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20th September 2014

Singapore Real Estate

Five new ECs break 9-month dry spell

It's unclear if they will benefit from pent-up demand amid selective buying and unsold units

Source: Business Times / Wealth

FIVE executive condominiums (EC) are coming onto the market, after a nine-month drought in EC launches, but consultants and developers alike are unsure of how they will perform.

Some expect the new launches to benefit from pent-up demand, while others believe sales will not be that brisk as increasingly selective buyers take their time with their new array of choices.

It boils down to the price eventually, most say. SLP International executive director Nicholas Mak said ECs will meet with buyers' resistance if prices exceed S$1 million in quantum or about S$800 psf. Most ECs are selling at about S$780-820 psf presently.

-By Lee Meixian

Fragrance plans to list Aussie business on Catalist

Source: Business Times / Companies

FRAGRANCE Group has plans to spin off its property business in Australia and list it on Singapore's Catalist board.

The property developer's share price rose to an intra-day high of 24.5 Singapore cents on Friday, before closing at 24 cents - up 1.5 cents or 6.7 per cent.

It said in an announcement that the Singapore Exchange (SGX) has voiced no objections to the proposed spin off, but reserves the right to amend the decision as and when new information is provided.

-By Kelly Tay

Balestier gains investors' favour with good location

Its proximity to the city attracts expatriates on a tight budget: Experts

Source: Straits Times / Money

BALESTIER'S unsavoury reputation as a red-light district seems a thing of the past.

Investors are now closing in on the area thanks to rejuvenation efforts and the nearby fast-growing Novena medical hub.

A spate of new projects has enlivened the area, while new amenities have been injected with the completion of the integrated hotel-park complex comprising Zhongshan Mall, Zhongshan Park, and the Days and Ramada hotels.

Hotels and home fixture shops might dot its streets, but the area still retains its charm with the preservation of art deco shophouses dating back to the 1930s.

But consultants said Balestier's location on the city's fringe is the main draw for investors, as expatriates on tight budgets are being forced out of the city centre.

"Within close proximity of city areas such as Newton and Novena, Balestier provides a compelling sought-after alternative to potential homebuyers with its city-fringe location," said Knight Frank research head Alice Tan.

The latest project there is the 48-unit Viio @ Balestier, developed by Techkon Commercial.

Three 926 sq ft two-bedroom units, which come with a study, have been sold at the mixed development since its launch about two weeks ago, at an average price of $1,600 per sq ft (psf). Its 30 retail units are not on sale yet.

At the freehold Ascent @ 456, 12 of the 28 units have been sold for an average of $1,477 psf as at last month, according to official data. Cosmo Loft, also a freehold project, has moved five of its 56 units for an average of $1,775 psf.

Prices of new condos in Balestier have enjoyed steady gains over the past two years, experts noted. Average prices have increased about 9.8 per cent from $1,378 psf in 2012 to $1,513 psf last year. In the first six months of the year, it rose by 2.7 per cent to $1,554 psf.

However, resale prices have eased from $1,362 psf last year to $1,256 psf in the first half of 2014.

Mr Ong Kah Seng, director at R'ST Research, said the slide was in line with the downbeat property market, as home owners prefer holding out for a better offer.

At the 104-unit Domus in Irrawaddy Road, prices have averaged $820 psf in the past year, while average monthly rents have been about $5.10 psf.

Balestier rentals have eased 4 per cent on average over the past year, as more landlords face competition from completed condos in the suburbs, said Mr Ong.

However, he predicted that owners who hold on to their units for at least seven more years should still be able to expect about 10 per cent in capital appreciation.

-By Cheryl Ong

Jurong's journey from sleepy outback to bustling gem

With a major makeover in the works, Jurong's longtime residents recall the days when all was quiet on the western front. 

Source: Channel News Asia / Singapore

SINGAPORE: Jurong is being primed for a major revamp that could make it the place to be - a big turnaround from less than half a century ago, when all was quiet on the western front.

In its previous incarnation, Jurong was a swampy area, with jungle and small fishing villages. Mr Zaman Kadir, 76, has been a Jurong resident for 42 years. "When I was in the army, we used to come around to this area. People reared chicken, and bred fish and prawns. To cross the roads, we had to pay 30 cents to cross in a sampan," he recalls. 

Dr Goh Keng Swee, one of Singapore's founding fathers, made the decision to develop Jurong. It became Singapore's first industrial estate, and played a key role in the industrialisation of the economy in the 1960s. Investors were encouraged to set up factories here, receiving pioneer certificates that gave them tax exemptions and protective status for their goods.

But getting workers to work in Jurong was a problem. The lack of infrastructure meant that companies had to pay workers extra to commute. So the Government decided to build housing estates in Jurong. That was how Mr Zaman came to live in Jurong - he shifted to company quarters here when he left the army to work for a Jurong factory.

Other amenities soon followed, including Singapore's one and only drive-in theatre. Recalls Madam Tan Peck Siok, 87, who has been living here for 43 years: "When I brought my children to the theatre, I also brought straw mats. We would watch the 9pm show. We went twice a week. The kids would clamour to go, or friends who were visiting would want to. This was the most happening place!"

The Jurong Drive-In shut after 15 years, due to flagging attendance. For many years, Jurong was still considered a less than attractive place to live, due to its lack of amenities. Said Madam Tan: "When I moved here, there was no market. When we wanted to take the bus, we had to walk all the way out to the main road - and there was only one bus there."

Gradually, things changed - especially after the Jurong Town Corporation was set up. The transformation into an industrial area meant new companies moving in, and many new buildings going up. 

Social and recreational facilities, as well as transport links, soon improved. By the 1980s, the Pan-Island Expressway linked the west to the east of Singapore, and the MRT line was extended to Jurong.

Today, the area is no longer a sleepy outback. Said longtime Jurong resident Madam Lim Yoh Tee, 70: "Everything is so convenient now. In the past, heading out to take the bus was so hard. Now, everything is so convenient. Buying things, sending the children to school is convenient. There was nothing in the past."

Jurong now has shopping malls to rival those on Orchard Road. A huge new hospital hub is coming up, and Jurong's existing gardens are slated to be transformed into a new lake garden district, complete with waterfront housing. With change in the air once again, Jurong is set to come into its own.

- CNA/xy

A property launch in all but name

Times are hard, but cautious developers may be going overboard

Source: Straits Times / Money

YOU know times are hard in the property market when developers cannot even call a launch a launch.

Before sales of private homes slowed down so badly, developers would, with much fanfare, open a project for preview one weekend and launch it for sale the next.

These days, however, projects seem to spend a prolonged period moseying through an untold number of preliminary stages before they finally muster up the courage to take that big, scary step of making the sale official.


Their main goal throughout seems to be to keep the sale under the radar just in case it turns out to be a flop.

When they do finally launch it, they make only a smaller portion of the total number of units available for sale, so that they can proclaim high take-up rates.

Some may also proclaim that they have secured "commitments" from buyers to pick up units, which may or may not translate to actual sales.

Even if the project's showflat is already completed, many developers are happy to let dust collect.

Like spiders spinning a web, they now quietly complete their showflat first and then wait and wait. The hunt begins only once they believe enough interest from prospective buyers has been drummed up.

It starts off with a tentative and somewhat tense song and dance often known as the "VVIP preview", since clearly only one "V" no longer cuts it in these uncertain times.

This preview can stretch up to several weeks, and though it may make it sound rather exclusive, those not in the Tatler set do not have to fear being shut out.

As I have found over the months I spent visiting showflats as part of my job, "VVIP" pretty much applies to anyone who picked up an agent's call and looks capable of opening a bank account.

Having become extremely flexible in this regard, developers are balancing that out by being extra cautious in others.

This is completely understandable, given the moribund state of the property market - which is not within their control - and their need to keep the public perception of the project positive.

In their eagerness to do that, however, some developers could go somewhat overboard.

I can think of at least one new project where the developer insisted that marketing had not started yet, even though real estate agents had begun to distribute fliers for the condo and send out promotional e-mail.

At another project that had already begun sales, the developer took pains to steer clear of the taboo word. Rather than call it a "launch", it insisted on saying that units were "released" for sale to the public, which to me sounds no different.

Of course, private developers are free to call their project sales anything they want. The Urban Redevelopment Authority does not stipulate precise definitions for the word "launch" in its data dictionary available online.

But I cannot see how smokescreen tactics like that would truly help sales, which depend far more on the project's location, design and, of course, pricing.

After all, what's in a name? A launch by any other name would sell just as sweet - or poorly - as it would otherwise.

-By Melissa Tan

Realtor HSR's commission scheme shakes status quo

Source: Business Times / Companies

A FORMER banker and a major shareholder of two Singapore-listed companies, Tong Kooi Ong is one man whose penchant for shaking up the business turf and needling the big boys with his niche-market ideas in Malaysia has won him both admirers and arch rivals.

Now, amid a relatively torpid real estate market in Singapore and as property brokers grapple to protect their income from further injury, Mr Tong is at it again - this time through HSR International Realtors, a firm owned by Catalist-listed 3Cnergy which he majority owns since March last year.

Just under a month ago, the mid-sized realtor punched above its weight and unveiled a scheme which, in Mr Tong's own words, has set off "bickering" among its rivals.

-By Anita Gabriel

Real Estate Companies' Brief

Lum Chang sells LCD Global stake

Vendors of combined 29.5% stake include David Lum and Raymond Lum

Source: Business Times / Companies

LUM Chang Investments and other shareholders have sold a combined 29.5 per cent stake in LCD Global Investments to privately held JTrust Asia.

LCD - which owns, develops and manages hotels and resorts globally - will eventually be known as JTrust International Ltd.

The sale involves 310,475,205 ordinary shares, at 30 Singapore shares each, for a total of S$93.1 million.

-By Kelly Tay

Keppel Land

Source: Business Times / Wealth


OCBC Investment Research | Sept 19

Close: S$3.46 |

Keppel Land

Source: Straits Times / Money

Broker: OCBC Investment Research

Call: Buy

Fair Value: $4.09

KEPPEL Land has entered into a conditional agreement to sell its one-third stake in Marina Bay Financial Centre Tower 3 at a valuation of $1.25 billion or $2,790 per sq ft. This is in line with an independent valuation by Colliers as at Aug 28, and is broadly within our and the market's expectations. The purchase consideration will comprise $710.1 million, which consists of a part cash payment of $525.1 million and issue of new Keppel Reit units amounting to $185 million. Keppel Land expects net proceeds of $658.9 million and a net divestment gain of $95.5 million when this transaction is completed.

Looking ahead, the group expects to expand its presence in overseas office and retail assets, particularly in China, Indonesia and Vietnam.

Management reiterated its policy of paying out about one-third of divestment gains, which translates to an estimated special dividend of 3.5 Singapore cents per share from both sales. We continue to like Keppel Land for its diversified exposure across property segments, geographical markets and a strong balance sheet.

Frasers Commercial Trust

Source: Straits Times / Money

Broker: DBS Group Research

Call: Buy

Fair Value: $1.48

FRASERS Commercial Trust has entered into agreements with several banks for transferable term loan facilities of $545 million and A$135 million (S$153 million) to refinance its entire existing borrowings. While the interest rates are likely to be comparable, we view this as a major positive move, given that all the new facilities will be unsecured, and that the debt maturity profile will be significantly enhanced. For the year ahead, we remain positive on Frasers' performance.

Apart from benefiting from the recovery in the Singapore office market, we note that the master lease at Alexandra Technopark expired last month and that Frasers is poised for strong rental uplift with direct management of the property. This is in addition to the improved performance at China Square Central, which enjoyed higher leasing demand after its asset enhancement initiatives and the opening of Telok Ayer MRT station.

Investors snap up FCL's $600m bonds

Perpetual bond issue developer Frasers Centrepoint's first

Source: Straits Times / Money

FRASERS Centrepoint (FCL) has launched its first perpetual bond issuance, which is also the biggest cash-raising exercise of its type by a non-bank firm in Singapore since 2012.

The developer priced the $600 million perpetual capital securities on Thursday, with orders coming in at over $3.5 billion.

DBS was a joint book runner for the deal, which is the fifth perpetual bond issuance in Singapore so far this year.

Its head of fixed income, Mr Clifford Lee, said he was not surprised by the overwhelming demand for the bonds, given FCL's strong credit and its reputation as one of Singapore's largest developers.

FCL is behind residential, commercial and hospitality projects, including the upcoming Northpoint City in Yishun which, when completed in 2018, will be the largest mall in northern Singapore.

Earlier this year, FCL said it aimed to set up a private equity fund focused on high-yielding assets in Europe. Separately, it injected six serviced residences into a hospitality real estate investment trust here in July.

Perpetual bonds or securities are bond-like instruments with no maturity or voting rights but with higher coupon rates - the regular payouts investors receive.

The FCL "perp", as it is called, carries a 4.88 per cent coupon to be paid out semi-annually.

FCL can redeem the bonds from the fifth year onwards. If it chooses not to, the bonds' coupon rate will be reset to take into account the prevailing Swap Offer Rate, a market-based rate.

This means that if interest rates in Singapore rise within the next five years, the bond's coupon will be hiked in tandem, to keep it attractive to investors.

In the 10th year, if the bonds are still not redeemed, the coupon rate will once again be reset the same way, plus an extra 1 percentage point will be added.

This is FCL's biggest bond deal and its first perpetual bond. It is also the biggest perpetual bond in the Singapore market since Mapletree Treasury issued its $600 million perpetual capital securities in July 2012.

There were 87 orders for FCL's issuance, from a mix of institutional investors that included private banks, fund managers, insurers and other companies. Some 94 per cent of the orders came from Singapore.

Mr Lee noted that bonds in general have made a strong comeback after last year's lull.

"The peak was in 2012, when we had bond issuances totalling about $30 billion in Singapore. But last year that fell to about $19.8 billion - a 34 per cent drop - as there was a big sell-off in bonds due to fears that the [United States] Federal Reserve was tapering its stimulus programme," he noted.

"But this year the bond market has firmed back up, demand for bonds has returned, so there's been a pick-up in bond issuances. So far this year, there have already been $19 billion worth of bond issuances in Singapore."

DBS was involved in three other perpetual bonds earlier this year - a $300 million deal for Hyflux, a $200 million issue for European commodities trader Trafigura and a $100 million launch for local logistics and real estate player Vibrant Group.

-By Yasmine Yahya Assistant Money Editor

M'sian developer Sunway to list its construction unit next year

Source: Business Times

Lone Star to buy 38 US hotels from Hyatt for US$590 million

Source: Business Times / Wealth

LONE Star Funds, the private-equity firm founded by billionaire John Grayken, has agreed to buy 38 US select-service hotels from Hyatt Hotels Corp for about US$590 million.

The purchase consists of about 4,950 rooms at properties including Hyatt Place and Hyatt House hotels, Chicago-based Hyatt said in a statement on Thursday. The hotels will maintain their existing branding under a franchise agreement between Hyatt and Lone Star, which plans to spend about US$50 million in additional capital on renovations over the next two years.

"Hyatt utilised its strong balance sheet and industry expertise to launch the Hyatt Place and Hyatt House brands," Steve Haggerty, global head of capital strategy, franchising and select service at Hyatt, said. "We are now leveraging that brand equity to recycle capital while maintaining a long- term brand presence in multiple markets."

-From Los Angeles, US

Italy Mortgage Rise Not Enough to Reverse Home Slump, Fitch Says

Source: Bloomberg / Luxury

Italian house prices will continue to decline over the next two years as an increase in mortgage lending isn’t sufficient to counter a sagging economy, Fitch Ratings said.

“Any recovery in the Italian housing market will be slow and faces material risks,” Fitch said in a report published today. “The main driver of the current housing market is the slowness of the economic recovery.”

Residential lending in Italy climbed by 6.5 percent in the first quarter from a year earlier according to data compiled by the European Mortgage Federation. The number of home purchases in the period increased by 4.1 percent, Fitch said.

Italian house prices have fallen by 11.5 percent through the first quarter from a peak in the third quarter of 2011, according to statistics agency Istat. Prime Minister Matteo Renzi has promised to accelerate his economic agenda after data last month showed that Italy slipped into its third recession since 2008.

The International Monetary Fund said yesterday it expects a 0.1 percent drop in Italy’s domestic product in 2014, with debt peaking at 136 percent of gross domestic product before starting to decline. While unemployment is forecast to peak this year, the subsequent decline will be modest, Fitch said today.

“Greater mortgage availability should support transaction volumes and improve affordability, especially while interest rates remain low,” Fitch said. “Nevertheless, we still think that any recovery in the Italian housing market will be slow and faces material risks.”

-By Chiara Vasarri

Japan’s Top Cities Post Land-Price Gains as BOJ Easing Help

Source: Bloomberg / News

Land prices in Japan’s three largest metropolitan areas increased for a second year and residential prices in the cities increased for the first time in six years as low interest rates lifted demand for properties.

The price of land in Tokyo, Osaka and Nagoya gained 0.8 percent on average in the year to July 1 from a 0.1 percent increase a year earlier, the Ministry of Land, Infrastructure, Transport and Tourism said in a report released yesterday. Declines in nationwide land prices, which have been falling for 23 years, narrowed to 1.2 percent, matching the decline six years ago, the report showed.

Property demand has picked up in the world’s third-largest economy as the Bank of Japan eased monetary policy, while expectations for increased building of infrastructure ahead of the 2020 Olympic Games in Tokyo are contributing to the recovery. Real estate prices have risen about 20 percent since Prime Minister Shinzo Abe took office about two years ago, according to an estimate by Deutsche Asset & Wealth Management.

“The real estate market has remained strong based on real demand and that is being reflected in the land-price data,” said Hirotaka Sugiyama, president and chief executive officer at Mitsubishi Estate Co. (8802), Japan’s biggest developer by market capitalization.

Real estate investment in Japan rose 70 percent to 4.6 trillion yen ($43 billion), the highest level since March 2008, in the 12 months ended in March from a year earlier, according to a report published in July by Deutsche Asset.

Residential Prices

Residential land values in Japan’s three-biggest metropolitan areas rose 0.5 percent in the year, reversing a decline of 0.1 percent a year earlier, the annual land survey showed. Commercial land values in the cities gained for a second year, rising 1.7 percent, compared with a 0.6 percent increase a year earlier.

Nationwide prices for commercial land fell 1.1 percent, while land prices for residential property dropped 1.2 percent, according to the report. By contrast, in Tokyo’s metropolitan area, commercial land prices gained 1.9 percent, while residential land values rose 0.6 percent.

“We are seeing a revitalization of the real estate investment market,” said Akira Mori, chief executive officer of developer Mori Trust Co. “We are especially seeing a concentration of demand for large-size properties in central Tokyo. The trend will continue if not accelerate.”

The most expensive piece of commercial property remained in Tokyo’s Ginza shopping district, where a plot can cost as much as 22.6 million yen per square meter (10.76 square foot). The patch of land posted an 11 percent gain from last year, according to the report.

The Topix Real Estate Index that includes 45 developers rose 0.6 percent in Tokyo as of 10:19 a.m. in Tokyo, bringing the year-to-date decline to 19 percent. The Tokyo Stock Exchange (1345)REIT Index, which consists of 46 real estate investment trusts that pay investors rental income generated from the properties they own, fell 0.2 percent.

-By Kathleen Chu