More land for industrial use is being made available to the market.

The Urban Redevelopment Authority (URA) said on Tuesday that it has accepted an application from a developer to put up the industrial site at Yishun Avenue 6 for public tender.

The land parcel was made available for sale through the Reserve List system in May 2007. Under the system, a site would be released for sale only if a bid with an acceptable minimum price is received.

URA said it has received an application from a developer who has committed to bid at a price of not less than S$11.5 million for the land parcel. As such, URA is making public the minimum price committed for the site.

It will launch the public tender for the site in about two weeks.

The site, which has a maximum permissible gross plot ratio of 2.5, has a 60-year lease period and an area of 14,192.8 square metres.

Source: Channel News Asia, 23 Feb 2010

It upgrades S’pore- listed Yanlord Land Group to ‘buy’ from ‘neutral’

China’s property developers had their share-price estimates lowered by as much as 32 per cent at Goldman Sachs Group Inc, which cited increased uncertainty from government tightening measures.

Goldman Sachs’ new target prices reflect a discount of as much as 40 per cent to the companies’ asset values, compared to a maximum 30 per cent previously, analysts led by Yi Wang wrote in a report yesterday. Still, a recent slump means that the shares are only 8 per cent higher on average than the estimated ‘bear-case’ net asset values (NAV) for end-2010, they said.

Real-estate stocks on the MSCI China Index have declined an average 7.9 per cent over the past six months, compared to a gain of 0.8 per cent for the broader gauge, according to data tracked by Bloomberg. China’s property prices surged the most in 21 months in January, prompting policymakers to tighten home lending and order banks to set aside larger reserves to slow credit growth.

‘Although we believe the purpose of this tightening is to slow, rather than reverse, China’s economic recovery, we believe it could affect the pace of developers selling properties or realising their land-bank value in the near term and could therefore weigh on share-price performance,’ the analysts wrote.

Goldman Sachs downgraded Greentown China Holdings Ltd and Shenzhen Investment Ltd to ’sell’ from ‘neutral’. They also upgraded Singapore-listed Yanlord Land Group Ltd to ‘buy’ from ‘neutral’ and raised their rating for Franshion Properties China Ltd to ‘neutral’ from ’sell’.

‘We like stocks that screen as having significant potential upside to our base-case valuations as well as limited downside to our bear-case NAV,’ the analysts wrote. ‘We view our bear-case NAV as attractive entry levels.’

Chinese property stocks, trading at the cheapest level among Asian peers, may be ‘worth another look’, Credit Suisse Group AG said last week.

Shares of the nation’s real-estate companies have underperformed the MSCI China by almost 30 per cent since July and are trading at a 7 per cent discount relative to the region based on a model that values companies’ net assets and return on equity, which may signal that risks of tightening are already factored into prices, Credit Suisse said.

Source: Business Times, 23 Feb 2010

Sun Hung Kai Properties Ltd, the world’s biggest developer by market value, won Hong Kong’s first land auction of the year with a bid that exceeded most analysts’ estimates after selling 900 homes over the weekend as demand for property in the city surges.

The shares closed 2 per cent higher after the developer paid HK$3.37 billion (S$611 million) for the site in the eastern Tseung Kwan O district. The company raised HK$4.2 billion in a weekend apartment sale that attracted 120,000 prospective buyers in the city of seven million.

The land auction and the weekend sale fanned speculation a bubble is forming in Hong Kong’s housing market, where home prices surged 29 per cent in 2009 as low interest rates and an increase in buying by mainland Chinese stoked demand. Norman Chan, chief executive of the Hong Kong Monetary Authority, told lawmakers on Feb 1 that the city faces a ‘huge’ potential risk of bubbles forming in its asset markets given high liquidity.

‘The outcome is positive for the Hong Kong property market,’ said Eva Lee, a Hong Kong-based property analyst at Macquarie Securities Ltd. ‘People expect 2010 won’t be an easy market given the strong growth last year, but the auction has reinforced their confidence.’

Sun Hung Kai spokeswoman Brenda Wong confirmed the company made the winning bid yesterday. Price estimates for the auction ranged from HK$2.6 billion to HK$3.4 billion, and the median projection of five analysts Bloomberg News surveyed by phone and e-mail was HK$2.9 billion.

Hong Kong is trying to ease a shortage in land supply and new properties that developer Cheung Kong (Holdings) Ltd said last month may help raise home prices by as much as 20 per cent this year.

Sun Hung Kai paid a ‘reasonable’ price for the site, Victor Lui, executive director of Sun Hung Kai’s real estate broker, said by phone yesterday. The price paid was ‘higher than expected but reasonable’, he said, adding he is ‘positive’ about the outlook for the property market.

Sun Hung Kai plans to invest HK$6.5 billion on the plot of land in a medium-sized residential project, which may take between three and four years to complete, Mr Lui said.

The developer at the weekend sold 900 apartments at the Yoho Midtown apartment complex in northwestern Yuen Long district for an average HK$5,400 per square foot, Amy Teo, Sun Hung Kai project director, said. That compares with an average HK$3,000 per square foot for new homes in the area a year ago, according to Wong Leung-sing, an associate director at Centaline Property Agency Ltd.

‘All the ingredients are in place for a property bubble in Hong Kong, including low interest rates and limited supply, but I don’t think we are in one yet,’ said Buggle Lau, chief property analyst at Midland Holdings Ltd. ‘If more speculators enter the market then it could push prices up too high.’

The city had the world’s fastest-growing major housing market last year, according to a survey compiled by real-estate agents Knight Frank LLP.

Some 120,000 prospective buyers have flocked to the show homes since Feb 19, Ms Teo said, speaking at the display properties set up in a shopping centre near the apartment complex in the city’s New Territories. Sun Hung Kai increased the number of apartments on sale to 900 from 700 because of demand, she said. The building complex has a total of 1,890 homes, according to Ms Teo.

About 40 units were immediately advertised for resale at asking prices of as much as 20 per cent more than the original costs of purchase, the South China Morning Post newspaper reported, citing property agents.

The number of private homes completed in Hong Kong last year fell 18 per cent to 7,200 units, the lowest since 1997, the government said in a report on Jan 22.

The city’s home sales more than doubled in value in January from a year earlier to HK$36.2 billion, according to figures released by the government’s land registry.

Sales gained 4.1 per cent last month from December, the agency added.

The authority, Hong Kong’s de facto central bank, raised deposit levels for luxury apartments in October to try to cool lending. The government also plans to raise stamp duty, or transaction tax, on homes selling for more than HK$20 million to 4.5 per cent from 3.75 per cent in a bid to rein in the property market, the Chinese-language Sing Tao Daily said on Feb 11.

‘Government intervention could lead to higher interest rates, but I can’t see mortgage rates much above 2.5 per cent this year, which is unlikely to deter some buyers,’ said Midland Holdings’ Mr Lau.

Prices may rise as much as 15 per cent in the first quarter, Centaline’s Mr Wong said. Hong Kong’s Chamber of Commerce forecasts the city’s economy may grow between 3 per cent and 4 per cent this year.

‘Given that the US is unlikely to raise interest rates sharply and the yuan is under appreciation pressure, Hong Kong property prices may have substantial growth this year, but there is also a risk of a bubble,’ said Benny Wong, executive director at Hong Kong-based Pan Asian Mortgage Advisory Company Ltd. ‘I expect the Hong Kong government will increase land supply this year in response to the high prices.’

Source: Business Times, 23 Feb 2010

The number of American borrowers falling behind on their mortgage payments dropped sharply at the end of last year, a sign the foreclosure crisis is beginning to ebb.

The Mortgage Bankers Association said on Friday that the percentage of borrowers who missed just one payment on their home loans fell to 3.6 per cent in the October to December quarter, down from 3.8 per cent in the third quarter. The decline was even more remarkable because delinquencies usually rise at that time of year due to higher heating bills and holiday spending.

The new trend in late payments is significant because it means the number of people going into foreclosure will continue to decline this year. And that is important for all homeowners in areas where cheaply priced foreclosures are bringing down neighbouring values.

In high-foreclosure cities like Las Vegas, Phoenix and Miami, for example, homes have lost roughly half their values from their peaks.

But Friday’s report showed Nevada, Arizona and Florida had some of the biggest declines in new delinquencies.

Jay Brinkmann, the trade group’s chief economist, said the report likely marks ‘the beginning of the end’ of the wave of mortgage delinquencies and foreclosures that started more than three years ago.

Still, more than 15 per cent of US homeowners with a mortgage have missed at least one payment or are in foreclosure, a record for the 10th-straight quarter.

‘The bad news is that we still have a big problem,’ Mr Brinkmann said. ‘The good news is it looks like it may not get much bigger.’ There will be, however, more short-term pain. The number of borrowers who were at least three months behind continues to soar.

Nationally, more than 5 per cent of borrowers fell into that category in the fourth quarter, up from 4.4 per cent in the third quarter.

Many of those borrowers are still being evaluated for help under the Obama administration’s US$75 billion mortgage relief effort.

Source: Business Times, 23 Feb 2010

Al Rajhi Capital, the investment arm of Saudi Arabia’s Al Rajhi Bank and Bahrain’s Arcapita Bank has launched a US$500 million Gulf property income fund to capitalise on falling prices, the firms said yesterday.

The two companies will seed a joint investment of US$50 million for the fund, which will focus on logistics warehouses, healthcare and education-related assets in Saudi Arabia and the Gulf Arab region, they said in a statement. Saudi Arabia has earmarked around US$400 billion to boost infrastructure over the next five years and is looking to cater for growing demand for new housing from the young population in the world’s largest oil exporter. al Rajhi and Arcapita have completed the first acquisition for the fund and bought a logistics and distribution centre in the kingdom’s capital, Riyadh, for US$79.7 million.

‘We believe that this fund is launching at a time that will allow us to deploy our financial resources to gather a portfolio of prime real estate assets at attractive valuations,’ Jorge Cantonnet, managing director and head of private equity at Al Rajhi Capital said.

The logistics facility is the main distribution hub for Azizia Panda United Company, a leading supermarket firm in the kingdom, and will be leased back to Azizia over 18 years, the statement said.

Dubai-based investment bank Rasmala Investments said in October it was setting up a 500 million riyal (S$187.88 million) Islamic property fund to pursue opportunities in mid-income housing in Saudi Arabia. But in Dubai, which has been worst affected in the region by the economic downturn, the emirate’s second-largest developer, Deyaar, postponed earlier in February a 500 million-dirham (S$191.8 million) distressed property fund after international investors withdrew previously committed funds.

Property prices in Dubai have plunged some 60 per cent since their peaks in 2008 and billions of dollars worth of projects have been put on hold or cancelled.

Source: Business Times, 23 Feb 2010

Mah Sing Group Bhd, a Malaysian developer, may gear up to build a RM1 billion (S$414.26 million) war chest for acquiring land to capitalise on an expected rebound in the Malaysian property market, group managing director Leong Hoy Kum said in a statement yesterday. ‘We believe that developers like us with sufficient cash and a healthy balance sheet will continue to grow stronger,’ Mr Leong said, in a statement accompanying the company’s fourth-quarter results.

Net income climbed 46 per cent to RM25.1 million, or 3.88 sen per share, in the three months ended Dec 31, as revenue jumped 64 per cent to RM249 million, the statement said. The company is proposing a final dividend of 6.5 sen per ordinary share.

Mah Sing had RM400 million in cash and zero net gearing at the end of December. ‘Should we gear up to 0.5 times, we can build a war chest of approximately RM1 billion to purchase good prime land that suits our business model,’ Mr Leong said in the statement.

The developer spent RM323 million buying 184 acres of land last year to take advantage of reasonable asset prices when the South-east Asian nation slipped into its first recession in decade.

Source: Business Times, 23 Feb 2010

ARA Asset Management posted improved fourth quarter earnings and proposed a cash dividend and a one-for-five bonus issue.

The real estate fund manager, tied to Hong Kong tycoon Li Ka-shing’s Cheung Kong group, is also looking at raising around US$1 billion for other funds and ventures in the next two years.

For the quarter ended Dec 31, ARA’s net profit rose 47 per cent from the previous year to $14.1 million. This was driven by a 48 per cent increase in revenue to $26.9 million.

The top line grew as ARA collected more management fees, acquisition and performance fees and other forms of income. For instance, the newly set up ARA Harmony Fund, which owns Suntec Singapore International Convention & Exhibition Centre, brought in management fees for the group.

ARA has proposed a final cash dividend of 2.5 cents per share and a bonus issue of up to 116.4 million new ordinary shares on the basis of one new share for every five existing shares held. Both proposals will be put to shareholders’ vote at an annual general meeting on April 26.

Taking into account an interim dividend of 2.3 cents per share, the total cash dividend for FY2009 comes up to 4.8 cents per share. The firm is confident that it can continue paying this amount to shareholders in FY2010.

‘We believe that with the continued expansion of the group, we will be able to maintain the current cash dividend per share, notwithstanding the increased number of shares post the bonus issue,’ said ARA group CEO John Lim in a press release.

Separately, Mr Lim told BT that ARA is looking to set up funds in a few areas. First, there could be a private fund focused on the aged and healthcare sector, investing in retirement homes or hospitals mainly in Japan and Australia.

ARA is also working on setting up a private fund or real estate investment trust in the hospitality sector.

In addition, it plans to raise more capital for the next franchise of the ARA Asia Dragon Fund.

For the three initiatives, ‘in the next two years, we believe we can raise another US$1 billion or so’, Mr Lim said.

There are other previously-announced plans in the pipeline. ARA recently partnered logistics firm CWT to set up Cache Logistics Trust in Singapore, and Mr Lim hopes the real estate investment trust can be listed ‘around the first quarter’.

For the full year, ARA’s net profit hit $48.3 million – a record since it was set up in 2002. This reflects a 32 per cent increase from the preceding year. Revenue rose 23 per cent to $86.3 million. As at Dec 31, ARA’s assets under management stood at $13.5 billion – up from $12.1 billion a year ago.

ARA shares rose three cents yesterday to close at $1.07.

Source: Business Times, 23 Feb 2010

THE government has decided to do away with a tax allowance scheme for businesses introduced in the 1940s to encourage Singapore’s industrialisation. The axed scheme will be replaced by one designed to enhance land productivity – but only companies from nine chosen sectors will benefit from the new scheme.

Singapore should promote the intensification of industrial land use and move towards more land-efficient and higher value- added activities, Finance Minister Tharman Shanmugaratnam said yesterday.

‘The Industrial Building Allowance (IBA) has met its objective but is no longer adequate or relevant to meet our current priorities,’ he said. ‘It does not distinguish between efficient and inefficient uses of industrial land.’

In its report earlier this year, the Economic Strategies Committee said Singapore has to support the intensification of industrial land use as there are now greater demands on the country’s limited land resources.

The IBA gave tax allowances to companies for capital expenditure on the construction or purchase of an industrial building or structure.

Its replacement, the Land Intensification Allowance (LIA), similarly allows companies to claim for capital expenditure incurred to construct a qualifying building or structure.

But only companies from nine sectors – pharmaceuticals, petrochemicals, petroleum, chemicals, semiconductor-wafer fabrication, aerospace, marine and offshore engineering, solar cell manufacturing and other ’speciality’ industries – will qualify for the LIA.

These sectors have been singled out as part of the government’s long-term plans to move Singapore’s manufacturing sector up the value-added chain.

The building or structure will also have to meet the gross plot ratio (GPR) benchmark relevant to the industry sector of the building user. To encourage intensification, the benchmarks for each industry sector will be set around the 75th percentile of actual GPRs for the sector.

Qualifying firms will be granted a first-time allowance of 25 per cent, then 5 per cent each year for qualifying expenditure on the construction of buildings.

Analysts are surprised by the switch, as fewer companies will now qualify.

‘The old IBA did not restrict the benefits to only a few sectors,’ said David Lee, executive director of tax services for KPMG. ‘At the end of the day, if those (nine industry) sectors are the ones they are encouraging, they can always give them incentives instead.’

He pointed out that the new scheme means that companies in some of Singapore’s biggest industries – such as electronics manufacturing and equipment manufacturing – will be missed out.

Ernst & Young tax director Helen Bok said: ‘Many companies will be disappointed that the IBA will be phased out because this is a significant deduction for those carrying on qualifying activities. This will increase their cost of doing business in Singapore.’

But pegging the tax allowances to building plot ratios will encourage building owners to maximise land use, which is a good move for land-scarce Singapore, said Colliers managing director Dennis Yeo.

Source: Business Times, 23 Feb 2010

IN a move that took some people by surprise, the government last Friday unveiled two measures designed to cool speculation in the property market. But the imposition of a seller’s stamp duty on sale of properties sold within a year after purchase and the lowering of the loan-to-value ratio should not really have come as a surprise to anyone, given that home sales had more than tripled in January to 1,476 units, from 481 units in December.

Similar measures were taken in September last year in response to a 16 per cent surge in home sales during the July-September quarter. The immediate impact of that move to kill off innovative interest absorption home loan schemes was a halving of the home price rise to 7.4 per cent, quarter on quarter, during the October-December 2009 period. Under the latest measures, anyone selling property within 12 months of purchase will pay a 3 per cent stamp duty. And home buyers can now borrow only up to 80 per cent of a property’s purchase price, versus up to 90 per cent previously. If the somewhat muted reaction of property stocks yesterday is any indication, the market appears to be taking Friday’s measures in its stride. In contrast, property stocks plummeted by more than 15 per cent in September.

The general consensus is that the latest measures will not have an impact on genuine property buyers or long-term investors, most of whom take loans of less than 80 per cent of value and hold on to their properties for several years at least. The measures also appear to have been calibrated so as not to impact home prices in a big way – a critical consideration given that residential property accounts for the bulk of Singaporeans’ wealth.

But the extent to which these measures will reduce speculative activity in the mid to high-end segment of the property market – where much of the speculation is said to be focused – is open to debate. Here is why: Singapore’s reputation as a vibrant first world city in a buoyant and developing region has attracted a significant tide of funds into its premium properties. This inflow of offshore funds – whether for investment or speculation, from buyers from Greater China, South-east Asia and South Asia – continues unabated, and is unlikely to be affected by a 3 per cent stamp duty or a cap on borrowing.

In an environment of abundant liquidity and improving consumer confidence underpinned by a global economic recovery, it is natural for property prices – especially the premium segment – to trend upwards in a land-scarce and developed island-state such as Singapore.

Still, the latest measures, coming just five months after the previous set of calibrated moves, are a necessary reinforcement of a message from the government that it will not sit idly by if speculation in one segment of the property market endangers the broader economy. Presumably, more will be done, should the need arise.

Source: Business Times, 23 Feb 2010

THANKS to a sharp drop in fair-value losses, Hotel Properties Ltd reported a 7.2 per cent rise in full-year net profit despite a 27.6 per cent dive in revenue.

For the year ended Dec 31, 2009, net profit attributable to shareholders climbed to $35.2 million from $32.9 million. Revenue dropped to $443.2 million from $612 million, resulting in gross profit diving to $131.8 million from $184.6 million.

The earnings attributable to shareholders were also helped by a $5.15 million fall to $1.98 million in profit attributable to minority interests.

‘2009 was a challenging year as the global economic crisis and the H1N1 outbreak directly affected the hospitality sector,’ the group said yesterday. ‘Both hotel occupancy and room rates suffered due to low tourist arrivals and a more cost-conscious business community.’

Revenue from its hotel segment declined 16.3 per cent from $427.7 million in 2008 to $358 million in 2009, while its properties segment recorded a 53.7 per cent fall in revenue from $184.6 million to $85.5 million.

The group attributed part of its lower revenue to the completion of The Met condominium development in Q2 2009. The collection from purchasers, however, resulted in higher cash generated from operations of $153.9 million for 2009 against $26.5 million the previous year.

Hotel Properties noted that the group’s last quarter of the year had begun to show ’signs of recovery’ where its hotel business had been concerned. Boosting its bottomline were the comparatively lower fair value losses last year.

For 2009, the group recorded a fair value adjustment loss on investment properties of $2.7 million compared with $37.6 million in 2008.

The group’s earnings per share for 2009 stood at 6.99 cents compared with 6.52 cents for 2008. It has recommended a final one-tier tax-exempt cash dividend of two cents per share, up from a final one cent the preceding year.

The group is planning to launch the condominium development at the former Beverly Mai site at Tomlinson Road this year. ‘An associate of the group will also have the proposed condominium development at the former Farrer Court site launch-ready during the year,’ it said.

Source: Business Times, 23 Feb 2010