Keppel Land shares falter on weak property market

Keppel Land shares falter on weak property market

 

SHARES of Keppel Land have been under pressure this week, as the property developer faces headwinds in both its domestic and overseas markets.

One testing spot is Vietnam, where a cooling property market and concerns of a potential devaluation of the Vietnamese dong have hit sentiment.

 

Keppel Land has about US$7 billion (S$9.66 billion) worth of projects in Vietnam, a larger exposure than those of rival developers such as CapitaLand, GuocoLand and Allgreen Properties.

 

This could ‘affect the affordability of the local buyers’, said CIMB-GK in a report yesterday. ‘We see capital values falling below our base-case assumptions of US$2,000 to US$2,500 per sq m.’

 

The brokerage suggested Keppel Land’s stock could have been oversold. It maintained its ‘outperform’ call but slashed its target price from $7.73 to $6.68 after reducing earnings estimates on lower contributions from Vietnam.

 

Keppel Land is down 13 cents, or 4.66 per cent, this week and off 29.3 per cent this year compared to a 13.5 per cent decline in the benchmark Straits Times Index.

 

On the home front, Keppel Land and other developers are facing the challenge of a deteriorating property market, particularly in a high-end sector facing price weaknesses.

 

Analysts point to a lack of transactions, low take-up rates and delay in launches by developers.

 

High-end properties are at a ‘greater risk to further price corrections, as there is still a substantial pipeline of projects waiting to be launched’, said OCBC Investment Research in a report on Thursday.

 

‘We remain cautious over developers that have large land-bank exposure in the high-end market, like CapitaLand and Keppel Land.’

 

OCBC is reviewing its calls on Keppel Land, as well as CapitaLand and City Developments, among others, and has a ‘neutral’ view on the Singapore residential property sector.

 

Source: Straits Times

Guthrie buys into Chinese retail mall business

Guthrie buys into Chinese retail mall business

 

GUTHRIE GTS has bought a 14 per cent stake in a China retail mall business.

The mainboard-listed engineering and property group announced yesterday it had bought a stake in Shenyang Shida Logistics for $5.98 million from GIC Real Estate. This is the real estate arm of the Government of Singapore Investment Corp.

 

The acquisition, its first in China, said Guthrie, has been approved by the Liaoning provincial government.

 

The Chinese firm was set up to own and refurbish the Life Square retail mall in Shenyang city. The mall has a gross floor area of 30,000 sq m and will boast an extra 15,000 sq m after the refurbishment, due to be completed by year-end. Among the 200 tenants are a 9,000 sq m hypermart and six-screen cineplex.

 

The deal, said Guthrie executive director Michael Leong, offered ‘a good opportunity for Guthrie to participate in the growing retail sector in China’.

 

Guthrie will provide retail planning and mall management for Life Square. This will allow it to ‘showcase Guthrie’s brand and service capabilities’, and help further its ambitions in the Chinese mall business, said Mr Leong.

 

Shenyang Shida Logistics is a joint venture between GIC Real Estate and Chinese property developer Super Shine, which is listed on the Shenzhen Stock Exchange. Following the sale, GIC Real Estate will retain a majority stake in the company and control over it.

 

Guthrie shares closed unchanged at 33 cents yesterday.

 

Source: Straits Times

1997-1998 vs 2007-08: Median prices of developers’ sales of condos

MacarthurCook sells 13% stake for A$4m

MacarthurCook sells 13% stake for A$4m

 

 

AUSTRALIAN property asset management firm and takeover target MacarthurCook said yesterday it has sold a 13 per cent stake to IOOF Holdings, an Australian wealth management business, for about A$4 million (S$5.2 million).

 

 

This follows a A$31 million takeover offer for MacarthurCook this week by Australia’s AMP Group Holdings at A$1.35 per share through the latter’s unit AMP Capital Investors.

 

MacarthurCook, which sold 3.45 million shares at A$1.15 each to IOOF through a private placement, said in an announcement that this move will help strengthen its position in its local retail market.

 

‘MacarthurCook has been looking for some time to secure a domestic partner to help us grow our funds under management in Australia,’ managing director Craig Dunstan said in the statement.

 

‘This alliance allows MacarthurCook to concentrate on investment management, the continuing growth of our business overseas, and provides an immediate increase in our funds under management and revenue.’

 

MacarthurCook, which manages Singapore-listed MacarthurCook Industrial Reit (real estate investment trust), said it will work with IOOF to oversee existing funds and develop a range of new direct property-based investment funds.

 

MacarthurCook will become the preferred direct property and mortgage investment manager of the IOOF Group, which held A$30.7 billion of funds as at March 31 this year.

 

IOOF will manage the fixed-income component of the A$200 million Mac-arthurCook mortgage fund, as well as market and distribute it to investment platforms and financial planners.

 

The fund will be re-branded as the IOOF MacarthurCook mortgage fund.

 

MacarthurCook is listed in Australia and manages about A$1.5 billion in 12 funds.

 

Moody’s downgraded its rating of Singapore’s MacarthurCook Industrial Reit on Thursday to ‘developing’ from ‘stable’, saying the strategic direction and medium-term operating and financial outlook now hinge on whether the takeover will be accepted.

 

Source: Business Times

Guthrie gets 14% stake in Shenyang Logistics

Guthrie gets 14% stake in Shenyang Logistics

 

GUTHRIE GTS said it has acquired a 14 per cent stake in China-based Shenyang Logistics – in the form of equity and shareholders loans – for $5.98 million.

 

Shenyang Logistics, a joint-venture company between GIC Real Estate and Shenzhen-listed Super Shine, was set up to own and refurbish a retail mall, Life Square, in Shenyang. GIC Real Estate retains majority control of Shenyang Logistics.

 

Life Square, which has a gross floor area of 30,000 square metres, will be refurbished to create an additional 15,000 sq m, said Guthrie. The project, which is scheduled for completion by the end of the year, will see the retail mall house about 200 shops including a 9,000 sq m hypermart and a six-screen cineplex. Guthrie said it intends to provide retail planning and mall management services for this project.

 

‘This investment is a good opportunity for Guthrie to participate in the growing retail sector in China. Guthrie will leverage on its track record and expertise in retail planning and mall management for the Life Square Mall,’ said Michael Leong, executive director of Guthrie GTS.

 

‘The retail planning and mall management services we intend to provide would be a suitable platform to showcase Guthrie’s brand and services capabilities in China and will be a further step towards establishing a regional footprint for Guthrie’s mall investment participation and related services.’

 

Source: Business Times

CapitaLand looking for distressed assets

CapitaLand looking for distressed assets

It is on the lookout in Japan, China to help its expansion in these markets

 

(SINGAPORE) Capitaland Ltd, South-east Asia’s biggest developer, is looking for distressed assets in Japan and China to help its expansion in the two markets, chief executive officer Liew Mun Leong said.

 

The developer already runs two property funds in Japan and teamed up with Mitsubishi Estate Co in a Tokyo project worth as much as US$1.5 billion. It runs seven funds in China, and developed office and retail complexes under the Raffles City brand in Shanghai and Beijing.

 

‘We are always on the lookout,’ Mr Liew said in an interview in Beijing late on Thursday. ‘There will be developers who are under stress, they got land bank and they need money.’

 

The Singapore developer is expanding in new markets to broaden its revenue base beyond its home market of 4.6 million people. It’s also seeking distressed assets as rising energy and commodity prices and a slowing global economy add to financial stress on companies and stoke defaults worldwide.

 

The global default rate may rise to 5 per cent by the end of 2008 and reach 6.1 per cent by April 2009, Moody’s Investors Service said last month. The number of corporate defaults worldwide this year has already exceeded the total in 2007, according to Standard & Poor’s. Borrowers have defaulted 28 times on US$18.9 billion of debt, compared with 22 last year and 30 in all of 2006, S&P said.

 

CapitaLand is seeking distressed assets in China as the country raised reserve requirements for banks for the fifth time this year.

 

Chinese banks must put aside a record 17 per cent of deposits as reserves starting on June 15, rising to 17.5 per cent beginning on June 25, the People’s Bank of China said on June 7. Investors are also buying distressed assets as banks and brokerages globally raise capital after booking US$391.4 billion of writedowns and credit losses related to sub-prime mortgages.

 

CapitaLand said in a May 14 presentation that it has a portfolio of 114 malls, including 73 in China and 7 in Japan. The developer said that its assets under management, including real estate investment trusts and funds, rose $1.4 billion to $19.1 billion since the start of the year.

 

Asked about his outlook on the Singapore property sector, Mr Liew said that he expected the mid-market and lower-end home prices in Singapore to be little changed this year.

 

Demand for homes is still ‘holding very well’, Mr Liew said.

 

Prices of mid-market and lower-end homes, usually bought by residents upgrading from government-built apartments, have risen 3 per cent to 5 per cent this year, he said.

 

‘This year, the lower end will be marginally up or down,’ Mr Liew said. ‘Unless it affects the affordability of the buyers so badly, there is still demand. Our unemployment has gone down and economy in Singapore is good.’ Home sales in Singapore, the fastest-growing market in 2007, are slowing as confidence among prospective buyers were eroded by the sub-prime mortgage crisis in the US and the contraction in global credit markets. The economy may grow as little as 4 per cent, the slowest since 2003, after expanding 7.7 per cent last year, the government said.

 

In the first quarter, residential sales fell to 787 units from 1,449 in the previous three months, according to the city’s Urban Redevelopment Authority.

 

CapitaLand said in January that it plans to offer fewer homes for sale this year in Singapore, between 800 and 1,000, from 1,200 in 2007. It also said that prices may rise as much as 10 per cent. City Developments Ltd, Singapore’s second-biggest developer, said last month that it was delaying sales of new residential projects.

 

Home prices in Singapore rose 3.8 per cent in the first quarter, the smallest gain in a year, after rising 31.2 percent in 2007. — Bloomberg

 

Source: Business Times

Low Keng Huat posts 78% rise in Q1 profit to $4.88m

Low Keng Huat posts 78% rise in Q1 profit to $4.88m

 

By OH BOON PING

 

PROPERTY firm Low Keng Huat (Singapore) yesterday reported a 78 per cent rise in Q1 net profit to $4.88 million, even though revenue slipped 7 per cent to $26.79 million.

 

The firm was helped by a more than proportionate fall in cost of sales to $21.2 million for the first quarter ended April 30. Meanwhile, earnings per share for the quarter dropped to 1.32 cents – from 1.34 cents in Q1 2007.

 

During the period, construction sales dropped 28 per cent to $11.3 million due to the completion of major projects, that is, Novena Square Extension, The Chuan, Twin Regency and Domain 21 in FY07/08 and the lower percentage of completion of ongoing projects.

 

However, net loss before tax and minority interests for the construction segment narrowed to $3.3 million in Q1 as more projects were completed in FY07/08.

 

‘These construction projects were undertaken by the group for associated companies at prices determined at the time of entering into the joint venture agreement with the partners to tender for the sites. Management is working with the partners to recover some of the cost increases,’ said the company.

 

Under the hotel and F&B segment, turnover rose from $13 million in Q107 to $15.4 million in Q108 – attributable to higher contributions from Duxton Hotel Saigon and Duxton Hotel Perth and the F&B business arm consisting of the Starworth group of companies. This came about as a result of increased room rates in both hotels during the period, the firm said.

 

Meanwhile, associated firms reported a 64 per cent jump in contributions to $4.3 million, thanks to contributions from Regency Suites, Southbank, one-north residences and Duchess Residences.

 

Looking ahead, the group remains cautiously optimistic about its business prospects despite the volatility in global markets and increased inflationary pressures on costs.

 

Source: Business Times

Prime condo prices heading for long, gentle decline

Prime condo prices heading for long, gentle decline

Cushman model shows subdued market until 2012 but firm argues it’s still a good time to buy

 

 

By KALPANA RASHIWALA

 

(SINGAPORE) The prices of condos and private apartments in the Core Central Region (CCR) will inch downwards and are unlikely to touch their recent peaks for almost the next four years, a model developed by Cushman & Wakefield (C&W) shows. The extent of the fall will depend on how slowly the Singapore economy grows, but C&W expects these median prices to drop between 8 per cent and 17 per cent from their peak of Q1 2008, before recovering by some time in 2012.

 

Even so, it argues that now may be a good time to look at buying into new developments, as the developers are unlikely to slash prices dramatically. Instead, a gentler decline is on the cards.

 

The trigger for this is ‘there’s still a lot of private housing supply’, says C&W’s head of forecasting Lee Chong Yong, who developed the model.

 

Mr Lee points to the Urban Redevelopment Authority’s projections that about 8,000 non-landed private homes will be completed this year, followed by another 12,000 units next year, around 16,000 in 2010, and some 20,000 in 2011, before the supply eases to around 8,000 units again in 2012.

 

‘Some of these units have not been launched yet. As time goes on, the unsold or yet-to-be-sold stock will keep creeping up, until 2011. The extent to which there will be downward price pressure from this will depend on the pace of economic growth. The stronger the economic growth, the faster the supply can be absorbed,’ Mr Lee says.

 

Assuming Singapore’s GDP grows at a rate of 4 per cent a year between 2008 and 2012, the median per square foot (psf) price for non-landed private homes in CCR – which includes the prime districts 9, 10 and 11, Downtown Core location and Sentosa Cove – will fall a total of 17 per cent between the Q1 2008 high and Q1 2012.

 

Based on a higher 5 per cent GDP growth rate, the price decline will be a lower 12 per cent over the same period.

 

If GDP grows at 6 per cent, the median price will decline 8 per cent between early 2008 and Q3 2009 before recovering back to the Q1 2008 high by end-2012.

 

C&W also tracked developers’ sales in 255 new condo projects across Singapore and constructed an islandwide non-landed private residential new sales price index, which showed a 2.2 per cent decline between the peak in December last year and May this year.

 

‘From the start of the credit crunch in August 2007 through to May 2008, developers of only 10 per cent of the 255 new condo projects tracked have cut their prices by more than a fifth,’ C&W said.

 

C&W argues that ‘compared to the 1997-1998 Asian crisis, today’s falling prices are at present moderate without any signs of panic from the developers’. During the Asian crisis, most developers cut prices by at least 20 per cent while some reduced asking prices by up to 40 per cent in 12 months, it said.

 

The property consultancy group says ‘now would be a good time to consider buying into new developments’. It also notes that expats living in Districts 9, 10 and 11 have seen a doubling of rents over the past two years, while sale prices of many condos are starting to see a slow price decline. ‘For expats expecting to stay in Singapore, it would be a good time to consider buying (a condo) to take advantage of this short-term dip in the market,’ C&W’s head of residential Connie Looi says.

 

But JPMorgan analyst Christopher Gee gave a different view, saying that compelling values were needed to get buyers back to the market. ‘The fear of making a purchase now, only to have prices fall later, is what’s holding buyers back at this stage. Developers too don’t want to sell too cheap; if prices recover, then they would have missed out on making bigger profits.’

 

One property market watcher said that tempting buyers back would require mass-market condos to be launched at $600-$650 psf on average, compared with a price of $700-$800 psf last year.

 

In the mid-range category, a freehold condo in the Balestier area for instance would today need to be priced at $900-plus psf, instead of the $1,000-plus psf they’re still being marketed at, based on last year’s pricing. For freehold projects in the prime districts 9,10 and 11, what would lure buyers back today would be an average price of no more than $3,000 psf, instead of $3,500-$4,000 psf last year, another industry observer said.

 

Giving his take, an experienced property industry player said: ‘How Singapore home prices will pan out will depend on both internal and external factors. Residential property prices have fallen in many markets across the globe, such as the US, Europe, UK, Australia, Vietnam and China. If we want to be in line with the rest of the world, we’ll also see some slide.’

 

Source: Business Times

Home prices in mid to low tier expected to stay stable: CapitaLand

Home prices in mid to low tier expected to stay stable: CapitaLand

 

PROPERTY giant CapitaLand expects prices of mid- to low-tier homes to remain largely stable this year despite signs of a weaker market.

 

Chief executive Liew Mun Leong reportedly said in Beijing on Thursday that demand for homes in Singapore is still holding up well.

 

Prices of lower-end homes will be ‘marginally up or down’, Mr Liew said in an interview at a press conference, Bloomberg reported.

 

He also noted prices of mid-market and lower-end homes, usually bought by HDB flat upgraders, have risen 3 per cent to 5 per cent this year.

 

His comments come against the backdrop of a much quieter property market, with many buyers keeping to the sidelines.

 

Industry sources say demand exists but only at lower price tiers. Home prices, particularly those for high-end projects, shot up to unrealistic levels during the property boom last year, they say.

 

The market turned silent this year, which has led some analysts to project that home prices will fall by as much as 40 per cent over the next two years.

 

Last month, CapitaLand reiterated its target of launching 800 to 1,000 units this year. Among those lined up for launch are Latitude in River Valley and the project on the Silver Tower site in Orchard. Projects in the pipeline include those on the Char Yong Gardens, Farrer Court and Nassim Hill sites.

 

CapitaLand also bought the huge Gillman Heights site. But the objecting owners are trying to overturn the sale and the High Court judge has yet to decide on the case.

 

On Thursday in Beijing, Mr Liew was also quoted as saying that the group is looking for distressed assets in Japan and China to aid its expansion in the two markets. CapitaLand is seeking such assets at a time when rising energy and commodity prices as well as a slowing global economy are putting additional financial stress on firms and stoking defaults worldwide.

 

 

Source: Straits Times

A new haven in Sengkang

A new haven in Sengkang

 

THE sleepy Sengkang West neighbourhood is set to get a splash of life – the Sengkang Sports and Recreation Centre is almost ready.

 

Final touches are being made to the $28 million centre, complete with two swimming pools and water slides, as well as a sports hall and hockey field.

 

It is expected to be handed over to the Singapore Sports Council, which will manage the facility, early next month, and it should open soon after.

 

A spate of construction delays had caused the project to miss its early 2008 opening date, causing much disappointment.

 

Sengkang West, formed in the run-up to the 2006 General Election, is home to about 35,000 residents but is relatively undeveloped, compared to other parts of Sengkang and Punggol.

 

The sports centre is part of a multi-million- dollar makeover to transform the area into a recreation haven with eateries, parks and water-sports facilities.

 

Source: Straits Times