Bank of America plans to raise new money for Merrill Lynch’s Asia property funds business instead of selling it due to a recovery in the real estate sector, sources said.

BoA was in talks with several private equity firms, including Blackstone Group and Apollo Investment Management, to sell management rights to its US$2.65 billion Asia Real Estate Opportunity Fund which the bank regarded as a non-core business, Reuters reported in July.

Despite negotiations lasting more than six months, no deal was reached because of disagreements over financial terms and the complicated structure of Merrill property funds, sources with direct knowledge of the matter told Reuters yesterday.

BoA has hired people in Beijing to raise money for a new Asia-focused property fund, the sources said, adding China remains a focus for the Merrill funds.

In China, Merrill invested a few years ago in the development of the Beijing Yintai Centre, a top-end complex where the luxury hotel Park Hyatt Beijing is located on the historic Chang An Avenue.

The sources, who were involved in the bidding process and have business ties with BoA, declined to be identified as they were not authorised to speak to the media.

‘Basically there was a lack of interest from Merrill Lynch’s part to go forward with the process,’ said a prospective bidder, who asked not to be identified.

A BoA spokesman in Hong Kong declined to comment.

Bank of America took over Merrill at the end of 2008 during the financial crisis.

In October 2008, just two months before the deal went through, Merrill closed and launched the Asia property fund with focus on Japan, China, India and South Korea.

Investors, also known as limited partners, in the Merrill property fund include many rich families and some sovereign funds in the region, said one of the sources.

Property market transactions in Asia have risen in recent months as investor confidence improves and banks start lending.

A research report released last week by property consultancy firm DTZ, for instance, showed the value of property transactions in South-east Asia rose 25 per cent in the last three months of 2009 from the preceding quarter.

Despite a clear recovery in the sector, some analysts and government officials are worried that asset bubbles were forming due to the sharp rises in property prices.

Merrill is not alone making property investments in Asia.

Rivals, including Goldman Sachs and Morgan Stanley, are long-time players in some key Asian markets like China.

In March, Morgan Stanley raised US$6 billion for a new global property fund, including money from China Investment Corp, the sovereign wealth fund.

Source: Business Times, 28 Jan 2010

THE second phase of Orchard Medical Specialists Centre will be offered for sale and rent from tomorrow by Hong Property Investments.

The fifth floor of Lucky Plaza has been transformed into an exclusive medical hub with occupants engaged in fields such as psychological medicine, dentistry and women’s wellness. Since the first launch some two years ago, eight units have been sold and another 30 are tenanted.

The remaining 18 units are now being offered for sale at average prices of $3,100 to $3,200 per square foot (psf) and for rent at $11 to $12 psf per month.

Knight Frank, which is marketing the units, said that with the renewed buying interest in high-end apartments at Orchard Road as well as the continued growth in medical tourism in Singapore, medical practitioners and retail investors can generally envisage the capital appreciation and the rentability of the medical suites in the mid to long term.

According to Knight Frank, at the nearby 99-year Mount Elizabeth Medical Centre, a 1,206 sq ft unit changed hands at $3,701 psf last month while another 893 sq ft unit was sold for $4,798 psf in November last year.

Over at Novena Medical Centre, there were some transactions of the 99-year leasehold units in the range of $2,800 psf to $3,000 psf.

Rents of medical suites in the Orchard Road vicinity, such as at Paragon Medical Centre and Mount Elizabeth Medical Centre, are in the range of $14-$16 psf, Knight Frank said.

Source: Business Times, 28 Jan 2010

But weaker room rates drag down RevPAR by 13.6% to $159 in Q4′09

CDL Hospitality Trusts (CDLHT), a favourite stockmarket proxy for the improving outlook for Singapore’s tourism sector, achieved an average occupancy rate of 88.9 per cent for its five Singapore hotels in the fourth quarter last year, a better showing than the fourth quarters of the preceding two years.

‘We’re seeing demand levels back to where they were prior to the economic crisis, albeit room rates are lower,’ said Vincent Yeo, CEO of the trust’s manager.

‘In November 2009, we did the highest occupancy rate ever bar one month (since the inception of our Reit in July 2006),’ he added.

However, weaker room rates dragged down room revenue per available room (RevPAR) by 13.6 per cent to $159 in Q4 2009 from $184 in Q4 2008. RevPAR peaked at $222 in Q2 2008.

The trust posted income available for distribution to unitholders of about $21.7 million for Q4 2009, a 14 per cent improvement from the same year-ago period.

Despite a 7.1 per cent year-on-year (y-o-y) drop in gross revenue to $26.1 million in Q4 2009, CDLHT achieved a 14 per cent y-on-y rise in net property income to $24.7 million. This was due to lower property tax expenses (inclusive of a 40 per cent property tax rebate granted by the Singapore government last year) and lower other property expenses.

The latest Q4 distributable income reflects a distribution per unit (DPU) of 2.58 cents.

For full year ended Dec 31, 2009, CDLHT posted total distributable income of $75.8 million, a decline of 17.6 per cent from the preceding year. The trust is paying out a total of $71.7 million, reflecting a 94.6 per cent payout ratio. It is retaining the balance $4.1 million (which is tax-exempt income) to help fund future capital expenditure on its properties.

CDLHT had $5.7 million in cash and cash equivalents as at end-2009.

CDLHT, which pays distributions semi-annually, will be making a payout of 4.71 cents per unit for the second half of last year. The full-year 2009 payout works out to 8.57 cents, which translates to nearly 5.2 per cent yield based on the counter’s $1.66 closing price yesterday.

The trust, which was listed on the Singapore Exchange in July 2006, owns five hotels in Singapore – Orchard, Grand Copthorne Waterfront, M, Copthorne King’s and Novotel Clarke Quay – and Orchard Hotel Shopping Arcade. It also owns a hotel in New Zealand – the Rendezvous Hotel Auckland.

London-listed Millennium & Copthorne Hotels (M&C), as sponsor of CDLHT with a 39.5 per cent stake, has given a right of first refusal to sell its Singapore properties to the trust for a five-year period starting from CDLHT’s listing date in July 2006. M&C will open a new hotel, Studio M, in the Robertson Quay area around April.

M&C’s parent City Developments has a stake in the St Regis Singapore. Overseas, the trust’s acquisition strategy is dependent on where the deals emerge and ‘the markets where we’re seeing the most deals flow are Australia and Japan’, Mr Yeo said.

Singapore’s pool of hotel rooms is expected to increase by about 5,800 rooms or 17 per cent this year. Most of the additional supply will come from the two integrated resorts (IRs).

Achieving even a 0.5-night increase in the average length of visitor stay in Singapore will help to offset a large part of the additional supply in 2010, Mr Yeo argues.

The demand-pull factors in Singapore are escalating to a new plane with the opening of the IRs. With a mix of gaming entertainment, conference facilities and the Universal Studios theme park, ‘the IRs mark a significant step forward in Singapore’s transformation into a world-class travel destination and a preferred mono-travel destination’, the trust manager said.

Mr Yeo said that ‘gaming is somewhat addictive so you could see very frequent visits’ from visitors in neighbouring countries such as Indonesia and Malaysia.

The draw of the IRs should also help to convert some of the transit passengers at Changi Airport to visitor arrivals into Singapore.

‘Less than 7.4 million of a total of 37.2 million passengers passing through Changi Airport in 2009 would have visited Singapore,’ the trust manager noted.

Source: Business Times, 28 Jan 2010

I REFER to the letters on Monday by Ms Susan Prior (‘Save owners from sword of Damocles’) and Mr Augustine Cheah (‘Loopholes in law’).

Ms Prior suggests that a collective sale committee should have a limited lifespan. This is already provided for in the Land Titles (Strata) Act. The committee will automatically dissolve on expiry of the collective sale agreement. The agreement will expire if the requisite consent level is not attained within 12 months from the date of the first signatory.

The committee can also be dissolved by an ordinary resolution at a general meeting. Further, if no one has signed the agreement, the owners can dissolve the committee at any general meeting.

Mr Cheah claims that there had been no clarification or reply from the Ministry of Law to letters by many, including him, on purported loopholes in collective sale legislation.

Mr Cheah should know that what he says is inaccurate. The ministry has regularly responded to various letters on the matter.

The ministry has also previously responded to a Forum letter from one Mr Augustine Cheah (who is probably the same writer). The ministry’s reply to Mr Cheah (‘En bloc sales: Rights of all owners adequately protected’) was published on Aug 21 last year.

As for Mr Cheah’s call to tighten the legislation, the public is assured that the ministry has always actively considered feedback received, consulted industry experts and introduced amendments where appropriate. The ministry will continue to do so.

Chong Wan Yieng (Ms)
Head, Corporate Communications
Ministry of Law

Source: Straits Times, 28 Jan 2010

PROPERTY developer Hiap Hoe and SuperBowl Holdings, which owns and manages leisure and recreational facilities, are investing $300 million to open two hotels in Balestier through their 50:50 joint venture company, HH Properties.

HH has appointed Wyndham Hotel Management – which is part of the Wyndham Hotel Group – to run the two hotels. The hotel group’s portfolio consists of over 7,000 hotels and 11 brands.

The two hotels will be operated under the Ramada and Days Inn brands, which are new-to-market brands for Singapore.

The 390-room Ramada Singapore at Zhongshan Park will have more than 6,400 square feet of meeting space and will be linked to an adjacent office block. The Days Hotel Singapore, also at Zhongshan Park, will have 405 rooms. Both hotels are slated to open their doors in 2014.

‘Singapore is one of the most important business and leisure destinations in the Asia-Pacific region and we are thrilled to introduce our Ramada and Days Inn brands to the market,’ said Tom Monahan, Wyndham Hotel Group’s executive vice-president of international development. ‘We are very excited to be working with HH Properties as we expand our global footprint.’

While Hiap Hoe and SuperBowl Holdings have worked together in the past on residential projects such as The Beverly, this is the maiden venture into the hospitality industry for both companies.

The Balestier site was awarded to HH Properties in August 2008, when HH Properties acquired the land for some $75 million. The land cost is included in the $300 million investment.

Located opposite the Sun Yat Sen Nanyang Memorial Hall, it has a land area of about 190,000 sq ft and a gross permissible floor area of about 421,000 sq ft. HH Properties will also construct commercial developments on the site.

Teo Ho Beng, managing director of Hiap Hoe Group said: ‘We have spent a considerable amount of time planning the project. We selected Wyndham Hotel Group to manage the hotels based on its strong brand portfolio and track record.’

Source: Business Times, 28 Jan 2010

Possible cap on PR proportion in every HDB neighbourhood and block

THE Housing & Development Board (HDB) is considering setting a cap on the proportion of permanent residents (PRs) allowed in every HDB neighbourhood and block.

The possible move – which is now under study – was revealed yesterday by Minister Mentor Lee Kuan Yew, who was speaking at a dialogue session at the International Housing Conference.

HDB, which celebrates its 50th year this year, now has in place an ethnic integration policy which seeks to prevent the formation of racial enclaves by setting the maximum allowable proportion for each ethnic group in every HDB neighbourhood and block.

There have also been concerns, of late, that purchases of resale flats by PRs have been pushing up prices. PRs are now allowed to buy HDB flats only on the resale market.

Recent media reports have quoted housing agents on the ground as saying that cash-rich buyers – both locals and permanent residents (PRs) – are driving the recent rally in HDB resale flat prices and the resulting high cash-over-valuation (COV) levels.

HDB resale prices hit a new record in Q4 2009, with prices climbing 3.9 per cent from the previous quarter. The median COV for all resale transactions doubled to $24,000 in Q4 from $12,000 in Q3.

Mr Lee also addressed concerns about the affordability of HDB flats.

‘It (affordability) will always be an issue,’ said Mr Lee. ‘What is affordability, from the point of view of the buyer, and the point of view of the government that is subsidising you?’

Buyers, he said, always want cheaper and better flats. But the government has to price it at a level that is fair to the revenue it collects as well as fair to individuals – not only present buyers but also past and future buyers, Mr Lee added.

Mr Lee pointed out that HDB is now selling new flats for lower than their market values. This allows Singaporeans to benefit from rising asset prices as the economy grows.

Buyer expectations are also being affected by rising aspirations, Mr Lee said. But rising aspirations have to go hand in hand with rising productivity – which Singapore has not seen.

Singapore, he said, has grown in the last five years mainly by importing foreign labour. But now Singaporeans are uncomfortable as they feel that there are too many foreigners. There are complaints that trains and buses are over-crowded with foreigners. Foreigners have also been blamed for driving up property prices.

‘The answer is simple,’ Mr Lee said. ‘Check the flow of foreigners, raise your productivity, do the job better.’

Earlier in the day, Minister for National Development Mah Bow Tan said during his keynote speech that HDB faces increasing challenges in the 21st century.

‘The core mission of HDB remains unchanged: that of providing affordable quality homes and building up cohesive communities,’ said Mr Mah.

But while HDB will keep that commitment, it faces challenges from shifting demographics and the steadily ageing profile of HDB flats and towns. For example, with more new Singapore citizens, greater integration efforts will be required, Mr Mah said. And as HDB flats and towns age, there will be an urgent need to upgrade, redevelop and rejuvenate older estates, he said.

And HDB also needs to minimise the impact of growth on the environment and to use resources efficiently, Mr Mah said.

‘HDB must rise up to meet these challenges and continue its efforts in achieving the three dimensions of environmental, economic and social sustainability,’ Mr Mah said.

Source: Business Times, 28 Jan 2010

DESPITE a tough year, CDL Hospitality Trusts had some bright news for unit-holders when releasing its annual results yesterday.

Retail space at one property in its portfolio, Orchard Hotel, has been boosted by about 5,000 sq ft – which has been leased by a new tenant who will set up a bistro and live music venue.

The trusts, a combined hospitality real estate investment trust and a business trust, put in a stronger fourth quarter with income to be distributed to unit-holders up 48.3 per cent to 2.67 cents.

However, for the full year ended Dec 31, income to be distributed fell 19.3 per cent to 8.57 cents per unit.

The trusts recorded gross revenue of $26.1 million in the fourth quarter, down 7.1 per cent. Full- year gross revenue slid 20 per cent to $91.8 million.

The decline in gross revenue was attributed to the economic downturn and H1N1 that affected the tourism industry in the first half of last year.

The trusts’ net property income showed improvement in the fourth quarter by increasing 14 per cent to $24.7 million. But the full-year figure dropped 16.4 per cent to $85.9 million.

Distributable income for stapled securities holders stands at $21.7 million in the fourth quarter, up 14 per cent from $19 million the year before. The full-year distributable income, however, declined 17.6 per cent to $75.8 million.

Despite the general negative outlook of the full- year results, analysts remain upbeat as they expect the entertainment and tourism industry to grow this year with the opening of the integrated resorts.

Mr Vincent Yeo, chief executive of M&C Reit management, the manager of CDL Hospitality Real Estate Investment Trust, said the trusts saw increasing demand throughout the second half of last year.

‘In the fourth quarter, we achieved an occupancy rate of 89 per cent, which was not only the highest for the year, but also higher than that of all four quarters in 2008, albeit at a reduced room rate,’ he said.

Source: Straits Times, 28 Jan 2010

THE current contentious issue on the affordability of public housing was given another airing by Minister Mentor Lee Kuan Yew who cautioned Singaporeans not to cast a protest vote against the ruling party over this.

As Singaporeans lament rising flat prices, he said they ought to understand that the Government sells them at a subsidised price, below market rate, so that they can own an asset that will appreciate in value over the years.

It adds to their wealth and this is an asset-enhancing policy Mr Lee believes citizens should not find fault with.

If they do, they must be ‘daft’, he said, at a dialogue during a housing conference as part of a series of events to mark the Housing and Development Board’s 50th anniversary.

And if National Development Minister Mah Bow Tan is unable to defend this policy, ‘he deserves to lose’ at the next general election, he quipped, to laughter from the participants, including a chuckling Mr Mah.

But if Mr Mah loses to the opposition, he warned that Singaporeans better sell their flats fast as they would no longer be of any value.

Mr Lee’s blunt remarks were in response to a question by dialogue moderator Tommy Koh, who pulled out a Straits Times report which said at least three opposition parties are keen to contest Tampines GRC, which Mr Mah helms, as they want to raise the affordability of public housing as an election issue to gain votes.

‘It will always be an issue,’ noted Mr Lee. ‘They always want it cheaper and better.’

The Government, he said, has to price the flats at a level which is fair, not only to current buyers but past and future buyers, as it will affect property prices.

He went on to explain why the Government had put in place a five-year limit before people can sell their new flat, saying it was to prevent speculation in the property market.

‘Because the moment you buy a flat, you can sell it to make a profit,’ he said.

‘We are giving you something more valuable than you’re paying for. So we say you cannot sell it for five years.’

This philosophy of giving citizens an asset that will grow in value and give them a stake in the country was a recurring message in the 60-minute dialogue.

Asked why the Government placed such emphasis on housing the population in the early days after Singapore gained self-rule in 1959, Mr Lee, who was the Republic’s first prime minister, said:

‘We decided from the very beginning, everybody must have a home, every family will have something to defend. And that home, we developed over the years into the most valuable asset.’

It was also about giving people a clean place to live, as living conditions then were squalid and overcrowded.

To a question from Hong Kong’s Secretary for Transport and Housing, Ms Eva Cheng, on letting the private sector play a bigger role, he said they cannot take over the housing responsibility.

‘We give them land, they build, and they sell it below market price? Cannot be done,’ he said.

‘We give our buyer an asset which is below market price the moment he buys it. So there is no profit, it’s a loss, but there’s a strategy behind that loss.

‘That loss is to give the man an asset which he will value, which will grow in price as the country develops, as his surroundings become better.’

He added: ‘This is a social responsibility which we have undertaken and that’s the reason why we are re-elected.’

Referring to the three opposition parties that are targeting Mr Mah, he said: ‘If Mr Mah is not re-elected and these three wise men take over, then I say you better sell and get out quickly.’

Source: Straits Times, 28 Jan 2010

EVEN as Singapore’s public housing agency looks back to celebrate its achievements over the past 50 years, it will face increasing challenges that mean evolving to meet changing needs.

The Housing and Development Board (HDB), which marks its 50th birthday on Feb 1, must meet these challenges while maintaining its three-pronged approach of environmental, economic and social sustainability, National Development Minister Mah Bow Tan said yesterday.

He was addressing more than 500 delegates from around the world at the opening ceremony of a three-day international housing conference hosted by the HDB and held at Suntec City.

‘In this globalised world, we face many common challenges: climate change, migration, demographic shifts, shrinking resources, among others,’ he told the conference. ‘These changes impact all cities alike, large or small, developed or developing, sooner or later.’

The conference was a great opportunity for policymakers, architects and urban planners to exchange ideas.

The growing challenges that HDB will face include an ageing population, which may require further innovations in housing policies or building design, he said. Others included integrating the growing number of new Singapore citizens and the effects of rising affluence.

‘As the public housing authority, HDB’s key task is to find innovative ways to accommodate our people, taking these challenges into account,’ he said.

Speakers at the three-day conference, which discussed themes such as environmental sustainability, include housing ministers from Spain, Finland and Australia, and senior government officials from the United States and Hong Kong.

Hong Kong’s Secretary for Transport and Housing Eva Cheng said Hong Kong faced similar challenges as Singapore over land size and a growing population, and had ensured public housing for lower-income earners. She will be speaking at the conference today.

Adressing the audience, HDB chief executive Tay Kim Poh also acknowledged yesterday that HDB has ‘achieved much that we are proud of’, but it is also mindful of the ‘challenges to housing that are shaped by the changing needs and expectations of our people’.

Source, Straits Times 28 January 2010

TWO out of three people are satisfied with the service they get from real estate agents but there is still room for improvement, according to a survey conducted by Ngee Ann Polytechnic.

Of the 1,041 people questioned in the poll – 564 of whom had prior experience of property transactions – 64.6 per cent said they were either satisfied or very satisfied with the service they got from their agents.

Another 27.7 per cent felt neutral about the service provided, while the remainder were either very dissatisfied or dissatisfied.

Even among those who were satisfied, 71.1 per cent reported negative experiences of their property agents.

Chief among their complaints was failing to negotiate a ‘good’ price for the property. The second most common gripe was being given the ‘wrong advice’.

Of the survey’s respondents, 63.8 per cent felt that a property agent should have at least two years of relevant work experience before being accredited by a professional body.

The polytechnic’s real estate lecturer Nicholas Mak, who is the survey’s research coordinator, said: ‘Two years is an indicator of the standard a real estate professional accreditation body should require from its members.’

An overwhelming majority – 96.6 per cent – of respondents called on the Government to implement changes to the industry.

The most popular proposed action was for the implementation of a property agent certification scheme. Although such a scheme might involve higher costs, 49.1 per cent of respondents did not mind paying a higher commission if they got experienced property agents.

Dr Tan Tee Khoon, chief executive of the Singapore Accredited Estate Agencies, acknowledged that despite a variety of measures taken towards self-regulation, ‘there is still much to be desired of this industry’.

Publication of the Ngee Ann Polytechnic survey, which was conducted in the middle of last year, comes before the expected publication of the Ministry of National Development’s proposed regulatory framework for the real estate industry.

Source, Straits Times 28 January 2010