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9th August 2014

Singapore Economy

Singapore economy grew 3.5% in H1; full-year growth seen at 2.5% to 3.5%

Prime Minister Lee Hsien Loong announced in his National Day Message that growth projections for 2014 will be between 2.5 and 3.5 per cent, narrowing earlier forecasts.

Source: Channel News Asia / Singapore

SINGAPORE: Singapore's economy grew 3.5 per cent in the first half of the year, bringing the growth forecast for the rest of the year to between 2.5 and 3.5 per cent. That is narrower than the forecast by the Trade and Industry Ministry in February this year of between 2 and 4 per cent. Prime Minister Lee Hsien Loong said this in his National Day Message on Friday (Aug 8) ahead of Singapore's 49th birthday.

In his message delivered from the Alexandra Park Connector, Mr Lee outlined some priorities for the country, including giving Singaporeans greater peace of mind in their retirement years and helping everyone achieve their potential, regardless of their family background or circumstances. Ahead of his National Day Rally, Mr Lee also hinted at several policy changes to come.

In enhancing retirement adequacy, Mr Lee said his team is studying how to make it more convenient for retirees to get cash out of their flats, in a prudent and sustainable way. Currently there is the Lease Buyback Scheme. It is a monetisation option to help low-income elderly households unlock part of their housing equity, and receive a lifelong income stream to supplement their retirement income. Response to the scheme, though, has been somewhat lukewarm, with just over 300 households signing up for it since it was enhanced in February last year.

The Prime Minister will also talk about ways the Central Provident Fund system could be improved at the National Day Rally in a week's time.

"Stronger safety nets are not just to give you peace of mind, but also to build confidence to hope and dare," said Mr Lee. "Our system will help you shoot for the stars. Everyone will have full opportunities to fulfil your potential, regardless of your family background or circumstances."

Mr Lee said education is a big part of achieving this. To that end, a committee tasked with reviewing polytechnic and Institute of Technical Education studies is expected to announce its recommendations to help young Singaporeans acquire the relevant skills, to succeed in a constantly changing, economic environment.

"You are talented, passionate and confident. You deserve to chase your dreams and be the best you can be. The academic route is not the only way up. We will also help you upgrade yourselves while you work. We will help you master specialised skills, and earn advanced qualifications as you progress in your careers," said Mr Lee.

But Mr Lee said this is also a matter of social values: "As Singaporeans, we must judge a person not just by his educational qualifications but also by his skills, contributions and character. This is how we keep Singapore a land of hope and opportunity for all."

He added Singapore will succeed, only if its citizens stand together as one united people. There was a rallying call by the Prime Minister for Singaporeans to come together despite their differences and to uphold the spirit of the Pioneers who built this country. Mr Lee said Singapore has changed, so there also needs to be a reassessment of its position, direction and strategies.

Mr Lee added that even as Singapore has made strong progress since independence, it has not reached its limit. As the country turns 50 next year, Mr Lee observed that many Singaporeans intend to embrace and mark the special occasion in their own ways.

He said it is this collective sense of ownership and belonging, that will take this country forward, in a changing world. 

Read the transcript of the Prime Minister's National Day Message at

- CNA/ly

Newer structures shaping Singapore’s identity too

Modern developments such as MBS have emerged as icons of the Lion City

Source: Today Online / Business

SINGAPORE — While there is little doubt that buildings from the Republic’s colonial past are representations of heritage and history, their newer peers also have a part to play in shaping the unique Singapore identity, experts told TODAY.

Developments such as Marina Bay Sands, which officially opened in 2010, and Gardens by the Bay, which opened two years later, have emerged as icons for both residents, who identify with them, and the millions of tourists who visit Singapore every year.

“There are a few modern buildings that connect with people on a deeper level, such as Marina Bay Sands, Marina Barrage and Gardens by the Bay. These buildings (have been created) to transform Singapore’s skyline around the Marina Bay area to become one that is attractive and distinctive, and one that integrates ‘work, live and play’,” said Dr Luke Peh, head of SIM University’s facilities and events management programme.

“The Marina Bay area has become the postcard representation of Singapore,” he added.

The city skyline that forms the backdrop for many national and international events, such as the National Day Parade and the Formula 1 Grand Prix night race, is the result of “careful sculpting” by the Urban Redevelopment Authority (URA).

“The land parcels are oriented to ensure that almost all new developments have water or garden views. The URA has drawn up design guidelines to ensure that tall buildings will not overwhelm the Bay and that the overall pedestrian experience around the waterfront is attractive and pleasant,” said Ms Fun Siew Leng, URA group director (urban planning and design).

“The locations of the individual high-rise towers within Marina Bay have also been carefully arranged to create ‘breathing space’ and provide vistas towards the waterfront and major open spaces. This safeguards views to and from individual buildings, enhances their attractiveness and creates a pleasant skyline for the district,” she said.

Besides their unique architecture, what gives buildings such as Marina Bay Sands their iconic status is the experience they offer that continues to draw residents and visitors alike, noted Associate Professor Johannes Widodo from the Department of Architecture at the National University of Singapore.

“The experience of being at the SkyPark, sitting there waiting for the laser show — the atmosphere all adds to the good memories about the place; so Marina Bay Sands has become a must-see for many people. It has achieved an iconic status, not only for Singaporeans, but for people from all over the world who have part of their lives in this city,” said Assoc Prof Widodo. “So buildings resonate with people not only because of how they look. It’s also the function and the experience that they offer … Those are like the glue of these places.”

Balancing aesthetics and function was one of the major guiding principles for architect Colin Wu during his involvement in the development of Gardens by the Bay, which is part of the URA’s aim for a “city in a garden” to differentiate Singapore’s business and financial district from those in other cities in the world. The development also seeks to create a more liveable and endearing environment for residents despite Singapore being one of the mostly densely-populated places in the world.

At the opening ceremony of Gardens by the Bay in June 2012, Prime Minister Lee Hsien Loong said it offered a place to relax after work, a place to take the family to on weekends, a place to enjoy a concert or a nice meal, as well as activities that cater to a wide spectrum of ages and interests.

Only two years after the official opening, the gardens, which sit on a 100ha site along the waterfront of the prime Marina Bay downtown area, have welcomed more than 10 million visitors. Mr Wu told TODAY that the success of Gardens by the Bay lies in the right “programming”.

“I think as much as we can build an iconic structure, what’s important is the ‘programming’, because the experience, the events that are hosted here are things that engage people and keep people coming,” said the senior vice-president (architecture) at CPG Consultants. “When working on the gardens, that was the guiding principle that the team adhered to. It is important that everyone involved in a development starts with a mind to make a good product. And it is a bonus if, at the end of the day, that building is put up for conservation. I think that is the best compliment that any development can get.”

But whether or not modern developments such as Gardens by the Bay are worthy of conservation is for the future generations to decide, Mr Wu added, a sentiment that Assoc Prof Widodo shared.

“History is moving forward. We always think that heritage buildings are from the colonial period, the nation-building period. Actually, they are not. The structures that we build today — ION Orchard, the ‘durian’ Esplanade, Marina Bay Sands — may be very new and recent to us, but for the future generations, they will become historical buildings,” he said.

As such, the Singapore identity is one that is continually evolving, noted Dr Kang Soon-Hock from SIM University’s School of Arts and Social Sciences. He added: “Apart from the usual identifiers such as local food, national dress and symbols such as the Merlion, buildings — in particular, iconic buildings — also contribute to our unique Singaporean identity. For those of us who have gone away for a period of time, the images that come to our mind when we think of home do not only include images of food, but also architectural images.”

-By Lee Yen Nee

Singapore Real Estate

Govt right to keep cooling measures in place: PropertyGuru CEO

Housing portal co-founder says there is room for further decline in prices, which have fallen only 2 to 3 per cent this year

Source: Today Online / Business

SINGAPORE — With private home prices declining a mere 2 to 3 per cent in the first six months of this year, the Government has done the right thing to maintain the property curbs for now, said chief executive and co-founder of real estate portal PropertyGuru Steve Melhuish.

At the current rate of decline, it could be another 12 to 18 months of downtrend before the Government starts to consider reviewing some of the measures that have been introduced to take the heat out of the property market, he told TODAY.

“The decline has only been about 2.5 per cent in the past six months, (but) home prices in the private space increased about 70 to 80 per cent in the past few years, so this rate of decline is not catastrophic,” Mr Melhuish said. “With things staying status quo, we’ll continue to see this price decline take place in the next 12 to 18 months. It sounds like a long time, but if the market has been growing for five to six years, you can’t expect it to fall in one year and then bounce back.”

Private property prices grew 62 per cent between the second quarter of 2009 and the third quarter of last year before falling in the final three months last year, data from the Urban Redevelopment Authority showed. They dipped further by 1.3 and 1 per cent, respectively, in the first and second quarters of this year.

Transaction volume took a hit earlier, with sales of new launches plunging 73 per cent right after the Total Debt Servicing Ratio (TDSR) framework was introduced in June last year. They have not recovered to levels seen before the TDSR took effect.

With the slip in prices lagging behind the fall in sales volume, many market watchers have indicated that there is room for further decline in prices as the curbs continue. Mr Melhuish said prices could decrease at a quicker rate to register an 8 to 10 per cent fall by the end of this year.

“What’s happening now is population growth is not as high as it was, so you see less demand for housing. The cooling measures have also caused a reduction in demand. At the same time, there’s a big pipeline of new projects in 2014, 2015 and 2016, and the unsold properties from the reduction in demand now will add to that supply,” he said.

If the scenario that Mr Melhuish outlined plays out, there would probably be another 10 per cent or so fall in private home prices next year, which may lead the Government to review some measures.

“Once there’s a 15 to 20 per cent drop, it’s quite significant. My personal opinion is that that’s when the Government will turn things around,” he said.

-By Lee Yen Nee

UOL seeks land with 'strong growth story'

Group continues to be selective in land choice; Q2 hit by sharp drop in fair-value gains

Source: Business Times / Companies

UOL Group is still keen on selectively replenishing its Singapore residential landbank even though it expects the market to remain subdued for a while.

The group yesterday posted a 51 per cent year-on-year drop in second-quarter net earnings due to sharply lower fair value gains from investment properties.

When contacted, UOL president (property) Liam Wee Sin told BT that the group will continue to selectively buy Singapore residential development land in locations that have good connectivity and which have strong growth story. "As you would have noticed, most of our recent site acquisitions have been in Rest of Central Region (RCR) - for example Upper Paya Lebar and Prince Charles Crescent - as this region has shown greater price resilience."

The group's Thomson Three condo, which is also in RCR, has to date achieved sales of 92 per cent of the project's 445 units, with UOL maintaining its average price at around $1,330 psf. 

The 99-year leasehold project was launched in September last year, after the introduction of total debt servicing ratio (TDSR) framework in late June 2013.

The group plans to launch its Seventy St Patrick's residential project later this year. The plan is to release in the first half of next year a condo in Upper Paya Lebar, with the majority of its nearly 800 units comprising one and two-bedders. Also slated for launch next year is a condo project along Prince Charles Crescent.

The group's chief executive Gwee Lian Kheng noted in a statement yesterday that "we expect the residential property market to remain subdued for a while" - citing declining home prices and the record number of private home completions between now and 2016.

The property and hotel group posted net profit of S$211.72 million for Q2 2014 - a 51 per cent drop from the same year-ago period. The decline was largely from lower fair-value gains on investment properties.

Fair value gains from the group's investment properties fell 75 per cent to S$85 million while gains from associated companies' investment properties eased 21 per cent to S$52.5 million.

Group revenue declined 30 per cent year-on-year to S$213.6 million on the back of a 73 per cent drop in revenue from property development to S$36.6 million. Unlike in Q2 2013, the latest Q2 did not see revenue from two residential development projects - Waterbank at Dakota and Spottiswoode Residences - which were completed in May and December last year respectively.

On a more positive note, revenue from property investments climbed 8 per cent to S$47.6 million, boosted by contribution from Pan Pacific Serviced Suites Beach Road, which opened in May 2013. Gross revenue from hotel ownership and operations too rose 2 per cent to S$104.5 million, with higher contributions from Parkroyal on Beach Road and Parkroyal on Pickering.

Share of profit from associated and joint-venture companies surged 56 per cent to S$38.4 million - due mainly to higher contributions from the Pan Pacific Singapore hotel, and the Archipelago and Thomson Three residential projects.

Earnings per share halved to 27.45 Singapore cents for Q2 2014 from 56.03 Singapore cents in Q2 2013. Net asset value per share stood at S$9.15 at end-June this year, up from S$8.77 last Dec 31.

The counter ended nine Singapore cents lower at S$6.41 on Friday. UOL annnounced its results after the stock market closed.

Mr Gwee noted that travel patterns in the near term could be affected by rising geo-political tensions. However, the group was "still positive about the long-term prospect of the hotel industry (and) will continue to seek out new opportunities to expand into strategic gateway cities", he added.

As in the previous year, UOL will not be paying a Q2 dividend.

For the first-half, UOL's net profit fell 34 per cent to S$332.55 million. Revenue was 13 per cent higher at S$622.39 million.

-By Kalpana Rashiwala

Fall in fair value gain halves UOL profit

Source: Straits Times / Money

DEVELOPER and hotelier UOL Group's second-quarter net profit halved to $211.7 million from $431.4 million, mainly due to a sharp fall on fair value gains.

Fair value gains on investment properties, including those of associated companies, dived by 64 per cent to $121.2 million.

Revenue for the three months to June 30 slumped by 30 per cent to $213.6 million.

Turnover from property development fell 73 per cent to $36.6 million, primarily due to a decline in revenue from the sale of development properties at Waterbank at Dakota and Spottiswoode Residences, which were completed in May and December last year respectively.

Revenue from all other segments registered modest growth, with higher contributions mainly from Parkroyal on Beach Road, Parkroyal on Pickering and the Pan Pacific Serviced Suites Beach Road, which opened in May 2013.

Gross profit margin was higher at 55 per cent compared with 49 per cent in the previous corresponding period, due largely to lower revenue contribution from property development, which has a higher cost margin.

The increase in marketing and distribution expenses of $1.4 million was attributed mainly to advertising and showflat expenses for Riverbank@Fernvale, which was launched in February.

Share of profit from associated and joint venture companies rose 56 per cent to $38.4 million, thanks in part to higher contributions from Pan Pacific Singapore and the Archipelago and Thomson Three projects.

Group expenses fell 10 per cent to $55.9 million. This was due to a 59 per cent fall in currency exchange losses amounting to $3.1 million in the quarter compared with $7.5 million in 2013.

Quarterly earnings per share shrank to 27.45 cents from 56.03 cents previously while net asset value per share firmed to $9.15 compared with $8.77 as at Dec 31.

"In view of the declining residential property prices and the record number of newly completed private dwellings from now till 2016, we expect the residential property market to remain subdued for a while," said group chief executive Gwee Lian Kheng.

"Despite the rising geopolitical tensions that could affect travel patterns in the near term, we are still positive about the long-term prospects of the hotel industry. We will continue to seek out new opportunities to expand into strategic gateway cities."

UOL plans to launch Seventy St Patrick's later this year and its Upper Paya Lebar project next year.

-By Dennis Chan, Deputy Money Editor

Pinnacle of HDB flat resales soon?

* Units widely expected to fetch high prices * Minimum occupancy period up in December

Source: Straits Times / Singapore

THE first flat from premier Housing Board project Pinnacle@Dux- ton has hit the market, with its owner obtaining special permission from the authorities to sell the unit.

The four-room flat, with a floor area of 90 sq m and located "above the 20th floor", has been on the market for about a month. But it has already had more than 50 viewings, said Mr Bruce Ang, one of two agents marketing the unit. He said that several "verbal offers" have been received, the highest being $830,000.

The unit is being sold despite the owner not having lived in the unit for five years, which is a legal requirement known as the minimum occupation period (MOP).

Most Pinnacle@Duxton home owners will meet this MOP in December.

But the HDB has allowed the early resale of the unit "with a short deviation from MOP, after considering the flat owners' circumstances", said a spokesman.

A Straits Times check showed there were at least eight other units listed on various property websites. All but one - a five- roomer - are four-room flats.

An agent behind a listing of a 38th-storey four-roomer, Mr Benjamin Tan, said that the owner is "not in a rush to sell", but simply sounding out the market.

Comprising 1,848 units in seven 50-storey blocks, the project in Tanjong Pagar faced overwhelming response at its launch in 2004.

Its four- and five-roomers have long been expected to fetch high resale prices, with National Development Minister Khaw Boon Wan himself saying in 2012 that when the Pinnacle@Duxton flats hit the market, "there will be many millionaires there".

In 2004, new four-room flats there cost $289,200 to $380,900. Its five-room flats were priced from $345,100 to $439,400.

Though the resale market has been cooling over the past year, large flats in prime locations are still fetching high prices. Two four-roomers in nearby Tanjong Pagar Plaza went for $730,000 in June and $710,000 in March.

Six five-roomers have been sold in nearby Cantonment Close so far this year, all going for above $800,000.

PropNex Realty chief executive Mohamed Ismail Gafoor expects the Pinnacle@Duxton flats to fetch handsome prices in the resale market. "I will not be surprised if people even pay $1 million for a four-room flat there. It's an iconic building in a really good, central location."

But R'ST Research director Ong Kah Seng pointed out that the ongoing cooling measures would make it difficult to achieve benchmark prices. "Prices for five-room flats are unlikely to go beyond $850,000, as the mortgage servicing ratio cap is expected to restrain excessively large loans," he said. "Resale competition from other sellers in the locality will also drive prices down."

But that has not stopped agents from aggressively hawking their services to residents there. Pinnacle@Duxton residents said property agents have been going door-to-door and calling them at home, particularly in the last few months. Namecards and fliers offering to help sell their flats have also been left in letterboxes and at individual units, said residents.

But for many of them, selling is the furthest thing on their minds. "We are not planning to sell. It's difficult to find such a central location elsewhere. We can easily jog or cycle to Marina Bay," said offshore diver Muhd Shaifullah Latif, 30, who lives in a 28th-floor four-room flat with his wife.

Many are also reluctant to uproot because of their children. "My kids go to school in this area, so moving would (disrupt) their schooling," said housewife and mother-of-two Joanne Lee, 34, who lives in a five-roomer there.

-By Janice Heng & Yeo Sam Jo

Renting may be better option when aiming for a school

Source: Today Online / Business

Parents looking for a home near a school of their choice so that their children may stand a better chance of acceptance need not buy in the neighbourhood as it may sometimes be better to rent the property.

By the end of this month, the Ministry of Education (MOE) will complete this year’s Primary One Registration Exercise. If you are a parent, where you live could affect your child’s chances of admission. If the number of applications to a primary school exceeds the number of vacancies, the school fills the available spots based on home-school distance in order of the following priority: (1) Within 1km; (2) between 1km and 2km; and (3) more than 2km.

In a previous commentary, I reported on the price per square foot (psf) of private apartments in the neighbourhoods within 2km of Singapore’s 190 primary schools.

The median psf ranges from about S$700 to S$1,824.

For a 1,000sqf home near River Valley Primary School, the median price is more than S$1.8 million. Radin Mas Primary School, one of the country’s most popular schools based on take-up rates, is in a neighbourhood that has a median price of more than S$1.5 million.

What if it does not make sense to buy in the neighbourhood of the primary school of choice? Some parents have benefited from renting instead. For homes in the neighbourhoods of all 190 primary schools, the median psf rentals range from S$2.17 to S$5.08, or a monthly rent of S$2,170 to S$5,080 for a 1,000sqf unit.

For a young family, it might be financially more viable to rent. For example, the median price of a four-room Housing and Development Board (HDB) flat in Bishan in June was S$518,000, SRX data shows. This is about one-third the price of a private home near Radin Mas Primary, which is in District 4.

The family can rent out the HDB flat for the median Bishan rent of S$2,500 and then rent a 1,000sqf private apartment near the popular primary school for S$4,630. The “property cost” to send the child to the school is the difference in the two rents or S$2,130 per month.

Naturally, the more children you have, the lower the cost per child.

SRX has posted the neighbourhood median rents and home prices for all 190 primary schools on A quick perusal of the tables will help you decide whether it is better to buy or rent. In my next column, I will look at home prices and rents around international schools.

-By Sam Baker

Heritage buildings given new lease of life

Adapting historical buildings allows S’pore to preserve them for future generations

Source: Today Online / Business

SINGAPORE — Termite infestations, rising damp and corroded metal parts were some of the problems architect Lee Soo Khoon had to deal with as part of the team from the then Public Works Department (PWD) that was commissioned in 1995 to convert the former police station and barracks on Hill Street into the headquarters of the then Ministry of Information and the Arts.

But the challenges came as no surprise as they are common wear-and-tear characteristics seen in old buildings, especially those that have been left vacant for some time. Much of the six-storey neoclassical building built in 1934 had not been in use for several years.

“The (old police station) wasn’t in very good condition when we started work on it because many parts weren’t in use for a few years. Termite and water ingress are two very common problems in old buildings, but these are technical issues that we can overcome. It’s just more tedious,” said Mr Lee.

-By Lee Yen Nee

Realtors joining forces to survive sluggish market

Latest partnership of three agencies comes after bigger tie-up last month

Source: Straits Times / Money

MORE real estate firms are banding together to consolidate their strengths as challenging market conditions have made it harder to run solo.

A new partnership, the Real Alliance, was formed from three agencies - C&H Group, Remax and More Property - on Monday.

The coalition, with a combined strength of 1,500 agents, aims to broaden its database of properties and network of buyers in a market where transaction volumes have almost dried up on all fronts.

The move follows the formation of a similar group last month, after four agencies joined forces to form the Project Alliance Group. It comprises SLP International, OrangeTee, HSR International and Dennis Wee Realty, and has about 6,000 agents in all.

The focus of the latest grouping, the Real Alliance, will be on shifting units at new launches, but its portfolio of properties for sale will also include foreign projects - giving agents some respite from the tepid local market.

"Because of factors like the total debt servicing ratio and cooling measures, it makes the environment very challenging for agents," said Remax executive director Thomas Tan. "If they can't sell local properties, they still need to put bread on the table. One of the options obviously is to sell overseas properties."

The biggest agencies here are PropNex Realty, with about 5,600 agents, and ERA Realty, which has around 5,700 members. There are about 31,783 licensed agents here, according to the Council for Estate Agencies.

Mr Kenneth Tan, chief operating officer at C&H Group and a founder of Real Alliance, said it would be easier for the firms to land new projects this way.

"Nowadays, developers like to see that it's a collaboration of agencies. So we say, we'll give you the three together, instead of you having to put it together. You will get the numbers and a bigger base (of buyers)," he said.

Property agents who are members will also be given "preferential" commissions when marketing units at projects the alliance secures from developers, as opposed to realtors who do not belong to any of the three agencies.

Currently, the group has about 15 projects under its wing.

The firms also hope to benefit from collaborations in training their staff and, of course, a broader base of properties to be sold, but their operations will remain autonomous, said Mr Shawn Tan, key executive officer at More Property.

The partnership expects to market resale properties next as they see bright spots in the segment.

Developers who have forked out hefty amounts for land are finding it hard to dangle more discounts at new launches, noted Remax's Mr Tan.

But buyers looking for affordable homes might take to the secondary market for cheaper deals. "You're dealing with individual owners who are more open to negotiation in the resale market," he said.

-By Cheryl Ong

Real Estate Companies' Brief

Lippo Malls Indonesia upbeat on outlook; Q2 DPU down

Source: Business Times / Companies

LIPPO Malls Indonesia Retail Trust (LMIRT), which posted a 26.9 per cent year-on-year drop in second-quarter DPU to 0.68 Singapore cent, says the outlook for retail malls in Indonesia remains positive.

The lacklustre second-quarter performance was a result of higher expenses and weakness in the Indonesian currency, it said. The gross rents at its malls grew 4.8 per cent to 266.1 billion rupiah (S$28.4 million) during the quarter but, when translated to Sing dollars, gross rents fell 11.6 per cent from a year ago to S$28.8 million.

Backed by Indonesia's largest developer and mall operator, the Reit manager said that the limited supply of new retail space - amid Jakarta's moratorium on the construction of new malls - presents a favourable condition for existing shopping mall owners.

-By Lynette Khoo

IReit Global IPO to add diversity, say analysts

It offers 8% forward yield but global uncertainties may dampen listing

Source: Straits Times / Money

ANALYSTS say an upcoming new listing of a trust that holds German office assets will add diversity and depth to the real estate investment trust (Reit) sector here.

Property and market consultants told The Straits Times that IReit Global Group offers an attractive proposition for investors, with a projected distribution per unit yield of 8 per cent next year.

But the debut could be hit by poor market conditions due to geopolitical concerns over, for example, impending United States air strikes against militants in Iraq.

OCBC Investment Research analyst Eli Lee said the 8 per cent forward yield offers a 130-200 basis point spread above average forward yields for Singapore Reits (S-Reits).

For instance, the office S-Reit subsector's average forward yield is 6 per cent, while the overall sector has an average of 6.7 per cent.

"That said, unlike IReit, which holds properties in Germany, the typical office S-Reit has the bulk of its portfolio exposure here," said Mr Lee.

"The differences in key geographical drivers could lead to meaningful divergences ahead, in terms of rental outlook, occupancy trends and reversion profiles."

Voyage Research deputy research head Ng Kian Teck noted that S-Reits have performed well, with most reporting second-quarter earnings that are either in line with or better than expectations.

IReit will have to dangle higher yields if it wants local investors to put their money into assets they are not very familiar with in a place that is half a world away.

Mr Ng added that market conditions have not been favourable for initial public offerings (IPO).

The two most recent entrants, Accordia Golf Trust and Terratech, have both sunk into the red since making their debuts in the past two weeks, and have yet to hit their IPO prices.

Mr Ng said: "The poor performances are fresh in the minds of investors, and with IReit coming behind them, the timing is not good.

"There's a lot of uncertainty now, with global markets not doing well, but a good asset is a good asset, and investors will come in, especially since Reits are usually held for the longer term."

Overseas trusts such as IReit also face inherent challenges, including currency exchange losses from a strengthening Singapore dollar, and subject potential investors to higher risks, noted Mr Ng.

Mr Donald Han, managing director of property consultancy Chestertons, pointed out that some Singapore-listed overseas Reits have done well, particularly those from growing economies.

They include Ascendas India Trust, Global Logistics Properties and Mapletree Greater China Commercial Trust, whose owners have been around for a long while.

Mr Han said Germany is considered a safe haven among European countries and is one of the key drivers of growth for the region.

"IReit's 8 per cent yield is fairly attractive compared with yields for Singapore's prime office sector, which are less than 4 per cent," he added.

"Yields for business parks and office space are also well below 6 per cent, even in major German cities such as Munich and Frankfurt."

Analysts warned that IReit's assets are mostly in second-tier German cities and highly reliant on a single tenant.

Three of its properties are leased to GMG, a unit of Deutsche Telekom, and the four office properties that make up the initial portfolio are in the cities of Bonn, Darmstadt, Munster and Munich.

The company has priced the IPO at 88 cents a unit, and 167.7 million units will be available.

The public offer closes next Monday. Trading is expected to start next Wednesday.

-By Mok Fei Fei

Global Logistic Properties

Source: Straits Times / Money

Broker: CIMB

  • Rating: Add

  • Target price: $3.29

GLP's first-quarter earnings made up only 20 per cent of our full-year estimates, but we think it is well positioned for its next growth spurt.

Underlying activities are strong, with accelerated development starts in the first quarter and strong leasing momentum in China and Japan.

Continual sourcing of landbank through strategic tie-ups, most recently with CMSTD, has extended earnings visibility in the longer term.

We remain positive on GLP's outlook, driven by value creation in China and expansion of its fee income business.

We expect earnings growth to accelerate as the group ramps up development activities over the next 12 months.

Global Economy & Global Real Estate

Skyscrapers show capitalism at its worst - and most sublime

Source: Business Times / Perspective

SKYSCRAPERS always provoke some extreme reactions, and the sale of London's Gherkin as a result of the bankruptcy of one of its current owners is no exception. For a century, ever since the property explosions of New York and Chicago, the tall building has come to symbolise the best and the worst of the modern city, and of the economies that have produced it.

No wonder then that the Gherkin's sale has been taken to be an illustration of the emptiness at the heart of rental-driven capitalism. It prompts talk of the relationship between building high and economic slumps, and of a London dotted with empty skyscrapers. Like a J G Ballard story, or the reality of downtown Detroit, the image of a high rise with broken windows haunts every metropolis.

There has been a lot of hand-wringing about the shiny new city state that is sprouting under the rule of busy King Boris. Old London seems to be in danger of disappearing beneath a forest of new buildings, with hundreds more planned up and down the Thames.

This is regulation lite, driven by property prices which make parking your money in glass and concrete a very attractive investment. Prince Charles's complaints about the stubby developments of the 1980s, and their damaging of Canaletto's views of St Paul's cathedral, now look very moderate indeed.

-By Martin Parker

Blackstone Said to Seek $1 Billion From Industrial IPO

Source: Bloomberg / Personal Finance

Blackstone Group LP (BX) is planning to take its industrial-property unit public this year to raise about $1 billion, said a person with knowledge of the proposed transaction.

The initial public offering would value IndCor Properties Inc. at about $8 billion, said the person, who asked not to be identified because the information is private. That would make IndCor the largest “pure-play” U.S. industrial real estate investment trust, said Eric Frankel, an analyst at property research firm Green Street Advisors Inc.

Blackstone has been taking public some of its largest real estate holdings as stocks hover close to highs. Transactions include last year’s IPOs of Hilton Worldwide Holdings Inc. and shopping-center owner Brixmor Property Group Inc. (BRX)

The near-term outlook for IndCor “should be pretty strong in terms of fundamentals, and I’m sure that will reflect well” on the offering’s reception by investors, Frankel, whose firm is based in Newport Beach, California, said in a phone interview. The prospect of Blackstone looking to sell a large stake over time “may weigh on the stock for a short period.”

Blackstone formed IndCor in 2010 by taking advantage of the financial crisis to acquire assets. Chicago-based IndCor holds more than 100 million square feet (9.3 million square meters), about the same as Duke Realty Corp. (DRE), the largest REIT focused on U.S. industrial properties. Duke, which also owns office properties, has a market value of $6.1 billion.

Industrial REITs

The existing pure-play U.S. industrial REITs, DCT Industrial Trust Inc. and First Industrial Realty Trust Inc. (FR), together may roughly equal IndCor in asset value, Frankel said.

Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment on the IndCor plan, which was reported earlier today by the Wall Street Journal.

Industrial REITs reported second-quarter earnings that were mostly positive, according to Frankel, citing EastGroup Properties Inc. (EGP), Prologis Inc. and Liberty Property Trust.

“Demand is solid across all size ranges,” Frankel wrote in a July 23 report. “As market occupancy rates trend up, REITs are gaining pricing power.”

Industrial landlords have been laggards within the Bloomberg REIT Index in the past year, after outperforming most other property types the previous year. The Bloomberg Industrial/Warehouse Index returned 9.2 percent in the past 12 months with dividends reinvested, while hotel REITs gained 25 percent, apartments 19 percent, offices 15 percent and regional malls 13 percent. The broader REIT index also had a 13 percent return.

Blackstone is working with units of Citigroup Inc. (C), Barclays Plc, Royal Bank of Canada and Wells Fargo & Co. on the IndCor offering, according to the Wall Street Journal.

Robert Julavits, a spokesman for Citigroup; Mark Lane, a Barclays spokesman; and Jessica Ong of Wells Fargo all declined to comment, as did Elisa Barsotti, a spokeswoman for RBC.

-By Hui-yong Yu and Leslie Picker