Real News‎ > ‎2014‎ > ‎February 2014‎ > ‎

28th February 2014

Singapore Economy

Services sector business receipts up 6.4% in Q4

Year-on-year growth is broad-based but slower than a revised 7.9% in Q3

Source: Business Times / Top Stories

[SINGAPORE] Singapore's services sector raked in 6.4 per cent more in fourth-quarter sales than it did a year ago, but its pace of growth has slowed from a revised 7.9 per cent in Q3.

Receipts were boosted by all industries except recreation & personal services, which contracted by 1.7 per cent. Apart from that segment, growth was broad-based across all activity clusters reflected in the business receipts index (which excludes wholesale & retail trade, and accommodation & food services).

Education services led the way with a 15.4 per cent year-on-year jump in Q4 turnover. The financial & insurance services segment - which carries the biggest weight on the index of almost 25 per cent - followed close behind, and reported double-digit growth of 12.4 per cent. Transport and storage services, the second-largest weighted segment on the index, grew a more modest 2.9 per cent year on year.

The Department of Statistics, which compiles the quarterly index, said yesterday that the other services industries registered growth ranging from 0.2 per cent (information & communications) to 6.2 per cent (real estate, rental & leasing).

Without adjusting for seasonal factors, total business receipts collected in Q4 increased 1.3 per cent compared to Q3.

In quarter-on-quarter terms, the information & communications services industry registered the highest growth of 3.5 per cent in Q4, followed by the health & social services segment which reported an increase of 2.7 per cent. Higher turnover was also seen in other clusters such as transport & storage services (2.1 per cent) and financial & insurance services (2.0 per cent).

The growth in these segments helped to offset contractions in the business receipts of education services and recreation & personal services, which dropped 3.8 per cent and 3.5 per cent respectively.

The Ministry of Trade and Industry (MTI) announced last week that Singapore's gross domestic product grew 5.5 per cent in Q4 from a year ago. Services producing industries as a whole grew by 5.9 per cent year on year over the quarter, easing from the 6.3 per cent growth seen in Q3.

For the whole of 2013, MTI said the Singapore economy grew 4.1 per cent, roundly beating market forecasts and the government's own estimate.

-By Kelly Tay

Singapore Real Estate

S'pore private home rent rates expected to fall

Analysts see decline in demand as expatriate population shrinks

Source: Business Times / Property

THERE is now a growing consensus among analysts that rental rates for private homes will slide in the coming two years since the official data showed the first quarter-on-quarter decline in four years for private home rents.

Hopes that a growing expatriate population and resilient economic growth will lend support to rents have also dimmed since the latest government budget suggests continued tightening of foreign labour force.

Savills Research said in a note yesterday that the residential leasing market will see a decline in demand from a shrinking pool of overseas nationals as more employment restrictions are implemented.

"Rents in some locations may continue to see a correction, particularly in the mass-market segment due to strong competition from new supply, as well as smaller rental budgets amid the rising cost of living in Singapore," the property consultancy and research firm said.

-By Lynette Khoo

Private housing market more akin to 2009 than 2003

Source: Today Online / Business

It has not been a pretty start this year for the housing market, with last month’s data showing deteriorating indicators in both the private- and public-housing segments. Sporadic positive market responses to projects launched thus far, such as theRiverbank@Fernvale and Rivertree Residences, garnered positive responses and provided some relief.

However, such good response is not the norm as many other projects are struggling to meet the pace achieved in the past few years.

Two weeks earlier, the Government eased the Total Debt Servicing Ratio framework to exclude those seeking refinancing for owner-occupied properties, providing a slight boost to sentiment.

However, Finance Minister and Deputy Prime Minister Tharman Shanmugaratnam quickly put paid to market speculation that more measures could be eased in the short term, saying last Friday that it was too early for such a move.

The weakening market conditions have led to prominent property developers turning bearish and even DBS Chief Executive Piyush Gupta to forecast a 10 to 15 per cent decline in private housing prices this year.

As more market participants add to the chorus of voices talking down the private housing market, the questions most pertinent to stakeholders are whether the decline will be even bigger and if it will be prolonged.

To give an alternative view, we take an assessment of the relationships between the key drivers of private housing demand and the private Residential Property Price Index (RPPI). The purpose of the exercise is to show how the performance of these drivers helped to shape the prices in the private residential property market, which could then be used to determine how this segment would fare in the coming years.

This framework will serve as a basis for a more structured discussion on the property market than one relying on momentum indicators such as monthly home sales and quarterly price movements.

The first four drivers are what we would call wealth creation and destruction factors, namely, the pace of economic growth, the net change in foreign population, the change in stock market prices (measured by the Straits Times Index) and the credit environment (measured by the three-month SIBOR, or the Singapore Interbank Offered Rate).

Next come the direct drivers of demand for private housing, namely, the direction of Government policy, the strength of the Housing and Development Board resale market, the strength of the private housing rental market (measured by the average occupancy rate and the change in the Urban Redevelopment Authority’s Private Residential Property Rental Index).

The graph depicts the rise and fall of the RPPI compared with the number of drivers that turn negative for private housing demand each year.

From the graph, it can be seen that from 1995, as an increasing number of demand drivers turned negative, the pace of increase in the RPPI started to slow. As the number of negative factors hit the peak in 1997 and 1998, the RPPI suffered its sharpest decline in years. In 1999, as the number of negative factors receded, the RPPI rebounded sharply.

After 1999, the market reversed as the combined impact of the bursting of the dotcom bubble, the 9/11 attacks in the United States and the global health crisis due to SARS resulted in many of the drivers of demand for housing turning negative. As a consequence, the RPPI declined for four years in a row, starting from 2000.

After 2003, the market started to recover with the improvement in the demand drivers resulting in a recovery in the RPPI. Even after world markets were hit by the 2008 global financial crisis, private housing prices here managed to rebound very quickly as the number of demand drivers improved rapidly in 2009.

We came to the conclusion that no one single factor, by itself, can cause a prolonged fall in property prices. We propose the theory that a combination of negative factors are necessary to create an ecosystem of negative sentiment that will dampen demand for private housing, much like what happened in the 2000-2003 period.

Conversely, in 2008-2009, when these drivers quickly turned positive, private property prices recovered rapidly.

So, the big question is: Will the downward correction be more like the one in the 2000-2003 period or the one in the 2008-2009 period? In our opinion, the cumulative weakening of the drivers in the coming years could spark off a short-term decline, but the conditions are more akin to those in the 2008-2009 period.

This is primarily due to the rapid build-up in wealth in Asia and the continued expectation of growth in the region. In addition, the significant improvement of the infrastructure of Singapore has enhanced its attractiveness as a location of choice for people and businesses.

Numerous rich and famous personalities, such as Facebook co-founder Eduardo Saverin, A-list actor Jet Li and billionaire investor Jim Rogers have decided to call Singapore home. These provide a good basis for economic growth, job creation and demand for housing.

Taken together, we believe that the number of drivers that could negatively affect demand for housing also have the capacity to rebound quickly, suggesting that price corrections could be more reflective of the conditions post-2008.

-By Tan Kok Keong

Fewer HDB flat dwellers buying condos, private apartments

The number of HDB flat dwellers buying condominiums or private apartments last year fell 1.1 percentage point in 2013. 45.5 per cent of non-landed private home transactions were made by HDB flat dwellers, down from 46.6 per cent in 2012.

Source: Channel News Asia / Singapore

SINGAPORE: The number of HDB flat dwellers buying condominiums or private apartments last year fell 1.1 percentage point.

According to the Singapore Real Estate Exchange (SRX), the total number of non-landed private home transactions in 2013 was 20,203 units.

Of these, 9,192 units were bought by those who owned or lived in HDB flats.

This accounted for 45.5 per cent of the total purchases, down from 46.6 per cent in 2012.

The number of non-landed private home purchases made by HDB addressees in 2012 was 14,955 out of 32,125 total purchases.

Experts said cooling measures such as the total debt servicing ratio (TDSR) restricted financing options for potential buyers to upgrade, resulting in less demand in the market.

Chris Koh, director of Chris International, said: "Because a lot of buyers today own HDB flats - most of them are servicing their instalments for their HDB flats.

“On top of that, if they have a car, that would mean quite a bulk of their monthly income is going toward instalments. If you put TDSR at 60 per cent and they are already stretching at 40 to 50 per cent, then it's difficult for them to buy a second property.” 

- CNA/xq

Yen set to fall further, property buyers told

Slide of 5% against Singdollar by year-end: analysts

Source: Business Times / Top Stories

[SINGAPORE] Local investors considering buying Japanese property should consider the currency exposure as the yen is poised to slide further due to economic reforms, said Bank of Tokyo-Mitsubishi UFJ (BTMU) analysts.

The yen is expected to depreciate against the Singapore dollar around 5 per cent by the end of 2014, while the slide against the US unit will be a steeper 8 per cent, they said.

Pension liberalisation reforms and stepped up overseas asset buying will lead to more than 10 trillion yen (S$124 billion) outflows from April, said Takahiro Sekido, BTMU Japan strategist.

Yen will fall to 110 to US$1 by December 2014 and 115 in 3-5 years' time, said Mr Sekido.

-By Siow Li Sen

CityDev chairman calls for easing of property timelines

Firm posts 11% fall in Q4 profit as property development earnings decline

Source: Business Times / Companies

WITH softening property prices and sales volumes, City Developments (CDL) chairman Kwek Leng Beng expressed hope yesterday that this year, the government will tweak or even remove the rules on qualifying certificates (QCs), which bind developers with foreign stakeholders to strict timelines to complete and sell a residential development.

Speaking at the group's full-year results briefing, he noted that the QC rules put the heat on developers which purchase private land to push projects out quickly, depleting their land bank. These developers then have to turn to Government Land Sales sites and put in high bids to secure the land needed to replenish their land bank.

Mr Kwek said: "I believe that with the QC in place, bidding for every site will be competitive. To a developer, land is our stock-in-trade. Without sites, business will come to a standstill, so there is no choice but to bid at higher prices."

Paying top dollar for land means developers need to sell the units at a high-enough price, but current market conditions do not allow for this, he said.

-By Felda Chay

CDL warns of tough times as property curbs remain

Source: Today Online / Business

SINGAPORE — The Republic’s property market is in for another challenging year with cooling measures set to stay in place and with the introduction of new measures in the construction sector, City Developments Limited’s Executive Chairman Kwek Leng Beng said yesterday after the company reported an 11 per cent fall in fourth-quarter net profit.

The head of Singapore’s second-largest listed developer maintained his forecast of a 10 per cent fall in prices this year, after his call for the Government to tweak some of the curbs went unanswered. In his Budget speech last week, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam acknowledged that while the Government’s successive rounds of measures were working, it was too early to start pulling back.

Mr Kwek said: “In view that the Government has very recently announced … that it will not be relaxing the property cooling measures soon and will further tighten foreign labour in the construction sector, macro headwinds are expected to continue to weigh on the domestic property market.

“I’m not as disappointed (because) if you read the Finance Minister’s speech carefully, he said (the Government) is not engineering a collapse of the property market … It doesn’t matter if they treat it today or tomorrow, as long as they have the mindset that we have to do something when the market is not so good.”

He added that he remained hopeful some measures, especially those limiting foreign investments, might be tweaked in due course to alleviate any prolonged down cycles.

“When you see that volume starts to swing and prices come down maybe 0.1 to 0.2 per cent, you may think it’s nothing, but adding that up can be quite a lot (of declines) per annum. I believe the government is fully aware but it’s a question of when is the right time to press the button, and the right time can be a judgment call,” he said.

Mr Kwek also called for changes to the Qualifying Certificate (QC) rule, which applies to developers whose shareholders and directors are not all Singaporeans, as doing so will help to moderate bidding for land.

“I believe with QC in place, competition for every site (is intense) … Without any sites, business comes to a standstill so developers have no choice but to bid higher and higher,” he said.

City Developments reported a 11.4 per cent on-year drop in its fourth-quarter net profit to S$221 million and a 12.6 per cent fall in revenue to S$774.4 million. The company attributed the fall to lower contributions from its property development segment, as earnings from a few completed residential projects have not been recognised. CDL’s performance in the same period a year ago was also boosted by gains from the sale of several industrial land parcels.

For the whole of last year, the developer sold 3,210 homes compared with 2,395 units in 2012. However, in light of difficult conditions in the domestic property market, CDL aims to be less Singapore-centric and plans to expand its footprint overseas in order to diversify risk.

“We want to build an international external wing, and that’s why we have decided to appoint Mr Grant Kelley (as the Chief Executive) because he can bring in an external angle … We cannot forever be Singapore-centric and do the way we have been doing; a company evolves over time,” Mr Kwek said.

-By Lee Yen Nee

CDL may turn condos into serviced homes

Source: Straits Times 

Property giant City Developments (CDL) says it might consider turning some of its upcoming high-end condominium projects into serviced residences. This drastic move is being contemplated as thinner profits from property development in a rapidly slowing market weighed down the company's earnings released yesterday.

8 town councils to increase service & conservancy charges

Eight town councils will increase their service and conservancy charges from April 1. The town councils are Ang Mo Kio, Jurong, Marine Parade, Moulmein-Kallang, Nee Soon, Pasir Ris-Punggol, Potong Pasir and Sembawang.

Source: Channel News Asia / Singapore

SINGAPORE: Eight town councils will increase their service and conservancy charges (S&CC) for flats, shops/offices and market/cooked food stalls, with effect from 1 April.

They are Ang Mo Kio, Jurong, Marine Parade, Moulmein-Kallang, Nee Soon, Pasir Ris-Punggol, Potong Pasir and Sembawang town councils.

Sembawang Town Council, which announced the increase in a statement, cited rising costs and inflation as reasons for the revision.

It said: "In order to keep S&CC charges as affordable as possible for residents, the town councils have been making a conscious effort to control costs to avoid increasing the S&CC rates, despite rising inflation every year.

"The town councils have succeeded in resisting S&CC increases for the last 10 years, even when the inflation rate hit a high of 6.6 per cent in 2008.

"However, with current cost increases, it is becoming increasingly difficult to continue operations at current S&CC rates, with several town councils running into operating deficits."

The statement cited electricity as one of the biggest contributors to cost increases for the town councils.

Maintenance costs have also gone up, due to most towns having successfully undergone the Lift Upgrading Programme.

It costs S$198 to service a lift that stops on every floor.

Before lifts were upgraded, the cost was S$170 monthly to service a lift that stops on three out of 12 floors in a residential block.

Cleaners' wage costs also have to be factored in.

The S&CC increase will be phased over two years.

The first-tier increase on 1 April this year ranges from S$0.50 per month for those living in HDB's one-room flats to S$8.50 per month for executive flat home owners.

Commercial property owners and tenants will see an increase ranging from S$0.10 to S$0.21 per psm/month while the increase for most cooked food stalls is between S$9.90 and S$15.83 per month.

The second-tier adjustment will be effected on 1 April 2015.

The S&CC increase will range from S$0.50 for HDB's one-room to S$6.50 per month for executive flat home owners, depending on the type of flat.

Commercial property owners and tenants will see an increase ranging from S$0.07 to S$0.11 per psm/month while the increase for most cooked food stalls is between S$9.50 and S$12.00 per month.

Out of the eight town councils that are raising S&CC, six had not increased the charges for a decade.

The town councils are Moulmein-Kallang, Ang Mo Kio, Marine Parade, Nee Soon, Pasir Ris-Punggol and Sembawang.

Charges by Jurong Town Council were raised in 2010. Charges for Potong Pasir Town Council went up in 2008 for residents.

Hawazi Daipi, chairman of Sembawang Town Council, said: "One good way for residents to also contribute to saving costs is by making sure the estate is well-maintained - that there's as little littering as possible. When there is not much cleaning to be done, then the maintenance costs would be, can be managed."

- CNA/xq

8 PAP town councils to raise S&CC

Hike over two years is between S$1 and S$15 a month, depending on the flat type

Source: Today Online / Singapore

8 PAP town councils to raise S&CC

SINGAPORE — About half a million households here will have to pay more for their town councils’ service and conservancy charges (S&CC), starting from April.

The total S&CC increase, which will set in over two years, is between S$1 and S$15 a month, depending on the flat type.

To reduce the impact on residents, the S&CC hike by the eight town councils — those looking after Ang Mo Kio, Jurong, Marine Parade, Moulmein-Kallang, Nee Soon, Pasir Ris-Punggol, Potong Pasir and Sembawang — will be carried out over two phases, with the second round kicking in from April next year.

On average, at the end of the exercise, households living in one-room Housing and Development Board (HDB) flats will pay S$1 more each month, while those in two-room and three-room units will pay S$2.10 and S$4.60 more each month, respectively.

The average hikes for households in four-room and five-room flats will be S$6 and S$7.10 each month, respectively. Households in executive flats will need to fork out the highest average increase of S$9.40 each month.

Except for Jurong Town Council and Potong Pasir Town Council, which last raised charges in 2010 and 2008, respectively, the other six town councils are raising S&CC for the first time in a decade.

In a joint press release yesterday, the eight town councils cited a spike in electricity tariffs and higher spending on lift maintenance after upgrading as reasons for the hike. They said that electricity tariffs had gone up by 66 per cent last month, compared with the same period a decade ago.

Utilities account for about 35 per cent of the town councils’ overall operating cost.

The town councils said the number of lifts under maintenance has increased by 1,800, while another 3,800 lifts were upgraded to stop on every floor. They explained that every new lift in a 12-storey block will cost the town council about S$3,300 a year to maintain and operate.

With the increase in the number of new and upgraded lifts, the total lift maintenance cost will go up by S$7.2 million a year for the eight town councils. Other maintenance and operation costs, such as for covered walkways, children’s playgrounds and fitness equipment, have also risen in the past decade due to an increase in the tender rates for various maintenance work.

The joint statement reiterated that the town councils have been making a conscious effort to control costs to avoid increasing the S&CC rates, despite rising inflation every year. The amount collected would not be sufficient to meet routine expenditure without the help of government grants, it said, and the town councils had managed to post surpluses only because of the grants.

“However, such surpluses have been in decline over the years. With continuously rising maintenance and operation costs, the town councils would not be able to sustain their operations without incurring operating deficits,” the statement said.

It added that the town councils will continue to work closely with Members of Parliament, grassroots organisations and the Community Development Councils to help residents who may face difficulties with their S&CC payments.

Last Friday, Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam announced, as part of the budget measures, that the Government will be providing one-off S&CC rebates of one to three months, based on HDB flat type.

The eight town councils are among a total of 15 People’s Action Party-run town councils. The seven other town councils announced an increase — which was also carried out in two phases — in their S&CC in 2012.

The Aljunied-Hougang-Punggol East Town Council, run by the Workers’ Party, has not announced any increase in rates. It did not reply to queries on whether it has plans to raise S&CC rates.

Sembawang Town Council General Manager Soon Min Sin said the average monthly operating cost for the town council has increased from about S$2.5 million to S$3.2 million in the past decade.

“The majority of the town councils have run into operating deficits without government grants in the financial year of April 2012 to March 2013,” he said. “With rising costs, some town councils will run into deficits even with the help of government grants in FY 13/14 and FY14/15 if there is no revision in S&CC.”

He added: “If S&CC is not revised, town councils will need to cut back on non-essential maintenance work and other improvement work.”

A check on the Marine Parade Town Council’s annual report showed that its operating surplus for the financial year that ended in March last year was about S$1.3 million, down from about S$3 million in 2012.

Ang Mo Kio Town Council’s annual report showed that its operating surplus stood at about S$1.8 million, compared to about S$2.2 million in 2012.

When contacted, the town councils’ chairmen referred media queries to Mr Hawazi Daipi, who is Chairman of Sembawang Town Council.

Mr Hawazi, who is also Senior Parliamentary Secretary for Education and Manpower, had coordinated a three-month review of the S&CC of the eight town councils.

He said the town councils will continue to take a prudent approach in managing expenditure carefully and explore new cost-saving measures such as using energy-efficient lighting and bulk procurements to enjoy greater economies of scale.

Mr Hawazi added that there are no further plans to increase S&CC at the seven town councils which last raised their rates in 2012.

-By Fang ZhiWen Joy

Real Estate Companies' Brief

Singapore firms surpass expectations in Q4: report

But analysts turning more bearish on earnings estimates for current year

Source: Business Times / Companies

SEVERAL Singapore-listed companies have beat market forecasts with their fourth-quarter results, but are also recording weaker expectations from the street for their 2014 results.

A Morgan Stanley report released this week showed that among the 70 per cent of companies covered in the research that had reported their fourth-quarter earnings, about half had beaten analysts' expectations.

Singapore had the highest proportion of such better-than-expected performances among three Asean countries when compared with Indonesia and Thailand, the report said.

Among the companies that outdid expectations were property companies and banks.

-By Jamie Lee

CRT to acquire two Tokyo retail properties

Source: Business Times / Property

CROESUS Retail Trust (CRT) has agreed to acquire two retail properties in Tokyo for 14.25 billion yen (S$176.7 million) and is gunning for more properties in Japan this year.

Its trustee-manager said yesterday that it is paying 3.45 billion yen for Luz Omori in Ota Ward from Godo Kaisha Omori Kaihatsu and 10.8 billion yen for NIS Wave I in Tachikawa City from Godo Kaisha Wave I.

These properties were part of CRT's ROFR (right of first refusal) agreements with its strategic partners at the time of listing.

The proposed deals will expand CRT's portfolio from four retail malls to six malls and increase CRT's total net lettable area by 9 per cent to 198,148 square metres and its portfolio value by 28.3 per cent to 67.83 billion yen.

-By Lynette Khoo

City Developments 4th-Quarter Profit Falls on Property Curbs

Source: Bloomberg / Luxury

City Developments Ltd. (CIT), Singapore’s second-largest developer, posted an 11 percent drop in fourth-quarter profit on lower sales and said it faces continued challenges in its home market.

Net income fell to S$221 million ($174 million) in the three months ended Dec. 31, from S$249.3 million a year earlier, as sales decline 13 percent to S$774 million, the developer said in a statement to the Singapore exchange today. The lower sales was in part due to the absence of a similar gain from the disposal of industrial land parcels in the fourth-quarter of 2012, it said.

City Developments, which hired Grant Kelley from Leon Black’s Apollo Global Management LLC as chief executive officer, is seeking to expand abroad as developers face the lowest total homes sales in the country in four years following the government’s tougher housing curbs to cool record prices.

“I expect City Developments to bolster its overseas business,” Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore, said in an e-mailed statement. “The operating landscape for developers has become challenging as competitive land bids amidst slowing residential demand is eroding developers’ margins.”

City Developments shares added 0.2 percent to S$9.34 at the close of trading in Singapore, trimming its loss this year to 2.7 percent. The benchmark Straits Times Index gained 0.3 percent today and has declined 2.2 percent this year.

‘Macro Headwinds’

Singapore’s fourth-quarter home prices slid for the first time in almost two years, trimming annual gains to the smallest since 2008 as mortgage curbs cooled prices in the Southeast Asian city.

“Macro headwinds are expected to continue to weigh on the domestic property market,” the company said in the statement. It reiterated that it is “hopeful that some of the cooling measures could be tweaked in due course, particularly in the area of foreign investment.”

Housing values gained 1.1 percent in 2013, the smallest annual increase since prices slid 4.7 percent in 2008. Private home sales fell to 14,948 units last year from 22,197 in 2012, the data showed. Resale transactions of homes dropped by half to 6,608 units from 13,214 in 2012. Home sales slid in January, marking the slowest start to the year since 2009, the Authority said on Feb. 17.

Singapore’s central bank said in June that home loans should not exceed a total debt-servicing ratio of 60 percent as it sought to limit borrowers exceeding their capacity to service loans.

-By Klaus Wille and Pooja Thakur

Ho Bee earnings soar on $489.6m revaluation gain

Source: Business Times / Companies

A REVALUATION gain of $489.6 million for The Metropolis office project in Buona Vista provided a big boost to Ho Bee Land's fourth-quarter and full-year net earnings.

The property group announced net profit of $506.1 million for the fourth quarter ended Dec 31, 2013, up from $66.9 million for Q4 2012. For FY 2013, the group's net profit rose to $591.8 million from $187.1 million in FY 2012. Also contributing to the stronger bottom line was the $47.2 million gain from disposal of shares in Chongbang Holdings (International) in early 2013.

As at end-December 2013, The Metropolis, comprising two office towers with Grade A specifications plus a small retail component, was valued at $1.242 billion by Colliers International. This translates to around $1,150 per square foot (psf) based on the project's 1.08 million sq ft total net lettable area. Market watchers reckon this may be on the conservative side. Ho Bee developed the project on a 99-year-leasehold site it acquired at a state tender in 2010.

Tower One received Temporary Occupation Permit in July 2013 and Tower Two, in November.

-By Kalpana Rashiwala

Banyan Tree Q4 net down 27% due to unrest in Thailand

Source: Business Times / Companies 

THE political upheaval in Thailand has adversely impacted resort operator Banyan Tree Holdings, which reported a 27 per cent drop in fourth quarter net profit as earnings from its core market fell.

And looking ahead, the group expects operations to continue being negatively affected.

"We expect the group's Q1 performance to be below the same period last year," said the group in its financial statement.

"We expect continuing political uncertainties in Thailand and this will affect our operations in the near term. However, with the economies in the US and Europe continuing to recover in 2014 and the active China market, we expect our operations outside Thailand, eg Maldives, to continue to perform favourably."

-By Felda Chay

Banyan Tree faces slowdown as Thai unrest continues

Source: Today Online / Business

SINGAPORE — Banyan Tree, the manager and developer of premium resorts and hotels around the region, has reported a 27 per cent fall in fourth-quarter net profit after operations were hit by the ongoing political crisis in Thailand.

Profit for the three months ended December came in at S$3.7 million, down from S$5 million in the same period in 2012. Revenue was stable at S$97.9 million.

In yesterday’s earnings statement, the company noted that many countries issued travel advisories to Thailand, which affected the tourist arrivals.

“The ongoing strife in Thailand —the worst political crisis since 2010, when protests turned violent — has slowed down our business in the fourth quarter,” said Mr Ho KwonPing, Banyan Tree’s Executive Chairman.

The slowdown in business in Thailand in the final part of 2013 was a reversal from the trend earlier in the year, with resorts there performing strongly in the first nine months, the company said.

“If not for the Thai political upheaval in November last year, which affected tourist arrivals, our operation in Thailand would have ended (2013) even stronger.”

For the full year, net profit was 22 per cent higher at S$18.1 million, with revenue up 5 per cent at S$356.1 million.

The company expects the political uncertainties to continue to affect operations in the near term, saying forward bookings in the first quarter for hotels owned in Thailand are 11 per cent below the same period last year.

However, on a more upbeat note, the company said it would benefit from the continuing recovery of economies in the United States and Europe, and an active China market. These factors should mean that operations outside Thailand continue to perform favourably, Banyan Tree said.

Haw Par profit slips 10% to $107.9m

Source: Business Times / Companies

HAW Par Group posted a 10 per cent decline in full-year profit on poorer contributions from associated companies and fair-value losses, the diversified property and investment group said yesterday.

Haw Par's net profit slipped to $107.9 million, or 49.4 cents per share, in 2013 as share of results from associated companies fell 58 per cent to $8 million due to lower profits and a year-earlier exceptional gain recorded by a Hong Kong-listed associate.

Revaluation gains on investment properties were also 54.6 per cent lower in 2013 at $10.7 million, compared to $23.5 million a year earlier. Excluding those items and taxes, operating profit would have grown 14.3 per cent to $96.6 million for the year.

Haw Par, which paid six cents per share in dividends at the mid-year, is recommending a final dividend of 14 cents per share to bring its full-year payout to 20 cents per share.

-By Kenneth Lim

Yongnam's revenue up 20%, profit plunges 87%

Source: Business Times / Companies

AS forewarned, steel contractor and civil engineering group Yongnam Holdings rounded off a horrid 2013 by reporting net profit of $5.5 million, 87 per cent lower that the $43.5 million for the year before.

The profit plunge occurred despite revenue rising 20 per cent to $362 million. Other than lower margins from a change in project mix, Yongnam was plagued by significant cost overruns for three structural steelwork projects including the Singapore Sports Hub. It was also hit by an $8.1 million one-off disposal loss after having to sell off some steel pipe piles when there was a delay in renewing the land lease to store them.

Yongnam also made a $5.1 million provision for an insolvent contractor not being able to pay them.

Said CEO Seow Soon Yong at a results briefing yesterday evening: "We've been enjoying the last five to six years, and suddenly this year everything was not good. The schedule was tight for our projects . . . we needed to rush in the end to make sure the clients had fewer problems."

-By Cai Haoxiang

LifeBrandz plans reverse takeover

Source: Business Times / Companies

LOSS-MAKING nightlife group LifeBrandz is hoping to undergo a reverse takeover that would turn it into a hospitality developer.

Yesterday, it signed a memorandum of understanding (MOU) with shareholders of Acteam International Co Ltd and 122 Middle Investment Pte Ltd to acquire their stakes, payable in cash and new share issue at an indicative price of 1.2 cents each, the company said.

It has also signed an MOU with Centurion Private Equity Ltd and Massive Collective Pte Ltd to dispose its existing businesses to them. This will be satisfied in cash.

LifeBrandz also plans to transfer its shares from the mainboard to the Catalist board on the Singapore Exchange.

-By Lee Meixian

OUE sinks into red with $36.5m loss

OUE has reported a net loss of $36.5 million for the full year ended Dec 31, down from a net profit of $90.05 million in FY2012, mainly due to net fair-value losses on the group's investment properties. Revenue edged up 4.5 per cent to $436.5 million while loss per share worked out to four cents per share. The directors have recommended a final dividend of two cents per share.

SingHaiyi gets nod for share consolidation

Shareholders of Catalist-listed property group SingHaiyi yesterday approved a 10-to-one-share consolidation, which is being undertaken in line with the group's push to diversify into property development and investments in the US. At an extraordinary general meeting, shareholders voted in favour to consolidate the issued share capital base from about 28.6 billion shares to around 2.9 billion shares.

Views, Reviews & Forum

Refund of CPF savings: Ministry replies

Source: Straits Times 

Under the CPF Act, any withdrawal of Central Provident Fund savings for housing must be secured against a charge on the property, and such a charge can be created only when the property is owned by the CPF member ("Help kids ease parents' mortgage burden" by Ms Jayapriya Kanagasundra; Feb 17).

Global Economy & Global Real Estate

US housing wealth centred in a few markets

Study finds 10% of communities held 52% of total wealth

Source: Business Times / Property

[WASHINGTON] A sizable chunk of America's housing wealth is concentrated in a few markets, and that picture is unlikely to change as the housing recovery unfolds, according to a report released on Wednesday.

The Demand Institute, a non-profit group run by the Conference Board and Nielsen, analysed prices of owner-occupied homes in 2,200 of the largest cities and towns. It found that 10 per cent of communities held 52 per cent of total housing wealth - about US$4.4 trillion.

By contrast, the bottom 40 per cent held 8 per cent of the wealth, or US$700 billion.

The disparity has remained constant for years, with little movement in and out of the top and bottom rungs, the report says. Also, although home values rose across the board from 2000 to 2012, the gains totalled nearly US$2 trillion for the top 10 per cent, but US$260 billion for the bottom 40 per cent.

-From Washington, US

Ukraine's unfinished revolution has mansion to match

Workers abandon construction of Yanukovych's luxurious Black Sea retreat

Source: Business Times / Property

[LASPI, Ukraine] Chased from his sumptuous villa outside the Ukrainian capital and last sighted searching for a sanctuary on the Crimea Peninsula, Viktor F Yanukovych, the former president, suffered a final indignity on Tuesday: the masons and electricians he had hired to build a seaside retreat in a historic, old-growth forest decided that he would never pay his bills and started hauling away their equipment and materials.

The mansion, still under construction but even bigger than the palatial presidential residence outside Kiev that was overrun by protesters over the weekend, had been at least two years in the making, a gargantuan folly of excess just down the Crimean coast from the former summer palace of Russia's toppled imperial family.

Its main hall has a 40-foot-high ceiling and majestic view of the Black Sea, while living quarters downstairs feature an indoor swimming pool, a big hole for a hot tub and walls thick enough to withstand an armed attack.

With the interiors still unfinished, instructions left on the walls by builders identify what kind of flooring was to have been laid in each room, a mix of marble and wooden parquet.

-By Andrew Higgins

Asean growth outlook 'remains robust'

Soruce: Straits Times

Swiss GDP growth slows to 0.2% in Q4

However, data in January suggests the recovery remains on track

Source: Business Times / World

[ZURICH] Switzerland's economy stumbled in the fourth quarter of last year as exports fell, growth data showed yesterday, although evidence of an upturn going into 2014 suggests the recovery remains on track.

Quarter-on-quarter gross domestic product growth was 0.2 per cent, the State Secretariat for Economic Affairs (SECO) said in a statement yesterday - lower than a forecast for 0.4 per cent in a Reuters poll and the previous quarter's 0.5 per cent growth.

Consumption, supported by low unemployment and a high rate of immigration, and investment in construction helped to prop up growth.

But that was offset by a 1.7 per cent fall in exports of goods, with a decrease in chemical and pharmaceutical products weighing in particular, the SECO said.

-From Zurich, Switzerland

Colony-Woodridge Venture Buys Ritz-Carlton Maui Resort

Source: Bloomberg / News

A partnership of Thomas J. Barrack’s Colony Capital LLC and Woodridge Capital Partners LLC bought the Ritz-Carlton Kapalua resort in Hawaii for an undisclosed amount.

The new owners, which include Colony Financial Inc., an affiliate of Barrack’s firm, plan to make additional investments in the luxury property, the companies said in a statement today. The resort, on the island of Maui, will continue to be operated by Marriott International Inc. (MAR) under its Ritz-Carlton brand.

Colony Capital based in Santa Monica, California, and Los Angeles-based Woodridge acquired the property as lodging demand on the Hawaiian islands soars. Hotel occupancy statewide was 80 percent in January, the highest in the U.S., according to Hendersonville, Tennessee-based research company STR.

“With its special character, remarkable location and precious natural resources, the Ritz-Carlton Kapalua is a rare property that would be nearly impossible to duplicate today,” Michael Rosenfeld, Woodridge’s founder, said in the statement.

Lehman Brothers Holdings Inc., once the world’s fourth-largest investment bank, financed the resort before filing for bankruptcy in 2008 and gained control after foreclosing on the loan.

A joint venture of New York-based Goldman Sachs Group Inc. and Gencom Group bought the Ritz-Carlton Kapalua in March 2006 and renovated the property before defaulting in April 2009 on a $260 million loan from Lehman. The resort sits on 54 acres (22 hectares) and has 463 guest rooms and suites. It also features a spa and two championship golf courses, according to its website.

-By Nadja Brandt

U.S. Retail Chains See First Profit Decline Since Recession

Source: Bloomberg / Persoanl Finance

U.S. retailers last quarter suffered their darkest days since the recession.

With results in from 62 of 122 retail chains, the industry has posted its first profit quarterly drop since the economic contraction that ended in 2009, according to Retail Metrics Inc. Revenue also rose at the lowest rate since that year, the research firm found.

The results paint a grim picture of an industry hit hard by the sluggish job recovery and slow wage growth, which have turned U.S. consumers into a nation of penny pinchers. Earnings are expected to drop 6.1 percent on average during the holiday quarter, according to Retail Metrics data. The broader pool of Standard & Poor’s 500 Index companies, meanwhile, are estimated to see profit rise 8.5 percent.

“It was a very tough season for the retailers, no question about it,” Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said in a phone interview. “They were facing pressure on multiple fronts.”

Still, some chains are predicting a rebound this year. Target Corp. (TGT) -- which saw profit and revenue tumble last quarter, in part because of a hacker attack -- said yesterday that sales have shown signs of improvement this month. Macy’s Inc. also predicted that spring would bring a sales recovery, after frigid weather forced it to close hundreds of stores.

‘Fire Sale’

For the past quarter, retailers’ total revenue is expected to climb 1 percent, the smallest gain since the third quarter of 2009, according to Retail Metrics. The lack of wage gains restrained many consumers from making discretionary purchases, Perkins said. To cope, some chains cut prices by 50 percent to 60 percent. The industry hasn’t seen such heavy discounting since the “fire sale” that took place during the 2008 holiday quarter, he said.

Teen retailers were the hardest hit, based on adjusted earnings per share. Their profit is decreasing 37 percent, Retail Metrics found. Electronics chains are down 17 percent, and discounters are dropping 12 percent, the firm said.

Thirty-four percent of the retailers missed analysts’ estimates, compared with a 13-year average of 20 percent. While many retailers have yet to report their results, those chains are smaller and unlikely to affect the overall picture, Perkins said.

-By Cotten Timberlake

S&P Says Too Soon to Give Rental-Home Securities AAA Grades

Source: Bloomberg / Luxury

New securities backed by U.S. rental homes don’t meet the criteria for the highest credit grade, Standard & Poor’s said, going against at least three rivals.

S&P’s main concerns “revolve around the industry’s operational infancy, historical performance,” lack of testing under “extreme economic conditions and the ultimate liquidation values of the underlying properties, given the risks associated with short liquidation periods,” it said today in a report.

Moody’s Investors Service, Kroll Bond Rating Agency and Morningstar Inc. (MORN)assigned top grades to 58 percent of the bonds in a $479.1 million offering in November by Blackstone Group LP (BX)’s Invitation Homes, the only of its type so far. The market could fuel an unsustainable expansion of institutional rental-home investors if demand for the securities is too strong, according to a report today by the Center for American Progress, a Washington group typically aligned with Democrats.

Wall Street ultimately may sell more than $20 billion a year of rental-home bonds, according to Ryan Stark, a director at Deutsche Bank AG, which structured and helped underwrite the first transaction. Bank of America Corp. analysts forecasted $4 billion of issuance this year in a 2014 outlook, while Barclays Plc said sales “could easily be” $3 billion to $5 billion.

Housing Bubble

S&P “has yet to see” a transaction with portions warranting AAA grades based on the amount of risk protection including “credit enhancement,” New York-based analysts Rasool Alizadeh, Weili Chen and John Connorton III wrote in the report.

Those loss buffers can be tied to items such as classes of deals bearing losses before others, or collateral in excess of the amount of notes sold. The Blackstone transaction was backed by houses bought for $444.7 million and valued at $638.8 million.

“We were comfortable getting to Aaa on the first” Invitation Homes “deal because we believe that even if the borrower is unable to refinance the loan, sufficient value would be available from the sale of the properties in a liquidation scenario to pay off the bonds,” Kruti Muni, a senior vice president at Moody’s, said today in an e-mail.

Kroll was also willing to provide top grades to the securities based on its ability to gauge the potential minimum value of the underling homes, which it has experience with studying when rating traditional mortgage bonds, Glenn Costello, a senior managing director at the firm, said by telephone.

Inflated Grades

Ratings companies are assessing the market after being blamed for helping create the U.S. housing bubble and subsequent financial crisis in 2008 by granting inflated grades to mortgage bonds. The Justice Department sued S&P and parent McGraw Hill Financial Inc. (MHFI) a year ago, seeking as much as $5 billion in civil penalties for losses to federally insured banks and credit unions who relied on the grader’s claims that its ratings were free of conflicts of interest.

McGraw Hill has said it will defend itself “vigorously” against the “meritless” claims.

Institutional investors, led by companies such as Invitation Homes and American Homes 4 Rent (AMH), have bought as many as 200,000 U.S. properties in the last two years, taking advantage of real estate prices that fell by as much as one-third from the 2006 peak, and rising demand for rentals among Americans who lost their houses in the foreclosure crisis.

Fitch Ratings said in October it didn’t believe that rental-home securities should get top ratings now, citing in part the limited track record of big institutions in the business and incomplete historical data on how rents, vacancies and other considerations can vary over economic cycles.

The firm said in a statement then that it was also concerned the borrowing could be hard to refinance or to pay off with the proceeds of home sales that could potentially flood markets. If the single-family rental industry gets too big, it might not be sustainable because it could outstrip the capacity of managers to oversee homes or overinflate property prices, the Center for American Progress said.

-By Jody Shenn