Singapore Property News Upfront 11

Office 53% up compared to last year
The latest evidence of fast escalating office rentals in Singapore is provided by a CB Richard Ellis report which shows that office rents on the island are the fifth fastest growing globally. The report, issued yesterday, compared percentage change in occupation costs over a 12-month period for 176 cities worldwide.

Rents in Singapore jumped 53.6 per cent year-on-year to US$67.97 per square foot per annum (or S$8.60 psf per month) in the study dated May 2007 and based on Q1 2007 data. CBRE’s survey also shows that 90 per cent of the office markets monitored reflected positive growth in the 12 months to Q1 2007.

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Abu Dhabi reported the highest year-on-year rental rise globally (up 102.9 per cent), followed by New Delhi (79.1 per cent), Sofia, Bulgaria (62.9 per cent), Edmonton (60.1 per cent) and Singapore (53.6 per cent). Mumbai took the sixth place (45.1 per cent). The US$67.97 psf annual rental figure for Singapore makes it the 24th most expensive office market globally as of May 2007, up from 37th placing in November last year and 43rd spot in May last year.

London’s West End was the world’s most expensive office market in the latest survey, with annual rental of US$241.22 psf, followed by the City of London (US$165.72 psf), and Tokyo’s Inner and Outer Central Five Wards. CBRE executive director (office services) Moray Armstrong, while acknowledging that increases in cost base are always going to be an issue for occupiers, reasons that ‘the more immediate concern is the lack of office space, which is placing constraints on business expansion’.

‘I don’t think we are at the pivotal point where Singapore is becoming uncompetitive and businesses are starting to re-think expansion plans. After all, the driver for this strong office demand is an economy that’s performing extremely well and a city that MNCs and international banks are excited about,’ he added. ‘Of course, things could change at some point if exponential rental growth continues unabated. But the government’s policy reaction is already in play - with the Urban Redevelopment Authority’s plans to release temporary office sites, additional office plots and other measures. And the private sector, that is developers and investors, are gearing up to build future offices.’

Singapore still has huge tracts of prime developable land, especially in the Marina Bay area. ‘So its position as an attractive place for accommodating business growth is assured,’ Mr Armstrong reckons.

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

Enbloc sales almost hit $6.4b before June 2007.
Whole of last year, it was $7.75b.
A total of 39 collective sale sites have been sold for some $6.38 billion since the start of this year, up to May 15 - just 18 per cent shy of the $7.75 billion record achieved last year, show latest figures from Jones Lang LaSalle. The property consulting firm’s regional director and head of investments, Lui Seng Fatt, expects the momentum of en bloc sales to continue for the rest of this year, predicting a $10 billion figure being hit for the full year, assuming prices hold.

Mr Lui attributes the buoyant collective sales figure so far this year to the trend of mega sites being sold, as well as rising unit land prices as developers race to replenish their high-end residential landbanks in the face of strong sales of their luxury housing projects. ‘In addition, several new players from overseas are coming in, mostly foreign funds partnering local developers,’ he said. These include the likes of Morgan Stanley Real Estate Fund, Qatar Investment Authority and Forum Partners.

The current benchmark price for residential land, of $1,735 psf per plot ratio, was set when Overseas Union Enterprise exercised an option to buy The Parisian at Angullia Park in January this year. This is almost double the $876 psf ppr fetched for Habitat II in the prime Ardmore/Draycott area in September 2005. ‘Following the quantum jump in land prices achieved over the past 12 to 24 months, prices could still go up but further increases are likely to be more moderate,’ Mr Lui reckons. ‘Current price levels will comfortably hold for the rest of the year.’

Market watchers expect more big en bloc sale sites to be transacted in the coming months. Farrer Court, with a whopping 838,488 sq ft land area and $1.2 billion reserve price, was launched just last week. More billion dollar sites are expected to be offered, including The Claymore. Among the big transactions so far this year are Leedon Heights ($835 million), Gillman Heights (sold for $548 million), Horizon Towers ($500 million) and Tampines Court ($405 million).

JLL’s analysis shows that the $6.38 billion worth of en bloc sale transactions sealed in the first four and a half months of this year included 39 transactions, whereas the $7.75 billion for the whole of last year covered a much larger number of deals - 62. That shows that the size of deals has shot up, as there have been more mega sites as well as the increase in unit land prices.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

Tampines One - the new mall on the block
Tenants at a mall being developed next to Tampines MRT Station will have to refresh their concepts every five or six months - and this will be written into their lease agreements. The move is part of Tampines 1’s plans to offer shoppers something new each month. The plan is to divide tenants into roughly five groups, and each group will have five to six months to come up with a new concept. Once they do, the next 20 per cent of the tenants will have another five-six months to refresh their offerings under a rolling programme.

‘The idea is that each month we’ll be able to advertise ‘This Month’s Specials’ for Tampines 1,’ said Michael Leong, CEO of AsiaMalls Management, which is responsible for the retail planning, marketing and later property management of the mall. AsiaMalls is 50 per cent owned by Guthrie GTS and 50 per cent by Asian Retail Mall Fund (ARMF). A sequel fund, ARMF II, is developing the Tampines project.

AsiaMalls is also working with Architects 61 and Fitch Design to come up with some iconic features - such as water features, lighting or display - that will be regularly updated, to provide visual attractions at the mall. Tampines 1, which will have about 260,000 square feet of net lettable space, will comprise two basement levels, including a carpark, and five levels above ground. The mall is slated for completion in early 2009.

It will have a food court/food hall, supermarket and gym and spa with a lap pool big enough for water aerobics. It will have a cluster of double-storey restaurants on the upper levels. There will also be a bookstore and mid-to-upper-mid international and local fashion brands.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

Hotel Development for Balestier enbloc sales
Invvestors looking for hotel development sites have just been given a choice of three properties in the Balestier/Lavender area. The Urban Redevelopment Authority (URA) yesterday made available for application a 99-year leasehold reserve list site at Jellicoe Road opposite Lavender MRT Station.

And the freehold Ruby Plaza and adjoining Balestier Towers are being offered for collective sale.
Realtorhub Real Estate, which is marketing the two adjoining properties through separate sale exercises, said the joint owners expect bids above $670 per square foot of potential gross floor area.

Based on this unit land price, the price for Ruby Plaza would be at least $79 million and that for Balestier Towers at least $60.3 million. Ruby Plaza is on a 39,493 sq ft site and Balestier Towers on 29,986 sq ft. Both sites are zoned for commercial and residential use with a 3.0 plot ratio - the ratio of maximum potential gross floor area to land area - under Master Plan 2003.

Ruby Plaza has received outline planning permission for hotel use and Realtorhub believes the same permission will probably be given for Balestier Towers. Realtorhub director Daniel Ng believes developers could also seek URA permission to redevelop the sites into a medical centre, to capitalise on strong demand for such space.

As for the 45,408 sq ft hotel site at Jellicoe Road being offered by URA, CB Richard Ellis executive director Li Hiaw Ho reckons it can be developed into a hotel with about 400 rooms.
He estimates the site could fetch slightly more than $420 psf per plot ratio achieved for the tender of URA hotel site at Belilios Road this week. This is because the Jellicoe Road plot has a better location and easy access to the MRT.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

Paramount Hotel - asking $200m. Any takers?
Paramount Hotel and Paramount Shopping Centre are up for sale at an indicative price of $200 million through a public tender exercise. The property has a combined land area of about 102,710 square feet and a plot ratio of 3.0 with a maximum gross floor area of 308,130 sq ft. At the indicative asking price, this works out to about $650 per square foot per plot ratio.

The site is being marketed by Cushman & Wakefield, whose managing director Donald Han said it can be developed into a retail and hotel development with 450-600 rooms. Perhaps even more attractive to potential developers is the fact that the site is under the government’s ’safeguard list’. This means there is a possibility of converting the site to residential development instead.

Indeed, Mr Han believes that based on current prices for new property launches in the East Coast area, this could prove to be the better option. ‘Prices for recent residential projects like CapitaLand’s The Seafront on Meyer and GuocoLand’s The View @ Meyer transacted between $1,500 and $1,800 psf, reflecting a new high in the Katong, Meyer and Amber Road residential enclave,’ he said.

Based on the possible redevelopment of the site into a condominium with a plot ratio of about 2.1, Mr Han estimates that a developer might pay $830 psf per plot ratio for the site. ‘The breakeven cost could be around $1,100 psf,’ he added. There is also potential for a hotel development. ‘The property is situated next to Grand Mercure Roxy Hotel, which is operated by the Accor Group. Accor recently announced that they will be relocating their Asian headquarters from Sydney to Singapore to take advantage of the growing tourism market in Singapore and in the region,’ noted Mr Han.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

URA steps in - a mild coolant to a very hot engine
The last time the government asked the Real Estate Developers’ Association of Singapore (Redas) for help to cool the property market, sweeping anti-speculation measures followed.
So it’s not surprising that the Urban Redevelopment Authority’s (URA) announcement on Tuesday that it has asked Redas to help make property pricing more transparent has an ominous ring to it.

In 1996, then Prime Minister Goh Chok Tong approached Redas with suggestions on how it could cool the over-heated property market. These include setting aside a certain number of units in new developments for sale to the public instead of private previews. Redas followed up by setting a new guideline for developers to offer at least 70 per cent of all available units for sale to the public. The guideline, which was finally announced on May 19, 1996, was a largely self-regulatory one and has also long since lapsed.

At the time, the measure had little bite because a few days earlier, on May 15, the government announced a package of anti-speculation measures that put an end to a bull run that had gone unabated for 10 years (with the exception of a blip in 1990 due to the Gulf War). The latest news that URA wants Redas to facilitate the reporting of detailed sales data monthly is also likely to be self-regulatory. If the government really wanted to impose any new measures, it would not need the endorsement of any professional body.

But based on Monday’s comments by Minister of National Development Mah Bow Tan in Parliament, where he said that the number of sub-sales was ’still lower than that in 1996′, major reform does not seem imminent. The latest proposed measure could, of course, simply be an effort to streamline reporting procedures and should not be met with too much objection except that a certain segment of the market thrives with a very narrow margin of opportunity that manages to go unregulated.

This margin can actually be measured in time - it is about three weeks long, or the time it takes to exercise an option to buy a property. Speculators who operate within this three-week margin are often not reflected in the number of sub-sale transactions reported quarterly by URA because, aided by over-zealous real estate agents armed with blank cheques, they move too fast and are almost invisible.

The period in which sub-sales are logged, on the other hand, can stretch from the day a caveat is lodged to the time a development is completed two to three years later. As such, figures for sub-sale transactions are indeed low, almost too low considering the level of activity in the market.
Another serious implication of selling within the time frame of exercising an option is that the prices influence overall market sentiment, which is currently extremely bullish.

Given the nature of property speculation, speculators tend not to care about purchase price as the intention is to make a quick profit anyway. Left unchecked, prices can easily be inflated.
A check with the URA revealed that options are indeed taken into account. A URA spokesman said: ‘For the data compiled by URA on the number of uncompleted private residential units sold by developers, a unit is considered to be sold when an option to purchase the unit is issued by the developer to a buyer. If there are buyers who do not exercise the option to purchase, URA will revise the number of units sold accordingly in the following period. However, other than some exceptional cases, we observed that the majority of buyers do exercise the option to purchase issued by developers.’

URA did clarify that its property price index is computed based on the information on prices in the caveats lodged by purchasers after they have exercised the options to purchase private residential units, and not prices reflected in options. Getting developers to report the number of options granted should not be a problem. Getting them to reveal the number returned every month could be more tricky. Then again, nobody wants to see the return of the draconian measures of May 15, 1996.

So far, some measures to cool the market have already been put in place. They include the withdrawal of stamp duty concessions and the cut in the withdrawal amount of Central Provident Fund savings. These appear not to have cooled the market much.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

Asia's top 10 property deals, including 4 from Singapore
Singapore accounted for four of the 10 biggest property investment sales deals across Asia in the first three months of this year, according to CB Richard Ellis. These were the $1.04 billion sale of Temasek Tower - which was ranked the top deal in Asia in Q1 - and the collective sales of Gillman Heights ($548 million), Horizon Towers ($500 million) and Anderson 18 ($477.7 million), which were ranked fourth, sixth and seventh.

‘That four of the 10 largest real estate investment deals in Asia are Singapore properties is a very clear signal that investors are confident of Singapore’s strong economic fundamentals,’ CB Richard Ellis (CBRE) executive director (investment properties) Jeremy Lake said yesterday. ‘Property funds and overseas institutional investors anticipate further capital value and rental appreciation.’

The firm’s updated estimate of Q1 2007 investment sales in Singapore is $11.16 billion. ‘If the pace continues for the rest of the year, we’ll see $44 billion for the whole of 2007, which would be higher than the $29.92 billion achieved for 2006,’ said Mr Lake.

The $11.16 billion figure for Q1 is an 86 per cent increase from a year earlier, due mainly to the large number of development sites sold this time around. The residential sector accounted for 62 per cent of Q1 2007 investment sales, followed by the office sector at 27 per cent. CBRE only includes transactions of at least $5 million as investment sales, and these include land, en bloc sales and strata-titled units such as office units and apartments.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid

Pramerica may float $1b Reit this year
A new real estate investment trust owning more than $1 billion worth of assets, including suburban shopping centres - Century Square, Hougang Mall, Tiong Bahru Plaza and White Sands - could be floated here as early as Q4 this year. Pramerica Real Estate Investors (Asia) chief executive officer Victoria Sharpe told BT that the fund manager is considering spinning off the assets in Asian Retail Mall Fund (ARMF), as one of the options for an exit strategy for investors in the fund.

The assets in ARMF, valued at slightly over $1 billion, include the Central Plaza office block next to Tiong Bahru Plaza mall. Pramerica Asia - formerly known as GRA Singapore - manages the ARMF and its sequel fund ARMF II. ARMF, which has a total equity size of $320 million, is fully invested, and ARMF II, with US$400 million equity size, is nearly 80 per cent invested.

The second fund’s property portfolio includes Liang Court Shopping Centre, which is undergoing a $45 million refurbishment, and a new $450 million mall, Tampines 1, being built next to Tampines MRT Station. The two funds have some common investors, including Pramerica-linked entities, three big Dutch pension funds and Singapore-listed Guthrie GTS. NTUC FairPrice invested in the first fund but not the second. The second fund also has some new investors.

Pramerica Asia also manages Asia Property Investment Fund (ASPF) with an equity of 655 million euros (S$1.35 billion) which is fully invested. This is a Pan Asian fund with a property portfolio in markets including Japan, China, Singapore, Korea, Hong Kong, India and Thailand. The fund has a half share in the Jurong Point extension development and Centris residential project in Singapore.

Investors in the fund include German insurance companies and pension funds, as well as investors from the Gulf region. These three funds - ARMF, ARMF II and ASPF - hold eight properties in Singapore, with about 1.7 million sq ft net lettable area, valued at more than $2.4 billion. Singapore is the biggest of the firm’s Asian investment markets. Pramerica Asia is currently raising capital for ASPF II with a target equity size of one billion euros, which it expects to finish raising by the end of this year, Ms Sharpe said.

The follow-on fund will probably target the same Asian countries for property acquisitions, she said. Pramerica Asia-managed funds generally have gearing of about 60 to 70 per cent.

Source: The Business Times, 24 May 2007
Posted by Property Wizkid