Singapore Property News Upfront 28

As usual, Property Developers top list of Singapore super rich
The property boom, while churning out millionaires by the dozen, has also sprinkled its gold-dust on the billionaires driving the market. Riding the wave, property tycoon Ng Teng Fong, with an estimated net worth of US$6.7 billion, has topped the Forbes Asia 2007 Singapore Rich List, nudging the Khoo family down to second place.

The Khoo family's fortune swelled 14 per cent to US$5.7 billion, but this was nowhere near enough to keep pace with Mr Ng, who controls Far East Organization and Yeo Hiap Seng. From an estimated wealth of US$4.9 billion last year, his fortune grew a staggering 36 per cent, placing him firmly at the top of the table. United Overseas Bank's Wee Cho Yaw and his family came in third with an estimated wealth of US$3.3 billion - a drop from last year's US$3.4 billion.

Occupying fourth spot was China-born property developer Zhong Sheng Jian - now a Singapore citizen - whose wealth was estimated at US$2.5 billion. Kwek Leng Beng of Hong Leong Group is at number five since Forbes Asia divided up his extended family's holdings - an exercise that enabled his cousins Kwek Leng Kee and Kwek Leng Peck, who also have stakes in the group, to make this year's list.

The collective net worth of Singapore's 40 wealthiest increased about 14 per cent to US$32 billion. The top 10 on the list alone have a combined worth of nearly US$23 billion, constituting an impressive 72 per cent of the US$32 billion that the wealthiest 40 are said to possess. According to Forbes Asia, the net collective wealth of Singapore's 40 richest could easily dwarf that of their other South-east Asian counterparts.

The 2007 list was dominated by those in real estate, shipping and palm oil - a clear reflection of Singapore's booming industries - while those in the banking sector saw a slight decrease in fortune in the wake of the recent worldwide downturn in mortgages. The list also boasted a significant number of entrepreneurs. 'If you read through the list, you'll see there are a lot of very highly qualified and successful entrepreneurs here. All these individuals have been very entrepreneurial in finding ways to make money in different industries,' said Mr Justin Doebele, contributing editor of Forbes Asia and project editor, Forbes Asia Rich Lists.

Some 19 of the top 40 saw a growth in their net worth this year, while eight saw a dip in fortunes and one was unchanged. Twelve on the list were newcomers. Among them is fourth-placed Mr Zhong, who has a 71.4 per cent stake in Yanlord Land Group. He attributed his substantial fortune to being able to 'understand the phase that the economy is in at any particular time'.

Founder and CEO of main-board listed Chemoil Corporation, an established supplier of marine bunker fuels, Robert Chandran has a net worth of US$490 million, which placed him at number 14. The Mumbai native, who pursued his masters degree in Manila and made his first fortune in the United States, moved to Singapore recently where he opted for citizenship. He, too, was not on the list last year.

Another new addition to the list, at number 36, is Christina Ong, wife of Malaysian tycoon Ong Beng Seng. Ms Ong is the managing director of Club 21, which owns Ishop and a share in luxury brand Mulberry. The two other women on the list are Olivia Lum, founder of water treatment firm Hyflux, and Margaret Lien, who inherited wealth from late banker husband Lien Ying Chow.

Forbes calculated various fortunes using stock prices and exchange rates as at August 10, 2007. Privately-held wealth was 'estimated'. Mr Doebele said that the spillover effects of the sub-prime mortgage crisis in the US wouldn't change the order of the listings. 'We're looking over a 12-month period so if they drop 10 per cent less over two weeks, that's not going to wipe out the entire gains they've made,' he said.

The cut off for the 2007 list was also upped to US$100 million, nearly double last year's minimum net worth of US$55 million. Still, number 40, chairman and CEO of Creative Technology Sim Wong Hoo, whose wealth was estimated at US$105 million, made the cut with a cool US$5 million to spare.
Source: Business Times, 24 Aug 2007
Posted by Property Wizkid

CapitaLand wants One George Street
Ergo's 50% stake in office building may be priced at $2,500 psf or more. CapitaLand will gain full ownership of One George Street if negotiations to buy German insurer Ergo's 50 per cent stake in the 23-storey award-winning office building are successful. BT understands that the Singapore-listed property company is in talks to buy Ergo's half-stake for about $2,500 per square foot of net lettable area - or higher. At $2,500 psf, the building would be priced at just over $1.1 billion and the half-share CapitaLand would buy from Ergo would be worth about $560 million. CapitaLand and Ergo, a member of Munich Re Group, own roughly equal stakes in the property through their equally owned Eureka Office Fund.

One George Street, completed in late 2004, was a redevelopment of the former Pidemco Centre in South Bridge Road. It was one of three assets that CapitaLand pumped into the $875 million Eureka Office Fund in 2001. The other two were stakes in The Adelphi and Temasek Tower.
Earlier this year, CapitaLand and Eureka sold their stakes in Temasek Tower to Macquarie Global Property Advisors Group for $1.04 billion or $1,550 psf. Temasek Tower is on a site with about 74 years of the original 99-year lease remaining. CapitaLand Group CEO Liew Mun Leong revealed later that the group's listed CapitaCommercial Trust (CCT) made an offer for Temasek Tower but it was less than Macquarie's.

As for CapitaLand's decision to buy the rest of One George Street, a market watcher said: 'Maybe they see greater upside there because it was developed on a fresh 99-year lease, boasts big floor plates of about 30,000 sq ft and is closer to the Raffles Place area.' Analysts reckon CapitaLand may be seeking full ownership of One George Street with a view to injecting it into CCT when it generates sufficient yields as leases are renewed at higher rates. Agreeing, another industry observer said One George Street recently received a tenancy offer for a 4,000 sq ft space at a whopping $16.50 psf a month, but this was rejected by the owners, who may be eyeing even more. 'When the present leases at One George Street were signed, the office market was weak,' an analyst said. But there is upside now as leases are renewed and new leases signed, given the surge in office rents over the past two years.

Major tenants at One George Street include the Royal Bank of Scotland, Legg Mason, hedge fund manager Tudor, Man Financial and Lloyds. At CapitaLand's recent Q2 results briefing, Mr Liew said 'the Singapore office sector will remain a core holding' for the group but that it will reconstitute its portfolio by selling some office assets and investing in new developments. One George Street has almost 450,000 sq ft of net lettable area and has won awards for its architecture and landscaping. It has four skyrise gardens, the biggest of which is on the fifth floor and accessible to the public.

As for The Adelphi in the City Hall area, the Eureka fund initially had full ownership of the 999-year leasehold property but later sold some units, leaving it with 62 per cent of share values, according to a report in February this year. There are plans for a collective sale of The Adelphi, which will provide Eureka an exit. The fund is expected to be wound up once the last of its three assets has been divested.
Source: Business Times, 23 Aug 2007
Posted by Property Wizkid

Capitaland partners Azure City to develop condo in Vietnam
CapitaLand is taking a 75% stake in a joint venture company to develop a high-rise condominium project in Vietnam's Ho Chi Minh City. The Singapore-based property developer will pay US$32 million (S$49 million) for the stake. Its partner, Azure City, a Vietnamese infrastructure and property firm, will hold the balance.

CapitaLand plans to build a 25-storey high-rise development that will yield 1,200 apartments over the next three to four years. The first phase of the development will be ready for launch towards the end of 2008. This will be CapitaLand's fourth residential project in Ho Chi Minh City. The latest project will double the Singapore developer's residential pipeline in Vietnam to 2,800 homes.
Source: ChannelNewsAsia, 22 Aug 2007
Posted by Property Wizkid

What happens when Development Charges go up to 60%?
Average development charge (DC) rates could go up 18-60 per cent for non-landed residential use, 10-25 per cent for commercial use and 10-40 per cent for hotel use come Sept 1, property consultants said. The forecast increases - due to rising land values - would be on top of last month's effective 40 per cent across-the-board increase in DC rates under a change in the formula for calculating them. According to Jones Lang LaSalle regional director and head of investments Lui Seng Fatt: 'The Chief Valuer is most unlikely to let the earlier 40 per cent hike, which was more a policy realignment by the state to get a larger share of the appreciation in land value, influence his decision on the quantums of revision for the Sept 1 DC table, since the rates are meant to reflect the market conditions.' Agreeing, Colliers International director for research and consultancy Tay Huey Ying said: 'We expect the government to maintain the aggressiveness in the upward adjustment of DC rates as seen in the last (March 1) revision. It is unlikely to be deterred by the resulting large hike in DC rates that this dual exercise will cause.'

A surprise change in the DC formula on July 18 creams off 70 per cent of the enhancement in land value arising from higher use or plot ratio, up from 50 per cent. But while this effectively raised DC rates 40 per cent across the board, the July review was based on land values in the March 1 DC table. In other words, the July 18 move was independent of the regular six-monthly DC rates reviews on March 1 and Sept 1 each year, which are based on market value.
DC, which may be payable when a site's use is enhanced or when it is built on more intensively, is specified according to use - such as non-landed residential, landed residential, commercial and hotel, and listed by 118 geographical sectors or locations across Singapore. With recent transacted land values significantly above imputed values based on current DC rates for many locations and use groups, there is room for the Chief Valuer to impose steep increases in the Sept 1 revision, market watchers reckon. They say some developers have been waiting for this before they finalise decisions on acquiring collective sale sites that have a significant DC component. But according to CB Richard Ellis executive director Li Hiaw Ho: 'Even without any revision in the DC rates, developers are likely to take a step back from acquiring sites through collective sales because of the high prices set by owners.

'In addition, the possibility of losing deals because of strong opposition by minority owners is a dampener for developers. Therefore, the rate of collective sales may slow in the coming months.' Citing other factors, Colliers's Ms Tay said: 'Developers are taking a cautious stance not only due to the impending DC rate revision but also because of the volatility of the stock market and possible credit tightening.' According to her, higher DC rates by themselves would not necessarily lead to a slower collective sales market or put a stop to land price escalation. Rather, this depends more on whether developers are confident they can pass on higher costs to buyers, she said. Jones Lang LaSalle expects DC rates for non-landed residential use to escalate 45-60 per cent islandwide on the back of collective sale transactions. Mr Lui predicts a 45-50 per cent rise in DC rates for District 9 locations, where deals such as The Ardmore and Char Yong Gardens have been done at 80 per cent and 92 per cent above land values implied by the current July 2007 DC rates.

The East Coast and Telok Blangah areas are likely to see higher non-landed residential DC rates to the tune of about 35-45 per cent and 25-30 per cent respectively, Mr Lui said. Colliers's Ms Tay expects the average non-landed residential DC rate to rise 18-25 per cent but reckons bigger jumps of 40-50 per cent are likely in Sinaran Drive, Telok Blangah, Bedok/St Patrick's Road and Upper Paya Lebar/Geylang. This is because transactions in these fringe areas since March have been done at prices that were 143-195 per cent above the land values implied by the current July 2007 DC rates.

As for landed residential use, JLL expects an average islandwide increase of 20-30 per cent, with the East Coast posting about 25-30 per cent, District 11 about 40-50 per cent and Sentosa some 20-30 per cent. For commercial use, JLL expects DC rates to go up 20-25 per cent islandwide, while Colliers predicts the increase will average 10-15 per cent. 'We expect DC rates for the Collyer Quay/Marina Bay locations to see the biggest adjustments to the tune of 40 to 50 per cent,' said Ms Tay. 'This is because the $1,540 psf per plot ratio transacted price achieved for the 60-year leasehold Collyer Quay commercial site in October 2006, in the previous review period, still reflects a 220 per cent premium on the land value inferred from the current DC rate for commercial use in this location.'

CBRE's Mr Li expects the biggest jump in commercial use DC rates - about 40 per cent or more - to be for the Shenton Way and Tanjong Pagar micro-markets, where sites and many buildings were transacted in the past two quarters. 'The recent award of Tampines P15 site at the Tampines Regional Centre for $622 per square foot per plot ratio in May could also result in an upward revision of the commercial DC rate for this location,' he said. 'The implied land value based on the DC rate for this sector is about $334 psf ppr.' Colliers expects DC rates for industrial use to remain unchanged for all locations as there has been no clear increase in land prices, while DC rates for hotel use could rise 10-15 per cent on average. JLL forecasts hotel DC rates will rise by an average of 35-40 per cent, given the recent sale of two hotel sites by the state in Tanjong Pagar at prices exceeding their DC rate-implied land values by about 80 per cent. CBRE's Mr Li said that a rise in hotel DC rates come Sept 1 can be expected because the booming tourism market has boosted interest in hotel investment.
Source: Business Times, 21 Aug 2007
Posted by Property Wizkid

Reverse Mortgage may be a good solution for elderly
Property industry players said a new initiative to help older Singaporeans monetise their flats is expected to be popular because it is a viable alternative to the reverse mortgage scheme. The new initiative, announced by Prime Minister Lee Hsien Loong during his National Day Rally speech, is targeted at those aged 62 and above, living in two or three-room flats, and who have only made use of the government's housing subsidy once.

The Housing and Development Board (HDB) will shorten the lease of their flat to 30 years and pay them the value of the lease foregone in cash, through an upfront lump sum and monthly payments for the rest of their lives. They can also stay in their own flats for the remaining 30 years. Property industry players said this move would help many older flat owners derive income from their most valuable assets – their homes. Mohamed Ismail, CEO of PropNex, said: "This scheme really helps people to unlock and monetise their assets. A lot of Singaporeans are asset rich and some of them may have challenges as far as their cash situation is concerned. And currently, there are not many solutions available." Under current schemes, these home owners are allowed to sublet their units, but this would entail a loss of privacy.

A reverse mortgage scheme for HDB flats – introduced in March last year – also drew little interest, with just ten people signing up so far. Assistant Vice President of ERA Realty, Eugene Lim, said: "Previously, the government was trying to implement reverse mortgage, but this was not very well-received especially by the senior citizens. "Number one, they found it difficult to understand, and number two, they didn't have a very good feeling about mortgaging their house which is already paid for." Property watchers said the new scheme could potentially boost demand for three-room flats, which are comparatively scarce in the HDB resale market. "Three-room flats provide a very basic, essential need. And with these things in place, I do think – depending on the outcome of the package – three-rooms will be in better demand," said Mr Mohamed Ismail. The government is also studying other arrangements should a flat owner outlive the 30-year lease period.
Source: ChannelNewsAsia, 20 Aug 2007
Posted by Property Wizkid