A VAST prime Manhattan property that has caused losses to investor, the Government of Singapore Investment Corporation (GIC), is having its ownership transferred to creditors – possibly including GIC.

The Stuyvesant Town and Peter Cooper Village apartment complexes will be given up by troubled owners Tishman Speyer Properties and BlackRock Realty after loan restructuring talks failed.

‘We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,’ spokesman Bud Perrone said in an e-mailed statement yesterday, the Associated Press reported.

The timing of the transfer has not been set, nor has it been decided who the new owners will be, he added. GIC declined comment when contacted yesterday. One of the junior lenders, Gramercy Capital, is reported to have asked for Tishman Speyer to be replaced as manager of the complexes last Friday.

Tishman Speyer and BlackRock bought the properties for US$5.4 billion (S$7.6 billion) in a joint venture at the height of the United States property boom in 2006.

The owners each invested US$112.5 million out of total equity of US$1.9 billion. They also took out a US$3 billion mortgage from Wachovia Bank and US$1.4 billion of mezzanine debt from various lenders, including GIC. The mortgage was packaged with other loans and sold as securities – with the biggest holders Fannie Mae and Freddie Mac.

A controversial court ruling last October ordered the owners to pay back rents to a third of the more than 20,000 residents – after they were found to have raised rents too quickly. Then the recession depleted the property’s value to US$1.8 billion. A reserve fund of US$900 million has also been drained.

Tishman Speyer and BlackRock failed to repay a loan of US$16 million, which triggered the default last month, leading to talks to restructure the loans to avoid foreclosure.

GIC said then it already recognised losses on its investment. While it has not confirmed the total value of its investments, it is believed to have written down the value of about US$575 million in mezzanine debt. It has a further US$100 million in equity.

Mezzanine financing became a popular way of funding real estate investments during the property boom. In the event of a foreclosure, senior debt holders are paid back first before the mezzanine, or secondary, debt holders, which include the likes of GIC and Gramercy Capital. Equity holders are paid last.

A former banker familiar with debt proceedings said with ownership transferred, creditors will negotiate in court and could hold on to the property or make a fire sale to recoup losses as soon as possible.

He said the most senior creditor would most likely want to take possession quickly and sell. Secondary debt holders such as GIC and Gramercy could negotiate with the senior creditor to delay the foreclosure, hoping the property’s value rises and they can recoup some of their losses. But this could involve them pumping in more money to service interest payments, pay conveyancing fees and wages.

Source: Straits Times, 26 Jan 2010

NOMURA Singapore is joining a growing list of multinational corporations that are taking up space at the new Marina Bay Financial Centre (MBFC).

It has signed a 12-year lease for 102,000 sq ft of space in MBFC’s Tower Two, and will occupy levels 34 to 37 of the 50-storey tower. Nomura will take occupancy of the space next year.

No rental rate was disclosed but a Business Times report earlier indicated that it is slightly below $9 per sq ft a month. This appeared to be high for a space this size but could be due to Nomura planning to begin its lease late – some time after Tower Two is completed, the report said.

The latest tenant brings the total pre-commitment of Tower Two to about 66 per cent, with overall pre-leasing figures for MBFC Towers One and Two at about 79 per cent, said Raffles Quay Asset Management, which manages MBFC.

Standard Chartered Bank, DBS Group, BHP Billiton and Macquarie Group are among the big companies that have taken up leases at MBFC, which is being developed by a consortium comprising Hongkong Land, Cheung Kong/Hutchison Whampoa and Keppel Land.

Raffles Quay chief executive Wilson Kwong said in a statement that MBFC was in discussions with other firms and had received strong leasing interest for commercial space in Towers Two and Three.

The 33-storey Tower One, expected to be completed in the first half of the year, is already fully let, said Hongkong Land in a separate statement.

Phase 1, comprising two tower blocks of Grade A office space, retail space as well as high-end condominium Marina Bay Residences, is scheduled for completion this year. MBFC is expected to be fully developed in 2012.

Source: Straits Times, 26 Jan 2010

SINGAPORE’S thriving biomedical sciences sector is set to get a boost of up to $180million this year for the expansion of buildings and other related facilities.

This will cater to the growing number of companies that need more space for their cutting-edge work in creating new drugs and medical equipment.

The nation’s premier biomedical research hub, Biopolis, near Buona Vista, will be expanded at an estimated cost of about $80million to $100million, providing 40,000sqm of new space.

The plan was announced yesterday by industrial developer and landlord JTC Corporation, which said separately that it will launch a medical technology cluster in Jurong.

This cluster will bring major industry players together in a new facility that will cost $60million to $80million to build initially. It will enable firms there to collaborate and cut costs through cooperation.

Mr Heah Soon Poh, JTC’s director, biomedical and chemicals cluster, said yesterday that the Biopolis expansion would include laboratory design improvements to support the growth of clinical trials.

This new phase – the fourth for Biopolis – follows on the heels of Biopolis3, which is due for completion by year-end.

It brings the total cost of Biopolis to about $700million.

Companies setting up shop in the newly expanded facility can look forward to new facilities such as fitted out laboratories and shared facilities such as air-conditioning.

‘This helps to lower the upfront costs for small and medium enterprises. We are moving up in the value creation for companies,’ said Mr Heah.

The expansion is set to be completed by 2012 to 2013.

Biomedical sciences, though a volatile performer during the recent economic recession, is an increasingly important pillar of the local economy, said research house CIMB-GK regional economist Song Seng Wun.

‘The performance of this sector was quite good through the recession. It had a weak start, then a strong quarter, and even though it had a soft end to the year, we are still seeing companies interested to come into Singapore,’ he said, referring to last year.

The sector contributed $19billion, or 4.3per cent, of Singapore’s economic output in 2008, the latest available figures show, and provided 16,000 jobs.

Mr Song added: ‘It could become a bigger, more productive industry.’

Mr Heah said that looking ahead, the sector is expected to continue expanding, and JTC will provide the real estate to support this growth.

Within the sector, the medical technology sector (med-tech) is expected to drive the rapid growth. It manufactures equipment used in the industry, such as syringes and medical test-kits.

Singapore’s manufacturing output of med-tech products is expected to increase from $2.9billion in 2008 to $5billion by 2015, said Mr Heah.

Med-tech employs the majority – two-thirds – of those in the biomedical science sector, as it is more labour intensive than pharmaceutical production, for instance.

This is why JTC is driving the new med-tech cluster, at Jalan Tukang in Jurong, at which all the main players in the industry will be located – ‘in the same space, creating synergies and reducing costs’, said Mr Heah.

This means manufacturers, suppliers, logistics firms, sterilisation firms and support services will be located fairly close to each other, and will therefore be able to complement one another’s efforts.

The first phase of this cluster, with a built up area of 40,000sqm, is expected to be built by the end of 2013; a second phase of 40,000sqm will be built later.

JTC is also in the midst of discussions for a new biologics facility, which will take up less land because it will be built upwards, said Mr Heah.

Biologics refers to medicinal products produced through biological methods rather than chemical ones.

Irish firm PM Group, which specialises in servicing the pharmaceutical and food industries, is advising JTC on the project.

JTC says it is currently in talks with potential companies to locate to both the new med-tech and biologics facilities.

It plans to launch tenders for both the Biopolis and med-tech cluster expansions for private developers to bid sometime this year.

Source: Straits Times, 26 Jan 2010

WITH reference to the Housing and Development Board’s (HDB) reply last Thursday (‘Income ceiling helps ensure neediest get subsidised flats’), my sense is that the HDB underestimated the social ramifications of the resale policy to permanent residents (PRs), while it failed to maintain the Home Ownership Scheme for the people to balance demand of rapid population growth during the past 20 years. As a result, low- and middle-income households have suffered.

The ceiling of $3,000 and $2,000 for three- and two-room flats did not help as HDB did not build enough units to meet the market, citing low demand. This drastic reduction in the number of flats built is detrimental to the ageing population in the rental and sales market.

The policy to allow 533,000 PRs to buy resale HDB flats works against citizens. It is difficult to comprehend why HDB began to wind down the momentum to build more flats during the 1990s when the population ballooned from 3.047 million to 4.027 million by the end of 2000.

The yearly average peak of 30,900 HDB flats built during the 1980s corresponded with the population growth meeting the Home Ownership Scheme. However, during the 1990s when one more million people were added, HDB began to taper down to 25,700. What puzzles me most is that by 2008, when another 810,000 people were added to the population, HDB built only 8,260 units. Why the paradigm shift?

Take the example of a Queenstown five-room flat at $619,000. Single-income families earning $6,000 with two children cannot afford to pay 50 per cent of their income to buy such a flat. Can the $30,000 subsidy help them? Combined-income families with two children earning $8,000 may falter to commit 38 per cent for such flats. These groups are the ‘neediest’ for bigger flats, yet the Home Ownership Scheme eludes them.

Paul Chan

Source: Straits Times, 26 Jan 2010

NOMURA Singapore has joined other multinational corporations at Marina Bay Financial Centre (MBFC), Raffles Quay Asset Management (RQAM) announced yesterday.

Nomura has signed up 102,000 square feet of space in MBFC’s Tower Two, and will occupy levels 34 to 37 of the 50-storey commercial tower.

The leading financial securities company in Japan, Nomura has signed a 12-year lease and will take occupancy of the space in 2011.

The latest tenant brings the total pre-commitment of MBFC Tower Two to about 66 per cent, with overall pre-leasing figures for MBFC Towers One and Two at approximately 79 per cent.

Said RQAM chief executive Wilson Kwong: ‘With the recent levels of growth seen in the economy, more multinational corporations will be on the lookout for quality commercial space in Singapore’s Central Business District, and MBFC will play an integral part in attracting these firms.

‘MBFC is also in discussions with other companies and continues to receive strong leasing interests for commercial space in Towers Two and Three. We believe that its tenants will enjoy both state-of-the-art office space as well as the unique ‘work.live.play’ environment provided by the development.’

When fully completed in 2012, MBFC will be Singapore’s first mixed-use development that successfully integrates residential, business, retail and entertainment facilities.

Source: Business Times, 26 Jan 2010

Fourth quarter net profit jumps 56%; group on the prowl for more land

KEPPEL Land, which saw fourth-quarter earnings jump 56 per cent as property markets across Asia recovered, said it plans to launch more than 5,500 homes across the region for sale this year.

‘Keppel Land is moving into 2010 with optimism on the back of its stronger financial position, improving residential sales and office space take-up together with expectations of continued recovery of Asia and a return of capital flows from the West,’ chief executive Kevin Wong said yesterday.

In Singapore, KepLand will sell more units in two upmarket projects – Marina Bay Suites and Reflections at Keppel Bay – to capitalise on the opening of the integrated resorts, which is expected to boost the high end market.

And in China, the group will launch two projects in Shanghai as well as phase one (comprising about 1,700 units) of its 35.4 ha project in the Sino-Singapore Tianjin Eco City.

The developer yesterday reported that net profit for the quarter ended Dec 31, 2009, rose to $106.9 million from $68.5 million a year ago. Revenue rose 52 per cent to $300.5 million from $197.4 million.

‘Residential sales in Singapore and overseas have recovered, encouraged by signs of economic recovery and improved market sentiments,’ Keppel Land said. Revenue rose as the company saw progressive revenue recognition from the newly launched Madison Residences and The Promont in Singapore.

Higher revenue was also recognised for projects in Vietnam, India and China. Riviera Cove in Ho Chi Minh City has also recorded robust sales since its launch in November 2009, KepLand said.

The property group, however, recorded a net fair value loss of $12 million at the pre-tax level for fourth quarter 2009, mainly from completed investment properties owned by its listed office trust K-Reit Asia.

For the full year, Keppel Land’s profit rose 23 per cent to $280.4 million from $227.7 million in 2008. Revenue rose 10 per cent to $923.9 million compared with $842.2 million for 2008 on the back of higher sales.

Earnings per share for the full year rose to 24.2 cents from 22.4 cents in 2008.

Keppel Land is on the lookout for land to purchase. The company last year carried out a rights issue which raised gross proceeds of $708 million. ‘This ensures the group is well-positioned to capitalise on opportunities to acquire attractive assets at competitive prices in Singapore and overseas,’ it said.

The company also said the commercial segment is showing signs of bottoming out.

‘A flight to quality has been observed with Marina Bay Financial Centre (MBFC) and Ocean Financial Centre (OFC) chalking increased pre-commitment occupancy rates,’ Keppel Land said. MBFC saw a take-up of about 213,000 sq ft in 2009. Phase One of MBFC is now 79 per cent pre-committed and the overall occupancy for the entire MBFC stands at 68 per cent.

UBS Investment Research on Jan 22 issued a fresh ‘buy’ call on KepLand and upgraded the stock’s target price to $4.38 from $3.50.

‘On account of the higher office and luxury residential price assumptions, we upgrade our RNAV (revalued net asset value) estimate for Keppel Land by 25 per cent to $4.40 a share,’ said analyst Regina Lim.

Keppel Land shares gained one cent to end at $3.44 yesterday.

Source: Business Times, 26 Jan 2010

Suit filed against some members of original sales panel

A fresh lawsuit has just been filed over the failed en bloc sale of Horizon Towers – and a new chapter in the long-running saga is about to begin.

It’s a suit that’s set to be a closely watched one in Singapore, seen as a litmus test for the possible legal action that can be brought to bear against those involved in this, as well as all other, en bloc sales.

A group of Horizon Towers’ minority owners – those who had originally opposed the sale of the Leonie Hill development – are now suing some members of the original sales committee for their handling of the en bloc sale.

According to documents filed with the High Court, these minority owners are looking to reclaim close to $1 million in legal and administrative costs which they say they’ve incurred during the lengthy fight to keep their homes.

The sale of Horizon Towers – first tabled for $500 million to Hotel Properties Ltd (HPL) in January 2007 – has been one of the most dramatic and long-drawn- out en bloc battles in Singapore’s history. The whole affair spanned more than two years and went back and forth between the Strata Titles Board (STB) and the High Court twice before finally being decided in the Court of Appeal.

The Court of Appeal ruled in April last year that the deal could not go through because the development’s sales committee had failed to fulfil its duty on several counts.

And now, three sets of minority owners – represented by Kannan Ramesh of Tan Kok Quan Partnership – have cited that landmark judgment, as a basis on which to seek reimbursement for the hundreds of thousands they have each spent in this battle.

They have served writs on former sales committee chairman Arjun Samtani and member Tan Kah Gee, alleging that they were ‘key players in the process leading up to the commencement, facilitation, management and finalisation of the collective sale process’.

The minorities, in their claim, allege that Mr Samtani and Mr Tan had ‘pushed for a quick sale of the property for their personal benefit’, because both had bought additional units in Horizon Towers, at the start of the collective sale process, and were keen to profit from that.

Their statement of claim frequently cites the Court of Appeal judgment which had accepted, as facts of the case, that:

# Mr Samtani and Mr Tan had bought additional units in the development;

# The sales committee had received an alternative higher offer of $510 million from Vineyard Holdings, one day before HPL verbally indicated it was willing to purchase the development for $500 million; and

# The sales committee agreed to go ahead and sell Horizon Towers to HPL, in spite of a suggestion from one committee member that it seek the approval of the other consenting owners because property prices had shot up, because it was concerned that the deal would fall through if the other owners were consulted.

Justice Rajah, in his judgment, had also ruled that HPL and the estate’s majority owners should share the legal costs for the second High Court hearing, as well as the Court of Appeal hearing – and that the majority owners should bear the costs for the second STB. He also allowed two minority objectors who did not participate in the final appeal to be given 80 per cent of the costs incurred in the second STB and High Court hearings.

The minority owners are now seeking compensation for the sums not covered by Justice Rajah’s judgment. The three sets of owners are seeking between $117,000 to $370,000 in costs – making for a total claim of more than $800,000.

In his defence, filed with the High Court, Mr Samtani states repeatedly that he was not alone in driving the sale process. He said ‘each and every member of the SC (sales committee) played an equally important role’ and that he ‘did not have any special powers’ that could influence the committee’s decisions.

Mr Samtani also claimed that the committee ‘followed up on all expressions of offer’ for Horizon Towers and that it received no offer better than HPL’s at the relevant time. He said that, on the advice of the committee’s lawyers, Drew & Napier, the committee proceeded with the HPL offer.

As for the additional unit he purchased, Mr Samtani said that it ‘was not for investment, instead it was for use by his son’. He claimed he had disclosed the purchase of an additional unit to Drew, and was not advised by Drew that he had to announce it to the other consenting owners.

Mr Tan, who is represented by TSMP Law Corporation, has requested an extension of time to file his defence. Mr Samtani is represented by N Sreenivasan from Straits Law Practice.

Source: Business Times, 26 Jan 2010

Developers have sold over 900 units this month as bullish sentiment returns

Developers have sold more than 900 private homes so far this month – based on BT’s poll of developers and property agents – and with another week to go, the tally is easily expected to cross 1,000 units by month’s end.

Besides Allgreen Properties’ Holland Residences, which will be previewed this week, Wing Tai is said to be at an advanced stage of preparation for an imminent preview for L’Viv at Newton Road. The average price is touted at about $1,900-$2,000 per square foot (psf) – significantly higher than the $1,700 psf average price at which Ho Bee is selling its Trilight condo nearby.

Wing Tai is eyeing a higher per square foot price by offering smallish units (thus keeping the absolute lump sum price per unit ‘affordable’ to potential buyers). The developer is said to be packaging its project with Deferred Payment Scheme as it had clinched approval for it before the scheme was scrapped in 2007.

L’Viv comprises a total of 147 units – 72 units have one bedroom and a study and these come in two sizes, both 600-sq ft plus; another 72 units have two bedrooms and a study (all about 1,000 sq ft); and there are three penthouses (all three bedders).

Trilight does not have any one-bedders. It has two, three and four bedders as well as penthouses. Two bedders range from 1,100 to 1,200 sq ft.

Fortune Development is also slated to begin previewing this week RV Edge in the River Valley/Shanghai Road vicinity. The 108-unit freehold project, being marketed by Huttons, comprises mostly smallish apartments ranging from one-bedders to two-bedroom with study units. The smallest unit is about 400 sq ft. Prices are expected to start from $600,000-plus per apartment.

City Developments Ltd (CDL) said yesterday evening that it has sold about 85 per cent or about 150 of the the total 177 units at its Cube 8 condo at Thomson Road, which it began previewing last week.

Singaporeans bought 75 per cent of the units sold. The other 25 per cent were picked up by permanent residents (PRs) and other foreigners – mainly from Malaysia, Indonesia, Hong Kong, Korea, India, China and Europe.

The District 11 freehold project was initially priced at $1,250 psf on average but prices were upped 2-3 per cent for subsequent releases.

CDL group general manager Chia Ngiang Hong said in a statement that the buyers were an ‘equal mix of owner-occupiers and investors’ and that this pointed to the development’s appeal to both home owners and investors.

Some market watchers suggest, however, that the project has probably also drawn a fair number of specuvestors. Slightly over half of the total 177 units comprised one and two bedders and these were the first to go, mirroring the pattern for other projects that were launched in Districts 9, 10 and 11 last year.

In addition to the buying buzz created this month from the release of new projects, some developers have been pleasantly surprised with a steady stream of activity even for existing projects that have been on the market for at least a few months. For instance, Ho Bee Investment has sold about 60 units at its Parvis condo at Holland Hill and 10 units at Trilight since the start of the year.

CDL is also understood to have sold more than 50 units at its Livia condo in Pasir Ris this month and the 724-unit project is now left with about 10 units.

‘Sentiment has picked in the mid and high-end markets because of the improvement in the economy; the imminent opening of the two integrated resorts (IRs) may also have given a psychological boost to foreign buying interest, which seems to be returning,’ says Ho Bee executive director Ong Chong Hua.

Agreeing, a fellow developer said: ‘We’re seeing a bigger variety of buyers from the region this round – including markets like Myanmar and Laos.’

UOL Group has sold this month 25 units at Double Bay Residences in Simei and 18 units at Meadows @ Peirce along Upper Thomson Road. The group plans to launch two projects in the first half of this year – a 99-year-leasehold condo with about 600-plus units at Dakota Crescent and a project with some 170 units on the Rainbow Gardens site in the Toh Tuck area. The latter will be a joint development with LaSalle Asia Opportunity II fund.

Developers’ home sales slipped below the 1,000-unit per month mark in Q4 last year as they wound down their launch activities towards year-end. Some potential buyers had also grown cautious following the government’s measures in September to cool the property fever.

However, fear of missing the boat appears to be re-igniting with strong signs of another round of price hikes this year.

‘For the economy, the worst is over and much of the physical infrastructure investment like the IRs is close to completion,’ says Knight Frank chairman Tan Tiong Cheng.

Asked if the authorities are likely to come up with fresh measures to cool the market if another wave of buying frenzy builds up, Mr Tan said: ‘Frankly, it’s very hard to deter people from buying, if you look at how strong the HDB resale market is. There’s very strong bottom-up support.’

Source: Business Times, 26 Jan 2010