Singapore Property News Upfront 15

Foreign investors have pumped $885.5 million into residential land purchases
This year foreign funds have outstripped the $651.84 million for the whole of last year. And CapitaLand said yesterday that it hopes to redevelop the $420 million Char Yong Gardens with US-based Wachovia Development Corporation, so the sum invested by foreigners is set to increase further.

According to an analysis of data by CB Richard Ellis (CBRE), purchases by foreign investors so far in 2007 amount to 11.4 per cent of a total of $7.13 billion, excluding Char Yong Gardens. For the whole of 2006, they accounted for 7.12 per cent of a total of $8.17 billion.

Significant acquisitions with foreign investment include Horizon Towers by Hotel Properties Ltd (HPL) and Horizon Investments, an entity owned by funds managed by Morgan Stanley Real Estate and Qatar Investment Authority, the investment arm of the Emirate of Qatar. Two unnamed private funds, with HPL, also bought into CapitaLand’s Gillman Heights site.

On the marked increase in foreign investment, CBRE’s Jeremy Lake said: ‘The Singapore residential growth story has spread further afield. What was a secret 18 months ago is no longer a secret.’ On tie-ups with foreigners, Patricia Chia, chief executive of CapitaLand Residential Singapore, said: ‘Partners come along with us because they share our vision on the Singapore residential market and the sites that we have. More often than not, they do not have development and execution capabilities, but have real estate knowledge globally.

One of the consequences of so much global capital is that it could raise price expectations for prime collective sale sites. CBRE’s analysis of data also shows that although the number of transactions overall is increasing, the number in prime districts appears to be dropping. In 2006, 30 of 76 collective sale deals were in District 9 alone, representing 39 per cent of all transactions.

This percentage has now dropped to 16 per cent or 10 out of 62 transactions done year to date.
The percentage of transactions in the prime districts of 9, 10 and 11 combined has also dropped, from 68 per cent for the whole of 2006 to 47 per cent year to date.

Prices, availability and location combine to make a site attractive. But as Mr Lake puts it: ‘Developers won’t buy a site if they don’t think they can make money on it. You only have to look at the sites that have been launched but not sold.’ The shift to non-prime districts is not necessarily a bad thing. As Mr Lake notes, it suggests that the recovery, supported by demand, has spread beyond traditional high-end areas.

In 2006, districts 5, 12, 19, 21 and 27 combined made up only 13 per cent of the collective sales pie. For the first five months of 2007, district 19 (Serangoon) alone made up 10 per cent. Other districts highlighted by CBRE include the combined districts 15 and 16 (19 per cent) and districts 2,4,5 and 8 (13 per cent).

Mr Lake believes one possible outcome of a more even spread of transactions across all districts is that the gap between prices for different districts could shrink. Currently the gap can be extremely wide, even if the sites are just minutes apart. CBRE, for instance, is marketing Grangeford Apartments for $2,000 per sq ft per plot ratio and Alexandra Centre for around $300 psf ppr.

City Developments is one outfit that believes in paying the right price for the right property at the right time. ‘We have consistently maintained a valuable land bank which includes a fine range of sites in all parts of Singapore,’ said group general manager Chia Ngiang Hong.
‘With this strategy, CDL has the advantage of creating more value by being able to respond quickly to the market and selectively launch the most appropriate project at any given time so as to best maximise its investment returns.’

CDL’s most recent acquisition was Thomson Mansions in the Thomson/Balestier area.
Developers will now have to look harder. Lippo Realty executive director Thio Gim Hock said: ‘I believe en bloc asking prices are getting quite high. However, Lippo is always on the lookout for opportunities both in prime and other areas.’

Source: The Business Times, 13 June 2007
Posted by Property Wizkid

Capitaland ups the benchmark with purchase of Char Yong Gdns
Setting a new benchmark price for residential land in Singapore, CapitaLand has bought Char Yong Gardens at the corner of Cairnhill and Hullet roads at a unit land price of $1,788 psf of potential gross floor area inclusive of development charges payable to the state.

The 93,274 sq ft freehold site is next to the Silver Towers plot which CapitaLand bought in September last year for $1,107 psf per plot ratio (psf ppr). The average land cost of the two sites works out to about $1,400 psf ppr. It remains to be seen if CapitaLand will amalgamate the two plots for a single project.

Prior to yesterday’s deal, the record price for residential land was $1,735 psf ppr set by the sale of The Parisian at Angullia Park in December last year to Overseas Union Enterprise. CapitaLand said yesterday it has signed a sale and purchase agreement to acquire Char Yong Gardens through a collective sale for $420 million. The unit land price of $1,788 psf ppr is inclusive of a $47 million development charge.

Market watchers reckoned CapitaLand’s break-even cost for a new condo on the site could be around $2,200 to $2,300 psf. Char Yong’s unit land price is 16 per cent higher than the $1,542 psf ppr that Sing Holdings paid in March this year for the nearby Hillcourt Apartments.
Jones Lang LaSalle brokered the collective sale of Char Yong Gardens.

The sale to CapitaLand was agreed following the lapse of an earlier offer made in late April by a joint venture involving China, Indonesia and Singapore entities. But that offer is believed to have had a series of conditions. CapitaLand’s acquisition of Char Yong Gardens is subject to approval from the Strata Titles Board. Consent from owners controlling at least 80 per cent of share values at Char Yong Gardens has been obtained, JLL regional director and head of investments Lui Seng Fatt confirmed yesterday.

CapitaLand said yesterday it is in talks with Wachovia Development Corporation to develop the Char Yong site through a 50:50 joint venture. The company is a wholly owned subsidiary of Wachovia Corporation, one of the biggest diversified financial services groups in the US, through which certain real estate activities are transacted.

For now, the plan is to redevelop the Char Yong plot into a 20-storey condo with about 130 biggish apartments. The project is slated for launch in end-2008. CapitaLand said that since 2005, it has bought four residential sites and one mixed development plot in Singapore. These include Gillman Heights, for which it has partnered Hotel Properties and two funds. ‘The company will continue to seize opportunities to acquire prime sites to augment its existing landbank,’ it said.

Source: The Business Times, 13 June 2007
Posted by Property Wizkid

Ho Bee & Choice Homes join hands to take on Dakota Crescent
Reflecting developers’ confidence in the mid-tier residential sector, a joint venture between Ho Bee and NTUC Choice Homes yesterday cast the top bid of $524 psf per plot ratio for a 99-year leasehold condo plot at Dakota Crescent in the Mountbatten Road/Old Airport Road area fronting Geylang River.

The state tender attracted 15 bids, most of them at above $400 per square foot per plot ratio.
Market watchers recalled that the last time 99-year condo sites outside the prime districts and Sentosa Cove fetched such high price levels was in 1997. In that year, the plots that were subsequently developed into the Rafflesia condo in Bishan and Costa del Sol in the Bayshore area were sold at $403 psf per plot ratio and $457 psf ppr respectively, according to CB Richard Ellis data.

Ho Bee Investment executive director Ong Chong Hua estimates the break-even cost for a new condo on the Dakota Crescent site will be about $850 psf and that it could sell for about $1,000 to $1,100 psf on average. ‘There’s currently a shortage of such condos in this sort of price range,’ he observed. ‘The project will be pitched as a mid-market condo located in the city-fringe, Mountbatten/East Coast area. If you cannot afford the Sentosa Cove lifestyle, this is a very good alternative,’ Mr Ong said.

Going by current market prices, Ho Bee/NTUC Choice Homes should not find it challenging to achieve their target selling prices. Wing Tai is said to have achieved an average price of $1,500-1,600 psf for its freehold condo near Kallang Riverside (The Riverine) which it began selling in April and which is now fully sold.

Ho Bee’s and NTUC Choice Homes’ proposed condo at Dakota Crescent will be 18 to 20 storeys high and have about 370 apartments comprising two, three and four-bedders. The project is slated for launch by mid-2008. ‘This is not a traditional upgrader’s market if you look at the site’s attributes - it fronts the Geylang River, is across the low-rise Goodman Road area and just about 100 metres from the Dakota MRT Station which will be linked by the Circle Line to Suntec City,’ Mr Ong said. ‘The site is also near the future Sports Hub and is easily connected to Nicholl Highway, PIE and ECP.’

The top bid by Ho Bee/NTUC Choice Homes of $228.89 million or $524 psf ppr was just 3 per cent higher than the second highest offer of $508 psf ppr, which came from IOI Land unit Multi Wealth (Singapore). GuocoLand was in third position, with $475 psf ppr. CapitaLand teamed up with US-based Wachovia Development Corporation to cast a $466 psf ppr bid. Other contenders included Frasers Centrepoint ($451 psf ppr), Allgreen Properties & Hoe Seng Company ($430 psf ppr), City Developments, Sim Lian Land and Keppel Land. Wing Tai placed a joint bid with United Engineers unit Greatearth Developments.

Source: The Business Times, 13 June 2007
Posted by Property Wizkid

Alexandra Centre - collective sale at $45 million
The 50,838 sq ft site is for residential use with first-floor commercial use. It can be built up to four storeys and the allowable plot ratio is three. The development charge (DC) is estimated at $1.21 million. The property is about 25 years old and at present there are 12 ground floor shops and 12 apartments. It is on Alexandra Road close to Ikea and The Anchorage, with Queenstown MRT station a five-minute walk away. More than 80 per cent of the share value owners have signed the collective sale agreement so far.

Based on the asking price, owners of the apartments stand to get about $1.25 million each while shopowners will receive around $2.5 million each. This is about twice as much as they would get if they sold their units individually. A recent collective sale in the area is the privatised former HUDC estate Gillman Heights. At $548 million, the acquisition cost for that site worked out to $363 per square foot of potential gross floor area, including an approximate $90 million DC. But the land area of 836,432 sq ft is the biggest for a collective sale so far and much bigger than the Alexandra Centre site. The tender for Alexandra Centre closes on July 12.

Source: The Business Times, 13 June 2007
Posted by Property Wizkid

HK auction site price fails expectation
A residential site along Hong Kong’s harbour has been auctioned for HK$5.56 billion (S$1.1 billion) in a sluggish sale that is unlikely to provide much of a boost to the flagging mass property market. The auction was tipped by analysts to fetch up to HK$7 billion for government coffers and hopes were high that the sale would inflate prices and trigger buying activity in the mass residential sector, which has treaded water for the first half of 2007.

Developer Sun Hung Kai Properties bid successfully for the 122,200 sq ft site, which enjoys views of the city’s skyline. The minimum asking price for the plot of land was HK$4.2 billion. It is Hong Kong’s third land auction this year, and one that had been eyed as a catalyst to bigger price movements in the mass market. Many sellers in the secondary market had been holding off in the hope of gleaning a better price after the auction.

‘Everybody was expecting more than HK$6 billion,’ explained Ricky Poon, director of residential sales at Colliers International. ‘I think it’s below expectation, but better than what was submitted in the land application. I don’t think people will be too optimistic though - there’s a lot who were waiting to see how the land auction went today, they decided to wait before taking the next step.’

In the last land auction in May, two sites in the Tuen Mun area were sold for HK$1.74 billion, also below the top end of expectations. The city, however, boasts as one of its most lucrative auctions the December sale of a Peak residential site to Sun Hung Kai Properties for HK$1.8 billion. This put the accommodation value at HK$42,196 psf - potentially one of the most expensive land sites in the world.

Luxury residential sales are expected to post double-digit growth this year as limited supply and an influx of capital to the city pushes up prices. However, the mass residential sector is still lagging in terms of growth, although sales have picked up slightly in the first half of the year. While luxury sales are at 1997 levels or above, the mass sector is still about 20 per cent short, according to Mr Poon.

He explained that residential property on Hong Kong island is 20-25 per cent below 1997 prices, while those out in Kowloon and the New Territories could be as much as 40 per cent below. ‘There’s still a big gap,’ he stressed. ‘For the last two to three years, there’s a lot of remaining stock in the mass market, we still have quite a lot,’ he said. There was speculation that legal action by a resident seeking to limit development of high rises in the area may also have dampened enthusiasm for the auction.

An application for a judicial review was filed on the eve of the auction seeking to stop the Town Planning Board and the government from building a skyscraper in the district. The resident claimed the government did not follow guidelines when giving approval to the development of high-rise buildings, in particular, ignoring parts of the Town Planning Ordinance which should promote health and general welfare of residents.

In Hong Kong, the issue of the ‘wall effect’ has become a thorny topic for the government, as the city suffers sweltering temperatures and restricted air flow because of high rise construction.
Although the government said the judicial review application would not affect the auction, it would be wary of ignoring the significance - it was just a few years ago that an elderly resident filed legal proceedings against the city’s first Reit.

The tenant had protested over the selling off of public assets - housing estate shopping centres and car parks - as contrary to residents’ best interests. The deal had to be delayed - causing much embarrassment to the government - as a result, as the court considered the legal issues, although the listing eventually went ahead.

Source: The Business Times, 13 June 2007
Posted by Property Wizkid

China tightens foreign speculation
China said overseas developers must prove they have real estate projects under way before they are allowed to form companies, in a move to tighten rules to curb property speculation.
Overseas investors must provide proof of their projects in addition to incorporating local companies before they’re allowed to invest in the country, the State Administration of Foreign Exchange said in a statement posted on its website yesterday.

The Chinese government has tightened loans to developers, cracked down on housing speculators and raised taxes to cool the real estate market, amid concern that soaring prices have made housing beyond the reach of many buyers. Property prices in 70 of China’s major cities rose by 5.4 per cent in April from 2006, while the average price jumped as much as 23.6 per cent in the southern city of Beihai.

‘The government is trying to curb speculation rather than control normal foreign investment,’ said Huatai Securities Co’s analyst Zhang Chifei, in the eastern city of Nanjing. ‘The impact on the property market won’t be too significant since it’s still mainly driven by domestic demand.’
China’s currency administrator yesterday also said that it will bar overseas investors from changing the names of actual real estate owners and bypassing regulations.

‘Return investment’, or direct investments inside China by a local resident via a special-purpose company, ‘will be strictly controlled’, according to yesterday’s statement. Foreign investors should obtain land-use rights for their projects or own real estate before they can be approved for real estate development and operations, according to the statement.

China in July 2006 required foreign institutions and individuals to set up foreign-invested companies before buying real estate for investment purposes. The government in September required overseas companies to pay in full rather than instalments when they acquire Chinese developers. Chinese builders are also barred from borrowing from overseas institutions to buy or develop land if their capital is less than 35 per cent of the total investment.

The government will ’strictly control’ foreign investment in high-end real estate projects, yesterday’s statement said. Tomson Group Ltd, developer of China’s costliest residential project, is under investigation for allegedly faking sales of its Tomson Riviera apartments on the east bank of Shanghai’s Huangpu River, the Shanghai Housing and Land Administration Bureau said on June 6. The company in August 2006 sold three apartments for 130 million yuan (S$26.1 million) each, or a record 130,000 yuan per sq m. Those sales contracts have since been cancelled.

Source: The Business Times, 12 June 2007
Posted by Property Wizkid