ analysis from credit rating companies, may help avoid future losses of confidence.

‘More transparency also seems to be called for in credit markets,’ Mr Cotis said. ‘I don’t think there’s a miracle cure readily available.’

Some so-called asset-backed securities lost more than 50 per cent before credit agencies downgraded them in July.

US Senate Banking Committee chairman Christopher Dodd said last month that the rating agencies’ failure to act sooner caused ‘great damage’.

Meanwhile, the Dutch central bank said that uncertainty has risen in the Netherlands’s financial system over the past six months and the full impact of the recent increase in borrowing costs ‘cannot be determined’.

The outlook for the financial system depends on ‘the extent to which the decreasing risk tolerance among investors continues and how much farther it spreads’, the central bank said in a report issued yesterday.

The European Central Bank and other monetary authorities around the world injected more than US$350 billion into money markets last month to prevent a wider crisis as investors shunned assets linked to US mortgages and corporate borrowing costs rose.

The US sub-prime meltdown has revealed that ‘unfavourable developments in one segment could lead to an overall deterioration of the market climate’, the Dutch central bank said. The ‘direct exposures’ of Dutch financial service companies to the sub-prime mortgage market are ‘relatively limited’, according to the report.

Meanwhile, tight money markets showed no sign of let-up in a liquidity squeeze caused by banks clamming up on lending over the past month as they scrambled to calculate exposure to mass defaults in the US sub-prime mortgage market.

Australia held interest rates steady yesterday, the first piece in a monetary jigsaw which investors expect to show euro zone policy on hold and a US rate cut in response to a global credit crisis.

Overnight interbank lending rates in the euro zone approached six-year highs, after Tuesday’s injection of liquidity by the ECB failed to sate demand for ready cash.

‘The fact that overnight is trading so high at the moment shows that the cash is not spreading out across the system, there are institutions which are struggling to get short-term needs filled,’ said a euro zone trader.

In Britain, sterling three-month money rates hit fresh 81/2-year peaks. The Bank of England – which has stood back until now – decided to act, but focused on overnight rates.

The BOE raised its aggregate reserves target for the next month by 6 per cent and said that it stood ready to add 25 per cent more if overnight interest rates stayed high.

It said that it aimed to ‘relieve some pressure on interest rates for overnight borrowing which have, at times during the maintenance period over the past month, been unusually high’.

The Reserve Bank of Australia does not explain its reasoning when leaving interest rates steady but has been striving daily to add liquidity to the banking system as market rates climbed.

The Bank of Canada was expected to follow Australia’s example late yesterday, and the European Central Bank and the BOE are seen keeping rates on hold today, while the calming of market turmoil depends overwhelmingly on the delivery of an expected Federal Reserve rate cut on Sept 18.

The Fed is expected to cut rates at its meeting after chairman Ben Bernanke said last week that he would take any steps needed to shelter the economy from the credit squeeze.

Richmond Fed president Jeffrey Lacker said on Tuesday that he would back a rate cut if the evidence showed slowing growth and lower inflation, but said that the case was not yet made.

‘If evidence arrives that we need a policy move, of course I will consider it and I will take that evidence seriously,’ he said.

‘That evidence would be of the nature of information that alters the outlook for real spending and inflation.’

Further diagnosis of the US economy will be provided later by the Fed’s Beige Book on regional economic conditions, while tomorrow’s August non-farm payrolls figures loom large.

 

Source: Bloomberg, Reuters (Business Times 6 Sept 07)

Ascendas IT Park project in Dalian to cost US$200m

Flagship outfit will be built over 5-8 years in phases

(SINGAPORE) The six million sq ft Dalian Ascendas IT Park in China will cost an estimated US$200 million and will be built over five to eight years in phases.

Speaking at an event in Dalian yesterday to mark the completion of the first phase of the flagship project, Ascendas president and chief executive officer Chong Siak Ching said: ‘It will offer a fully integrated work-live-play environment and give full play to an international business lifestyle concept that we have test-bedded successfully in Singapore and India.’

The 11-storey, US$62 million first phase comprises one million sq ft of space. Ascendas said that 25 per cent of this has been taken up by tenants including Konica Minolta, Network Appliance and Dalian Hi-Think Computer Technology.

The second phase of development is expected to start early next year and to be completed by mid-2009, adding another 11-storey building with a gross floor area of about 840,000 sq ft.

The 35-ha Dalian Ascendas IT Park project could eventually have a total of six million sq ft, depending on demand, and is expected to target Dalian’s business process outsourcing (BPO), information technology outsourcing (ITO) and software R&D sectors.

Ascendas will run the park, including project management, marketing, lease management, property management, advertising and corporate services.

The chairman of Yida Group and Dalian Ascendas IT Park, Sun Yinhuan, said that the park is the first development in Dalian’s Lu Shun Nan Road software industry area. ‘This will surely facilitate the fast development of Lu Shun South Road software belt and further boost the software and IT service industry in Dalian,’ he said.

BPO is the fastest-growing sector in China’s IT services market. According to a recent report by IDC, China’s offshore BPO is expected to grow five times to almost US$7 billion by 2011 – a compounded annual growth rate of 37.9 per cent.

 

Source: Business Times 6 Sept 07

Dubai to build hotels and apartments in Vietnam

(DUBAI) Dubai will develop a US$220 million property in Vietnam, building hotels and luxury apartments near the beaches and limestone mountains of Halong Bay, government-owned developer Limitless said here yesterday.

Limitless is part of the conglomerate that is building three palm-tree-shaped islands and an archipelago the resembles a map of the world off the coast of Dubai through its Nakheel unit.

The Halong Star development will include a 250-room hotel, the first five-star property in an area designated a World Heritage site by the United Nations, Limitless said in a statement.

The development is the company’s first in Southeast Asia, and Limitless is planning several projects in the region, it said, without giving details.

Gulf Arab property developers are turning increasingly to Asia to tap the region’s fast-growing tourism and housing markets.

 

Source: Reuters (Business Times 6 Sept 07)

Ample perks for M’sian property sector

Tax adviser says any more incentives in Budget likely to benefit buyers

(KUALA LUMPUR) Malaysia’s property sector does not need another shot in the arm in the 2008 Budget as it has received more than enough incentives, Veerinderjeet Singh, managing director of Taxand Malaysia Sdn Bhd said yesterday.

Instead, any incentive introduced tomorrow might well slant towards benefiting property buyers more, he said.

‘I think the property sector has been given too much. The main reason for the exemption of the real property gains tax (RPGT) last April is because various property entities said it would help them sell their completed buildings and houses,’ said Dr Veerinderjeet.

He said this when asked if the property sector needs a further boost from the government to increase sales, at the Bernama Roundtable on the 2008 Budget here yesterday.

‘If anything more, it should be for buyers because it is the buyers who pay the stamp duty, not the sellers,’ he said.

Dr Veerinderjeet also downplayed recent suggestions for the government to remove stamp duties, a transaction tax imposed on buyers, as it contributes more to the country’s revenue compared with RPGT.

‘That’s why (the abolishment of) RPGT is the easy thing to do in terms of providing exemptions because the loss is not tremendous.

‘The government has to balance all these things and actually give away small little things, which will increase the level of economic activity and still recover tax in other ways,’ he said.

Citing the Iskandar Development Region, he said the government would receive a huge bulk of revenue from investors, both local and foreign, just from stamp duties alone.

‘By just removing or giving an exemption in paying stamp duties, it will create a bigger gap in the total revenue,’ he added.

‘Maybe a slight reduction in stamp duties was possible, thus giving an extra push in terms of the multiplier effect,’ he said.

‘At the end of the day, if the buyers are willing to buy, then there is no need for incentives. Sometimes you need to let market forces work their way and you don’t really need incentives,’ he said.

‘I personally think the property sector has been given enough,’ he added.

The government also relaxed rules for foreign buyers.

 

Source: Bernama (Business Times 6 Sept 07)

Pan Hong sues land owner for non-completion of sale

Non-completion has significant impact on Chinese developer’s financial numbers

CHINESE property developer Pan Hong Group is suing a company which owns four parcels of land in Beihai City, Guangxi province, for not completing a deal to sell.

The non-completion of the deal has a significant impact on the Singapore-listed company’s financial numbers as the group has recognised a profit of 77.8 million yuan (S$15.7 million) – that’s 84 per cent of its first-half net earnings – as gains from the appreciation of the land value in its first-quarter results.

In a statement yesterday, Pan Hong said its wholly owned subsidiary, Loerie Investments, had on Dec 14, 2006 agreed to buy a 90 per cent share in Ever Sure Industries for HK$101.5 million (S$19.8 million) from Liu Hong Shu.

Upon signing the agreement, Pan Hong had paid Liu Hong Shu HK$30 million as a deposit. The legal completion was to have been on Aug 31.

Following its due diligence of Ever Sure, Pan Hong sent a bank draft for the balance of the purchase price of about HK$71.5 million to Mallesons Stephen Jaques, the firm of solicitors which sealed the agreement.

‘However, on Aug 31, 2007 the vendor failed to fulfil his obligation which required the transfer of legal ownership of 90 per cent of Ever Sure to Loerie. After seeking legal counsel in Hong Kong, Pan Hong is of the view that it has a strong legal case against the vendor,’ Pan Hong said.

It said it was advised that Liu Hong Shu does not have grounds to walk away from the transaction and has accordingly committed a material breach of the agreement.

Ever Sure is an investment company incorporated in Hong Kong whose sole investment is a 100 per cent interest in China company, Beihai Southern Paradise Land Industries Development Co Ltd.

This company owns four parcels of land in Beihai City, Guangxi province.

Pan Hong had planned to develop the land, which has an aggregate area of about 358,296 square metres and a planned gross floor area of about 381,000 sq m, into residential and commercial properties.

Real estate values in Beihai have been rising rapidly this year. Pan Hong said that since it had been given two board seats on Ever Sure and was deemed to have control over the group, it had accordingly consolidated Ever Sure into its accounts.

Pan Hong said there may be an impact on its financial performance and net asset value for FY2007 if the claim against the vendor is not successful or if specific performance of the agreement is not granted to it by the courts in Hong Kong and damages awarded are not commensurate with the gain in value of the shares in Ever Sure, or if it is subsequently determined that Ever Sure should not be included in the group’s financial reporting in view of the legal proceedings.

Pan Hong shares yesterday slipped two cents to 69 cents.

 

Source: Business Times 4 Sept 07

Home owners’ compensation is a legal right

BEIJING – CHINA’S real estate law has been amended to ensure home owners will be compensated for property taken from them by the government.

Parliament voted on Thursday to add a clause to the law regarding the expropriation of buildings in the public interest while promising compensation to owners, the Xinhua news agency reported yesterday.

The new clause also underscores protection of legal rights of the owners and guarantees concerning residence conditions for private owners after their resettlement, it said.

Analysts said the amendment was the first time that the compensation of house owners was mentioned in the real estate law, whereas before it was only mentioned in less authoritative administrative rules.

‘Writing (the compensation clause) into the law will ensure the local governments and authorities will respect it more,’ said Mr Sun Cunxin, a lawyer at the Beijing Hengsheng Law Firm.

China has struggled to control mushrooming illegal land seizures and development, typically caused by the collusion of business interests and local officials.

The country sees regular protests by farmers and other citizens angered by having their land snatched at cutrate prices or seized outright.

Reflecting the saliency of the issue, the Property Law, which guarantees protection for the state-owned, the collective and the private sectors, triggered unprecedented debate before being passed by the legislature in March.

It went through a record 13 years of debate, passed seven readings and had been the subject of criticism and proposals from 47 government departments and 11,500 members of the public.

Old-school Marxists have been its fiercest opponents, arguing that the law is a sell-out, pushing China dangerously close to capitalism.

Source: AGENCE FRANCE-PRESSE (The Straits Times 1 Sept 07)

Philippines’ Ayala Land to raise capital, issue preferred shares

Move will allow more foreigners to buy into the firm

(MANILA) Ayala Land Inc, the Philippines’ top property developer, said yesterday that its stockholders approved a plan to raise capital and issue 1.5 billion pesos (S$49 million) worth of preferred shares.

The company raised its authorised capital by 7.5 per cent to 21.5 billion pesos from 20 billion pesos previously by issuing the preferred shares, the company said.

Ayala Land will offer 13.03 billion preferred shares with a par value of 10 centavos per share to all common shareholders of the company on record as of Aug 6, 2007.

The move will allow more foreign investors to buy into the country’s fifth most valuable firm with a market capitalisation of US$3.8 billion and a unit of Philippine conglomerate Ayala Corp.

At the end of the first half, the company was close to breaching its foreign ownership limit of 40 per cent of total outstanding shares.

The Philippine Stock Exchange earlier said that Ayala Land breached its foreign ownership limit in July.

The Manila-based company’s shares fell 3.64 per cent to close at 13.25 pesos yesterday, a bigger fall than the wider market’s 1.3 per cent drop.

Foreign and institutional investors offloaded the more liquid blue-chip companies like Ayala, on fears that the ongoing sub-prime crisis in the United States will persist for months.

 

Source: Reuters (Business Times 30 Aug 07)

Peninsula luxury chain to open its first hotel in Japan

Tokyo property will be Hongkong & Shanghai Hotels’ eighth Peninsula

(TOKYO) Hongkong & Shanghai Hotels Ltd will open the Peninsula Tokyo on Sept 1, becoming the latest international luxury chain to seek to benefit from increasing visitor numbers to Japan’s capital.

The hotel, with nightly rates start at 69,300 yen (S$920) and running to almost 1 million yen, overlooks the Imperial Palace in central Tokyo.

It’s the eighth property operated under the Peninsula name and the first in Japan.

‘Peninsula Tokyo is likely to get off to a favourable start’ because of its location in a key business district, said Takashi Ishizawa, a real estate analyst at Mizuho Securities Co.

The 314-room hotel, the sixth chain since 2002 to enter the Tokyo market, will benefit from the growth in international arrivals spurred by the weaker yen and a recovering economy. A record 7.3 million people visited Japan in 2006, up 9 per cent from the previous year.

The six new properties have a total capacity of 1,477 rooms, surpassing the 1,011 rooms at the Imperial Hotel, founded in 1890 and one of the city’s oldest hotels.

Peninsula will capitalise on its central location, close to the Ginza shopping district, Malcolm Thompson, the hotel’s general manager, said.

The hotel aims to operate at close to full capacity by October, he said.

Imperial Hotel Ltd, Hotel Okura Co, and New Otani Co are three of the domestic luxury hotel companies that are likely to see their room occupancy rates hurt by the expanding presence of foreign chains in Tokyo, said Mizuho Securities’ Mr Ishizawa.

The 24-story hotel was built by Mitsubishi Estate Co for 20 billion yen.

 

Source: Bloomberg (Business Times 30 Aug 07)

US developer ProLogis to invest 450b yen in Japan

(TOKYO) US-based industrial property developer Pro- Logis will invest 450 billion yen (S$6 billion) in Japan to bring its total Japanese investment to 900 billion yen by end-2009, its Japan chief said on yesterday.

The company, which started to invest in Japan in 2001, has already invested 450 billion yen of assets including those currently under development, but demand for large and efficient distribution centres remains strong, said Miki Yamada, president and co-chief executive of ProLogis in Japan.

‘We have set a goal of 900 billion yen and we are progressing as planned,’ Mr Yamada said.

ProLogis Japan has tied up with Government of Singapore Investment Corp and jointly launched two funds worth about 320 billion yen.

Mr Yamada said corporations are under pressure to lower their inventory levels but the need to move goods swiftly and effectively to meet market demand remains strong. ‘Overall, inventories are falling and the absolute number of warehouses may be falling, but there is demand to renovate old warehouses and needs for new, large and effective distribution centres will increase,’ he added.

ProLogis operates 69 warehouses with total floor space of 3.4 million sq m. With a gradual economic recovery and pick-up in land prices in 2006 for the first time in 16 years, the Japanese property market has turned competitive, making it harder to procure land or properties.

Mr Yamada said prices have soared and competition heated up, but the company is ready to expand and boost its investments.

‘We started with nothing in Japan. Now we have about 100 staff. We have ability and speed to process things,’ Mr Yamada said.

He said the company is considering listing a real estate investment trust but no solid plan has been set, adding that it will explore various options including tying up with other investors or listing itself as a public company.

 

Source: Reuters (Business Times 30 Aug 07)

WBL unit to sell Kowloon building for HK$223m

WBL Corporation’s wholly- owned subsidiary, Wearnes Motors (HK) Ltd (WMHK), has entered into a provisional agreement to sell a building in Kowloon for HK$223 million (S$43.4 million).

Upon completion of the deal, WMHK will lease the building – which it now uses as a showroom with workshop service facilities for the car trade – from the purchaser for two-and -a-half years at a rental of HK $1.1 million per month.

The property, No 163 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong, was valued at HK$202 million on July 31, 2007, by Jones Lang LaSalle Hong Kong.

The purchaser is New Land Development Ltd. An initial HK$10 million deposit was paid on signing of the provisional sales and purchase agreement. Ten per cent of the purchase price (inclusive of the initial HK$10 million deposit) will be paid upon the signing of the formal S&P and the remaining 90 per cent will be paid when the deal is completed on or before Dec 7.

WBL said the proposed sale-and-leaseback arrangement was in line with its strategy to unlock value from its investments.

The group will record a gain of S$26.3 million from the transaction. ‘As at July 31, 2007, the net book value and the latest available valuation of the property were S$16.6 million and S$39.3 million respectively. The net proceeds from the sale is S$42.9 million,’ said WBL.

Assuming the sale had been completed on Sept 30, 2006, WBL’s net tangible asset per share will rise to $3.05 from $2.94. WBL shares last traded at $4.54.

 

Source: Business Times 28 Aug 07

Goldman bags Tiffany’s Tokyo flagship property

Deal worth 37b yen; glitzy Ginza store to be leased back to jewellery retailer

(TOKYO) Goldman Sachs is buying Tiffany & Co’s flagship property in Tokyo for 37 billion yen (S$484 million), a person familiar with the deal said yesterday, in a move that underlines the appeal of prime real estate here to investors.

The person, who requested anonymity because he is not authorised to speak on the matter, confirmed a report in Japanese business daily The Nikkei Sunday that said the deal is being finalised following a bidding for the property in Tokyo’s glitzy Ginza shopping district.

The New York-based jewellery retailer Tiffany will lease the property to keep its store open there.

Goldman Sachs Group Inc spokesman Yoshihide Nakagawa and Tiffany spokeswoman Kyoko Okada declined comment on the report.

Japanese real estate has been recovering and gradually drawn investors amid an economic recovery.

Earlier this year, Morgan Stanley said it was buying 13 hotels from Japanese carrier All Nippon Airways Co for 281 billion yen, in a deal roughly doubling the American investment bank’s portfolio of hotels in Japan.

Japanese are among the world’s biggest fans of Tiffany products, although their popularity has waned somewhat in recent years amid intensifying competition from other brands.

Tiffany’s recorded better sales and profits for the first fiscal quarter, but reported that retail sales fell 2 per cent in Japan.

 

Source: AP (Business Times 28 Aug 07)

S Korean firm building 70-storey tower in Hanoi

World’s 17th tallest building will house offices, hotel and 2 apartment blocks

(HO CHI MINH CITY) Keangnam Enterprises Ltd began building what the South Korean company says will be Vietnam’s tallest skyscraper, betting that the South-east Asian country will maintain economic growth and foreign investment levels.

Ground-breaking ceremonies were held in Hanoi two days ago for the 336-metre, 70-storey structure, to be flanked by two 47- storey apartment buildings, according to a Keangnam statement.

The tallest structure will include offices, a trade centre and a hotel, according to the Saigon Times Daily, which put the project’s total cost at US$1.05 billion.

The Keangnam Hanoi Landmark Tower will be one of the world’s 20 tallest buildings, ranking 17th between Chicago’s John Hancock Center and Dubai’s Rose Tower, Keangnam said.

‘It is inevitable that in a dynamic economy like Vietnam you’ll start to see skyscrapers,’ said Tony Foster, Vietnam managing partner for the law firm Freshfields Bruckhaus Deringer, who has lived in Hanoi since 1994.

‘The distinction with other Asian tigers is that the process here is being planned so as not to destroy the historic heart of the city.’

The structure will be located near the 4.3 trillion-dong (S$402 million) National Convention Centre, which was built in time to host last year’s summit of leaders from the Asia-Pacific Economic Cooperation forum.

The building should be completed by 2010, when Hanoi will celebrate a millennium since the city’s founding in 1010.

Demand for office space in the Vietnamese capital has been rising amid a lack of new supply, according to a report by the Vietnam office of CB Richard Ellis Group Inc. Hanoi is facing a shortage of residential housing due to a high population density combined with government restrictions on land use, UK-listed Aseana Properties Ltd said last week in an investor update.

Units are being ‘resold in the market many times before completion,’ said Aseana, which has property projects in Hanoi, Ho Chi Minh City and the central coastal city of Danang.

Increasing demand for top-quality office space in Hanoi has boosted rental rates quarterly by about 7 per cent in the so- called ‘Grade A’ class, according to Aseana.

‘Further demand growth will come from local, smaller players who are aiming to upgrade their offices and transfer to bigger, high-rise office buildings and show that they can compete,’ Aseana Properties said.

‘Demand is also likely to be driven by the increasing number of entrepreneurs who are looking to set up offices for the first time.’

Growing foreign investment in Vietnam makes the project more attractive, Keangnam said.

Foreign investors committed to a total of US$8.3 billion worth of projects in Vietnam during the first eight months of 2007, and this was led by South Korean companies, the Vietnam News reported yesterday.

Vietnam’s economy grew 8.2 per cent last year.

‘The growth of investment in Vietnam by multinational enterprises is coupled with a large increase in demand for hotel and office space,’ Keangnam chairman Sung Woan Jong said in a statement.

Woori Finance Holdings Co and Bookook Securities Co may arrange as much as US$500 million in financing for the project, according to the Aug 23 Saigon Times Daily report.

The shares of Keangnam, which previously was part of the now-defunct Daewoo Group, rose 1.3 per cent on the Seoul stock exchange yesterday to close at 38,800 won.

Source: Bloomberg (Business Times 27 Aug 07)

CapitaLand buys Shanghai site

CAPITALAND has stepped up its presence in Shanghai by securing a commercial site in the Zhabei District for 598.1 million yuan (S$119.6 million).

The purchase was made in a government land auction through an indirect subsidiary, Yorksure Pte Ltd.

The 20,310 sq m site, with a plot ratio of 3.5, will be developed into quality offices and a high-end hotel or service residences. Total gross floor area is estimated at 71,085 sq m.

CapitaLand said in a statement yesterday that the leasehold site, located along West Guangzhong Road in the commercial area of Ling Shi, is in the Shanghai Multimedia Valley.

The Shanghai Multimedia Valley, with a planned total gross floor area of 800,000 sq m, will house a concentrated cluster of high-tech and multimedia-related industries.

The mega project is slated for completion in 2015.

The property group’s proposed Zhabei District development, which has a tenure of 40 years for the hotel and 50 years for the offices, will be ready by end-2009 to benefit from the maturing business environment in the area.

Lim Ming Yan, CEO of CapitaLand China, said: ‘This acquisition will enhance our presence in Shanghai and extend the group’s footprint into Zhabei District.

‘With its comprehensive transport infrastructure, excellent connectivity and maturing business environment, Zhabei District is becoming one of the major extensions of the city’s central business district.

‘We will build quality offices and high-end business accommodation to cater to the needs of those working in the Shanghai Multimedia Valley.’

 

Source: Business Times 24 Aug 07

Developers in China rush to raise funds

Huge appetite for financing reflects Beijing’s tightening grip on bank lending

(SHANGHAI) Property developer Gemdale Corp said yesterday that it would raise about 20 billion yuan (S$4 billion) selling shares and bonds – part of an unprecedented series of fund-raisings in China’s booming real estate sector.

The scramble to raise funds reflects the breakneck growth of the property market, but it is also the result of authorities’ actions to make bank loans more expensive and difficult to obtain as they seek to cool property prices and the economy.

While some of the smallest real estate developers are suffering, a bull run in the stock market means bigger companies are having no problem obtaining funds.

‘A flood of developers is turning to the capital markets for money as borrowing costs keep rising,’ said Yang Xingfeng, an analyst at TX Investment Consulting Co. ‘Equity investors are unlikely to be disappointed during this real estate boom.’

Gemdale, which has real estate development tie-ups with Dutch financial services giant ING Groep NV, said it would make a public offer of up to 360 million new A shares to help fund 15 residential property projects.

The Shenzhen-based company’s shares climbed 3.22 per cent to a record closing high of 52.53 yuan yesterday. At that price, the share offer could raise as much as 18.9 billion yuan.

In addition, Gemdale said that it would raise up to 1.2 billion yuan by selling bonds with tenors of at least five years.

That could make it the first firm to issue bonds since the government, aiming to expand the corporate bond market as an alternative to bank lending, transferred supervision of it to the securities regulator from the top economic planning agency.

‘As China’s interest rates keep rising, selling bonds will help reduce capital costs and alleviate the risks of purely relying on bank loans,’ Gemdale said in a statement.

Home prices in China’s major cities such as Shanghai and Shenzhen have more than tripled since 2001 and are still climbing, buoyed by rising incomes and speculative trading.

On the back of this boom, Gemdale reported early this month that net profit jumped 53 per cent from a year earlier to 205.6 million yuan in the first half of 2007.

China Vanke Co, the nation’s biggest listed property developer, said yesterday that it would raise as much as 10 billion yuan by selling new shares to fund real estate projects.

Poly Real Estate Group announced last month that it would issue up to 350 million shares to raise 19.42 billion yuan for expansion.

And Shanghai Industrial Development Co, a steel products maker that is transforming itself into a major real estate developer, said this month that it would sell up to 160 million new shares to fund its purchase of property-related assets worth 4.19 billion yuan.

Since last year the government has been trying to rein in real estate prices through tax measures, administrative controls and restrictions on lending to the sector, but prices have continued rising.

Late on Tuesday, the central bank announced its fourth interest rate hike this year. Analysts said the property sector was one of the most vulnerable to higher interest rates, but yesterday the shares of many property developers rose strongly.

 

Source: Reuters (Business Times 23 Aug 07)

Macquarie looking to develop Reits in China

Talks with regulators and investors nearing fruition, says exec

(BEIJING) Macquarie Group Ltd, Australia’s biggest securities firm, is seeking to develop real estate trusts in China, even though financial markets are being roiled by a credit crunch and as China clamps down on property speculators.

Macquarie is in talks with regulators and institutional investors, including insurers and pension funds, to help build a real estate investment trust market in China, said Andrew Low, head of corporate finance in Asia, at a press briefing in Beijing yesterday. The discussions are ‘nearing fruition’, he said without elaborating.

‘There are some issues for foreign money going into Chinese real estate in this macroeconomic environment,’ Nicholas Moore, Macquarie’s global head of investment banking, said at the briefing. ‘But we remain very bullish since the property market obviously reflects China’s strong economic growth.’

Macquarie, the world’s largest private manager of infrastructure such as roads and airports, is stepping up expansion abroad after leading more than US$30 billion of overseas acquisitions last year.

Shareholders will vote in October on the bank’s plans to create a separate holding company, allowing it to raise cash to expand abroad.

China Market Macquarie is sizing up China’s property market even as the government moves to curb speculation in real estate. China raised interest rates on Tuesday for the fourth time since March to cool the world’s fastest growing economy and to control asset bubbles in property and stocks.

Macquarie hopes to replicate in China its strategy in other markets, where it has bought utilities, airports and roads, according to Mr Low. A group led by Macquarie in December bought Thames Water Utilities, supplier to eight million people in London and the Thames Valley area, for £pounds;4.8 billion (S$14.6 billion).

Real estate investment trusts, or Reits, are trusts that own, manage or lease commercial real estate, or invest in property-related products such as mortgage-backed securities.

Macquarie led China’s first offer of commercial mortgage-backed securities, according to a company statement.

Macquarie climbed 4.2 per cent to A$74.85 at the close yesterday in Sydney, taking gains this week to 16 per cent, the stock’s biggest three-day rally since 1997.

Source: Bloomberg (Business Times 23 Aug 07)

Shanghai to curb property buying by foreign firms

(SHANGHAI) China’s biggest city plans to tighten controls on purchases of property by foreign companies to help cool surging real estate prices, a newspaper report said yesterday.

‘We no longer encourage foreign companies to purchase en bloc properties rather than develop their own,’ the state-run newspaper Shanghai Daily quoted Liu Jinping, head of the city’s Foreign Economic Relations and Trade Commission, as saying.

‘Stricter requirements are applied to the approval of such acquisition deals to prevent prices from being pushed up by speculative investors,’ Mr Liu said.

The report gave no details on what further restrictions might be imposed.

The government has already imposed special taxes and other controls, including a requirement that overseas institutional investors with investments in China totalling more than US$10 million hold at least half the investment as registered capital in a China-incorporated company, the report said.

Real estate purchases accounted for 4.4 billion yuan (S$884 million), or nearly half, of all acquisition deals between local and overseas companies in 2006, up 44 per cent over the previous year, according to the report.

Among major deals was the purchase of a downtown office building by investment bank Morgan Stanley for 1.96 billion yuan.

 

Source: AP (Business Times 23 Aug 07)

CapitaLand unveils another Viet project

CAPITALAND has signed a conditional joint venture (JV) agreement with Azure City Co to develop a 1,200-unit high-rise condominium project in Ho Chi Minh City, Vietnam.

This brings CapitaLand’s pipeline of residential units in Vietnam to 2,800 homes, after venturing there in 2006.

CapitaLand will take a 75 per cent stake in the JV for $48.8 million.

Azure City Co, a local Vietnamese company involved in infrastructure and property, will hold the remaining 25 per cent.

The site is located in Ho Chi Minh City’s District 9 and CapitaLand said it will develop the project over the next three to four years.

CapitaLand Residential CEO Lui Chong Chee said: ‘With the country’s strong economic growth fuelling rapid urbanisation, we see demand for well-built and well-designed homes rising in both metropolitan cities like Ho Chi Minh City and Hanoi, as well as the other major cities in the country.’

This will be CapitaLand’s fourth residential development in Vietnam.

All four are in Ho Chi Minh City. The first is the 750-unit Vista in District 2 and CapitaLand says that the first phase, which was launched in June, has been fully taken up.

A 600-unit development in District 7 will be launched by end-2007.

CapitaLand also announced earlier this month that it will develop a 300-unit landed-housing develop with Azure City Co.

 

Source: Business Times 23 Aug 07

It’s official: Riau islands get FTZ status – for 70 yrs

The three free zones will be run by a new supervisory council, management bodies

IN JAKARTA

AT long last, the Riau islands of Batam, Bintan and Karimun have been officially designated as free trade zones (FTZs) – a big step towards the more extensive benefits of becoming a Special Economic Zone (SEZ).

The three long-awaited government instruments were signed by President Susilo Bambang Yudhoyono on Sunday, and the necessary documents were scheduled to be verified and legalised by yesterday, officials said.

Indonesia has previously granted FTZ status only once, in 2000, to Aceh’s Sabang seaport. As in the case of Sabang, the Riau islands’ FTZ status is intended to last for 70 years.

Bambang Susantono, secretary of the National Team for SEZs, told BT the next step is for the islands to set up a supervisory council for the Batam-Bintan-Karimun (BBK) Free Trade and Free Port Zone. The council will appoint management bodies to run the FTZ. According to legal stipulations, the management body or Badan Pengusahaan Kawasan (BPK) for Batam specifically must be formed by the end of next year, he said.

Riau islands governor Ismeth Abdullah told local media that he and the regional legislative body would propose a supervisory council to the President by next week. ‘At the very latest, the council should be approved by the beginning of September,’ he said.

The council will pull in members from all parties that are involved in or have influence on developing investments in the area, he added. Thus not only bureaucrats and policy-makers but also the business community and security bodies will be represented on the council, he said.

Mr Ismeth clarified that there would be just one supervisory council for the whole of Batam, Bintan and Karimun, to be headquartered in the Riau islands’ provincial capital of Tanjung Pinang. But each island would have a separate BPK or management body.

Asked if the upcoming Batam BPK would make redundant the existing Batam Industrial Development Authority (Bida), he said the two had different roles. Bida is in charge of developing Batam’s physical infrastructure and managing its key assets such as the airport and seaport. The BPK, on the other hand, will focus on managing investments within the FTZ.

The FTZ regulations map out the exact FTZ boundaries on the islands. While the whole of Batam will be a free trade zone, only certain enclaves in Bintan and Karimun will enjoy this special status.

The main advantages of an FTZ are the abolition of import taxes and Customs and excise duties, value-added tax and luxury goods sales taxes. Other business incentives involving tax holidays or land-ownership issues will be dealt with separately under the proposed SEZ Law, which is still undergoing parliamentary processes.

 

Source: Business Times 23 Aug 07

KepLand plans to launch Vietnam condo in Q4

Ho Chi Minh City joint project with 1,500 units could fetch $185-215 psf

KEPPEL Land will launch its high-end condominium The Estella in Ho Chi Minh City, Vietnam. The project will have about 1,500 units with a potential gross floor area of 280,000 sq m. The sales launch of the first phase is planned for the final quarter of this year.

Based on current prices, the units could sell for US$1,300-1,500 psm (S$185-215 per square foot).

The announcement was made yesterday after Keppel Land was awarded the investment licence by Vietnam’s Ministry of Planning and Investments to proceed with the development of The Estella.

The licence was presented in Ho Chi Minh City in a ceremony just before a Vietnam-Singapore Friendship Concert sponsored by the Keppel Group.

At the ceremony, Kevin Wong, managing director of Keppel Land, said: ‘With a pipeline of more than 20,000 homes in the country, we are on track to develop and deliver benchmark quality homes to fulfil rising home ownership aspirations resulting from Vietnam’s rapid growth.’

The total investment capital for The Estella is estimated at US$106 million. A Keppel Land subsidiary will take up a 55 per cent stake amounting to US$17.6 million of the total registered capital of US$32 million in the joint venture company while Vietnamese property developer Tien Phuoc will subscribe for the remaining interest.

The Estella is situated along the Hanoi Highway and is 6.5 km away from the Central Business District and a 15-minute drive to the city centre.

Recently Keppel Land announced other residential and township developments in Ho Chi Minh City, Hanoi and Dong Nai Province. These include two waterfront residential developments fronting the Saigon River on a 1.7 ha Binh Thanh District site and a 8.5 ha Ca Cam River site in Ho Chi Minh City.

Keppel Land will also develop a waterfront residential township on a 509 ha site in Dong Nai District.

Two Memorandums of Understanding have also been signed with local joint venture partners to develop residential townships in Hanoi.

 

Source: Business Times 22 Aug 07

KepLand obtains licence for condo project in Vietnam

It will invest $27m in joint venture, start selling The Estella in the next quarter

HANOI – KEPPEL Land (KepLand) has received the official go-ahead – in, what observers say, is double-quick time – for the development of its latest residential project in Vietnam’s booming property market.

The Estella is a 1,500-unit condominium in a residential area of Ho Chi Minh City and is set to go on sale in the next quarter.

KepLand said yesterday that it will invest US$17.6 million (S$26.8 million) in a joint-venture firm. The total project cost is set to be US$106 million, it said.

The official licence – handed over in a ceremony in the capital Hanoi before a Keppel Group- sponsored Vietnam-Singapore Friendship Concert at the Hanoi Opera House – is music to the ears of KepLand, which already has significant success in the market there.

The Estella is to be built near the firm’s fully sold waterfront project Villa Riviera, about a 15-minute drive from the city centre. KepLand now has just over 20,000 units in Vietnam.

Up to a third of The Estella will be released in the first phase in the fourth quarter. It said a few hundred potential buyers have already expressed interest.

It said its unit Keppel Land Estate and established local developer Tien Phuoc have been awarded the investment licence for The Estella. This gives it the ‘green light’ to proceed with the launch, said KepLand managing director Kevin Wong.

The approval process in Vietnam can be time-consuming. Observers here say KepLand achieved quite a feat to obtain its investment licence in a relatively short period of several months.

‘We have been here for a while and are able to leverage on that,’ said KepLand’s director of regional investments, Mr Ang Wee Gee. KepLand entered Vietnam about 13 years ago and is the largest foreign developer by number of projects.

The firm will take a 55 per cent stake valued at US$17.6 million in the total joint venture-registered capital of US$32 million. Tien Phuoc will take the rest. The Estella sits on a whopping 4.8ha site in An Phu Ward, which is close to major foreign schools.

While the Vietnamese property dream is villa ownership, the rapid rise of the city’s condominium sector has been a major driver of its property market, said consultancy CB Richard Ellis.

The arrival of more and younger expatriates to Ho Chi Minh City has helped keep the condo market buoyant – evident from the full occupancy seen in the service apartment market, KepLand said. Its service apartments and Grade A office buildings in Ho Chi Minh City and Hanoi are also still in demand.

Apart from the two waterfront residential projects, KepLand is also building townships in Ho Chi Minh City.

 

Source: The Straits Times 22 Aug 07

Asian stock markets make sharp rebound

INVESTORS who could not exit fast enough last week rushed back into Asia stock markets yesterday, sending share prices soaring.

The gains stunned even hardened traders. Singapore’s Straits Times Index (STI) rocketed 191.67 points, or 6.12 per cent, to 3,322.38, its second biggest single one-day gain ever, following a 204.27 point surge on Feb 2, 1998.

But Indonesia’s Jakarta Composite Index managed to trump the STI, leaping 6.97 per cent, while Hong Kong’s Hang Seng rose 5.93 per cent and South Korea’s Kospi was up 5.69 per cent.

It vindicated many market experts’ belief that last week’s regionwide sell-down – the STI dropped by 12.5 per cent at one point between Wednesday and Friday – was irrational and indiscriminate.

The opening bell here was more like a starting pistol, with traders piling in to battered banks, property and shipyard counters. The STI shot up more than 110 points in an instant and by 5pm, about $28.5 billion had been added to the value of local shares.

‘Fortune rewards the brave-hearted. Anyone who picked up blue chips as they were sold down last week would have made a big pile,’ said a trader.

While the size of the gains took some by surprise, most traders had expected the market to rise, given the dramatic gains in Europe and on Wall Street last Friday after a cut in a key US interest rate.

The Federal Reserve slashed its discount rate from 6.25 per cent to 5.75 per cent to make loans to banks cheaper and calm global markets that went into a panic over a crisis in the US mortgage market.

And last night, European bourses advanced for the second day. London was up 0.5 per cent, while Paris rose 1 per cent.

Another big boost to Asian bourses came as the Japanese yen weakened sharply against the US dollar and other currencies, after appreciating strongly last week.

This eased concerns that investors, who have borrowed massively in yen to buy assets in countries with higher interest rates, will unwind their positions soon.

A Citigroup report yesterday also showed that, despite the massive regionwide sell-off by hedge funds, long term investors who parked their funds in offshore Asian funds are staying put.

Net outflows from funds that invest only in Asian markets totalled US$73.5 million (S$112.3 million) in the first week of this month and a just US$100,000 last week.

By contrast, about US$4.5 billion was taken out during the correction in early March, while US$4.9 billion was withdrawn during the Asian market turmoil in May and June last year.

Citigroup also noted that in some markets like South Korea, local institutions and individuals had been big share buyers as hedge funds stepped up selling.

Yet experts do not believe the sharp rebound means the bulls are back in charge. Many are urging caution, warning that more wild swings are likely, while others want the US Fed to take more action on interest rates.

‘The Fed has its back against the wall, and we feel the inevitable outcome is further volatility,’ said European private bank LGT.

Deutsche Bank Private Wealth Management chief Asian strategist Marshall Gittler warned: ‘While the strong buying suggests that there is some bottom-fishing in the equities markets, we are not seeing a similar improvement in the bond market where the crisis started.’

AmFraser Securities’ research head Najeeb Jarhom added: ‘Traders should take profit and wait for the next downturn…The rebound does not mean that the market nightmare is over yet.’

 

Source: Business Times 21 Aug 07

Asian firms prepare for sub-prime fallout

(HONG KONG) Asian companies will have a tough time raising funds and will face weaker export demand if the global credit squeeze persists and a deteriorating US housing market crimps consumer spending.

But most firms in the Asia-Pacific, where robust consumption provides a driver beyond the traditional reliance on exports, are waiting to see how the fallout from the US sub-prime mortgage crisis works its way through financial markets.

‘We believe the sub-prime situation will have some impact on the real economy and on the spending of consumers,’ said Chu Woo Sik, executive vice-president for investor relations at Samsung Electronics.

So far, a handful of financial firms, mostly in Australia, Japan and Taiwan, have reported exposure to the US sub-prime crisis but to a far lesser degree than has been seen in the West.

‘Asian corporates are in a strong position as robust nominal GDP (gross domestic product) growth since 2001 and reluctance to leverage heavily leaves the region in a better position than most,’ said Ben Simpfendorfer, strategist in Hong Kong at Royal Bank of Scotland. ‘But the region is still exposed to global capex (capital expenditure) if a credit crunch drags down capex spending in the developed world.’

Companies with riskier profiles have been forced to scrap or delay fund raisings. Last Friday, bankers said

loss-making Melco- PBL Entertainment was having a hard time finding lenders for its Macau casino projects.

Exporters with heavy exposure to the US could see their sales crimped if consumers and businesses lose confidence. ‘A slowdown in the US housing market will certainly affect demand for appliances and electronics goods,’ said an official with South Korea’s LG Electronics.

China’s Baoshan Iron and Steel yesterday said that it was cutting steel product prices for the fourth quarter of 2007, which industry sources said is a result of weaker demand spawned by the global credit squeeze.

Asian companies will be forced to pay more to raise capital if tight credit persists. Already, issuers from higher-risk markets such as Pakistan and Indonesia have been forced to pull deals or pay more for bond issues.

 

Source: Business Times 21 Aug 07

Thai real estate market unhurt by global turmoil

Speculation only in lower to mid-end segments, say property developers

IN BANGKOK

THE panic about US sub-prime mortgages might have caused turmoil in the world’s financial markets, but Thailand’s robust real estate market appears to be largely unscathed.

‘Yes, I do sense some kind of saturation in the property market but it is only in certain segments and overall, the market still has momentum that can sustain the growth,’ said Srettha Thavasin, president of Sansiri plc, one of Thailand’s leading condominium developers.

Sansiri has so far this year brought in more than 10 billion baht (S$463 million) from its various housing projects, despite the country’s continuing political uncertainties and the lowest consumer confidence in more than five years.

‘We too see some kind of saturation, but property units are still selling, based on the project’s location. The closer they are to the mass transit, the higher their demand,’ said Chen Lian Pang, chief executive officer of TCC Capital Land, a high-end property developer.

Mr Chen said there is strong demand for projects near stations of the MRT or the Skytrain, with any new developments in such locations being snapped up quickly.

‘We have so far sold nearly 80 per cent of our project, Villa Sathorn,’ he says. The project, which was launched just a month ago, is expected to be completed in just over two years’ time. Villa Sathorn is located near the yet-to-be operational Charoen Nakorn Skytrain station. In the vicinity are developments planned by Land & Houses plc and Quality Houses plc.

TCC Capital Land is a 50:50 joint venture between Singapore’s CapitaLand and TCC Land, the property arm of Charoen Sirivadhanabhakdi, the owner of Singapore-listed Thai Beverage plc. Land & Houses and Quality Houses each have Government of Singapore Investment Corp (GIC) among their largest shareholders.

‘We are seeing some kind of speculation in the market – but it is not in the high-end market yet,’ said Adisorn Thananan-narapool, senior vice-president for Land and Houses plc, Thailand’s largest real estate developer.

He said demand remains strong in the high-end market, as long as the projects are well located, an assessment which is shared by most major developers.

‘We have sold more than 70 per cent of our Siri 08 project that we launched a few days ago at the near high-end price of 97,000 baht per square metre,’ Sansiri’s Mr Srettha said of the company’s newly launched project near the Nana nightlife area.

Thailand’s property market, which has seen been on an uptrend for several years, has seen increasing supply in the lower to middle segment.

Jones Lang LaSalle, the international real estate consulting company, said that the average selling price of condominium units in central Bangkok peaked in 1994 at 52,000 baht per sq m, but began falling in 1995 due to oversupply, bottoming out at 38,500 baht per sq m in 1999. Currently, newly launched units are being offered for sale at an average asking price of 81,000 baht per sq m, and the prices are in excess of 150,000 baht per sq m in certain areas.

Most developers agree that there is speculation in the market especially in the middle and the lower end of the market, both for single detached houses and condominium units.

‘In the condominium market, units that are priced between one million and 1.5 million baht are witnessing an oversupply situation, which can be scary for the overall market,’ Mr Adisorn said.

Similarly, Mr Srettha said that his lower-middle income development marketed as My Condo has seen much interest from the speculative element.

Mr Chen said that in his view, the high-end housing market has started to reach a saturation point, although there was still a good future for well-located projects.

Mr Chen’s views reflect recent data released by the Bank of Thailand which showed that the Thai property market has been slowing down during the second quarter of this year, with new land registrations down more than 50 per cent from the same period last year.

The central bank said that property transactions slowed due to weak consumer confidence and uncertainties over plans for extending the mass transit system.

New property registrations in Greater Bangkok fell 30.9 per cent year-on-year in May, with single-home registrations off 19.7 per cent and condos and apartments down 52.2 per cent.

The data showed that new land development applications dropped 54.2 per cent in the second quarter as developers awaited clearer signals on transit extensions.

Prices also fell slightly, with detached homes down 3.5 per cent from the year before and townhouses down 0.7 per cent.

Land prices, however, rose slightly by 2.7 per cent, lifting the overall price index 0.2 per cent.

 

Source: Business Times 21 Aug 07

Viet property projects up for tender soon

Investors cleared to build up to 70 storeys on 20 plots in prime areas totalling 40 ha

(HANOI) The municipal government of Ho Chi Minh City, Vietnam’s economic hub, will select investors in a tender for 20 large real estate projects from next month, state media reported yesterday. Investors will be allowed to develop office and commercial centres of up to 70 storeys on 20 plots with a total area of nearly 40 hectares in prime areas, the Dau Tu newspaper quoted the Urban Planning and Architecture Administration as saying.

The first tender next month will be for a 5,000 square metre site at its busiest shopping street, Dong Khoi, where the country’s most expensive real estate costing as much as US$30,000 per sq m is located, property dealers said.

Leasehold terms of 50 years would be applied to the projects and investors, including foreigners, can choose to pay land rent once or annually.

Prices, especially of condominiums in big cities, have surged about 50 per cent to an average US$1,000 per sq m and about US$4,000 per sq m for luxury apartments in the past year due to limited supply. Most new projects are sold before they are built.

Foreign investors have expressed interest in pumping about US$16 billion in real estate and tourism projects so far this year, the Ministry of Planning and Investment said.

 

Source: Business Times 21 Aug 07

CDL to invest up to $460m in Korean project

It signs MOU to develop residential and commercial site in Incheon

CITY Developments (CDL) will be giving one of South Korea’s leading cities, Incheon, an image boost, with plans to invest up to US$300 million (S$459.2 million) in a major residential and commercial project.

The Singapore-listed property giant yesterday signed a memorandum of understanding with DC Chemical Company (DCC) to develop a large site in the city.

Under the deal, it will pump between US$150 million and US$300 million into the site, which is more than 600,000 sq m. By comparison, Suntec City Mall has only about 82,498 sq m of retail space.

Incheon, which will play host to the 2014 Asian Games, is a major seaport with a population of about 2.5 million, not far from the country’s capital of Seoul.

A large-scale commercial centre will be built on a site of 281,850 sq m, DCC said at a press conference held in Incheon yesterday.

The centre will consist of a 50-storey tower, incorporating a ‘top-class’ hotel, a service residence and an office building. These will be anchor facilities.

Department stores, brand outlets, multiplex cinemas and an e-sports gaming hall will flank both sides of the tower.

To the north of the integrated commercial centre, another large site of about 380,000 sq m of land is slated for residential development.

Renowned British and engineering firm Atkins – which was responsible for the Burj Al-Arab in Dubai, the world’s first seven-star hotel – has been roped in to be the conceptual designer for the project.

Development work is scheduled to begin in two years with the main commercial centre to be constructed first, followed by residential blocks in 2010.

The large-scale commercial centre, according to DCC’s chief executive, Mr Baik Woo Suk, will ’significantly increase’ economic activity in the area and will create many jobs, in a boost to Incheon’s economy.

‘When Incheon City hosts the Asian Games in 2014, this commercial centre will be the very first image visitors will see when crossing over on Incheon Bridge into Incheon City,’ he said.

CDL’s group general manager, Mr Chia Ngiang Hong, said the firm is always on the lookout for ‘new strategic growth opportunities’, and it believes this investment is timely, given the ‘exciting developments’ in South Korea.

‘With the synergistic collaboration of an established company such as DCC, coupled with our many decades of experience in the real estate and hotel industry, we are very positive about the prospects of this project,’ he added.

This is not CDL’s first investment in South Korea’s burgeoning economy.

Subsidiary Millennium and Copthorne Hotels owns and operates Millennium Seoul Hilton hotel, Hong Leong Group spokesman Gerry de Silva told The Straits Times. ‘Of course we’re looking for viable investments in the region, and we’ve been looking at Korea for several years now. We think Korea is a market that can offer more value.’

Shares of CDL, which is part of the Hong Leong Group, closed 50 cents lower at $13.60 yesterday. The announcement came after the market had closed.

Listed on the Korean Stock Exchange, DCC is among the world’s top producers of carbon black, soda ash and pitch.

 

Source: The Straits Times 17 Aug 07

Asia’s property sector retains allure in stormy markets

In the short term, real estate deals in the region are likely to keep flowing

HONG KONG – ASIAN property investments could dip because of rising borrowing costs and investors’ risk aversion stemming from the sub-prime crisis in the United States, but the region is still a better bet than the struggling US and European markets.

European and US commercial property markets, which had been energised by a spate of leveraged buyouts by private equity firms, are now expected to suffer because of a turmoil in credit markets sparked by US mortgage defaults.

With exposure to US mortgage-linked collateralised debt obligations causing havoc in financial markets, credit for property deals, including commercial mortgage-backed securities, is drying up in the West.

Asia’s property industry – where complex securitisations are an anomaly – has lesser worries, such as a narrowing gap between bond and property yields that puts pressure on returns, and a rising yen that could make Japan expensive.

Convincing nervous investors to buy into thriving but notoriously volatile Asian property markets – from Hong Kong and Singapore to India – could also be tough.

Dr Robert Lie, the head of Asia at ING Real Estate, said investors in Asia could no longer rely on a simple formula of cheap borrowing and rising capital values.

‘The job’s getting a bit more difficult,’ he said. ‘It doesn’t mean you shouldn’t invest in property, but you should rely more on rental increases and less on capital markets.’

He suggested that private equity property funds would have to change tactics, having flourished in recent years by snapping up non-performing loans in the wake of Asia’s financial crisis and riding a wave of asset inflation.

‘That period is over,’ he said, adding that ING Real Estate was having little trouble raising two funds for Asia, totalling about US$1.35 billion (S$2.03 billion).

In the short term, deals in Asia are likely to keep flowing because a raft of new global funds raised in recent months are keen to put that money to work in assets such as commercial buildings in Japan and housing in China and India, where investment returns can surpass 30 per cent.

Blackstone Group, whose US$39 billion February purchase of US landlord Equity Office Property Trust was a signature deal for leveraged buyouts, is opening a real estate office in Tokyo, sources told Reuters this week.

 

Source: The Straits Times 16 Aug 07

Home ownership rate in NZ slips to 66.9%

Strong growth in home prices reducing housing affordability: govt

(WELLINGTON) New Zealand’s home ownership rate fell last year and is projected to keep declining for the next 10 years, according to government research based on the 2006 census.

The proportion of New Zealanders owning a home fell to 66.9 per cent from 67.8 per cent in 2001, the Wellington based Centre for Housing Research said in a report posted on its website. The ratio is forecast to fall to 61.9 per cent by 2016.

Home ownership is declining as house prices have doubled in the past six years, outpacing incomes, while homeloan interest rates have surged as the central bank attempts to curb inflation.

Ownership fell the most for households with lower incomes, and for couples with children, the research group said.

‘This supports the contention that an increasing number of working households on what would previously be considered ‘reasonable’ incomes can no longer access home ownership,’ the research group said.

‘Strong growth in dwelling values has significantly reduced housing affordability, particularly for younger households.’

As homes become less affordable, more consumers will rent rather than buy. The number of owner-occupied homes is expected to increase by 43,000 in the 10 years to 2016, while the number of houses occupied by renters is expected to surge by 152,000.

 

Source: Business Time 16 Aug 07

HK’s Wharf reports 38% surge in H1 profit

(HONG KONG) Wharf (Holdings) Ltd, a Hong Kong commercial landlord and container terminal operator, said first-half underlying profit rose 38 per cent, helped by China property sales and sea-cargo demand.

Profit excluding property revaluation gains rose to HK$2.63 billion (S$515.2 million) from HK$1.9 billion a year earlier, the company said in a Hong Kong Stock Exchange statement yesterday. That was more than the HK$2.49 billion median estimate in a Bloomberg News survey of three analysts.

Wharf made a profit of HK$903 million from property developments in the period, compared with a year earlier loss, after it sold residential units in two developments in China. The company’s container terminal operator also handled more cargo as China’s trade growth fuelled demand.

‘Second-half earnings will still be driven by property developments and port growth,’ Cusson Leung, a Hong Kong-based Credit Suisse Group analyst, said before the announcement.

Including revaluation gains, Wharf’s net income fell 29 per cent to HK$4.43 billion, or HK$1.81 a share, compared with HK$6.26 billion, or HK$2.56 a share, a year earlier. Sales rose 33 per cent to HK$8.61 billion.

Wharf sold 94 per cent of the residential units at its Wellington Garden development in Shanghai by the end of June and 87 per cent of the units at Wuhan Times Square, it said.

‘We will continue to look for new projects in China and will speed up investments at the right time,’ Stephen Ng, Wharf’s deputy chairman and managing director, told reporters in Hong Kong yesterday.

Operating profit from offices, shopping malls and other rental properties rose 19 per cent to HK$2.29 billion in the first half, as Wharf benefited from higher rents and retail spending in Hong Kong. The company’s properties include Harbour City in Hong Kong and Times Square commercial complexes in Hong Kong, Beijing and Shanghai.

Wharf is ‘optimistic’ about Hong Kong rents in the second half, Mr Ng said.

Wharf, a unit of Hong Kong-listed developer Wheelock & Co, will pay a first-half dividend of 36 Hong Kong cents, unchanged from last year.

 

Source: Business Times 16 Aug 07

Japan fund to put US$5.5b into property

(TOKYO) Japan’s largest private-sector pension fund manager, the Pension Fund Association, will invest as much as US$5.5 billion in the business year starting next April 1 in real estate development projects, the Nikkei business daily reported yesterday.

The association, which manages pensions of workers who are not in a regular company employee pension programme because they have changed jobs, will allocate as much as 5 per cent of its 13 trillion yen (S$169.7 billion) in assets, the newspaper said.

Tying up with property developers, it plans to help finance major urban redevelopment projects in a move that will diversify its assets from stocks and bonds, it said.

 

Source: Business Times 16 Aug 07

HK property boom: Pay gain for some, pain for others

REAL estate professionals in Hong Kong, such as architects, are enjoying pay rises of more than 20 per cent, thanks to the hot property sector here and in the region.

But in a sign of the widening wage gap, a problem faced by many countries, lower-skilled construction workers have taken to staging protests for higher daily wages and better working hours.

This dichotomy is an unwanted side-effect of a booming economy, which has seen the unemployment rate drop to 4.3 per cent – the lowest since June 1998.

For architect Daniel Leung, 36, times have never been better.

The professional with five years’ experience got a pay jump of 25 per cent when he switched jobs, bringing his monthly pay to ‘over HK$45,000 (S$8,800)’.

‘I missed out on the boom years of the 1990s so it is good that I’m in another one now,’ he told The Straits Times.

Professionals like Mr Leung are in hot demand, as the Hong Kong economy continues on a steady growth path, amid the booming economies of neighbouring Macau and mainland cities like Shenzhen.

For instance, Hong Kong has set up a new ministry overseeing infrastructure developments – such as the HK $5.2 billion new government headquarters project – that is aimed partly at providing jobs for thousands in the construction sector.

Macau is also soaking up billions of dollars worth of casino and luxury housing projects, following the liberalisation of its gaming market earlier this decade.

Mr Bernard Hui, honorary secretary of the Hong Kong Institute of Architects, said that such firms are now paying an average increment of 20 per cent to entice experienced employees – the largest pay jump seen since the 1997 Asian financial crisis.

‘Hong Kong is acting as a regional service provider in the property sector, with many of its developers and companies involved in projects in the region, as well as the Middle East,’ he told The Straits Times.

Property consultants have reportedly also offered up to a 40 per cent pay rise for suitable candidates as regional work piles up.

Such monetary benefits, however, have yet to filter down to lower-skilled workers in Hong Kong.

One reason is that while there may be work waiting for them in, say, Macau, they are prevented from working there because of local labour regulations that typically seek to protect local workers.

The lack of better pay has angered these workers, with hundreds of welders and bar benders going on strike recently to demand better pay packages.

Hong Kong Chief Executive Donald Tsang has identified such social unrest as a key problem. Beijing has also continually warned against such unrest.

Protesting workers have scuffled with police over the past few days, and even held up traffic in the central business district over the weekend.

They are demanding a raise in daily wages from around HK$600 to HK$950, and for working hours to be cut to less than eight hours a day.

One worker, identified as Mr Kwok, told Oriental Daily News at a protest on Monday that his pay has not returned to pre-1997 levels of HK$1,200 per day, despite the current good economy.

‘Instead of going up, my salary has been cut three times to HK$600…We cannot take it anymore,’ he said.

 

Source: The Straits Times 15 Aug 07

Gamuda’s Hanoi projects

(HANOI) Gamuda Bhd, Malaysia’s third-biggest developer, plans to build US$964 million of projects in Vietnam’s capital, a Hanoi government official said yesterday.

The Malaysian company will build a US$711 million complex on a 327-hectare site that will include a hotel, convention hall, villas and apartments, as well as a US$253 million water-treatment factory to supply the development, said Trieu Dinh Phuc, director of planning and investments.

‘We’re going to sign the agreement with Gamuda this afternoon to develop the projects,’ Mr Phuc said in an interview by phone from Hanoi.

 

Source: Business Times 15 Aug 07

Singaporeans urged to invest in Vietnam’s property boom

Foreign investors will play key role in latter’s growth, says Ho Chi Minh official

SINGAPORE’s property market is not the only one on the rise: Vietnam’s real estate sector is heating up too and investors in the Republic were invited by Vietnamese officials to seize the opportunity.

Major industry players and Vietnamese government officials met in Singapore yesterday at the inaugural Vietnam Real Estate 2007 seminar to discuss and develop investment opportunities.

Mr Truong Trong Nghia, president of the Investment and Trade Promotion Centre of Ho Chi Minh City, said foreign investors would play a key role in Vietnam’s development in the coming years.

Mr Nguyen Trong Hoa, director of Ho Chi Minh City’s Department of Architecture and Planning, outlined the masterplan for the city’s development, which will be approved by year-end.

He also identified key areas that are in need of investment, including urban centres, high-tech industrial parks, tourism and infrastructure.

The managing director of property consultancy CB Richard Ellis (Vietnam), Mr Marc Townsend, said Vietnam’s property market is very attractive, with demand outstripping supply, causing rising prices.

But he cautioned the 100 or so delegates at Orchard Hotel about expecting to make a quick buck. ‘You need patience to do business in Vietnam,’ said Mr Townsend.

Singapore’s big hitters, Keppel Land and CapitaLand, have enjoyed good sales at home developments in the country.

Mr Alpha Chen, chief marketing officer of Phu My Hung, a property developer, likened the country’s situation to China’s 10 years ago. ‘If you go in now, you will be successful in 10 years, like those investors who invested in China 10 years ago,’ he said. ‘But you must have a good plan to compete with the businessmen there, as they are very creative.’

His company is behind the famously successful urbanisation of Saigon South – a US$700 million (S$1.05 billion) investment – which is now a thriving urban area south of Ho Chi Minh City’s centre.

The positive outlook for the property market at the seminar, which attracted delegates from real estate, consultancy and banking, comes after reports yesterday that Singapore and Vietnam have agreed to deepen their bilateral ties and trade cooperation.This made the liberalisation of Vietnam’s laws to encourage foreign investment and ownership one of yesterday’s hot topics.

Ms Dao Nguyen, managing partner of law firm Johnson Stokes & Master (Vietnam), said Vietnam has taken active steps to revamp its legal framework in favour of local and foreign investors since its entry into the World Trade Organisation in January.

For example, the Law on Enterprises, which came into effect last year, abolishes the distinction between a local and foreign company, private, or state-owned. This creates a level-playing field for doing business, she said.

 

Source: The Straits Times 15 Aug 07

Blackstone to open property office in Tokyo

(TOKYO) Global investment firm Blackstone Group is opening a real estate office here to hunt for deals in Japan’s booming property market, sources familiar with the matter said yesterday.

Blackstone is shifting property deal-makers from its other offices to Tokyo and has hired the head of private equity at Japanese lender Shinsei Bank Ltd, Daniel Fuji, to search for real estate deals in Japan, the world’s second-largest real estate market, the sources said.

Tokyo’s property market is growing at the fastest pace since Japan’s bubble years while the average national land price rose for the first time in 14 years in 2006.

Blackstone is raising a US$10 billion global real estate fund, one of the biggest ever. Part of this fund may be deployed in Japan.

The firm, which floated on the New York Stock Exchange in June, has been building a presence across Asia. Blackstone’s first office in the region was established in Mumbai in 2005 to handle private equity and real estate investments.

That office was followed by a satellite office in Hong Kong in 2006 to support the firm’s hedge fund operations. In January this year, Blackstone opened a private equity office in Hong Kong.

Blackstone is rumoured to also be on the hunt for a person of stature to establish and front a private equity practice in Japan. In Hong Kong, the US- headquartered firm hired Antony Leung, the former financial secretary of Hong Kong from 2001 to 2003.

Global property markets have been soaring of late, and deal-making hit a record US$382 billion in the first half of this year according to Jones Lang LaSalle. However, worries about a worldwide credit squeeze have investors worried about a slowdown.

On a global basis, Japanese real estate has looked attractive, according to analysts, given the relatively large difference between real estate yields and long-term interest rates.

Blackstone has shown interest in the Japanese real estate market before. It competed fiercely for the 13 hotels auctioned off by All Nippon Airways Co earlier this year; but was outbid by a 281.3 billion yen (S$3.5 billion) bid from Morgan Stanley, a record price for a Japanese real estate deal.

A Blackstone spokesman in New York declined to comment and a Shinsei spokesperson was unavailable to comment immediately.

 

Source: Business Time 14 Aug 07

Property developer Gapura Prima to list in October

Developer hoping to raise 400b rupiah amid boom in property sector

IN JAKARTA

PRIVATE property developer Gapura Prima is hoping to capitalise on the rising tide in the Indonesian property market and raise 400 billion rupiah (S$65.1 million) through an initial public offering (IPO).

Its debut on the Jakarta stock exchange (JSX) is planned for the beginning of October.

Dedi Setiadi, director of Gapura Prima, said the group planned to sell one billion shares – 30 per cent of its total stakes – to raise the 400 billion rupiah, which would mean a share price of about 400 rupiah.

‘The proceeds raised will add to our working capital and be used for building projects,’ Mr Setiadi said in a report published yesterday in local business newspaper Investor Daily.

He declined to give further details, saying that they would be revealed in the prospectus.

Three underwriters have been appointed, PT Mandiri Sekuritas, PT Danareksa Sekuritas and PT Nusadana Capital Indonesia.

Analysts expect a good take-up rate for the listing, given the current boom in the property sector.

With mortgage interest rates falling below 10 per cent for the first time in recent years, coupled by aggressive marketing on the banks’ part and an overall recovery in the macro-economy, sales have shot up beyond expectation, especially in the middle and upper-middle class segments.

Stanley Tjiandra of Trimegah Securities noted that home sales for the first half of this year exceeded the initial projection of 20.8 trillion rupiah to hit 25.3 trillion rupiah. Property stocks are probably the second-best performing counters on JSX right now, he reckoned.

‘First-liners are going up very much, and investors are just seeking any good buys among the property stocks,’ Mr Tjiandra said.

While still a relatively smaller player compared to the 20-odd established property counters on the JSX, Gapura Prima is clearly on an ambitious and aggressive expansion plan not only within Indonesia, but also in the wider Asean region.

The company, which started out concentrating on residential developments, has been branching out into the commercial segment.

Earlier in July, it teamed up with Malaysian partner Amanah Raya Berhad to launch a real estate investment trust on the Singapore Exchange by the end of the year.

Starting with US$250 million worth of properties – five malls in Indonesia and another two in Malaysia – the trust will eventually also look into properties in other Asean countries such as the Philippines, Singapore, Thailand and Vietnam.

 

Source: Business Times 14 Aug 07

UK firm to buy two Shanghai buildings

(SHANGHAI) British property firm Grosvenor plans to buy two mid-rise residential buildings in Shanghai worth an estimated 500 million yuan (S$100.2 million), the official Shanghai Securities News said yesterday.

The buildings are located in central Shanghai’s upmarket Xintiandi district, the newspaper said.

Grosvenor managing director Nicholas Loup said in an interview in June that Grosvenor would start marketing its first fund dedicated to China in the second half of this year, with initial equity of US$300 million to US$500 million, as the company accelerates its move into Asia.

Borrowing at a loan-to-value of about 50 per cent, the fund would wield as much as US$1 billion in spending power.

 

Source: Business Times 14 Aug 07

NZ house value growth rises for the 6th month in July

(WELLINGTON) The annual pace of New Zealand house value growth accelerated for the sixth consecutive month in July but there were signs the market may be levelling out in the face of rising interest rates, official figures showed.

Government agency Quotable Value’s (QV) residential house price index rose 12.7 per cent in the month from a year earlier, up from a 12.2 per cent annual rise in June and an 11.1 per cent gain in May.

The pace of growth slowed through 2006, but this year has gained renewed vigour, although QV said there were tentative signs the market was cooling.

‘There are clear signs that the property market is slowing with feedback of fewer listings and buyers, resulting in fewer sales,’ QV spokesman Blue Hancock said in a statement, adding that the softness had yet to be reflected significantly in lower prices.

He said signs of a flattening out in the market were most evident in the main cities, where the rates of increase were minimal or eased slightly.

The annual rate of increase for Auckland, the biggest population and commercial centre, was fractionally higher at 10.2 per cent, the capital Wellington was little changed at 14.7 per cent and the southern city of Christchurch was unchanged at 13.4 per cent on a year ago.

‘If the spring market doesn’t provide a surge, then we would expect to see annual growth in property values dropping back to single figures in coming months,’ said Mr Hancock.

The Reserve Bank of New Zealand (RBNZ) raised its cash rate to 8.25 per cent last month – the fourth rate rise this year – but said it did not expect to raise further because of emerging signs of a slowdown in domestic borrowing.

The surge in house prices, fuelled by relatively cheap credit, has been one of the RBNZ’s main inflation worries.

 

Source:  Business Times 14 Aug 07

Portfolios take a ’sub-primal’ beating

HOW quickly investment sentiment can sour. Up till a few weeks ago, punters were still betting on penny stocks like there was no tomorrow. But the turning point came last month when a US bank, Bear Stearns, spooked the markets with news of major losses and accounting difficulties with its investments linked to risky US housing loans.

Losses by other banks and investment funds have led to what has been termed the ‘US sub-prime housing crisis’ – the source of turbulence and uncertainty in global financial markets in the last couple of weeks.

How these financial losses will trickle down to the real economy – the consumers and companies – remains to be seen.

Meanwhile, banks are now setting aside cash as a precaution against further losses from their bad investments and have become far more cautious about lending.

This is known as a ‘credit squeeze’, but the fear is that this could become a veritable ‘credit crunch’ in which companies and consumers have inadequate access to loans, according to an AFP report.

‘As private sector banks, in a time of uncertainty, set aside more funds for their own funding needs, we are seeing a shortage of liquidity in the money markets,’ AFP quoted Societe Generale’s chief Asia economist Glenn Maguire as saying.

A shortage of liquidity would restrict the ability of companies, and eventually consumers, to borrow, potentially slowing economic growth worldwide.

In an attempt to avert a crisis of confidence in global credit markets, central banks in the US, Europe, Japan, Australia and Canada last week added about US$136 billion to the banking system.

The Federal Reserve, in a second day of action in concert with the European Central Bank (ECB), provided US$38 billion of reserves and pledged more ‘as necessary’, in a statement unprecedented since after the Sept 11, 2001 attacks.

Money market rates had risen worldwide in the previous two days on evidence that the sub-prime crisis is spreading.

By the end of Friday, the central bank actions helped spark a turnaround in American stocks and drive the US overnight bank lending rate below the Fed’s target.

The Dow Jones Industrial Average recovered from a 210-point deficit to end just 31 points lower.

‘They accomplished their short-term mission to make sure the market stabilised ahead of the weekend,’ Bloomberg quoted David Resler, chief economist in New York at Nomura Securities International Inc, as saying. ‘It remains to be seen how much more they’ll have to do.’

Our portfolios declined by an average of 7.5 per cent last week. The one which fell the least – the analysts’ upgrades portfolio – is also the one with the highest cash component. This illustrates the truth of the saying ‘cash is king’ in a turbulent market.

It slid only 2.2 per cent. It had about 30 per cent cash as at last week due to the privatisation of companies like MMI and Amtek, and Want Want Holdings soon.

Meanwhile, small-cap stocks with dubious fundamentals which have been carried along in the wave of euphoria until a few weeks ago have seen the biggest declines.

The one-month top winners portfolio and the one-year top losers portfolio shed the most last week. Each fell by 9.4 per cent.

Big losers included General Magnetics, JK Technology and China Education. The lowest forward PE portfolio and the lowest price-to-book portfolio were down by 8.5 per cent and 7.9 per cent respectively.

 

Source: Business Times 13 Aug 07

Prices slump amid US housing woes

(LONDON) Global commodity prices slumped last week as speculators rushed to bank profits amid concern that demand for oil and metals will slide should the world economy dampen due to the US housing crisis.

Oil: World oil prices dived, with a barrel of Brent below US$69 for the first time since June, on concern that energy demand may weaken amid the US sub-prime crisis. By Friday, Brent North Sea crude for September delivery plunged to US$69.70 a barrel on Friday, compared with US$75.57 a barrel a week earlier.

New York’s main oil futures contract, light sweet crude for delivery in September, plummeted to US $70.68 a barrel, from US$76.67 a barrel.

Gold: Gold prices dipped as the dollar rose. On the London Bullion Market, gold fell to US$668.50 an ounce at Friday’s late fixing, from US$670.50 a week earlier.

 

Source: Business Times 13 Aug 07

Markets fear more volatility ahead

Uncertainty as traders watch developments

THE dramatic intervention by the world’s central banks helped to calm jittery bourses on Friday, but as Asian markets reopen for trading today, investors will be watching to see if the relief is only temporary.

Many traders believe that any move by the more optimistic investors or ‘bulls’ to stage a rally today will be met by an equally determined attempt by pessimistic ‘bears’ to sell into any rebound in share prices.

So, share prices are likely to remain volatile today as traders react to any fresh developments coming out of the credit markets, where investors’ appetite for risk has been soured by the crisis-hit mortgage market in the United States.

Bank of America senior economist Gilles Moec told AFP: ‘One of the big issues is that no one has any real clue of the amount of sub-prime loans which have been purchased by foreigners.

‘The big question is what is the overall amount, and this is bad for the markets because if there is one thing that the markets hate, it is uncertainty.’

Sub-prime loans are offered at high interest rates to Americans who have a poor credit rating and might otherwise be denied credit.

But Commerzbank analyst Andreas Huerkamp was more optimistic and predicted that the crisis would blow over.

‘There are strong parallels with the crisis in the mid-1990s, so you have to be a brave investor to buy shares at the moment,’ he said. ‘But history shows that everything will be forgotten in six months, and the market will recover.’

But given the state of uncertainty that now exists in global financial markets, most analysts believe it may be better for investors to simply sit on the sidelines while waiting for the mortgage crisis in the US to blow over.

Share prices in Singapore and other major regional bourses had see-sawed last week as fears of tightening credit gripped financial markets globally.

Even the commodities markets were whiplashed as traders unwound risky positions, leading to hefty falls in the prices of crude oil and base metals.

The current panic started last Thursday after French bank BNP Paribas froze three hedge funds with US mortgage exposure, sparking widespread fears the contagion had spread to European financial institutions.

This caused international banks to be so risk-averse that they refused to take any form of debt securities as loan collateral, causing interbank lending to come to a virtual standstill.

The European Central Bank was forced to pump 95billion euros (S$197billion) on Thursday and another 61billion euros on Friday to restore calm to the banking system.

The US Federal Reserve followed with a US$24billion (S$36billion) infusion on Thursday, and another US $38billion in three separate operations on Friday to ease a growing liquidity crunch as stock markets crashed across the globe.

What made the Fed’s intervention as ‘lender of last resort’ all the more significant was its decision to accept mortgage bonds as collateral from banks – shoring up investors’ confidence in the badly shaken credit markets.

In Asia, Singapore managed to escape relatively unscathed, with the benchmark Straits Times Index closing down just 53.99 points, or 1.6 per cent, at 3,359.18 on Friday after dropping 115 points at one stage.

But European markets suffered their worst one-day drop in more than four years as London’s FTSE-100 Index slumped 3.7per cent down, while in Paris, the CAC-40 Index was down 3.2 per cent.

Wall Street, however, managed to steady itself, with the Dow Jones Industrial Average recovering to close a mere 31.14points lower at 13,239.54 following the Fed’s intervention after initially crashing by 200 points.

Phillip Securities’ managing director Loh Hoon Sun said yesterday the local stock market is likely to remain vulnerable to any bad news coming out of Europe and the US in the coming weeks.

And this may leave traders to bet on two scenarios with few alternatives in between – a swift recovery or a meltdown.

‘Stocks will look cheap if international banks can swiftly work out the extent of the credit woes arising from the sub-prime loans and chop off their losses,’ a stockbroking director said.

But share prices may fall a lot more if a few big financial institutions could not take the heat and collapse, he warned.

The only good news is that retail investors here have been partly spared from the financial carnage because of the trading curbs imposed recently by local brokerages on highly speculative penny stocks after their daily traded volumes exceeded a few hundred million shares each.

The big concern now is whether the booming residential property market will be affected if the international credit crunch continues.

‘Some investors are obviously growing uneasy about the ability of private equities funds to complete some of the collective property sales which had been announced recently,’ said a dealer.

The abortion of any blockbuster en bloc property sales may hurt the share prices of listed real estate developers and construction counters quite badly, he said. 

 

Source: The Straits Times 13 Aug 07

IN ASIA: Rough ride for many more weeks: Analysts

HONG KONG – IF THE past week’s roller-coaster ride in Asian stock markets is anything to go by, investors should strap in tight for another bumpy ride in the coming sessions.

Ongoing jitters about a global credit squeeze and uncertainty about the fallout from the US sub-prime mortgage crisis will continue to roil markets, analysts say.

‘We’re going to see a pretty volatile ride over the next couple of months,’ said Mr Shane Oliver, head of investment strategy at AMP Capital in Australia.

‘But it’s not a bear market. As is often the case, the longer the bull market, the deeper the corrections become, and that’s exactly what we’re seeing at the moment.

‘The fundamentals globally still look pretty good…and most companies are in pretty good shape to deliver ongoing profit growth.’

Mr Sean Darby, a regional strategist at Nomura, said he expected ‘ongoing indiscriminate selling’ in regional markets as banks were likely to sell Asian stocks to fund their losses in illiquid assets such as sub-prime debt.

‘Irrespective of their fundamentals, Asian equities will be used as a source of funding to meet cash calls,’ he said. ‘It’s going to be a rough ride for the next couple of weeks.’

Analysts and economists differed on just how long or how closely Asian markets would remain tethered to the unfolding drama in the US housing market.

Most predictions have to do with ongoing debates about the vulnerability of the Asian economic and financial boom to the sub- prime fallout.

The first debate centres on the relative Asian dependence for growth on US demand for imports.

While some say Asian economies have generated enough trade with one another to offset a US slowdown, others say Asia will be hurt if the sub-prime mess translates into broader US housing problems and lower consumer spending.

The second debate centres on the source of the cash driving up Asian asset prices.

Some say the bulk of those funds comes from Asia’s own vast pile of savings, and that they are bound to find their way back into local markets once calm returns.

Others, however, contend that the sub-prime fiasco is part of a broader retreat by global capital – a retreat from risk.

Mr Christopher Wood, CLSA’s Hong Kong-based chief Asian equity strategist, said investors should consider the current drop in global stocks as a chance to acquire Asian shares that will rise once the crisis has passed.

 

Source: The Straits Times 12 Aug 07

Plan to link Shenzhen, HK into one metropolis

HK think-tank’s plan covers business, border clearance, rail links and talent

HONG KONG – A PLAN to make Hong Kong and Shenzhen a single metropolis and an economic powerhouse bigger than London, Paris, Chicago or Los Angeles by 2020 has been set out by a think-tank close to Chief Executive Donald Tsang.

The Bauhinia Foundation Research Centre has issued a 10-point plan for achieving this goal, according to Hong Kong newspaper South China Morning Post yesterday.

The plan includes fostering cross-border business cooperation; creating a multiple-entry electronic smart card for Shenzhen permanent residents to enter Hong Kong; building a rail line between the two cities’ airports; and a joint programme aimed at nurturing talent, the Post reported.

The foundation says if the metropolis maintained gross domestic product growth of 8 per cent a year until 2020, its GDP would reach US$1.11 trillion (S$1.7 trillion), making the metropolis the third-largest economy, behind only Tokyo and New York.

‘With the direct express link, the journey time between the Shenzhen Bao’an Airport and Hong Kong’s Chek Lap Kok International Airport will just be 17 minutes, with trains presumably running at 140kmh,’ study consultant Zhu Wenhui said.

The study proposes that the Lok Ma Chau Loop – a 1 sq km site beside the Shenzhen River – becomes a ’special region within special regions’, with simplified entry procedures for Shenzhen residents, the Post said.

The site came under Hong Kong’s jurisdiction in 1997 when the river was straightened.

‘Such visas would greatly reduce the time needed for Customs clearance from the existing 45 minutes to as little as 15 minutes,’ Mr Zhu said, adding that with easier access, 88 per cent of Shenzhen residents surveyed had indicated they would travel more frequently to Hong Kong.

The report also proposes that a joint development management authority run the area, which would remain under Hong Kong’s legal jurisdiction, the Post said.

Mr Zhu said the Hetao development zone aims to attract investment with ‘high value, low pollution and with high land utilisation’, though the market would determine who invested there.

The development of the Hetao area will also enable more Shenzhen students to have easier access to study in tertiary education institutions in Hong Kong, another Hong Kong newspaper The Standard reported.

However, Mr Zhu acknowledged that HK$2.4 billion would be needed to clean up and prepare the area.

The site contains 4.5 million cubic m of toxic mud, the Post said.

The two governments had formed a group two years ago to study the feasibility of developing the site.

Previous plans for it have included making it a trade expo zone, a container storage park or the Pearl River Delta’s answer to Silicon Valley, the Post said.

A Hong Kong government spokesman said it would look further at developing the site once the study begun in 2005 was ready.

Fifty Hong Kong officials and 50 mainland officials, from China’s Cabinet, Ministry of Commerce as well as National Development and Reform Commission were interviewed for the foundation’s study.

Foundation chief Anthony Wu said that 150 enterprises in the two cities and 1,000 Shenzhen citizens were also interviewed for the study.

While admitting competition exists between the two cities, Mr Wu said ‘an enlarged pie’ would constitute a winwin situation amid healthy competition, the Standard said.

 

Source: The Straits Times 11 Aug 07

Sub-prime domino hits Asia again

Painful pattern takes shape as US ripples exact their toll

(SINGAPORE) For the fourth time in two weeks, stock markets in Asia plunged following steep losses in the United States and Europe the previous trading day.

As the fallout from rising defaults in US sub-prime mortgages continues to spread, the Straits Times Index fell 53.99 points or 1.6 per cent to end at 3,359.18.

Earlier in the day, the index was down as much as 3.8 per cent before clawing back some ground.

A distinct pattern – that seems set to continue for some time – has been unfolding of late. Each new piece of bad news related to the US sub-prime mortgage market has been followed by a plunge in the Dow Jones Industrial Average. This has invariably been mirrored the following trading day in Asia.

Fears of a global credit crunch hung over the US for the second day running as, shortly after opening yesterday, the Dow Jones index was down 124.8 points at 13,145.9.

Europe reflected the strain, too, as in London the FTSE 100 fell 3.1 per cent in morning trade, the Paris index was down 3 per cent and German shares slumped 1.6 per cent as fear of more bad news to come in credit markets gripped investors.

On Thursday, the trigger had been provided by French banking group BNP Paribas, which stopped withdrawals from three of its funds which own US sub-prime mortgages citing a ‘complete evaporation’ of liquidity.

Central banks across the globe have since been pumping in doses of liquidity to ease the crunch.

Here, the Monetary Authority of Singapore said it is monitoring developments in the markets and is ready to inject additional liquidity ‘if the situation so warrants’.

Meanwhile, Fullerton Fund Management, a unit of Temasek Holdings, told Bloomberg that it has no direct exposure to US sub-prime loans and its investments in collateralised debt obligations or CDOs amount to less than one per cent of its total assets under management.

Over the past week, banks and asset managers here have sought to reassure analysts and investors by releasing details of their exposure to US sub-prime property loans through their investments in CDOs.

The sub-prime woes in the US have already caused several hedge funds to suspend withdrawals by investors, usually seen as a sign that the value of the assets they hold may not be enough to repay investors in full.

‘The markets will remain volatile for a few more weeks. More hedge funds are going to have some terrible announcements to make,’ said economist David Cohen at Action Economics. But he added: ‘I wouldn’t get too upset by the fact that the central banks were injecting liquidity today – they were just accommodating the public want to hold cash rather than stocks.

‘That would have caused some cash-flow problems in the banking system, so they added some reserves. It’s not as if they’re bailing out the economy.’

In Asia-Pacific, stocks were again battered as all major markets in the region suffered losses.

South Korea saw the worst fall in percentage terms with a 4.2 per cent plunge, followed by Australia, where shares fell 3.6 per cent.

In Japan, the Nikkei 225 lost 2.4 per cent, while Hong Kong’s Hang Seng Index fell 2.9 per cent. China’s CSI 300 index slid 1.1 per cent.

In South-east Asia, the Kuala Lumpur Composite Index ended 2 per cent lower, while key indices in Thailand, Indonesia and the Philippines also lost 0.9-3.1 per cent.

 

Source: Business Times 11 Aug 07

M’sian developers getting caught on bumi quotas

Faster issue of strata titles allows authorities to keep track of laggards

IN KUALA LUMPUR

MALAYSIA’S drive for better service in the property sector seems to have backfired on some developers – the speedier issue of strata titles has made it easier for the authorities to track those that have not met bumiputra housing quotas.

This has been most evident in sales of condominiums and apartments and in the state of Selangor, which boasts a third of the 1,000-plus developers registered with the Real Estate Housing Developers Association (Rehda).

Because land is a state matter, regulations differ in the various states. In general, most states say at least 30 per cent of a property development must be reserved for bumiputras, mainly ethnic Malays. But the requirement can be as much as 70 per cent in some suburbs such as Shah Alam in Selangor, where the Malay population is higher.

Developers who do not meet the quotas have to obtain an exemption from the state authorities before unsold ‘bumiputra units’ can be sold to non-bumiputras. In the past, some developers short-cut the process and sold units before obtaining state release.

Because land offices used to take an interminable time to issue strata titles for sub-divided buildings – sometimes more than a decade – shortfalls in the bumiputra quota were not obvious.

But the federal government now wants strata titles issued within 12 months. ‘And now that these titles are coming out, it is very clear how many units were actually sold (to bumiputras),’ said Rehda Selangor branch chairman Fateh Iskandar Mohamed Mansor.

A move to penalise errant developers retrospectively by charging them penalties has made some unhappy – the amounts can run into hundreds of thousands of dollars.

The difficulty of meeting the quota is compounded in areas not popular with Malays, such as those with big Chinese majorities.

Rehda Johor branch chairman Steven Shum suggested there be an automatic release mechanism.

He said that in Johor, developers have to set aside 40 per cent of any project for bumiputras and advertise the project in a Malay newspaper a certain number of times.

But on reaching 50 per cent completion, they can apply to the state authorities for permission to release unsold bumiputra lots to non-bumiputras.

‘But the state does it very gradually, sometimes releasing the units only after the certificate of fitness stage,’ Mr Shum said. ‘This slows the development process and pushes up holding costs, which is why there is a need for clearer guidelines than the broad discretion given to the state housing boards.’

Other developers told BT that the current ‘case-by-case’ practice is full of uncertainty and open to corruption.

Rehda Kuala Lumpur branch chairman Teh Boon Ghee said the city council could be giving gradual exemptions because bumiputras usually prefer to purchase completed units.

While the aim of the quota is ostensibly to encourage racial integration and redistribute wealth, bumiputras regardless of their income are entitled to housing discounts ranging from 5-7 per cent in the Klang Valley and as high as 15 per cent in Johor. Naturally, these discounts are priced into the selling price.

Rehda Johor’s Mr Shum said that even with such discounts, bumiputras in Johor prefer to buy undiscounted units because these are not endorsed as ‘bumiputra title’ and are easier to re-sell. Properties endorsed as bumiputra title have to be re-sold to other bumiputras unless the state allows otherwise.

‘That’s one of the reasons Johor has the second highest property overhang in the country,’ Mr Shum said. ‘More than 70 per cent of unsold units are bumiputra units.’

With the states enforcing the bumiputra quotas more stringently now, the release of unsold bumiputra units could be even more gradual, possibly raising unsold stock and raising holding costs even higher.

 

Source: Business Times 10 Aug 07

KepLand in US$146m Vietnam condo project

It partners Viet company to build luxury housing on waterfront site

DEVELOPER Keppel Land said yesterday it has entered into a US$146 million joint venture with a Vietnamese real estate company to develop a luxury condominium on an 8.5 ha site fronting the Ca Cam River in Ho Chi Minh City.

The project is the third residential development KepLand has announced in Vietnam and Ho Chi Minh City this year.

After investment and government approvals have been obtained, KepLand will take a 75 per cent – amounting to US$33 million – of the JV company’s total registered capital of US$44 million. Vietnamese partner Tan Truong will hold the other 25 per cent.

The project will feature about 2,400 waterfront apartments on potential gross floor area of about 408,500 sq m, KepLand said. Construction is expected to start as soon as planning approval is granted, and the first phase is expected to be launched in 2008.

The site, which enjoys 500 metres of river frontage, is 6.5 km away from Ho Chi Minh City’s central business district in a location is popular with the upper income locals and the expatriate community, KepLand said.

This latest JV forms two other recent partnerships formed by KepLand to develop prime residential sites in Ho Chi Minh City – The Estella, a 4.8 ha site in An Phu Ward and a 1.7 ha waterfront project fronting the Saigon River in Binh Thanh District. The company also recently said it has fully sold Villa Riviera, an exclusive 101-unit waterfront villa development.

‘Demand for quality homes in Vietnam is sustained by rising affluence among locals and further liberalisation of land laws,’ said Ang Wee Gee, KepLand’s director of regional investments. ‘We are confident that our development, with its premium quality and prime waterfront location, will be positively received by the upper-income market.’ Mr Ang added that KepLand continues to be on the lookout for select sites in Vietnam to develop products which will set the benchmark in the country.

The transaction is not expected to have any significant impact on the net tangible asset per share or earnings per share of KepLand for the financial year ending Dec 31, 2007, the company said.

KepLand’s shares fell 15 cents to close at $9.05 yesterday. The stock has climbed 31.2 per cent since the start of the year.

Source: Business Times 14 Jun 07