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7th June 2014

Singapore Economy

A 'smart city' has to be green, sustainable and liveable

Source: Business Times / Top Stories

THREE-QUARTERS of the world's population will live in cities by 2050, according to the United Nations. The question of what kind of cities the people of 2050 will find themselves living in was tackled at the recently concluded World Cities Summit (WCS) here.

The general consensus was that a "smart city" would be one that is green, sustainable and liveable.

"The ultimate achievement for a city is to earn unconditional respect from people all over the world, for our people, our city and our country," said Liu Thai Ker, chairman of the Centre for Liveable Cities (CLC), during his closing remarks.

-By Lester Wong, Raphael Lim and Sheena Tan

Singapore Real Estate

Unsold homes big drag on developers' coffers

Punishing fees seen incentivising some to reprice projects to move sales in near term

Source: Business Times / Top Stories

DEVELOPERS have collectively paid up to $55.1 million in extension fees for unsold units in their private condo projects since 2012. They could potentially fork out another $80.7 million to extend the sales period for another year if they do not sell their inventory by year-end, according to a study by OrangeTee Research.

"As the penalty amounts to millions of dollars per project, we believe that it will incentivise some developers to reprice some of these projects to move sales in the near term," said OrangeTee research head Christine Li.

A total of 24 condo projects, mostly high-end ones, are still not fully sold two years after receiving their temporary occupation permits (TOPs) between 2010 and 2012, the study showed. 

Under the government's Qualifying Certificate (QC) rules, developers have to pay extension charges to extend the sales period after two years of the project's TOP.

All developers with non-Singaporean shareholders or directors need to obtain QCs to buy private land for new projects because they are deemed "foreign developers" under the Residential Property Act (RPA). This means the QC rules apply to all listed developers. Privately owned Far East Organization and Hoi Hup are among the few developers exempted from the rules.

Given that the QCs allow developers up to five years to finish building a project and two more years to sell all the units, the heat is on developers to clear their stock by the deadline.

To extend the sales period, developers pay 8 per cent of the land purchase price for the first year of extension, 16 per cent for the second year and 24 per cent from the third year onwards. The charges are pro-rated based on unsold units over the total units in the project.

Such fees drove luxury residential player SC Global to delist from the Singapore Exchange last year after sales slowed significantly due to the government's property cooling measures.

Analysts warn that more extension charges will kick in. The charges paid up so far are just the tip of the iceberg as projects built from land acquired during the 2006-2007 en bloc fever have just crossed a seven-year mark, they say.

"More developers are caught between a rock and a hard place" as they have to decide whether to pay the extension charges or cut prices to move the units, said SLP International executive director Nicholas Mak.

If they pay for extension charges, there is also the question of whether they can recover these costs later on, he said. This is why some developers of luxury projects are resorting to selling the units in bulk to mega investors.

OrangeTee's study of the 24 projects excluded three projects whose land costs could not be determined. It tracked sales of projects through caveats lodged, which it conceded could be lower than actual sales.

At the end of the first quarter of this year, there were 10,295 unsold units in the Core Central Region (CCR), 8,089 in the Rest of Central Region (RCR) and 12,433 in the Outside Central Region (OCR).

Based on URA caveats, there are 71 unsold units in Wheelock Properties' Scotts Square that TOP-ed in 2011 and 16 unsold units in Wing Tai's Helios Residences, which also TOP-ed in the same year.

"As unsold inventory builds up, there will likely be more bargains in the market if developers want to avoid paying penalties to extend the sales period, especially high-end developers who have already paid premium prices for their lands," Ms Li said.

The study excluded the fees that developers need to pay to extend the completion of projects beyond five years, as they can typically extend without paying the charges "based on technicalities".

Even in a more optimistic scenario where developers manage to sell 20 per cent of the remaining units for the rest of this year, further extension charges to be paid by developers by end-2014 will amount to around $68.3 million.

Some market watchers noted that the QC rules should mark a distinction between larger and smaller projects, given that it takes a longer time to move all the units in large projects in a difficult market as the current one.

Century21 chief executive officer Ku Swee Yong said that demand for high-end projects had been hit hardest by higher additional buyers' stamp duty (ABSD) since January 2013 and a borrowing cap under the total debt servicing ratio (TDSR) since June last year.

Even if a developer decides to set up an investment company to buy the units and rent them out, the company could be hit by a 15 per cent ABSD and is restricted by a loan-to-value limit of 20 per cent.

While there is good reason for having QC rules to regulate foreign participation in the housing market, these rules were in place before the ABSD and TDSR. "It is about time we review these measures," Mr Ku said.

-By Lynette Khoo

More malls going green

Source: Channel News Asia / Singapore

SINGAPORE: More shopping malls in Singapore are going green in the global push to be more environmentally friendly.

Such green features help to reap savings in energy and water usage.

But in addition, some consultants say, they also help to create a safer shopping experience for consumers

There are 32 eco-malls in Singapore according to the Building and Construction Authority, and some of the green features do enhance your shopping experience without you even knowing it.

Lend Lease which manages 313@Somerset along Orchard Road says such features include a highly efficient air-conditioning system that generates more airflow but less noise, skylight that lets in natural lighting, and the use of what's called low volatile organic compounds or low VOC paints which are less toxic.

"It is creating a more comfortable environment," said John Sironic, Head of Retail Operations at Lend Lease. "The paint is less volatile, there is fresher air coming through, we use bulbs with reduced flickering so there is less of a stress in your eyes which can potentially give people headaches."

Lend Lease says 313@Somerset achieves annual energy savings equivalent to powering about 6,700 4-Room HDB flats in a month. While water savings works out to an equivalent of six Olympic sized swimming pools.

The mall operator is also working with tenants to drive more sustainable practices.

"The way our model works is if they introduce some of these greening initiatives, and these initiative have in turn reduced energy cost that they may be charged, we may discount some electricity cost for example," Sironic added.

Lend Lease says typically air conditioning uses the most energy in a mall, followed by escalators and lifts, and lighting. Together they account for about 70 to 80 per cent of total energy consumption."

Over at City Square Mall on Serangoon Road, Singapore's first eco-mall, there is a green feature which collects rain water to be re-used for irrigating plants.

Mall Manager City Developments Limited (CDL) says such efforts have helped the mall reap annual water savings equivalent to nearly 10 Olympic-sized swimming pools.

CDL says annual energy savings is equivalent to powering 3200 4-room HDB flats for a year.

The developer adds that it invests 2-5 per cent of construction cost of new developments on green building design and features.

But it says that there is more to going green.

"It is easy to make a mall green in terms of technology, in terms of infrastructure, however to be sustainable it is more important to engage the community at large to learn about sustainability -- to know about energy conservation, waste recycling, water conservation," said Allen Ang, Head of Innovation & Green Building at CDL.

So CDL has placed eco-messages around City Square mall to drive greater awareness.

Consultants say that, increasingly, more developers are building green properties.

"You have lower over-heads, and in some studies, it also translates into better occupancy rate, better rental rates, as well as resale value," said Owen Wee, Vice President, Building Consultancy Services at Surbana International Consultants. "Developers are recognising that it is an asset protection strategy as well."

Meanwhile, building tenants are also getting in on the greening act.

The Building and Construction Authority says at least 50 tenants including supermarkets and fast food restaurants have committed to green their outlets through the Green Mark Portfolio Programme since its launch last September.

The programme seeks to encourage the adoption of energy efficient design, technologies, and good environmental management system among tenants. 

- CNA/rw

Flats, social institutions among 75 buildings to be conserved

Source: Straits Times

Warehouses, public housing flats, a former market, health-care facilities and places of worship were among the latest 75 buildings gazetted for conservation yesterday. Experts say the list represents a widening of the Urban Redevelopment Authority's (URA) conservation net to recognise buildings beyond their architectural merit.

CBD living set to pick up momentum

Source: Straits Times

Living in the bustling Central Business District has caught on, with plenty of property launches in the area in recent years. Many people love the convenience of being just five minutes from work, but some have grumbled at a lack of amenities. There are no schools, supermarkets and shopping centres in close proximity, they say.

Real Estate Companies' Brief

From 'white knight' to Reit grower

Heng Fai Enterprises is seeing results from its first two Reits

Source: Business Times / Companies

THE days of swooping in to rescue and turn around troubled companies through drastic corporate restructuring are over for Hong Kong-listed Heng Fai Enterprises.

The company, which most recently washed its hands of Singapore-listed SingHaiyi by selling it to low-profile Chinese tycoon Gordon Tang, told The Business Times that its transformation from a compulsive "white knight" to a dedicated real estate investment trust (Reit) manager has already borne its first fruit.

Its first two Reits, American Housing Reit (AHR) and Global Medical Reit (GMR), with US single-family homes and healthcare facilities as their respective assets, have both taken off; by FY15, they will migrate from the over-the-counter bulletin board to the Nasdaq mainboard.

-By Lee Meixian

Ascott pursues China expansion

Source: Straits Times

Capitaland's wholly owned serviced residence business unit, The Ascott, has formed an alliance with Beijing Vanke to drive Ascott's expansion plans in China, the firm said yesterday. Beijing Vanke, a wholly owned subsidiary of Vanke China, will "leverage its significant presence and expertise" to develop serviced residences in China, while Ascott will provide its capabilities in managing serviced residences. -

Thai tycoon has market buzzing about plan for FCL

Source: Straits Times

You can't deny that when Thai billionaire Charoen Sirivadhanabhakdi does something, he does it in grand style. Last January, he took control of beverage giant Fraser & Neave (F&N) in a $13.75 billion deal billed as Singapore's largest corporate takeover in history.

Centurion Corporation

Source: Business Times / Wealth


DBS Group Research | June 6

Close: $0.705

Global Economy & Global Real Economy

SingHaiyi eyeing more distressed US property

Source: Business Times / Companies

HONG KONG-listed Heng Fai Enterprises may have guided SingHaiyi, previously a struggling interior fit-out firm, into Singapore's property development scene in 2006 and helped its market cap to grow hundred-fold to about $400 million in the immediate years that followed, but Heng Fai's exit last year also left it in the lurch, saddled with a portfolio of residential projects amid government measures to quell property speculation.

Although three of its four projects have sold well, sales at one - the 56-unit freehold CosmoLoft in Balestier - have been slow with only 10 per cent sold. This led SingHaiyi to record an impairment of $10.5 million for FY2014 after the company compared its sales and selling prices to other projects in the vicinity.

In a recent interview, SingHaiyi's management told The Business Times that more than just diversifying out of residential projects into the more resilient commercial space - evident from its taking of a 20 per cent stake in TripleOne Somerset earlier this year - the Catalist-quoted real estate firm is increasingly focusing on purchasing distressed properties in the US.

For FY2014, SingHaiyi's US operations accounted for $11.8 million (versus nothing for FY2013) or one-fifth of the group's revenue, mainly from the sale of units at its Vietnam Town commercial condominium in San Jose, California, as well as rental revenue from its Tri-County Mall in Cincinnati, Ohio.

-By Lee Meixian

GLP completes first tranche of China agreement

Source: Business Times / Companies

GLOBAL Logistic Properties (GLP) has completed the first part of its agreement with a group of Chinese investors.

The provider of modern logistic facilities in China, Japan and Brazil had entered into an agreement with a group of leading Chinese institutions, including Bank of China Group Investment Limited, China Life and HOPU Funds in February for an up to US$2.5 billion investment in GLP.

The company said yesterday: "The new partners enhance GLP's access to land, leasing demand and new business opportunities."

-By Raphael Lim

UK must curb rising house prices: IMF

Otherwise, increased indebtedness may pose a risk to economic recovery

Source: Business Times / Wealth

THE United Kingdom must act to contain rising house prices as increased indebtedness may pose a risk to the economic recovery, the International Monetary Fund (IMF) said.

While the British economy has "rebounded strongly", widening house-price inflation and an increase in the size of new mortgages has made households more vulnerable to interest-rate shocks, the IMF said, while adding there are "few of the typical" signs of a bubble.

Action could include limiting the proportion of high loan-to-income mortgages lenders can issue, and modifying or even scrapping the government's Help to Buy programme, the Washington-based fund suggested.

-From London, UK

Link Reit sees steady rent increase from malls

Source: Business Times / Wealth

LINK Real Estate Investment Trust, Asia's largest property trust, said rental income from its malls should steadily increase even as Hong Kong's retail sales fell for three straight months.

"Our tenants are quite resilient," chief executive officer George Hongchoy said in an interview on Thursday. Excluding high-end goods, such as jewellery and watches, the city's retail market is still healthy, he noted.

Hong Kong's retail sales tumbled 9.8 per cent in April, the biggest year-on-year drop since 2009, driven by a 40 per cent plunge in jewellery, watches and clocks as mainland Chinese spenders reined back luxury purchases. Link Reit, which owns neighbourhood malls, food markets, and car parks, has less exposure to the luxury sector compared with other landlords, Mr Hongchoy pointed out.

-From Hong Kong, China

Angola’s $7 Billion Waterfront Project Stalks Hilton Hotels

Source: Bloomberg / News

Builders of a $7 billion waterfront development in Angola’s capital, Luanda, are seeking to attract an international hotelier such as Hilton Worldwide Holdings Inc. (HLT) to boost the profile of the project.

Baia de Luanda SA, whose shareholders include state oil company Sonangol Holdings Lda and the president’s daughter, Isabel dos Santos, is developing four plots around the upmarket seaside bay of the city. It wants a flagship hotel to be built on the site, part of a 7-kilometer (4.3-mile) spit into the Atlantic known as the Ilha surrounded by yacht clubs and some of the city’s most expensive restaurants.

“We have people knocking on our doors to have hotels here, whether Americans or Angolans,” Mauro Filipe Martins, business development director at Baia de Luanda, said in an interview at the site. “This project is a postcard for the new Angola.” He named Hilton as one of the hoteliers the developer is hoping to attract.

Africa’s second-biggest oil producer is luring foreign investors to help diversify the economy away from crude as it recovers from a 27-year civil war that ended in 2002. Dozens of construction cranes mark the Luanda skyline as offices, retail and residential developments are built to accommodate a growing middle class. The Angolan capital is Africa’s fifth-largest city after Cairo, Lagos, Kinshasa and Johannesburg, with almost 6 million people, according to data compiled by Bloomberg.

Attract Investors

Angola’s economy excluding oil will grow by 6.4 percent this year, the International Monetary Fund said on March 19, up from about 5.8 percent last year. Total Gross Domestic Product expanded by an average of 9.2 percent in the five years to 2012, according to government budget documents. Angola pumped 1.68 million barrels a day in May, second to Nigeria in Africa, according to data compiled by Bloomberg.

The waterfront needs international brands such as the hotel chains to boost confidence in the developments and attract other foreign investors, according to Fernando da Ponte, manager at Luanda-based real-estate company Century 21 Angola. Three other projects under construction near the bay have the potential to add 350,000 square meters (3.8 million square feet) of new buildings.

“There is demand for retail and office space, but they’ll have to bring in big commercial brands as tenants or they won’t be able to support these developments,” da Ponte said in an interview in Luanda on May 30. “Compared with four years ago, when buyers would accept anything, developers now have to make sure they provide good finished spaces.”

Africa Expansion

Hotel chains including Hilton and Marriott International Inc., the owner of the Ritz-Carlton and Renaissance brands, are expanding in Africa to take advantage of rising disposable incomes and demand for business travel. Both are yet to enter Angola, where hotel investment has been mostly restricted to companies from Portugal, the country’s former colonial ruler. These include the Epic Sana Luanda, run by Lisbon-based Sana Hotels, and TD Hotels’s Tropico.

Angola is perceived as one of the most difficult countries in the world in which to do business, ranked 179th of 189 countries in the 2014 World Bank Ease of Doing Business Index. The country is placed 153rd of 177 countries on Transparency International’s 2013 Corruption Perceptions Index.

“The major challenge for hotels will be in education,” Baia de Luanda’s Martins said. “They know this and that they’ll have to train everyone to be service-oriented and professional.”

Yacht Club

Marriott almost doubled its rooms in Africa to about 23,000 in April with the $200 million acquisition of Cape Town-based Protea Hospitality Holdings. A spokeswoman said she couldn’t immediately comment on the company’s plans for Angola. A spokeswoman for Hilton didn’t return an e-mailed request for comment.

Other Luanda bay projects in development include the Fortaleza Center, which will have 90 outlets including shops and cinemas over seven floors.

The 250,000 square-meter Kinaxixi MXD Complex will include five floors of shopping and two 25-story towers for residential and office space, while Kianda, managed by London-based Mace Group Ltd., will have two 25-story and two 27-story commercial office towers.

“The impact of all this development will be positive because people will seek our services,” Mario Fontes, president of Clube Naval de Luanda, said in a dockside interview on the spit, called the Ilha do Cabo. “However, I don’t exactly agree with some of the large developments and buildings that will bring a lot of people to live on the Ilha. It should be more for sports and leisure.”

New Park

Clube Naval, Africa’s second-oldest yacht club at 131 years, is preparing for a $20 million renovation of its own. Its 450 members, including government ministers, ambassadors and oil executives, will get an Olympic-sized pool, gymnasium and three restaurants.

Baia de Luanda was granted the waterfront land by the government of President Jose Eduardo dos Santos. One of the stakeholders is Geni Holding Co., part-owned by Isabel dos Santos, 41. The project cost includes dredging and adding 77 hectares (190 acres) to the waterfront, all road, water and electrical links, and a new 3.1 kilometer park curving round the bay, Baia’s Martins said.

The park’s 47,000 square meters of grass was laid by SIS Angola Lda, a unit of the company that maintains football pitches for European soccer clubs Real Madrid and Ajax, according to the company website.

“Development zones get a lot of buying interest if you have a major hotel chain,” Martins said. “There’s a lot of companies in houses, like ours, that want to move to proper offices.”

-By Colin McClelland

IMF Says U.K. Must Act to Curb Risk From House Prices

Source; Bloomberg / Luxury

The U.K. must act to contain rising house prices as greater indebtedness may pose a risk to the economic recovery, the International Monetary Fund said.

While the British economy has “rebounded strongly,” widening house-price inflation and an increase in the size of new mortgages has made households more vulnerable to interest-rate shocks, the IMF said, while adding there are “few of the typical” signs of a bubble. Action could include limiting the proportion of high loan-to-income mortgages lenders can issue, and modifying or even scrapping the government’s Help to Buy program, the Washington-based fund suggested.

“In an environment where expectations of capital gains can quickly drive up household indebtedness -- and thus systemic risk for financial institutions —- more policy action is warranted,” the IMF said today in its Article IV report on the U.K. “Macroprudential policies should be the first line of defense against financial risks from the housing market.”

Today’s warning on house-price inflation echoes European Commission recommendations made earlier this week that the U.K. should consider tax reforms and adjust Help to Buy to curb surging property prices. Chancellor of the Exchequer George Osborne said the Bank of England should use the tools at its disposal to curb property-price inflation if it posed a risk.

’Remain Vigilant’

“We need to remain vigilant for any risks that might emerge in the housing market,” Osborne told a news conference in London to mark the report’s publication. “That’s why I have given the Financial Policy Committee new macroprudential tools should they see a risk to financial stability,” including “recommendations to me on the parameters of the Help to Buy scheme.”

The IMF suggested measures to curb house-price growth “should be introduced early and gradually” to allow the FPC to calibrate them to the risks. The BOE panel has said it’s “alert” to risks and will review the housing market at its meeting this month.

Initial measures could include implementing rules on the level of loan to income, for example allowing lenders to make only a limited percentage of loans above a certain ratio, according to IMF officials.

U.K. house prices surged 3.9 percent last month as rising demand pushed values to the highest in six years, according to Halifax. Prices have risen 11 percent in the past year to an average 184,464 pounds ($309,000), the mortgage lender said yesterday.

Lending Restrictions

Rising demand and a shortage of supply have fueled prices, particularly in London. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc (LLOY), the owner of Halifax, have imposed restrictions on mortgage lending to counteract the surge in the capital.

The number of homes bought with the support of a government mortgage guarantee under Help to Buy totaled 7,313 in the first six months of the program, equal to 1.3 percent of all loans completed, according to the Treasury. Eighty percent went to first-time buyers. The mortgage guarantees were made available in October, extending an existing program that provided interest-free loans for buyers of newly built homes.

IMF officials said the Treasury should examine whether there’s still a need for the mortgage-guarantee plan as while volumes were still small, lending through the plan could pick up over time, and evidence suggested credit outside the program was becoming available to the kind of people it had intended to benefit.

Housing Supply

The government pledged to press ahead with Help to Buy in its legislative program for the next year, announced to Parliament by Queen Elizabeth II this week.

The fund also urged the government to make further reforms to spur housing supply.

“Key inefficiencies remain,” the IMF said. “These include unnecessary constraints on brownfield and greenfield developments, tax policies that discourage the most economically efficient use of property, and underdeveloped rental markets with relatively short lease terms.”

The fund, which previously criticized Osborne’s budget-reduction program for being too aggressive, praised it in this report for its flexibility and predicted that growth will “remain strong” this year.

“The U.K. economy is firing on all cylinders,” Osborne said. “Today’s IMF report shows that our long-term economic plan is the right one.”

Hold Rates

The IMF, while noting that “inflation has fallen rapidly,” also recommended that monetary policy should remain on hold “for now.”

“Policy might, however, have to be tightened quickly if costs run ahead of productivity growth, slack is absorbed, or financial stability concerns cannot otherwise be addressed,” the fund said.

The BOE’s Monetary Policy Committee held its key interest rate yesterday at a record-low 0.5 percent, the level it’s been at since March 2009.

Investors are betting the benchmark rate will rise 25 basis points by next May, according to forward contracts based on the sterling overnight interbank average. Expectations of a rate increase in the coming 12 months climbed to the highest since 2011, according to the BOE’s quarterly Inflation Attitudes Survey, published today.

-By Svenja O’Donnell