Singapore Property News Upfront 7

Crazy or plain greed? Subject: Eliz Hgts. Asking: $2100ppr!
Asking prices for land in the prime districts continued their dizzying climb, as Elizabeth Heights, a freehold development in the Cairnhill area, was released for sale yesterday - with a price tag of as high as $2,100 per square foot per plot ratio (psf ppr).

The price topped that set by the 99-year leasehold Grangeford Apartments earlier this week. Grangeford comes with a whopping $660 million ‘guide price’ - more than double the $280 million bandied about in October last year. This works out to $2,016 psf ppr, including an estimated $97.8 million any developer will have to pay the state to restore the site’s remaining 66-year lease to 99 years.

Grangeford’s asking price of $2,016 psf ppr was the highest until Elizabeth Heights came along.
‘We expect to receive offers in the region of $570 million to $600 million, reflecting a land rate of about $2,000 to $2,100 psf ppr,’ said Karamjit Singh, managing director of Credo Real Estate, which is seeking expressions of interest for the site.

For any developer to earn a decent 20%, which I think it'll be silly at this point, they would need to market it at $2,800 - $2,900psf! Many developers are aiming as high as 30% - 50% margin! If that's expected, the market needs to be as bouyant in 2008/9 as now or somebody's gonna get hurt." - www.PropertyBingo.com

Elizabeth Heights has a land area of 88,600 sq ft and comes with a 2.8 plot ratio, but any buyer may redevelop the site up to its existing gross floor area of 285,000 sq ft, said Credo. No development charges should be payable, the property firm added.

An estimated 136 units with an average size of 2,000 sq ft each can be built on the site. Credo executive director Yong Choon Fah said that the asking price was not too high, and that it was comparable with that asked by Grangeford, which is used as a benchmark. In addition, Elizabeth Heights is unique in that it falls within a small stretch of properties along Cairnhill Road on which a 36-storey development may be allowed, Mr Singh said. He added that most of the other sites in Cairnhill and Scotts Road have a height control of up to 20 storeys.

‘Home buyers are willing to pay a significant premium for luxury homes on high floors with good views,’ said Mr Singh. ‘As the new development on this site may overlook its surroundings with its 36-storey potential, we believe this advantage would help support a land rate of at least $2,000 psf ppr.’

At present, Elizabeth Heights comprises 84 maisonettes and six penthouses. Some 71.2 per cent of the owners by share value have consented to the collective sale. A minimum of 80 per cent is needed before any sale can go through. If the price of $600 million is achieved, maisonette owners will each receive $6.2-6.4 million, while penthouse owners will get at least $11.1 million each.

These prices are about 40-50 per cent above market values, said Credo. The expressions of interest exercise will close on May 25 at 2.30 pm.

Let's watch this deal. Fear or Greed? Either way, somebody will sway.

Source: The Business Times, 26 April 2007
Posted by Property Wizkid

Hotel site, anyone? URA beckons.
The Urban Redevelopment Authority has put another hotel development site on the Government Land Sales reserve list. The move comes on the back of a strong performance by the hotel sector, based on the latest Singapore Tourism Board figures.

STB revealed that hotels here generated $162.1 million of room revenue in March - 28 per cent more than a year earlier and the highest monthly figure since 1995. The average room rate increased 24.5 per cent in March from a year earlier to a record $194, surpassing the previous high in September last year. The average occupancy rate was 91 per cent in March, up 2.9 per cent from March 2006.

As such, demand for new hotel sites is expected to be high. The latest site on the reserve list is at the junction of Victoria Street and Jalan Sultan. The 73,424.9 square foot site has a plot ratio of 4.5 and a maximum gross floor area of 330,408.7 sq ft. Savills Singapore director of investments Steven Ming reckons that the land could be worth $500-550 per sq ft per plot ratio (psf ppr). In November 2006, the Hong Leong Group paid $520 psf ppr for a site in Mohamed Sultan Road.

There are now six hotel sites on the reserve list. There is also one site in Tanjong Pagar that is already open for tender. Apart from these, there are sites on the confirmed list with a hotel component, and more sites on the reserve list coming up later this year. Mr Ming believes that there should be demand for the sites. ‘We do not think that there are too many hotel sites given the current high average occupancy rate and expected strong growth in the number of tourist arrivals to Singapore,’ he said.

Savills estimates that a 400-450 room hotel is feasible on the latest site, with the cost of each room coming in around $350,000-400,000. ‘This is on the assumption that the winning developer builds a 4-star hotel on the site,’ Mr Ming said. Jones Lang LaSalle Hotels executive vice-president Chee Hok Yean also thinks a 450-room hotel is likely.

On the supply of hotel rooms, Ms Chee said: ‘Sites released now will take three years before the hotel will be completed and this is in line to meet the expected increase in tourist arrivals.’
Going by STB’s figures, visitor numbers are growing. In March, Singapore welcomed 835,000 visitors, a 1.9 per cent increase from a year earlier and a record for the month.

Source: The Business Times, 26 April 2007
Posted by Property Wizkid

Another Hotel site by URA, what else?
The Urban Redevelopment Authority (URA) is calling for bids for a reserve site along Rochor Canal earmarked for hotel development. Located at the junction of Victoria Street and Jalan Sultan, the 99-year leasehold land parcel has a maximum permissible gross floor area of about 30,696 square metres, the URA said yesterday.

The site, near Lavender MRT station, measures 0.68 hectares and has a gross plot ratio of 4.5.
“Its dual frontage along the major thoroughfares creates an opportunity for a distinctive hotel development,” said the Government agency. The maximum building height permitted for the new hotel would be a part four-storey and part 25-storey building that does not exceed 153 metres.
Under the reserve list system, a site would be put up for tender only if a developer’s indicated minimum bid price is acceptable to the Government.

The Victoria Street land parcel is one of three new hotel sites listed in the Government Land Sales Programme for the first half of this year. Last week saw a New Bridge Road site put up for application, while another hotel site at the junction of Victoria Street and Jellicoe Road will be made available next month.

Source: Today, 26 April 2007
Posted by Property Wizkid

Time to trumpet huge profits!
Keppel Land, Singapore’s third-largest property developer by market value, on Wednesday reported a 72 per cent surge in first-quarter profit on stronger luxury home sales and higher office rents.

The firm, partly owned by government-linked conglomerate Keppel Corp, said it earned $62.5 million (US$41.4 million) net profit in the January-March quarter this year, up from $36.3 million in the same period last year. Keppel Land has a 40 per cent stake in K-Reit Asia, a property trust which has a portfolio of four office buildings in Singapore.

Source: The Business Times, 25 April 2007
Posted by Property Wizkid

Singland sings her earnings too!
Singapore Land, an office landlord that also owns a majority stake in the Marina Square development, yesterday reported a 25 per cent year-on-year jump in first-quarter group net earnings to $28.13 million.

This helped give a 30 per cent fillip to its parent United Industrial Corp’s net profit for the same period to $22.1 million. SingLand said its total revenue for the three months ended March 31, 2007 declined 12 per cent to $44.99 million due to the absence of $13.8 million sales recorded in the year-ago period for The Paterson and Stevens Loft residential projects, which were fully sold in 2006.

However, gross rental income increased 22 per cent to $43.7 million. SingLand owns a portfolio of office blocks including Singapore Land Tower, The Gateway and Clifford Centre and part of SGX Centre. SingLand said yesterday its 53 per cent-owned subsidiary Marina Centre Holdings (MCH) achieved a higher Q1 net profit.

The subsidiary fully owns the Marina Square mall and - under a deal announced late last month - the Pan Pacific Singapore hotel. It also has a 50 per cent interest in the two other hotels in the complex, Marina Mandarin Singapore and The Oriental Singapore.

SingLand’s Q1 earnings per share rose to 6.8 cents from 5.5 cents a year earlier. Net asset value per share at March 31, 2007 was $7.56, up six cents from the figure a year ago. UIC’s Q1 revenue rose 9 per cent to $81.1 million, chiefly due to a 19 per cent increase in rental income. Earnings per share rose from 1.2 cents to 1.6 cents. Net asset value per share rose from $1.77 at Dec 31, 2006 to $1.79 at March 31, 2007.

Source: The Business Times, 25 April 2007
Posted by Property Wizkid

1.7m sq ft of office space will be gone by end 2007!
With the current trend of old office buildings being sold for redevelopment, an estimated 1.73 million square feet of space might be taken out of the Central Business District (CBD) supply by the end of this year.

This will likely drive up office rentals and the capital values of those buildings, analysts said. At the 33-year-old Ocean Building owned by Keppel Land, about half of the tenants have already moved out to make way for a new office block.

That alone will take more than 400,000 square feet worth of space out of the market in the CBD.
This is in addition to old offices such as Asia Insurance Building, Straits Trading Building and Natwest Centre, all of which were sold for redevelopment last year.

“All in all, if you look at the total amount of office space that used to be in the market, close to about 900,000 square feet of space has been taken out of the supply, just over the last 12 or 24 months,” said Cushman & Wakefield’s managing director Donald Han. “And as the collective sale market gains momentum, some of these strata title office buildings might be taken out of the supply equation as well.”

To date, an estimated 500,000 sqft has been quashed over the last 12 months. With an encouraging economy, companies can afford a little more prestige and a reasonable price increase. However, likely mergers of Barclays & ABN Amro may relieve about 50,000 sqft into the market. No doubt it's only 10% but didn't I say it's a relief. http://www.propertybingo.com/News.aspx?id=40

United Industrial Corporation, which owns 78.8 per cent of UIC Building, has announced plans to acquire the 400,000-square-foot property. Analysts are also predicting that other buildings in the vicinity, such as Dapenso Building, Shenton House and Afro Asia Building, will be put up for collective sale. “It only means that there will be higher rentals. I think the balance of power will continue to be controlled by the owners and landlords. At the same time, we expect capital values to grow in tandem with the increase in rentals,” said Mr Han.

Prime CBD office rentals are forecast to rise by some 56 per cent to $18.50 per square foot by the end of next year, up from the current $11.80, Citigroup estimated. Like Diana Ross sings "Rush Rush".

Source: Channel NewsAsia, 26 April 2007
Posted by Property Wizkid

SMD(Small & Medium size Developers) takes action
Developer Hoi Hup Realty has bought a freehold residential site at Killiney Road for $115 million in a collective sale, the property firm marketing the project said yesterday. Colliers International said that the price paid by Hoi Hup for Killiney Apartments works out to $1,022 per square foot per plot ratio (psf ppr), including an estimated development charge of $500,000.

The site was sold through an expression of interest exercise. The 40,300 square feet site has a 2.8 plot ratio, which gives the site a gross floor area of 113,000 sq ft. The maximum building height is 10 storeys.

Hoi Hup could develop a 10-storey high condominium with 75 units with an average area of 1,500 sq ft each, said Colliers. Killiney Apartments is at present a 16-storey development with 44 apartments. Each of the 44 owners will receive between $2.5 million and $2.8 million from the sale, Colliers said.

The site was put on the market for the second time in March this year with a $115 million price tag.
The site was first offered for $94-$96 million, which works out to about $835-$852 psf ppr, in June 2006. Then, the site was put on the market through a public tender, but offers were not satisfactory, said Ho Eng Joo, director of investment sales for Colliers. ‘I think the market growth was not very strong yet (last June),’ said Mr Ho. ‘Since then, the market sentiment has changed.’

For the sale, following an expression of interest from Hoi Hup, Colliers negotiated with the developer to raise the price to $115 million, Mr Ho said.

Source: The Business Times, 25 April 200
Posted by Property Wizkid

Now, MAS makes a remark about rising home prices
Does it mean anything?
The Monetary Authority of Singapore (MAS) yesterday said home prices are expected to continue to grow this year - after climbing 4.6 per cent in the first quarter, the highest growth seen in seven years.

The gain, which has so far been greatest for the luxury market, could also filter down to other mid to high-end segments which could benefit from the steady stream of buyers who have sold their houses in en bloc sales, Singapore’s central bank said in its latest Macroeconomic Review.

MAS expects the property upturn to spill over to the construction and financial services sectors.
‘Contracts awarded have trended up steadily from 2003 to reach $16.1 billion last year, a level not seen since 2000. This is expected to translate into higher certified payments and value added for the sector in the near term,’ says MAS. ‘Indeed, the recovery of the construction sector continued in early 2007, underpinned by ongoing work in the residential segment.’

A number of ongoing major projects including the Marina Bay Financial and Business Centre, the integrated resorts and the downtown MRT extension, are also expected to further fuel the recovery in the construction sector.

The recent spike in raw material costs caused by disruptions to the supply of sand has not resulted in delays in building projects, MAS says. But the bank warns that in the future, new developments could be slowed or delayed if sand and concrete become more difficult to obtain. The large number of upcoming new commercial developments should also see more credit being extended to the building and construction industry, MAS says. This is expected to benefit the financial services sector.

And on the consumer loans front, while mortgage loan growth has remained tepid in recent quarters, some upside could be seen in the months ahead as the residential property uptick at the luxury end begins to spread to the broader market. MAS also says that the recent upswing in property prices will have only a small impact on inflation this year. This is mainly because substantial price increases in the near term should be largely confined to the upper and middle segments of the private residential market, MAS predicts.

‘On balance, the impact of rising property prices on consumer price index (CPI) inflation is likely to be modest, with the direct impact contributing only 0.1 percentage point in 2007, compared with the average of negative 0.2 percentage points over the past three years,’ says MAS.

So, what's the verdict? The government will not slow down growth in any way. So, prices, up, up and away!

Source: The Business Times, 25 April 2007
Posted by Property Wizkid

What happens when 2 gigantic office occupiers merge?
Mergers between banks usually involve ironing out kinks from consolidation and rationalisation.
But when Barclays and ABN Amro merge their Singapore operations, things should be a tad smoother for at least one reason - they already occupy contiguous areas in One Raffles Quay’s South Tower.

Office players are watching whether the two banks will give up any premises as they consolidate operations. Any space they return would help ease the office supply crunch. At One Raffles Quay’s 29-storey South Tower, ABN Amro occupies about 190,000 square feet from levels 21 to 26, and Barclays has 90,000 sq ft on levels 27 to 29. ‘It’s quite a quirk. A neater fate to consolidate, if they intend to do that,’ quipped an office market watcher. ‘They have a reasonably nice, ready-made solution, whether by fault or design.’

Agreeing, another observer said Barclays stands to enjoy rental savings at One Raffles Quay from merging with ABN Amro, since the latter was the first tenant to sign up there back in 2004 and has locked in lower rent - probably below $4 per square foot (psf) a month. Barclays signed a lease the following year and could be paying ‘$6-plus psf’.

On Monday, Barclays agreed to buy Dutch rival ABN Amro for about 67 billion euros (S$137.7 billion) in shares. The two banks said the merger will result in about 23,600 job losses, or just over 10 per cent of their combined workforce. The job losses comprise a net staff cut of about 12,800 plus about 10,800 positions to be off-shored to low-cost locations.

In Singapore, Barclays now has about 1,500 staff. ABN Amro has about 1,250, with plans to grow this figure to 1,500 by year-end, according to a BT article last month. Besides the 190,000 sq ft it occupies at One Raffles Quay, ABN leases 47,678 sq ft of backroom office space at Haw Par Technocentre in Commonwealth Drive.

Barclays’ other leased office premises besides One Raffles Quay are at Capital Square (more than 40,000 sq ft), The Atrium @ Orchard near Dhoby Ghaut MRT Station (about 80,000 sq ft) and Samsung Hub in Church Street (where Barclays recently signed a deal to lease more than 50,000 sq ft). ‘Most likely, the merged entity will keep at least two or three locations in Singapore for business continuity reasons,’ said the office-leasing head of a property consultancy.

If the duo do decide to give up some space at One Raffles Quay or elsewhere, this is expected to be snapped up quickly given the shortage of office space. Such arrangements could involve Barclays or ABN Amro sub-letting excess space with approval from the landlords or returning the space to the landlords.

For some of the locations, including One Raffles Quay, the rental profit from sub-letting would go straight into the landlord’s pocket, market watchers reckon. ‘Generally, that would be the current market practice,’ an office-leasing consultant said.

Source: The Business Times, 25 April 2007
Posted by Property Wizkid